Could commercial rent stabilization solve NYC’s retail vacancy woes?

A Brooklyn City Council member plans to introduce a pioneering bill that could fundamentally reshape how rents are set for small commercial spaces—and breath new life into struggling mom-and-pop shops.

Over the last year, councilmember Stephen Levin and small business advocates have worked to craft legislation that would regulate rents for retail, manufacturing, and office spaces under a certain square footage. The system would essentially mimic how the city’s rent-regulated apartments are managed, with the creation of a commercial rent stabilization board that would set increases and “provide predictability” to small businesses, Levin says.

“We think that this is a viable bill that’s actually pretty straightforward,” Levin says. “There would be no incentive for a landlord to sit on an empty storefront and it would allow small businesses to compete.”

As local shops have struggled with soaring rents, red tape, and competition from online retailers, empty retail space in New York City has doubled over the last decade—climbing to 11.8 million square feet in 2017 from 5.6 million square feet in 2007, according to a September study by Comptroller Scott Stringer. The citywide rate of empty storefronts jumped by nearly 50 percent—from 4 to 5.8 percent—during that same period, the report shows.

Julian Hill, an attorney with Take Root Justice, which offers legal services to small commercial businesses through a contract with the city’s Department of Small Business Services and helped Levin’s office develop the bill, frequently works with tenants who are faced with steep rent increases. Levin’s bill, Hill says, could be a key step toward stability for small commercial renters.

“Folks are being exploited in different neighborhoods throughout the city, and so how do you create a mechanism that helps to curtail that risk?” says Hill. “I think a bill that approaches a way to stabilize rent is definitely something that will be valuable.”

Retail and office space under 10,000 square feet and manufacturing space within 25,000 square feet would fall under the purview of the commercial rent guidelines board. That body would consider myriad factors while mulling increases, including the economic conditions of the real estate industry such as “commercial real estate taxes, sewer and water rates, gross operating and maintenance costs,” according to one section of the bill as currently drafted. The overall supply of commercial space and vacancy rates would also be considered.

If a storefront is empty when the bill takes effect, according to Levin, then the first rent negotiated between the landlord and tenant would be the starting point for adjustments.

“We’re not looking to take away anyone’s livelihoods,” Levin says. “The goal is to provide some stability so that business owners can make investments in their companies, and so landlords know what they’ll be getting and can plan accordingly instead of holding a storefront empty waiting for a windfall.”

New York City previously had a commercial rent control statute from 1945 to 1963, but after the law expired, regulation efforts largely faded from the policy landscape. Advocates pushing the long-stalled Small Business Jobs Survival Act, which would give tenants the right to a 10-year lease renewal and force landlords and tenants to go to arbitration if they cannot agree on an increase, saw a flicker of hope when the bill was resurrected for a City Council hearing in 2018, the first time in nine years.

But Council speaker Corey Johnson has flagged concerns about the bill and Mayor Bill de Blasio does not back the legislation; SBJS has since seen little traction. Other, less aggressive, legislation geared toward better understanding the city’s retail vacancy crisis passed the Council in July, including the “Storefront Tracker” bill that will gather data on commercial vacancies and make it available via a digital tool.

While helpful, those bills don’t go far enough and more dramatic measures are needed to ensure the mom-and-pop businesses and local commerce survive, says Olympia Kazi, an architect with the NYC Artist Coalition.

“It’s about the culture of the city. Basically we’ve been bleeding culture out of the city,” says Kazi, who points to now closed businesses like the Cornelia Street Cafe, a mainstay in the city’s literary, music, and art world for 41 years that shuttered in January. The restaurant’s rent and basement performance space was $33,000 per month, 77 times the rent paid when the business first opened.

“It’s very important that people have access to culture in an affordable way,” says Kazi. “How unfair is it for these community spaces that have been operating for 10, 20, 30 years—building the neighborhood—and then suddenly have their rent spiked? It’s not. Not to anyone.”