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NYC considers ending broker fees for tenants
NEW YORK | It’s a familiar and agonizing experience for legions of New York City renters: before moving into a new apartment, a tenant must first shell out thousands of dollars in fees to a real estate broker, even if that person was hired by the landlord.
The hefty one-time payments, known as broker fees, are ubiquitous in New York but nearly unheard of anywhere else. In most other cities, landlords cover the commission of agents working on their behalf.
But legislation backed by a majority of the New York City Council would require landlords who hire brokers to pay their fees, marking a potential sea change in one of the country’s most expensive housing markets.
Renters, who make up more than two-thirds of city households, are hailing the latest attempt at reform. At a hearing Wednesday, many New Yorkers recalled paying exorbitant fees to brokers who appeared to do little more than open a door to an apartment or direct them to a lockbox.
“In most businesses, the person who hires the person pays the person,” said Agustina Velez, a house cleaner from Queens who said she recently paid $6,000 to switch apartments. “Enough with these injustices. Landlords have to pay for the services they use.”
But the proposal has triggered fierce opposition from New York’s real estate industry.
Ahead of the hearing, hundreds of brokers gathered to voice their objections at a rally organized by the Real Estate Board of New York, the industry’s powerful lobbying group.
Through hours of testimony, they warned the legislation would sow chaos in the rental market and decimate the livelihoods of the city’s roughly 25,000 real estate agents. Many predicted landlords would pass on the costs of paying brokers to tenants through increased rents or keep apartments off the market altogether.
“This is the start of a top-down government-controlled housing system,” said Jordan Silver, a broker with the firm Brown Harris Stevens. “The language is so incredibly vague we actually have no idea what this would look like in the world.”
The bill’s sponsor, City Councilman Chi Ossé, has said he was moved to act following a recent apartment search that was “tiring, treacherous, and competitive.” Another local official, Brooklyn Borough President Antonio Reynoso, testified that he’d once paid a $2,500 fee to a broker he never met.
Their frustration was echoed at Wednesday’s hearing by dozens of ordinary renters, along with a mix of labor unions, housing policy groups and some prominent business leaders. Critics said paying brokers’ fees serves as a barrier to those who’d otherwise move to the city while preventing low-income New Yorkers from relocating to new homes.
Such broker fees were previously banned in 2020 under a package of renter protection laws passed by the state. But they were quickly reinstated following a lawsuit led by the Real Estate Board of New York.
Brokerage firms estimate that roughly half of the city’s apartments require a tenant-paid broker fee. The price of those fees can vary widely, though the standard amount is 15% of the annual rent. For the average apartment in Manhattan, where the median monthly rent recently hit $4,500, that would amount to a fee of $8,100.
Under the legislation, tenants would still pay brokers that they hired directly. The bill’s brief language — less than 200 words — only requires the party that hires the real estate agent pay their fee.
“How the market works is not as simple as a few sentences, which is what the bill is,” said Ryan Monell, a vice president at the Real Estate Board of New York. “It’s a misnomer to compare New York to other cities. This is really an exceptional market.”
Brokers are adamant that their jobs are far more intensive than merely opening the door to tenants. Many said they help put together listings, review applications, answer questions posed by tenants and arrange tours at all hours of the day. But some also acknowledged that the current system favors landlords.
“I think it’s not logical. The landlord should pay the listing agent who is working on their behalf,” said Maria Octavio, a real estate broker with the firm of Douglas Elliman. “Because it’s worked this way for many years, the owners are used to it.”
Anna Klenkar, a broker at Sotheby’s, said the industry group — known as REBNY — had contacted her employer after learning that she planned to testify Wednesday in support of the legislation. “It feels less like we’re protecting ourselves, and more like we’re protecting landlords, whom REBNY also represents,” she testified.
A spokesperson for REBNY did not respond to an emailed inquiry about whether they had reached out to the employer.
