New York’s City Council passed the Fairness in Apartment Rentals Expenses Act (FARE Act) on November 13, 2024. This new policy will have a huge impact on NYC renters who are used to paying exorbitant broker fees when renting an apartment – sometimes 15%+ of the annual rent.
The Bill’s aim is to alleviate the financial burden of moving which is why openigloo testified in favor of the FARE Act at City Hall in June 2024. Here are 9 FAQs about the FARE Act!
What is the FARE Act?
Traditionally in New York City, the majority of rental listings come with a broker fee – often ranging from one to two months rent. Typically, renters pay this fee to a broker that the landlord hired. The FARE Act ends this practice. It simply states that whoever hires the real-estate broker is responsible for paying the broker fee.
When Does the FARE Act Go Into Effect?
The FARE Act passed with a veto majority, which means the Mayor of New York CANNOT block the bill. The Mayor now needs to sign it into law within 30 days. Once he does, the law will go into effect in 180 days. Renters should expect for this law to be implemented and enforced by June 2025 (right in time for summer rental season!).
How has the Real Estate Industry Responded to the FARE Act?
Not everyone is in favor of the FARE Act. The Real Estate Board of New York (REBNY) and other industry groups have voiced concerns. They argue that landlords may simply raise rents to offset the cost of broker fees or bring leasing operations offline to skirt the new law. But there are many real-estate stakeholders including brokers who agree with this policy and think it will bring much needed transparency to apartment hunting.
Will The FARE Act Make Rents Go Up?
Probably not. Nearly 50% of the housing stock in NYC is rent-stabilized which means landlords cannot bake in broker fees. They legally cannot increase the rent above a certain cap. But what about the other 50% of apartments? Landlords need to compete with those 1 million stabilized apartments. This means they cannot price those apartments much higher than the rest of the housing stock or their apartments won’t be competitive. Even before the FARE Act passed, if landlords truly felt they could increase rents by 15%, they would have done that. The likely scenario is that landlords will negotiate a reduced fee with their brokers. A bargaining power that renters never had, but landlords do!
What Does The FARE Act Mean for Renters?
It means no more forced broker fees! For tenants, the FARE Act represents a significant reduction in the upfront costs associated with renting an apartment. When this law goes into effect around June 2025, tenants will no longer face the additional burden of paying broker fees if the broker was hired by the landlord. It also means no more bidding wars on broker fees. Of course, renters can still choose to hire and pay their own broker if they want extra help navigating their apartment hunt!
What Does the FARE Act Mean for Landlords?
Despite some industry resistance, the FARE Act has many benefits for landlords. With lower upfront costs for renters, landlords may fill vacancies faster. Paying their own broker fee could also give landlords greater insight and control of their leasing process. Lastly, covering broker fees can foster goodwill between landlords and tenants. This will give renters the flexibility to move if they wish. It’s not good for owners if their renters are stuck in a lease because they can’t find alternative housing. Happy and empowered renters are good for business!
What happens if a landlord or broker doesn’t follow the new law?
The Department of Consumer and Worker Protection is responsible for enforcing the FARE Act. Anyone found in violation of the Bill will be subject to civil penalties, which range from $500-$2,000 per violation.
What Does this Bill Mean for Brokers and Agents?
The FARE Act is beneficial for agents and brokers as well. The FARE Act standardizes who pays the broker, which can create more predictable and transparent business outcomes. It will allow for great brokers to differentiate themselves. Brokers can focus on building long-term exclusive partnerships with property owners and renter clients who truly value the work they do and the network they bring to rental transactions.
What’s Next for the FARE Act?
The FARE Act will take effect 180 days after the Mayor signs it into law. This will give the real estate industry and renters alike time to adjust to the new regulations. Mayor Eric Adams, who has expressed some reservations, still has the option to sign or veto the bill. Yet with strong support from the Council, the bill has enough backing to override a veto if necessary.
At openigloo, tens of thousands of NYC renters have reviewed their buildings and landlords. We’ve read too many comments about renters that are stuck in problematic situations because the cost of moving is just prohibitive. Our hope is that the FARE Act will bring much needed relief and transparency to NYC’s housing crisis. Do you have any questions about the FARE Act? Send our team an email at info@openigloo.com.