By Adam Frisch, Managing Principal, Mantus Real Estate
Recently, I spent the day sitting in on the hearing for Intro 1423 at the New York City Council and it was both an odd and an upsetting experience, to say the least. Seeing as though the main topic of the day was the proposal to legally limit rental broker commissions to one month’s rent, a huge number of the city’s residential brokers were in attendance as were some paid protestors wearing shirts sporting slogans such as “Keep Housing Affordable.” Needless to say, it was an interesting mix of individuals.
Essentially, the City Council claimed that Intro 1423 doesn’t actually limit incomes because it only caps what the tenant has to pay. They argued that owners can pay brokers whatever amount they desire. When it was pointed out that owners are not likely to pay these fees, there was essentially no response from the council’s members. It was also pointed out that if even if owners were to pay the full fees, they would build them into the rents which would further increase the cost of housing in the city. The council’s members remained equally quiet in the face of this point.
The relationship between an owner, broker and tenant is entirely voluntary. The idea that the existence of a broker fee unfairly limits consumer choice is simply not true. Brokers make their entire livings from commissions and have no health insurance, paid leave, vacation time or 401 (k) plans. When a councilmember suggested that he would work with the real estate industry to ensure they received such benefits, he demonstrated a complete lack of understanding of independent contractor laws.
In short, limiting the income of an entire industry sets a deeply alarming precedent for limiting the income in any other industry. Fortunately, it appears that the strong opposition to the bill has caused the City Council to table it for the time being. However, the residential brokerage industry will continue to be on edge as it remains to be seen where this precarious conversation will go next.