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Even NYC Real Estate Brokers Think Fees Have Gotten Bonkers

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Illustration by Elizabeth Brockway/The Daily Beast/Getty

There is a well-worn complaint among prospective renters in New York City: Apartment brokers collect massive fees seemingly just for opening the front door. But sometimes they don’t even do that. Last summer, when 31-year-old Bri’anna Moore was scouting for a one-bedroom in Brooklyn, many brokers simply texted her the lock code and told her to let herself in. And yes, they still wanted their commission.

This spring, as Moore contemplated moving again, the landscape was just as bleak. One rent-stabilized unit in Flatbush, Brooklyn, was listed at $1,243 per month, she said. The broker fee? Almost $5,000—even for people who found the listing themself without the help of an agent.

“It’s really predatory,” Moore said. “It’s contributing to the gentrification of New York City… The only people who can afford these apartments are going to be really wealthy.”

Even some brokers are disgusted. “There’s a little more that goes into what I do than opening the door, but not enough to charge somebody two months rent [as] a broker’s fee, I’ll tell you that,” said Keyan Sanai, the top New York City rental agent at Douglas Elliman.

“I think people know what’s fair and what’s unfair,” he continued. “At the end of the day, it comes down to money and greed and not wanting to work. Why rent two apartments for a [one-month fee] when you can rent one apartment for 15 percent?”

The New York City rental market collapsed during the early days of the pandemic, then roared back as tenants returned. Demand dwarfed inventory, sparking bidding wars and allegations of price-gouging. The chaos peaked last summer, with reports of broker fees as high as $20,000 for rent-stabilized apartments that are theoretically supposed to be more affordable.

Now, with prices at record highs, many brokers continue to insist on a fee equal to 15 percent of a unit’s annual rent. In May, the median cost for a Manhattan rental was $4,395 per month, according to Miller Samuel, a real estate appraisal firm. At that price, a 15 percent fee would amount to $7,911 in upfront cash—not including the security deposit and first month of rent that many landlords require.

“I will be the first to go on the record to say the entire notion of a broker’s fee is unfair and should be paid for by landlords,” said Ian Slater, a power agent at Compass. But he also argued that most renters only see “the tip of the iceberg” of the work brokers do. Managing a listing involves dealing with painters and contractors, insurance issues, and incessant calls and texts, he said.

Once a listing goes live, Slater added, “people [are] telling you that you’re a piece of shit, and that you’re stealing their money, and that you suck…All of that is not very pleasant.”

Lower-priced listings are generally managed by junior brokers who make far less money than outsiders would expect, he said. Brokers usually hand at least half of their fees to their brokerage firm and sometimes must further divide the commission with other agents.

And while the market is currently hot, Slater said, things could easily flip like they did at the onset of COVID. Listing agents “are making more money than they’ve ever made, but it’s highly unreliable.”

In Sanai’s view, agents who lack experience and are trying to snag huge fees are doubly unreliable. “You have some schmuck on wheels trying to rent you an apartment they can’t even afford,” he said.

Sanai noted that many listing agents are ignoring messages from brokers representing prospective renters, since such deals would require them to split the fee.

There are multiple explanations for the scorching-hot market. Tenants who fled during the pandemic are still trickling back; the summer months generate more activity; and the high cost of moving keeps many people in their units, reducing vacancies.

The sales market has also cooled due to rising interest rates, which has encouraged would-be buyers to rent. Reba Miller, an agent at Compass who has sold more than $1.5 billion in property, said co-ops and condos that previously sold in a snap might now require dozens of showings.

In February 2020, broker fees for renters were briefly banned in New York, until a judge issued an injunction. Now, several lawmakers—including state Sen. Jabari Brisport and Assemblymember Zohran Mamdani—are trying again. Their bill would prevent landlords from forcing tenants to pay the fees, but it’s not clear whether it will receive a vote before the end of the current legislative session. If it fails to pass, the lawmakers will need to wait until the next session begins in January to advance it again.

