By Gary Malin, President of Citi Habitats
Sponsored by City Council Member Keith Powers, a new bill (Intro. 1423) aims to cap all residential rental commissions at one month’s rent in an attempt to make NYC more affordable for tenants. I adamantly oppose this bill – and here’s why:
I know first-hand how tirelessly real estate professionals work to earn a living (often 7 days a week) and I admire my team’s entrepreneurial spirit. Bill 1423 would effectively cut rental agents’ compensation by over 40%, and serves to scapegoat the profession. Land and construction costs, taxes, insurance, operating expenses etc. all play a far greater role in the problem of housing costs, not to mention the low vacancy rate, than do brokers’ fees.
- Our local rental market is fast and competitive – due to New York City’s desirability as a place to live. For many, the help of a real estate professional is essential in the moving process. For their efforts, agents charge clients a fee, the amount of which is negotiated between the renter (or landlord) and their agent.
- Agents often fight for lower rents in support of clients – and help landlords understand fair asking prices for their available units. Frequently, the rent savings over the lease term – as negotiated by the agent – far exceed any brokerage fees paid.
- It’s important to note that many tenants who use an agent do not pay a fee at all. In fact – given market conditions – landlords paid the brokerage fees in approximately 40% of rental transactions last month.
- I would also like to respectfully note that the use of a rental agent is not required, rather it is a
voluntarilydecision. There are many resources available for those who want to find housing without using our services. We are simply one option – among many – that New Yorkers can choose.
- In approximately 80% of rental transactions, the potential 15% (of a year’s rent) commission is shared by the listing agent and the one who finds the new tenant – bringing each agent’s share to 7.5% (a co-broke). If an agent spends days (or even weeks) with a home-seeker who then falls off the radar – they receive nothing at all for their time. However, they may have expended considerable resources on behalf of this potential client.
- As small business owners, agents have many expenses, including marketing and insurance/healthcare costs – plus state-mandated paid continuing education requirements and licensing fees. These costs continue to climb year-after-year. In addition, most agents are affected by rising rents, just like every New Yorker who leases their home. Capping rental agents’ income potential will only serve to make their goals – both in business and in life – exponentially harder to attain.
- Each real estate brokerage firm employs dozens of support staff – receptionists, administrative assistants, marketing specialists, I.T. help desk technicians
andlistings database personnel. All of these working people’s salaries are dependent upon company revenue generated by fees collected by agents. Passing this bill has the potential to negatively impact many city residents – beyond the agents themselves.
I urge the City Council to reconsider this unfair proposal – and instead tackle the housing affordability crisis with meaningful legislation that makes sense. The livelihoods of thousands of middle-class New Yorkers hang in the balance.