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New York just banned apartment broker fees. Why not Boston?

Renters' rights groups rallied outside the State House last month. A proposal to restrict broker fees is before the Legislature along with a bill to reenact rent control.
Renters' rights groups rallied outside the State House last month. A proposal to restrict broker fees is before the Legislature along with a bill to reenact rent control.Lane Turner/Globe Staff/The Boston Globe

It’s one of the most hated things about apartment-hunting in Boston: that extra month’s rent you often have to fork over to a real estate broker just for the privilege of renting a beat-up two-bedroom in Allston or Somerville.

But New York, one of the few other places in the United States where such broker fees are common, just banned them. Regulators there said this week that a new state law strengthening rent control also prohibits tenants from — in most cases — being charged broker fees.

The news prompted cheers of joy from cash-strapped renters across New York. And it immediately raised a question here: Can Massachusetts do the same?

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The answer: maybe.

Banning broker fees here would probably require state legislation, local officials and policy makers said Thursday. It’s beyond what cities and towns are allowed under state law to do themselves. But bills to protect renters — and housing bills in general — have faced tough sledding on Beacon Hill in recent years.

Still, there’s been a groundswell of support lately for pro-tenant legislation. Hundreds of renters and advocates packed a State House hearing last month to support bills that would allow municipalities to impose rent control. One of those bills, a lead cosponsor says, includes language that would also allow cities and towns to regulate brokers fees.

The New York rules, part of a broader measure lawmakers passed last year to beef up rent control in the state, were announced this week by regulators. They would still allow broker fees, but only if they’re charged to landlords, or if a tenant specifically hires a broker for help finding an apartment. Real estate groups in New York say they plan to challenge the rules in court. But advocates for renters and their legislative allies here say the move could inspire a similar push in Massachusetts.

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“It’s a really welcome development,” said Representative Mike Connolly, a Cambridge Democrat who cosponsored the rent control bill, which he said would also give municipalities the right to eliminate broker fees. “I’m really struck by how many people who’ve posted on social media or reached out to say, ‘I can’t believe how much money I forked over to a broker for an apartment I found myself.'”

And as the news from New York spread on Thursday, Boston Mayor Martin J. Walsh said he’d form a “working group” to study the fees and how they affect renters here.

Broker fees compensate real estate agents who act as middlemen in the region’s crowded, competitive housing market. They connect landlords with renters who are often racing to find a place to live. The fee, typically equivalent to a month’s rent and paid upfront, is charged to the renter. Along with the first and last months’ rent and a security deposit, that would mean shelling out $10,000 for the keys to a $2,500-a-month apartment.

That’s a daunting barrier for tenants who already face some of the steepest rents in the country, Connolly said.

“Many of us don’t have thousands of dollars in cash just laying around,” he said. “This could really make it easier for people to move into that next apartment.”

These fees have been customary in the Boston area for decades, especially in pricier neighborhoods and those where the market is dominated by students and more transient young renters. But they’re not required. Indeed, larger buildings with their own leasing offices typically don’t charge broker fees, and some landlord groups discourage the hiring of brokers, who bear no responsibility if a tenant they bring in doesn’t work out.

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“Brokers play a role, and I understand that,” said Doug Quattrochi, executive director of MassLandlords. “But there are so many websites that list apartments now, it’s not really necessary to hire one.”

Real estate groups warn that, without brokers fees, the brokerage industry would fall apart, and while people wince at the prospect of paying so much just to get in the door, brokers do perform a valuable service — both for tenants who need to navigate the market and landlords who need easy access to renters.

“That’s basically their income,” said Greg Vasil, CEO of the Greater Boston Real Estate Board. “You’d have a whole lot of people who’d probably lose their jobs.”

For that reason, Vasil said, his group is likely to oppose any move on Beacon Hill to end the fees. Connolly’s bill is still before the Legislature’s Joint Committee on Housing, which has until the end of March to vote on whether to move it forward this session.

Should that measure pass, the debate would probably then shift to city and town halls, with municipalities free to set their own regulations.

"There’d be a lot of support for this,” said Ben Ewen-Campen a city councilor in Somerville. “In a housing crisis like this, we need to be doing everything we possibly can to make it easier for people to find affordable places to live.”

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In Boston, where a growing number of city councilors are calling for some form of rent control, discussion of banning broker fees is in the early stages. Walsh announced late Thursday that he’d name “a wide range of stakeholders” later this month to a panel to study the fees, with an eye to crafting state legislation to change how they’re used in Boston.

“I am proud to pull together this working group to move us forward in determining how broker fees are impacting our renters and our housing market in Boston,” Walsh said. "This is another tool we are putting forward to tackle the underlying challenges of housing affordability in Boston.”

Still, some warn that ending broker fees could backfire. If landlords pay them instead, they might simply raise the rent, said Skip Schloming, executive director of the Small Property Owners Association. If they can’t do that, they could cut spending on repairs, and apartments would deteriorate.

“Many landlord-tenant laws have this kind of deleterious effect,” Schloming wrote in an e-mail.

Others are trying to lower prices all around.

John Puma is chief operating officer of Places for Less, a Boston startup that charges a flat fee, currently $990, to help renters find an apartment, using the same database of nonexclusive listings that most brokers use. The New York rules, which still allow renters to pay a broker they have specifically hired, should help open up a rental market that’s too opaque, he said, and is stacked against renters.

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“It’s very specific to Boston and New York, and with these new rules, now just Boston,” he said. “It’s a tough market to crack, just because everything was always set up for the brokers.”


Tim Logan can be reached at timothy.logan@globe.com. Follow him on Twitter at @bytimlogan.