City’s Small Businesses Need Rent Stabilization to Survive COVID-19, Advocates Say

Creamy, pink, infused with spices and sugar, and garnished with crushed pistachios, Kashmiri chai is decadently delicious. The painstaking process of making this tea begins with boiling green tea leaves with baking soda, sparking a chemical reaction that reddens them. “My father perfected it,” says Rizwan Hamid, 35, whose father, Abdul Hamid, came to New York from Pakistan in 1978 and opened Al-Naimat Restaurant & Sweets in Jackson Heights, Queens, in 2000. 

Kashmiri chai’s higher production cost explains its price tag: Al-Naimat charges $2 a cup, twice the price of regular chai. “It’s a luxury item,” says Hamid, “So no one is buying it anymore.”

As COVID-19 escalated throughout February and March, New Yorkers began stocking up on groceries and eating at home, and Al-Naimat’s sales declined. Since March 23 alone, the first day Governor Andrew Cuomo placed New York State on PAUSE – closing non-essential businesses, banning gatherings, and urging New Yorkers to stay home – sales dropped 80 percent, says Hamid.

With sales plummeting and storefronts shuttering across the city, worries about rent have come to the forefront for small business owners like Hamid, who struggle with high rent and property taxes. In New York City and across the U.S., small businesses were in a precarious situation even before the COVID-19 crisis: A 2019 nationwide survey by the Federal Reserve found that 70 percent of small employers have outstanding debt. Another 2016 JPMorgan study found that most small businesses’s cash reserves would not provide a sufficient cushion in case of a significant economic downturn, and that the median independent restaurant had enough cash to last only 16 days.

United for Small Business NYC (USBnyc), a coalition of NYC community organizations dedicated to protecting small businesses from displacement, sees commercial rent stabilization as a way to ease the burden. “Removing the ability of speculative landlords to implement outrageous rent increases is really important to prevent displacement,” says Karen Narefsky, senior organizer for equitable economic development at Association for Neighborhood & Housing Development (ANHD), which convenes USBnyc.

USBnyc is currently campaigning for Intro 1796, a commercial rent stabilization bill that Brooklyn Councilmember Stephen Levin introduced last November. Just as apartments in New York City are rent stabilized, it would create a board that determines an acceptable annual rent increase that landlords could not exceed. 

The Real Estate Board of New York strongly opposes the bill, pointing to rising property taxes and other factors as the true culprits crippling entrepreneurs. “The small businesses we speak to cite many factors that negatively impact their current condition, starting with overburdening government regulations and the added costs of implementing a significantly higher minimum wage and paid sick time,” Randy Peers, president and CEO of the Brooklyn Chamber of Commerce, said in a press release REBNY issued the same day that Levin proposed Intro 1796. 

However, a 2019 ANHD report identified rent burden as the top concern for immigrant small business owners throughout New York City, with 68 percent of those in Jackson Heights experiencing a rent burden even before coronavirus forced them to shut down.

“The crisis is exacerbating pre-existing issues. The two biggest things I hear from businesses is they don’t know how they’re going to pay rent, or pay their employees,” says Shrima Pandey, small business program manager with Chhaya CDC, a Jackson Heights-based non-profit that helps local businesses like Al-Naimat. “Rent is a key factor right now.”

Staying open to shrinking customers

Al-Naimat serves a hot buffet with Pakistani, Indian and Bangladeshi curries and kebabs, but its front counter – selling colorful, sugary South Asian sweets – normally makes up 75 percent of sales, according to Hamid. In the era of coronavirus, however, people are forgoing indulgences; sweets suddenly dropped to 20 percent of sales. Instead, customers stocked up on meals like butter chicken, biryani, and chana masala.

“People are buying two days’ worth of food and freezing it,” says Hamid, who took over daily operations so his father, who is 75 and in poor health, can stay home.

Four days into the coronavirus lockdown, Hamid confided that he would also like to be at home with his wife, children, and newborn baby, but felt a responsibility to Al-Naimat’s customers. “In the restaurant business, customers need to trust that you’ll be there every day when they’re hungry,” he says. “There are people who rely on us on a daily basis.”

One regular customer, Zafar Qureshi, 73, stumbled upon Al-Naimat the day it opened in Jackson Heights’s Little India, a dense shopping and culinary destination. Now Qureshi’s daily routine involves stopping by for supper on his way to work nights in security at LaGuardia Airport, coming home to sleep and returning for brunch when he wakes up. He is drawn not only by meals, but by social connections. “My friends know that I will be there seven days a week, so they find me there,” he says. “That place is practically like my home.”

When the mayor suspended public school classes and limited restaurants to takeout and delivery starting March 17, Hamid decided to offer free lunches for children. “The whole purpose was to put a smile on a child’s face, and a parent’s face, because some parents rely on that meal their kid gets from public school,” he said. 

