NYC is lifting broker fees for most tenants. Here’s what to know.

Tenants around the five boroughs rejoiced on Wednesday when the City Council passed a measure that would eliminate steep broker fees for most renters.

The Fairness in Apartment Rentals Act will instead shift the cost of the fee to whoever hires the broker — usually the landlord or management company.

Broker fees have long been an unavoidable scourge for many renters who are required to hand over thousands of dollars before signing a lease on a new apartment. That will likely change next year.

The measure's supporters — including its sponsor, Councilmember Chi Ossé of Brooklyn — say it will save renters thousands in upfront costs piled on top of their monthly rent.

But opponents, such as brokers and the real estate industry’s main lobbying group, warn the legislation could backfire because landlords will simply raise rents to cover the fee they’ll soon have to pay.

Here’s what New Yorkers need to know about the future of broker fees.

What is a broker and what do they do?

Real estate brokers facilitate the sale or rental of a property by listing apartments online, showing them on behalf of landlords and handling applications from prospective tenants. They’re regulated by the New York Department of State.

In exchange for their service, they usually charge the equivalent of one month’s rent or up to 15% of the annual rent. That’s $5,400 for a $3,000-a-month apartment.

In New York, unlike nearly every other part of the country, tenants usually pay the fee even though landlords usually hire the broker.

Tenants and advocates rallying outside City Hall ahead of the vote said that’s the problem.

Software engineer Tim Samuel, 30, said he paid a $2,100 broker fee — the equivalent of a month’s rent — when he moved from Long Island to Astoria last year. That brought his total expenses to $6,300, including his security deposit and first month’s rent. While he said he could afford the cost, he added that the same fees would put the apartment out of reach for many other New Yorkers.

“It can stop people from moving,” Samuel said of the fees.

A recent analysis by the online listings site StreetEasy found tenants pay an average of nearly $13,000 in upfront costs before moving into an apartment subject to a broker fee.

“This bill is common sense,” Ossé said ahead of the vote on Wednesday. “It replicates how every other transaction exists in this country. Whatever you hire or order, you pay for.”

What’s the problem with landlords paying brokers?

That depends on your perspective.

The legislation will certainly force landlords and brokers to adapt to a new landscape, said Stewart Sterk, a real estate law professor at Cardozo Law School.

“It’s a bill that’s bad for brokers [but] I don’t think it’s bad ultimately for landlords,” Sterk said.

He called it a “sensible” measure that brings New York City in line with the prevailing practices of pretty much every other city in the country.

Yet, it will likely have a dramatic effect on brokers and the heads of large firms that take chunks of their employees’ commissions.

Hundreds of brokers rallied to oppose the bill in June. An analysis by the Real Deal found nearly 40,000 licensed real estate agents and brokers in Manhattan, Brooklyn and Queens in 2023.

Will rents go up?

No one quite knows how this will play out, though the measure will probably add a new expense for many landlords accustomed to tenants paying the brokers. They could then pass that cost on to tenants in many cases.

Yet, brokers probably won’t be charging landlords the same 15% commission that tenants face.

John Tsevdos owns seven buildings in Brooklyn and said he works with one broker for all of them.

Tsevdos said he told his broker he can pay her the equivalent of one month’s rent for each apartment. He said he will then factor that cost into the tenants’ rent over the course of their yearlong lease. So if the rent is $2,500, tenants can expect to pay about $200 more per month than they do otherwise, he said.

But he said there’s a limit to that.

“There’s only so much tenants will pay,” he said.

Notably, landlords won’t have the option of raising prices on New York City’s roughly 1 million rent-stabilized apartments, including newer buildings subject to rent regulations due to tax breaks.

Those rent increases are set by a board of mayoral appointees each year.

When will this become law?

It’s still unclear, but not until mid-May at the earliest.

That means renters looking for a new place over the next few months won’t benefit because the rules only take effect 180 days after the bill becomes law.

And exactly when it becomes law is up to Mayor Eric Adams. He can either sign the bill, veto it or let it automatically become law after a month — no later than Dec. 13.

But Adams hasn’t taken a firm stance on the legislation. He has expressed concerns about its effect on “small property owners” and its potential to raise rents.

But he may be hesitant to veto it because councilmembers voted 44-8 in favor of the the bill — a veto-proof majority for a mayor whose vetoes have already been overridden twice in his first term.

After the vote, a City Hall spokesperson told Gothamist that Adams is “closely watching” the bill. They didn’t respond to follow up questions about what exactly that means, since the bill has passed and is no longer subject to changes in the Council.

Could anything stop it from taking effect?

Renters may recall a previous effort to curb broker fees enacted as part of a package of tenant-friendly state laws in 2019. State officials at the time interpreted the new rules as a ban on broker fees, but the Real Estate Board of New York and large brokerages immediately sued. A judge issued an injunction allowing brokers to continue charging tenants for their services and the case resulted in the official reinstatement of the fees.

REBNY, which represents brokers, may sue again. REBNY President James Whelan said the lobbying group will “pursue all options to fight against” the new rules.

What does this all mean for brokers?

There’s a stereotype about no-show brokers swooping in on lease-signing day to claim their multi-thousand-dollar commission even if the renter found the place online and did all the work themselves.

In the age of StreetEasy and Apartments.com, that happens more frequently, as many New York City renters can attest.

But Bed-Stuy broker Chrisette Mignott said she and many of her colleagues actually do work hard to match tenants with apartments.

“For me, I take pride in what I do,” Mignott said. “Many times, I’m showing properties multiple times a day. I really screen the applicants. There is a lot of work that that entails and I work hard for every last thing I have.”

Mignott said she will now begin focusing more on home sales, though she thinks many property owners will also see the benefits of paying brokers to take the job of finding a tenant off their hands.

Still, she said she’s waiting to see how her profession and the overall housing market changes when the new legislation takes effect.

“No one knows what will happen,” she said. “No one knows until it’s put into play.”