Keith Powers is a nice guy. He brings vegetables to the elderly when the cameras are on him and when he writes Bills, he does so for attention as well. Before drafting a Bill, one needs to think about what effect it will have on the public before petitioning a Bill into law.
This new Bill will hurt our industry as a whole and make rentals the wild, wild west once again. Bill 1423-2019, which will be turned down and found illegal, is the first attempt to curb real estate commissions. It will top out rental commissions at a flat one month's fee. Right now, the fee is unregulated and always negotiated.
What effect will this have on our industry? It will make the tenant side broker disappear and remove that protection from many apartment hunters. With a fee of only one month, a listing agent will only be able to cover costs such as advertising, photographs floor plans and showing the property. In addition, every agent also needs to feed their family. In our world it is incomprehensible to expect an agent to lease more then 50 apartments a year. With the standard one month rent being about $4,000 in Manhattan, 50% of that fee going to a firm and about 20% of that fee going to marketing, an agent can expect to earn $1,200 per deal or $60,000 per year, which is above average for rental agents. Now, make them split that fee in a co-broke. That is why when the fee is co-brokered, it will usually be around 15% of the yearly rent to cover both agents.
With the higher fees being capped, we will see co-brokering stopped and tenant prospects being left unprotected.
If you think that the savings of the lowered fee will ever be seen by the individual, you are being fooled. The lowered fees means landlords will raise their rents. Now, without tenant side agents, the individual will have no protection or advisement against these higher rents.
This Bill will not pass as it is flat out wrong. However, in the current climate and administration, we will see more of these foolish an uneducated laws being put out there - out of all of them, perhaps one may make it through one day.