In the late 1980s Ruth Messinger, who was then on the New York City Council, was pushing a proposal to impose rent controls on commercial space to save small businesses from being pushed out by soaring rents. I called her “the most dangerous woman in New York” in a Crain’s editorial opposing her plan. I think my writing is a little less shrill these days, but commercial rent control was a bad idea then and now.
In fact, a 1987 Fordham Urban Law Journal article lays out exactly why the concept is so wrongheaded. (I am indebted to Crain’s political reporter Will Bredderman for finding the piece). Author John J. Powers makes three major points.
Commercial rent control will lead to disinvestment and overall physical degradation of commercial properties. When taxes and mortgage obligations rise faster than rents, landlords have no choice but to cut back on maintenance of their properties. Capping rents means owners have no incentive to improve their properties to attract tenants who can pay more. Commercial tenants eventually will be trapped in buildings that are deteriorating.
Commercial rent control is fundamentally unfair. It puts the interests of one kind of businessperson ahead of those of another kind, namely real estate owners, who have invested their capital to make a profit, not provide a free service to others.