In the struggle against skyrocketing New York rents, it helps to have Lin-Manuel Miranda on your side. When news broke in January of the upcoming closing of Coogan’s, a beloved Irish pub in Washington Heights, after its landlord, NewYork-Presbyterian Hospital, demanded a $40,000 per month rent increase, Miranda tweeted to his 2.3 million Twitter followers, “I love Coogan’s. My stomach hurts from this news.” (2,300 likes.)
Within 48 hours, an online petition to save the restaurant had garnered more than 15,000 signatures, and local politicians had started making calls to the hospital demanding that it renew Coogan’s lease at a reasonable rent. By the end of the week, Coogan’s co-owner Dave Hunt had a handshake deal for an affordable lease renewal. That night, he signed the papers in the back room of the pub as the celebration was already under way in the bar. Manhattan Borough President Gale Brewer and Congressman Adriano Espaillat were there, as was Miranda, singing “Happy Birthday” to patrons and tweeting about the victory. (3,600 likes.)
A week or so later, on January 21, Washington Heights residents gathered once more, this time for a rally to save Galicia, a Spanish restaurant three blocks north of Coogan’s. According to owner Ramón Calo, Galicia’s landlord, Edel Family Management, was demanding a $20,000 per month rent increase. Standing in front of handmade posters reading “Save Galicia” and “Salvemos a Galicia,” activists and politicians spoke out to call on the landlord to offer Galicia more reasonable terms. Another online petition — “Let’s Save Galicia Restaurant, too!” — went live. To date, the petition has gathered only 1,600 signatures. Miranda didn’t tweet. (Zero likes.) According to Calo’s son Cristian, Galicia recently lost a court battle for its survival and will be forced to close on June 30.
More than a quarter-million small businesses exist in New York City employing more than 1.2 million workers, and the Small Business Congress estimates that more than a thousand close each month, many for reasons other than rising rents. Local advocates are hoping for the passage of a robust Small Business Jobs Survival Act, which was reintroduced by Washington Heights Councilmember Ydanis Rodriguez for the umpteenth time in the City Council on March 22. The proposed law would grant lease renewal rights to commercial tenants, somewhat leveling the playing field between small businesses and landlords, who currently can evict store owners at will when their leases expire, regardless of how much cash and sweat equity they’ve put into their businesses.
Lena Meléndez, an activist with Dominicanos Pro Defensa Negocios y Viviendas (Dominicans in Defense of Businesses and Housing), says the lack of legal protections for small business owners are especially devastating in neighborhoods like Washington Heights and Inwood, where rezoning is likely. “We are talking about the decimation of any kind of wealth that has been amassed by this majority-minority community,” she says.
Calo, who built his business in the lean years of the 1980s, says that now, after so many people worked to build up the neighborhood, it’s hard to see landlords and developers looking to cash in: “They’re getting the luxury of eating the steak while we were stuck with eating the bone.”
Calo says he came to New York in 1985 from Boiro, a small town in the region of Galicia on the northwest coast of Spain. He hadn’t originally intended to stay, but after five years in the city he had an opportunity to become co-owner of a restaurant at 172nd Street and Broadway. His friends said he was crazy. “Why would you go up there? You’re going to end up dead!” he recalls them telling him. But he remembers thinking, “I’m only going to sell food. I’m not going to do harm to anybody. So why shouldn’t I be able to go?”
Calo knew for years that renewing his lease, which was set to expire in October 2017, might be difficult, so in 2015 he began calling his landlord to start negotiations. For the next two years, he says, he called a couple of times a week, finally receiving his landlord’s offer only a few weeks before the end of the lease. Calo figured the highest rent increase he could sustain was about 40 percent of the $5,000 a month he was paying. Edel Family Management asked for a 400 percent jump, Calo says, which would raise his rent to $25,000 a month. (Edel Family Management did not respond to a Voice request for comment.)
The landlord also wanted him to expand into the commercial space next door, an expensive and disruptive proposition that still wouldn’t have brought in enough revenue to cover the increase. “It was basically a diplomatic way to ask for us to leave,” says Calo.
Calo started crying shortly after being asked how he felt about his eviction. A minute or two later, he came back to the table and said, “I can’t lie: pretty bad. It’s just tough, knowing that one person can just say, ‘This is the end for you. You have to start over.’ ” He said he was worried about his employees, many of whom had worked at the restaurant for years. He was concerned about his financial future. And he was saddened by the prospect of losing the physical space where he’d made so many memories: the times when taxi drivers and truckers came for a warm meal late at night, the dance parties he and the staff had had while cleaning up after closing.
“The location itself is part of the family. It’s where my sons grew up. My wife works here. I’ve worked here for thirty years. It’s just a heartbreaking struggle — how one person can determine whether this is the end or not.”
