Landlords, Activists Clash as City Council Mulls Small Business Jobs Survival Act

Corey Johnson began yesterday’s hearing with an elegy:

Tortilla Flats. 30+ years. Closing this weekend.
Clayworks Pottery. Kicked out after 44 years.
Lenox Lounge in Harlem. Billie Holiday played there. Being demolished to make way for a Sephora.
North Shore Hardware. 70 years. Given one month to vacate.
Cup and Saucer. Chinatown. Another diner lost.
The Associated Supermarket. Closed after having its rent tripled. Its storefront remains vacant.

It was a little after 1pm at City Hall. Johnson, the City Council Speaker, was offering opening remarks before a standing-room-only crowd at the hearing of the Committee on Small Business regarding the Small Business Jobs Survival Act (SBSJA).

The SBJSA could be described as an attempt to stop Johnson’s list from growing. If passed, it will provide protection for small business owners looking to renew their leases. Assuming business owners are in good standing, their landlords will be required to offer them a 10-year lease renewal. If the two parties cannot agree on the rent, the tenant will have the right to take the landlord to binding arbitration.

It’s a simple idea. But the bill has been kicking around City Council for more than 30 years and last had a hearing about a decade ago. It was back in the spotlight yesterday thanks to Councilman Ydanis Rodriguez, its lead sponsor, and to Johnson, who was following through on his commitment to give it a new hearing. The testimony would last until 9pm, long after most of the council members and onlookers had departed.

As Johnson shared his obituary, the Founding Fathers looked on. George Washington peered out from an enormous gilt-edged canvas. Thomas Jefferson stood tall in the form of a life-sized statue nearly two centuries old. One of Washington’s lesser-known quotations was painted on the ceiling: “Our commercial policy should hold an equal and impartial hand.”

The first person to testify was Gregg Bishop, Commissioner of the NYC Department of Small Business Services. Bishop raised several concerns about the SBSJA. For one thing, he said, relying on arbitration to settle rent disputes would give landlords the upper hand, because they’d be more able to muster resources for navigating that process and tipping things in their favor. For another, the regulations included in the bill would make landlords less likely to offer leases to new businesses in the first place. Plus, would there even be a large enough supply of arbitrators in New York City to handle the demand the bill would cause?

The Council members proceeded to spend nearly two hours grilling Bishop, mostly using him as a proxy for taking shots at Mayor de Blasio. Example: Bishop held up the shining example of the Commercial Lease Assistance Program, which he said has helped 250 small businesses renegotiate their leases so far this year.

“How many small businesses are there in New York City?” asked Johnson, eliciting a few knowing laughs from the crowd.

“The number we use is 230,000 small businesses in New York City,” replied Bishop, ceding the point that about one-tenth of 1% of the city’s small businesses had benefited from the program he was citing.

But even that number—230,000—was an estimate, and Bishop was also grilled on the lack of hard data available. We don’t actually know exactly how many small businesses there are. Or exactly how many close each month. Or exactly how many do so because of an inability to afford a rent increase. Or how many jobs are lost in those instances.

Why not? What can we do about it? No one seemed to know, but everyone seemed to agree that someone should study the matter.

John H. Banks, president of the Real Estate Board of New York, seized on this problem later in the hearing: “We don’t have good information. And there is a proposal to legislate in a data vacuum,” he said, arguing that choices on this scale should be made “based on fact and data, not anecdote.”

“I don’t disagree with you on that,” Johnson responded, arguing that more data is indeed needed. Cynical activists surely saw this statement, as well as others by Johnson about the bill’s flaws and the need to explore related bills as well, as signs of betrayal. Meanwhile, those more inclined to take the Speaker at his word saw a thoughtful leader delving into the issues with transparency and candor.

The bill’s opponents repeatedly noted its myriad flaws. The most glaring? As currently written, the SBJSA applies to all commercial tenants, from mom and pop cafes and bodegas to McDonald’s branches and Goldman Sachs offices.

The bill’s advocates repeatedly lamented the loss of New York City’s soul.

“I’m a licensed clinical social worker and a psychoanalyst, and a small businessperson who lost my office to a commercial developer,” said Jeremiah Moss of Vanishing New York. “I can tell you that the stress of losing a space, the instability of constantly having to pull up stakes, is detrimental to mental and physical health, and not just to a businessperson.

