Big Apple tenants have been saving money on dropped broker fees even though landlords try to bake them into higher rents — but the financial gain won’t last, real-estate experts warn.
New York City renters saw a “significant” average savings of roughly $1,300 from the banned fees since the Fairness in Apartment Rentals Act went into effect June 11, according to a study published by tenant review platform OpenIgloo on Friday.
City rents overall this past summer rose a relative modest 6% above last year’s average for the same period, even as many landlords folded the lost fees into monthly rents, said OpenIgloo CEO Allia Mohamed.
Landlords used to force tenants to shell out fees of between 8% to 15% of their annual rent to pay brokers linking all the parties up, Mohamed said.
“We heard a lot of warnings and a little bit of fear over what the FARE Act would be,” Mohamed recently told The Post. ”Rents did increase … but it’s nowhere close to that 8 to 15% increase that some people were warning of.”
In a normal summer, rents rise about 8%.
But some brokers such as Douglas Eliman’s Kelyan Sanai said any savings for tenants will eventually run dry.
“Right now, [rent] is up [an average of] 6% or more, and we’re talking about one year,” Sanai said, pointing to upwards of 12% increases in swanky Manhattan nabes. “What about next year when your rent gets raised 3%?
“The question is, do you end up paying more over time? And the answer is yes,” he said.
Danielle Nazinitsky, founder and CEO of Decode Real Estate, said, “Maybe [renters are] paying less in fees, but their base rent is up, so if they stay a second year, that $1,300 in savings is totally gone.
She estimated that her clients are paying 10% more in rent increases.
“I don’t think people are saving’’ from dropped broker fees.
Meanwhile, the cost of some of the most typical city rentals is soaring.
The annual cost for the average market-rate one-bedroom apartment in Gotham increased 14.6%, from $3,600 this spring to $4,125 post-June 11, the OpenIgloo report said.
Even higher increases have been reported in trendy neighborhood such as SoHo, the West Village and East Village, Mohamed said.
Kenny Lee, a senior economist at StreetEasy, noted that any FARE Act savings is at odds with other factors impacting affordability in the Big Apple rental market.
“The rental market has become even more competitive as would-be buyers remain in the rental market amid elevated mortgage rates,” Lee said.
“In Manhattan, rental inventory has been falling for more than a year and a half now, and this persistent decline has driven up asking rents.”
As for spots such as Long Island City in Queens and Crown Heights and Gowanus in Brooklyn — where housing stock is exploding — tenants are seeing humbler increases, given landlords are “extremely cautious” of raising rents.
“What the FARE Act has done is it created a very large incentive for landlords to retain their renters,” Mohamed said.
But Nazinitsky noted there are still “very few apartments for rent right now” across the coveted Upper West Side and Upper East Side in Manhattan and Brooklyn Heights and Cobble Hill neighborhoods in Brooklyn.
“There’s like 84 rentals in SoHo — which is also Hudson Square — but there’s always been over 150,” she said.
“People are scrambling, People are paying over asking price,” she added.
“More people are willing to pay a one-month ‘broker fee’ now to have help.”
Lee, meanwhile, says renters will have to be more patient to reap any long-term impacts of the FARE Act — and see the housing supply catch up with demand.
“Housing cycles take a long time to play out,” he said, “but we expect that eventually, a lower barrier to moving, thanks to the FARE Act, in combination with increases in new housing supply will lead to a healthier market where more homes become accessible.”
The post NYC renters see ‘significant’ savings over dropped broker fees — but financial boost won’t last: experts appeared first on New York Post.
