New York real estate is on fire. new legislation may force landlord Pay the high broker fees tenants traditionally pay to real estate companies.
If the law passes, many landlords may skip brokerage to keep their properties. cash flow. They won’t get much sympathy from tenants, though. As New York rent prices soar, the city is in trouble affordability crisisrenters are struggling to pay the sky-high fees charged by agents — typically 10 to 15 percent of annual rent, excluding margin and first month’s rent.
The move would change the makeup of real estate in New York City – one of the most expensive markets in the country.
New York State rental market
Tenants include more than two thirds of urban households and hold huge Use your influence in elections. Their frustration with exorbitant agent fees is understandable: They never hired an agent to represent the apartments, and being forced to pay thousands of dollars for the privilege has been a source of dissatisfaction for years. What’s particularly jarring is fact In other cities, it’s the landlord, not the tenant, who pays the broker’s fees.
“In most businesses, the person who hires the person pays the person,” said Agustina Velez, a house cleaner from Queens. abc news. She said she recently spent $6,000 to upgrade her apartment. “Enough of these injustices. Landlords must pay for the services they use.
However, the real estate industry in New York is different from other industries. Each multi-million dollar apartment generates a six-figure commission for an agent, and there are thousands of agents scurrying around the city showing apartments to potential clients.
As the battle lines are drawn, much is at stake for both sides. Soaring rents mean the upfront cost for the average apartment renter outside Manhattan often exceeds $10,000, or about 14% of their average annual income. Only one in five tenants has Cash available on hand Ability to move into a New York City rental. For many potential renters, this often means taking on credit card debt only Find a place to stay.
“This is an additional cost in an already expensive and competitive market,” said Assemblymember Chi Ossé, the bill’s sponsor. Tell New York Times. “It holds a lot of People are coming back after finding new homes, which is driving people out of the city.
New York City rents continue to rise
During the pandemic, when thousands of residents fled the city, it seemed foolish to many to wonder whether New York City could survive. The office building finally appears signs of recoveryNew York rents are rising steadily, with no respite in sight.
The Rent Guidelines Board, which sets rent increases annually for rent-stabilized apartments, voted to increase rents for the third consecutive year 2.75% This year, the company is offering about 2 million tenants 5.25% on one-year leases and 5.25% on two-year leases. According to data from New York City listing website StreetEasy, the median asking rent is $3,800 in May—The highest level since the site began tracking data in 2010.
New York City tenants and agents are struggling to make ends meet
Considering the average salary in New York City is $73,950, average tenant It’s expectation Spend about 20% of your annual salary after tax to secure a place to live.
Meanwhile, when a broker splits a rental commission with a showing agent, their agent typically receives about 60% of the commission. So if an apartment rents for $4,000/month, that’s $48,000 per year, and there is an agent receive 10%, or $4,800, of the agent’s receive $2,880. According to Zip Recruiter, the average annual salary for a real estate agent in New York City is $90,773.
New York City faces chronic housing shortage
it’s not like There are a lot of apartments Available for rent. In April, New York Gov. Kathy Hochul and the state Legislature reached a deal to boost residential construction in the state’s most populous city. The city has long been plagued by housing shortages and rising homelessness, a problem that has been further exacerbated by the immigration crisis.
“The fact that New York City has a vacancy rate of 1.4 percent should scare us all,” said House Speaker Carl Heastie, a Democrat. tell reporters At that time, it was quoted Report It found rental vacancy rates across the five boroughs were at their lowest levels in more than 50 years. Occupancy rate Homeless shelter surge This year, as migrant buses arrived in the city.
Free apartments rising in New York City
With the upfront cost of living in New York City being so high, it’s no surprise that the number of free rentals, where the landlord rents the apartment instead of an agent, is on the rise. new york city increased. StreetEasy even screens for this type of apartment, which is understandably popular and sells quickly. Expect free rent to surge if brokers’ commissions are transferred to landlords, with landlords and their affiliates choosing to complete the screening process themselves rather than paying brokers.
“This is the beginning of a top-down, government-controlled housing system,” said Jordan Silver, a broker with Brown Harris Stevens. Tell NBC New York. “Language is so vague that we actually No idea what that would look like in the world.
Ryan Monell, vice president of the Real Estate Council of New York, said the complexity of the New York City market makes it unique. “Comparing New York to other cities is a misnomer,” he told NBC New York. “This is real A special market.
New York City Mayor Eric Adams, a former real estate agent who also serves on the New York City Police Department, has taken a neutral stance, saying tenants will not have to pay agent fees for city-funded affordable housing. A spokesman for the mayor was noncommittal: “We are reviewing the legislation and taking time to understand any potential impacts.” Interview New York Times.
New York City is facing an exodus of low-income residents
Faced with high housing costs, New York City is also working to keep its workforce in the city. U.S. census data shows 78,000 people to leave the city in 2023.
However, this is only half the story. In 2022, the city lost more than 126,000 residents. From April 2020 to July 2023, it lost nearly 550,000 residents, or more than 6% of the total population. Department of City Planning spokesperson Casey Berkovitz said 180,000 immigrants have come to the city since spring 2022, and 64,600 of them are still in the city’s care. However, immigrants typically do not join the workforce or rent housing.
While many believe the city will eventually regain its population, this is no coincidence Bronx and Brooklyn The wealthiest boroughs lost the most people, but maintained their numbers. If this continues, New York City’s population will increasingly skew toward the wealthy living in expensive Manhattan apartments. High rents mean these apartments dominate upper-class areas Free rental category.
final thoughts
Considering the cost of living, it’s easy to see why so many people are leaving New York City. Still, the city’s chronic shortage of affordable housing and the relatively low average real estate agent earnings mean there are legitimate arguments on both sides for and against ending broker fees from tenants. As with much New York law, only either/or solutions will suffice.
Is it feasible for landlords and tenants to split broker fees? I can understand the problems that might arise with this arrangement (either party might try to avoid paying their share, or the landlord might make a side agreement with the broker, such as lower fees and a promise of further listings). However, if watertight legislation could enforce this arrangement, it would seem to be one of the most logical solutions.
Considering the difficulty of evicting tenants in New York City, having an experienced agent can be a powerful help Filter tenants, including background checks, are fees that landlords should charge as a cost of doing business. Ultimately, if they rent to the wrong person, finding the right tenant and paying for the services can save them a lot of money in the long run.
As with most contentious real estate issues, it’s hard to believe that a compromise that appeases both parties is impossible.
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