In some respects, doing business successfully is simple. When revenues exceed expenses, you get profit. Make a profit and you’ve got a viable business. Make a sufficient profit to make the effort worthwhile and you stay in business. But that’s not where it ends in a city where every business is regulated within an inch of its life.
There are issues. Do people want to buy what you’re selling? Even if they do today, will they tomorrow? Will the cost of your product increase, whether because its manufacturing costs have increased because of higher minimum wage or more costly benefits, or because government saw you were doing too well and wanted its slice of your pie? And then there are the ancillary rules, like whether the place you shop has two steps, preventing wheelchairs from entering unimpeded. The list goes on.
And finally, there is the rent, which is always too damn high. But the guy who owns the building is in business too, and what he sells is the space you occupy. He’s inundated with regulations and the expenses associated with keeping the building clean and standing. He’s taxed. And taxed. And sometimes nobody wants to buy what he’s selling either.
This plague has been underway for several years, but its familiarity does not diminish the damage inflicted on the economic and the psychic well-being of neighborhoods. One by one, cherished local shops are disappearing, replaced by national chains or, worse, nothing at all. To borrow from Tim Wu, a Columbia University law professor who has examined the issue, “Blight extracts [sic] a social cost.”
Empty storefronts are certainly a blight on a neighborhood. So too is the lack of businesses that serve the needs of a community. like a supermarket or a hardware store. But you can’t force some random person to open a hardware store because your neighborhood could use one. If there’s a profit to be made, chances are better that someone will choose to put his time and money into a hardware store. If not, then the neighborhood will have to do without.
In the view of the Times, landlords are just greedy bastards waiting for the megachain store to show up, willing to pay oodles in rent. And so they’ll sit atop their piles of money with empty storefronts until that glorious day when the riches will flow again.
But landlords can be blamed mightily for this blight — the greedy among them who raise rents to stratospheric levels, figuring that some deep-pocketed company will pay top dollar for the space. Speculative behavior has led to boom-or-bust cycles, as on Bleecker Street in Greenwich Village. It was fancy boutique heaven for a while. But how many $400 T-shirts does even the wealthiest New Yorker need? Boutique heaven turned into vacancy hell.
When stores go empty, landlords make no money. They still have expenses, but no revenues from an empty storefront. While no landlord would turn away a top tenant willing to pay top dollar, because it’s a business, renting to a tenant who can’t pay the rent, or can’t pay enough rent for the landlord to make a profit, isn’t viable either. And when there’s no one seeking to rent a storefront, the landlord can’t go out on the street and demand passersby start businesses, rent their space and pay them money.
All of this seems to be a mystery to the New York Times, as well as New York City’s local politicians, who fail to grasp anything about how business happens.
Take the Upper West Side. Its City Council member, Helen Rosenthal, reports that her staff recently surveyed shops along Broadway and Amsterdam and Columbus Avenues, and on some side streets. Of 1,332 storefronts, 161, or 12 percent, were unoccupied. The situation, Ms. Rosenthal correctly says, is a threat to the area’s character, its “sense of community” and even its residents’ sense of safety.
What is Rosenthal’s point, that businesses should magically spring up to satisfy residents’ “sense of safety”? Of course it’s best for a neighborhood to have thriving businesses, but what does that have to do with businesses being successful? The storefronts aren’t empty to make residents feel unsafe. They’re empty because no one wants to rent them. They’re empty because businesses can’t earn a sufficient profit to sustain the burden of rent and regulation, like New York City’s minimum wage.
But rather than grasp how business happens, the Times come up with a better idea.
Another idea that merits consideration — and is likely to need Albany’s approval — is some sort of a “vacancy tax” on those landlords who leave storefronts unoccupied for years, hoping against hope that Sephora or Marc Jacobs or whatever will move in someday. Details would, of course, have to be worked out, including how steep a tax after how long a period of vacancy.
Under the assumption that this problem stems solely from greedy landlords, biding their time for years until a chain store succumbs to their charms, the answer lies in imposing a penalty on the Snidely Whiplash Holding Corp. for not using its resources to serve the best interests of the neighborhood. It’s not that landlords are inherently wonderful people, but they’re not ogres either. They’re just people doing business to make a profit, which is what all viable businesses must do.
The core point is that all these dead spaces hurt, and neighborhoods have a right to protect themselves. “The city is losing what makes it appealing, what makes it New York,” Professor Wu said. Amen to that.
The core point is that no business can survive if it doesn’t make a profit. That includes the grocery store on the corner or the landlord who owns the building housing the grocery store. The saddest tears for the blight of a neighborhood won’t get people to want to start businesses so that they’ll want to rent empty storefronts from landlords.
Wu is right that the city is “losing what makes it appealing,” and there are many reasons why business fail to succeed, why new businesses aren’t being started in brick and mortar spaces. But that’s the product, not the cause. Just because you want someone to start a business that suits your needs doesn’t mean anyone will do so. It’s not their fault they haven’t dedicated their lives to charity for your benefit.
