For years, landlords have rejected the idea of a commercial rent regulation board, while some small businesses have been lining up in support.
Now, Councilmember Stephen Levin, who introduced a bill into the City Council to create such a board two years ago, is trying to push it through before the end of his term in two months. Brooklyn Paper’s sister publication PoliticsNY spoke with Levin to get a better sense of the bill — and what it could mean for everyone on a commercial lease.
After a hearing on Friday, Sept. 17, Levin told PoliticsNY that he is still hopeful.
“This is nothing other than a level playing field when their lease expires,” he said.
The bill creates a seven-member appointed commercial rent guidelines board, similar to the residential rent guidelines board, and it would annually establish guidelines for rent adjustments in commercial spaces.
Both Landlords and tenants have suffered during the pandemic, on the commercial and rental side. Job closures prevented tenants from paying rent, while eviction moratoriums prohibited landlords from enforcing rent payments.
Addressing the uncertainty
One supporter of the bill, Natasha Amott, closed her Williamsburg business due to a rent increase around the same time that Levin created the bill. Though she sees rents lowering during the pandemic, she knows it’s not something to count on.
That’s what Levin says he is trying to address — the uncertainty, lack of flexibility and forethought businesses can have when their lease is up.
“Landlords will often give reduced rent, then increase as the business gets more successful, and makes capital improvements. They don’t want that to go away,” Levin said. “Commercial tenants have very little leverage in any negotiation.”
Amott said her main competition is national and multinational corporations, who are ready to pay a higher rent. Small businesses have different considerations. “If I had taken that rent increase at 44 percent it would be putting a cap on my staff’s wages,” Amott told Politics NY.
She added that prices on her products at Whisk, her housewares store, would be priced higher. “Neither of those scenarios made me feel very good,” she said.
The board Levin wants to create would create regulations for how much the rent can increase each year in commercial spots.
How that might work
The Rent Guidelines Board researches factors like current tax rates, operating costs, availability of financing, and the overall supply of housing and vacancy rates. Then, they hold meetings, hearings and voting meetings where they listen to the input of the public and experts in the industry. Finally, they vote on the rent guidelines for leases.
“It doesn’t guarantee them the right to renew,” Levin clarifies.
There are things that do work within the current framework, Levin says. “It’s a dynamic marketplace … They don’t want that to go away.”
The Real Estate Board of New York recently came out in opposition, telling The Real Deal that it would hurt property owners after they’ve already suffered through the pandemic.
“Here, in 2021, in the wake of COVID, in the wake of shutdowns, in the wake of every expanding reach of online retail, which is ravaging so many brick-and-mortar retailers, the rationale for enacting commercial rent regulation now is completely backwards,” Alexander Lycoyannis, a real estate attorney with Rosenberg & Estis, told the outlet.
But, as long as vacancies are high, both property owners and the small business owners will be hurting, Levin contends. Office space and retail vacancies specifically reached a 30-year high this past May. Whether or not this trend continues is dependent on the negotiations the two make.
Levin was elected in 2009 to serve the Council’s 33rd District, which encompasses the neighborhoods of Boerum Hill, Brooklyn Heights, the Navy Yard, Downtown Brooklyn, Dumbo, Greenpoint, Vinegar Hill and Williamsburg.
This story first appeared on PoliticsNY.