New York City’s Broker Fee Law Is in Effect. Now What?

The Fairness in Apartment Rental Expenses Act, or FARE Act, takes effect today in New York after a federal judge tossed a down-to-the-wire effort by the Real Estate Board of New York (REBNY) to halt it in its tracks.

Tuesday’s decision by Judge Ronnie Abrams is either a major win for New York City’s renters or a devastating blow that will send rents skyrocketing. It depends who you ask. 

The act prohibits brokers who are hired by landlords from charging renters for their services, and requires the broker and the landlord to present the complete costs related to renting an apartment to every tenant. Broker fees can be charged only to tenants who personally hire a broker to help them find an apartment.

Brokers and landlords who try to elude the restrictions will be subject to first-time fines of $750, which will rise to $1,800 and then $2,000 for subsequent infractions.

The New York City Council approved the FARE Act last November, and REBNY quickly filed suit to try to stop the law. With Judge Abrams’s decision, that effort now seems to have failed. 

REBNY President James Whelan expressed disappointment that the law is moving forward, saying he believes this will lead to higher rents and noting that REBNY will explore all avenues for continued litigation in hopes of repealing the measure.

“New Yorkers will soon realize the negative impacts of the FARE Act when listings become scarce and rents rise,” Whelan said in a statement.

The New York Apartment Association (NYAA), a not-for-profit group that represents apartment building owners, believes the law will make an already unhinged rental market even more chaotic, adding to the considerable costs involved in operating a rental building in New York City.

“We know that tens of thousands of rent-stabilized buildings are in financial distress and are unable to shoulder the cost of brokers’ fees. We expect many of them to stop using brokers for future rentals, and many of them will not publicly list apartments,” NYAA CEO Kenny Burgos said in a statement. “Either way, the law is an added cost on rent-stabilized buildings, many of which are already bankrupt or are quickly plummeting towards financial insolvency.”

Unsurprisingly, some feel otherwise.

Nick E. Smith, executive director of the housing legal services organization Communities Resist, wrote in a January editorial in City Limits that the FARE Act is a significant step in addressing New York’s housing crisis, calling it “a great example of what we can accomplish when tenants come together and advocate for policies that will make our lives easier.”

Genesis Aquino, executive director of Tenants & Neighbors Coalition, feels similarly optimistic about the new law.

“The FARE Act is a step in the right direction toward addressing New York’s affordability crisis by ensuring tenants are no longer forced to pay a fee to a broker they did not hire,” said Aquino. “This removes a huge barrier for everyday New Yorkers to access housing, and is a big win for all of the working families and tenants who keep our city running.”

Given the perpetual roller coaster that is the cost of housing in New York City, time will tell who the bill ultimately benefits, and who finds themselves burdened by even higher costs of living.

Larry Getlen can be reached at lgetlen@commercialobserver.com.