Monday, March 23, 2015

Gale Brewer's plan to help save small NYC businesses

Manhattan Borough President Gale Brewer released a report today titled "Small Business, Big Impact: Expanding Opportunity For Manhattan Storefronts." (Find a PDF here.)

Per the Daily News:

Brewer is proposing legislation to give small businesses a one-year break before they get booted from their spaces. Under the plan, the city would create a mediation program that would kick in when a store nears the end of its lease.

If the landlord and tenant don’t reach a deal with the help of a mediator, the landlord would be required to offer a one-year lease extension with a rent hike of no more than 15%.

“The city can — and must — do more to help small businesses survive,” Brewer said.

Other ideas from Brewer include ... via Gothamist:

Finding a way to "condo-ize" more storefronts (basically allowing tenants to buy space, as there are federal funds for small businesses to do this); create "low-intensity" commercial districts in areas that have skyrocketing rents (this would be allowing some commercial businesses to open on quieter streets); and helping small business owners navigate the thicket of various city agencies.


Anonymous said...


Anonymous said...

Is it Gail or Gale?

Anonymous said...

While this legislation may make for a good political sound byte for the papers, it's going to really fuck everybody. Let's say this small business rent control gets enacted, what is going to happen?

1. People will think twice about renting to a small business. Renting to a small business is going to be even riskier to a landlord than renting to a big business already is. In the business world, that means a "risk premium" will be built in to the price. Which in plain English means "I'm going to charge more because I am taking an extra risk by doing this deal, assuming I even do it at all."

2. Old businesses will have a competitive advantage over new business. Think about how rent control work. Person that has had their apartment forever pays a lot less than someone that hasn't. Old businesses are going to be able to operate at lower costs than new. Customers should pick winners and losers in the market, and not city politics. Or, as others may say, let the best man (or bodega) win.

3. Your rent will go up. Commercial rent is the big daddy for a building's revenue. If that gets cut, the only other place to lean is on the residences. I.e., YOU.

4. If you are a home owner, this will hurt your property values. If you are an owner in a coop, you own a sliver of that commercial space. If you are now going to have a rent controlled business in there, you are going to take a loss. Unless you go back to point number 1 and don't rent to a small business. I have been on a coop board before, and the members have a fiduciary duty to pick the best financial investment for the shareholders.

This sounds like a good idea, but it really isn't. If you are really serious about wanting to prevent bank branches and national chains from taking over, then back legislation that does so directly. Maybe say only X chain stores or bank branches per Y feet, or something. That's going to have its own variety of problems, but it would leave less of a blast radius of unintended consequences.

Anonymous said...

Thank you, Gail Brewer. No, it's not enough and who knows who smoothly it might go in practice but I'd guess something along these lines might help businesses that are worth saving (for the owners and the community). It's certainly better than cheering on the death of every small business in the city like most of our other politicians are doing.

EV Grieve said...

Thanks 10:37 -- it's Gale ... I changed the headline

Anonymous said...

Oh, good grief.

Anon at 10:41 writes:

" . . .fuck everybody . . . "

"People will think twice about renting . . . "

" . . . old businesses will have a competitive advantage . . . "

"Your rent will go up."

" . . . will hurt your property values . . . "

" . . . coop board . . . take a loss . . . fiduciary duty . . . "

No. This law will not destroy the world. And, alas, no one is going to get fucked, not even the rich.

I'd guess most building owners should, just as responsible building owners if nothing else, try to rent to businesses that will stay around for a while and try not to raise the rent more than 15% in a given year. It's just good business practice.

Old businesses will, yes, have a tiny advantage for one year but once the law is in place a year, new business owners will have the same advantage. Doh.

Commercial rent is "the big daddy" for commercial buildings but for most residential buildings (even small coops where, say, the ground floor is a store) commercial rent is a small slice of the overall building income. So, after this law, the coop can only raise the rent 15% for a year before kicking out the old tenant and raising the rent to whatever they please? I fail to see much hardship, even for small coops. I fail to see that property values will change at all under this law. It's _not_ rent control. Everyone can raise their rent to whatever they want, they just have to wait 12 months (while collecting a 15% increase over what they currently charging) to do so.

Coop boards have a general fiduciary duty, yes, but coop boards can also vote to, say, rent to a quiet store or only a restaurant or not a restaurant or only professional offices or whatever. Coop boards also have a duty to consider the quality of life for their building that certain tenants may or may not improve. I'd guess most coop boards lean toward longer term leases than shorter term leases anyway.

blue glass said...

everything has side effects.
witness the side effect on our neighborhood (and the city) of doing nothing to protect small businesses for the past 30 years. soon there will be none left to protect.
will this be another example of putting a lock on the door after you've been robbed?

Jill W. said...

Not sure about Anon 10:41's #3 item. I've heard that, at least in new buildings, residential is where it's at. And the commercial space is like an afterthought.

dwg said...