Mayor Eric Adams, a Democrat, warned the bill could have unintended consequences. He had strong real estate industry backing during his campaign and moonlighted decades ago as a real estate agent while working in the city’s police department.
Southwest Airlines CEO says he won’t resign
DALLAS | The CEO of Southwest Airlines said Wednesday he will not resign in the face of pressure from a hedge fund that wants him fired and that his leadership team will produce its own plan to boost the airline’s financial performance.
CEO Robert Jordan said Southwest will present its plan in September. He declined to give specifics, but again hinted that it could include changes in the airline’s longstanding boarding and seating policies.
Elliott Investment Management notified Southwest’s board Monday that it bought a $1.9 billion stake in the Dallas-based company and is seeking to replace Jordan and Gary Kelly, the airline’s chairman and former CEO, with executives from outside the company.
Elliott accused Southwest leadership of failing to change with evolving customer tastes, causing it to lag behind rivals. The hedge fund noted that Southwest’s share price has fallen more than 50% over the past three years.
Another investment manager, Artisan Partners, said Wednesday that it has raised the same issues with Southwest, and it urged the airline’s board of directors to “upgrade the company’s leadership.”
Speaking to reporters after a Politico event in Washington, Jordan said, “I have no plans to resign” and that Southwest will treat Elliott “like any other investor.”
“Elliott can provide us ideas. They can talk to other shareholders, but Elliott is not directing the company,” he said.
Jordan said Southwest is investing in better technology — critics blamed outdated systems for contributing to massive flight cancellations in December 2022. He said the airline is also improving the customer experience with better WiFi, larger bins for carry-on bags, and more power outlets.
Southwest is also considering changes to its cabin and seating, such as whether to sell some seats with extra legroom, Jordan said.
“We’ve got an investor day in September, and I’m eager to lay out a very broad plan for how we improve the company both from a customer perspective but from a financial perspective,” Jordan said. He added that an Elliott presentation aimed at Southwest shareholders was “fairly light” on ideas.
Elliott, whose stake in Southwest is estimated by analysts to be around 11%, declined to comment on the CEO’s remarks.
Artisan Partners, which holds 1.8% of Southwest stock, according to FactSet, said Wednesday that it has made the same points as Elliott about the need for “dramatic change” to Kelly, the airline’s chairman, in the past several months.
Two Artisan executives said in a letter to Southwest’s board that they were writing “to urge the board to reconstitute itself and upgrade the company’s leadership. … We believe this process needs to commence immediately.”
Elon Musk drops lawsuit against OpenAI
SAN FRANCISCO | Elon Musk has dropped his lawsuit against OpenAI just ahead of a scheduled Wednesday hearing on the case.
Musk in February sued the San Francisco artificial intelligence company and its CEO Sam Altman over what he said was a betrayal of the ChatGPT maker’s founding aims of benefiting humanity rather than pursuing profits.
In the lawsuit filed in February at San Francisco Superior Court, billionaire Musk said that when he bankrolled OpenAI’s creation, he secured an agreement with Altman and Greg Brockman, the president, to keep the AI company as a nonprofit that would develop technology for the benefit of the public and keep its code open instead of walling it off for private gain.
However, by embracing a close relationship with Microsoft, OpenAI and its top executives set that pact “aflame” and are “perverting” the company’s mission, Musk alleged in the lawsuit.
Most legal experts said Musk’s claims — centered around allegations of breach of contract, breach of fiduciary duty and unfair business practices — were unlikely to succeed in court. Musk’s lawyer filed a notice Tuesday seeking to dismiss the entire case. No explanation was given for why it was being dropped.
Neither Musk nor anyone representing him in the case showed up at a status hearing Wednesday.
Musk’s lawyers and OpenAI didn’t immediately respond to requests for comment. OpenAI vowed in March to get the claim thrown out and released emails from Musk showing his earlier support for making it a for-profit company.
—From AP reports
