11 ms·

So the landlords just make the rent more expensive to account for having to pay the broker, what changed?

by literallycancer 5y ago

tut-urut-utut 5y ago
The rent price depends on supply and demand, not on landlords costs.
- dspillett 5y ago
  It isn't quite as simple as that in many cases. Kickbacks from brokers and other dubious jiggery-pokery can make quite a difference.
- bin_bash 5y ago
  Doesn’t it stand to reason that without broker fees the landlord margins would increase bringing more landlords (supply) into the market?
- einpoklum 5y ago
  That's like saying rent prices depend on the will of god. Retroactively, you can justify this claim regardless of what happened: "It was god's will" or "You had to adapt your price to the demand".
dspillett 5y ago
Less admin for the tenant? More up-front pricing (assuming the broker fee was not required to be obviously disclosed) for them too?
badestrand 5y ago
Actually the brokers' prices fell drastically in response to this law. Probably because the landlords now have an incentive to take the cheapest broker.
munificent 5y ago
It addresses the principle-agent problem[0]. Yes, renters that want a broker may simply raise the rent to pay for it, but doing so affects their own bottom line because either (1) it's harder to find a renter at that higher price or (2) they could have found a renter without a broker and pocketed the higher rent themselves. [0]: https://en.wikipedia.org/wiki/Principal%E2%80%93agent_problem https://en.wikipedia.org/wiki/Principal%E2%80%93agent_proble...
- 988747 5y ago
  Both of those things happen regardless of who formally pays the fee: one side of the transaction has a desirable good (apartment) the other side only has money to bargain with, so it's obvious from who's pocket the fee will come from. Many times the buyer would openly raise that argument in negotiations: "You know, I have all those fees to pay, can you lower the rent a bit?". It's not like sellers are completely oblivious to fees paid by a buyer.
  - IggleSniggle 5y ago
    It has a real effect on the advertised price, and landlords are generally in a better position to reduce the cost or eliminate it altogether.
  - joshuaissac 5y ago
    When the person choosing the broker is the same one that pays, it creates competition on fees. The renter cannot choose to change the agent to a cheaper one. They have to deal with whatever agent the landlord has chosen. It works similarly when software is chosen by people who have to use it versus those who do not. IDEs and text editors are usually chosen by the users, so there is competition on usability between different options. Timesheet and other HR software are usually chosen by upper management, and the people actually using them cannot switch, so there is not the same kind of competition on usability. Instead, they compete on other things that make them more appealing to those who can make the decision.
    - heurisko 5y ago
an_opabinia 5y ago
> So the landlords just make the rent more expensive to account for having to pay the broker, what changed? Nothing. Clearly brokers are doing something or else people wouldn't pay for them. My theory is the broker fee has positive selection for wealthier tenants, which for every property - low or high rent - makes for an economically better tenant. Raising the rent has the same effect. We care that there's cheap rent because shelter is a basic human right, and we appreciate that spending tons of money on rent couldn't possibly be good in a positivist economic sense, but of course raising the rent also selects for a wealthier tenant. Replacing the brokers with software has a similar effect. If your users feel comfortable using a complicated website with no human beings involved, they are going to be wealthier. This comes up everywhere. For example Oscar selects for a healthier insurance pool by being a complicated app - old people want real human beings to talk to and are turned off by apps, and they are also more expensive for insurance to carry, so it's a "win" for Oscar. Credit card only restaurants with lines make higher revenue because lower-ticket cash paying customers are substituted by higher-ticket credit card paying ones. And the iPhone is a $800 phone versus a $300 Android one, no wonder iPhone users spend 2-5x as much on IAP.
- lotsofpulp 5y ago
  I am also under the impression that one of the purposes of brokers/agents is to serve as plausible deniability against accusations of discrimination.
  - boringg 5y ago
    It also solves the problem of having to source tenants and do all the legwork around that which is a pain in the ass part of owning property. Especially if you own many properties. It's not unlike the role a recruiter plays for jobs.
- einpoklum 5y ago
  > Clearly brokers are doing something or else people wouldn't pay for them. In many cases (not talking about NYC here), what they're doing is simply blocking access to an apartment. You see an apartment, you have to deal with the broker / real-estate agent / makelaar. Or - you don't even see it in the first place, since it's only available via an agency. This is similar to setting up a roadblock and collecting a transit tax; or the "troll under the bridge" from folk tales. That being said - In some cases and some places brokers can help apartment seekers filter relevant apartments, and can help convince both the seeker and the landlord to compromise, agree to some arrangements to seal the deal. Another benefit of such type of apartment brokerage is that a broker with a minimum of reputation would not try to scam you (rent contract scams are a thing in some countries); and may be able to exert some pressure if, say, some serious problem is revealed right after you move in and the landlord doesn't want to address it.
deleted 5y ago
[deleted]
udfalkso 5y ago
This is a fallacy, at least in NY. I asked my last landlord about this. I asked "if brokers can't charge renters their fee will you pay it instead?". He replied immediately, "no way, I'll just ask my nephew to show the apartments instead". I had just paid a 12% fee to a broker a year earlier with this same landlord! Thousands of dollars. The broker did very little for this exorbitant fee, they opened a door for a dozen people maybe, and uploaded a few pictures online. They were simply the gate-keeper and I had no choice in the matter. The only reason landlords deal with them is that it's easier for them to do so, so why not. It's pervasive enough, as a quirk of history, that it's tolerated. They certainly do not provide value that matches up with their fees in most cases. Rents may go up, but it will be only a fraction of the insane fees retail brokers in NY charge. It needs to change.
- tut-urut-utut 5y ago
  That's exactly what happened in Germany. As soon as the landlords had to pay the brokers out of their pockets, they quickly realized that the "service" is not worth that much for them, so many went without brokers, and the ones that still kept brokers had to pay them much less than before, and the price was related to actual service provided.

