Submitted Testimony of the Real Estate Board of New York to the New York City Council Committee on Housing and Buildings Regarding Residential Rental Legislation

REBNY strongly supports policies that expand the local economy, grow and improve the City’s housing stock, and create greater opportunities for middle class New Yorkers.

Thank you for the opportunity to share our concerns with the committee today. What follows are more specific comments on the individual bills.

INTRO NO.: 1423-A

SUBJECT:  A Local Law to amend the administrative code of the city of New York, in relation to limiting the fees charged in a rental real estate transaction

SPONSORS: Keith Powers , Carlina Rivera , Laurie A. Cumbo, The Public Advocate (Mr. Williams), Brad S. Lander, Stephen T. Levin, Ben Kallos, James G. Van Bramer, Mark Levine, Diana Ayala , Margaret S. Chin, Helen K. Rosenthal, Vanessa L. Gibson, Francisco P. Moya, Costa G. Constantinides, Daniel Dromm , Karen Koslowitz, Donovan J. Richards, Antonio Reynoso, Robert E. Cornegy, Jr., Rafael L. Espinal, Jr., Alicka Ampry-Samuel

Intro. 1423-A seeks to limit the amount that residential real estate agents can collect from a property owner in those instances where the agent represents the property owner. This legislation is of grave concern to the entire residential real estate community, property owners, and should be of concern to renters as well.

Real estate agents provide an invaluable service both to prospective tenants and to property owners. They provide a full suite of assistance to property owners and tenants in ensuring that vacant units are filled as soon as possible. They provide a whole host of services, including marketing, facilitate dozens of showings, conduct market research to help the owner price apartments, advise on improvements, pull together application materials, and guide tenants on what can sometimes be a stressful process.

The fees that they collect are negotiable, and the Department of State has been clear in ensuring a competitive market place by not placing any fixed prices for these services.

We fully appreciate and support the sponsors intent of making rentals more affordable for New Yorkers and protecting tenants in these transactions. But Intros. 1423 and the recently amended version both will have the opposite effect of its intentions and hurt both renters and these hardworking agents.

The fee that an agent collects in these transactions are a one-time cost for the renter. Placing a cap on what the agent can collect in these transactions will result in consequences such as property owners raising rents to cover these costs or stop hiring these experts to handle these transactions that require quality services.  

Going to a unit where a property owner has engaged the services of a real estate agent is ultimately a decision that the renter chooses. There is zero obligation for any renter in New York City to choose a unit with an agent’s fee attached. As an industry and as a City, we need to ensure that all renters have options when they look to find their new home. But it is important to note that there is truly no such concept as a “no-fee” listing. It is ultimately a choice as to whether the property owner chooses to incorporate the services needed into the rent (leading to a higher monthly rent) or chooses to have it structured as a one-time cost. And for a renter, it is ultimately a choice of whether they prefer to look for a unit with these fees already incorporated into their monthly rent or choose to spend this one-time cost when they have found their new home.

The Real Estate Board of New York cannot support any bill that needlessly raises rents for New Yorkers or hurts the ability for residential real estate agents to be fairly compensated for their tireless efforts. We look forward to working with the bill sponsors towards any efforts to promote transparency and understanding for renters in a responsible way. 

INTRO. NO: 1424

SUBJECT: A Local Law to amend the administrative code of the city of New York, in relation to limiting rental security deposits to one month of rent

SPONSORS: Keith Powers , Carlina Rivera , The Public Advocate (Mr. Williams), Mark Treyger, Laurie A. Cumbo, Stephen T. Levin, Brad S. Lander, Ben Kallos, Mark Levine, Margaret S. Chin, Diana Ayala , James G. Van Bramer, Helen K. Rosenthal, Vanessa L. Gibson, Francisco P. Moya, Costa G. Constantinides, Daniel Dromm , Adrienne E. Adams, Karen Koslowitz, Robert F. Holden, Donovan J. Richards, Antonio Reynoso, Robert E. Cornegy, Jr., Rafael L. Espinal, Jr., Alicka Ampry-Samuel , Justin L. Brannan, Ruben Diaz, Sr.

