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Facing A Retail Vacancy Crisis, Is NYC Ready To Take On Rent Control For Small Businesses?

Two vacant storefronts in the West Village
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Two vacant storefronts in the West Village Elizabeth Kim / Gothamist

The proliferation of empty storefronts has proven to be one of New York City’s most intractable and high-profile problems. The crisis is marked by a seemingly endless series of mom-and pop casualties, brought on by skyrocketing rents and the impact of e-commerce, all of which which has inflamed New Yorkers' anxiety about gentrification, cultural displacement and the loss of character in neighborhoods.

Efforts to save small businesses through legislation have been consistently narrow. In 2016 the city passed a law allowing commercial tenants to sue their landlords for harassment. The following year, commercial businesses south of 96th Street in Manhattan that pay under $500,000 a year in rent were granted a tax break. The city also rolled out a mobile business support program called Chamber On-the-Go that makes visits to small businesses and offers free legal advice.

However, last month the City Council passed a package of bills that were described as the "first of its kind" and the groundwork for future policy. Of the five pieces of legislation, which are set to take effect next July, three are focused on collecting data, including a “storefront tracker” that would require landlords to register commercial storefront and second floor spaces as well as report any vacancies. Other data on the business environment will be gathered by the Department of Finance, including size as well as occupancy status and monthly rents if the property is being leased.

But the legislation was viewed with considerable skepticism from some small business activists who called the latest measures nothing short of ridiculous, analogous to applying a band-aid to what has essentially become a festering wound in the city's economy and cultural landscape.

"This will not save a single business," insisted Kirsten Theodos, a co-founder of TakeBack NYC, a small business advocacy coalition.

The city's attempts to address retail vacancies reflect the sharp divisions among those trying to remedy the crisis and the challenges of coming up with policy that has the potential to reshape the city's commercial real estate market. In reality, small businesses fail for a variety of reasons—poor business planning, high labor costs, a declining market—but stories about escalating rents have become increasingly frequent and alarming.

Last December, the Cornelia Street Cafe, a beloved Greenwich Village restaurant and performance venue that opened in 1977, announced it would close to the sadness of many New Yorkers. Owner Robin Hirsch spoke of an "impossible" rent situation, having risen to $33,000—77 times what it was when the cafe began.

According to Theodos, the city has favored studies over action for too long. In 2017, Manhattan Borough President Gale Brewer commissioned a survey of Broadway storefronts. Similar counts have been taken in other neighborhoods by other elected officials.

Listen to Elizabeth Kim discuss commercial rents on WNYC:

On a broader scale, the Department of Small Business Services uses self-reported data from the city's 72 Business Improvement Districts to come up with an average citywide storefront vacancy rate, which in 2018 came out to 8.9 percent. And just on Thursday, the Department of City Planning issued their own report examining 10,000 storefronts across 24 neighborhoods, in which it found vacancy rates ranging from 5.1% to 25.9%.

But all the available data points aside, the bigger and more vexing question, Theodos said, is this: "Why is the Council not focusing on legislation that’s there?"

She was referring to the Small Business Jobs Survival Act, a bill which would give tenants the right to a 10-year lease renewal and force landlords and tenants to go to arbitration if they cannot agree on a rent increase. The proposal dates back to 1986 and its tortured history of seemingly being on track to passing only to suddenly get shelved has become a political parable for its dejected supporters. According to them, the moral is that New York City's deep-pocketed real estate industry, which has consistently opposed the plan as a form of commercial rent control, will wind up holding sway over every mayor and City Council speaker, the two individuals who have the power to move the bill to the floor for a vote.

Mayor Bill de Blasio, who signed the Council's recently passed legislation into law, does not support the SBJSA bill.

Prior to becoming council speaker, Corey Johnson in 2017 said he was strongly in favor of the plan, but has since hedged on whether the Council should try to pass it.

Jenny Dubnau, an artist and activist with the Artist Studio Affordability Project, described the bill as injecting "a small degree of cooling down" in the city's commercial real estate market, where rents in some trendy neighborhoods have climbed to such unreasonable levels that they succumb to high-rent blight.

