Charles Esther
New York City renters often face steep upfront costs when securing an apartment.
One major expense is the broker fee, which can add thousands of dollars before a tenant even moves in.
Starting June 11, the Fairness in Apartment Rental Expenses Act, or FARE Act, shifts the responsibility for paying broker fees from renters to landlords.
This change could save renters like Josh Magpantay thousands of dollars and ease the financial burden of moving in New York City.
Understanding the Current Broker Fee System in NYC
Before the FARE Act, renters typically had to pay broker fees that ranged from one month’s rent to 15% of the annual rent.
These fees are in addition to the first month’s rent and security deposit, creating significant upfront costs.
For example, Magpantay paid around $7,000 in broker fees alone during his recent apartment search in 2023.
Many renters feel trapped by these fees because moving to a new apartment would require paying the broker fee all over again.
The broker fee system has long been criticized for limiting renters’ mobility and affordability in the city.
How the FARE Act Changes the Landscape for Renters
The FARE Act mandates that landlords now cover the broker fees unless the renter hires their own broker.
This shift aligns New York City with most other U.S. markets, where landlords traditionally pay brokers’ commissions.
According to a report from StreetEasy, the FARE Act is expected to reduce upfront moving costs by about 41.8%.
The average upfront cost for signing a lease, including rent, deposit, and broker fees, would drop from $12,951 to approximately $7,537.
This reduction is a major win for renters struggling with affordability.
The Potential Impact on Rental Prices and the Market
Critics argue landlords might raise rents to recoup broker fees, potentially negating savings for tenants.
The Real Estate Board of New York has even sued to block the law, warning of rental market disruptions.
However, economists suggest the impact on rent prices will be minimal.
Rent levels are mostly influenced by supply and demand, not landlord expenses like broker fees.
Data from properties that dropped broker fees earlier in 2024 showed only a slight increase in rent, indicating landlords are absorbing much of the cost.
This suggests rent hikes due to the FARE Act may be limited or nonexistent.
How the FARE Act Benefits Renters and the Rental Market
The law gives renters more financial flexibility and could encourage more people to enter the housing market.
Some renters had delayed apartment hunting until the FARE Act passed to avoid paying high broker fees.
The law also empowers tenants by clarifying that whoever hires the broker is responsible for the fee, putting control back in renters’ hands.
Brokers hired by tenants still offer value by guiding renters through the complex market, but renters now have the choice to avoid those fees if they search independently.
Landlords may also negotiate lower broker fees if they continue to use brokers, balancing the market dynamics.
Challenges and Industry Reactions to the FARE Act
Some landlords plan to avoid online listings and rely on word of mouth to fill vacancies, trying to reduce broker involvement.
Industry experts doubt this approach will be effective since landlords want to rent units quickly and will use whatever means necessary.
Renters like Lexis Xia worry about rent increases, but data shows this concern may be overstated.
Actors like Dante Fiallo, who were financially locked into expensive apartments due to broker fees, stand to benefit the most from this law.
Conclusion: A Positive Step for NYC Renters
The FARE Act, effective June 11, represents a significant change in New York City’s rental market.
By shifting broker fees to landlords, it reduces upfront costs and eases financial pressure on renters.
While concerns about rent increases exist, evidence suggests the overall impact on prices will be minimal.
Ultimately, the law empowers renters with more choice and clarity in one of the most expensive and complex housing markets in the world.
This legislation offers hope for more affordable and accessible housing for many New Yorkers.