Among those reasons is the burden of a progressive city trying to micromanage every iota of business for the benefit of every identity group with a sad tale of woe, sucking the viability out of businesses and the life out of a neighborhood. If there’s money to be made, people will start businesses, rent storefronts, and contribute to the appeal of a neighborhood.
If there’s no money to be made, storefronts will be empty, and if they’re empty long enough, landlords will walk away. There’s a tipping point where regulation strangles a neighborhood, a city. The solution isn’t to strangle even harder. If New York City is dying, and you don’t want that to happen, then stop killing it.
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It takes a special kind of stupid to see businesses failing and think that a failing business tax is what you need.
Reminds me of the first rule of holes: “If you find yourself in a hole, stop digging.”
If a tax is the best policy, then maybe they should tax online purchases, since that’s the biggest reason that people are patronizing brick and mortar stores less these days.
Or you conflated tax as an incentive to lease storefronts with tax as a revenue collection method, and the convenience and, often, lower price of online purchasing with the imposition of out-of-jurisdiction local sales tax to equalize burdens. But hey, nuance is for kids.
Hey!!! Don’t you dare gore my ox!!!!
You know how I really hate it when someone says something that’s kinda supports the post but is superficial, wrong and borderline idiotic? I similarly hate if when someone shows they’re just as idiotic by not realizing what’s idiotic about it, because it makes me feel as if my writing appeals more to blithering idiots than relatively intelligent people, and that make me sad. Do you want me to be sad?
Are you only just now figuring out that we’re all blithering idiots? Maybe there’s a reason we are attracted to your writing….
OMG, you make a very persuasive case.
Ok, maybe my nuance (or sarcasm) was lost. I wasn’t endorsing a tax on online transactions — only pointing out that if the NYC pols want to pursue a bad tax policy, there are other ways to do so besides a vacancy tax.
smh.
That’s an option?
I was just figuring that NYC wanted to start a competition with San Francisco to see who hated small businesses more.
At least Frisco is enjoying the bounty of the internet. NYC is such a wannabe.
SHG, the NYT article is completely devoid of economic understanding. It’s like one of those Yakov Smirnoff jokes, “In Soviet New York, business owners don’t make business, communities of color and progressive politicians make business”.
For a further chuckle or belly laugh. Everyone should read the comments on the NYT article. It’s completely insane and even more devoid of basic economic theory. Landlords really take it on the chin…..I like the constant use of the word “greedy” and the phrase “greedy fat cats”.
Landlords have always been a target of hatred in New York, and many deserved it. Some get rich. Some go bankrupt. Some suck. Some don’t. But we still need buildings.
Everything I ever needed to know about NYC landlords I learned from Fred Mertz.
And what does it tell you that he let Ricky Ricardo rent an apartment?
I know what the city should do. Instead of sending convicts off to lockup, make them lease these vacant storefronts and try to run businesses!
When I saw this carefully-reasoned piece in the Times, I actually considered leasing some of sites around their offices, so I could set up brothels. I just couldn’t figure out how I would keep their journalists from harassing my sex workers.
We prefer not to call them brothels, but law schools.
Ah! Like the Harlot School of Law, but I think it closed (still “fully accredited,” though).
Do landlords of occupied storefronts pay the same property taxes as if the storefront is empty?
Property tax isn’t affected by occupancy.
Property tax isn’t affected by occupancy”.
Right, we have the regressive commercial rent tax for that.
I really hate CRT.
Landlords are a literal embodiment of capitalism, I’m surprised they’re getting such a soft treatment. I would expect the NYT to call for the obvious next step – nationalize their property for the good of the collective, comrade. After all, the despicable kulaks might avoid the tax by renting to insensitive, culturally appropriating businesses, instead of woke revolutionary cafes that will serve the needs of the diverse queer communities of colour.
Which one is Starbucks, again?
“recently surveyed shops along Broadway and Amsterdam and Columbus Avenues, and on some side streets. Of 1,332 storefronts, 161, or 12 percent, were unoccupied”
One obvious political Solution – shrink the boundaries by 12% then there’ll be 100% Occupancy.
You could relabel the other bits Nowheresville, Vote Gerry for Mayor!
Why does the city have to horn in? Why don’t the neighbors sue the owner of the vacant store front for damages and see if the judge will throw out the case?
Aside from there being no cause of action available to neighbors, how can politicians prove their worth if they don’t stick their nose into things?
NYT tears aside, the replacement of small businesses by megacorps is not a bug; it is a feature, and it will only get worse.
Even so, you can only have so many Gaps in a row, and most of these buildings are more suited to bodegas than Sephora.
There are very few (maybe no) areas where small business cannot be replaced by big business. They already have coffee shops, hardware stores, auto parts stores, etc. Every year the regulatory environment becomes less friendly to the remaining small businesses. Megacorps will continue to expand and replace small businesses, and eventually there will be none left.
Remember when coffee shops all had their own unique flavors and decor, and supported the families who owned them? Ah, the good old days. Am I the only one who refuses to patronize their shiny cookie-cutter replacements? I do go in there and use the free wifi; a minor benefit accompanying the destruction of our culture.