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GOVERNMENT

Why Don’t We Ever Hear About Commercial Rent Policy?


levine small biz

Council Member Levine & co outside an evicted business (photo: @MarkLevineNYC) 


Mid-June, it was a block in Washington Heights that was poised to be the next to close up shop. The landlord, Coltown Properties, looked to evict the mostly Latino-owned stores on the street, which included a barbershop, restaurant, and income tax service. The store proprietors faced the same issue as many other small business owners in New York — there was nothing they could do.

“Collectively, the businesses on this block have been in operation for over 80 years,” local City Council Member Mark Levine said at a press conference on 162nd Street and Broadway. “At a time when unemployment rates in our neighborhood are disproportionately high, these businesses are vital to the economic livelihood of this area.” Levine’s office is partnering with Legal Aid Society to provide legal assistance to small businesses in his district.

This is New York today, the plight of the city’s small businesses is grumpily accepted like a late train. It’s perceived by many New Yorkers as a part of the city grind, the dog-eat-dog, if-you-can-afford-it-here-you-can-afford-it-anywhere reality of a town teeming with opportunity, but becoming evermore competitive - and expensive.

Echoing all too quietly in the halls of both city and state government, the average retail rent in Manhattan has risen 22 percent over the past decade, causing a sprawl of small businesses to relocate or simply close. It is a disease that’s spread to Brooklyn too.

As news and debate over residential rent regulation dominated Albany and New York City over the past several months, what happens on a daily basis to small businesses throughout the city tends to fall by the wayside. Commercial tenants have far less protection against sudden rent increases than residents do, and now, that deficit is playing out in pockets of the city at an increasingly rapid pace. In comes another Chase, next to the new Duane Reade.

Depending on who you ask, the reasons vary as to why elected officials in New York and Albany have acted — or, to some advocates, failed — on reforming commercial rent policy.

“No one is lobbying the state Legislature for commercial rent control, so obviously legislators are not thinking about the issue,” Michael McKee, the treasurer of Tenants PAC, says. “I am not even aware that there is a bill that would provide protections to small businesses.”

As it stands, the only bill in the New York State government that pertains to commercial rent in New York City is the “Small Business Survival Act,” first proposed by Senator Tony Avella of Queens in 2013. It aims to level the playing field between tenant and landlord by mandating arbitration privileges to small businesses. Landlords must follow certain criteria when setting a lease, and the commercial tenant has more time in negotiations. “The current commercial rental market results in unjust, unreasonable, and oppressive leases for the payment of rent for commercial space in New York City,” the bill reads. As of this legislative session, it has not seen a vote.

The more common small business bills that do exist are like the resources offered by the city and state’s economic development agencies: they seek to provide clarity with forms, regulations, and other bureaucratic nuances that come attached to opening and operating a small business in a tax- and rule-heavy state. The same situation stands in the Business Council, the most prominent lobby for businesses in Albany. Providing commercial tenants with some sort of leverage in lease negotiations did not make its 2015 ‘Top Ten Objectives’ list, or the webpage for its subdivision of small businesses. Rejecting a higher minimum wage did, though.

“If there is ever to be any movement on this issue, folks have to organize,” McKee said, talking with Gotham Gazette while he was in the midst of yet another major push to influence tenant rent regulations being set by lawmakers in Albany and the city’s rent guidelines board.

As many can attest, it is especially tough to compete against what is, without a doubt, the most powerful force in New York politics: real estate. This is a business community that spends millions every year on political campaigns; the contributions of one of its biggest entities, the Real Estate Board, made up a tenth of the entire state’s campaign money last election cycle. And that’s just one group.

To James Parrott, the deputy director and chief economist of the Fiscal Policy Institute, a left-leaning think tank, that wealth of influence explains the radio silence both down- and up-state, among Democrats and Republicans, on an issue that directly threatens real estate hegemony. Reasoning seems to be that if small businesses had more protections against space-seeking developers, it would cut into the pace and profits of the city’s longstanding natural order. Landlords either want to charge more for commercial space or developers want tenants out so they can sell or demolish and build anew.

“The real estate community has always been aggressive in campaign contributions,” Parrott explains. “And, by doing so, they’ve successfully prevented anything that would restrict them.”

This, of course, includes commercial tenant rights. Parrott makes a key point: in a state government where the recently former Speaker of the Assembly and Majority Leader of the State Senate are both indicted for crimes involving real estate’s influence, it’s hard to believe a bill called the Small Business Survival Act would even last a day. Not to mention the probe into the abrupt closing of the Moreland Commission by Governor Andrew Cuomo; an investigation that is specifically looking into tax breaks for huge developers.

City government is not excluded, either, Parrott argues.

The tale of the Small Business Jobs Survival Act (better known as the SBJSA) in the City Council is a long yet uneventful one. Basically, the bill — which, in structure, is very similar to its upstate counterpart — has been floating around the chambers of City Hall since 2008. (Last year, Gotham Gazette dove into its reintroduction.) It would let commercial tenants have the right to lease renewal ten years or more. If a landlord wants to raise rent, mediation with the tenant would be mandated, and, if the parties don’t come to an agreement, an arbitrator would make the final decision.

In essence, it is a flexing of New York City’s municipal home rule, which allows the Council to bypass Albany and regulate commercial code on its own turf. Similar proposals have existed in the Council for decades now, but all have met the same fate: failure. No surprise, Parrott says: the power of real estate is as strong in the city as it is upstate, if not stronger. Also, past mayors and council speakers have strongly sided with that community, meaning any bill is unlikely to ever see a vote, and even if passed by Council, likely vetoed.