“Psychologists and neuroscientists who study the streets have shown that the monotony of chain stores makes people depressed,” explained Moss, attempting to bring the room up for air, and humanity, after hours spent mired in the underwater gloom of finger-pointing and point-scoring. “Senior citizens age faster when they live on blocks with chains instead of small businesses. A diversity of stable mom and pops both improves and extends our lives. But that diversity is being destroyed by unregulated greed.

“The city’s small business crisis could also be considered a public health crisis. The SBJSA will help stop the bleeding.”

The Mayor’s office has said in the past that it “recognizes the growing challenges small businesses face finding space they can afford, but has not supported commercial rent control.” The New York City Bar has opposed the measure on the grounds that it is the equivalent of rent control and previous efforts by the City to enact rent control without the State’s cooperation have been struck down in court. Advocates of the bill are adamant that the SBJSA does not constitute rent control. 

At the hearing, alternative/complimentary solutions to the crisis abounded. Maybe we need a vacancy tax! Maybe we need an official registry of commercial tenants and small businesses! Maybe we need a taxpayer-funded program to temporarily subsidize small businesses whose rents have skyrocketed! Stick that on a bumper sticker.

In truth, the moments of greatest clarity were largely unscripted. For example, Banks’ REBNY allies were out in force, sporting matching blue hats that read “VOTE NO Commercial Rent Control.” Council member Mark Gjonaj, chair of the Committee on Small Business, asked whether the hats had been purchased from a local small business. Nope, came the reply from REBNY. They were purchased online.

Another REBNY gem: when asked by Johnson about real estate speculation and high vacancy rates, Banks pointed to Brooklyn as proof positive that “the city is a dynamic place. Ten years ago, Williamsburg, on Wythe Avenue, was desolate. Today, it is booming.” On a recent drive through the area, Banks noted, he “could not believe how vibrant the community had become.”

And then there was David Eisenbach, Founder of Friends of the SBJSA. “For 400 years, there’s been a basic relationship that built New York City,” said Eisenbach, proceeding to out-American-Dream the field with this follow-up: “It was the landlord and the tenant.”

Opining the long-lost good-ole days of landlord-tenant love felt a little strange, given both the circumstances and his position as both a history professor and SBJSA supporter, but he carried on.

“It didn’t matter what language that tenant spoke, or what food he served in his restaurant or sold in the store. It was all about the rent. Could you pay the rent? And that notion created the greatest marketplace on earth. And people from all over came to New York to fulfill their dream.”

Well, maybe there’s some truth in that, though a lot of folks, not least New York’s indigenous peoples, might have a very different version of what’s happened here over the last four centuries. Still, the fact remains: small businesses are being forced to close. And whether or not some version of the SBJSA passes—or is even put up for a vote—will be a clear signal as to how much we, as a city, care.

In REBNY’s defense, Banks was right about at least one thing: the debate was too often mired in anecdote. But this wasn’t just a problem because it impeded data-informed decision making. It was also a problem because the hearing failed to reach the systemic level on which this game is truly played. People on all sides acknowledged that the SBJSA was not a “silver bullet” or a “panacea” or a “vaccine”… but no one seemed to agree on the second half of that thought: a “vaccine” for what? What ill-defined crisis were we addressing, actually?

For Speaker Johnson, the answer was pretty specific: the egregious doublings and triplings and quadruplings and quintuplings of rent that are driving out otherwise thriving and beloved businesses. For others, it was high-rent blight. Or gentrification. Or hyper-gentrification. Or the myriad other problems—regulation, bureaucratic red tape, competition from e-commerce, too much scaffolding—plaguing small business.

Each of these related concerns ultimately harkened back to the writing on the ceiling, to Washington’s competing priorities. Which is to say: our commercial policy cannot be both equal and impartial. Or at least, it can not be both entirely equitable and entirely impartial.

To live up to the spirit of the first demand, we must indeed seek to support the entrepreneurs, many of them immigrants, who provide our neighborhoods with vital services and decent jobs and unique personalities. To live up to the second demand, we must relinquish control to the “free” market.

To attempt to live up to the spirit of both is to attempt to fit a round peg in a capitalism-shaped hole.