One small businessman's desperate situation illustrates how Rents are Too Damn high in NYC
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Scott Baker
Jun 4, 2014, 4:38:52 AM6/4/14
to Common Ground NYC, Ted Gwartney, Billy Fitzgerald, Andy Mazzone, Alanna Hartzok
Dear Common Groundlings (and friends)!
Occasionally, people will come across our website - http://commongroundnyc.org/ -
and be driven to write to me about what they've read and how it applies to their own situation. Of course, we cannot give legal or rental opportunity advice, but sometimes a brief dialog opens a window into just how desperate things are for average folks in the most expensive city in the country in which to rent or buy property. The exchange that follows - lightly edited for clarity - is just such an example:
On Mon, Jun 2, 2014 at 7:14 PM, Alex D <alexde...@gmail.com> wrote:
Hello,
So I came across your site today via Crane's. Nice ideas on the vacant lots but seems little chance of this getting out of state legislature.
So I came across your site today via Crane's. Nice ideas on the vacant lots but seems little chance of this getting out of state legislature.
In addition to that, I wanted to know your thoughts on the current tactics of commercial real estate owners. Particularly retail stores and restaurants in Manhattan as well as industrial in Brooklyn?
What I see is super high rents asked and property sits vacant until a "vanity" project comes along.
- High rent means high deposit. Usually 3 or more months.
- Good Guy Clause in lease passing liability on to individual regardless of company structure
- Business fails quickly due to high rent. Tenant walks away from space due to Good Guy clause.
- Landlord pockets deposit.
- Agent begins searching for another tenant. Sometimes as soon as 6 months later.
- Landlord raises rent further based on property improvements made by failed tenant. I've even seen them charging key money for someone else's (failed) investment.
This is an untenable situation for independent businesses that do not sell alcohol. The only kind of businesses that can afford the rent long term are national chains who view some of the costs as a marketing expense. More 7-11's and Walgreen's do not make for a vibrant retail landscape. We don't need any more popup stores either.
Selling alcohol is generally not an option because respective community boards are not friendly to any establishment seeking to do so; restaurant or otherwise. Only the big players like Soho House can afford to disregard the CB's and go direct to the SLA (State Liquor Authority) with their connected attorneys.
What can be done?
I'm one of many in my group of small business owners who is thinking it's time to leave the city once and for all.
My experience
- Living in NYC for 20 years.
- Small business owner with offices and work studio in city for last 12 years
- Looking for restaurant property for over a year. After dealing with landlords and the CB, giving up on NYC and opening elsewhere. Risk too high here.
- Looking for retail for the last 6 months. Small footprint and part of a marketing plan so expense can be justified. Not happy with terms but risk is lower at least since not a 6 figure deposit.
Since moving our main business operations to the city in 2003 we have moved farther and farther into Brooklyn every 3 years or so as our rent doubled/tripled due to gentrification. Now in Ridgewood/Bushwick we are facing a doubling of rent later this year as artist studios and galleries take over once again. Will start looking a little farther out on the L soon.
Personally I've all but given up at finding decent residential apartment in Manhattan. Looked for 3 years for a decent 1bdrm but nothing to be found for less than $3k/mo. Seems Bloomberg eviscerated rent control allowing so many EV and LES landlords to break the $2500 barrier without inspection of the alleged capital improvements. It's a tragedy below 14th St and probably not so great elsewhere.
Apologize in advance for the long email. Hopefully you have some optimism to share.
Thanks,
At 11:41 AM 6/3/2014, Scott Baker wrote:
Well, our new Mayor is going after vacant land hoarders. See the attached Crain's article (http://www.crainsnewyork.com/article/20131124/REAL_ESTATE/311249973/de-blasio-tells-lot-owners-to-put-up-or-pay-up). So is our Comptroller, since the days he was Manhattan Borough President and wrote a report on vacant land supporting taxing it into production.
Sorry you are not making it in NYC! It's an all-too-common refrain, despite the fact that a billion of GDP is generated in the average square mile. Fully 5.8% of land is vacant in NYC, and much more is under-utlized. Our site just scratches the surface. See video & slideshows here for billions of dollars that is literally just beneath our feet:
<http://www.opednews.com/articles/Fairness-Sustainability--by-Scott-Baker-Community_Fairness_GROWTH-DEVELOPMENT_Georgism-140210-926.html
Collecting the Land Rent would change the entire economy of the city, and eliminate the need to collect just about any other kind of revenue, leaving more for wage-earners.
