[reaperman]

The term "Chesterton's fence" implies there's a good chance that something will break in an unwanted way if you remove the brokers fees. I'm curious what would break for the other parties in the transaction.

"building owners can pay brokers less if brokers pass on overhead costs to renters" could just as easily be "owners could charge $10,000/year more in rent if brokers didn't capture it".

[cameldrv]

I'd summarize Chesterton's Fence as "do not destroy that which you do not understand." Human things that have been around a while almost always have some sort of purpose. That purpose could be something noble and important, or it could be some sort of kickback scheme. Figure out which one it is before you lead a protest against it.

[nickelpro]

Ya that's a silly explanation, the only relevant point is this:

The price charged by brokers to landlords is less than the perceived value of the labor required for the landlord to list the property, receive calls from interested renters, and show the property.

This isn't surprising because brokers charge next to nothing to the landlords because they make their money on the fees from renters.

Renters are forced to abide this situation because of the aforementioned mismatch in supply and demand.

Why does this market crop up in some cities but not others? It's hard to say, some claim it's rent control but buildings without rent control still have exorbitant broker's fees in NYC. However, this is hardly the only market niche that is cultural rather than dictated purely by market forces. Americans don't buy bidets, the Japanese still frequently prefer cash transactions to electronic payment, and San Franciscans don't charge brokers fees.

[reaperman]

> The price charged by brokers to landlords is less than the perceived value of the labor required for the landlord to list the property, receive calls from interested renters, and show the property.

There's no way this costs $10,000 ... the equivalent of 160 hours (a full month) of highly-paid labor. In a housing-constrained city where the landlords product sells itself.

[karaterobot]

> The term "Chesterton's fence" implies there's a good chance that something will break in an unwanted way if you remove the brokers fees. I'm curious what would break for the other parties in the transaction.

No, it's about making changes without knowing enough about what you're changing, and why it is the way it is. If we actually understand the reason for high broker's fees, there is no Chesterton's Fence. It seems like we do know the reason they're so high, and could move to address them with some confidence.

[thaumasiotes]

The reason it's going to the brokers is that the landlords are legally prohibited from charging higher rent.

It can't go to the customers for the obvious reason that the whole point of the system is to allocate a smaller number of apartments to a larger number of customers.

[1_1xdev1]

Legally prohibited? How?

Rent stabilized units are a small percentage of the NYC rental market (and change tenants much less frequently than the rest of the market)

Brokers seem to be able to capture the value just because they’re entrenched. Demand has outpaced supply, and landlords are happy to outsource the majority of the tenant search process.

Large apartment buildings with leasing offices capture the value you’re saying can’t be captured. There are tons of comparable “no fee” apartment buildings with a rent that’s 15% higher.

So — do you pay a 15% fee once, up front, and hope you don’t need to move? Or do you pay it on your rent?

Edit: ok the percentage of rent stabilized units in NYC is actually a good bit higher than I thought. But my second assertion still stands — they practically never change over. So it feels like they’re an impossibly small part of the market. You won’t find rent stabilized deals advertised.

[s1artibartfast]

>Demand has outpaced supply, and landlords are happy to outsource the majority of the tenant search process.

This is the part I simply cant fathom.

I am a landlord. Why would I ever be willing to fork over 10K to save a trivial amount of work. Do the brokers take on some sort of liability for tenants?

[sixo]

No, the brokers are extracting value from the excess demand. The landlords get what they want: not doing that part of the work, particularly showings as many landlords do not live nearby.

And the landlord, for a city of predominantly 2 yr-ish-long rentals, benefits from nominal rents being as low as possible--a well-priced apartment sells fast, a poorly priced one does not. (Compare to Ticketmaster and music venues.)

Then brokers extract as much as they can. But since a broker only gets the commission a fraction of the time they do the work (say 1/3), the competitive equilibrium for brokers fees is higher (say 3x)than it ought to be, bc the marginal addtl broker who would undercut them simply left the industry instead.

[s1artibartfast]

I dont think that helps me understand it at all. That still doesn't explain why landlords give up that value. Why let a 3rd party make 10k off renters when you could pay some maintenance man $20/hr and keep the difference. If lazy and disinterested landlords are the answer, why are landlords less lazy in every other high demand city?

The question of if the marginal broker can or cant live off of 10k per transaction is entirely sperate. my guess is that there is some city regulatory barriers to entry here, but I haven't looked into it.

[sixo]

Yeah, fair, it doesn't add up. The landlord gets a potentially-large boost to marketability by offering a lower nominal rent... But so what? Is it just that that sets a lower competitive equilibrium? Idk.