In a move that could reshape the New York City rental market, the City Council has passed legislation to prohibit mandatory broker fees for tenants. The Fairness in Apartment Rental Expenses Act, or FARE, was approved on Wednesday with a veto-proof margin of 42 to 8 and is set to take effect in six months.

The new law eliminates a long-standing practice in New York City where tenants are often required to pay substantial broker fees, even when the agent represents the landlord's interests. These fees typically amount to 15% of the annual rent.

Council member Chi Ossé, the bill's sponsor, argues that the legislation will empower tenants by reducing upfront costs and providing more leverage in lease renewal negotiations. The FARE Act has gained widespread support among renters, who make up two-thirds of the city's households, and has even become popular on social media platforms like TikTok.

However, the Real Estate Board of New York (REBNY) has strongly opposed the measure. "Wednesday's vote is yet another instance of prioritizing ideology over economic and practical reality when it comes to the city's rental housing stock,” said president Jim Whelan, according to an account in The Real Deal.

REBNY and its members have raised concerns about the potential consequences of the bill. They argue that landlords may pass on the broker fee costs to tenants through higher monthly rents. The group also claims that the bill fails to account for the common practice of multiple agents advertising a single property, which could lead to the disappearance of non-exclusive listings. Additionally, with 25,000 agents employed in the sector, opponents warn of potential job losses and industry disruption.

In response to these concerns, REBNY had proposed an alternative measure focusing on increased disclosures to tenants rather than changing the payment structure. However, this proposal was not adopted.

Ossé has dismissed claims that landlords will automatically increase rents, arguing that market forces ultimately determine rental prices.

As the FARE Act moves forward, REBNY has indicated it may pursue legal action. "REBNY will continue to pursue all options to fight against this harmful legislation on behalf of our members and the renters they serve,” Whelan said.