So the landlords just make the rent more expensive to account for having to pay the broker, what changed?

tut-urut-utut 5y ago

The rent price depends on supply and demand, not on landlords costs.

dspillett 5y ago
It isn't quite as simple as that in many cases. Kickbacks from brokers and other dubious jiggery-pokery can make quite a difference.
bin_bash 5y ago
Doesn’t it stand to reason that without broker fees the landlord margins would increase bringing more landlords (supply) into the market?
einpoklum 5y ago
That's like saying rent prices depend on the will of god. Retroactively, you can justify this claim regardless of what happened: "It was god's will" or "You had to adapt your price to the demand".

dspillett 5y ago

Less admin for the tenant? More up-front pricing (assuming the broker fee was not required to be obviously disclosed) for them too?

badestrand 5y ago

Actually the brokers' prices fell drastically in response to this law. Probably because the landlords now have an incentive to take the cheapest broker.

munificent 5y ago

It addresses the principle-agent problem[0]. Yes, renters that want a broker may simply raise the rent to pay for it, but doing so affects their own bottom line because either (1) it's harder to find a renter at that higher price or (2) they could have found a renter without a broker and pocketed the higher rent themselves. [0]: https://en.wikipedia.org/wiki/Principal%E2%80%93agent_problem https://en.wikipedia.org/wiki/Principal%E2%80%93agent_proble...