An early version of the SBJSA was first introduced in 1986 by then-Councilmember Ruth Messinger. It was first voted down in 1988, and has resurfaced multiple times since, with 27 councilmembers signing on as co-sponsors by 2016. Yet the bill has never made it to a full council vote, as real estate interests have complained that its provisions were of dubious legality and would present too much of a hardship for commercial landlords.
The goal of the SBJSA is to make it so that no one person can determine whether a small business owner like Calo has to leave. The bill guarantees the right to a minimum ten-year lease renewal for all commercial tenants (with a few exceptions, such as if the tenant has broken the lease or violated tax or license laws). Crucially, if the tenant and landlord are not able to agree on terms, the bill would also send the dispute to an independent arbitrator, who would set a rent based on comparable prices in the area and the landlord’s and tenant’s finances, among other criteria.
With so many failures in the bill’s past and the powerful real estate lobby led by the Real Estate Board of New York (REBNY) dead set against it, Steven Barrison, a spokesperson for the Small Business Congress, has worried that it will again fail to even be put for a vote. Small Business Committee chair Mark Gjonaj has received significant donations from the real estate industry — $96,070, more than 10 percent of his total campaign contributions in 2017 — with new Council Speaker Corey Johnson right behind him at more than $63,000.
Reginald Johnson, Gjonaj’s chief of staff, told the Voice in a statement: “Councilman Gjonaj is committed to addressing the needs of New York business owners. He wholeheartedly supports the objective of reducing the cost of owning a business in New York and looks forward to reviewing and debating the bill in committee.” Corey Johnson also offered a statement, which read, in part, “I am committed to giving the Small Business Survival Act [sic] the hearing and full consideration that it has been denied for too long, so that it can be debated on its merits.” REBNY did not respond to a request for comment.
Jenny Dubnau of the Artist Studio Affordability Project, an SBJSA supporter, shares Barrison’s skepticism. “These quote-unquote ‘progressives,’ when it comes to what’s going on in our city, they’re not progressive when it comes to real estate policy. It’s shocking.”
Rodriguez, the latest councilmember to introduce the bill, says he’s committed to it, but says it’s just “one of many measures that I want to put in place to protect mom-and-pop stores,” including adding local-business requirements for developers who get public money.
As of this writing, no hearing on the bill has been scheduled.
In the past, the bill’s opponents have argued that its passage would harm landlords and disincentivize developers from investing in property, and therefore ultimately hurt small businesses. They’ve also argued that a bill like this is unprecedented, maybe even illegal.
Mary Ann Hallenborg, a clinical assistant professor of real estate at NYU’s School of Professional Studies, says there’s precedent in New York City for commercial rent control, dating back to a 1945 law that limited commercial rent increases, much as residential rent regulations still work today. Then, as now, small business owners complained of excessive rent hikes and evictions, and the state legislature stepped in to regulate the commercial rental market, though the law was repealed in 1963 once the rent emergency was deemed to have passed.
David Eisenbach, a Columbia historian and 2017 candidate for Public Advocate, believes that the bill, if passed, “will absolutely hold up” to court challenges. “LaGuardia passed commercial rent regulation back in the 1940s because he saw a very similar situation happen,” he says. “There were numerous court challenges, and each time, the courts in the state of New York said that New York City has the powers, under home rule, to address a crisis. And it was a crisis.”
Dubnau would like to see things go even further. She worries that the arbitration component in the bill may be too expensive for small business owners. And she believes “there should also be legislation that makes it illegal for landlords to simply warehouse space. There should be a tax penalty for that.” She’d even love to see a restoration of commercial rent control.
Hallenborg isn’t so sure that limits on commercial rents are a solution. “I agree that it hurts when your favorite neighborhood restaurant closes its doors because the landlord has hiked the rent,” she says. “But the reality is, in the urban core, property taxes, insurance, and other operating costs have increased dramatically over the last thirty years. And rents have increased commensurately.” She worries that the current draft of the SBJSA defines tenants so broadly that it could cover “big law firms, big pharmaceutical companies, big financial services companies — and I’m sure that they will appreciate everything that the city is doing to keep them in a below-market lease.”
Moreover, she notes that unlike commercial rent control, the SBJSA does not feature mechanisms to assure landlords of a fair return on investment or address landlord hardships, and doesn’t include a sunset clause. Such clauses “would help protect” the proposed new law from legal challenges by landlords, she says; as the law is written, “we could expect many challenges to it on a variety of grounds,” including a failure to provide due process and whether it’s an illegal taking of private property.
For small business advocates, though, the issue is not just the specifics of a new law, but the fact that the city has gone thirty years without even holding a vote on a bill that has strong support both on the council and among small business owners. “I don’t know a neighborhood in New York City where the people aren’t upset and angry about these businesses closing,” says Barrison. “If the people knew that all they had to do was go to their lawmaker and hold their lawmaker responsible if they did not pass a law that stopped this, it would stop. The people just need to know.”