Brisport told The Daily Beast that broker fees are “exploitative of the tenant if the landlord hires the broker and then says the tenant needs to pay for it.” He says his bill would not rob agents of their incomes, just change the party responsible for the commission.

Mamdani added that his own chief of staff was asked to pay an exorbitant $7,000 broker fee. “People are being priced out of the neighborhoods that they helped to build. And then they’re being told that, ‘Oh, if your apartment is too expensive, simply find another apartment,’” he said. Yet many can’t afford the required fees.

New York City Councilmember Chi Ossé is preparing to introduce his own bill to rein in high fees, he said.

Real estate lobbyists have opposed new regulation, arguing that laws obligating landlords to pay fees would simply increase rent prices. (Mamdani noted that higher rents are still more affordable than upfront costs that require tenants to have many thousands of dollars in savings.) Many agents also believe renters don’t understand the behind-the-scenes work that justifies their commissions.

Several apartment hunters who spoke to The Daily Beast scoffed at that. Pierre Mballa, a 25-year-old actor, said brokers are even asking for fees on low-quality units without complete kitchens or living rooms. He wrote in a message that he and two roommates “are in our twenties with great credit and reasonable incomes but we don’t have [$5,000] to drop on a move BEFORE taking into account additional moving costs.”

A broker recently requested a $7,000 fee, he said, plus the first month of rent and a security deposit. When they complained, the broker replied, “We’re doing the same thing everyone’s doing.”

Catherine Lindsay, a business development manager at an entertainment company, said some brokers have requested the equivalent of a month’s rent simply to apply for a unit, promising to reimburse her if the application was rejected.

Landlords are demanding extra money for dubious reasons, too. A couple of weeks ago, Lindsay was preparing to sign a lease when the broker called and asked whether she works from home. “I go, ‘Well, like, I’m a hybrid worker. So I work from home a few days a week,’” she recounted. The agent then informed her there would be an additional $200 fee on top of her rent.

Would-be renters hoping the market will soon slow down are out of luck, said Tara Steppacher, of Sotheby’s International Realty. “As a matter of fact,” she forecasted, “I see things picking up.”

 

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Here are some facts about British Columbia’s housing market

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Housing affordability is a key issue in the provincial election campaign in British Columbia, particularly in major centres.

Here are some statistics about housing in B.C. from the Canada Mortgage and Housing Corporation’s 2024 Rental Market Report, issued in January, and the B.C. Real Estate Association’s August 2024 report.

Average residential home price in B.C.: $938,500

Average price in greater Vancouver (2024 year to date): $1,304,438

Average price in greater Victoria (2024 year to date): $979,103

Average price in the Okanagan (2024 year to date): $748,015

Average two-bedroom purpose-built rental in Vancouver: $2,181

Average two-bedroom purpose-built rental in Victoria: $1,839

Average two-bedroom purpose-built rental in Canada: $1,359

Rental vacancy rate in Vancouver: 0.9 per cent

How much more do new renters in Vancouver pay compared with renters who have occupied their home for at least a year: 27 per cent

This report by The Canadian Press was first published Oct. 17, 2024.

The Canadian Press. All rights reserved.

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B.C. voters face atmospheric river with heavy rain, high winds on election day

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VANCOUVER – Voters along the south coast of British Columbia who have not cast their ballots yet will have to contend with heavy rain and high winds from an incoming atmospheric river weather system on election day.

Environment Canada says the weather system will bring prolonged heavy rain to Metro Vancouver, the Sunshine Coast, Fraser Valley, Howe Sound, Whistler and Vancouver Island starting Friday.

The agency says strong winds with gusts up to 80 kilometres an hour will also develop on Saturday — the day thousands are expected to go to the polls across B.C. — in parts of Vancouver Island and Metro Vancouver.

Wednesday was the last day for advance voting, which started on Oct. 10.

More than 180,000 voters cast their votes Wednesday — the most ever on an advance voting day in B.C., beating the record set just days earlier on Oct. 10 of more than 170,000 votes.

