Testimony of the Real Estate Board of New York in Opposition to Manhattan Community Board 3’s Proposed Special District

The Real Estate Board of New York (REBNY) is a trade association with over 17,000 members comprised of owners, builders, residential and commercial brokers, managers, lenders, and other real estate professionals active in New York City.

REBNY opposes the special district proposal by Manhattan Community Board 3.

The Community Board’s assertion that local small businesses are suffering due to “exorbitant rents” is not based on any factual analysis of whether the businesses are failing or moving for other reasons. The fact of the matter is that both national chains (see today’s announcement from Sears) and local mom and pop stores are facing unprecedented retail challenges that stem from a lack of demand due to burgeoning e-commerce, not high rents. In fact, REBNY’s most recent Manhattan retail report found that there has been a decline in asking rents in 14 of the 17 retail corridors surveyed.

Additionally, it is well documented that small businesses have an extraordinarily high failure rate. According to some reports, 50 to 70 percent of all businesses fail within the first 18 months, with lack of experience and general incompetence cited as the reason for 75% of these business failures.

While rising property taxes and the cost of regulatory compliance can be contributing factors in business failure, our retail brokers also report that it is not uncommon for successful businesses to move to more vibrant locations in order to continue growing. For example, some of the businesses on Bleecker Street have been looking at the Meatpacking District as a more desirable location.

The Community Board’s special district proposal will create more restrictions on new businesses coming into the community and would place impediments to their growth by restricting their expansion. This is not an appropriate way to plan for economically vibrant communities. The restrictions on banks, for example, create an opportunity for one bank to dominate a neighborhood, preventing both competition and limiting the convenience of residents who patronize other banks. A linear frontage restriction could produce more frequent vacancies and lead to more vacant storefronts, which has been an objection raised by the community.

It should also be noted that most of the nightlife establishments the Community Board seeks to push out are local small businesses that have been the source of robust job growth. According to the US Bureau of Labor Statistics, the city has added over 112,000 jobs through food and drink establishments over the past ten years. To that effect, we believe the Community Board’s attempt to restrict certain commercial uses is misguided and represents poor public policy. Food and drink establishments are an important source of economic activity and employment in our city.

We would also ask the Community Board to consider the unintended consequences that other special districts have experienced. For example, the use and street frontage restrictions in the Upper West Side’s Special Enhanced Commercial District did not result in more mom and pop stores, but the corridor did experience high vacancy rates in the years following its enactment.

If the Community Board is sincere in its desire to assist small businesses, we encourage them to join a broad coalition that includes the Manhattan Borough President and Manhattan Chamber of Commerce in advocating for the repeal of the Commercial Rent Tax — an onerous tax imposed on Manhattan businesses operating below 96th Street.

This special district proposal is simply an abuse of zoning tools to restrict a few particular uses the Community Board has long fought to prohibit.

It is our hope that the Community Board will consider the issues we raised and rethink any effort that will restrict certain uses that are so important to our city’s commercial vitality.