Proposals seek to protect small businesses amid skyrocketing rents

Mayor Bill de Blasio’s plan to create or preserve 200,000 units of affordable housing in New York City over the next decade is a hallmark of his administration – the cornerstone of his vision for a more equitable city. And while the particulars of the plan are very much up for debate, the largely progressive City Council tends to support the plan’s overall goals. The affordability crisis, they agree, poses a critical threat to the city’s well-being.

Yet as the housing crisis commands the attention of both politicians and the public, an unchecked rise in commercial rents has gone comparatively unacknowledged, begging the question of why, when commercial tenants are in fact more vulnerable to abrupt rent increases than their residential counterparts, neither the administration nor the council leadership has seemed to take a strong initiative on the issue.

While de Blasio has recently touted a dramatic drop in the amount of small fines it collects from the small businesses, advocates argue that this fails to address the underlying issue: that as things now stand, commercial tenants have no recourse to mediate disputes with their landlords. Many commercial tenants are stuck with month-to-month leases that can be terminated with only a 30-day notice. The Small Business Congress, an advocacy group in the city, has estimated that hundreds of small businesses close their doors every month. 

“De Blasio’s big thing has been reducing fines. And look, it’s nice,” said Kirsten Theodos, an organizer for Take Back NYC, a newly formed group lobbying on behalf of small businesses in the city. “But the reality is, businesses aren’t shuttering because of fines. They’re shuttering because of rent hikes. They’re shuttering because they just got evicted.”

No where in the city are small business owners feeling the crunch more than in Manhattan. According to a report from the Real Estate Board of New York, commercial rents increased 15.7 percent on average along major retail corridors around the borough from spring 2014 to spring 2015. Along 125th Street in Harlem, the asking price increased 21 percent during that period.

“I have heard, and read, countless stories of small businesses closing solely because they were unable to negotiate a fair lease renewal,” City Councilwoman Annabel Palma said. “Closing of these small businesses has a profound impact on the economic well-being of our neighborhoods. These small businesses produce jobs which often are sourced locally. Low-income New Yorkers, who heavily rely on the inexpensive local merchants, will now be priced out of their own communities.”

The problem isn’t exactly new: Legislation that would give commercial tenants the right to negotiate fair terms on a 10-year lease extension, with recourse to non-binding mediation and binding arbitration as a last resort, has been floating around the City Council since 1985 in the form of the Small Business Jobs Survival Act. But the bill has never gone anywhere, which advocates largely blame on REBNY’s powerful grip on city politics.

Now, Take Back NYC and several other groups are looking to breathe fresh life into the bill, known as the SBJSA, which, in its latest version which Palma introduced last year, would also protect against the extortion of immigrant business owners by landlords and prevent landlords from passing on property taxes to their tenants. Take Back NYC has so far garnered over 5,000 signatures on MoveOn.org, and has also lobbied council members to sign on to the bill, which now has 24 sponsors, including Public Advocate Letitia James. 

Still, they face an uphill battle.

Former REBNY President Steven Spinola has said the SBJSA has no legal standing – that the mayor does not have the power to “control the leasing of properties” – and that any such law would have to come from the state at the very least.

But Theodos says this is just a smokescreen – that in all the time she has spent speaking with council members about the bill, no one has been able to produce evidence that the bill would be unconstitutional.

“I always ask any council members that I meet with, ‘Have you seen a legal document? A case law that would prove this is illegal?’ And they tell me ‘No,’” Theodos said.

Palma agreed: “This bill has been around for decades. It has been analyzed by lawyers, debated in a public hearing, and argued about in the press. It is perhaps the most scrutinized bill before the council. But this scrutiny is just what the bill needed because I am confident that we can move forward now with a bill that not only works but is also legally sound.”

In 2010, Bronx Borough President Rubén Díaz Jr. hosted a forum to evaluate the legality of the SBJSA. The resulting report, which found the bill to be “fully constitutional and legally sound to withstand likely court challenges,” was largely a rebuttal to objections from the City Council legal staff, working under then-Speaker Christine Quinn, which had effectively blocked a vote on the bill in 2009. 

Whether or not the SBJSA would actually hold up in a court of law has of course never been tested, but Theodos is concerned by the fact that the City Council leadership under Quinn offered no recommendations to amend the bill to satisfy their legal concerns. And while the current council leadership hasn’t explicitly objected to the SBJSA, they have yet to offer any constructive criticism either, over a year since the latest version was introduced.

“We would be more than happy to entertain amendments, suggestions, or even a different solution altogether. But none of that has happened. Not from the speaker, not from anybody,” Theodos said.

A previous version of the bill, introduced in 2008 by then-Councilman Robert Jackson, was endorsed by then-Councilman Bill de Blasio, Councilwoman Melissa Mark-Viverito (now the speaker), Councilwoman Julissa Ferreras (who now chairs the finance committee) and then-Councilwoman Gale Brewer. Today, neither Ferreras nor Mark-Viverito have signed on to the legislation or taken a formal stance on it.

Brewer, now the Manhattan borough president, has been the only one of this group to take an alternate stance to the SBJSA. Long known for her advocacy for “mom and pops,” Brewer, who worked on the original version of the SBJSA in the ’80s as a staffer to then-Councilwoman Ruth Messinger, in the spring claimed that the bill stands almost no chance of passing and therefore an alternative measure should be sought.

“I just know that the one that’s pending, I don’t think it’s either going to stand up legally or politically,” Brewer said. “It’s been around since 1985 and it hasn’t moved.”

Brewer’s proposal would require landlords to notify retail storefront tenants of a proposed rent hike six months in advance. If negotiations over the increase fail, non-binding mediation can be requested. If that fails, the tenant would be given a one-year extension on their lease and a 15 percent rent hike, after which time they would have to vacate the premises.

While clearly a compromise, Brewer says her plan would force landlords to sit down with their tenants, and at the very least it would give store owners some time to find a new property.

“We all want to save the mom and pops – I have the same goals as everyone else – but I’m not interested in another 30 years of discussions,” Brewer said. “We have to get something done. We’re not going to have anything left in Manhattan.”

Brewer’s proposal, which she first set forth in March, is now set to be drafted into a bill by the office of Councilman Robert Cornegy, chairman of the Committee on Small Business. No bill has yet emerged however, and Cornegy’s office could give no timeline on its progress.

Theodos, who has said Brewer’s plan fails to address the root of the problem – the inability of commercial tenants to negotiate down skyrocketing rents – says support for the SBJSA is gaining momentum, largely thanks to the Internet and social media.

“Our strength is in numbers,” she said. “REBNY has deeper pockets, certainly. But we have a lot more people – New York City residents, merchants, nonprofits, political groups. And it’s not just Manhattan, it’s across all the boroughs.”

Take Back NYC will hold the latest in a series of public forums on the issue on Sept. 30 in the Bronx.

Correction: A previous version of this article listed the Small Business Jobs Survival Act as having 25 sponsors in the City Council. The bill in fact has 24 sponsors, including Public Advocate Letitia James.