Council Eyeing Moves Beyond Mayor’s Vision to Boost Small Businesses

In Mayor de Blasio’s “Save the City” speech last month, he told the story of how his office helped save the 190-year old bar Neir’s in Woodhaven, Queens from closing shop after the bar owners said the landlord had raised the rent. He followed up the Neir’s story with a handful of plans to help small businesses thrive across the city, such as financing, vacancy taxes, cutting fines, free legal services and creating a commission on rent control. 

Small business advocacy groups say the administration and the City Council are making small steps but there is much more work to be done in protecting and sustaining small businesses across the five boroughs. 

The de Blasio administration now aims to reach out to an estimated 28,000 businesses through several initiatives. The city plans on committing $500 million from the city’s pension funds for investment in local businesses, especially focusing on small businesses. In order to address the reported surge in vacant storefront, the city plans on pushing a vacancy tax through Albany to keep vacant commercial properties occupied by small businesses. 

The city also plans to continue to cut fines on small businesses. During his annual  speech, de Blasio said the city had cut fines over 40 percent during his administration and vowed that it would reduce fines by half by the time he leaves office. The administration will also continue to expand assistance programs for those businesses who need guidance to secure permits and licenses as part of their preparation for inspections. The city plans on providing free legal services and low-interest loans and finally create a commercial rent control commission which will give analyze commercial rent control proposals and sharne their recommendations by the end of this year.

Council weighs a raft of bills

The city administration is not alone in trying to help small businesses, the City Council has also introduced bills to assist small businesses through legislative actions. One of the main pieces of legislation is a bill proposed by Brooklyn Councilmember Stephen Levin on regulating commercial rent by creating a commercial rent guidelines board similar to the city’s existing Rent Guidelines Board (RGB), which votes on annual residential rent increases across the city.   

Similar to the RGB, the commercial rent guidelines board will be comprised of nine members appointed by the mayor: a chairperson, two members representing commercial tenants which are not chain businesses, two members representing commercial landlords; and

four public members with some experience in finance, economics, real property management or community development. All members would serve a two-year term. 

The commercial rent guidelines board would be responsible to limit rent increases on commercial spaces based on several economic conditions of the commercial real estate industry, commercial real estate taxes, sewer and water rates, gross operating and maintenance costs, availability of financing and costs, overall supply of commercial spaces and overall vacancy rates, and data from the current and projected market values of commercial rentals. 

The commercial rent guidelines board regulations would be applicable to retail stores of 10,000 square feet or less, manufacturing establishments of 25,000 square feet or less, and professional/services or other offices of 10,000 square feet or less, according to the bill. This bill is supported by the City Council Speaker Corey Johnson. 

Other City Council bills introduced over the last year would also address some concerns small businesses face such as Intro 1410, introduced by Bronx Council member Vanessa Gibson last year, which would strengthen the existing commercial tenant harassment law by changing its definition to include “commercial tenant harassment as an act or omission by a landlord that would reasonably cause a commercial tenant to vacate, or surrender or waive their rights under a rental agreement.” It would also increase civil penalties and fines for landlords. 

Another bill, introduced by now-resigned Brooklyn Council member Rafael Espinal, would require the city to provide funding which would require any development project to perform a retail needs assessment to determine whether the project will provide commercial space at below market rents. 

Additionally, Intro 1049, sponsored by Council Member Carlina Rivera, would require the city’s Small Business Services department to produce an assessment of storefront businesses in at least 20 commercial districts every three years. 

Other bills would address concerns of micro-business or e-commerce businesses that have fewer than 10 employees, mandate that SBS create an online guide for small businesses, provide training and counseling for small business owners and require the Department of Finance to collect data and establish a public dataset of commercial properties. 

Across the five boroughs, the city’s own 2013 data estimates there are over  200,000 businesses with fewer than 100 employees. According to the state’s Empire State Development last report on small businesses — those small businesses have over 650,000 people employed in the city. 

Those businesses face rent burdens and continuing displacement in an ever-changing city,  according to a city Comptroller’s report which said retail rents rose by 22 percent on average between 2007 and 2017 — a driver of retail vacancy. One of the drivers behind commercial rents rising, the Comptroller’s report points to many landlords burdening commercial rent prices to include property taxes.  

Flaws in the EIS process?

