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What Restaurants Need to Know About the Bill Trying to Save Mom-and-Pops from Rent Hikes

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The proposed bill aims to give commercial tenants the right to 10-year lease renewals, plus other benefits

Brushstroke closed in September due to a rent hike
Photo via Viviann L./Yelp

Restaurants struggling to cope with pricey rent hikes may benefit from a proposed bill — discussed Monday in City Council — that seeks to level the playing field between landlords and commercial tenants in NYC.

The bill, dubbed the Small Business Jobs Survival Act, gives tenants a right to a lease renewal, including a 10-year term for those in good standing. It also lets tenants demand arbitration if a rent hike is too high and extends to all commercial businesses, including restaurants. NYC currently has no restrictions on commercial rent increases.

It’s heavily supported by groups like the Friends of SBJSA, founded by historian and Columbia University professor David Eisenbach, and the Greenwich Village Society for Historic Preservation, who say the city is losing the bulk of its small businesses to hefty rent hikes they can’t afford.

But the bill faces stiff opposition from real estate powerhouses, as well as other organizations like the Manhattan Chamber of Commerce. Real Estate Board of New York, a big opposer of the bill, argues that it fails to tackle the real issues that mom-and-pop shops are facing — like changes to minimum wages. Others say the bill would unleash a series of unintended consequences, such as discouraging landlords from renting their spaces to small operators.

The City Council’s Committee on Small Business discussed the bill Monday, October 22, and moving forward, changes are expected with both sides airing their concerns. It’s been three decades since a similar bill was first proposed, but nothing has ever solidified.

Here is what restaurants should know about each side of the issue.

What bill supporters are saying

Supporters say the bill can save small operators from rising rents

NYC is facing a small business crisis that is “not about Amazon or high taxes, but about rising rent,” according to Eisenbach of the Friends of SBJSA, a key supporter of the legislation. The bill gives extra rights to businesses that currently have no control over powerful landlords and their rent increases. “I can’t imagine a New York without its mom-and-pop shops, and I don’t want to,” says City Council Speaker Corey Johnson.

There’s been an exponential decline in local mom-and-pop shops

Steve Barrison, executive vice president of the Small Business Congress, tells Gothamist the city is losing 1,100 to 1,200 mom-and-pop shops per month. His group’s membership has fallen from 365,000 to 120,000 since the 1990s, and the main issue is “the unfair lease-renewal process,” he says.

And retail vacancies are on the rise — and businesses say rent is the top concern

There’s a staggering number of vacant storefronts around NYC — a Douglas Elliman survey shows that 20 percent of Manhattan’s retail space is vacant, compared with about 7 percent in 2016 — and businesses say rent is a top concern, Patch reports.

What bill opposers are saying

There are outstanding legal issues

The bill has been categorized as “commercial rent control” by its opposition. A report issued by the New York City Bar Association states the city lacks the legal authority to establish such a policy. (Key supporter Friends of SBJSA argues that “it’s NOT commercial rent control,” saying the bill does not specify a certain rental rate but instead paves the way for small businesses to negotiate reasonable rates.)

Independent businesses may end up having a harder time finding commercial space

NYC’s Downtown Alliance fears the bill could unintentionally deter independent, experimental businesses from locking spaces down. It may encourage landlords to only work with “seemingly reliable” tenants like banks, director Jessica Lappin says.

Gregg Bishop, commissioner of the city’s Department of Small Business Services, says the law may unintentionally harm small businesses that don’t have formal leases, or it could discourage new ones from opening, the WSJ reports. “In our experience we have seen landlords give shorter leases or no leases to new businesses due to uncertainty of a business’s survival,” Bishop says.

Not all landlords should take the fall, and co-op buildings will be particularly impacted

Rob Byrnes, president of the East Midtown Partnership, says it’s “short-sighted” to put the blame on all property owners, many of which are struggling too. In particular, opposers argue it would negatively affect co-op buildings that rely on revenue generated by the commercial spaces in their buildings, according to the Real Estate Board of New York, one of the bill’s strongest opposers.

The group also says owners wouldn’t be able to make independent decisions about their properties because the bill would require them to offer existing tenants a 10-year lease renewal “that can only be changed with the tenant’s approval.” It would therefore force co-ops to keep tenants that may not be of best interest to the buildings’ residents, rather than finding a higher-paying one.

The bill may complicate affordable housing initiatives

The state’s Association for Affordable Housing is wary the bill could hurt the possibility of integrating ground-floor retail in new affordable housing projects — an effort backed by Mayor Bill de Blasio. It’s an especially significant issue for the projects that are subsidized by commercial space, and the bill could “roll back that progress and make it more challenging to integrate and manage commercial space in these developments,” association president Jolie Milstein says.

These people say the bill needs work

The bill would protect big boxes, law firms, and banks too

Manhattan Borough President Gale Brewer supports the bill’s central ideas but calls for a narrowed scope. The current legislation would not only offer protection to small businesses, but also to big-box retail stores like banks. And Johnson, the Council speaker, is concerned that the bill doesn’t distinguish between commercial tenants, meaning it would broadly apply to both “white shoe law firms” as well as small businesses, Patch reports.

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