Commercial rent regulation sought in new bill

Chelsea Now photo by Caroline Debevec

A large banner advertises retail space for lease on Ninth Ave. between 17th and 18th Sts., where the purchase of the block-long property threatens to evict the long-term businesses in favor of more upscale retailers.

By Patrick Hedlund

When a string of longstanding shops along Ninth Ave. in Chelsea became endangered earlier this year after a large property purchase threatened to replace them with upscale retail, both storeowners and community advocates spoke out at a rally in defense of local mom-and-pop operations.

The May event—attended by a host of local politicians, neighborhood activists and community board members—succeeded in drawing attention to the issue, but failed to produce any concrete protections to prevent sweeping evictions. Legislative efforts on both the state and city level have so far only been discussed, while the eight shops between 18th and 17th Sts. have been left to their fate in the real estate market.

However, one city councilmember plans to introduce a bill next week that would require small businesses and landlords to submit to arbitration for all lease renewals if they can’t negotiate a fair rent agreed upon by both parties. The far-reaching measure—deemed by some as a form of commercial rent control—would set regulated increases not subject to the whims of landlords, and, to its proponents, will ultimately salvage the small businessperson’s American dream.

Upper Manhattan Councilmember Robert Jackson will bring the bill next week after consulting the architects of a similar measure introduced in 1988 that fell one vote short of Council approval. The language of the proposed legislation looks to ensure a place for small businesses in the current commercial landscape by prohibiting short-term lease renewals and “rent gouging by greedy landlords.” According to the bill, lease renewals would be set at a minimum of 10 years unless otherwise agreed upon, and arbitration would only be triggered if the law’s set rent-increase rates are disputed. Those rates, the current plan indicates, allow for no more than a 3 percent rent increase the first year above the previous lease; no more than a 15 percent increase by the last year of the lease over the previous lease; and no more than 3 percent incremental increases each year of the lease.

The legislation would be applied on a case-by-case basis to all commercial tenants across the city, including manufacturing businesses, nonprofits, performing arts and theater groups, retail establishments, service businesses, and professional medical offices.

When asked about the measure’s chances of success, Jackson’s chief of staff Susan Russell said she believes “the provisions are reasonable,” but acknowledged the language is subject to tweaking. “I think that this is something that’s worth sitting down at the able and talking about,” she added.

Supporters claim that in the current climate, small businesses can’t survive because real estate speculators artificially inflated the cost of property over the years, allowing landlords to seek astronomical rents.

“You cannot allow unchecked speculators to control any segment of your economy for 25 years and not expect people to suffer,” said Steve Null, a former small-business owner who helped write the original measure in the ’80s. As a storeowner, Null was pushed out by rising rents himself, so he helped then-Councilmember Ruth Messinger write the proposed legislation, which was eventually killed by a “no” vote from former Council Speaker Peter Vallone. In the period between then and now, Null said, 137,000 small businesses in the city have been issued eviction notices.

“The number of stores that didn’t want to fight and just walked away is about 200,000 to 300,000,” he added. “The bottom line is that the government of New York City abdicated its responsibility to formulate a fair economic policy that respected all the businesses.”

The current economic crisis will bolster the bill’s chances by bringing the focus back to Main St. in light of the failures on Wall St., Null noted, and the city’s vast minority population—many of them small-business owners—will want to support politicians who vote for its passage.

“I don’t know a businessperson in New York City that would ever recommend a friend to open a business in New York City,” he added. “It is so anti-small business that the odds of them surviving would be very slim… This bill is going to bring that dream back.”

But David Yassky, the Council’s chairperson of the Small Business Committee, felt the measure poses too large a risk to the market to work feasibly. He convened a joint meeting last September to address the threat to mom-and-pop businesses, but feared this bill’s regulatory implications are too extensive.

“This bill has some serious problems in how sweeping it is and how much it inhibits the market,” said Jake Maguire, Yassky’s communications director. “Our goal, and a better long-term solution, is not to try to weaken or try to put unrealistic constraints on the market, but to try to strengthen small businesses so that they can compete in the market as it stands.” According to Maguire, Yassky’s possible strategies include providing incentives like tax abatements for landlords, subsidy programs for small businesses and zoning implementations. “Real things we can do before we try to regulate the market so heavily,” Maguire added. “It’s not something that’s ultimately served in the long run by telling a landlord who they can and can’t rent to.”

Upper West Side Councilmember Gale Brewer, whose district includes a northern portion of Clinton/Hell’s Kitchen, agreed that tax abatements for landlords might increase their willingness to rent to small-business owners. She also suggested cutting down on the size of stores and looking at rezoning procedures similar to what was done along 125th St. in Harlem, where bank branches have been relegated to the second floor of buildings.

“I’ve been working on this issue for 25 years,” Brewer said. “Nobody’s had a good solution.” She added she hasn’t read the new bill and reserved comment on whether or not she would support it. Brewer was Messinger’s chief of staff when the original arbitration bill was introduced, and she noted that “nobody’s worked harder on this issue” over the years than she.

Support from Council Speaker Christine Quinn would certainly boost the bill’s chances, but spokesperson Andrew Doba said the speaker couldn’t comment on the measure until it is introduced. Most agreed that the bill would face staunch opposition from Mayor Michael Bloomberg, who would likely veto the measure if it passed the Council.

Others, however, felt the bill might be more symbolic than realistic, and could act to draw more attention to the issue by starting at such an extreme end of the spectrum.

“I think the goal of the bill is good,” Maguire said. “Clearly the bill has hit upon an increasing problem for small businesses in New York.”

Fulton Houses tenant advocate Miguel Acevedo, an early proponent of the measure, is helping organize a rally at City Hall on Oct. 7 to garner support for its passage. His complex sits across the street from the shops on Ninth Ave., which many of his neighbors have frequented for years for basic needs like haircuts, dry-cleaning or a quick meal. Acevedo worked with Jackson to realize the proposal and plans to use it as a central issue in his campaign for City Council next year. “If there’s no balance in the economy, than we’ll be in worse than a recession,” he said, “we’ll be in a depression.”