After New York City banned tenant-paid apartment broker fees, Boston-area politicians are looking to end the practice in their cities, too. iStock illustration
Politicians in Cambridge, Boston and Somerville are all seeking to stop tenants from having to pay apartment broker fees. But two industry leaders say that any potential change could have undesirable ramifications.
The push in all three cities comes in the wake of a New York City Council vote that shifted the responsibility from renters to landlords. Gov. Maura Healey also included a measure in her $5 billion housing bill to do the same, but legislators removed it before the bill passed this summer.
Agents typically charge the equivalent of one month’s rent in an apartment.
Research by the Boston arm of multifamily brokerage Berkadia found that the typical rent in Cambridge and Somerville was $3,710 at mid-year. Listings portal Zillow said the typical monthly rent was $2,886 across all of Greater Boston in September.
State law currently bans landlords from charging a tenant more than first month’s rent, last month’s rent and a security deposit before move-in, and it requires landlords to be up-front if the tenant has to pay the broker’s fee as part of signing the lease.
But advocates for eliminating tenant-paid broker fees say this is often unclear to renters, who wind up having to pay the equivalent of four months’ rent before moving into an apartment – sometimes over $10,000 at once.
That sum can be a serious barrier to being able to afford a move, they say, and can be especially galling for tenants when their landlord is the one who hired the broker in the first place.
Rental Brokers Defended
Cambridge City Councilor Jivan Sobrinho-Wheeler is leading the charge against tenant-paid broker fees in his city.
When describing his own rental experience, Sobrinho-Wheeler said that he never even met in-person with the broker he ended up paying for.
“They were just the person on the listing that we found online and in order to move into our apartment, we had to pay them a month’s rent,” he said.
Demetrios Salpoglou, CEO of apartment-listing service Boston Pads, said that politicians are “picking on” real estate agents instead of handling the larger issues driving unaffordable homes, such as a lack of supply.
“They feel like they’re being targeted in a lie,” Salpoglou said. “They don’t think it’s valid … This general thought of ‘Well, we just beat them up on sales now [via the agent commission lawsuits], let’s go beat them up on leasing.’”
Doug Quattrochi, executive director of landlord trade group MassLandlords, said he believes many renters don’t know the value that a broker brings to the table.
“I mean the idea of a broker is that you can have somebody who might know the fair housing law better than you, or might have a better ability to screen tenants, and you can hire them to actually screen and fill a unit,” Quattrochi said. “And similarly, if you’re a renter, you can use a broker to help you put your best foot forward, to use the fair housing law to make sure that the landlord takes your application despite what might be things that they wouldn’t want.”
Salpoglou argues that agents do much more than what any one renter can see.
“If I’m 100 percent candid, apartment leasing agents on any given week show an order of magnitude more properties than the residential sales agent,” he said. “The last thing they need is some other entity telling them they can’t operate.”
Will Landlords Shift the Cost?
While proponents of shifting the cost to landlords are doing so in the name of affordability, there are some concerns that doing so could actually increase rents.
With such low vacancy rates and high competition for the few available apartments in Boston, Salpoglou said landlords will have little incentive to pay for a broker’s services out of their existing budgets if they don’t already do so.
“At the end of the day, our real-time vacancy rate’s at about 1 percent right and nothing gives a landlord more confidence to not pay a brokers commission than a ridiculously low real-time availability rate or real-time vacancy rate,” he said.
Quattrochi believes that landlords will simply pass on the cost to renters by increasing rents.
“This policy definitely could have the unintended consequence of increasing housing costs for people, and if the rent is higher than so is the first month’s rent, security deposit and all that.,” he said. “So, they can’t really eliminate broker fees directly without that collateral consequence.”
The sentiment was echoed by Jared Wilk, 2024 president of the Greater Boston Association of Realtors, in a statement emailed to Banker & Tradesman.
“In order to fix the high cost of renting in Massachusetts, we must focus on long-term solutions,” he said. “A broker/agent should be compensated by the party who they have established a contractual relationship with and brought them into the transaction. Mandating that brokers must be paid by the property owner may decrease upfront costs to renters, however, it is extremely likely that cost will still be passed along to tenants through increased rent. This approach will not make Massachusetts a more affordable place to live. The focus needs to be on tackling the region’s housing crisis by boosting housing production.”
Sam Minton
Spread-Out Fees Called More Affordable
Renters won’t see much change in landlord behavior until many more apartments get built, Salgpoglu said.
“What I find is that if you get up towards six percent vacancy rate, prices come down, there’s way more choices, and landlords pay fees,” he said. “So, we’re not really looking at the big picture here.”
But Sobrinho-Wheeler argued that competition will force at least some landlords to pay these fees. If some landlords pay the fees for tenants, including those multifamily operators that handle leasing in-house, buildings that do not pay broker fees will be less favorable to renters.
“If we eliminate tenant-paid broker fees, and those landlords just try to pass on that whole rent increase in terms of rent, they are going to look less competitive against properties that already are not charging brokers fees,” he said.
Sobrinho-Wheeler said he believes that, even if a landlord increases rents to cover a broker’s fee, it would ultimately be more affordable as the financial impact would be spread over 12 months and instead of a single up-front payment.
