Is The NYC Rental Market A FARE Game?

July 10, 2025

Time to read [4 minutes]

  • The FARE Act Raised NYC Rents About 12%, Annualized
  • Manhattan Median Rent Was Highest In History In Four Of Past Five Months
  • One Out Of Four Manhattan Rentals Leased For More Than Asking Price

Well, the rental month of June is over [gift link], and the FARE Act is officially embedded into the rental market (tenants will pay broker commissions in the form of higher rent from landlords). The tenants benefit by having the once “up front” cost of commissions “amortized” into the rent. Before I review the record rental results for June, let’s examine how I believe the FARE Act has already affected rents. Manhattan rents for June have increased by 12% annually from FARE after extracting the increase in rental market price trends. The money that tenants save from not paying rent directly to real estate agents in a one-time lump sum is shifting to paying higher rent to the landlord over the life of the lease.

FARE Act Market Impact Math Explained

I examined Manhattan rent data from June 1 to 10 and from June 11 to 30 and found that the increase was 2.2%. However, rent from May to June rose 1.2%, so I deducted that from the 2.2% calculation to arrive at 1% per month, or 12% annualized, attributable to the FARE Act. It’s a little fuzzy, but seems reasonable, since it was not possible to examine each of the roughly 7,000 Manhattan rentals over the past two months.

Many who follow the rental market were expecting rents to pop 10% to 15% overnight, which is roughly the market rate for rental commissions. However, that’s an unreasonable expectation. That would mean the tenant, with the FARE Act adjustment, would pay the full annual brokerage commission for each month of the year, or twelve times the annual commission. The annualized rent increase is what requires review. I am examining market-wide rent levels, not specific instances where landlords have increased the rent by 8-15% in one month to tenants. Not all landlords have immediately raised rents. By the way, the notion that landlords will eat the full brokerage commission has already been proven incorrect, as some landlords are already trying to push rents significantly higher in a super-tight market. In Manhattan, one in four tenants are paying more than the landlord’s asking price; in Brooklyn, it’s one in three. This tight condition isn’t new; it has been ongoing since 2022.

The above is my attempt to explain the FARE Act situation on the ground. There is a lot more nuance, but this is the reality I’ve reviewed empirically. It’ll take a few months for the market to settle in on the new law, but I doubt the annual rent increase in the coming months will vary much from the June results. The key benefit to tenants is that the upfront costs are now amortized into the annual rent. I’m unclear about the interplay between one- and two-year leases, although I’m confident the market will work out that nuance in short order. Generally speaking, tenants are not saving money, but they are also not exposed to the same level of upfront costs as they were before the FARE Act. After all, apartments don’t rent themselves.

The trajectory of rents over the past 5 years has been anything but normal.

Final Thoughts

Image Source: Bloomberg

With mortgage rates stabilizing just shy of 7% and supply constrained, NYC rents are at record highs and continuing to rise as more tenants remain in the rental market, waiting for mortgage rates to drop. The FARE Act is a one-time event that will push rents a little higher, possibly to the level of an annual brokerage commission. Tenants don’t save on the brokerage fee because they are reimbursing the landlord through higher rents. The FARE Act is another example, much like the NAR Settlements, of clarifying who is paying for the services used in a transaction.

The Actual Final Thought – Despite high rents, it’s better NOT to Walk Away – Saw him in concert in the late 70s.

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July 8, 2025

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