John Surico is a freelance journalist and researcher who covers New York City transit for VICE and frequently contributes to the New York Times. He is based in Queens, NY.
For decades, the city has mulled rent control for small businesses. As the city’s wealthiest areas fill with vacant shops, lawmakers are taking another look.
The story of New York City in 2018 is a story of empty storefronts: Nearly every week, another longtime shop or eatery announces that they are closing, after years—if not decades—in business. (Latest addition: The much-loved 35-year-old Tex-Mex joint Tortilla Flats, in the West Village.) In my neighborhood of Astoria, Queens, it’s Steinway Street, a retail strip that’s now undergoing pedestrian-focused improvements to lure back visitors, because there are too many vacancies. And when new tenants do move in, their name is often Starbucks. Or Wells Fargo.
The booming Big Apple has become a “capitalist paradox,”as The Atlantic’s Derek Thompson recently wrote—a “rich ghost town.” As its unique mix of retailers and eateries metamorphose into a monotony of nail salons, chain outlets, and bank branches, the city is becoming “a high-density simulacrum of the American suburb.” Several studies indicate that 20 percent of Manhattan’s storefronts lie vacant—concentrated in the borough’s most trafficked areas, where commercial rents have soared. The worrisome trend—which exists outside of Manhattan, too—suggests a question: What happens when a city becomes too costly to offer the very ingredients that people look for in a city?
This is hardly a new question for New York City. The wave rolled in over many years, as crime dissipated, affluent newcomers arrived, real estate speculation heated up, and gentrification reshaped neighborhoods. And for decades, local lawmakers have offered the same answer: the Small Business Jobs Survival Act (SBJSA), which would force landlords to negotiate rent increases. Essentially, critics of the bill argue, it’s a form of rent control for businesses.
Now the legislation, which has floated around City Hall since Mayor Ed Koch’s administration, is up for debate again. The bill’s fate is being closely watched in other cities that are experiencing their own variations on this retail vacancy problem as brick-and-mortar stores reel under the rise of Amazon and e-commerce.
First introduced in 1986, the SBJSA is designed to discourage landlords from doubling or quadrupling rents, shuttering mom-and-pop tenants that are unable pony up. (Case in point: McNally Jackson, an independent bookstore in SoHo, will relocate because its landlord just asked for $500,000 more in rent this year.) The SBJSA would regulate rent negotiations between small businesses and landlords when leases are up for renewal. The controversial bill has received a total of 12 hearings in the City Council in its long lifetime, the most recent one this past Monday. This was its first hearing since 2009; then, the bill had enough votes, but wasn’t allowed to the floor due to legal concerns.
When I first wrote about SBJSA in 2015, the bill’s supporters were invigorated by the election of Mayor Bill de Blasio, whose campaign had emphasized containing income inequality and who had supported the bill when he served in the Council. The bill had 19 co-sponsors then, but it was missing the support of a key player: City Council Speaker Melissa Mark-Viverito. She ultimately tabled the bill, torpedoing its shots of success during her tenure.
Fast forward to 2018. The bill’s co-sponsor count has now risen to 30, and the new Council Speaker, Corey Johnson, was responsible for convening Monday’s hearing on the bill. “This has to be one of our top priorities if we want to maintain the city as we know it,” Johnson said at the start. “If it isn’t a priority, we will lose the vibrancy of our neighborhoods, and New York begins to look more like any other city. Humdrum. Cookie cutter. Boring.”
Outside, two parties of rival supporters had gathered on the steps of City Hall. A knot of people in suits wore bright blue hats that read “Vote NO Commercial Rent Control,” facing off against a crowd of SBJSA advocates holding signs like “Save small businesses, and the soul of NYC.” While the blue hats looked on, speeches were delivered by a litany of advocates and small business owners, led by Columbia University historian David Eisenbach, who leads the advocacy group Friends of the SBJSA. “It isn’t about the taxes; it isn’t about Amazon,” said Eisenbach. “It's about the rent.”
Since the bill was conceived, it has been opposed by the Real Estate Board of New York, the most powerful association of real estate interests and developers in New York. That hasn’t changed. “This bill will kill jobs, kill ingenuity, and ensure the homogenization of retail in NYC,” testified John Banks, REBNY president, on Monday. “It was deeply flawed 30 years ago, and it is deeply flawed today. The only survival the bill ensures is of continued vacancies.”