Hello Scott,
I read about his plan on the vacant land and listening to your presentation in the background. From what I understand this depends on the NY state legislature to move forward. Has the state legislature ever done anything in a timely manner unless they were being "lobbied"? No one is going to pay the price to change this rule and no matter what the developers say in public I seriously doubt they would do anything to jeopardize their investments.
My main concern is the rapidly diminishing culture. Diversity is being replaced with white and privileged (I'm white). Landlords have a 40x rent income requirement; 80x if your parents cosign. Who are these kids under 30 who make a minimum of 6 figures+ to rent an apt outside of stabilization? Not creative types and not minorities.
Almost all apartments in the EV are outside of stabilization after Bloomberg. A 1 bdrm place on E 6th/1st Ave that I lived in at $600/mo in 2003 is now $2600/mo without any improvements.
I don't see opening up new land changing this much. No one builds truly affordable housing. I don't count the few low income basement apartments that are given to those who have waited on a list for a decade+. Bloomberg's "micro apartments" at $1500/mo for 250 sq ft are just another gift to developers. There would just be more rich kids, investment props and Airbnb rentals on the market. More faux luxury and less real people.
More important to me is that as soon as a lease expires local businesses are being forced out for chains. A former pizza place on 1st Ave is now on the market for $19k/mo. You would have to sell 450 slices a day just to pay the landlord's share. What smart business would go for that? If someone is dumb enough to try, I see the landlord pocketing the $76k deposit within a year. All this money drained out the economy and into the pockets of a very few who give nothing back.
With any new retail or service business in NYC the landlord profits more than the business owner without the risk. They have no incentive to offer fair rents. The buildings were given to them in the 80's and they have no tax burden while the commercial property sits vacant. They set the price high and wait for a sucker to come along.
It's not that I cannot afford to live here it is that I don't think it is worth it anymore. When a 1 bdrm apartment on Ave B and E5th starts at $3300 and the bdrm is so small you cannot even walk around a queen size bed, that's not something I am willing to pay. For the same price I can buy a ocean view condo in Rio De Janiero or rent a massive apartment in the center of Paris; many cities are more affordable with a better quality of life these days.
Without local businesses and diversity New York is not New York anymore. While I can leave for somewhere better but that doesn't make it any easier. If there is anything that can be done please let me know. Not a lot of hope at this point.
Best,
Alex
I read about his plan on the vacant land and listening to your presentation in the background. From what I understand this depends on the NY state legislature to move forward. Has the state legislature ever done anything in a timely manner unless they were being "lobbied"? No one is going to pay the price to change this rule and no matter what the developers say in public I seriously doubt they would do anything to jeopardize their investments.
My main concern is the rapidly diminishing culture. Diversity is being replaced with white and privileged (I'm white). Landlords have a 40x rent income requirement; 80x if your parents cosign. Who are these kids under 30 who make a minimum of 6 figures+ to rent an apt outside of stabilization? Not creative types and not minorities.
Almost all apartments in the EV are outside of stabilization after Bloomberg. A 1 bdrm place on E 6th/1st Ave that I lived in at $600/mo in 2003 is now $2600/mo without any improvements.
I don't see opening up new land changing this much. No one builds truly affordable housing. I don't count the few low income basement apartments that are given to those who have waited on a list for a decade+. Bloomberg's "micro apartments" at $1500/mo for 250 sq ft are just another gift to developers. There would just be more rich kids, investment props and Airbnb rentals on the market. More faux luxury and less real people.
More important to me is that as soon as a lease expires local businesses are being forced out for chains. A former pizza place on 1st Ave is now on the market for $19k/mo. You would have to sell 450 slices a day just to pay the landlord's share. What smart business would go for that? If someone is dumb enough to try, I see the landlord pocketing the $76k deposit within a year. All this money drained out the economy and into the pockets of a very few who give nothing back.
With any new retail or service business in NYC the landlord profits more than the business owner without the risk. They have no incentive to offer fair rents. The buildings were given to them in the 80's and they have no tax burden while the commercial property sits vacant. They set the price high and wait for a sucker to come along.
It's not that I cannot afford to live here it is that I don't think it is worth it anymore. When a 1 bdrm apartment on Ave B and E5th starts at $3300 and the bdrm is so small you cannot even walk around a queen size bed, that's not something I am willing to pay. For the same price I can buy a ocean view condo in Rio De Janiero or rent a massive apartment in the center of Paris; many cities are more affordable with a better quality of life these days.
Without local businesses and diversity New York is not New York anymore. While I can leave for somewhere better but that doesn't make it any easier. If there is anything that can be done please let me know. Not a lot of hope at this point.
