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NYC bans rental broker fees, can Massachusetts be far behind?
By hrose on Wed, 11/13/2024 - 11:15pm
New York City has banned rental broker fees. It will be interesting to see if Massachusetts follows suit.
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Comments
I really hope so, but doubt
I really hope so, but doubt it. The rich have so much power here I doubt something that would help those who have less will pass. People who make money because they are rich like landlords have the most power here. Just look at how a group of rich people got to take part of Franklin Park (and tens of millions of dollars of taxpayer money) for their sports franchise stadium.
Rich Landlords?
Most property in the US is owned by small landlords who are far from rich. I get the false narrative has been put out there but just because you own a piece of property does not mean you are rich.
Most residential rental property is owned…
…. by big corporations and very wealthy individuals.
Citation please
I’m sure you have it handy
Incorrect
I know that is the narrative most want to push but the facts are big corporation own less than 5% of the housing stock in the US.
There are about 146 million rental units in the US. Of that about 34 million are multi unit properties.
The largest players in the apartment rental business:
MAA (100,000 apartments)
Greystar Real Estate Partners (100,000 apartments)
Morgan Properties (94,000 apartments)
AvalonBay Communities (80,000 apartments)
Equity Residential (80,000 apartments)
Cortland (77,000 apartments)
Nuveen Real Estate (about 73,000 apartments)
Monarch Investment & Management Group (67,000 apartments)
The Related Companies (71,000 apartments)
Edward Rose Building Enterprise (70,000 apartments)
5 other companies own a combined total of around 350,000 single family home. The rest of the stock is owned by mom & pop or small time investors that may own several properties.
Obfuscation
Now do Massachusetts and Boston.
Please do!
Yes, please! I really want to see how much housing stock is owned by Alpha and United Properties. For that matter, I'd also love to see how much of the stock is owned by people who own 10+ units.
It's hard to know
Even small (single building) landlords tend to incorporate or form an LLC. So it can be true that almost all rental properties are owned by a corporate entity but yet a majority are controlled by a single person company that only has a few units and the ownership isn't that person's sole source of income.
There's also the whole complexity of buildings that are owned by a single person but are managed by a firm that has hundreds of units. The management firm pretty much controls everything and the actual owner gets a small cut.
Not that hard
With the caveat that there are always units and people who slip through the cracks, it's not too hard to find out (with not necessarily guaranteed, but pretty high probability) who owns a building, especially if you're looking for multiple buildings.
Look in the Registry of Deeds for the most recent owner, then look up the LLC name in the business registry records and note down the officers. Then you can search for the names in the business registry and find the other LLCs registered to that person. Sometimes it will be obvious that they're the same people, other times it may need a little more triangulation.
robo would like a citation, please.
.
Challenge coming
This sets a bad precedent for all business.
Disagree
About the bad precedent. It's not outlawing or denying brokers, it's just changing who needs to pay. It's a small change that help a lot of people except brokers themselves. If a renter still wants to hire a representative, they are free to do so. Landlords are in a better position to negotiate the price for the services down.
I'm skeptical of rent control laws but this makes a lot of sense and should have been done years ago.
All the actual services are for the landlord
credit checks and court case checks cost money. For renters the brokers are just gatekeepers. That is not a service. It's not like brokers tell renters which landlords are slumlords.
“ It's not like brokers tell
“ It's not like brokers tell renters which landlords are slumlords.”
Bingo!
Yeah
That's why renters shouldn't have to pay for those costs. If it cost a landlord more every time they need to fill a vacancy, they'll be slightly less inclined to get rid of existing tenants.
So no business should charge a fee?
Folks choose to use the services of a broker so why would they not pay a fee for that? When I invest with a stock broker I pay them a fee even though the service is really for me. I could just invest on my own if I wanted just like someone looking to rent an apartment.
Folks don't choose to use the services of a broker most times
Most of the time, the landlord hires the broker and the prospective renter has no say in the matter. People are forced to pay broker fees even if they found out about the rental on Craigslist or other non-broker source.
Craigslist doesn't
Craigslist doesn't independently post rentals. The broker ('s assistant) probably does it. Advertising, especially in free media, is part of the service.
If you see a billboard, and
If you see a billboard, and buy the product, do you pay the person who rented the billboard from clear channel for the privilege?
The service is to the landlord. The landlord could have posted to CL themself. If they want someone else to do it, they can pay someone else to do it.