This bill would limit the amount that individuals, corporations, or entities can collect as a security deposit in a rental real estate transaction to the value of one month’s rent.

As previously discussed with the Council prior to the enactment of the statewide law, REBNY unequivocally believes that requests for additional security as a means of discrimination is completely unacceptable. There are many instances where a property owner requesting additional security would be considered completely reasonable based on a number of factors present in a tenant’s application. Factors such as credit, rental, and employment history, salary or income, and current assets are all important and practical variables that a property owner looks at to determine whether a prospective tenant can fulfill the obligations of their rent on a monthly basis.

The recently passed state law and this legislation are both problematic and will actually hurt the same renters this bill intends to help. When a property owner receives an application where the prospective tenant does not meet reasonable financial requirements, they would be able to request an additional security in order to mitigate their risk of providing the applicant with the unit. Under this law, property owners can no longer do that. So they are left with two options: 1. Take the risk and still provide the applicant with the keys or 2. Go to the next applicant who may have a better financial history. This only exacerbates the City’s efforts to eliminate barriers to provide housing for those who may need it the most.

INTRO. NO: 1431-A

SUBJECT: A Local Law to amend the administrative code of the city of New York, in relation to requiring the return of security deposits within 14 days of the end of a lease

SPONSORS:  Carlina Rivera , Keith Powers , Laurie A. Cumbo, Mark Levine, Justin L. Brannan, Robert F. Holden, Daniel Dromm , Stephen T. Levin, Ben Kallos, Helen K. Rosenthal, Diana Ayala , Adrienne E. Adams, Margaret S. Chin, Brad S. Lander, Antonio Reynoso

This bill would require commercial or residential landlords to return security deposits, less any lawful deductions, to the tenant within 14 days of the end of the lease.

Security deposits are the tenant’s money, and should be returned to the tenant as soon as humanly possible. That is why the vast majority of property owners ensure that the security deposit is returned in a timely fashion. That is why REBNY supported the initial iteration of this legislation where security deposits were to be returned within 60 days.

Unfortunately, as a result of the State legislature now making it law across the State that security deposits must be returned within 14 days, we understand that the Council seeks to now codify this into the City administrative code.

REBNY is deeply concerned with both the recently passed state law and this legislation. The process for returning a security deposit first begins with an assessment of the physical condition of the unit after a tenant moves out. There are times where a tenant wishes to inspect the unit with the building manager, and other times where a tenant does not inform the building manager that they have actually moved out, which leads to delays on inspections to begin with. This process can take a few days, in which the property owner will reach out to the financial institution where the security deposit is held to process a return and closure of the account. At this point, the property owner has no role in the process for how quickly the bank processes their transaction, further putting pressure on meeting the 14 day return deadline.

The greatest operational delay often is a result of electricity bills. In many instances a property owner pays/receives an electricity bill and it is included as part of the monthly balance due. However for the last month of a tenant’s residency, this bill routinely does not come in until after the tenant moves out. The current practice of property owners and managers is to deduct the electricity bill from the security deposit and send it immediately to the tenant’s forwarding address. However, under the new state law and this legislation, a property owner has no way of ensuring that the electricity bill is paid for after the tenant moves out. A property can email, call, or send notices to a tenant but despite these efforts, there will be tenants who think they don’t have any type of responsibility after they return the key. These bills will undoubtedly go into collections, which is a situation that should be avoidable from the start.

INTRO. NO:  1432

SUBJECT:  A Local Law to amend the administrative code of the city of New York, in relation to transparency in residential rental application fees

SPONSORS:  Carlina Rivera , Keith Powers , Laurie A. Cumbo, Mark Levine, Justin L. Brannan, Robert F. Holden, Daniel Dromm , Stephen T. Levin, Ben Kallos, Helen K. Rosenthal, Diana Ayala , Adrienne E. Adams, Margaret S. Chin, Brad S. Lander, Antonio Reynoso

This bill would require apartment brokers to disclose an itemized explanation of how any application fee collected as part of applying for an apartment will be spent. Any person who collected such an application fee without making the required disclosure would be subject to a civil penalty of $150.

