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Surprise State Rules Ban Broker Fees Charged To NYC Renters

Old apartment buildings in Manhattan's Washington Heights neighborhood.

Renters will no longer have to pay fees to brokers who are working for landlords, in a move from New York regulators that has caught the real estate industry by surprise.

State regulators said tenants will no longer be charged the broker fee, The New York Times reports, unless they specifically hired a broker. Landlords will now have to pay the fees to the brokers that they hire. The change, which is attached to last year’s new rent regulation laws, caused an immediate reaction from those in the real estate industry, some of whom claimed it would result in increased rents.

“This is a dire issue with our members, so we are literally going through every single avenue,” Reggie Thomas, the Real Estate Board of New York’s board’s senior vice president for government affairs, told the Times. “It’s an all-hands-on-deck thing because this came out of left field.”

REBNY said it may challenge the new rule in court. Community Housing Improvement Program Executive Director Jay Martin said it would "decimate" the broker industry. Some brokers told the Times the rule wouldn't wind up saving renters any money, as the landlords paying the fee would just pass its cost on in the form of higher rents.

But the new laws passed last year have drastically curtailed landlords’ ability to raise rent on stabilized apartments, which sparked rage from many members of the real estate industry.

Brokers, landlords and developers say there is lingering uncertainty around what legislation now lies ahead, which they believe has continued to put a dampener on the local multifamily market.

Still, in the midst of a major housing affordability crisis, the ruling was met with praise from tenant advocates. Thousands of New York residents are rent-burdened, thanks to population growth outstripping housing supply.

Between 2000 and 2016, the population of New York City went up by 11%, according to a report from the NYU Furman Center released in 2018. Job growth increased by 16%, but the housing stock increased by just 8%.