Last week, New York City implemented the controversial FARE Act, a measure intended to eliminate broker fees for tenants. However, the legislation has led to an immediate and significant backlash, with landlords swiftly increasing rents in an apparent effort to recoup their anticipated losses. According to an analysis by real estate analytics firm UrbanDigs, the average rental in the Big Apple surged a shocking 15% in the week following the Act's implementation, jumping from $4,750 to $5,500. John Walkup, UrbanDigs’ co-founder, noted that the Manhattan rental market has experienced a "sharp reaction."

The FARE Act, which took effect on June 11, specifically prohibits agents representing property owners from charging renters a “broker fee” and mandates that all tenant-owed fees be explicitly included in rental agreements and real estate listings. Despite its intent, the sharp rise in rents suggests that landlords are integrating what would have been broker fees directly into the rental price. This effectively transfers the financial burden to renters in a less direct, yet very real, manner, as highlighted by Walkup.

The legislative change has also given rise to what real estate insiders are calling a “shadow market.” This phenomenon involves apartments that are not publicly listed, allowing landlords to circumvent the new rules and still find ways for tenants to cover the fees. Jason Haber, co-founder of the American Real Estate Association and a broker at Compass, warned that finding apartments might revert to a more challenging, pre-internet era, requiring personal connections and an “odyssey” of searching.

Furthermore, the market experienced an immediate and drastic reduction in available listings. An estimated 2,000 apartments vanished from the popular website StreetEasy on June 11, the day the FARE Act became law. UrbanDigs also reported an eye-popping 30% drop in available apartments citywide. Renters have been sharing frustrating experiences online, including screenshots of conversations with brokers who present two different prices: a lower one if the tenant pays the broker fee, and a significantly higher one if they do not – a practice illegal under the new law.

Bruno Ricciotti, principal at Bond New York, explained that prospective tenants are asking if they can simply pay the brokerage commission directly to benefit from the lower, pre-FARE Act rental terms, a request that agents must now, unfortunately, decline as it is illegal. Anecdotes illustrate this struggle: one New Yorker was told their rent would increase by $700, while another faced a choice between a $6,800 three-bedroom with a broker fee or an $8,000 option with no fee. Kebenae Tadesse, who was searching for a Brooklyn studio, expressed her frustration, noting that brokers repeatedly stated landlords would simply incorporate the fee into the rent. When Tadesse challenged a broker attempting to pass on the fee, the listing was promptly removed from StreetEasy, marked as “temporarily off market.”