The key argument against the SBJSA is that commercial rent control would disincentivize landlords from investing in properties and finding suitable tenants. But a lot of this falls upon interpretation of what the bill actually does, which includes allowing tenants a 10-year renewal when their lease is up, and the option of arbitration should the two parties fail to see eye-to-eye on a rent increase. Supporters say the bill merely sets boundaries as to what landlords can—and cannot—do.
“This is not about rent control,” said Councilman Ydanis Rodriguez of Upper Manhattan, the sponsor of the bill. “This is about being able to establish a fair process, so local small businesses and property owners are able to survive.”
Rodriguez rolled out some statistics: Out of the 220,000 small businesses in New York City, 89 percent of them create less than 20 jobs, which, currently, are driving the city’s job growth. (The Small Business Congress, who authored the bill, says that New York now loses 1,200 small businesses a month.)
But the de Blasio administration doesn’t seem convinced. At the hearing, Gregg Bishop, the city’s commissioner of small business services, voiced the administration’s concerns with the bill. The keyword of his criticism, and others, is “unintended consequences.” There are fears that a well-intentioned law could end up harming small businesses in the end.
Take, for example, arbitration, Bishop said. “In arbitration, both parties would need to provide data and documents to determine fair lease terms,” he testified. “However, arbitration often favors the party who is able to provide more resources and information into the arbitration process. Therefore, larger and more well-resourced parties, such as landlords and multinational corporations, will likely have the upper hand through this mechanism, and it may not bring the desired benefits to small commercial tenants.”
Additionally, Bishop said, the bill won’t protect small businesses that pay month-to-month and in cash, largely immigrant-owned shops like neighborhood bodegas, or smaller independent eateries. “This legislation may make it harder”—italics provided in testimony—”for those businesses to secure leases because landlords may be less inclined to execute leases to avoid the potential cost of arbitration,” Bishop added.
When pressed repeatedly by committee members as to what the city was doing to stave off the sprawl of vacancies, Bishop pointed to initiatives like Chamber On-the-Go, where canvassers present services to business owners, and the newly launched Commercial Lease Assistance Program, which provides pro bono legal representation for small businesses facing lease issues. He argued that going forward, the administration would be open to a storefront registry to collect data on vacancies, and a vacancy tax. (The administration has weighed a similar measure for abandoned lots in the past.)
Bishop was hardly alone in his concerns wth the SBJSA. Manhattan Borough President Gale Brewer, who enacted a more micro-scale version of the bill in her district on the Upper West Side when she was in the Council, testified that the current legislation’s definition of a “small business” would also apply to big-box stores. Left-leaning housing and legal rights organizations such as the Urban Justice Center and Association for Neighborhood and Housing Development also oppose the bill, echoing the administration’s concerns about arbitration.
Johnson, the council speaker, was worried about the blurry definition of small businesses, too. “I don’t think this bill should treat a WeWork in the same way it treats a bodega. And that is what this bill currently does,” he said. “I am not here today to help Goldman Sachs.”
As it stands, said Johnson, the SBJSA must be amended before it can be put to a full Council vote. And that’s currently where the bill lies: in a legal gray area, as the Council sorts out the legal and logistical specifics. Next, a Council committee will review the bill, make changes, and then, should the Speaker approve, put the SBJSA to a full vote. If it passes, all eyes would be on the mayor—whose concerns were echoed by Bishop—to either veto or sign it.
Should the latter come to pass, that would stand as a significant milestone in the role of cities combating affordability and the dearth of retail in the Age of Amazon. As CityLab has reported, while other municipalities have enacted a host of measures boost small businesses, the SBJSA is the only bill in America that directly targets skyrocketing rent rates.
As I left the chamber, I ran into one of the many foes of the bill wearing the blue hats. I asked him where he got it from. “A man with a briefcase was handing them out,” he told me.
He was a landlord, he told me, with a number of properties in New York. (He refused to give his name.) While he was here to demonstrate his opposition to the bill, he also noted that it could create a beneficial loophole for him, by forcing “bad” tenants who do not have a lease into signing one.
I asked him what he made of the argument that the loss of small businesses was killing the soul of New York City, and the chain pharmacies and expensive salad stores just needed to be stopped. He balked. “Listen… if landlord wants a tenant who will pay them more,” he said, “then why shouldn’t they be allowed to make some money?”