Manhattan apartment rents hit another all-time high in May, with the median rent for new leases topping $4,571. The increase comes as demand is expected to rise over the summer, driven by lease turnovers and an influx of students ahead of the upcoming fall school year. Rents are likely to increase further following the passage of a new broker fee law.
Bloomberg cited a new report from appraiser Miller Samuel Inc. and brokerage Douglas Elliman, which showed that Manhattan apartment rents reached $4,571 in May—marking the third record in four months and exceeding the previous high by $71.
In addition to typical seasonal demand, a significant change emerged in New York City's rental market on Tuesday with the implementation of the Fairness in Apartment Rental Expenses (FARE) Act.
FARE now requires broker fees to be paid by the party who hired the broker, most often the landlord or property management company, rather than the tenant.
As a result, the upfront broker fees for most tenants searching for apartments will most likely be passed along in the form of higher rents.
According to data from the real estate search website StreetEasy, about half of all NYC leases in the last year charged tenants a hefty broker fee.
With the broker fee burden lifted, StreetEasy forecasts that renters can expect the average upfront cost of signing a new lease to tumble 41.8%, from $12,942 to $7,537. There is no actual cap on what brokers can charge; however, fees typically range from 12% to 15% of the annual rent.
Real Estate Board of New York (REBNY) President James Whelan recently warned, "New Yorkers will soon realize the negative impacts of the FARE Act when listings become scarce, and rents rise. We will continue to litigate this case as well as explore our avenues for appeal."
