Like you, I get frustrated when a small business closes, only to be replaced with another bank, drugstore, or coffee chain. When it’s time to renew the lease, commercial landlords often raise the rent by 100% or 200% -- regardless of the longstanding small business owner’s ability to pay. Mom and Pop shops can’t afford today’s rents, much to the disappointment of loyal neighborhood customers.
To add insult to injury, once a commercial landlord clears out the space, it can sit empty while the landlord waits for a tenant who can afford the newly exorbitant rent. The Olympic Deli at 87th and Columbus, for example, closed in May 2014 after a decade in business, because they couldn’t afford the proposed rent in the new lease. The storefront sits empty to this day.
An additional burden for businesses in Manhattan between 96th Street and Chambers Street is the Commercial Rent Tax (CRT). The CRT requires stores with an annual rent of over $250,000 to pay an additional tax. While no one likes the tax, it brings in over $800 million in much needed funds to the city.
The city could provide relief to 2,600 small businesses by eliminating the CRT for those with rent between $250,000 and $500,000 annually. Using 2015 data, the cost to the city from the lost tax revenue would be roughly $33 million. Even better, the city could provide relief to 3,900 small businesses by eliminating the CRT for those with rent between $250,000 and $750,000 annually. In that case, the cost to the city would be $58 million.
What else can government do to help? From a legal standpoint, the options are thin. Government cannot regulate the amount of money a commercial landlord charges for rent; it’s considered a form of “taking” of the landlord’s property, which is prohibited by the Fifth Amendment.
Last week my office and the NYC Department of Small Business Services (SBS) co-hosted a small business forum: a free event where business owners could learn best practices when negotiating a commercial lease, get advice from city agency inspectors on how to avoid violations, and get one-on-one consultations with a lawyer for their own commercial lease.
City agencies provide a number of additional services that could be beneficial to local businesses:
* A Compliance Advisor from SBS can do a free site visit of a small business to help identify and solve potential violations-- from any city agency. Similarly, restaurants can request a free on-site consultation from a NYC Department of Health and Mental Hygiene (DOHMH) inspector. In both cases, there are no violations or fines issued.
* Any business getting noise complaints can get professional help from the NYC Department of Environmental Protection (DEP) website, which lists approved acoustical consultants. DEP suggestions to address noise issues include: a limiter for the sound system, using soundproof doors and walls, installing sound isolating treatments, and using directional loud speakers.
* The Ombuds Office at DOHMH appreciates feedback from restaurant owners regarding the health inspection process. They will take suggestions, answer questions, and investigate complaints about an inspector or an inspection.
As rising commercial rents continue to plague the Upper West Side, please shop local. There are lovely independent local business owners along Columbus, Amsterdam, and Broadway. If we don’t want them replaced with chain stores, we need to give them our business.
Helen Rosenthal represents the Upper West Side on the New York City Council