Rental Brokers Are Useless

At the beginning of this month I spent about a week and a half of improbably beautiful, sunny, breezy, vacationing-in-New-York days huddled over my laptop in a borrowed apartment, hitting “refresh” over and over again. I would wake up in the mornings and instinctively reach for the phone (kept next to my pillow) and check my email to see whether anything had changed. I often didn’t shower until 3 or 4 p.m. I survived, largely, on coffee, and I slept at most a few hours a night. I didn’t read the news or even watch television except for that one night the stupor was so thick that I managed to get through four episodes of “True Blood” without actually suffering a brain hemorrhage brought on by excruciating dialogue. This, if I recall correctly, was what having a full-time, soul-destroying corporate lawyer job was like. But this past month I was not working. I was not getting paid. I was just trying to find a place to live in New York this September, in a rising market where the vacancy rate in July was well under 1%.

The wrinkle was that I was trying to do it without paying a broker’s fee. I have rented five apartments in the city, in three different boroughs, and not once have I paid a broker. It’s become a point of pride for me, though this time around I could have been accused of carrying the strength of my conviction to the point of lunacy. I certainly scraped up against the edge of it in August.

After a few days of this, I caved. I contacted a few brokers and tried to commit myself to the notion that I could part with a couple of thousand dollars if it promised to liberate me from this hell. But with one exception, instead of helping me, these brokers mostly toyed with my patience and time. I arrived at one apartment in Fort Greene at 9 a.m. for what I was told was a group showing; upon arrival the broker’s intern told me it had rented the night before. This had not been mentioned when I confirmed the showing by email that very morning. I arrived at another appointment in Astoria with an agent who’d been informed I’d be using a guarantor; after dragging me through two apartments, the agent told me the landlord didn’t accept guarantors. I saw a studio on Montague Street in Brooklyn Heights, and said I’d like to put in an application on it, and even confirmed this by email with the relevant broker. Then, as though we had had a bad Nerve.com first date, I never heard from her again, despite numerous polite—I’m Canadian, remember?—follow-ups. Only one broker of the dozen or so I contacted—this guy—was consistently responsive and courteous. The rest all seemed dedicated to no other cause than preventing me from renting an apartment.

I returned to combing the listings myself; and, in the end, I did manage to rent something without paying 15% of my annual rent (the standard brokerage fee in New York) to a class of professional whose chief skills, it seems, are phone-and-email avoidance and egregious overuse of superlatives. I’m not a cheap or even a frugal person, but there’s something about the idea of paying a broker for performing no service whatsoever that activates my latent skinflint genes. And those genes, lately, have been screaming: “Why isn’t this business model completely goddamn illegal??”

***

When did New York first succumb to the power of the broker? I’m not really sure. Nora Ephron mentions using one in her essay about her first New York apartment, included in New York’s recent collection My First New York: Early Adventures in the Big City. She writes that she rented this place, at 110 Sullivan Street, after graduating from college; that would put the year at 1962, and that’s the earliest mention I’ve found. The customs then apparently deviated little from contemporary practice: the broker reassured Ephron that the apartment was located in “a coming neighborhood, on the verge of being red-hot. He was about 25 years off.” (Yes, the Village—or SoHo, depending on who you ask—once was East Bushwick too.)

Ephron, however, was almost certainly renting in the blessed era before the emergence of the “standard” Manhattan-and-much-of-Brooklyn fee of 15 percent. That amount appears to have been drawn from the market’s hat sometime in the early 1980s. Before that, according to New York Times articles I’ve dug up from the era, brokers usually collected a month’s rent as a fee. Assuming that’s what Ephron paid for her then-$160 a month apartment, with inflation that would come out to just under $1200 today. (Whimper—that was a two-bedroom, and, as of three years ago I was paying over $2000 for a tiny if charming one-bedroom around the corner, on Spring.) If she had had to pay 15 percent that would have been almost $2160 in today’s dollars. Perhaps I know all the wrong recent college graduates, but this strikes me as an absolutely astronomical sum to be spending, at that age, on what often amounts to, on the broker’s end, as a day’s worth of work.

No doubt the more wealthy among you are shrugging your shoulders, thinking your time is more valuable to you than your money. I hardly need to tell you, though, that that isn’t true for all of us. And for some people not being able to afford a broker fee is a major hurdle to being able to obtain an apartment.

Don’t believe me? Well, note that in a recent cut to housing subsidies, the city announced that it would only cover one half of a one-month broker’s fee. Housing Works objected, noting that the policy would “severely inhibit the ability of low-income people to find permanent housing.” From the standpoint of affordable housing advocacy, I’m of course sympathetic to the objecting parties—people using Section 8 vouchers shouldn’t be shut out of the market simply because they require government assistance to secure a roof over their heads. But it’s a very strange thing, in my view, that we find rental brokers so totally natural and acceptable that we don’t even ask why they are even operating at that level of the market, where the potential tenants are so transparently unable to afford the fees.

