Brokerage firms will be collecting fees from the landlord, unless the tenant hires an agent to help find an apartment. This change will immediately impact brokerage firms and the business models of their agents who derive a majority of their income through rentals. More importantly, this will greatly impact the macroeconomic real estate market in NYC immediately and over the next 3 years as follows:
We will see landlords of small 4-40 unit buildings that typically hire exclusive agents with 15% broker fees previously paid by tenants raise rents in the buildings 10-15% and instead pay an exclusive agent a one-month fee
That in turn will allow larger rental buildings with on-site staff already paying one-month fees to agents to raise their rents 2-5% on average
There will be units the smaller landlords will choose not to pay an exclusive agent a one-month fee. Those units will become "open" listings - meaning any agent can take prospective tenants there and legally charge a one month fee to the tenant they are being hired to represent
Co-op and Condo owners will pay an exclusive agent a one-month fee to represent their rental transaction & advertise as no fee (which was a trend already happening)
Month-to-month tenants might be hearing from their landlords increasing their rent starting immediately 2-10% knowing their comparative inventory is now up
LONGER TERM (2-3 YEARS)
NYC residents will have an easier time evaluating 'renting versus buying'. Sales volume & prices should accelerate (more in Brooklyn & Queens where the carrying costs are lower)
Property taxes on rental buildings, condo's & co-ops will go up as taxes are assessed based on comparative rental prices
Rent-stabilized buildings will become an even less desirable asset to hold. This change will impact these landlords the most which is surprising because the mayor has been pushing for 'affordable housing' and this will do the exact opposite
Two-family houses should increase in value as they are taxed as single-family
Rental agents that have relationships with large landlords might go "in house" and be paid a salary versus on commission to handle the portfolio
The big losers here are:
Real estate agents whose revenue is generated mostly by rentals
Landlords of rental buildings whose property taxes will go up
Tenants who won't be able to get the representation they might need with difficult leases, relocations, etc
Rental brokerage firms whose net revenue will decrease
The winner here is New York State who will be able to collect millions more in property taxes.
***These are my thoughts and opinions - only time will tell if this ruling will be enforced or if the Real Estate Board of New York will go up against the New York Department of State (DOS).
I personally think this will be a positive for my business as more renters will become buyers and use me as their agent!
If you have any feedback or suggestions for future Saturday 'Thinks' contact me at [email protected] or 212-941-2634.
Lic. as Danielle Nazinitsky
Licensed Real Estate Salesperson
[email protected] & 330-936-7928
Danielle Sells NYC