Got To Get Paid: Why Do New Yorkers Still Have To Pay Broker’s Fees?
The UK has recently scrapped “lettings fees” that put the tenant out of pocket. Is New York set to follow suit?
As Grandmaster Flash wisely pointed out, we don’t work for free. Or at least most of us don’t, if we ever have any intention of paying bills, buying food, or staying warm. We get up on a Monday morning, we schlep to our workplaces, and once a month we receive a depressingly small pay check. And NYC rental brokers should be no exception, right? They weed out the flea-ridden dungeons from the habitable shoe boxes, they negotiate on our behalf, and as a result, they have the right to get paid. But the question, it seems, is who should be responsible for paying them?
In a recent budget statement, British Finance Minister Phillip Hammond announced that, as a direct result of the petition championing a fair and just rental culture and the abolition of “lettings fees” led by UK publication The Debrief, England would follow in the footsteps of neighboring Scotland and scrap the English equivalent of New York’s brokers fees. After 250,000 people signed the petition, and ministers from all the major political parties voiced their support, The Debrief’s campaign went stratospheric, and as a result, changed the very culture of renting in the UK.
Because until recently, England—in particular, London—shared one distinctive thing in common with New York: It demanded that prospective tenants pay any incurring “lettings fees” when securing a rental property, rather than the landlord footing the costs. For a Londoner, depending on the size, value, and location of the property, this could cost the tenant an additional £60-600, on top of six week’s deposit and one month’s rent. Typically, in the UK, lettings fees are cited as covering the costs of a credit check and preparation of contracts. However, everyone in the UK also knows that it costs a company around £40 to perform a credit check, and black and white photocopies cost literal pennies. In New York, unless you manage to bag a no-fee apartment, a broker’s fee amounts to a whopping 12-15% surcharge.
On paper, this doesn’t seem so far-fetched: Brokers perform a service, and they get paid. Except New York and England seem to be the only places that demand tenants foot the bill for the cost of marketing a property. But with The Debrief estimating that by 2025, over 50% of people living in the UK under 40 will be renting, unable to afford to buy their own home, it’s high time that the UK amend it’s rental laws. And with huge swathes of American landlords voluntarily stumping up for these costs, why are New Yorkers still left out of pocket?
In a purely numbers game, New York City spans 304.6 mi2 and hosts a population of over 8.5 million. London enjoys a similar sized population, but the city covers a huge 607 mi2. Very simply, London has more space per person than does the Big Apple—therefore, less competition between renters. If you consider other major American cities such as Chicago (234mi2 / 2.2 million) or LA (503 mi2 / 4 million), it’s clear that New York occupies a singularly unique position of being a small city, with a huge population.
“New York is one of the most expensive markets, with the lowest vacancy rates, and a significant majority of renters versus owners” says Joe Charat, founder of home-search site Naked Apartments. “The landlord has the luxury of not having to pay for that broker’s fee out of their own pocket, because of the supply and demand dynamic—there are a lot of renters competing for the same apartments.” In other words, they do it because they can. However, London’s landlords have been stopped in their tracks—could the same happen in NYC?
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