In many ways, New York has long been ahead of the United States when it comes to housing policy. We built the first public rental housing in the nation. Our rent stabilization system features some of the country’s strongest tenant protections. Mitchell Lama and union-built cooperatives proved that affordable cooperatives could be an enticing housing option for middle-class families.
These are just a few of the ways that New York’s housing history has been exceptionally progressive. But in other ways, we are exceptionally regressive.
One of the most blatant examples is how New York City deals with the cost of moving to a new home. Aside from Boston, New York is the only big city in the country where, in addition to a security deposit and first month’s rent, tenants are expected to pay a broker’s fee – often 15 percent of the annual rent – even when it was the landlord who hired the broker to show the apartment. Everywhere else in the United States, the party who hired the broker pays the broker. But recently this unjust practice has come under scrutiny, and City Councilmember Chi Ossé has offered an ingeniously simple solution.
His Intro 360, known as “the FARE Act” (Fairness in Apartment Rental Expenses), is essentially a one sentence bill: “A person collecting fees in connection with a rental real estate transaction, whether such person is a representative or an agent of the owner of the property or of the tenant or prospective tenant in such transaction, shall collect such fees from the party employing such person in such transaction.” If the tenant selects a broker to show them several options in a particular area or of a particular style, the tenant is on the hook for the broker’s fee. But if a landlord hires a broker to show their apartment – the more common scenario these days – the landlord pays the fee. Either way the broker earns their pay for the services rendered, but, crucially, the hiring party will now bear the cost.
Textbook Regressive Economics
Broker fees are not just a question of fairness, they’re also a question of equity. Home sellers often pay the broker fee for their buyers, but landlords typically do not pay the broker fee for their tenants. Meanwhile, according to a recent Community Service Society of New York (CSS) report AMI in NYC, New York City homeowners earn nearly twice the household wages of renters. This is textbook regressive economics.
Among tenants, the most recent New York City Housing and Vacancy Survey shows that those who are moving tend to be white and have higher incomes than tenants who stay put. Among tenants surveyed in both the 2021 and 2023 surveys, 56 percent of renters who moved into empty apartments since 2021 make over $100,000, even though such tenants only comprise 36 percent of renters overall. Meanwhile, 50 percent of recent movers were white, even though white households make up just 32 percent of all tenants.
Part of this is because there are so few apartments available at prices low-income renters can afford. But another contributing factor is brokers fees. Since low-income tenants often do not have the savings to pay a big up-front fee in addition to the first month’s rent and a security deposit, the idea of moving is simply unfeasible. According to CSS’s 2023 Unheard Third survey, most tenants have very little in savings. While most homeowners we survey reported having “$10,000 or more” in savings, the most common response for renters was “$0 to $99.”
In fact, a majority of tenants said they could not cover a $400 emergency expense without taking on debt, borrowing from friends or family, or selling something in their possession. Meanwhile, according to the website Zillow, the median asking rent for a vacant apartment in New York City today is $3,600. The first month’s rent, security deposit and a broker’s fee for that apartment could cost $13,680 – an up-front cost few tenants can cobble together.
Some of the poorest tenants in the city pay their rent with CityFHEPS vouchers, a rental assistance program sponsored by New York City. But if those tenants want to move to a different apartment, the city will only pay half of the apartment’s broker fee. This puts a cost on the tenant that, almost by definition, they cannot afford, and therefore locks them out of the very mobility a voucher system promises.
There are many vexingly complicated issues in this city, but this is not one of them. New York City should lead the way in progressive housing policy, not stand out as one of the country’s two regressive outliers. Councilmember Osse’s bill is so simple and fair that it boggles the mind why it is not already law. It’s time for the City Council to pass the FARE Act and correct this basic inequity in our housing system.
David R. Jones, Esq., is President and CEO of the Community Service Society of New York (CSS), the leading voice on behalf of low-income New Yorkers for more than 175 years. The views expressed in this column are solely those of the writer. The Urban Agenda is available on CSS’s website: www.cssny.org.