Fees should be for a service
Gatekeeping is not much service. The brokers vet the renters for the landlord. Other than a opportunity to be introduced to the landlord, what exactly does the renter get for their money?
A transparent application fee that lists what a background investigation costs is fair.
Lots of renters in Massachusetts.
Worth a try.
Sure!
Your annual rent is going up by the amount of the fee and you now pay it every year whether you move or not. Enjoy!
I had to pay a half renters
I had to pay a half renters fee ten years ago and it made zero sense to me. I found the place on Craigslist , I applied and I had to pay that and all the other costs. It's not my fault the landlord hired someone to do the leg work for them, that's the cost of doing business.
Im very much anti random fees in restaurants, take out and tickrts as well. I realize some people say it's a slippery slope but this is a slope we should look into sliding down.
The landlord needs to get
The landlord needs to get background checks on tenants. You were paying for that.
So
So why should the prospecting RENTER pay for a background check that the Landlord wants?
No.
It should be the other way around. The Landlord wants to have credit and background checks, they can pay for them. Not the renter.
Think of it like applying for a job and asking for a drug/background/credit check. Does the company pass this cost onto you, the prospecting employee. No. They eat the cost because its THEIR requirement upon hire. So why is renting a place different?
As far as cost, I know many real estate brokers, and the cost to do background and credit checks is pennies on the dollar. In fact, several brokers I know use a service that they pay peanuts to use. I'd guess it cost less than 50 cents per inquiry. Not a lot, and no where near the 2k and up that a 'brokers fee' usually is.
The Guardian article notes
One impetus for the NYC law is the fact that in “most cities” the landlord pays the broker fee.
Exactly
It's the market. Rental are scarce. So the broker builds up their listings by getting the renters to pay. And it is actually cheaper pay for the required services ala cart. The broker is gatekeeping. Do brokers offer landlords a guarantee of a good tenant? I doubt it.
Landlord Here
You are correct that landlords benefit way more from the services of rental brokers. But "who pays the fee" is a function of supply and demand. If Massachusetts changes the law so that landlords pay the fee AND the supply of rentals remains low, landlords will just raise the monthly rent on newly listed rentals (say by $100-200/month). Unfortunately, that higher rent will be baked into the rent for those new tenants going forward. If those tenants stay in their rentals for more than a year, they'll continue to pay that higher rent even though their expense for the broker has not been incurred by the landlord in future years.
Maybe
But with the supply so low, many landlords won't need a broker to find tenants.
Sure
Sure, then do that. I actually don't have a problem with this. I don't like seeing rents being raised, but would rather see fees go away for the renter.
Being a landlord is a business, any increasing costs that go up often are passed on to the consumers. However, using your example of people staying beyond a year, the fix to that is no rent increases for at least 3 years or more. That should flatten out things a bit. I also think if fees go away (or required to be paid by the landlord), you'll start to see 'flat fees' that do not scale based upon the unit's rent.
And even in my example about applying for a job, those costs are baked into the cost of recruiting and having employees. Background, drug, and credit checks, along with health insurance premium costs (employer costs), and other benefits are all factored in as 'cost of having employees'. Which is part of the reason why there's so many 'contractors' or 'temp' agencies, they can offer lower 'total cost of employee' fees for the hiring company.
Good changes in Real Estate happening
I like this and hope Boston does the same. When the money comes out of the landlord's pocket they will be less likely to churn their apartments every year with higher rents.
Following on the heels of buyers having to pay their own realtor when purchasing a home. All positive changes for renters, buyers, landlords, and sellers.
Test for unintended consequences
They’re not going to work for free and have massive leverage. This is like when people say public schools are “free” and ignore taxes and other costs the system imposes.
“Fare will make it so that a broker who publishes a listing for a property for rent is to be paid by the landlord.” Now the fee is going to be built into the rent, so that will have a higher starting point for your renewal in a year.
So basically a public policy gamble to see if there’s enough pricing pressure to keep the rent (and thus total costs) down in the face of that trade off. Brought to you by the same brilliant people that keep insisting rent control is good, when it is disastrous with the distortions it brings.
In chronically under built cities like Boston and NYC I wouldn’t take that bet. Fix the zoning and build out of it. Price controls don’t work. Insert Arrested Development “but maybe it’ll work for us” meme.
But again what value is the broker adding?
Many landlords will just do background checks themselves and pay for things ala cart. Renters are on all the socials trying find places by word of mouth.
