on May 02, 2024

Fixing zoning is not enough. We must proactively create affordable space for small businesses 

This op-ed was originally issued by Crain’s New York.

 

This spring, the City Council will vote on Mayor Eric Adams’ City of Yes for Economic Opportunity proposal – an important step for solving the myriad real estate challenges that small businesses face in a changing economy. It brings about long overdue changes to zoning created over 60 years ago by city planners who could not have conceived of how – and where – our city’s economy operates today.  As the Department of City Planning describes it, this proposal will “allow more types of businesses in more places” and remove barriers to growth.

 

It’s remarkable how outdated New York City’s zoning is. For example: Zoning dictates where haberdasheries (purveyors of men’s clothing) and millineries (women’s hat makers) can locate yet contains no mention of 3D printing.

 

Zoning also prescribes what types of stores can be located in destination commercial corridors or local retail streets. But technology has dramatically shifted how we shop, driving up brick-and-mortar retail vacancy in some neighborhoods. Prescriptive zoning makes it more difficult to adapt to a rapidly changing, unpredictable retail environment.

 

Zoning separates even relatively clean manufacturing uses from others, a vestige of a “smokestack economy.” Today, breweries, bespoke apparel manufacturers, and ceramics studios are not currently permitted on retail corridors, even though they depend on customer foot traffic.

 

Zoning in most manufacturing districts assumes all workers will drive to work, requiring so many parking spaces that it essentially makes constructing new buildings infeasible.

 

The City of Yes for Economic Opportunity proposal makes common sense changes to these outdated rules. It will allow more emerging uses like life science and urban agriculture, more types of businesses on commercial streets, and more multi-story loft buildings in manufacturing districts without onerous parking requirements near transit.

 

But the City needs to do more than update outdated regulations – it must proactively create affordable space for small businesses in a growing city with a finite amount of real estate.

 

Take one iconic neighborhood, Manhattan’s Chinatown. Chinatown has a unique historic significance to New York City and its identity is deeply tied to its legacy businesses, but those businesses face significant displacement pressures. In a study released by Welcome to Chinatown, a not-for-profit dedicated to supporting the neighborhood’s small businesses, between 2010 to 2019, rents increased by 39% and property taxes by 110% in Chinatown; in a survey, 60% of Chinatown businesses said rent costs were one of their top three challenges. While rent, labor, and supply costs are rising, many Chinatown businesses feel pressure to keep prices low: visitors expect Chinatown to be affordable, and many businesses also serve a low-income clientele.

 

To prevent displacement of businesses – and to reduce barriers to entry to new AAPI-owned businesses – the City must pilot bold strategies for creating affordable commercial space. This could include providing low-interest loans, tax credits, and/or capital to private or not-for-profit property owners who agree to limit rents. Vacant spaces could be repurposed as pop-up incubators that offer low-cost, short-term leases to allow new businesses to test the market. Larger spaces could become multi-tenant markets for both existing and new businesses – similar to the City-managed Essex Market on the Lower East Side, which has dedicated affordable space for legacy businesses. City-owned buildings could also be leveraged to offer affordable space.

 

City of Yes for Economic Opportunity is an important step towards updating archaic zoning to create greater flexibility for a changing economy, but it is just a first step. To become a national leader in promoting equitable entrepreneurship, the City should build on this momentum by piloting approaches to affordable space for small businesses, with a focus on communities of color such as Chinatown.

 

Sulin Carling is a Principal at HR&A Advisors, an economic development and public policy consulting company. As Senior Economic Development Planner at the Department of City Planning during the de Blasio administration, she developed zoning strategies that are being implemented in the City of Yes for Economic Opportunity proposal.