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Commercial Rent Control in New York: Back Again?
For generations, New York's Rent Control and Rent Stabilization Laws, which limit the amount of rent residential tenants may be charged and provide other protections, have been fixtures of New York real estate. For a time (1945-1963), New York City (the City) had a rent control statute applicable to commercial tenants, but that law expired, after which commercial rent control disappeared from the policy landscape. However, as retail vacancies have multiplied in the City in recent years, some in the City Council have advocated for the reconsideration of commercial rent control, as set out in a proposed piece of legislation, the Small Business Jobs Survival Act (Intro 737). §22-1202, et seq. This article provides a brief, nontechnical review of the bill and the legal and practical hurdles it faces if enacted.
The sharp increase in empty storefronts is not a mirage. Availability rates in many Manhattan submarkets exceed 20%. Nevertheless, the causes for these vacancies are unclear. While some claim that landlords are to blame for allegedly holding out for higher rents, the bankruptcies of retailers such as Toys 'R Us and Sears, and the growth of online shopping, suggest structural factors are at play.
The response to Intro 737 from the Real Estate Board of New York (REBNY) has been decidedly negative. REBNY and others have argued that commercial rent control is not the cure for retail vacancies and that its enactment might exacerbate the problem, as it could disincentivize landlords from modernizing existing commercial space or creating new space. The proposed legislation also might make it harder for less-established tenants to find space, as landlords would seek to avoid being saddled with a long-term, under-productive tenant.
Intro 737
Intro 737 would apply to all buildings or spaces within the City that are occupied for non-residential purposes pursuant to a valid commercial lease. §22-1203. (As currently drafted, the bill would apply to all commercial properties within New York City. However, following a hearing on the bill on Oct. 22, 2018, Council Speaker Corey Johnson indicated that the bill should be revised to apply only to “mom and pop” tenants and not large tenants such as WeWork and Goldman Sachs.)
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