"The rate of increase is insane and no small business can afford it," Dubnau said. "It could cool down the market at its height."

Manny Gomez, of the Sunnyside Business Chamber, the only business chamber in the city that supports the bill, said that for tenants, "This will definitely stop some of the bullying. At least they are going to be able to say something when that lease ends. At least there will be an arbitration."

In October, some SBJSA supporters saw a flicker hope when the bill was finally given a hearing before the City Council, the first time nine years.

But as a sign of deep pessimism among the bill's staunchest supporters, Steve Barrison, executive vice president of the Small Business Congress, boycotted the hearing. "The system is rigged," he said. Referring to the Real Estate Board of New York, the real estate industry's lobbying arm, he added, "City Hall should be renamed REBNY Hall."

During the hearing, John Banks, REBNY's president at the time, said that the bill, which would broadly include every type of tenant from bodega owners to CVS, would "stifle the commercial lease market" and warned that it would have "a catastrophic impact on our local economy."

Banks also promised that if passed, REBNY would challenge the new law in court.

Legal concerns have long plagued the bill even though supporters have maintained that the legislation has been vetted numerous times, including by a panel of lawyers. During the hearing, to the frustration of the 100 or so protesters who packed the room holding “Pass SBJSA Intact” signs, Johnson told the participants, "Some advocates may not want to hear this, but this is not a perfect bill. Some changes need to happen."

Reached for comment on this story, a spokesman for Johnson said in a statement, “Helping our mom-and-pop businesses survive and thrive is one of the Speaker’s top priorities. This is one of the most complex issues of our time and the Council is determined to get it right."

He added, "The Council is continuing to work on a number of complex policy proposals, including the Small Business Jobs Survival Act, that are making their way through the legislative process."

For Lena Afridi, a director of policy at the Association for Neighborhood and Housing Development (ANHD), which backed the recently passed legislation, the activist movement needs to move beyond SBJSA, which she said would put many small business owners, especially minorities, through a costly and complicated arbitration process. "SBJSA is not going to work for everybody across the board," she said. "That’s just the reality we need to confront."

A coalition of nonprofit community development corporations and tenant organizing groups, ANHD is best known for its research and vigorous lobbying on the recent landmark rent reform legislation in Albany that passed in June. But four years ago, the organization convened United for Small Business NYC, a coalition of roughly a dozen community groups, to work on solutions for struggling commercial tenants.

One of their proposals was the storefront tracker. "We need to have a clearer picture of what’s happening," Afridi explained. She argued that all the studies have thus far been piecemeal, focusing on specific neighborhoods or commercial corridors.

Afridi's group and the SBJSA advocates, which have not had any real dialogue, may never see eye to eye, but ultimately, both see commercial rent control as the "holy grail." For the first time, because of the game-changing tenants' rights movement that led to a historic overhaul of rent regulations this past June, it no longer feels like a pipe dream.

"This moment for sure has deeply impacted what people think is possible," Afridi said. It’s gotten people to want to stop displacement and to keep our neighborhoods working for us."

She added: "What we need is real rent stabilization and SBJSA does not get to that."

Asked if a database brings the city any closer to such a reality, she responded, "Although it seems like a small step, it is the first of many steps."

According to Afridi, a database could be used as a tool for the commercial equivalent of the Rent Guidelines Board, which sets annual rent increases for rent-regulated tenants.

SBJSA activists, however, said they would rather focus on the present and the bill that to date has 29 sponsors, including Public Advocate Jumaane Williams. At this point, all they want is a full Council vote.

Dubnau acknowledged that their plan was not going to be a magic bullet. All the same, after more than 30 years of lobbying, activists like herself have come to see the entrenched political resistance as proof of the bill's potential to be a catalyst and a threat to the real estate industry.

"Given what we need, this is not the strongest thing," she admitted. "But the City Council, which is supposedly so progressive, will not pass it."

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