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New York City’s controversial broker fee bill has gone into effect. This means rental property owners — not renters — must pay broker fees when they enlist a broker to help them lease a unit.
The New York City Council passed the bill, formally known as the Fairness in Apartment Rental Expenses (FARE) Act, in November with a vote of 42 to 8. The Real Estate Board of New York (REBNY) sued the City in December to stop FARE’s enforcement and filed an injunction on Tuesday, saying the bill shouldn’t be enforced until the lawsuit ends. However, Southern District of New York judge Ronnie Abrams denied REBNY’s request.
James Whelan | Credit: REBNY
“New Yorkers will soon realize the negative impacts of the FARE Act when listings become scarce, and rents rise,” REBNY President Jim Whelan told The Real Deal.
NYC Councilmember Chi A. Ossé pitched the FARE Act for two years and finally got traction in 2024 amid record rental growth. Ossé and his 33 co-sponsors said broker fees exacerbate high rental costs, with New Yorkers typically paying five figures to rent a unit, which includes the first month’s rent, a security deposit and a broker fee of one month’s rent or 10 to 15 percent of the annual rent.
“A party that purchases or contracts a good or service should be responsible for the cost,” Ossé, who represents Brooklyn, said last year. “This is the case in every other transaction across our vast economy, and should be true for New York City Rentals as well. The FARE Act has the potential to alleviate prohibitive upfront costs for workers and growing families searching for a new home.”
“If you want a broker, great, hire them. And if you don’t want one, my bill says you don’t have to pay,” he added.
Ossé said the bill will improve affordability for New Yorkers, an outcome that Zillow-owned StreetEasy supported through a report that found upfront rental costs had grown 19.28 percent from 2023 to 2024. For renters who leased a unit with broker fees, StreetEasy said they “likely spent 42.9 percent more” in upfront costs than renters who leased a unit without broker fees.
“This is a big win for renters,” StreetEasy Senior Economist Kenny Lee said.
However, early market trends hint that FARE’s supporters might be wrong.
The Wall Street Journal tracked rental listings in the days leading up to the bill’s enforcement, and found that property owners had hiked prices by hundreds of dollars. One unit that The WSJ tracked included a notice that the price would go from $3,300 per month to $3,975 per month if it wasn’t rented before the FARE Act’s enforcement.
REBNY warned that FARE would cause higher monthly rents, as property owners look for a way to offset the cost of brokers’ fees.
“What it really is going to do is complicate the transactions even further to where effectively that cost is going to have to be accrued through higher rent,” former REBNY VP of Government Affairs Ryan Monell told Inman in June 2024. “So while you may save some money on the front end of a transaction, the reality is the cost of the broker fee isn’t actually going to be evaporated into thin air.”
“For those who decide to renew the lease year over year, it’s going to be a problem,” he added. “When you’re looking at a higher base rent for the first year you’re in an apartment, it’s going to be effectively amortized over time because when you go to renew, generally in New York City, they raise your rent, say 5 percent.”
Even as rents experience a post-enforcement pop, New York City renters still seem to see FARE as a win — for now.
The WSJ spoke to 27-year-old NYC renter Rita Liu, who spent half of her savings to get into an apartment during a previous move.
“Landlords are going to jack up the rents no matter what,” she said. “If broker’s fees aren’t a factor now, moving would be a lot more feasible.”
Despite several hiccups in their suit, including Judge Abrams’ criticism of REBNY’s claims that the Act violates First Amendment rights and limits consumer choice, the Association said it won’t give up easily.
“We will continue to litigate this case as well as explore our avenues for appeal,” REBNY President Jim Whelan said.