Wait for legislation? Not in this lifetime. At least this is a plan where there is none. Better to start imperfectly than not at all.

Anonymous said...

Wishful thinking - tax breaks for small shops which have been in existence for more than 20 years.

Bloomberg really destroyed - purposefully - neighborhood stoes and businesses in Manhattan.

Ken from Ken's Kitchen said...

If the Daily News headline is accurate, the small biz owner gets a one-year extension at a 15% increase before getting evicted. Ugh. This looks like a watered down version of the Small Business Jobs Survival Act.

Ken from Ken's Kitchen said...

The Small Biz jobs Survival Act forces mediation on landlord and tenant when they can't settle on a new rent upon lease renewal. If mediation doesn't work, it goes to arbitration.

Just read Brewer's pdf. The Daily News headline is accurate. In Brewer's bill if mediation doesn't work, the tenant gets an additional year before eviction. Not good.

Anonymous said...

I felt obliged to counter some of this poster’s (at 10:41 PM) comments. I am not in real-estate but I am a small business owner

First maybe we should define what qualifies as a small vs big business. Is a big business defined as a corporation that is not necessarily based in locally in NYC as with Starbucks or Chipolte? Could a business like Subway or Pizza hut of Mcdonalds be considered a small business because it is a franchise?

Renting to a Subway or even a Starbucks comes with risk. If one is paying attention to corporate America there is a cycle of expansion then collapse with most chain stores. How many Burger Kings are left in Manhattan is one example. One could say renting to a big business is a short term gain, remember the Gap that opened on St Marks Place.

If a landlord rents to a small business yes it may close in a few years but if the rent is reasonable another small business will snap up this space immediately.

Since rental laws have changed we know that “forever” low rent is a thing of the past. Look at all the stories about tenements being bought up, some long term tenants are being bought out, some being forced out with illegal tactics.

If you owned a small business you would understand that you need some stability in your cost or at least know to expect a certain amount of increase in your cost so you can play your business’s future. If you think the city will have bodegas and small delis in the near future unless something changes you are in for a shock. Get ready to go to Whole Foods for you cat litter or 2% milk at 10 PM.

Is many cases rents cannot go higher in some buildings. There is a point when it makes more sense to buy than rent. A mortgage for $4000 per month vs a rental studio for that amount. If you think a NYU student’s wealthy parents will spend more and more you are wrong. I know several people with kids in college that have bought apartments rather than pay that much in rent. The child graduates and they can let them keep living there or sell the apartment as an investment.

The old structure was the commercial space subsidized the apartments, with rent control on its death bed this formula is not justified.

If you are a home owner, this will hurt your property values. If you are an owner in a coop, you own a sliver of that commercial space. If you are now going to have a rent controlled business in there, you are going to take a loss. Unless you go back to point number 1 and don't rent to a small business. I have been on a coop board before, and the members have a fiduciary duty to pick the best financial investment for the shareholders.

Sometimes in coops the commercial space is leased by a third party who can sub-lease to anyone they wish. This happened in a building a friend lives in. First the space was renting to a 99 cent store, now a big and always empty 7-11 is in that space. The hikes in commercial rents must have an affect on a building’s taxes. The more income generated the hight the city will evaluate the building, the hight the insurance, etc… All of this will soon be beyond the normal increase in living and inflation cost which will mean sooner or later we are looking at a model which crash under its own weight.

Large commercial spaces will always be beyond the reach of most mom and pop businesses. The abundance of bank branches will soon ebb once the bank pissing contest ends and the cost becomes unjustifiable going forward. Singling out a kind of business is wrong and too specific and will actually have the opposite affect by raising rents higher as more, let say banks compete for one space in an area that they want a presence.

nygrump said...

So long as the tax codes reward landlords for raising rents, nothing can change. Stop allowing landlords to deduct spaces that were emptied after a rent increase. It like the subsidizing of corn by the feds, we get cheap deadly GMO HFC in everything, much like a booze purveyor seemingly in every storefront.

Anonymous said...

And... Just in... A Domino's Pizza is opening a few doors away from Ray's on Avenue A.

KT said...

Ken from Ken's Kitchen, you are spot on.

Anonymous said...

The shoppe around the corner is clearly in danger jobs are involved and neighborhood fabric is at risk usury demands of doubling or tripling rents are not in the public interest property owners are entitled to a fair market valuation of the property but destructive usury increases have to curbed.

Anonymous said...

Talk is cheap. I'll believe it when I see it.

Anonymous said...

What we really need is ZONING to restrict what type of businesses can be in place.

Anonymous said...

This keeps getting said [coop board members] "have a fiduciary duty to pick the best financial investment for the shareholders." but it's simply not true that coop boards have to pick a business that pays the highest rent. This kind of statement (and the butchering of fiduciary duty) make me assume you have _not_ been on a coop board.