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Matt Katz: It's The Brian Lehrer Show on WNYC. Welcome back, everybody. I'm Matt Katz, keeping the seat warm for Brian for a couple of days. Now, we're going to talk about an issue that every New Yorker who's had to move apartments in the last few years is familiar with, brokers fees. New York and Boston are the only major American cities where rental broker fees are passed to the tenants. Typically, the fees are around 15% of annual rent or about one month's rent, but those costs aren't formally regulated or capped, and recently, they've gone up. Most New Yorkers are considered rent-burdened, meaning they pay more than 30% of their monthly income on rent.

Coming up with cash upfront to pay more money for brokers fees can put an apartment out of reach, even if the monthly rent is in that person's budget. You might have heard of efforts over the last few years to change this system to no avail. Most recently, City Councilmember Chi Ossé reintroduced a bill from last session called the FARE Act, that would transfer the brokers fee from tenants to whoever hired the broker, most often the landlord.

There was a rally yesterday and a hearing on this at City Hall, and it got contentious with tenants and landlords at odds. With me now is David Brand, housing reporter for WNYC and Gothamist. Later, we're going to be joined by Councilmember Ossé. Hey, David. Thanks for coming on and explaining all this to us. Appreciate it.

David Brand: Hey, Matt. Thanks for having me on.

Matt Katz: Why are brokers fees relatively unique to New York? How do brokers get paid in other places like Connecticut and New Jersey?

David Brand: It's a uniquely New York innovation that we have here. Maybe we should be proud of that, a new way of spending money here. I think it started many years ago when listing apartments, showing apartments, coordinating showings, was more difficult before the internet. Agents would have to place ads in newspapers, especially The Village Voice, have to coordinate meeting up with prospective tenants and taking them into the apartment and accepting their paper applications. Throughout that history, the tenants were the ones paying that fee. Things have changed. It's not as grueling of an effort, I guess, these days with the internet.

Yet we still have the current situation where the tenants are the ones who end up paying the fee, like you said, an upfront cost on top of their monthly rent and their security deposit. That's probably still a symptom of our extremely tight housing market where tenants don't have that much leverage. You can't really fight these fees. If the broker says you're paying and that's part of the agreement the broker has with the landlord, then you can try to negotiate, but you can't really get out of it. It's a throwback that still lingers today.

Matt Katz: Listeners, if you've encountered brokers fees that are so high that you just couldn't even afford to move into an otherwise affordable apartment, we want to hear from you. Brokers and landlords, tell us what you think of this proposal. How would it affect you? Why is it a problem? Call in and tell us about your experience. We're at 212-433-WNYC, that's 212-433-9692. You can also text us at that number. David, take me back in time a bit.

Have these fees risen over the years? You wrote several months ago about a rent-stabilized apartment in Flushing that had a monthly rent of $1,100, which is like a steal in today's market, it's pretty good, but the broker's fee was $15,000, it was $15,000. If you can only afford $1,100 monthly rent, then you probably don't have $15,000 on hand. How does the math even work on this? Was this an outlier or is this typical?

David Brand: It's an outlier, but I don't think it's not such an outlier that after doing that story, I didn't hear from a number of readers and listeners with similar experiences and pointing me in the direction of similar advertisements with relatively low-cost rent-stabilized units with a huge upfront broker's fee. You're right. It locks out a lot of people who really need an $1,100 a month apartment who are, in other cases, relatively low monthly rent apartment. If you do have $15,000 to hand over, you could justify that as a pretty good deal in the long-term. You'd put up all that money upfront and then you can stay in a pretty decently priced apartment for an indefinite amount of time.

Yes, it really limits who's allowed to apply. Cases like that, they tend to generate a lot of attention. I know that story was pretty popular. There was another one, a similar situation, I think, on the Upper West Side, where there was a brokers fee on a rent-stabilized apartment of $20,000. That captured the attention of state regulators, who then ended up fining the brokerage firm for an outrageous broker's fee. There's so much vague regulation that that one probably only led to a penalty because it generated media attention. Really, there are guidelines of, "Oh, you've mentioned 15%, or it used to be 12%, or maybe one month's rent." 15% is closer to two months rent.

It has risen gradually over time, but there's no hard and fast rules. There's nothing in state law saying a broker can only charge X percentage on an apartment. You asked before, how does it work in the rest of the country? I'm sure a lot of our New Jersey listeners or listeners elsewhere in the country will tell you that whoever hires the broker is the one who ends up paying them. It doesn't automatically fall on the tenant.

