NEW YORK — The New York City Council has approved a new law prohibiting mandatory broker fees, a controversial element of the city’s rental market that has long frustrated tenants. This legislation emerged after substantial opposition from the city’s real estate sector.

In New York, a rare practice among U.S. cities, renters have often been responsible for covering real estate agent commissions even when these agents represent the landlord. Typically, these fees can reach up to 15% of the annual rent, which can amount to around $7,000 for an average apartment.

With this new ruling, landlords will no longer be able to impose these broker fees on tenants as a pre-move expense. While tenants can choose to hire their own agents, they won’t be obligated to pay for brokers that primarily serve the landlord’s interests. This change is particularly significant in a city where approximately two-thirds of households are renters. The legislation has garnered notable support, even gaining traction on social media platforms like TikTok, but it has also faced significant pushback from real estate brokers and their lobbyists. Critics argue that this move could have substantial repercussions on an industry that currently supports about 25,000 brokers.

“We overcame immense lobbying efforts that spent hundreds of thousands of dollars trying to defeat this bill and burden you with broker fees,” stated Councilmember Chi Ossé, a Democrat and proponent of the FARE Act, during a rally. “We stood our ground and secured this victory.”

The broker fee model has historical roots in New York, dating back nearly a century when agents played a prominent role in advertising listings in newspapers and assisting potential renters directly. Although this commission system is also present in Boston, its occurrence is rare across the country. Increased reliance on online listings and the rise of virtual tours in the wake of the COVID-19 pandemic have led many tenants to express dissatisfaction with these fees, seeing them as unnecessary.

At a recent City Council hearing, several attendees shared experiences of spending exorbitant sums on broker fees for limited services, like merely opening doors or providing access codes. “In most businesses, the party requiring the service compensates the provider. I paid $6,000 to change my apartment. It’s time for these inequities to end. Landlords must pay for the services they engage,” voiced Agustina Velez, a house cleaner from Queens.

Brokers argue that their roles are more involved than merely facilitating visits. They conduct background checks, coordinate viewings, and serve as intermediaries between tenants and landlords in a city where many tenants never actually meet their building owners. “This sets a precedent for a government-run housing system,” warned Jordan Silver, a broker with Brown Harris Stevens. He pointed out that the wording in the new law is vague and raises concerns about its practical implementation.

Opponents of the legislation, which includes the Real Estate Board of New York, predict that landlords will adjust to these changes by raising monthly rents. However, some New Yorkers believe this prospect is more favorable than continuing to deal with high upfront broker fees that complicate transitions between apartments.

Bradley Tusk, an entrepreneur and advocate for the bill, stated, “From a business and tech investment standpoint in New York City, lowering barriers and costs for talented young individuals is beneficial for everyone. Those who have had to pay 15% of their annual rent for just a brief apartment showing understand that these fees amount to legalized theft.”

Mayor Eric Adams, who has a background as a real estate broker, has expressed reservations about this new legislation and the potential unforeseen consequences it might usher in. “Sometimes our ideas need further examination to fully understand the long-term impacts,” he acknowledged. He indicated his willingness to seek a compromise.

Nonetheless, the legislation was passed decisively with a vote of 42 to 8, indicating a strong mandate that may limit the Mayor’s options for intervention. The new law is set to be implemented in six months.