Environment Canada says voters in the area of the atmospheric river can expect around 70 millimetres of precipitation generally and up to 100 millimetres along the coastal mountains, while parts of Vancouver Island could see as much as 200 millimetres of rainfall for the weekend.

An atmospheric river system in November 2021 created severe flooding and landslides that at one point severed most rail links between Vancouver’s port and the rest of Canada while inundating communities in the Fraser Valley and B.C. Interior.

This report by The Canadian Press was first published Oct. 17, 2024.

The Canadian Press. All rights reserved.

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No shortage when it comes to B.C. housing policies, as Eby, Rustad offer clear choice

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British Columbia voters face no shortage of policies when it comes to tackling the province’s housing woes in the run-up to Saturday’s election, with a clear choice for the next government’s approach.

David Eby’s New Democrats say the housing market on its own will not deliver the homes people need, while B.C. Conservative Leader John Rustad saysgovernment is part of the problem and B.C. needs to “unleash” the potential of the private sector.

But Andy Yan, director of the City Program at Simon Fraser University, said the “punchline” was that neither would have a hand in regulating interest rates, the “giant X-factor” in housing affordability.

“The one policy that controls it all just happens to be a policy that the province, whoever wins, has absolutely no control over,” said Yan, who made a name for himself scrutinizing B.C.’s chronic affordability problems.

Some metrics have shown those problems easing, with Eby pointing to what he said was a seven per cent drop in rent prices in Vancouver.

But Statistics Canada says 2021 census data shows that 25.5 per cent of B.C. households were paying at least 30 per cent of their income on shelter costs, the worst for any province or territory.

Yan said government had “access to a few levers” aimed at boosting housing affordability, and Eby has been pulling several.

Yet a host of other factors are at play, rates in particular, Yan said.

“This is what makes housing so frustrating, right? It takes time. It takes decades through which solutions and policies play out,” Yan said.

Rustad, meanwhile, is running on a “deregulation” platform.

He has pledged to scrap key NDP housing initiatives, including the speculation and vacancy tax, restrictions on short-term rentals,and legislation aimed at boosting small-scale density in single-family neighbourhoods.

Green Leader Sonia Furstenau, meanwhile, says “commodification” of housing by large investors is a major factor driving up costs, and her party would prioritize people most vulnerable in the housing market.

Yan said it was too soon to fully assess the impact of the NDP government’s housing measures, but there was a risk housing challenges could get worse if certain safeguards were removed, such as policies that preserve existing rental homes.

If interest rates were to drop, spurring a surge of redevelopment, Yan said the new homes with higher rents could wipe the older, cheaper units off the map.

“There is this element of change and redevelopment that needs to occur as a city grows, yet the loss of that stock is part of really, the ongoing challenges,” Yan said.

Given the external forces buffeting the housing market, Yan said the question before voters this month was more about “narrative” than numbers.

“Who do you believe will deliver a better tomorrow?”

Yan said the market has limits, and governments play an important role in providing safeguards for those most vulnerable.

The market “won’t by itself deal with their housing needs,” Yan said, especially given what he described as B.C.’s “30-year deficit of non-market housing.”

IS HOUSING THE ‘GOVERNMENT’S JOB’?

Craig Jones, associate director of the Housing Research Collaborative at the University of British Columbia, echoed Yan, saying people are in “housing distress” and in urgent need of help in the form of social or non-market housing.

“The amount of housing that it’s going to take through straight-up supply to arrive at affordability, it’s more than the system can actually produce,” he said.

Among the three leaders, Yan said it was Furstenau who had focused on the role of the “financialization” of housing, or large investors using housing for profit.

“It really squeezes renters,” he said of the trend. “It captures those units that would ordinarily become affordable and moves (them) into an investment product.”

The Greens’ platform includes a pledge to advocate for federal legislation banning the sale of residential units toreal estate investment trusts, known as REITs.

