Why New York Needs Commercial Rent Control

Why New York Needs
Commercial Rent Control

Published: 
September 2015

A former butcher shop on Broadway near West 142nd St. Photo by Steven WishniaA former butcher shop on Broadway near West 142nd St. Photo by Steven Wishnia CBGBs, the venerable East Village rock’n’roll club, closed in 2006 when its rent went from $19,000 to $35,000 a month. In 2013, over 50 artists were forced to vacate their studio spaces in Industry City (the huge industrial complex in Sunset Park, Brooklyn) when their rents were jacked up, some by as much as 40 percent. This year, an entire block of Latino-owned businesses in Washington Heights, including Punta Cana, a restaurant serving the neighborhood for over 40 years, was evicted by their landlord, Coltown Properties. And Pearl River Mart, the Chinatown emporium of everything Asian, went out of business when its rent shot up from $100,000 to an unbelievable $500,000 per month. 

New Yorkers in every neighborhood, from the West Village to Bushwick to Jackson Heights, are seeing their local mom-and-pop stores go under at a terrifying pace, replaced by banks and Duane Reade chain drugstores. In many cases, they’re simply shuttered and the storefronts left vacant, as landlords sit tight and wait for higher-paying tenants to arrive (collecting tax breaks in the meantime). Much attention has been paid, as it should be, to the affordable-housing crisis and the erosion of the rent-regulation laws. But as neighborhoods across the city gentrify, with rents rising and communities of color being displaced by wealthier, whiter residents, we should also turn our attention to the commercial rent crisis. Hundreds of small businesses that provide services, jobs, and community to their neighborhoods are being forced out.

Commercial tenants have almost no rights. There are no limits to how much their landlord can raise rents, lease renewals are often accompanied by the extortion of thousands of dollars in under-the-table payments, and they don’t even have the basic right to renew their lease as a tenant in good standing. This wasn’t always the case, however. From 1945 to 1963, New York City had actual commercial rent control: It was enacted by the state legislature at the behest of Mayor Fiorello LaGuardia, in response to rampant real-estate speculation during World War II, which was deemed a “public emergency.”

Until last month, this Washington Heights building housed a barbershop, an income-tax preparer, a clothing store, and the Punta Cana restaurant. Photo by Steven Wishnia.Until last month, this Washington Heights building housed a barbershop, an income-tax preparer, a clothing store, and the Punta Cana restaurant. Photo by Steven Wishnia.

This law set a cap on the legal rent increase for any type of commercial tenant, from restaurants, dentists, and shoe repair shops to carpenters, welders, and artists. But in 1963, it was allowed to expire, and commercial tenants have been at the mercy of the market ever since. In the 1980s, as rents again began to rise, then-City Councilmember Ruth Messinger attempted to resurrect commercial rent control. The Koch administration defeated this bill—the Queens Councilmember who cast the deciding vote that killed one incarnation of it in committee was later convicted of corruption—but versions of it have been circulating in the Council ever since.

The commercial rent-regulation bill currently pending in the Council, the Small Business Jobs Survival Act, is not true commercial rent control like the city had from 1945–1963, with actual rent caps. Instead, it is basically an arbitration bill. If a tenant feels that their rent hike is too high, they can bring the landlord to mediation, and if necessary, to binding arbitration in order to come up with a compromise rent. In addition, the bill mandates that landlords give 10-year lease renewals if desired by the tenant. That is crucial in a world where many small businesses have month-to-month or one-year leases, which make it almost impossible for a mom-and-pop store to plan for the future. It gives tenants in good standing the basic right to renew their lease, and it specifically bans extorting under-the-table payments for a renewal.

Right now, the Small Business Jobs Survival Act sits in the Committee on Small Business, and 23 Councilmembers have signed on as cosponsors, three short of the 26 needed for a majority. In 2009, a similar bill had 32 cosponsors, and was on the verge of passing the Council. But on the weekend before it was to come to a vote, then-Speaker Christine Quinn quashed it by threatening to pull supporters’ committee chairmanships and neighborhood funding, and many of them abandoned their support. Former Councilmember Robert Jackson, one of the original sponsors, was so infuriated that he chained himself to a City Hall banister in protest.

Surprisingly, some of the Councilmembers who supported the bill back in 2009 are silent on this year’s version, including Speaker Melissa Mark-Viverito, Julissa Ferraras of Queens, and Mayor Bill de Blasio. Manhattan Borough President Gale Brewer, who was also a proponent of the bill last time, has suddenly proposed a much weaker measure that would only offer mediation, with no binding arbitration If mediation doesn’t work, the tenant would get a one-year lease extension at a 15 percent increase “to give the tenant a reasonable amount of time to move.” Her proposal would also only apply to storefront spaces, so upper-story commercial tenants, which include artists, small offices, dance troupes, and more, would not be protected.

Completely unsurprisingly, the Real Estate Board of New York is adamantly opposed to commercial rent control. REBNY President Stephen Spinola asserts that New Yorkers love chain stores: “People drive out of the city to Walmarts and Targets,” he told The Villager in March. “If big-box stores don’t work—then why are they working?”  Spinola also insists that the bill would violate landlords’ property rights, saying it “is a constitutional taking, and it will be legally challenged.” 

Will the City Council stand up to REBNY, even under threat of such a challenge, and take bold action to end the rent crisis for small businesses and the arts?