For those of you who aren't familiar with this Act, NYC has been an outlier in the US where the tenant would pay a broker fee to rent apartments that were listed by a broker. The odd thing about it has been that it's not the tenant who would historically "hire" the broker, but instead the landlord/owner. And the benefit to the landlord/owner is obvious: they didn't need to expend any resources/energy to market the property for lease and then once a tenant was found the tenant would take care of paying for the broker's efforts through a fee that would range from, say, 8% up to 15% or more of the annual lease rate (e.g., $3000 per month apartment minimum fee would be $3k and sometimes a multiple of that if the broker could get away with it). With the FARE Act this practice where the landlord hired the broker and the tenant pays the fee was banned. You may see where this is going...
For some reason, the NYC City Council thought (and still does think because you can't admit a potential mistake) that the landlord was going to now eat the broker's fee without raising the rent to offset that additional cost. So far? Landlords are not eating the fee and instead are raising the rents. And the worst of it is that the broker fee was always a one-time fee meaning that if the tenant stayed in place they wouldn't be paying the fee again upon lease renewal. Now? The tenant is paying the increased rent to offset the landlord having to pay the fee and that is now the baseline of all future rent increases.
Still early days for the FARE Act, but any reasonable person would've understood that landlords would not eat the broker fee and that this would cause an overnight increase in rents, which... it did (literally overnight once the Act was in effect).
Re the startup idea, agree fully. Zumper sort of tried what you're describing on the lease side in NYC. I interacted with them around the time they launched that effort and thought it was a bit rough around the edges (when is it not when you try something new?). Not sure if they're still doing it or how the FARE Act would've impacted them because I don't quite remember how/if they were using the software/marketplace to drive down the broker fee or just trying to capture the fee as-is (I think the former but not sure).
This is all true, but removing the broker fees and replacing it with a rent hike is still better for the market overall, since the broker fees simply artificially dampen liquidity. You only paid them when you moved into a new place, but that meant that if you are stuck with a crappy landlord you might not move out because the marginal cost of moving anywhere else in NYC is much higher.