City Council Member Keith Powers recently introduced a convoluted piece of legislation that would have a significant negative impact on New York’s real estate industry. The Real Estate Board of New York strongly opposes this proposal. The legislation’s goal to make New York more affordable would instead punish hardworking middle-class New Yorkers. The result will be to harm the people the bill intends to help.
There are several immediate concerns with the legislation that are worth addressing up front.
Intro No. 1423 mandates that residential brokers would be “prevented from collecting fees from prospective tenants that are above the value of one month’s rent.” This bill, if passed, would jeopardize the consumer’s ability to rely upon and choose from more than six hundred brokerage firms to help streamline the experience of renting a home in New York City.
First, rental real estate agents are, almost without exception, the most knowledgeable person in any rental transaction. The broker is the one, after all, that knows the building, surrounding neighborhood, schools and rental market conditions better than anyone else. They are able to best understand a prospective tenant’s financial standing and quickly show them the choices that would give them the best chance of being offered a lease at a price they can afford.
Consumers are free to decide if they want to work with a broker to help them find an apartment with a fee attached to it or to continue searching for one with no fee. Sometimes consumers choose to hire a broker to help them find a less expensive rent. Consumers often negotiate a broker fee to avoid paying a higher monthly rent. With rental inventory often exceeding 14,000 available apartments with very strict landlord application requirements at every price point, consumers rely on brokers to help identify choices that will work for their lifestyle, so they do not have to sort through many irrelevant options to find the homes that might be a fit. Engaging a broker saves time, effort, and money. That is why so many prospective renters choose to go with brokers as they seek out their next New York City apartment.
The expertise of a rental broker is a service that both owners and tenants rely upon. Commissions are the agents’ sole source of income – they are not paid salaries. Rental agents are hardworking New Yorkers who are often living paycheck to paycheck. Without these commissions many wouldn’t be able to put food on their tables, save for retirement, start a college savings fund, or pay their own rents. Residential agents are a diverse group of New Yorkers who are more reflective of the communities they serve than any other part of our industry. This legislation would abruptly strip income away from families who need it and work hard to earn it.
Instead of targeting bad actors, this misguided bill would apply to any broker in any situation. If a rental agent is charging exorbitant fees, then the consumer may choose to do business elsewhere or approach landlords directly. The government should avoid the business of dictating rental agents’ commissions and allow the free market to do its work.
REBNY is closely monitoring the legislation and making our opposition known to the Council. We are encouraging our members to phone Council Member Powers’ office to share their stories and thoughts on the bill.