City and state take aim at high broker fees with new legislation

Two New York City Council members will introduce renter-friendly legislation today that aims to curb brokers’ fees and modify security deposit payments. Council members Keith Powers and Carlina Rivera, both of Manhattan, have taken cues from other states and standards already set for rent stabilized apartments to formulate the bills.

Rivera’s and Powers’s proposal would limit brokers’ fees to a maximum of one month’s rent, putting a kibosh on the fees of 12- to 15-percent of yearly rent that some brokers charge. The stipulation aims to make brokers’ fees reasonable and predictable for new and lower-income renters in a landscape where more affluent renters hold more bargaining chips. The legislation also proposes requiring brokers to provide an itemized list of what the fee is being used for.

The legislation also seeks to curb security deposits at one month’s rent, which is already a standard for rent stabilized apartments in New York. A 2017 study by the New York Comptroller’s Office found that low-wage renters were often charged security deposits two or three times the monthly rent. In the same study, the office recommended capping security deposits at one month’s rent, as has been done in states including Massachusetts and Rhode Island.

Like the 2017 study, the legislation put forward by Powers and Rivera also proposes giving renters the option to pay security deposits in installments. For longer leases, renters would have the option of paying their security deposit over a period of six months. For shorter six-month leases, renters would have the option of paying a portion of that security deposit in equal installments through the duration of their lease. The traditional single-payment method would also still be an option. The legislation also proposes requiring security deposits to be returned when merited within 60 days of the end of the lease.

Parallel to that, state officials—including Assemblymembers Linda B. Rosenthal and Brian Barnwell, and Senators Brad Hoylman, Jamaal T. Bailey, and Jessica Ramos—introduced similar bills in the state legislature, taking aim at the high security deposits often required by landlords and the fact that those deposits can be hard for renters to get back at the end of a lease. Their proposed legislation would limit security deposits for a year’s lease to one month, give renters the option of paying that out in increments rather than as a lump sum, and would require landlords to return the deposit no later than 21 days after the end of a lease.

In a statement, Hoylman called the high security deposit barrier a “modern day form of redlining,” and cheered the joint package of bills. “When landlords ask for thousands of dollars in upfront costs just to move into an apartment, they are shutting out thousands of vulnerable people—especially those from marginalized communities,” his statement continues. “For too long, we’ve accepted this outdated, predatory practice as the status quo. No longer. Capping security deposits will eliminate one of the major barriers that prevent tenants from accessing safe, affordable housing across our city.”

The Real Estate Board of New York finds the legislation problematic. “Real-estate agents rely on commissions to feed their families, they offer a valuable service for both renters and owners,” John Banks, the president of REBNY, said in a statement issued to the Wall Street Journal. “The decision to use a real-estate agent is optional and the fees are negotiable.”