Commercial rent regulation is once again on the New York City Council docket and this time around, a leftward swing in city and state politics has some free-market advocates worried it has legs.
Councilman Ydanis Rodriguez introduced the Small Business Jobs Survival Act in March, the latest in a long line of attempts to insulate retailers from the city’s rising property values. After several months of dormancy, it is reportedly set for a hearing next month.
If enacted, the law would guarantee tenants who are fully compliant with the terms of their leases an automatic 10-year renewal option. If the tenant and landlord cannot agree on a rental rate for the extension, the dispute will automatically be kicked into mediation or arbitration, if necessary.
“This is another form of commercial rent control that has been attempted in various iterations for many years by various politicians,” Mark Fawer, a real estate lawyer at Greenspoon Marder, said. “This is not a new concept and clearly it’s a political attempt by the bill sponsor to appeal to small retailers in his district.”
Rodriguez, who represents Washington Heights, Inwood and Marble Hill in city’s 10th District, could not be reached before this article went to press.
Along with Rodriguez, the bill has 14 co-sponsors and Council Speaker Corey Johnson reportedly endorsed the idea of commercial rent control during an event last year, according to Crain’s New York Business Journal.
Earlier this month, the New York Bar association said the bill violates the city’s charter, the state constitution and would induce government overreach by allowing the city to tamper with contracts signed by two independent parties.
Fawer said the city previously had control over commercial rents from 1945 to 1963 and the idea has arisen numerous times in the decades since and been struck down time and again. If it manages to make its way through the City Council and get the mayor’s signature, Fawer said the bill would likely falter in court unless the state Legislature passed a corresponding law.
However, with a surge of left-leaning Democrats poised to replace centrists in Albany next year and an overall move toward populism, Fawer anything is possible. He attributes the renewed idea of commercial rent control to a greater embrace of government intervention.
“This is definitely an outgrowth of that [shift],” he said. “It’s two things: it’s, one, a greater involvement of government in regulating commercial life and that is something that is more of a left-of-center trend, it’s on what they call the progressive agenda. Then there are the interests of the populist mentality, which you see from both the Republicans under president Trump and on the progressive side under Bernie Sanders, looking out for the little guy who feels he’s been ignored.”
The Real Estate Board of New York has come out in opposition of the Small Business Jobs Survival act, calling it illegal and saying it “ignores market conditions” by not allowing landlords to negotiate rents freely or seek out better tenants.
REBNY President John Banks said he’d like to see the Council explore different options for addressing the changing retail marketplace, which is become less friendly to landlords.
“The retail market is experiencing a national transformation and successful retailers are adapting to change with creative new ways to attract customers,” Banks said. “In New York City, retail employment is increasing, even though online shopping continues to change consumer behavior. Vacancy rates fluctuate among individual retail corridors and rents are, in general, decreasing. The Council should focus its limited time, energy, and resources on solutions that will support small businesses instead of wasting millions of tax dollars defending an illegal bill that experts agree will be thrown out by the courts.”