Massachusetts Broker Fee Debate: What Renters & Landlords Need to Know
The conversation around broker fees in Massachusetts is heating up, with Governor Maura Healey proposing a major shift—eliminating tenant-paid broker fees. If this proposal becomes law, landlords, rather than renters, would be responsible for covering broker fees when hiring a real estate agent to lease their properties.
The goal? To reduce upfront rental costs and improve housing affordability. But what does this really mean for both renters and landlords?
Will Rent Actually Go Up if Landlords Pay Broker Fees?
One of the biggest concerns about this proposal is how landlords will respond. If required to pay broker fees, many are expected to offset the cost by increasing monthly rent, effectively embedding the fees into the lease. This mirrors the sales market, where nearly 90% of homes are sold with a seller-paid commission, and the commercial real estate sector, where broker-paid commissions are even more common. Currently, broker fees are not inherently built into the rental market, making this a significant shift in cost distribution.
For example, let’s say a landlord needs to pay a $2,900 broker fee. Instead of paying it upfront and taking a loss, they might increase the rent by around 8.5% over the course of the lease. That means a one-bedroom apartment that previously rented for $2,900 per month could jump to $3,147 per month as landlords factor in the cost.
This pattern has already played out in New York City, where a similar policy change led to rent hikes rather than overall savings for tenants. The bottom line? While the policy could help renters by reducing upfront costs, it may not necessarily lower the long-term cost of renting.
What Could This Mean for Renters?
If the proposal passes, renters could see some immediate benefits:
✅ Lower Move-In Costs – Renters would no longer need to pay hefty broker fees upfront, making it easier to afford a new apartment.
✅ Increased Mobility – With fewer upfront costs, renters might feel more comfortable moving when needed instead of staying in less-than-ideal situations.
✅ More Transparency – Landlords hiring brokers would pay them directly, which could lead to clearer pricing and expectations for all parties.
However, renters should also be aware of potential trade-offs:
❌ Higher Monthly Rent – If landlords pass the cost onto tenants, the savings from not paying a broker fee upfront might be offset by increased rent over time.
❌ Fewer Available Listings – Some landlords might choose to list their apartments without a broker to avoid paying fees, which could limit options in a tight rental market.
How Does This Compare to Commercial Real Estate?
Interestingly, landlord-paid broker fees are already standard in commercial real estate. When a business leases office or retail space, the landlord typically covers the broker’s commission, which is based on a percentage of the total lease value (usually 4-6%).
For example, if a business signs a 3-year lease for a 2,000 sq ft space at $20 per sq ft, a broker earning a 5% commission would receive $6,000—half when the lease is signed and the other half when the tenant moves in.
This model has worked well in commercial leasing, but it’s important to note that these costs are often built into the rent. So while tenants don’t directly pay broker fees, they do contribute to them through their lease payments—much like what may happen in the residential market if the new proposal passes.
Final Thoughts
If Massachusetts follows through with banning tenant-paid broker fees, the rental market could experience a shift in cost distribution, but not necessarily a reduction in total rental expenses. While renters may benefit from lower upfront costs, landlords will likely adjust rental prices accordingly.
For those navigating the residential or commercial real estate market, understanding how broker fees impact pricing and negotiations is key. If you have questions about renting, buying, or leasing property in Norwood, Walpole, Westwood, or Dedham, feel free to reach out—I’m happy to help!
📩 Contact me today for expert real estate advice.
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