By Rebecca Picciotto

New York City apartment hunters are waking up to some of the steepest overnight rent surges in the city's recent history.

Lots of renters are celebrating.

In New York City, brokers marketing an apartment are paid a fee when a contract is signed. Historically, that fee has been paid by the tenant. The Fairness in Apartment Rental Expenses Act, which went into effect Wednesday, ends this longstanding practice and requires the landlord to pay the marketing broker's entire fee.

Such a fee is typically between 10% and 15% of the annual rent, which means renters might need to pay thousands of additional dollars before they can move in. That is especially burdensome for young and low-income apartment seekers who don't have a lot of cash on hand.

Rita Liu, a 27-year-old Brooklyn renter, is applauding the new law. Liu spent roughly half of her savings to pay the upfront costs to move into her current place in 2023, much of which went toward the broker fee. She is glad she won't have to worry about that big payment when she starts hunting for an apartment again. And if rents go up because of the FARE Act, that is just New York City, she said.

"Landlords are going to jack up the rents no matter what," said Liu. "If broker's fees aren't a factor now, moving would be a lot more feasible."

The FARE Act is expected to decrease the upfront cost of moving by around 42%, according to an estimate by StreetEasy, a New York City real-estate listing service owned by Zillow.

"This is a big win for renters," said Kenny Lee, a StreetEasy senior economist.

New York is one of the last cities in the U.S. to eliminate tenant-paid brokers fees. Boston is now the only major U.S. city where tenants are still on the hook for these fees, though there are several proposals before the city government to follow New York and end the practice.

Some property managers are expected to test the market by imposing major rent increases as soon as the new law goes into effect, according to listings on websites including StreetEasy, where brokers have been advertising these rent increases for days.

A number of brokers have been listing two different prices. One for an apartment before the FARE Act went into effect, and another price that was often several hundred dollars more for Wednesday and thereafter.

On Tuesday, a one-bedroom apartment in the Park Slope neighborhood of Brooklyn was advertised at $3,300 a month on StreetEasy. The broker noted that the monthly rent would increase by $495 if the apartment wasn't leased before the FARE Act went into effect.

"We're going to see the biggest rent increase in the history of New York City," said Jason Haber, a New York City broker who co-founded the American Real Estate Association, a real-estate trade group.

The Real Estate Board of New York, another real-estate trade group, tried to block the new measure with a lawsuit that alleged that the measure violated the Constitution by interfering with private contracts. The effort failed.

Analysts expected that any initial rent surges will taper off as the market adjusts to the new rule.

Renters who stay in their apartments for an extended period won't have reason to keep celebrating. The additional rent increase over a number of years will more than outweigh the initial savings on the broker fee. And future rent increases will be priced off a higher base rent.

New York City's two million rental units are subject to the new law. City rents are already surging at double-digit percentages, outpacing other major U.S. metropolitan areas and rebounding from pandemic-era rent decreases. The city's rental vacancy rate recently hit a record low of 1.4%.

The median rent for a New York City two-bedroom apartment increased 17.5% from a year earlier to $5,560, the highest of any other city in the country, the rental-listing site Zumper said recently.

"The FARE Act could light a fire" under that pre-existing growth, said John Walkup, co-founder of the real-estate data firm UrbanDigs.

Write to Rebecca Picciotto at Rebecca.Picciotto@wsj.com

(END) Dow Jones Newswires

June 11, 2025 05:30 ET (09:30 GMT)

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