Those Hefty Broker’s Fees Can Still Be Collected Following State Judge’s Ruling

The Regional Plan Association wants tri-state legislators to phase out single family homes most New Yorkers can’t afford and turn them into apartments.

The RPA believes re-writing the zoning rules for the four million houses in the area would level the playing field to give more people a roof over their head.

“For our region to thrive equitably, state and local policy makers must create diverse, new, affordable housing options,” said Tom Wright, President and CEO, Regional Plan Association.

“Large single-family homes are misaligned with what many people today can afford or need. We can’t just build our way out of the problem. We need to comprehensively rethink our existing housing stock to meet the needs of a new generation.

“We have an opportunity to create a model for smart densification that minimizes the strain on infrastructure, and an obligation to undo the harm which exclusionary zoning has inflicted on communities of color.”

In a new report, entitled Be My Neighbor: Untapped Housing Solutions – ADUs and Conversions, the RPA calls on the governments of New York, New Jersey and Connecticut allow more Accessory Dwelling Units (ADUs), which are basement, garage and attic apartments, and offer financial incentives large single-and two-family houses to include additional units.

Calling the move “one of the best ways to reduce the impact of new housing, as they require minimal additional infrastructure” the RPA says the plan could create 500,000 new homes, including 100,000 in New York City.

According to the RPA, the coronavirus pandemic has exposed overcrowding as a major crisis in the tri-state metropolitan region.

Fundamentally, to self-quarantine, everyone needs a home. New York City alone created 363,000 more jobs than homes over the past two decades, and the region has been creating only one new housing unit for every two new jobs.

Even if job losses from COVID-19 temporarily reverse this trend, the Association believes the pandemic is driving us toward a wave of homelessness and foreclosures that will create an even greater need for affordable housing choices.

“In this economic crisis we are entering, ADUs provide a dual benefit: more affordable homes for those who need them and more income for homeowners who will struggle to pay their mortgage,” said the civic group, which believes its report highlights the connection between land use and racial and economic segregation.

Across the tri-state region, but most noticeably in the suburbs, municipalities have created exclusionary zoning codes where the only residential buildings allowed are large single-family detached houses.

Apartment hunters can continue to be asked to shell out steep broker’s fees, a judge ruled Friday, after state regulators sought to suspend them following sweeping updates to the state’s rent laws in 2019.

In a nine-page ruling, Albany County Judge Shannon Kushner said the passage of the Statewide Housing Security & Tenant Protection Act of 2019 does not allow the Department of State to prohibit brokers from collecting fees from renters. The act dramatically overhauled the state’s prior rent laws that critics said contributed to inequality in the city. Included in one provision of the act was a passage that states brokers acting on a landlord’s behalf can no longer charge certain fees “before or at the beginning of the tenancy.” Kushner ruled the state misinterpreted that portion of the act and erred in issuing guidance early last year that sought to clarify that brokers cannot collect a fee just because there is a “meeting of the minds.”

In her ruling, Kushner pointed directly to a statement by the lead sponsor of the bill, Manhattan/Brooklyn state Senator Brian Kavanaugh, who said the legislature seeks only to eliminate application fees and “fees for background checks and other costs landlords sometimes impose before even agreeing to rent an apartment.”

“In others words, the prohibition was intended to apply to application fees, background check fees, credit check fees, and any other fees imposed as a pre-condition to negotiations for entry into a lease agreement,” Kushner said. “No reference is made to ‘broker’s commission’ in the statute.”

Kushner said that if lawmakers intended to eliminate broker’s fees, the act “would have expressly stated it,” saying the guidance the Department of State issued last year to brokers was an “error,” and “abuse of discretion.”

The decision was hailed by the Real Estate Board of New York, the lobbying arm of the real estate sector that sued the state over the provision and successfully won a temporary injunction last year, alongside the New York State Association of Realtors, Inc. REBNY’s president, James Whelan, said the ruling “ensures that thousands of hardworking, honest real estate agents across New York State can earn commissions without fear of unwarranted discipline by the Department of State based on its erroneous interpretation of the Housing Stability and Tenant Protection Act [sic]. We appreciate the support of our members throughout this challenging process and we are proud to continue advocating for the rights of New York’s real estate agents.”

The ruling once again allows brokers to impose upfront fees as high as 15% of the total annual rent a tenant will pay. This is typically on top of first month’s rent. According to the Real Deal, an apartment hunter can be saddled with a broker fee as high as $5,580 if the apartment they seek has rent that falls within Manhattan’s median rent $3,100.