Some of these windows could be temporarily yours for: first and last month's rent + one month security + 15% that you'll never see again. (Photo via DRA+Photography)
"Are there broker's fees in LA?" I asked my realtor friend, Heather D, during a visit last year. "Never on the renter's side," she explained, "most rentals are through a management company or for rent by owner, but if the owner does go through a real estate agent to find a renter then it's the owner who pays the fees." I almost started penning an essay about leaving New York, but instead I reached out to experts in the field here, asking, "Why, why, why do broker's fees exist?" Some realtors we reached out to didn't even know.
The short answer, of course, is supply and demand. It's been the way NYC real estate has worked for decades upon decades. A NY Times article from the 1970s illustrates the grief over these fees, ultimately explaining that, aside from getting lucky, there's no real way around paying them.
And NYC has always been unique in this way—go to almost any other city in the nation, and you can rent without putting down up to 15% that you'll never see again.
Lee Lin at Renthop told me that the NYC market is "such an insane special case. Amazingly, the pervasiveness of broker's fees comes from the inventory being so tight, and the market so fragmented. Short story is, landlords actually like it the way it is, and the last recession gave us a glimpse into what might happen if the market were to ever soften for an extended period."
Lin added that "in almost every city other than Boston and NYC, the landlords pay the broker fees, and the brokers are usually called apartment locators or property managers." Typically, a single broker will sign an exclusive right to list, but in NYC and Boston, there are open listings that are not exclusive to any agent.
These open listings "are great for the landlord that doesn't want to do any work," Lin says. "They can email 50 firms, have those firms all fight over clients and spend money on marketing, and only one agent earns the fee at lease signing." And of course, the tenant pays that fee.
Native New Yorker Jake Dobkin, who's never known a world without broker's fees, explained that NYC has "a relatively high proportion of renters versus other cities (which makes brokering a more profitable business). He also spoke further about the root of the issue: supply and demand.
"We have a tiny vacancy rate," Dobkin explained, "which is even smaller than it appears once you take out the apartments you can never access, like the rent controlled and stabilized apartments that only go to native family and friends. So you have a large population competing for a small group of apartments, and that gives the landlords unusual power—so much power that they can demand you use a middle man broker as the only way to rent, simply because it saves them some time and money screening candidate renters."
Lin also spoke of the Landlord Factor.
"You would think that landlords could charge more rent if they advertise themselves without the broker. However, that's not cost effective for smaller landlords with lots of small buildings or single units. Hiring staff to do all the showings would cost much more and require more work than outsourcing the showings and marketing to the crowd of licensed brokerage firms."
Oh well, you're not a real New Yorker until you've paid nearly $10,000 to move in to a studio on the sixth floor of a walkup, only to move the next year and have to do it all over again.
