The Economics of Saving Independent Businesses

Everyone loves the idea of the neighborhood book store, but signing petitions isn't going to keep them open

Image
Flickr user Butterfly Sha, used under a Creative Commons license

The St. Mark's Bookshop, near where I grew up in Manhattan, is a longtime neighborhood institution. Lately, like so many independent bookstores before it, it's been in danger of closing thanks to rising rents and declining demand for brick-and-mortar book purchases. In response, fans of the store hit upon the somewhat odd idea of circulating a petition asking the landlord to reduce the rent. 

As it happens, St. Mark's landlord is a non-profit (Cooper Union), so it's theoretically possible that moral suasion could succeed in convincing them to lease to the shop at a sub-market rate. If the landlord was a normal for-profit entity, this obviously wouldn't work. But let's pretend for a moment that were the case. The St. Mark's devotees who love the store could still attempt to use coercion to secure sub-market rents for the bookstore. One tactic, in place in some neighborhoods here in Washington, D.C. and being considered in other retail corridors, is to block the issuance of new liquor licenses. Moratoriums of this sort make it impossible to use a space within its boundaries as a bar, and generally uneconomical to use it as a restaurant, especially when combined with regulatory curbs on fast food. You can then either combine that with penalties for large chain retailers (or the simple reality that many urban structures don't offer the right kind of space for national chains) to keep market rents in the area artificially low, perhaps to the point where the bookstore can pay the rent. 

Ultimately, the question here is the same as the one with the St. Mark's petition. If all these petitioners love the bookstore so much, why can't they all contribute some money, either to the shop to pay the high rent or else to the landlord to defray the opportunity cost of not renting to a more lucrative client? Over the weekend, local bloggers and the Village Voice hit on this strategy and urged readers to buy books rather than sign petitions. If it works, the store will be able to afford stay in business. But if it doesn’t, then vacating the location is exactly what should happen. 

All too often, the urban permitting process takes the opposite direction. Neighbors or community groups take advantage of weakly defined property rights to try to shape the community in ways that are costly to landowners but that they don't feel strongly enough about to pay for out of pocket. Yet urban communities rarely consider the potentially far-reaching consequences of such acts. After all, a store priced out of a newly expensive neighborhood does have an alternative to closing—relocating to someplace cheaper. And somewhere down the chain of "someplace cheaper"-ness in almost every American city is a neighborhood still suffering from blight, vacancies, and lack of economic opportunity. 

About the Author

  • Matthew Yglesias is a former writer and editor at The Atlantic.