Passing the cost to the renter presumes that there are real costs. Renters are paying at least a 1000 for record checks that cost less than a hundred. A landord would be better off in investing in good insurance coverage than a broker.
Exactly. People in general
Exactly. People in general are mostly ignorant of the concept of economic incidence. Just because party X wrote the check doesn't mean the expense actually falls on party X.
I agree
Jorf, that was the first thought I had when I read this; the landlords will simply raise the rent to cover the cost of the broker's commission.
Use of brokers will go down
I've lived in three other cities in the US with competitive rental markets and Boston is the only one of the bunch where broker fees are common. In other places besides NYC, landlords or property managers find tenants themselves and run the background checks. It's not hard. The reason so many landlords use brokers here is because they know they can just pass on the cost to renters. It's a scam, and the majority are unlikely to use brokers if they're the ones footing the bill. Good riddance.
Landlord pays if they choose the broker
Quote from one of the NYC city councilors:
This makes sense to me. Why should I have to pay a broker I haven't chosen to use? The new law also requires landlord to disclose fees like first & last month's rent and security deposits in their listings - something that's reasonable and overdue. People should know what they're going to have to pay up front.
Part of the problem here is
Part of the problem here is that people are in general uncomfortable with abstraction .
Tenant writes 24,000 worth of checks. The landlord gets 22,000. The broker gets 2,000.
Who paid the broker fee?
There might be a piece of paper saying the rent is 24,000, in which case you could say that the landlord paid the fee. Alternatively there could be a piece of paper saying that the rent was 22,000, in which case you could say that the tenant paid the fee. But at the end of the day the money situation is the same in either case; the piece of paper had no bearing on who paid what to whom
Broker fees come out of the transaction.
There is perhaps a truth-in-advertised-pricing argument to be made: that if you advertise an apartment for $2,000 per month, that ought to be the total of what the tenant pays. But that’s an entirely different argument than “who pays the broker”
The real problem
There is a huge difference between having to save up an extra month's rent up front and paying it as part of the cost of the rental.
Must be nice to have money all your life.
(deleted)
(replied to wrong post)
I am a fan of being told that
I am a fan of being told that the cost for the product is X and that's it. I don't want to find out later and Y and Z.
If there is an additional fee beyond X it should be optional. Like I bought a ticket to top of the HUB last month and there was a 4 dollar convenience fee added. But it was added no matter how you buy the ticket and was not optional. So why was it just not built into the ticket? It's not optional. If you want to charge me more for add ons that's different.
You and me both
I'm also a big fan of truth in pricing.
15 or so years ago the federal government stepped in and forced airlines to advertise as the ticket price the actual price you pay to fly, including all fees and surcharges,
It's way past time to do the same for hotels ("resort fee" and assorted crap), rental cars, telecom bills, restaurant meals, sports tickets, etc.
Renters always find something to complain about
Not many property owners in these comments obviously. It’s not the landlords fault you’re unable to afford to buy a home. With the rights attributed to renters in MA when not paying rent on time or at all these checks are needed. Some landlords work full time and may not have time to run these credit checks and background checks to assure a quality tenant. Hiring a broker is necessary for this. If broker fees are outlawed the fees will just find their way into your monthly rent payment so either way both parties still get paid and you’re the one coming out of pocket. God forbid people offering housing to those who otherwise can’t afford a single family residence or condo make some money from it. Building their credit, saving the down payment and managing the property to be in livable conditions is not so easily likely the reason most of you are renters
Considering tgst unless you
Considering tgst unless you own a multifamily home that you live in as well I would say it is kind of the rental owners fault people can't buy. It drives up the cost of housing and makes it into an investment.
With all due respect, being a landlord is a business. Id give exceptions to those owner occupied units in duplexes abd triple dockers. As a business there are business expenses involved. If a landlord does not want to do the work and farm it out to others that's part of doing business.
Now I don't have an issue with people owning rental properties and yes some tenants rights laws are a bit much. But it's a business and filling the vacancy is a core aspect of that business.
You slam renters, I am just turning that mirror back. Everyone wants free money for simply owning things.
Free Money?
Help me understand how landlords are getting free money?
By passing on the fee... are
By passing on the fee... are we on the same thread?
First month rent workaround?
A lease is a contract. Why can't I just do:
Month 1: $5000 rent
Month 2-12: $2500 rent
$2500 deposit.
To the best of my knowledge, there's no requirement that I charge the same amount of rent each month...