A new Pratt Center for Community Development report released last month said the city’s environmental review method overlooks the small business displacement impact of development on New York neighborhoods, where socio-economic demographics are rapidly shifting through private and public rezonings. 

During a city-initiated rezoning or project, the city must do an environmental review to understand and assess the impact a proposed project may have in the neighborhood. It uses a “technical manual” to guide those assessments. 

The Pratt report reviewed over a dozen environmental impact statements to see if they addressed  the general risk of business displacement due to increased property values/rents or related trends, the likelihood of displacement due to retail market saturation, and the possibility of displacement due to adverse effects on specific industries. The report found several flaws in those assessments. 

The Pratt report wrote, “These flaws lead to inadequately informed decision-making, which fail to correctly identify the true cost of government action or opportunities for mitigation: for decision-makers who do not have the thorough, robust or accurate analysis they require to adequately weigh in on rezonings; for local residents and businesses that would otherwise have mitigation measures to offset real displacement impacts; and for the city as a whole.”

One flaw: the city’s assessment method assumes that if a business relocates as a growing concern, there is not negative impact. Terms that govern the EIS, like whether businesses to be displaced provide products or services essential to the local economy, are imprecise or undefined. And the current method doesn’t examine the impact of business changes on workers or on specific racial and ethnic grups.

“The scan that we did for this report, we never found a finding of significant adverse impact or indirect business displacement,” said Elena Conte, Pratt director of policy. “This is a deep dive into what the technical manual says about analyzing a business [and] indirect business displacement. And it is riddled with flaws. It needs to be rewritten and it needs to be rewritten in a process that involves the public.”

The report went on to make a few recommendations such as creating a task force to re-evaluate the city’s Technical Manual’s approach to evaluating business displacement, conducting a citywide business analysis of existing economic conditions, planning or support for commercial and industrial districts as part of any substantial rezoning and finally, determining the success of existing business assistance and relocation programs stemming from rezonings. 

Hope and holdups

Some advocates are hopeful about the de Blasio administration and City Council’s efforts to address some  small business concerns while others say the majority of the power remains in the hands of the commercial landlord rather than the tenant. But both groups agree that they want to see more comprehensive legislation to address commercial rent prices and small business displacement. 

Kirsten Theodos, member of Take Back NYC, says that de Blasio’s rescue of Neir’s bar in Woodhaven missed out on a major point. The first issue was, indeed, rent affordability but another key issue was the bar not having a lease. 

“De Blasio wanted to make it about the rent, but that was only one piece of the puzzle and the other piece of puzzle is leases. When these leases come up, all the power is in the hands of the landlord, the tenant has zero power. I’m happy the bar is going to be around for another five years and that’s great. But reality is in five years, if no legislation passed, that means they will be in the same exact predicament where [the bar] could be facing a rent increase and could face perhaps a once a month lease or no lease at all or whatever the situation is,” said Theodos. 

Theodos says the legislation to create a commercial rent guidelines board does not address the issue of lease renewal and would create a board dominated by real-estate interests.  

Theodos said the Small Business Jobs Survival Act (SBJSA), would have addressed all of these issues but that bill has not seen any support in moving forward since its hearing last year and has come to a standstill (you can read our in depth coverage of the SBJSA bill here). 

Other advocates say the city and the City Council are making steps in the right direction in a long journey. 

“We really wanted to see across the board a strong commercial rent stabilization program. So one of the things that is important to have is a clear and fair criteria for how those rents are stabilized and make sure that as much as possible we’re stabilizing businesses in the neighborhood and making it harder for predatory landlords, take advantage of those businesses,” said Karen Narefsky, Senior Organizer for Equitable Economic Development at Association for Neighborhood & Housing Development (ANHD). “It creates a system of rent stabilization across the city [and] that system doesn’t go away when one business vacates in a new business comes in, it stabilizes rents permanently going forward. So we think it will have a really positive effect.” 

Narefsky said it would have been ideal to see legislation that had the right to a lease renewal or a good cause eviction provision for small businesses but that is an issue advocacy groups are still working towards. Narefsky said Levin’s bill currently does not include a clear criteria around rent increases and a clear mechanism for enforcement. “There’s definitely still a lot of room for the bill to be strengthened and for changes to be made,” she said