But, to tenant advocates, this time around offers hope. Finally, they argue, a legislative body and a mayor progressive enough to actually take up the issue. At least on paper.

“Historically, the deference to Albany has served as a smokescreen/distraction for elected city officials to validate their appalling inaction on issues that they, in all actuality, have complete control over,” Kirsten Theodos, a spokesperson for Take Back NYC, a grassroots advocacy group for tenants and subset of the larger group Save NYC, told Gotham Gazette.

Right now, the SBJSA has 19 City Council sponsors in a 51-member boday. Seeing the bill heard at a committee hearing and then brought to a vote is unlikely, and would probably first require a number of additional sponors signing on (Council members can support a bill without co-sponsoring, but sponsorship levels show strength). To land those additional sponsors, Theodos hopes that situations like the eviction of businesses in Washington Heights will shed light on the issue. When asked if Speaker Melissa Mark-Viverito, who endorsed the bill before becoming speaker, would support the bill now, a spokesperson pointed to remarks made by Mark-Viverito to The Villager in late May. She did not provide an endorsement of the bill then, but mentioned an argument that has been repeatedly made by the real estate community in the past: that the SBJSA is illegal.

“The bill gets introduced once the [Council] staff do their due diligence,” the Speaker said. “Then there are hearings to hear from all sides. And then we figure out what the next steps will be — because sometimes options are being explored that legally we don’t have the ability to implement as a city or as a legislative council.”

Last year, in Gotham Gazette, the president of the Real Estate Board, Steven Spinola, called the bill an “unconstitutional intrusion” on property owners. A spokesperson for the Board told me this position hasn’t changed. Essentially, the board believes it is not in the Council’s jurisdiction to regulate commercial tenants. Home rule doesn’t apply here, they say.

Theodos stresses that this is not true; SBJSA would target the negotiations process, she says, and not install commercial rent control. The legal counsel to the Small Business Congress, a coalition of tenant advocates, supported this argument last year, citing Supreme Court decisions that enable local autonomy.

As a member of the City Council, Mayor Bill de Blasio supported the SBJSA, but he has remained relatively mum on the bill since entering his current office. For many advocates, the hope is that he’ll extend the drive that he has recently demonstrated around housing rent regulations in Albany to the parallel issue for small businesses. However, although he was elected on a ‘helping the little guy’ message and a promise to embrace them, small business owners and their allies also worry that his tendency to meet with representatives from the Real Estate Board and other commercial heavyweights threatens his adherence to their cause. Holding an office that naturally attracts real estate interests, Council Speaker Mark-Viverito has also met with REBNY heads. While neither de Blasio nor Mark-Viverito appears especially cozy with real estate titans, neither has pushed directly on the commerical rent issue either.

That isn’t to say nothing has been done by the de Blasio administration to help small business owners since he took office in January of 2014, though. His office’s Department of Small Business Services (SBS) is spending upwards of $27 million to streamline and defuse the regulatory process and, with the Department of Consumer Affairs, made sure that fewer fines are handed out to small businesses that can barely afford rent. More importantly, SBS has rolled out initiatives aimed at providing pro bono legal services to small businesses in lease negotiations; a policy which will soon expand, SBS spokesperson Merideth Weber told Gotham Gazette.

“We are working to roll out additional programs that span the range of supports we can provide including education, assistance, and tools that can help businesses avoid pitfalls in leases, and make the retail market more transparent,” Weber said in a statement.

When asked if the mayor supports SBJSA, Weber responded, “We’re reviewing the bill and this administration is working on a comprehensive plan to ensure that small businesses have the tools and resources they need to compete in an ever-changing marketplace.”

Still, tenant advocates argue that these measures dance around the main issue: that small businesses have no legal powers against immediate evictions or rent gouging. In a hyper-developing environment reaching further into several boroughs, small business owners are often defenseless. With a state government not inclined to act on commercial rent policy in New York City, and a city bill that, for now at least, is on the back burner of the Council agenda, the urgency stressed by owners and advocates doesn’t seem to be resonating here nor there.

Council Member Mark Levine, who spoke out against the eviction of the small businesses on a block in Washington Heights, in his district, says that there are other options that can help stem the tide of closing small businesses. And these, he said, do not necessarily require either a dying bill or a dead government. “Albany is not acting in any domain, really,” he quickly noted.

The city government, Levina argues, could set an example by not renting out its own real estate to chain stores. Also, zoning laws can be regulated in order to prevent chains and encourage small businesses — a policy that Columbia University has undertaken in Morningside Heights, Levine said. He added that the city should look into preventing developers who receive city subsidies from renting out to chains.

One of the 19 sponsors of the SBJSA, Levine argues that the city needs to set out a structure in which commercial tenants can have enough time whereby they are properly notified of a lease change. He also referred to a bill recently introduced by Council Members Helen Rosenthal and Dan Garodnick that would raise the commercial rent tax exemption in Manhattan (below 96th Street) from $250,000 to $500,000 per year. As of now, the bill has 16 sponsors.

In terms of Albany attention, residential tenants supersede their commercial counterparts in numbers, Levine says, and the politics involved are different. But still, the council member describes challenges faced by small businesses in New York right now as a “crisis;” one that is perhaps even more alarming than the affordable housing problem, given the conditions. “There’s not much a tenant can do,” he says. “Therefore, we’re seeing dramatic changes in our streetscapes, and the scale of the problem is great.”

“It is the mom and pop stores that make this city,” Levine said. “And the city government should be doing much, much more to protect them.”

***
John Surico is a freelance journalist. His reporting can be seen in The Wall Street Journal, The New York Times, The New York Daily News, The Village Voice, and elsewhere. He lives in Brooklyn.



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