As rent-stabilized buildings deteriorate and go bankrupt, a pair of legislators are seeking the same fate for commercial properties.
State Sen. Julia Salazar and Assembly Member Emily Gallagher are “making a concerted push” for a bill they introduced last year to create rent stabilization for New York City retail tenants, City & State reported.
They’re calling it the Small Business Rent Stabilization Act, although it’s so badly written that it doesn’t specify retail space or exclude office space. Various versions of this destructive bill have been bouncing around the City Council for about 40 years, including this one, which had 24 sponsors in 2022.
The real estate industry has been able to stop them all, thanks in large part to the adults in the room — City Council speakers and mayors.
Here’s something many people don’t realize: Sponsors of a bill don’t necessarily want it to pass. By preventing commercial rent control from ever coming to a vote, legislative leaders have allowed their members to tell voters “I’m supporting a bill to save your favorite stores!” without fear that it will actually become law.
But I don’t doubt that Salazar and Gallagher, given their socialist ideology, really do want commercial rent control. Their bill, co-sponsored by several other democratic socialists, calls for 10-year renewals.
I understand the populist appeal of ensuring that stores can renew their leases at a modest increase. Customers like their stores to stay forever. But few realize the ramifications of giving stores unilateral power to do so.
It’s not just bad for landlords. It’s bad for everyone.
Imagine if your local commercial strip looked like it did in the 1980s, with TV repair shops, take-out places with bulletproof partitions, Off-Track Betting parlors, film processing, half-empty dive bars and the occasional Blockbuster Video.
Commercial rent control lets outdated businesses linger, freezing out whatever might move in.
In a free market, successful stores tend to stick around and mediocre ones get replaced by trendy new shops and restaurants. Under rent control, to replace sad stores, landlords would have to buy them out. Letting lousy businesses perpetually renew their leases would make it much harder for fresh, energetic entrepreneurs to find space.
Lawmakers can outlive their usefulness, too, which is why city officials have term limits. But Salazar and Gallagher are state legislators. They might hang on like a rent-controlled photo shop in the Digital Age.
What we’re thinking about: Construction union umbrella group leader Gary LaBarbera told Kathryn Brenzel of The Real Deal that the new plan for Pacific Park has “disproved” the real estate industry’s position “that you can’t build residential, affordable, workforce housing under a union model.”
Was it ever the industry’s position that this would be impossible for a single development — especially one financed by union pension funds? And does an unbuilt project prove anything? Send your thoughts to eengquist@therealdeal.com.
A thing we’ve learned: The aforementioned Kathryn Brenzel will moderate a panel discussion March 10 at the Albany Capital Center about the rent-stabilized housing crisis and the feasibility of development in the Bronx.
Panelists include state Jamaal Bailey, chair of the Senate Insurance Committee; Chantel Jackson, a member of the Assembly banking and housing committees; Matt Engel, president of Langsam Property Services, a Bronx-based firm focused on rent-stabilized housing; and Jessica Yoon, managing director of L+M Development Partners, one of New York’s largest affordable housing developers.
The panel is one of two to be held on Bronx Day in Albany, a series of events sponsored by the Bronx Chamber of Commerce.
Elsewhere…
A Reality Check reader pointed out that legislation and programs to pay for apartment improvements fail to account for the cost differential between fixing small and large units.
The reader, a multifamily owner, noted that “$15,000, $30,000 and $50,000 go a lot further to renovate a 200-square-foot studio than a 1,200-square-foot apartment. Why would policy makers issue a blanket allowance?”
The three dollar figures cited above are respectively from the Housing Stability and Tenant Protection Act of 2019, a subsequent tweak to HSTPA, and the city’s Unlocking Doors program. They are also not adjusted for inflation, the landlord said.
The omission of basic adjustments for unit size and inflation might have been intentional or a result of the rushed process to pass the 2019 rent reform. “HSTPA came together in 48 hours,” one real estate insider said.
Closing time
Residential: The top residential deal recorded Monday was $4.5 million for penthouse 20F at 180 Front Street in an off-market sale. The Dumbo condo unit is 1,594 square feet. It last sold in 2022 for $3.6 million.
Commercial: The top commercial deal recorded was $23.4 million for 280 Mulberry Street. The NoLita rental building is six stories, has 33 units and is 15,000 square feet. Ben Benedetto Kahlun’s JGK Real Estate Holdings is the seller, Commercial Observer reported.
New to the Market: The highest price for a residential property hitting the market was $7.8 million for co-op Unit 6D at 770 Park Avenue in Lenox Hill. Brown Harris Stevens has the listing.
Breaking Ground: The largest new building permit filed was for a proposed 52,776-square-foot, 18-story, 69-unit residential building at 503 Grand Avenue in Prospect Heights. Leandro Dickson of LND Architect is the applicant of record.
— Joseph Jungermann