By Adrian Roberson
City Councilman Chi Osieh recently introduced new legislation that requires landlords to pay all broker fees in New York City unless the tenant has “helped” the broker. He described the bill as “logical”. But it’s not really that simple, and the council member and his colleagues seem to be willfully ignoring it.
My opinions are derived from my many perspectives on this issue. I’m a freshman from Ohio, and I navigated the New York City rental scene when I moved here 17 years ago. I’m a real estate agent living in Councilman’s Osea area in Crown Heights, and I’m a graduate student who was recently accepted into the Graduate School of Architecture, Planning, and Preservation at Columbia University to study urban planning, with a focus on community development. My focus will be primarily on public planning policies to address inadequate housing in low- to middle-income neighborhoods.
Here are three reasons why this legislation is a step backwards for the City, and especially for Brooklyn renters.
First of all, even councilor Ossé admits that his legislation will lead to higher rents if the landlord has to pay the cost of brokerage fees. Of course, this already happens in some apartments. They are known as “no-fee” listings, which just means that the owner pays the broker’s fee. In almost any building, the monthly rent is more expensive if the landlord pays that cost because it amortizes the broker’s fee over the term of the lease, returning the cost to the tenant over time.
The councilman wants higher “no-fee” rents to become the norm on every building citywide. He claims this would make it easier for tenants because it would spread out their housing costs on a monthly basis rather than asking for more money up front.
As city renters know, the vast majority of landlords require a potential tenant to have an annual income of at least 40 times the cost of monthly rent. Many renters end up applying for and living in apartments where they only meet 40x the requirements.
Let’s say you’re a registered nurse (RN) or transit supervisor making $100,000 annually. You are looking for apartments priced up to $2,500. But under Councilman Ossé’s bill, the monthly cost for the same unit could be $2,750 or more. In this way, you are not eligible for the flats you would have otherwise had because you need them now $110,000 in annual income.
Also, this new unit at $2,750 per month which includes broker fees, is now locked in as base rent to an annual rent increase. Most tenants stay in their units for more than one year, so for anyone who renews their lease, they will be paying the broker’s fee more than once. The landlord will not reduce the rent after paying the broker fee. This additional revenue does not go to the broker, but only to the owner.
Next, Councilman Osseh claims his legislation will not limit the commission of working-class real estate agents across the city. Again, the council member makes it sound very simple by saying that all agents and brokers will now be paid by the owners. But this ignores the fact that many of the services we offer are really services for tenantseven if that tenant doesn’t explicitly “hire” us.
Every summer, agents and brokers guide newcomers as they complete the apartment search and application process – not because they hired us outright, but only because they saw our contact information on the list. Many tenants need help figuring out the requirements for each building, which trains they want to be near to commute, or the difference between a private building and a managed building. Or we may, as agents, fight for a family with two working parents with good cash flow but poor credit and a low FICO score due to a medical emergency. This is where we provide value.
Under the bill put forward by Councilman Oseh, many agents and brokers who offer this value to their tenants must worry about whether they will actually get a fair commission for their work. Entry-level rental real estate agents in New York City only make about $52,000, far less than the million-dollar commissions advertised on real estate reality shows that focus primarily on luxury sales. So to say that this bill “will not cap commissions” is misleading.
Finally, this legislation seems to blame brokerage fees for the housing crisis which was really caused by a failure of government policy – which doesn’t make sense. Rents continue to rise in New York City, and especially in Brooklyn, due to a housing shortage exacerbated by the disagreement of city and state elected officials with policies that increase rental housing production. Producing more housing will drive down prices in the rental market as supply increases; This is basic economics. Instead of regulating brokerage fees, Councilman Oseah could help renters further by lobbying for zoning and legislative changes that are already spurring the construction of affordable housing permanently across the city.
Mayor Eric Adams recently announced the new Office Transformation Accelerator An initiative of the Department of Housing, Economic Development and Workforce to help developers convert old office buildings into residential buildings; and the The South’s downtown plan is mixed-use To rezone Manhattan’s large commercial districts to include much-needed housing. These are the kinds of initiatives the city should continue to implement to encourage more housing construction and increase supply.
Here’s the whole point. If this legislation passes, three things will happen: the rents of many apartments will rise, many working-class real agents will fight for a fair commission, and the real problem of the housing shortage will continue to be ignored.
This isn’t a good outcome for Brooklyn renters—and it’s not “common sense.”
Adrienne Roberson is a real estate agent with Douglas Elliman.
