Commercial Rent Regulation in New York Will Hurt the Businesses It Aims to Protect

As the New York State Legislature considers legislation to impose rent regulation on commercial properties, the proposal is gaining attention as a potential lifeline for small businesses. It may sound like a solution. It isn’t.

After more than four decades working across nearly every corner of New York’s retail ecosystem — as a broker, an attorney, a landlord and a tenant — I can say with confidence: This proposal is likely to do more harm than good.

I don’t take that position lightly. I currently own and operate retail businesses in Brooklyn and have previously been part owner of multiple food establishments in New York City. I’ve sat on both sides of the table. And, even as a tenant, I oppose this legislation.

In my own experience, the landlord-tenant relationship — when both parties are operating in good faith — functions effectively. As a tenant, I’ve always paid rent on time and run strong businesses. In return, my landlords have consistently renewed my leases at reasonable terms. The only time I was not renewed was when a landlord chose to redevelop — a legitimate and necessary part of maintaining and improving the city’s building stock.

That’s not a broken system. That’s a functioning one.

Ironically, the businesses this legislation aims to protect may be the ones most negatively impacted.

If property owners lose flexibility at the end of a lease, they will become more cautious about who they rent to in the first place. Mom-and-pop tenants — who often carry more risk than national operators — may find themselves shut out before they even get started.

It also disrupts something essential to a healthy retail ecosystem: turnover. Not all turnover is bad. In fact, it’s what allows new businesses to enter the market, test concepts and grow. 

Restricting that natural cycle makes it harder — not easier — for new entrepreneurs to find space.

As someone actively leasing space for my own businesses, I can say plainly: This kind of legislation could make it harder for operators like me to secure locations.

From the ownership side, the logic is equally straightforward. Good tenants — those who pay on time and operate responsibly — are valuable and are typically renewed. Problematic tenants are not. That discretion matters. Buildings are ecosystems. One poorly run business can impact an entire property. Owners need the ability to make decisions that protect the long-term health of their assets. In over 40 years, I can’t recall a situation where I couldn’t reach a fair agreement with a good tenant. The current system already rewards stability and performance.

There’s also a broader financial reality that can’t be ignored.

Many rent-regulated residential buildings in New York City rely heavily on ground-floor retail income to remain viable. If you cap or suppress retail rents, you’re not just affecting storefronts — you’re putting additional pressure on already strained housing assets. That translates directly into lower property values. And when property values decline, so do tax revenues.

Real estate taxes often account for 25 percent to 35 percent of a building’s rent roll. Reduce retail income, and you reduce assessed values. Reduce assessed values, and you shrink the tax base.

At a time when New York City is facing significant fiscal challenges, this is not a small issue. It’s a structural one. Neighborhoods are not static. They evolve — and retail must evolve with them.

Property owners play a key role in that process by curating and upgrading tenant mixes over time. Limiting that flexibility risks locking neighborhoods into outdated retail patterns, ultimately making commercial corridors less vibrant and less competitive. That’s not preservation. That’s stagnation.

Finally, there’s the practical reality: This will be litigated. Heavily.

Any system that introduces rent regulation into the commercial sector will create disputes, ambiguity and delay. The result? More legal costs, more friction and more uncertainty — for both landlords and tenants. The biggest winners won’t be small businesses. They’ll be attorneys.

Lawmakers’ efforts are well intentioned. But policy needs to be judged by outcomes, not intentions. This proposal risks reducing opportunities for small businesses, weakening property values, straining the city’s tax base, and creating a more rigid, less dynamic retail environment.

New York’s retail landscape doesn’t need more constraints. It needs flexibility, investment and the ability to adapt. This legislation moves us in the wrong direction.

James Wacht is managing principal at Lee & Associates NYC.