New Yorkers are paying brokers thousands of dollars to find apartments that aren't on the open market.

Alexandra Dai obtained a two-bedroom apartment in a prestigious Brooklyn neighborhood for 60% below market rent. However, she had to pay the broker $4,000 to gain access to the apartment. Audacy explains how changes to rental regulations have led to some apartments being taken off the open market, forcing tenants to pay brokers to access these listings.

A year after a law went into effect banning landlords from passing brokerage commissions on to tenants, a new type of paid access has emerged in one of the most competitive rental markets in the US. Now, tenants are paying brokers thousands of dollars simply for the opportunity to see what apartments are available. available.

How tenants began paying for access to apartments

In Dai's case, a 29-year-old advertising professional contacted her about an apartment through StreetEasy. The broker told her the property was already rented, but offered to show her other options if she agreed to pay him at least one month's rent. rental payment for any apartment that he rents through him.

For two months, Dai encountered fraudulent listings. In one case, the landlord backed out at the last minute. She decided the broker's offer was worth it.

Dai ended up paying the broker more than double her monthly rent.

On the subject: New York City has launched a tenant protection campaign: Volunteers will visit buildings where there are violations.

"It seems like a lot of announcements are being deliberately held back. I miss the transparency we had before," she said.

Before the Fair Rental Expense Act (FARE Act) went into effect last June, many New Yorkers paid brokers hired by landlords. The commission often amounted to a month's rent or more.

Tenants were often annoyed at having to pay for a service they didn't request. Furthermore, online services have made finding an apartment on your own quite easy.

Now the commission is paid by the person who hires the broker. Many renters avoid brokers altogether. According to New York-based rental platform Openigloo, the share of renters paying brokers' fees has fallen from 31% to 15% since the law came into effect.

Apartments are leaving the open market

However, a year later, data shows that the law has contributed to more apartments disappearing from the public domain, increasing pressure on an already expensive rental market.

According to appraisal firm Miller Samuel Inc. and The Real Deal, every month since the FARE Act was enacted, the number of available apartments has been lower than the previous year. In June, when New York City's busy rental season begins, the number of available apartments fell by 31%.

Typically, in June, the number of available homes increases by 5,9% compared to the previous year.

Last month, the mayor's office released a report, "Rental Ripoff," aimed at combating illegal brokerage fees.

Under the FARE Act, renters can still hire and pay brokers themselves, including for finding apartments that never go on the open market.

However, brokers cannot use a specific apartment or a specific group of apartments as a condition to force a tenant to rent them and pay a commission.

The city considers it illegal for a broker to post an ad for a specific apartment and then, after a potential tenant contacts them, inform them that it is no longer available.

The broker then offers him only other options for which the tenant must pay a commission.

"These measures were supposed to make life easier for renters," noted Compass agent Tali Berzak. "But now many listings have disappeared."

Homeowners are increasingly doing without brokers.

For some landlords, paying brokerage fees has become a "last resort," said Chris Atheneos, who owns about 100 apartments in Brooklyn.

In winter, when demand is lower, he sometimes paid brokers a commission. But this summer, he's renting most of his apartments based on referrals from previous tenants.

Listing an apartment off the open market allows the owner to find a tenant without hiring a broker or paying to post an ad online.

For brokers, in turn, the inventory of such apartments becomes a competitive advantage. They can offer renters access to housing they might otherwise never see.

"This is a pre-market benefit I can offer my clients," said Peyton Yen, an agent at Charney Brokerage. He charges a monthly rent for this service.

"I view rental agent services as a premium service. It's not cheap," he says.

Of the roughly 15 leases Ian expects to close this summer, about half of the apartments won't be listed on major listing platforms.

Some brokers openly advertise such services on social media.

Grace Germeinder posts videos on TikTok of apartments that aren't on the open market.

One video of a one-bedroom apartment in the Financial District for $6,500 per month received 50 inquiries from potential renters.

"If a tenant is willing to pay a brokerage commission, more apartments will be available. If not, I'll only show them options for which the building pays the commission," Germainder explained.

The mere posting of information about apartments not listed on the open market on social media does not violate the FARE Act.

However, brokers cannot use a specific apartment or pool of apartments known to them as a condition to force a tenant to rent them and pay a commission.

Apartments on the open market are disappearing faster and faster.

The value of early access to apartments has grown as New York's rental market has become even tighter.

Rents reached record highs this summer. The number of apartments available for sale has decreased, increasing competition for the few apartments that do appear in listings.

The gap between the open and closed markets is also widening.

Before the FARE Act came into effect, rent-regulated apartments listed for public sale rented for only 3% more. By comparison, apartments not advertised publicly rented for less, according to Openigloo.

After the law came into force, this difference increased to 18%.

Apartments from open ads are rented out faster and often sell for more than the asking price.

According to RentReboot, apartments used to be on the open market for an average of 13 days. Now they're rented after just eight days.

In June, more than a quarter of Manhattan apartments were rented after a competitive bidding war among potential tenants, according to Miller Samuel and The Real Deal.

Tenants have to compete

Sophie An, a recent Columbia University graduate, primarily searched for housing through StreetEasy.

In June, she viewed 15 apartments and applied for eight of them. Other tenants also applied for each of these apartments.

Her initial budget was $3,000. She ended up bidding $3,200 to beat out another bidder for a one-bedroom apartment on the Upper East Side.

As of July, the Department of Consumer and Worker Protection has issued more than 79 citations for FARE Act violations. It has assessed fines totaling $36,125 and refunded tenants $15,475 that was illegally collected from them.

Dai's experience may have broken the law

Experts believe Dai's situation violated the FARE Act.

She contacted a property manager about an apartment that was publicly listed for sale. She was told it was no longer available. She was then asked to sign an agreement with a broker before she was even shown other apartments. Dai herself had mixed feelings.

She used to be outraged that she had to pay agents thousands of dollars to spend a few minutes opening the door.

This time, she believes the broker really made his $4,000. He found an apartment she would never have otherwise known existed.

"I really think I got an incredibly good offer," Dai said. "But I still felt a little cheated."