Op-Ed: Proposed Commercial Rent Guidelines Legislation Fatally Flawed

VacantCoffeeshop

In Brooklyn and all across the city, we are seeing the character of our neighborhoods being destroyed by hyper real estate speculation pushing out longtime established small businesses.  The destruction of our small local businesses results in job losses, lower wages and a depletion of affordable goods and services that affect seniors and working families.

New York City small businesses face a crisis to survive caused not just by competition from Amazon, but by an unfair lease renewal process and exorbitant rent increases.  For example, landlords can simply refuse to renew leases for existing tenants in order to seek out commercial tenants willing to pay higher rents. The need for legislation to address the small business crisis is long overdue.

City Councilman Stephen Levin

Councilmember Stephen Levin (D-Brooklyn) recently introduced a “commercial rent control” bill that would establish a commercial Rent Guidelines Board (RGB) to set rent increases.  It is commendable that Levin recognizes rising rents as a major part of the problem, but he is promoting a bill that will not stop the small business crisis because it lacks the most crucial component: the right to a lease renewal. Unlike regulated residential tenants, commercial tenants have no rights when their leases expire. Without the fundamental right to renew, businesses remain at the mercy of their landlords when their leases end.

The goal of any commercial lease legislation should be to empower the tenants towards “leveling the playing field” in negotiating fair lease terms with their landlords. In reality, according to the text of Levin’s bill, the majority of appointees to the proposed board represent real estate interests and only two out of the nine members represent the small business sector.

When setting rent increases, the proposed board only considers the landlord’s financial interests and does not require the board to make an inquiry into the financial interests of small business owners (interest rates, labor costs, location, etc.)  Even worse, it would establish today’s grossly inflated market rents as a baseline to set future rents.

Right now, several iconic businesses in Coney Island are all at the end of their lease and are about to close.  Lola Star boutique was rent hiked by 400%.  Under Levin’s bill if a landlord was not satisfied with the rent increase set by the proposed board because it wasn’t 400%, they could simply not renew the lease and put back on the market for the desired amount.  What good are set rent increases if you don’t have a lease?

The Small Business Jobs Survival Act (SBJSA) solves this problem by giving tenants in good standing the right to a long term lease renewal and the right to negotiate new lease terms with their landlords through arbitration if a mutual agreement cannot be reached.

The SBJSA has garnered the support of the majority of City Council and would easily pass if given a vote. Had Speaker Johnson kept his pledge after the October 2018 hearing on the SBJSA and made the necessary changes to the bill and passed it, all of these decades-old businesses in Coney Island would not be fighting for survival right now and every other commercial tenant in NYC would have rights when their leases expire.  Why substitute a landlord’s bill that will keep the status quo for commercial tenants when City Council can just vote on and pass the SBJSA and put an end to the small business crisis?

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