BIDs say commercial rent regulation bill is bad for business

New York City’s business improvement districts, which represent both small business owners and the landlords that provide them space, would seem to be stuck between a rock and a hard place when it comes to the New York City Council’s bill to increase regulation of commercial lease renewals. But the New York City BID Association, an umbrella group for the city’s 75 BIDs, isn’t waffling, saying it “strongly opposes” the Small Business Jobs Survival Act.

The bill, officially Int. 737-A and also known as SBJSA, was first introduced decades ago and is getting its first public hearing in nearly a decade on Monday afternoon. It is meant to level the playing field in commercial lease negotiations, taking power away from landlords in favor of lessees through measures including mandating a minimum six-month advance notice on lease renewals, requiring leases to last at least 10 years unless both parties agree on a shorter one, and giving renters the option of arbitration when they consider rent hikes exorbitant.

Leaders of the city’s BIDs say that the bill is poorly written and that it doesn’t even cover the biggest hurdles that small business face in the city. Some of their thoughts were conveyed in a statement from the BID Association, provided exclusively to City & State. The SBJSA “is not a silver bullet, and may in fact be counter-productive with unintended, negative economic consequences,” the association wrote. “While this bill may help some businesses, it will also restrict the natural evolution of our commercial corridors which enables new products to come to market and new business owners – potentially immigrant and minority business owners – to gain a foothold.” The statement went on to urge the city to conduct a thorough study of the city’s vacant storefronts before taking action.

The bill’s supporters include many small business owners and preservationists. They argue that the bill will rein in exorbitant rents that help cause so-called “high-rent blight” where storefronts are left vacant while owners wait for the right high-paying tenant to come along – usually a bank branch or a luxury goods retailer rather than a deli or a hardware store. Bleecker Street in the West Village has become notorious for empty storefronts, and a 2017 report from City Councilwoman Helen Rosenthal found nearly 12 percent of Upper West Side storefronts were empty.

Members of the BID Association went into more detail on their concerns about the bill, including its scope. The current iteration of the bill doesn’t have any size restrictions, meaning it would apply to every commercial tenant in the city. The SBJSA “has nothing to do with small businesses,” said Jessica Lappin, president of the Downtown Alliance, a BID covering Lower Manhattan. “It would apply to the bodega on the corner just as much as it would to American Express’s corporate offices.”

Lappin fears the increasing regulation would actually further incentivize landlords to shy away from smaller businesses in favor of corporate tenants like Duane Reade or Starbucks. “It will be easier in some sense to negotiate, and they have better credit,” she said. “So if they’re going to be unable to change the tenant maybe ever, you want somebody who you know has good credit.”

Lappin had previously come out in opposition to the bill, along with the Grand Central Partnership and the East Midtown Partnership. The three BIDs represent some of the city’s busiest commercial areas, full of corporate landlords leasing out space to hundreds of tenants, from white-collar offices towering over the skyline to small dry cleaners on the ground floor. The Downtown Alliance’s board of directors is largely made up of major property owners, from Brookfield Asset Management and RXR Realty to Trinity Wall Street and TF Cornerstone, making it no surprise that the group would oppose further regulation favoring tenants.

But BIDs represent commercial corridors across the city, from the Bronx’s Fordham Road to Brooklyn’s Brighton Beach, with many having memberships that looks far different from the major landlords of the Financial District.

Take Tim Laughlin, president of the Lower East Side Partnership, who also sits on the executive board of the citywide BID Association. Many of his members are relatively small-time property owners, who have just one or two walk-up tenement buildings. But he also represents the interests of the area’s thriving restaurants and bars that are leasing the neighborhood’s valuable street-level space.

“I’m being careful with my words because it’s a tricky subject,” he said at one point while explaining his calculus. Because, as Laughlin sees it, the issue is not just greedy landlords versus plucky tenants. “It’s not just mom and pop independent businesses that we need to worry about,” he said. “It’s also mom and pop independent property owners that are increasingly becoming smaller and smaller in number, just because of the significant cost of operating these buildings.”

Other BID Association members were quick to defend property owners, saying the difficulties small businesses face go far beyond high rents. Mark Caserta, executive director of the Park Slope Fifth Avenue BID and an executive board members of the BID Association, pointed to high property taxes, onerous city regulations and competition from online retail.

Caserta and the other BID managers weren’t short on criticism of the bill, but they all agreed, at least publicly, that they were happy to be getting the chance to talk about it. Discussing SBJSA makes Caserta think the city would be open to making other changes to help small businesses. “The spotlight is on, the window is open, let’s do something that makes sense and is really comprehensive that really helps these struggling small businesses,” he said. “We don’t necessarily think this is the bill, but we think this is the time to do it.”