Brokerage commission, deposit and huge rent: to rent a house in New York, you need to shell out $14

It's no secret that New York, despite its greatness, contains a lot of negative aspects. In addition to the critical situation with migrants, the city is suffering from a housing crisis. The two are certainly interconnected.

Tenants' upfront costs - security deposits, brokerage fees and monthly rent - have reached record levels in recent years. New York Times told you what difficulties you may encounter when moving to New York.

In July 2023—in the midst of moving season—29-year-old Hannah Brooks needed to move to New York City from Austin, Texas, before her boyfriend started a new job. Two rental applications were rejected. So when she found a promising home, the broker told her she needed to make a payment quickly to take it off the market.

Brooks panicked when the broker explained how much she would have to deposit. She even asked: “First month, security deposit and broker’s commission - $14?”

Living in New York is notoriously expensive, a consequence of the fact that there is too little housing for the number of people looking for it. This situation allows landlords to continue raising rents. But there is another side to the crisis: the amount that potential tenants pay up front before moving into an apartment has risen so much that moving has become problematic for some.

A big problem

An analysis of data from online rental platform StreetEasy found that last year, the average upfront moving cost - monthly rent, broker's commission and security deposit - was more than $10, the highest amount in more than a decade. It is almost 400% higher than in 30, before the pandemic.

On the subject: Renting an apartment in New York: what to look for in order not to rent a noisy bed bug with aggressive neighbors

In a survey conducted for StreetEasy by Harris Poll, nearly a quarter of more than 500 New York City respondents said upfront costs had prevented them from moving. “What many people forget is that it's not just skyrocketing rents that are putting New York City renters in a very difficult situation,” said Kenny Lee, an economist at StreetEasy who helped conduct the analysis.

Brooks was able to raise the money she needed, but only by borrowing money from other people, including her parents, her boyfriend's parents, and her aunt and uncle.
“It's a lot of money and we're just trying to get back on our feet,” she said. Hanne's job involves conducting marketing research; her boyfriend is an assistant professor. The couple wonders how people with limited income can cope with such a situation.

Do you need a broker?

According to Ingrid Gould Ellen, head of the Furman Center for Real Estate and Urban Policy at New York University (NYU), such dynamics are “undermining the market.” Not having enough money to cover initial expenses can force a couple with a newborn child to stay in a smaller apartment or hinder a family whose adult children have already moved out. “When the housing market is functioning well, there is mobility,” added Professor Ellen.

The escalation in upfront costs for tenants has increased the focus on broker commissions, which Lee says typically make up the largest portion of those costs.

Such fees are partly a relic of an earlier, pre-Internet era, when renters had a harder time finding an apartment on their own. Those fees were briefly eliminated in 2020, but the influential trade group Real Estate Board of New York City successfully sued to overturn the change.

Lee noted that in most U.S. cities, renters do not have to pay such fees. He said New York's system should be improved to benefit renters, including making sure they only pay a broker's commission when they hire one.

The Real Estate Board, which consists of brokers, argues that if a tenant didn't pay a down payment, the broker's costs would simply translate into a higher monthly rent.

Demand exceeds supply

Douglas Wagner, director of brokerage services at real estate brokerage Bond New York, says there are other ways to lower down-front costs. He said renters should take advantage of programs offered by companies like Rhino that allow them to pay part of the security deposit rather than the entire amount. But the biggest cost for tenants - rent - will remain high until officials address the city's housing shortage.

“Demand still exceeds supply,” Wagner stated. He noted that about half of the listings in New York do not require a brokerage fee.

This is exactly the kind of apartment 23-year-old Sterling Ortiz was looking for after graduating from college and moving to New York from Florida. He finally found it - a room in Bushwick for $1 a month. True, he had to pay about $050 in advance.

“It's hard for someone like me who just graduated from college,” he admitted. “I knew what I was getting myself into.” And although I am not delighted with such a high rent-to-income ratio, I, unfortunately, have gotten used to it.”