Best,
Alex
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I haven't responded yet; frankly, I'm not sure what else to offer to this articulate and well-researched plea from someone who has obviously spent some time looking for both affordable housing and affordable locations for his small business in NYC. Of course, we know that our solution would free up under-utilized land, remove the dead-weight tax burden on income and sales, and open up new opportunities for housing and small businesses, but what to do today?
Is it just a case of things balancing out, with some people finding more opportunity elsewhere? Well, that can't be right, because the Manhattan development boom (which spills over to a lesser extent even in the outer boroughs), continues unabated, with the largest development project in American history - $20 billion - taking place at Hudson Yards right now (it is quite a sight to behold, if you happen to walk by there). But, the catch, as the writer above shows, is that this is almost all at the high end, the luxury segment. Yet, even as the new Mayor promises 200K of new or maintained affordable housing units (and one has to look critically at even that category to be sure it really is affordable; on average, it requires an 80K/year income), he is asking for $41 billion to be spent over the next 10 years to do it.
Why is Mayor de Blasio not asking for more land rent?
Yes, he is under the same pressure as the "NY state legislature" not to harm developers' income stream (or the banks'), but is that the whole answer since, in aggregate, more development would actually help them, or at least those at the middle who don't need to build luxury condos to make a living.
Recently, a trio of Pols got together to force Madison Square Garden to finally pay its fair share of property taxes:
State Pols Square Off Over Madison Square Garden's Property Tax Exemption - Midtown - DNAinfo.com New York
Three state lawmakers are going toe-to-toe with Albany's two most
powerful politicians over a bill the trio introduced in the Assembly and
Senate last week that would strip Madison Square Garden of its decades-long, multi-million-dollar property tax exemption.
The bills, formally announced by Assemblymen David Weprin and Brian Kavanagh and state Sen. James Sanders
on Tuesday afternoon, would repeal a 1982 measure that, at the time,
supporters said they believed would give the Garden a 10-year reprieve
from property taxes in exchange for a decade-long guarantee that the Knicks and Rangers would remain in Midtown.
Instead, the exemption never expired.
Like Goldman Sachs, which pays zero property tax on their spiffy new headquarters both in the financial district of Manhattan, and in their New Jersey headquarters just across the Hudson, big and important land owners - as defined by big and important politicians - pass their taxes on to the rest of us, the "little people," getting ever littler all the time. The resulting middle class squeeze and flight has reached epidemic proportions.
What to do, asks our correspondent. Well, a start has been suggested in the article above. Two Assembly members, and a State Senator, have put forward a bill to repeal a tax exemption stretching all the way back to 1982! (I wouldn't even graduate college until the following year). I already contacted the State Senator and will contact the two assembly members expressing our support for this bill (Brian Kavanagh is my own, and I've met with him before; he did his Master's thesis on Henry George!). Those reading this email are invited to do the same.
Until next time, happy landings....
Scott Baker - President: Common Ground - NYC; NY State Coordinator, Public Banking Institute; Opednews Blogger/Senior Editor; Huffington Post Blogger; Author
Video Appearances & Slideshows here:
http://newthinking.blogspot.com/
Petitions:
-- Commemorate President Lincoln's Assassination with 1 Billion Debt-Free Lincoln $5 Bills
-- Replace Property Tax with Ground Rent in New York State
-- Assess NYC buildings using comparative properties
-- California Dreaming: Set up a State Bank with abundant CAFR funds
-- Complete the East Side Manhattan Greenway from 38-61 Streets and save bikers, help the environment, and clear up traffic
-- Tax Vacant & Unused Land to Return its value to the Community
-- Close New York State's budget Gap with money from its own agencies by setting up a State Bank
-- Defend the Clean Air Act
-- Produce debt-free United States Notes
-- Reclassify the FED's account, from private to public
Video Appearances & Slideshows here:
http://newthinking.blogspot.com/
Petitions:
-- Commemorate President Lincoln's Assassination with 1 Billion Debt-Free Lincoln $5 Bills
-- Replace Property Tax with Ground Rent in New York State
-- Assess NYC buildings using comparative properties
-- California Dreaming: Set up a State Bank with abundant CAFR funds
-- Complete the East Side Manhattan Greenway from 38-61 Streets and save bikers, help the environment, and clear up traffic
-- Tax Vacant & Unused Land to Return its value to the Community
-- Close New York State's budget Gap with money from its own agencies by setting up a State Bank
-- Defend the Clean Air Act
-- Produce debt-free United States Notes
-- Reclassify the FED's account, from private to public
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