Boston-area broker fees—ditch them, sure, but it won’t solve the larger problem

New York officials’ decision this week to affirm tenant protections that include eliminating certain broker fees have many in the Boston area mulling the same. News of New York’s affirmation wasn’t a day old before Boston Mayor Marty Walsh, for instance, announced the formation of a “working group” to study a similar ban.

While tenants would surely welcome the elimination of broker fees, the move would not solve the larger problem affecting renters in the region: high rents. In fact, ditching broker fees would obscure the issue, which is one of supply and demand.

First, one thing about that New York change that seems to have gotten lost in the coverage. It affects only landlord agents—those brokers who a landlord or a developer hires to hawk a rental. If a tenant hires a broker themselves, they’re still on the hook for the fee. They’re also on the hook for any other fees associated with renting in a particular building or development, including application fees.

Second, the reason that broker fees are even up for debate is that the Boston area is an unusually expensive and often difficult region for renting an apartment. That is due to myriad reasons, but all hinge on supply and demand.

The region’s population has been growing for years, and will soon close in on at least 5 million. Among that population is an unusually hefty share of what some call affluent tenants—those renter households pulling in at least $100,000 annually but nevertheless unable to break into the region’s sales market (which itself is unusually expensive—and which therefore drives more folks into the rental market ... round and round it goes).

Then there is the patchwork of zoning regs across the Boston region, with each municipality making and enforcing its own rules regarding multifamily development. Many of those rules have historically stymied the sort of apartment construction the region has needed to keep up with that population growth.

Then there are the land and construction costs; and the number of students living off campus in a region with dozens of colleges and universities. You get the picture. There are so many challenges to bringing down costs for tenants; and officials have put off decisions or compromises regarding these challenges until fairly recently.

Witness the 2018 decision by a group of mayors, including Boston’s Walsh, to better foster multifamily development or Gov. Charlie Baker’s proposal—five years into his tenure—to allow municipalities to override those local zoning regs with simple majorities rather than super ones.

So, yes, get rid of broker fees for landlord agents. It would be a step in the right direction from a tenant’s point of view (landlords, for their part, won’t care for having to make up the fees—real estate interests in New York are already vowing to fight the change). But the real work goes well beyond the one-time fee.