The Trump administration’s platform emphasizes an effort to help small businesses, yet his tax plan could help large corporations and hurt the already struggling small businesses in New York City.
There could be no more important time to push through the Small Business Jobs Survival Act (SBJSA). The SBJSA is a bill that has been stuck in city council limbo for almost 30 years, with progressive politicians refusing to touch it and small business owners refusing to give up on it. The bill deals solely with commercial rent renewals and is currently supported by 27 council members. It’s unable to move forward because it cannot go before a committee hearing. Trump’s tax plan would cut taxes for all businesses, but does not address the problem of rising rents. One only needs to look at the retail market in Manhattan to see the effect emphasizing corporations has done to the small business landscape, and the SBJSA outlines specific guidelines that would protect small businesses from being pushed out.
Commercial rent control ended in New York City in 1963 and the SBJSA was proposed in the mid 1980s. The main components of the SBJSA are binding arbitration for lease renewal negotiations, mandatory minimum 10 year leases for businesses, and restrictions to prevent landlords from passing their property taxes on to small business owners. Politicians label it as a bill that promotes rent control, though the bill does not set the rent for any businesses. They also say there are legal concerns with the bill and that it prevents free enterprise.
“All their arguments about protecting free enterprise are bullshit.” said Jenny Dubnau, founder of the Artist Studio Affordability Project, which represents artists supporting the bill. “Because you have businesses that are doing well and there needs to be some regulation of this out of control real estate industry. Because the real estate industry is actually killing free enterprise in the city.”
SBJSA supporters believe that the real reason behind the bill not moving forward is that politicians are beholden to the Real Estate Board of New York through indirect and direct campaign contributions. Politicians like Bill de Blasio, Letitia James and Melissa Mark-Viverito previously supported the SBJSA and then abandoned it once they ascended the political ladder. As de Blasio, James, and Mark-Viverito became more powerful, they made the decision not to go against REBNY.
“The Real Estate Board of New York has been pulling the strings for the last 15 years in this city,” said Barrison. “We all know real estate runs this town.”
Though Trump himself is not a member of REBNY, his daughter Ivanka and his son Eric are, according to the REBNY website. Keeping large businesses in New York by helping them make more money is something that would benefit REBNY. The problem is that this could continue to leave small businesses out in the cold.
Current trends indicate a rent downturn that would help alleviate the high rent problem. Ten of the 16 main retail corridors saw their overall rent decrease from 2015 to 2016 according to the REBNY Spring Retail Report. With predictors showing an ebb in rent, the tax cuts could come in just in time to reverse that and give corporations and developers incentives to continue increasing rents. A change of heart from politicians on the SBJSA or the implementation of another bill that acknowledges that the main detriment to small businesses is rising rent might become even more necessary.
Gail Brewer proposed an alternative plan in 2015 called “Small Business, Big Impact.” Her plan recommends mandatory mediation during lease renewals with the option for a short-term lease extension, an increase in the supply of ground-floor retail space, and reforming commercial rent tax by raising it from applying to those who pay $250,000 gross rent. According to supporters of SBJSA, these are watered down ways to help small businesses that specifically won’t anger REBNY. Brewer still won’t touch the SBJSA.
“I think that putting all your eggs in one basket for one bill that has not made progress past its introduction is a strategic decision and I can respect that,” said Lucian Reynolds, urban planner at the Manhattan Borough President’s office. “I think that together there’s many things that all these advocates and all these voices who are motivated can all push together all different things small businesses need.”
Yet one important argument must be acknowledged. The bill goes against the desires of the consumer and the market. If a tenant can’t pay his commercial rent, then he’s not making enough money and does not have a profitable business. Keeping unsuccessful businesses in place for longer prevents new businesses that might be more successful from coming in. The argument of SBJSA supporters is that even successful businesses can’t survive in the current real estate climate.
“New York small businesses are becoming extinct,” said Barrison. “They’re in the emergency room, they’re laying there dying for an expert. We have a solution. And we’re doing everything else except dealing with the dying patient.”