New York Commercial Rent Stabilization Is Back on the Table Due to State Bill

A version of what was known as the Small Business Jobs Survival Act has been introduced by Albany lawmakers looking to apply rent stabilization to New York’s commercial space.

State Sen. Julia Salazar and state Assemblywoman Emily Gallagher slated the “New York City Small Business Rent Stabilization Act” on the state level in June for review and potential passage. The act would create rent control for small retail businesses and an oversight body to enforce it, according to the state legislature’s website.

The legislation began winding its way through senate committees last month.

The bill would amend the New York City Administrative Code and create a Commercial Rent Guidelines Board with nine members appointed by the mayor. The board would establish rules for raising rents on non-chain retail tenants as well as options for renewing lease terms.

It would apply to not only tenants on a direct lease, but also subtenants and sublandlords — in other words, anyone legally occupying a space. 

Gallagher and Salazar did not immediately respond to a request for comment on the bill, which has largely flown under the radar.

The new bill is already not being well received by brokers.

“The proposed commercial rent stabilization bill would reduce property values, tighten lending, and discourage investment. By capping rent growth and limiting lease flexibility, it increases regulatory risk and weakens asset performance,” Frederick Betesh, senior sales and leasing broker at Tri State Commercial Realty, wrote on LinkedIn. “Over time, this would slow redevelopment, reduce capital flow and make landlords more selective, ultimately hurting the small businesses the policy aims to protect.”

The Small Business Jobs Survival Act (SBJSA) has been introduced and has failed to pass at the city level for over 30 years. However, it’s unclear how similar regulations will resonate in Albany.

“This legislation may also discourage property owners from renting to mom-and-pop tenants in the first instance, given the potential inability to replace them at lease expiration if an owner seeks to upgrade a building or reposition the retail mix,” James Wacht, managing principal at Lee & Associates, said in a statement. “That unintended consequence could directly impact my own ability to secure retail space for my businesses and would ultimately make it harder — not easier — for small operators to find locations.”

John Banks, former president of the Real Estate Board of New York (REBNY), was one of the biggest critics of the SBJSA the last time it got a hearing in the New York City Council in October 2018.

“We are vehemently opposed to this legislation which will do nothing to solve the underlying issues behind storefront vacancies and instead would have a catastrophic impact on our local economy,” Banks said at the time.

REBNY did not immediately respond to a request for comment on the latest iteration of commercial rent control.

Retail vacancies have been low in prime retail corridors in New York City with luxury brands lording over areas like SoHo and Fifth Avenue, where rents have been sky high. Yet, even the biggest brands haven’t been spared by economic conditions, evidenced by the recent bankruptcy-related closures slated for Eddie Bauer and Saks 5th Avenue.

National retail leasing has been high, too, mostly dominated by those luxury brands and bargain chain stores like Ross Dress for Less, T.J. Maxx and Primark, which JLL researchers have said is a strong indication that the consumer is grappling with a “K-shaped” economic recovery, as Commercial Observer reported earlier this month.

The bill in Albany argues that the small business tenants may be less resilient to changing economic conditions than chain stores, and commercial rent regulation could act as a protective barrier.

Mark Hallum can be reached at mhallum@commercialobserver.com.