The unexpected move came as a shock to New Yorkers, who have sometimes had to pay as much as 15 percent of a year’s rent in middleman fees, usually facilitated by a landlord, CNN reported.
“A resident could hire a broker to help them in their search, or the landlord can pay for broker’s fees, but the landlord can’t pass the broker fee on to the resident involuntarily,” Matthew Murphy, the executive director of the NYU Furman Center, told CNN. The Furman Center provides academic research on housing, neighborhoods, and urban policy.
Using a broker to find an apartment in New York City is often standard procedure. The one-time fee, while sometimes negotiable, is normally one month’s rent. However, in New York City, that line item can still translate to thousands of dollars in costs.
On top of that, renters also need to pay an application fee, a credit check fee, a security deposit, and the first month’s rent ahead of moving in.
The new law is expected to relieve some of the financial pressure for prospective renters in one of the world’s most expensive cities, and comes as part of a series of rent-regulation laws passed in New York in 2019 that are meant to protect tenants, The New York Times said.
“This is going to make it much easier for ordinary working people to find an affordable apartment,” Michael McKee, treasurer of TenantsPAC, told CNN.
However, some real estate experts believe the outlawing of the fee might have some consequences for renters in a city where some of the world’s most affluent people reside. Most recently, Madonna offered up her New York City apartment to Prince Harry and Meghan Markle, providing a third option for the royal couple. Meghan and Harry are planning to split their time between the United Kingdom and Canada, as reported by The Inquisitr.
A real estate broker remains an integral part of the property rental process in the Big Apple, and if the fee is not coming out of the tenants’ pockets, the landlord will likely have to pay — a reality which might result in higher rent, Bloomberg reported.
“If a restaurant sells hamburgers and the cost of meat goes up, what do they do to the cost of hamburgers? They increase the price,” Andrew Barrocas, the chief executive officer of New York City-based brokerage MNS, told Bloomberg.
Furthermore, given that the state has already passed several laws prohibiting rent from being raised on nearly 1 million apartments, landlords and real estate agents believe the additional move will upend their jobs, The New York Times details.
“We are aggressively pushing back on the Department of State’s misguided interpretation that will have a devastating impact on hard-working real estate agents, owners, and renters throughout New York State,” Reggie Thomas, senior vice president for government affairs at The Real Estate Board of New York, told CNN.