Broker Fee Bill Will Negatively Impact Queens Tenants and Real Estate Professionals – QNS.com
Being a real estate agent in Queens brings you new opportunities and challenges every day. As a real estate agent in town for the past several years, I have an inside look at this business and how the rental market works.
On a typical day, I might have to show several apartments throughout town and other neighborhoods, updating and promoting listings and responding to renters requesting time-sensitive information about available units. It’s not just 9 to 5, it includes late nights and weekends. And of course, there’s no guarantee that the tenants we respond to will actually rent any apartments we’ve shown them, which could mean that after days of work we could be back at square one with other applicants – and without any commission.
You may also be surprised to learn that the average real estate agent in New York City makes around $520,000 per year during the beginning of their career. Most of us who have been in this field for a while still don’t make six figures. That’s why we rely on commissions, sometimes referred to as broker fees, to support ourselves.
With all of this in mind, I and many of my counterparts are concerned about legislation regarding brokerage fees recently introduced by City Councilor Chi Oseh. That would hurt clients like me and the tenants we serve. It has been frustrating to see this bill being promoted as an obvious solution, when in reality it would create more problems than it solves.
The new legislation aims to make it illegal for estate agents to collect a broker’s fee from a tenant unless that person has specifically appointed the agent.
Ossé claimed his bill wouldn’t negatively impact agents like me because it doesn’t include language that caps commissions. But this is a false claim and does not match the facts of how the rental market works here in the city. In fact, this bill would limit opportunities for agents and result in lower commissions for many.
A large number of rental listings in Queens and throughout the city are known as “exclusive listings.” In other words, the agent has an exclusive agreement to promote a particular listing, ensuring that he or she receives a fair commission when renting that apartment.
If the Councilman’s bill is approved and agents can no longer charge commission from many of the tenants we have been serving, it will essentially put an end to exclusive listings and convert any existing exclusives to what is known as an “open listing.” To be fair, there are many open lists that already exist today — but this bill would increase that number dramatically.
The result will be that an already competitive industry will become more difficult for agents to secure commission opportunities. Working class agents will lose the income they need to pay their rent or bills. I do not believe that the Council Member intended to cause this problem, but that is simply the reality of what would happen in many cases under his proposal.
On the other hand, we need to consider the negative impacts of many tenants. Today there are exclusive listings and open listings, but there are also what are known as “no fee listings”. This is a misnomer because “no fee” simply means that the property owner pays the cost of the in-house broker’s fees and bakes that cost into the monthly rent for the apartments in their building.
So, under the councilman’s bill, in some cases, more property owners would decide to resort to this “no fee” approach to marketing their buildings. The upshot here is clear – they too will incorporate the cost of the in-house broker’s fees into the monthly rent for their units.
This means higher rents for tenants. This means that many applicants may no longer qualify for certain apartments if their income no longer equals 40 times the monthly rent. This means that even if they decide to live in the higher rent unit, they will likely pay higher rent the following year when they seek to renew their lease and face a rent increase.
There is already a lot of public discussion about rising rents in Queens, especially along the waterfront but also throughout the borough, where demand continues to increase but supply remains low. Converting more buildings into “no fee” apartments with higher monthly rents will not come as welcome news to many of these tenants. Again, I don’t think the Council Member is trying to cause these problems – but all I can do is point out the reality for the market.
This is a complex issue that requires thought and discussion with specialists in the field. What does not help is rushing to pass legislation simply because it looks attractive or generates flashy headlines in the press.
I sincerely hope that Osse will think twice about his bill with this in mind. Just as importantly, I hope that the council members in Queens will choose not to support this bill.
Calvin Yan is a real estate agent for Modern Spaces.