Regulatory Takings and the Constitutionality of Commercial Rent Regulation in New York City

In recent years, the plight of small businesses in New York City has become a contentious topic. Although the city and its current mayoral administration share a long-standing commitment to affordable housing, the city’s small businesses—an integral and defining feature of the urban landscape—have suffered immensely. In the past decade, local establishments have largely given way to a homogeneous landscape of empty storefronts and national chain stores.The loss of local business occurs with such staggering frequency that there is an entire thriving blog subculture documenting their “vanishing” and the Center for an Urban Future publishes an annual report on the growth of chain businesses in the city. Pro-development advocates assert that this “vanishing” merely represents a sort of creative destruction that the city naturally experiences. However, critics point out that most of these businesses were perfectly viable—even thriving—but were pushed out by a local commercial law regime that favors large landlords and strips small commercial tenants of all bargaining power. This imbalance, they suggest, is what results in commercial rents that can increase close to ten-fold when it comes time to renew leases.

In response to this perceived injustice, small business advocates have proposed the Small Business Jobs Survival Act (SBJSA) in the New York City Council. The Act proposes various protective measures and seeks to increase small commercial tenant bargaining power. However, the bill’s current incarnation languished at the committee stage until October 2018, when it finally received its first hearing. A primary reason for the near decade-long inability of the bill to make it to hearings—and the current uncertainty as to whether it will make it to a vote—in City Council is the position, held by some council members and real-estate advocates, that the proposed legislation is unconstitutional. However, public debate on the bill and related measures has reemerged in the recent mayoral election and its aftermath.

This Note surveys the current status of small businesses and commercial tenant law in New York City and discusses whether or not the SBJSA and commercial rent control are constitutional in light of current regulatory takings jurisprudence.