Councilmembers Pander To Brooklyn Merchants

In recent days both Courier Life and The Brooklyn Paper have written about recent efforts by the Brooklyn City Council delegation to pass bills intended to (a) make small businesses offer their employees mandatory paid sick leave and (b) institute a kind of rent control for commercial leases. I'm at a loss to decide which policy is worse.

The reason that small businesses are routinely exempted from labor laws like mandatory sick leave is that a company with few employees often lacks the financial resources to cover the extra expense and even less frequently has the employees necessary to cover for sick employees. While the impact on employment overall is probably overstated - the law would likely not lead to massive layoffs or business closings - some struggling businesses would get severely hurt by the imposition. Part of working for a small business is the knowledge that you are working for the kind of company that can't give you the benefits that Starbucks does.

On the other end of the spectrum, rent control for commercial leases is preposterous. I support rent stabilization (if not old-school rent control) for large residential apartment buildings despite the negative affect it has on the condition of rental housing and the rental market generally. I am willing to have the economy suffer in order to prevent the disruption and upheaval to individuals and families that would result if landlords could easily oust their tenants once a neighborhood became hot or the economy as a whole started improving faster as a whole than it did for the most vulnerable populations.

But commercial leases? No way. Yes, it is disruptive to have to close a business because it isn't profitable enough to meet the new lease terms. It is unfortunate for the patrons of that business to have to find a new way to meet that need. It is not, however, the city's responsibility to prop up small businesses that can't survive on their own.

In other words, the legislators are trying to simultaneously support businesses that don't earn enough to survive AND burden those businesses with substantial labor costs. Brilliant. And to think that this is supported by all of the candidates that I endorsed in the last election. *sigh*

In other, better, news, and in an attempt to regain my left-wing cred, kudos to the New York Court of Appeals, which upheld the decision of the New York Department of Civil Service to extend marriage benefits to same-sex couples with valid out-of-state marriages and congratulations to my sister-in-law, who wrote one of the amicus briefs in support of the State's decision. It was a narrow ruling by a bare majority and may not withstand later challenges for boring legal reasons ... but today I'll enjoy the good news.

Comments

[babs]

On the other hand, how many sufficiently successful small businesses have been forced to close by unreasonable rent increases? There are many empty storefronts along Seventh Avenue in Park Slope where merchants closed down after being hit with massive rent increases. I suppose those landlords who can't rent them out now have learned the hard way to manage their greed, but what became of those businesses forced to leave? Yes, ultimately, perhaps market forces wil prevail, but at what a cost in the meantime?

[Charles Star]

Those losses, which we wrote about here, are unfortunate but it is a mistake to think that there is a "solution" to the problem that would not be worse than the problem itself. If the landlord unreasonably hikes the rent, the landlord will suffer as well. That's the best way of disciplining the market.

[Bob Marvin]

Charles,

You'd think that market forces SHOULD work to discipline the commercial rental market, but for some reason the mechanism just doesn't work any more. There are MANY examples of commercial space going begging because property owners irrationally seek rents well beyond what normal businesses can possibly pay. The vacant "Mike's International" space on Flatbush is an example.

[Pete]

"It is not, however, the city's responsibility to prop up small businesses that can't survive on their own."

Why not?

The city provides "corporate welfare" for large corporations all the time. How much is Bruce Ratner getting to build his Atlantic Yards development? $100 million? $150 million? More?

The city and state regularly give hundreds of millions of dollars in incentives for large corporations and developers. Why not give incentives to small business owners? There are, in fact, some programs that do this and there should be more.

The success of small business is a cruical element in our communities. As Bob points out, what you THINK should happen doesn't happen.

How can you be citing market forces after what just happened in the banking industry? Even Alan Greenspan - a once personal friend of Ayn Rand - was forced to admit the market can't always correct itself.

In truth, the idea of free markets does work but only after tremendous suffering and disruption. Sure, we could have let the banks fail. And eventually, after a couple of decades, the system would have corrected itself. There also would have been: riots, empty supermarkets with no food, a mass increase in crime, a mass increase in sickness and death...

The success of both local and national economics is based on a thoughtful combination of some regulation and a market that is given some freedom to reward and punish investment behavior.

[carrie]

Just for the record, I agree with Charles that rent regulation for small businesses is a bad idea.
But I would support some sort of government help for small business, if the plan made sense. I'd be curious to know what how cities like Portland, Oregon (where there's a lot of very smart urban planning) deal with this issue.

[brn442]

Well said, that's what you get from an at best naive city council (most of whom have never owned a business.)

Rent Stabilization as it's currently set up (putting the burden on private owners) has been a disaster for affordable housing in the city. To do it for private businesses borders on lunacy. Are there shortsighted, greedy Landlords out there? Yes, but that's always been the case.

Regarding paid sick days for employees of small businesses, I have mixed feelings, yes it's a "burden" but do you want someone with a runny nose preparing your salad? If you can't "afford" to give a 6 month+ employee up to a week per year in paid sick days maybe business is not your calling. As long as the time is within "reason."

[babs]

Here's a Daily News article on just that subject: http://www.nydailynews.com/ny_local/brooklyn/2009/11/22/2009-11-22_hiked_rents_turn_into_empty_stores.html.

And I know many, many people who would long ago have been priced out of their homes were it not for rent stabilization.

[Pete]

Thanks for the link.

[brn442]

I don't have a problem with rent stabilization. Putting the burden 100% on private owners has been a disaster.

Whether it's a brownstone owner illegally subletting his RS Fort Greene apt he should have given up ages ago or an owner cynically jacking up rent on after doing superficial repairs.

Go ask a single mother in Flatbush who needs a two bedroom, making less than 40k a year how easy it is to find a RS apt.

[Pete]

This graph is pretty disturbing:

http://snipurl.com/tf60h

Graph comes from:

http://snipurl.com/tf60j

[babs]

Go ask a single mother (or anyone else for that matter) anywhere in NYC making less than $40K a year how easy it is to find an apartment, period. Most landlords (especially those with non-RS properties) won't accept anyone making less than 40x one month's rent in gross income. That means a cap of $1000 per month if you're at $40K. Apartments in this price range in any neighborhood within a 45 minute commute to Manhattan in Brooklyn and Queens are all but nonexistent. The only hope people in this income bracket have is to find a rent stabilized apartment that hasn't been increased above that due to the restrictions on increases (even after the vacancy increase, the hardship increase, and the MCI, they do exist!).