Last week, the city eliminated broker fees, thanks to a victory for renters, but landlords still managed to find a way to benefit from the situation. As expected, they increased rents to make up for their losses.
According to a report from a real estate analysis firm, rents have surged by 15% since the controversial fare law went into effect.
“We’re definitely seeing a clear reaction in the Manhattan rental market,” remarked John Walkup, co-founder of Urbandigs.
The fare law makes it illegal for agents hired by property owners to charge tenants broker fees. It also mandates that all fees be disclosed in lease agreements and property listings.
However, rising rents suggest that landlords might be covertly factoring these fees into the rental prices, shifting costs back to tenants in a more straightforward, albeit frustrating manner, according to Walkup.
This legal change has led to what some insiders call a “shadow market,” where landlords opt not to list certain apartments to help cover the fees for tenants.
“It feels like apartment hunting again, much like it did in 1999. We need to know who to contact and when,” said Jason Harbor, co-founder of the American Realtor and a compass broker.
“It’s going to be quite the journey.”
As listings vanished almost overnight—about 2,000 from StreetEasy disappeared when the law took effect—Urbandigs observed that the number of available apartments has surged by 30%.
Meanwhile, renters are sharing frustrating experiences online, documenting situations where they encountered various fees, showing screenshots of conversations with brokers that illustrate the confusion.
Ricciotti expressed that he has been inquiring whether tenants might end up paying broker fees kind of like accepting higher rents, which could actually yield more revenue over time.
For instance, one tenant reported a broker raising the rent by $700. Another said that a landlord was asking for $6,800 for a three-bedroom apartment with broker fees or $8,000 without. This type of advertising is against the new law.
“We’ve received many inquiries from future tenants wanting agents to charge fees directly,” someone noted. “Unfortunately, they have to be informed that this is now illegal.”
Quebenae Tadesse expressed her frustration while searching for a studio in Brooklyn, stating, “The broker keeps saying, ‘It’s disappointing.'” When she confronted an agent about the fee, the listing was quickly removed, and the apartment was marked as “temporarily off the market” since June 11th.
