The New York City Council approved new legislation on Wednesday that will shift the responsibility for hefty broker fees from renters to landlords, who are usually the ones to hire brokers.
The Greater Boston area remains one of the few spots in the country where renters are still on the hook for these fees, often equal to a months rent.
What is a broker fee?
A broker fee, or finder’s fee, is a one-time payment made to a real estate broker for helping a tenant find a rental property. In most cases, a landlord hires a broker to list their property online, and show it to prospective tenants. On occasion, a tenant will hire one. Brokers also can act as the middleman for paperwork like applications and checks between potential tenant and landlord.
The standard fee is equal to one month’s rent
In the Greater Boston area, the broker’s fee is usually an entire month’s rent.
According to Zumper, the average cost of a Boston apartment was just over $3,000 in November. That puts total move-in cost (first and last months’ rent, security deposit, and a broker fee) at a total of at least $12,000.
Broker fees vary, though. Some apartments will have a fee equal to a half month’s rent. Others won’t have a broker fee at all.
Doug Quattrochi is the executive director of MassLandlords, a nonprofit trade association. He said in parts of the state, it’s more common for an owner to rent out their own unit without a third party.
“I think the demand for the market is what creates this kind of gray area where the owner contracts with the broker that the renter pays for,” he said. “That only exists in the really high demand market, and Boston is still high demand.”
What Massachusetts law says about broker fees
Under state law, brokers
have to provide prospective tenants with a written notice of the amount of the fee, how it will be paid and when, and those details must be given upon their first meeting with a tenant.
Could Boston follow New York’s lead and eliminate renter-paid broker fees?
Having to pay over $10,000 to move into a new apartment is a burden.
“Who has access to that kind of cash that they can just give to move in when they’re already paying moving expenses? It’s a huge barrier,” said Alexis Smith, principal housing planner at the Metropolitan Area Planning Council.
She thinks codifying broker fees as the landlord’s responsibility would be a “very positive step” to help people access housing that is affordable. But she and others believe that if landlords start having to pay the fees, they might try to pass the cost onto renters by upping their monthly rent.
The move by New York City’s council may catalyze Massachusetts legislators to push through a change here. On a statewide level, Sen. Lydia Edwards said a recent effort garnered some support, but didn’t make the final housing bond bill.
“We did shift the burden to the person who contracts with the broker. That version passed in the housing bond bill and the Senate version,” she said. “But when it came to conference, it didn’t make it in the final housing bond bill. So we both really wanted it, but it didn’t happen.”
Edwards said that even Zillow wrote a letter in support of the effort. The company noted that the current system makes it hard for people to “move to or within the Commonwealth,” and that lack of turnover pushes up rents.
“The only reason why these tenants are paying the fees is because they won’t get housing unless they pay a fee,” she said. “They’re forced to kind of pay it, to compete.”
On a municipal level, Boston may consider doing away with the fees, but it is unclear how. The city would likely have to pass a home rule petition and get the approval of Beacon Hill, according to housing experts.
“Boston is now the only major American city where tenants can be forced to pay a broker’s fee, often thousands of dollars,” said Boston Mayor Michelle Wu in a statement. “As we confront the housing crisis, we must examine every opportunity to make Boston more affordable and keep families in our city.”
It’s also a potential legal grey area. Some believe the absence of clarity in state law could be ripe for legal proceedings.
“I think arguably, it’s ready to have a case brought, because the law is really clear. It’s the kind of thing that also potentially the courts could weigh in on and say 'you know what? This is just not gonna fly,'” said Quattrochi.
