Governor Maura Healey announced last week a plan to file a proposal that would do away with renter-paid broker fees in the state, a step taken by New York City last year.
If the Massachusetts Legislature approves the proposal, the onus will shift from the default of tenants onto whoever hires the broker, Healey said, which is typically the landlord.
“Broker fees are an unfair cost for renters, and they should not be on the hook to pay for someone they didn’t hire,” Healey said in a statement, adding that the proposal would save tenants thousands of dollars and enable people to afford the cost of living in Massachusetts.
Currently, some renters are required to pay a fee to a broker that typically equals the price of one month’s rent. This is in addition to the usual upfront charge of first month’s rent, last month’s rent, and a security deposit, which would put a tenant out around $10,000 or more when they first sign onto a lease for a $2,500 per month apartment, the median in the state.
“For tenants, this proposal would provide much-needed relief,” said Boston City Councilor Enrique Pepén in a statement to the Bay State Banner. He added that “many people are already being priced out of the market, and those who do manage to rent often face high upfront costs, including broker fees. By eliminating these fees, we make the rental process more accessible and less financially burdensome.”
Pepén is among a group of city councilors in Boston and neighboring Cambridge and Somerville who have pushed for the eradication of renter-paid broker fees locally and regionally. Pepén said he welcomed the action at the state level.
“This change would improve the overall fairness of the rental system in Massachusetts,” he said. “With landlords absorbing the broker fee cost, tenants won’t be faced with hidden charges on top of their rent, and the rental process will become more transparent. This is a step forward in creating a more equitable housing market for everyone in the state.”
Rising housing costs and a shortage of inventory have made living in Massachusetts challenging for many people, including the 25% of young adults who said they were considering leaving Boston, citing cost of rent among other factors.
“We have an affordability crisis, a housing crisis,” said Somerville Mayor Katjana Ballantyne in an interview. “I think we have to use every tool possible to help in that crisis. This is one of the tools. So I believe that it is an excellent move.”
In Somerville, where the median cost of rent is approximately $3,200, according to Zillow, rental assistance programs and help for low and moderate income households through the state or federal dollars don’t cover broker fees.
Last year, city councilors filed a Home Rule Petition to ask the state to ban the practice of tenant-paid broker fees, and Boston and Cambridge city councilors joined the effort. With Healey’s proposal, the individual cities won’t have to take the matter into their own hands.
Ballantyne said Healey’s proposal was a good first step but said it was important to move away from “a small group of band aid solutions to a robust ecosystem” to address the pitfalls of the state’s housing process.
Douglas Quattrochi, executive director of MassLandlords, expressed skepticism over the efficacy of the proposal to shift the responsibility of broker fees to landlords.
“You can’t really address complex problems with simple ideas,” he said, adding that it wasn’t a matter of the law but rather of enforcement. He questioned the proposal’s benefits and said depending on the language used, it could in fact be potentially harmful to tenants.
“If it says a renter can’t ever pay for a broker, that would be a disaster,” Quattrochi said, “because there are lots of people who do pay for brokers to represent them as renters.”
Pepén agreed that the proposal could have unintended consequences, such as landlords increasing rent prices to cover the cost of broker fees or stopping their use of brokers altogether. These outcomes would make an already overwhelming rental process more stressful for tenants. Still, he said if the policy is implemented carefully, those risks would be alleviated.
In her experience, Ellen Shachter, director of Somerville’s Office of Housing Stability, said landlords are engaging brokers often without tenants’ knowledge. The landlords don’t receive a broker fee, which would be unlawful, but rather tell tenants they have to pay a fee to the broker. State law, she said, outlines what the landlord can do but not the broker.
While some worry that landlords may simply bake the broker fee into the rent, Shachter said this at least allows for transparency and gives tenants a chance to make an informed decision about whether or not they can afford the apartment.
The exact language of Healey’s proposal is yet to be seen, but Shachter said it was “a huge step forward in terms of making this issue so public and so vital for the many legislators that may not have thought about this before and may not know anything about it.”
Shachter said filing the proposal “is the easy part” and that the complicated nature of the legislature’s process leaves its success hanging in the balance.
“We just really hope that the legislature is really going to say, ‘Hey, this is a commonsense answer,’” she said, “since we are one of the very few places around the country that allows this to happen.”
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