Hamid posted a sign on their front door and social media proclaiming, “Al-Naimat will be serving our children: Free School Lunch for all students.” He bought cases of juice boxes and planned to let children choose a hot food from the buffet, salad with carrot sticks, and dessert. Hamid, who comes from a long line of traditional sweets makers, took particular delight in planning the dessert: he packed small plastic containers of burfi, a fudge made of condensed milk – chocolate for boys, and for girls, tri-color burfi with pink, green, and white layers.

Then he waited for families to come in. But the long, lonesome week proved that parents were afraid to take their children outside. Only one child came, pulled along by an anxious mother and grandmother. Their downcast expressions changed to smiles when Hamid offered the special lunch. Opening her lunchbox, the young girl went straight for the tricolor burfi. Hamid’s excitement matched her own.

“It’s in our religion to give, to feed. The Muslim and Pakistani community love to feed. My dad and mom love to feed people,” says Hamid. “It’s good for the heart.”

Between sporadic visits from customers, Hamid sat in the back of the eerily empty restaurant. It reminded him of the aftermath of September 11th, when hate crimes shook the Muslim community. Hamid remembers people’s fear of coming to Jackson Heights. Sales fell 20 percent that year. “September 11th was a shakedown,” says Hamid. “COVID-19 is a lockdown.”

A long-running debate

To help with that enormous strain, advocates like USBnyc and Chhaya call for both a rent cancellation for at least 60 days, and for the passage of Intro 1796 as a way to provide stability for commercial tenants long-term.

“A lot of businesses have been forced to close, which is good because it reduces virus spread and keeps people safe, but it means they have no income. Many commercial landlords are still charging rent at this time,” says Narefsky. “It raises the question of where this money will come from if tenants don’t have income.”

Commercial rent stabilization in New York City has been debated since 1985, when then-Manhattan Councilmember Ruth Messinger called for commercial rent restrictions. Over the past 35 years, the City Council has engaged in a repetitious dance on the issue, with councilmembers proposing rent control bills and detractors citing legal concerns.

Most recently, in 2018, Manhattan Councilmember Ydanis Rodriguez introduced the Small Business Jobs Survival Act bill, which would establish “an environment for fair negotiations in the commercial lease renewal process,” but the New York City Bar Association determined the City Council has no legal power to enact commercial rent control.

In February, Mayor Bill de Blasio in his State of the City Address unveiled a plan to save small businesses that once again put commercial rent stabilization on the table. He will convene a “blue ribbon commission” of real estate and legal experts to find ways to support small businesses and deliver recommendations by the end of this year, he said.

The COVID-19 pandemic has thrown into sharp relief commercial tenants’ lack of rights and protections, lending new urgency to this legislation, proponents argue.

The outbreak has disrupted society on a scale that most New Yorkers have never witnessed, except perhaps those who lived through WWII. In 1945, near the end of the war, New York City instituted commercial rent control as an emergency wartime measure, authorized by the state. The Court of Appeals held that it did not unconstitutionally interfere with property rights, and rent control lasted until 1963, when state legislature let the law expire. It was “the only sustained precedent for commercial rent control in American history,” wrote W. Dennis Keating in a 1985 report.

Now, with national chains like Cheesecake Factory and Subway declaring that they will not pay April rent, time will tell if advocates can establish a similar emergency measure.

Making a tough decision

On Friday, March 27, the fifth day of lockdown, Hamid stood behind Al-Naimat’s counter wearing a surgical mask. His eyes crinkled when he smiled, but he looked off into the distance when he talked about his and his father’s late night decision to close the restaurant.

At home the previous night, they had watched grim news reports about mounting deaths at nearby Elmhurst Hospital, only five blocks from Al-Naimat. Thirteen coronavirus patients at the hospital died that Wednesday, and with the morgue at capacity, refrigerated trucks parked outside to hold bodies. The epicenter had found them.

Customers straggled in to pick up DoorDash orders, and Hamid informed them of the closure. 

One customer got teary. “What will I do?”

“I’m sorry,” Hamid told her. “We’re thinking of everyone’s safety.”

Qureshi had come in earlier and bought enough food to last 8 or 10 days. “I’m feeling sad,” he sighs. “I don’t like the food at the other places, but if I have to live, I have to eat.”

Hamid, his brother-in-law and one employee spent their last hours cleaning up and packing food to donate to a nearby church. The Kashmiri chai sat untouched.

Hamid’s landlord, currently in India, hasn’t contacted him, though March and April rent is past due. “Hopefully that rent cancellation bill passes. If not, we’ll tell the landlord we don’t have it. You’re the rich guy, you can sustain yourself, so please don’t ask anything from us for now,” says Hamid. “We’re all in this together.”

At the end of the day Hamid posted a photo of the restaurant interior on Snapchat, turned off the lights and locked the doors. He stood outside, looking at the door and thinking of his father’s sacrifices.

With no idea of when Al-Naimat will reopen, Hamid must reckon with how his business will survive this economic shock, and how his family will survive the virus.

“We just take two hands and pray to God.”