REBNY fully supports efforts to make any fees connected with a rental transaction as transparent as possible. To this end, REBNY would like to lend its support for Intro. 1432.

INTRO. NO: 1433

SUBJECT: A Local Law to amend the administrative code of the city of New York, in relation to providing tenants the option of paying a security deposit in six equal monthly installments

SPONSORS:  Carlina Rivera , Keith Powers , Laurie A. Cumbo, Mark Levine, Justin L. Brannan, Daniel Dromm , Stephen T. Levin, Ben Kallos, Helen K. Rosenthal, Diana Ayala , Adrienne E. Adams, Brad S. Lander, Antonio Reynoso

For residential tenancies that are six months or longer, this bill would provide tenants the option of paying a security deposit in six, equal, consecutive monthly installments added to the first six rental payments, respectively. Tenants with a shorter term tenancy of less than six months would be permitted the option of paying equal, consecutive monthly installments provided that the number of installments match the number of months of the tenancy. This bill could alleviate hardships associated with the requirement to pay a security deposit in one lump sum.

REBNY appreciates the intent and goals of this legislation to make it easier for residential tenants to ascertain a unit they would like, but may not have the full security deposit available up front in order to feasibility rent the unit. However, there are a series of unintended consequences that this bill would have on property owners and other renters within a building.

Security deposits are critical for property owners to ensure that any damages to the property are paid for, and that should the tenant break their lease that the accounts are still kept in good standing. A 6-month installment of a security deposit is not an actual security deposit. In a city of 8.5M people, there will always be instances where tenants suddenly break their lease, move out without notice to the owner, and/or leaves significant damages to the rental unit. If that tenant did not fully pay their security deposit because they were on an installment plan, it now puts pressure on the owner to find a way to increase revenues to cover the damages. That’s not fair to the property owner and that’s not fair to the other tenants who will inevitably bear the brunt of bridging the gap on these deposits.

Seattle is the only major jurisdiction that has implemented this type of approach to security deposits. REBNY believes it is always prudent to review how other major cities implement and enforce new regulations, especially one that is as dramatic as this. However, Seattle only implemented this in January and so there is nowhere near enough information available to assess its effect. We would urge the Council to carefully reconsider the approach being taken in this bill.

INTRO. NO: 1499

SUBJECT:  A Local Law to amend administrative code of the city of New York, in relation to the provision of tenant screening reports

SPONSORS:  Andrew Cohen, Carlina Rivera , Ben Kallos, Keith Powers

This legislation would prohibit any individual from charging a prospective tenant a fee in order to obtain a tenant screening report when the individual knows the unit is not or will not be vacant for such prospective tenant to lease. This bill would also require such individual to provide an applicant with the tenant screening report as long as the required fee has been paid, regardless of whether or not a lease has been signed. This legislation would also require the Department of Consumer Affairs to conduct a feasibility study on whether the city could establish its own tenant screening report system.

Tenant screening reports often can be a useful tool for property owners to review a tenant’s history, including criminal background checks, credit checks, and to confirm employment and rental histories. These reports help a property owner confirm the information being provided by a tenant in their application.

REBNY believes that if a prospective tenant pays a fee for this report, they should be entitled to it. This report could include information that the tenant believes may not be accurate, and it is important to ensure that renters understand what information is being relayed to property owners about them.

REBNY does wish to work with the sponsor to clarify who would be penalized in instances where a tenant screen report is requested, but the unit is not actually vacant. A residential rental real estate agent that represents a tenant may charge the tenant a fee for this report, but they are only operating based on the information a property owner provides them as to whether the unit is vacant or not. It would not be appropriate to issue a violation to this agent whose only interest is in getting their client a safe, quality apartment within their budget.

REBNY also would like to express its general support of a feasibility study on whether the City could establish its own tenant screening report system. We would like to caution however that a citywide screening report system would still need to take a look at other jurisdictions for employment, rental and criminal histories especially if a tenant is moving into New York from a different place in the country.