988747 5y ago
Both of those things happen regardless of who formally pays the fee: one side of the transaction has a desirable good (apartment) the other side only has money to bargain with, so it's obvious from who's pocket the fee will come from. Many times the buyer would openly raise that argument in negotiations: "You know, I have all those fees to pay, can you lower the rent a bit?". It's not like sellers are completely oblivious to fees paid by a buyer.
- IggleSniggle 5y ago
  It has a real effect on the advertised price, and landlords are generally in a better position to reduce the cost or eliminate it altogether.
- joshuaissac 5y ago
  When the person choosing the broker is the same one that pays, it creates competition on fees. The renter cannot choose to change the agent to a cheaper one. They have to deal with whatever agent the landlord has chosen. It works similarly when software is chosen by people who have to use it versus those who do not. IDEs and text editors are usually chosen by the users, so there is competition on usability between different options. Timesheet and other HR software are usually chosen by upper management, and the people actually using them cannot switch, so there is not the same kind of competition on usability. Instead, they compete on other things that make them more appealing to those who can make the decision.
  - heurisko 5y ago

an_opabinia 5y ago

> So the landlords just make the rent more expensive to account for having to pay the broker, what changed? Nothing. Clearly brokers are doing something or else people wouldn't pay for them. My theory is the broker fee has positive selection for wealthier tenants, which for every property - low or high rent - makes for an economically better tenant. Raising the rent has the same effect. We care that there's cheap rent because shelter is a basic human right, and we appreciate that spending tons of money on rent couldn't possibly be good in a positivist economic sense, but of course raising the rent also selects for a wealthier tenant. Replacing the brokers with software has a similar effect. If your users feel comfortable using a complicated website with no human beings involved, they are going to be wealthier. This comes up everywhere. For example Oscar selects for a healthier insurance pool by being a complicated app - old people want real human beings to talk to and are turned off by apps, and they are also more expensive for insurance to carry, so it's a "win" for Oscar. Credit card only restaurants with lines make higher revenue because lower-ticket cash paying customers are substituted by higher-ticket credit card paying ones. And the iPhone is a $800 phone versus a $300 Android one, no wonder iPhone users spend 2-5x as much on IAP.

lotsofpulp 5y ago
I am also under the impression that one of the purposes of brokers/agents is to serve as plausible deniability against accusations of discrimination.
- boringg 5y ago
  It also solves the problem of having to source tenants and do all the legwork around that which is a pain in the ass part of owning property. Especially if you own many properties. It's not unlike the role a recruiter plays for jobs.
einpoklum 5y ago
> Clearly brokers are doing something or else people wouldn't pay for them. In many cases (not talking about NYC here), what they're doing is simply blocking access to an apartment. You see an apartment, you have to deal with the broker / real-estate agent / makelaar. Or - you don't even see it in the first place, since it's only available via an agency. This is similar to setting up a roadblock and collecting a transit tax; or the "troll under the bridge" from folk tales. That being said - In some cases and some places brokers can help apartment seekers filter relevant apartments, and can help convince both the seeker and the landlord to compromise, agree to some arrangements to seal the deal. Another benefit of such type of apartment brokerage is that a broker with a minimum of reputation would not try to scam you (rent contract scams are a thing in some countries); and may be able to exert some pressure if, say, some serious problem is revealed right after you move in and the landlord doesn't want to address it.

deleted 5y ago

[deleted]

udfalkso 5y ago

This is a fallacy, at least in NY. I asked my last landlord about this. I asked "if brokers can't charge renters their fee will you pay it instead?". He replied immediately, "no way, I'll just ask my nephew to show the apartments instead". I had just paid a 12% fee to a broker a year earlier with this same landlord! Thousands of dollars. The broker did very little for this exorbitant fee, they opened a door for a dozen people maybe, and uploaded a few pictures online. They were simply the gate-keeper and I had no choice in the matter. The only reason landlords deal with them is that it's easier for them to do so, so why not. It's pervasive enough, as a quirk of history, that it's tolerated. They certainly do not provide value that matches up with their fees in most cases. Rents may go up, but it will be only a fraction of the insane fees retail brokers in NY charge. It needs to change.

tut-urut-utut 5y ago
That's exactly what happened in Germany. As soon as the landlords had to pay the brokers out of their pockets, they quickly realized that the "service" is not worth that much for them, so many went without brokers, and the ones that still kept brokers had to pay them much less than before, and the price was related to actual service provided.