The party has also proposed a two per cent tax on homes valued at $3 million or higher, while committing $1.5 billion to build 26,000 non-market units each year.

Eby’s NDP government has enacted a suite of policies aimed at speeding up the development and availability of middle-income housing and affordable rentals.

They include the Rental Protection Fund, which Jones described as a “cutting-edge” policy. The $500-million fund enables non-profit organizations to purchase and manage existing rental buildings with the goal of preserving their affordability.

Another flagship NDP housing initiative, dubbed BC Builds, uses $2 billion in government financingto offer low-interest loans for the development of rental buildings on low-cost, underutilized land. Under the program, operators must offer at least 20 per cent of their units at 20 per cent below the market value.

Ravi Kahlon, the NDP candidate for Delta North who serves as Eby’s housing minister,said BC Builds was designed to navigate “huge headwinds” in housing development, including high interest rates, global inflation and the cost of land.

Boosting supply is one piece of the larger housing puzzle, Kahlon said in an interview before the start of the election campaign.

“We also need governments to invest and … come up with innovative programs to be able to get more affordability than the market can deliver,” he said.

The NDP is also pledging to help more middle-class, first-time buyers into the housing market with a plan to finance 40 per cent of the price on certain projects, with the money repayable as a loan and carrying an interest rate of 1.5 per cent. The government’s contribution would have to be repaid upon resale, plus 40 per cent of any increase in value.

The Canadian Press reached out several times requesting a housing-focused interview with Rustad or another Conservative representative, but received no followup.

At a press conference officially launching the Conservatives’ campaign, Rustad said Eby “seems to think that (housing) is government’s job.”

A key element of the Conservatives’ housing plans is a provincial tax exemption dubbed the “Rustad Rebate.” It would start in 2026 with residents able to deduct up to $1,500 per month for rent and mortgage costs, increasing to $3,000 in 2029.

Rustad also wants Ottawa to reintroduce a 1970s federal program that offered tax incentives to spur multi-unit residential building construction.

“It’s critical to bring that back and get the rental stock that we need built,” Rustad said of the so-called MURB program during the recent televised leaders’ debate.

Rustad also wants to axe B.C.’s speculation and vacancy tax, which Eby says has added 20,000 units to the long-term rental market, and repeal rules restricting short-term rentals on platforms such as Airbnb and Vrbo to an operator’s principal residence or one secondary suite.

“(First) of all it was foreigners, and then it was speculators, and then it was vacant properties, and then it was Airbnbs, instead of pointing at the real problem, which is government, and government is getting in the way,” Rustad said during the televised leaders’ debate.

Rustad has also promised to speed up approvals for rezoning and development applications, and to step in if a city fails to meet the six-month target.

Eby’s approach to clearing zoning and regulatory hurdles includes legislation passed last fall that requires municipalities with more than 5,000 residents to allow small-scale, multi-unit housing on lots previously zoned for single family homes.

The New Democrats have also recently announced a series of free, standardized building designs and a plan to fast-track prefabricated homes in the province.

A statement from B.C.’s Housing Ministry said more than 90 per cent of 188 local governments had adopted the New Democrats’ small-scale, multi-unit housing legislation as of last month, while 21 had received extensions allowing more time.

Rustad has pledged to repeal that law too, describing Eby’s approach as “authoritarian.”

The Greens are meanwhile pledging to spend $650 million in annual infrastructure funding for communities, increase subsidies for elderly renters, and bring in vacancy control measures to prevent landlords from drastically raising rents for new tenants.

Yan likened the Oct. 19 election to a “referendum about the course that David Eby has set” for housing, with Rustad “offering a completely different direction.”

Regardless of which party and leader emerges victorious, Yan said B.C.’s next government will be working against the clock, as well as cost pressures.

Yan said failing to deliver affordable homes for everyone, particularly people living on B.C. streets and young, working families, came at a cost to the whole province.

“It diminishes us as a society, but then also as an economy.”

This report by The Canadian Press was first published Oct. 17, 2024.

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