NYC rental law shifts broker fees from renters to landlords

In December 2023, New York City passed the Fairness in Apartment Rental Expenses Act, commonly referred to as the FARE Act. This new law fundamentally changes how rental broker fees are handled in the city, which has long been one of the few places where such fees were permissible for tenants. Under the FARE Act, landlords are now responsible for broker fees unless a tenant specifically hires a broker to find an apartment. This legislative change comes as a response to increasing living costs, with advocates arguing that it will make renting more affordable for the city's population, which primarily consists of renters. The broker fee system, which historically charged renters a substantial fee, typically ranging from 12% to 15% of the annual rent, has been a significant financial burden for many. Prior to this law, many renters would pay thousands of dollars upfront in broker fees, adding to the already high costs of living in New York City. With the new law, as long as the tenant does not enlist the broker's help, they will no longer face these charges, effectively transferring that cost to the landlords. However, there are concerns from within the real estate community regarding the potential long-term effects of the FARE Act. Industry experts, such as Keyan Sanai of Douglas Elliman, believe that while the abolishment of broker fees will provide short-term benefits for tenants, it may lead to rent increases as landlords try to recuperate any losses associated with the lack of broker fees. Many brokers and real estate professionals voice the opinion that landlords may inflate rent prices to cover these expenses over time, thereby diminishing the intended benefits of the act. As the new law went into effect in December, reactions have been mixed. Some are optimistic, welcoming the relief from broker fees, while others fear a hidden cost in the form of increased rent. The ongoing debate within the real estate sector highlights the complexity of rental economics in one of the most competitive housing markets in the country. As the situation evolves, it remains to be seen how this significant policy shift will ultimately affect both current and future renters in New York City.