De Blasio Takes Mom-and-Pop Commercial Rent Control Longshot

By Gabriel Sandoval and Reuven Blau,  originally published in THE CITY.

Natasha Amott tuned in to a livestream of Mayor Bill de Blasio’s State of the City address on the web Thursday as she placed online orders for the last of her three kitchen supply stores.

The mayor grabbed her full attention when his “save our city” speech turned to efforts to help small business owners — including creating a panel to study the legality of commercial rent control, a longtime nonstarter.

“I was honestly both surprised and very happy to hear the mayor really making small business, and the plight of small businesses in New York City, such a prominent issue,” said Amott, who owns Whisk, based in Downtown Brooklyn.

Her Williamsburg branch, with about a dozen employees, shuttered after her landlord hiked her monthly rent from $18,500 to $26,500 last year, she said.

“At the end of the day, I realized I would have to change my business model, prices would have to go up, staff wages would be depressed and it would not be fun any longer,” she said.

‘Go to Albany’

In his address, de Blasio proposed a vacancy tax on owners of long-unoccupied storefronts and announced plans for a “blue ribbon” rent commission at a time of growing vacancy rates in some areas and increasing pressure on shopkeepers amid online competition.

But even as he raised the hopes of small business owners — and the hackles of landlords — he tempered expectations.

“For years and years, I’ve heard different proposals around commercial rent control and I have not for one day been able to find one that I thought was legal,” de Blasio said during his address at the American Museum of Natural History.

Mayor Bill de Blasio delivers his State of the City address at the Museum of Natural History, Feb. 6, 2020. Photo: Ben Fractenberg/THE CITY

“That’s the truth,” he added. “But I think the time has come to settle this once and for all because we — at this point in our history — we may need this to be able to save our small businesses.”

The commercial rent control commission will be comprised of real estate and legal experts who will complete their research this year, de Blasio said.

“If it’s a yes, we should go to Albany and get it done in 2021,” he added.

New Commission, Old Concern

But a trip to Albany is far from a sure thing.

Some small business advocates have for years been urging City Hall to champion a rent control system for commercial properties. In 1985, then-Manhattan Councilmember Ruth Messinger pressed for rent control restrictions on commercial spots. Then-Mayor Ed Koch convened a commission to review the idea, which never gained traction.

City Councilmember Ydanis Rodriguez (D-Manhattan) introduced a bill in 2018 that would have granted certain rights to small businesses in the lease renewal process. But his Small Business Survival Act failed to move out of committee.

Councilmember Ydanis Rodriguez (D-Manhattan) Photo: Ben Fractenberg/THE CITY

The city’s Bar Association analyzed that measure and concluded the City Council was not authorized to enact the legislation without approval from state lawmakers.

In November, Councilmembers Steven Levin (D-Brooklyn) and Brad Lander (D-Brooklyn) introduced the Commercial Rent Stabilization Act, which would create a panel akin to the Rent Guidelines Board to determine rent hikes for small retailers and other businesses.

The legislation drew fire from a coalition of business groups that said the bill didn’t address other pressures, including rising wages and real estate taxes. Some predicted the measure would wind up hindering growth and helping big-box chain stories.

Meanwhile, an August study by the mayor’s own Department of City Planning that looked at retail in two dozen areas found varying vacancy rates and multiple neighborhood-specific factors creating challenges for store owners.

The report shows “the reasons for storefront vacancies are complex and varied and that solutions must be nuanced and targeted – or we may do more harm than good,” City Planning Director Marisa Lago said at the time.

No Easy Answers

De Blasio’s commission is stacking up to be similar to one that in 2018 was charged with reviewing the city’s property tax system. That panel recently announced 10 recommendations, many of which would require Albany lawmakers to approve changes to state law.

The city’s top real estate group argued that those changes should be enacted before discussing commercial rent control.

“To create a more affordable, equitable and sustainable city requires creative solutions to help families and small businesses alike,” said Real Estate Board of New York President James Whelan. “We can’t ignore the fact that the city continues to inequitably tax retail properties and multifamily rental housing that hurts small businesses and exacerbates our affordability crisis.”

De Blasio’s focus on small businesses comes as empty real estate space throughout the city has nearly doubled over the past decade to 11 million square feet in 2017, according to an analysis by the city Comptroller’s Office released in September.

That’s equal to a vacancy rate of 5.8%, the report found.

“We have a retail vacancy crisis in our city,” Comptroller Scott Stringer said at the time. “We can’t roll back the clock, but we can do more to protect our mom and pops and adapt to our changing economy.”

Hours after the mayor’s address, City Council Speaker Corey Johnson described the myriad challenges facing small businesses, from online retailing to a “broken property tax system” and “dysfunctional regulatory system” during an interview on NY1’s “Inside City Hall.”

“There’s not a silver bullet that takes care of this,” he said, alluding to the commercial rent control concept. “So when we talk about it, we have to talk about it in a responsible way, and the biggest issue here is, how do you create public policy that affects all of these businesses that fall under the umbrella of all of the issues.”

The last remaining branch of the kitchen supply store Whisk on Atlantic Avenue in Brooklyn, Feb. 7, 2020. Photo: Gabriel Sandoval/THE CITY

As for Amott, her third storefront, in Manhattan, told a different story than in Williamsburg, she said.

She paid $10,000 a year in property taxes in 2012, but that grew to $54,000. “It was killing me,” she said.

While the challenges facing small businesses are numerous, Amott conceded, she pointed directly to the cost of land as the core problem.

“We are at that point where rents are so out of control, property taxes are so out of control, that we may need to look at some kind of commercial rent stabilization,” she said. “I don’t think there’s an easy answer.”