Matt Katz: The City Council tried to change this a few years ago. In 2019, there was a bill that would have capped brokers fees at one month's rent. Why did that fell? Where is the opposition coming from on this? What is their argument?

David Brand: There's been a few attempts to limit these fees. That one in the City Council was happening at the same time as confusion on the state level. Back in 2019, the state passed very tenant-friendly laws. One of the interpretations of those laws by the state's Department of State, which regulates brokers and brokers fees, was that those laws meant no more brokers fees. For a short period of time, they actually went away. Real estate groups and the Real Estate Board of New York almost immediately sued to try to block that interpretation. There was an injunction from a judge pending the result of the case, where brokers fees can continue, and they did.

A judge ultimately ruled that the state had overstepped by trying to eliminate brokers fees, and we have the current system we have in place now. Previous attempts by the Council have failed in the face of that really strong institutional real estate opposition. Now, for the first time, we're really seeing a lot of momentum at the city level, where this bill introduced by Chi Ossé now has 33 sponsors in the Council, which is one short of a veto-proof majority. It's moving full steam ahead.

Matt Katz: You mentioned Councilmember Chi Ossé, and we actually have the Councilmember on the line to talk about the bill. Councilmember, are you there?

Councilmember Chi Ossé: Good morning. How's it going?

Matt Katz: Going great. Thanks for calling in. David just mentioned that you have 33 Council members signed on to this bill. We talked about how efforts like this have failed in the past. Are you seeing more support right now in terms of tackling broker fees? What's the status of things?

Councilmember Chi Ossé: We put together a big net coalition when trying to approach this problem that many New Yorkers have dealt with when looking for housing. I think one of the first things that we wanted to do when introducing this bill was to be strategic around why it failed in the past. I think some of the bills that have been introduced were a bit confusing for not only the public, but really riled the brokers and revenue up to push back against it.

That's why we put together what I perceive to be a common-sense bill of whoever hires the broker, pays the broker fee. With that, we've been able to get the support of 33 Council members out of 51, 12 labor unions, including the Central Labor Council, dozens of advocacy organizations, and really utilizing our own communication strategy to build some public support for this common-sense bill.

Matt Katz: You mentioned revenue, that's the Real Estate Board of New York, which has been pushing back on the bill. David, you've been covering this issue. Do you want to ask the Councilmember a question here?

David Brand: Sure thing. Hi, Councilmember.

Councilmember Chi Ossé: Hi.

David Brand: The main argument from the Real Estate Board in New York and the brokers, including the hundreds who were out there at City Hall protesting this bill yesterday is that it's actually going to hurt tenants by leading to higher rents because the landlords, if they're forced to cover the fee, are going to factor that fee into the monthly rent that tenants will be paying. How do you respond to that opposition from the real estate interest?

Councilmember Chi Ossé: Sure. First, REBNY being the organization to be now concerned about raising rents is really hypocritical. This is the same organizing group that has pushed to weaken good cost. This is the same organizing group that is not mobilizing 1,500 people to show up and protest at the Rent Guidelines Board hearing. It's funny to see them coming to push back against a bill like this one. I disagree with their statements on this in terms of how it will increase rent. One, nearly half of New York City rentals, I believe about 44% are rent-stabilized, meaning rent legally cannot be raised beyond the levels established each year by the Rent Guidelines Board.

Two, rent is determined by market forces, not by what landlords could charge for rent. If your landlord could increase your rent tomorrow, they would have done so yesterday. We saw that happen during the pandemic. When demand fell, rents plummeted, thanks to supply and demand. If rent were indeed set by landlords and not by market forces, they would not have voluntarily slashed it during a period of low demand.

Third, I believe that in the current system, tenants do not have bargaining power, and landlords know that. They know that it's hard for tenants to move to a new apartment because of the upfront cost, including the broker fee. Passing the FARE Act would give tenants more bargaining power. It will allow them to be more mobile in terms of finding new apartments with less upfront fees, and what I believe would put a downward pressure on rents.

Matt Katz: Is this going to put all these brokers out of work. There's 14,000 or 15,000 brokers registered with the Real Estate Board of New York, there's others who are working independently. What's going to happen to them?

