Real Estate Brokers Protest City Council Proposal To Cap Their Fees

Diane Ramirez of Halstead⁩ real estate speaks at a protest outside City Hall against a proposed cap on brokers' fees.

Two weeks after Albany lawmakers passed landmark rent reforms which provide some tenants across New York state with safeguards against rent hikes, evictions, and background checks, the City Council held hearings on a package of bills intended to reduce the financial burden on market-rate tenants.

The proposed legislation would attempt to limit the high upfront costs of renting an apartment, which can include brokers' fees, application fees, security deposits, and other hidden fees, such as move in and move out costs.

Over a thousand real estate brokers chanting “trash the cap,” rallied outside City Hall to protest the legislation, NY1 reports. Only a fraction of them made it inside the hearing, due to the chamber's 250-person capacity, but 40 signed up to testify against the bills, which were first introduced in February, and received immediate pushback from the real estate industry.

If the legislation becomes law, it would cap broker transaction fees and security deposits at the cost of one month’s rent. (The proposed law would not apply to renters’ agents, who are hired to find apartments and represent renters during the lease transaction.) In addition, landlords would be required to return security deposits to tenants within 14 days after the lease ends (current law only mandates that they return security deposits “within a reasonable time”), and tenants would be given the option of paying the security deposit in installments.

The bills are co-sponsored by Councilmembers Carlina Rivera, Keith Powers, and Andrew Cohen. Robert Cornegy, Chair of the Committee on Housing and Buildings, spoke Thursday about how the city’s affordable housing crisis is not limited to high rents, and how additional costs often burden low-income residents looking for affordable housing.

“Renters are faced with unaffordable costs, just to be able to find and sign a lease on an apartment," Cornegy said. "In many instances, tenants find that they have had no meaningful choice when the broker has been hired by the landlord."

Elise Goldin, a Community Organizer at St. Nicks Alliance, said her organization often deals with immigrant and elderly tenants who are displaced or priced out of their North Brooklyn homes.

“Day in, and day out, tenants seek assistance in our office because they are unable to find housing that they can afford. They might be living in homeless shelters, in crowded communities with extended families, and facing eviction due to lack of tenants’ rights,” Goldin said. “The vast majority of our tenants are rent burdened. Even those who live in affordable housing are rent burdened.”

But real estate brokers say the proposed cap on their fees goes too far. Jeffrey Zicker, a salesperson with Century 21 Metropolitan, detailed how brokers split fees—called co-brokering—often reducing their commissions. He also warned that the cap would ultimately have an adverse effects on tenants.

“In order to save a quick buck, they [tenants] will not hire a tenant agent, and go to a listing agent," Zicker testified. "Listing agents care about closing what’s in the immediate future, rather than advocating for the long term standing relationship of the tenant."

Several other brokers bemoaned the cap on rental fees, claiming that tenants who seek “no fee” listings will often be duped by “shady” brokers. They pointed to websites like Craigslist, claiming that they are dishonest about fees, and filled with brokers who often cheat customers with fake photographs. As an alternative to the City Council legislation, Zicker proposed raising the entry barrier for brokers, and creating a unified public listing service.

“I think there’s some confusion with the fees that were cited,” said Sheila Carroll, a Manhattan based real-estate broker. "In particular those ‘move-in, move-out fees, processing fees,’ that has nothing to do with the brokering industry itself. This is to feed the pot of the co-ops and condos for roof repair, and reserves to the buildings. It’s set by the board of the buildings, not by us. We hate collecting those.”

David Schlamm, a brokerage owner, predicted the legislation would eventually lead to brokers losing their jobs, because it would drastically lower agents’ wages.

“It affects much more than just the real estate agents here," Schlamm testified. "It’s a domino effect. I hate brokers that don’t do the right thing, and the bad people should be out of this business."

Robert Desir, a staff attorney with the Legal Aid Society, spoke in support of the bills, arguing that prospective renters should not start with a disadvantage when looking for housing in the city.

“When tenants, who are our clients, and mostly low income, are finally able to access housing, new pitfalls await them. Many of the fees that we see are inflated, and have no rational relation to any real costs. This exploitation of vulnerable populations is just what this body is designed to protect against,” Desir said.

Thomas Zielinski, a service industry worker and Harlem resident, moved to New York 11 years ago. Over the last decade Zielinski has moved in and out of four apartments, downsizing each time, because of rising rents.

“Each of the moves have cost me thousands of dollars in fees, and deposits. My current landlord asked me for seven months rent upfront. When I add all that together, and the cost of moving, we are at well over $20,000 a year,” Zielinski said. “If we are truly serious about addressing affordability, I think it’s a multi-pronged approach.”