New York plan to cap rent for small business draws fire

New York City is considering a controversial commercial rent regulation law that would be the first of its kind in the United States. The bill, which is scheduled for a committee vote Dec. 1, has pitted proponents such as small businesses, organized labor, and even a dance troupe, against opponents that include Mayor Edward I. Koch, the real estate industry, and the Association of the Bar of the City of New York.

The underlying issue is how well small businesses can fare in times of gentrification and rising real estate costs.

The measure being considered is a bill co-sponsored by City Councilors Ruth Messinger and Stanley E. Michels of Manhattan, who prefer that their plan be called rent arbitration, rather than rent control. The measure would apply to businesses with fewer than 10,000 square feet, such as green grocers, clothing shops, or hardware stores.

Under the proposal, rent increases would be limited to 45 percent for a period of five years, and binding arbitration between landlords and tenants who do not reach agreement would be mandatory.

At a City Council committee meeting earlier this week, opponents of the measure warned that such a bill would likely be challenged in court. And it would, they contend, be harmful to the city's economy.

``While support of such legislation would provide short-term relief for certain small businesses,'' said Gary Kesner, commissioner of the New York City Office of Business Development, ``it is my belief that [the bill] would have a substantially negative effect on the business foundation of this city, especially in its most economically deprived areas.''

One study done for the city several years ago said that commercial rent control is not needed, and that the retail sector is growing, says a spokesman from the city's Office of Business Development.

But proponents of the bill say the commercial rental market needs to be stabilized to avert the further loss of businesses and manufacturers. Thomas Van Arsdale of the NYC Central Labor Council, told the committee that speculation and gentrification have weakened the city's diversified economic base.

In Forest Hills in Queens, Herb Koch, a partner in a gourmet food store, says commercial tenants are being victimized by landlords. He favors rent control.

In his case, the rent on his store, which sells fine chocolates, meats, and other delicacies, went up 100 percent - from $1,500 to $3,000 - when the lease was last signed. He says his landlords said he and his partners must take or leave the price, because others will take it. Mr. Koch adds that two kitchen employees had to be let go because of the increased rent cost, which, he says, are inevitably passed on to the consumer.

The bill has been tabled by the committee considering it, but Ms. Messinger has vowed to bring it to a floor vote before the City Council if it does not come through the committee. It has more than 20 co-sponsors in the 35-member body.

The mayor, who maintains a free-market perspective, has promised to veto it.

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