Councilmember Chi Ossé: Listen, this is not an anti-broker bill. I was looking for an apartment a year ago. It was really frustrating finding one in my district. I ended up hiring a broker myself, and this person did a wonderful job. They helped me find the apartment that I'm still living in today, but I don't believe that every single New Yorker has had that same experience. Just because I was able to hire a broker doesn't mean every New Yorker should be, or any New Yorker should be forced to pay for a broker that their landlord hired.

I believe that brokers that do their jobs well that are hired by an individual party will stay in business.

I think some of the brokers that may be bad apples, which we've heard plenty of horror stories about, not only in yesterday's hearing, but throughout our time as New Yorkers in terms of showing up to listings and no broker being there, I think some of those brokers will be out of business. I think some of the ones that have been working in the industry for a while have an amazing clientele, really great customer service, I believe, that they will stay in business.

Matt Katz: Councilmember, I know you're short on time, but tell us before you go, the status of the bill, when you expect a final vote, and whether you know if the mayor's on board.

Councilmember Chi Ossé: We're one Councilmember away from 34, which if passed, it would be a veto proof passing of the bill. Really, need to get to that 34. Would love to have the speaker's support in this. I think with our large coalition and growing, we will continue to push and hopefully see this bill pass my fantasy sometime this year. There's so many people who are DMing me and reaching out to me, asking me to pass the bill immediate. I would love to do nothing but that.

Matt Katz: Councilmember Chi Ossé represents parts of the Brooklyn neighborhood, Bed-Stuy, plus parts of Crown Heights. Thank you very much for calling in, Councilmember. Really appreciate it.

Councilmember Chi Ossé: Thank you for having me.

Matt Katz: We're going to go back to the phone lines, get a little bit of a different perspective. Vivian in Washington Heights, hi, Vivian.

Vivian: Hi. I'm an agent. I work for Brown Harris Stevens. I've been an agent for 16 years. I've come from a long career in documentary television. To me, it's the developers and particularly the landlords who are the ones who are keeping rents unaffordable for people. It's always the brokers that people go after because we're the ones who don't contribute to their campaigns the same way that developers and landlords will. That's why they don't go after the source of the problem.

Matt Katz: Vivian, tell me--

Vivian: I feel-- Sorry.

Matt Katz: I was just going--

Vivian: It's the people-- Sorry.

Matt Katz: Go ahead, Vivian. I think you're going there. I wanted to ask, give a sense of what it is you do day-to-day. Give people a sense of what your work is like.

Vivian: I'm a networker, and I think actually that every day is different. I'm sitting here right now writing a copy for a new sale listing that I have. I wanted to say that it's very much an information network. I've represented people with developmental disabilities because I have two grown children who have them as well. It's the network of knowing which landlord would accept people, even though it's the law, who would take clients like that, potential renters. It's not about finding the apartments, everyone can find them online.

If they're not transparent in the way that things are listed, and you need to know another broker who has a listing with a great landlord who, of course, would have no problem with somebody who has funding from the state as one of my sons does. I went to a broker that I know knows my neighborhood and is very tied into landlords, and that's how I found an apartment for him. I think it's delusional to think that we just grab money and really don't do anything for it.

Good luck to people who think that they can just do it from StreetEasy, but there's a whole information network in the background that is invisible to the average renter working out on their own. There are leases that come that have things that are quirky, that seem wrong. I've picked up the phone and called lawyers that I've dealt with mostly in sales to ask them if this lease sounds right to them and names that are constantly misspelled. We are agents for the people. We are not gum-chewing, idiot-money-grabbing people that we're often presented as being.

Matt Katz: Could landlords pay your fees? Does it have to come from the tenants?

Vivian: Landlords often don't pay fees. They don't want to pay fees. When they do pay fees, the rent is higher. When you then down the road with many years of percentages, it ends up costing people more in the long run than if they do work with an agent. Yes, they can pay fees, but they may not want to. There's a lot of work in running around for people. I've had a landlord reject somebody because she looked trans to him, and there was no way, no how he was going to have this person in his building.

Then it was trying to network to find a landlord who would accept, who would follow the law. All of this is the work that we do, and the people that should pay for it. You're not going to one landlord, and that's the point. You may end up with one landlord, but look at all the running around you do. As we always say, we get about 10 cents an hour in this business.