***

The utter irrationality of the rental broker fee in New York probably explains why, despite some effort, I couldn’t locate any academic work that even bothered trying to justify its existence. My amateurish extrapolation from some of the literature on real-estate brokers writ large (i.e., in sales) seems to go something like this: brokers serve us as “market makers,” providing an all-around benefit by allowing more prospective tenants/owners to meet more prospective landlords/sellers than they could find on their own, and thus maximize their chances of getting the right apartment for the right price. That sounds lovely and useful, of course, but it also sounds nothing like the actual experience of using a broker to rent an apartment in New York.

At some point, in a different kind of New York, it was no doubt true that brokers were necessary to find owners, because most landlords were actually flesh-and-blood individuals. At some point, it was also no doubt true that you needed the broker to facilitate the introduction because your personality was an indication of your creditworthiness. This was a time when there was no central repository of people’s credit information, consultable for $25 and a click of the mouse. But if that city ever existed (and I’m pretty sure it only ever existed for a precious few), it’s gone, now. You’ll hear, on occasion, nervous assurances from friends that to rent directly from someone, with no broker middleman, more or less guarantees you a terrible landlord. But there’s no longer any obvious reason why this would be true.

Meanwhile, the costs of organizing the apartment-search bazaar are now dramatically lower than they once were—which makes it even harder to swallow the high cost of the fees. I could repeat a cliché about the advent of Craigslist, but you know just what I mean. There is less and less reason to need your hand held through the buying process.

If nothing else, the advent of the online ads has made visible just how absolutely venal the whole process currently is. Indeed, Craigslist has likely been just as destructive to the reputation of brokers in New York as it has been a logistical saving grace. On the one hand you can reach a lot of people quickly. On the other, consumers of all types become pretty quickly inured to, and turned off by, breathless assurances that the apartment in question is “SICK MINT++++!!! CALL NOW thsi wont last!”

The New York City Council did a study (pdf) a few years ago and found that almost a third of the no-fee ads on Craigslist were scams, insofar as the apartments did, in fact, carry a broker fee. The main solution that emerged from that brouhaha, apparently, was that Craigslist began charging brokers to list there. The Department of Consumer Affairs investigated a few of the brokerages themselves, but the outcome of their investigation was less than clear cut. And the listings sections are still stuffed to the gills with misleading ads.

***

Until some enlightened legislative soul catches on to the ridiculousness of this whole thing and bans brokering in the rental market outright, there is some good news for us, as renters—namely, that the scams are bumbling and transparent, to an almost endearing degree. There are regional variations: the by-owner ads in Astoria, for example, are especially ridden with listings from brokers who try to game the system by referring to themselves as “agents for the owner.” The Brooklyn ads are more commonly afflicted with multiple brokers listing the same apartment, often one that, if you searched far back enough in the ads, was originally listed on Craigslist as a by-owner—meaning you could simply cut out the middleman if you read the ads carefully enough. This happened with not one but two of the apartments I looked at during my search. In one case, four ads were running side by side for the same apartment: three from a broker and one from the owner. But then, of course: I noticed that. In other words, a certain amount of renter due diligence can avoid this kind of problem (not that it excuses the practice).

And due diligence is what it comes down to when you’re looking for an apartment. Some of it is luck, of course (sometimes even a lot of it). But mostly what it took me was careful searching of the listings and being reasonably quick on the draw on email. I probably would have had an even quicker time if I was using sites like nybits.com, which aggregate rental-company listings—but most of those services were out of my price range.

And all those dark mutterings you’ll get from New York friends about the risks of skipping the broker can be traced to two thoroughly unreliable sources. One is the brokers themselves, who you can find trolling things like the Streeteasy user forums, repeating their doomsday refrains, always without actual examples or evidence. The other is the crush of the self-serving New York narrative that makes the difficulty of renting here stand in as some kind of test of personal mettle. I, too, have derived cocktail party mileage from New York real-estate battle stories (not to mention this piece itself). But if the result of being so proud of our overcoming real-estate adversity is thousands of dollars, paid out to an industry that in any other circumstance we would probably call predatory, we aren’t building character. We’re adhering to a much older, and more venerated tradition of New York-style capitalism: being the chumps who get cheated and then claiming that we actually like it.



Michelle Dean’s writing has appeared, among other places, at Bitch, The American Prospect and The Rumpus. She sometimes blogs here.

Photo by littleny, via Shutterstock.