Testimony: Pass the FARE Act and Combat Unfair Brokers’ Fees
Thank you, Council Member Menin and the Committee on Consumer and Worker Protection for holding this hearing on an important piece of legislation. My name is Oksana Mironova, and I am a senior policy analyst at the Community Service Society of New York (CSS). For over 175 years, the Community Service Society has directly aided and advocated for low-income New Yorkers. Throughout that time, we have maintained a focus on housing affordability, housing quality, and housing stability, particularly for the city’s majority of renters.
I am here today to testify in strong support of Intro 360, better known as the Fairness in Apartment Rental Expenses (or FARE) Act. The bill is remarkably simple and reasonable; in fact, it should be shocking and embarrassing that this is not already the practice – let alone the law – in New York City.
The FARE Act simply says that the party who hires a broker should pay that broker’s fee. That’s it.
Today tenants have to pay high fees for brokers that their future landlord hired. Often, these brokers have no interaction whatsoever with the future tenant. Broker fees can cost thousands of dollars and make apartments that might otherwise be attainable out of reach to low- and moderate-income tenants – which is to say most tenants, given that the median renter household in New York City earns just 59% of the Area Median Income. In an already tight housing market, this makes moving even less possible for most households, leaving them vulnerable to unfair treatment by the landlord they have today.
A City of Movers
The select initial findings from the most recent New York City (2023) Housing and Vacancy Survey (HVS) – the survey designed by the Department of Housing Preservation and Development and conducted every three to four years by the US Census Bureau – contains remarkable new data about household mobility. According to the survey, 761,2000 households – or more than one and five New York City households – moved into their home in either the year 2021 or 2022. This is a 44 percent increase in movement relative to 2021, and it runs counter to national data from the same time.
Most (57 percent) of those who moved ended up in market-rate apartments. This was not because of any preference or love for the “free market,” but rather because that was the subset of the market where most available apartments could be found. Market rate apartments, however, very likely to come with broker fees, and, given the rents in many of these apartments, those fees are quite high.
No Money to Move
Tenants, however, often do not have the money necessary to pay a broker fee, on top of a security deposit and first month’s rent. Every year, CSS conducts an annual survey of New Yorkers’ experiences and opinions called the “Unheard Third.” In the most recent survey, conducted in July 2023, we found that most tenants have very little to fall back on, and therefore would have little ability to pay an expensive broker’s fee on a new apartment.
A majority of our tenant respondents said they could not cover a $400 expense. Instead, tenants told us they would have to take on debt, borrow from friends or family, or sell something in their possession. When we asked about how much money New Yorkers have in savings, we found that while half of homeowners answered “$10,000 or more,” the most common response for public, subsidized housing and rent regulated tenants was between zero and $99. The percentage with nothing at all in savings ranged from 39 percent of market-rate renters to 63 percent of public housing residents.
Meanwhile, while 40 percent of homeowners reported that they “never” have to worry about family expenses, fewer than 20 percent of renters could say the same. For public and subsidized housing residents, the most common answer to that question was “all of the time,” while for market-rate and rent stabilized tenants it was “some of the time.”
The findings of the HVS and the Unheard Third Survey show that tenants are in a tightening bind: more and more of them must move, but few have the money to afford the costs associated with moving. There is much more that needs to be done to unwind this bind, from increased wages to more social housing, but the simplest thing the City can do right now is to pass the FARE Act.
The Wrong Kind of New York Exceptionalism
In many ways, New York is ahead of the United States when it comes to housing. We built the first public rental housing in the nation. Our rent stabilization system features some of the country’s strongest tenant protections. But when it comes to broker fees, our city is a strange and regressive outlier: New York and Boston are the only cities in the United States where the tenant is expected to pay their would-be landlord’s broker fee. The solution to this problem is so simple and straightforward that it boggles the mind as to why it is not already law.
Passing the FARE act will not mean that brokers are not paid; it will simply mean that the party who hires them pays them. It will not raise rents, since for-profit landlords already charge the maximum price the market can bear or the relevant regulations allow. This bill will hurt no one, while helping hundreds of thousands of New Yorkers every year. We call on the City Council to pass the FARE Act immediately and bring New York City in line with every other city in this country.