Matt Katz: Thank you, Vivian. Thank you for sharing that perspective. Really, really appreciate it. Want to continue with the phones here, David? We have a bit of a different perspective coming from Theresa in Manhattan. Hi, Theresa.

Theresa: Hi, there. Thank you for taking my call.

Matt Katz: Sure.

Theresa: I will say that, of course, I do appreciate the work of realtors and I do think that they should get paid. My first point would be, I don't know when it became a percentage versus I remember when I first moved to New York City, it was maybe a month's rent upfront. Then now I've been here for 25 years and had a family. Actually, when my family was living in Brooklyn, our home was sold and we had to move. It was impossible for us to stay in our neighborhood. We found apartments that we could afford, but to walk to the door was going to be over $10,000. That absolutely, there was no way we could afford.

We ended up being housing insecure for over six months, had to stay with family. It was very traumatizing for my children. Ultimately, we got an apartment in Manhattan because there was no fee. We had to leave our neighborhood and we were paying over $1,000 more a month, but it was the only way we could get ourselves back into a home. I understand that in the long run we end up paying more, but that upfront fee can be so prohibitive and just completely impossible that there, you're left with no other choice. Something does need to be done, whether it's put on the, I'm sorry, the building owner, but it can't all fall on the renter.

Matt Katz: Sure. Thank you, Theresa. I really appreciate it. David Brand, WNYC/Gothamist reporter has been covering this. You've been listening to these callers. Are these two opinions that we just heard, Theresa, Vivian, reflective of the arguments that you heard yesterday covering the hearing and rally?

David Brand: I think to start with Theresa's, I think that experience she had of facing this huge upfront cost that sounds like her family couldn't make at first is really common. That's the core issue that this bill is trying to get at, removing one of these huge upfront costs that are an additional burden, in addition to some of the highest rents in the country we have here in New York City. By shifting that burden onto the landlord, that could get rid of a pretty huge prohibitive fee. The StreetEasy, the listings website did a report back in February and found that the average upfront costs that an apartment hunter needs in New York City is $10,500.

That's security deposit, first month's rent, and the broker's fee. That's before moving expenses and everything. That's a common experience. You hear that a lot from tenants, and that's core issue here for this bill. Listening to Vivian talk, I think it's clear from Vivian that she does a lot of work. There are brokers, a lot of brokers who really hustle. It's not an easy job. They have to build these relationships. Sounds like she has a pretty strong understanding of the housing market in New York City and where it's going to work to place tenants, even if that's a result of discrimination by a landlord.

It sounds like, in some of those cases, a lot of that hard work that brokers do is on behalf of the landlords, though. That's the argument on this bill. It's like you're listing the apartment, you are marketing it, you're finding the tenants, you're taking their paperwork, you are showing them the apartment, you're traveling all around the city, but that's really on behalf of the landlord.

Back to what the Councilmember was saying about who should pay the bill and why the opposition is what it is, talk about raising rents. That's, I think, secondary to what the true opposition is among landlords and brokers. The fees are going to go down for brokers because landlords aren't going to want to pay as much as tenants are paying now, and that's really the crux of it.

Matt Katz: David, we actually have a landlord on the line. Dana, in Brooklyn, hi, Dana.

Dana: Hi.

Matt Katz: Thanks for calling in. You're a landlord in Brooklyn?

Dana: Yes. I have an apartment that I rent in Brooklyn. When I initially rented my apartment, I didn't even want to use a broker because I personally find it distasteful and I want people to save money, but I had a very hard time renting it. I didn't find good tenants on my own. I was spending money listing it in the New York Times. I went with a broker and the broker basically, when we were talking about how much we were going to charge for the apartment, she said, "Well, if you pay the fee, then you can charge more. If the tenant's going to pay the fee, then we're going to have to adjust the rent and make it less."

Matt Katz: Interesting.

Dana: Chose to have the tenant pay the fee and they started with a lesser rent. It probably actually works out in their favor because then when I'm raising the rent from a lesser number, it gets raised to us.

Matt Katz: Thank you, Dana. Thank you for calling in. We got a whole range of perspectives here, including from the Councilmember who introduced this bill. We're going to leave it there. David, thank you for coming on. WNYC and Gothamist reporter, David Brand has been following this brokers fee situation and will be following the bill as it moves through the Council. Thanks, David. Appreciate your reporting.

David Brand: Thanks a lot, Matt.

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