The NYC Apartment Rental System is Infuriating
At one point or another, everyone who lives in Manhattan has to deal with the extreme frustration of finding an apartment. Especially for 20-somethings on a budget looking for shares. For those of you who are not aware, it is virtually impossible to find a deal and avoid paying a broker fee. Let me explain briefly how it works:
The system in Manhattan is like no other anywhere in the country. Anywhere else, a rental agent is hired to save you the time and leg work, and you pay them a fee for their hard-work and service. In the City, however, a rental agent gets a fee for having a listing, in most cases 15% of the annual rent. You can spend hours every day for weeks looking for a place, you find a broker with access to a good apartment, and voila, you owe him thousands of dollars. I don’t know how the system came to be in the first place; it’s really screwed up. Now, in some cases, you can find a “no fee” apartment, where landlords and managers boast that there are no broker fees involved. But - the rent is typically listed at several hundred dollars a month more than the unit itself is worth. It’s like the landlord is doing us a favor by not charging a fee! I have even seen cases where one apartment is rented with at least 3 different real estate brokers, all for different rental amounts and different broker fees - listed for whichever sucker is willing to pay the most.
There is good logic behind the system: landlords in Manhattan typically own hundreds or thousands of units, and with the high-turnover in the City, they simply do not have the capability to run credit checks, collect paperwork, and qualify applicants all day long. So, they list the unit with the broker, and the agents do the rest. Simple as that. But over the past decade or so the rental vacancy rate in Manhattan has become so low (under 1%) that the brokerage system has become corrupt. I know Bloomberg is busy dealing with Wall Street and all, but maybe we’d all be better off and less bitter if the rental system is Manhattan was more efficient. Sure, agents need to make a living too, but let them work for it like everyone else and not just get paid for hanging their license. And I’m not blaming the agents – I’m blaming the system.
I am helping my sister find an apartment on the Upper West Side. Her budget for a 2-bedroom share is $2,800, no fee. This might sound like a lot of money for a two bedroom, but believe me this is nothing. For $2,800 she will probably not even get a dishwasher and laundry. And for this price, no fee, we are looking at apartments the size of closets that are worth maybe $2,200 per month. Maybe. There is a building on the Upper West Side in a great location, with 10 rental units available. Ten! They are listing the 2-bedrooms at $3,500 no fee. The units have a few appliances against the wall as the kitchen (no dishwasher!), and maybe 600 square feet of living space to share between 2 people. The nerve.
This past week I saw another 2-bedroom for $2,750, listed by the current tenants who need to break their lease. The ad mentioned a small possible third bedroom. The apartment was small but cute, maybe 650 square feet, and the “third bedroom” was nothing more than a walk-in closet or storage area. The current tenant informed me that there was an error in the listing, and the rent is actually $3,100 per month and not $2,750. And, it was just submitted to a broker. So, a 650 square foot apartment, that 3 people are supposed to live in, and each pay over $1,000 a month in rent, and pay a broker fee.
Now, a lot of rental agents are advertising apartments on Craigslist that they themselves have not even seen! This is something else that infuriates me; yesterday when I contacted an agent about a listing, he told me about this $3,100 small 3-bedroom that I mentioned above, and when I told him I had seen it and it was a closet, his answer was “Yeah, I figured”. So, we are living in a city where the brokers themselves don’t even believe in their product. And it doesn’t matter! Someone out there who doesn’t know better will end up paying.
One more scenario I will quickly mention. I saw a 2-bedroom listing for $2,800 in the West 80’s advertised in the “no fee” section of Craigslist. Sure enough, when I contacted the agent, she a) said she had not seen the apartment but heard it was big; b) said their was in fact a one-month fee and c) said the unit requires a first and last month’s security deposit. So, to get this straight, I need to be prepared with $8,400 up front, to deal with someone who has not even seen the apartment? Incredible.
My advice is that if you plan on staying in your new apartment for a few years, it is worthwhile to pay the broker fee, because you save money in the long run. But - who plans anything in New York City? At this point, how do you even know if you are still going to have a job next year? If you end up paying a fee and move out in a year, well, you just got screwed out of several thousand dollars.
So what’s the solution? There really is no solution. You need to be patient and keep your options open as far as neighborhoods and building types. If you have a budget of $2600-$3000 for a 2-bedroom, you are better off in a converted-two in a doorman building, because the layouts of those units lend themselves to convert well. I have lived in a doorman building and a walk-up building, and it’s all the same to me.
And be very cognizant of “no-fee” listings; most likely the rents are a lot more than the unit is worth ($3,700 a month for shitty 2-bedrooms with one bathroom in a walk-up), or the agent pulls the old bait-n-switch.
Some sites to take a look at are NY Bits and Urban Sherpa which are good New York City guides to landlords and no-fee listings.
