A committee convened by Seattle Mayor Ed Murray recommended several steps that could help small businesses find affordable space in the city, but it opposed the idea of commercial rent control floated by some on the City Council.
Small businesses, like individuals, are facing increasing difficulties finding affordable spaces in Seattle, but a committee formed by Mayor Ed Murray said one solution it opposes is commercial rent control.
The Seattle City Council had highlighted commercial rent control when it requested the mayor’s office convene a task force to look into possible regulations on commercial rents.
But the advisory committee convened by Murray ended up looking at a broader range of issues affecting commercial affordability.
On Wednesday, that committee, made up of small-business owners, developers and arts and music community members, issued its recommendations.
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Pointedly not among them was rent control.
“The Committee does not support rent control as a solution for commercial affordability,” according to its report, which cites possible “inadvertent negative consequences” of reducing landlords’ incomes while costs increase. That could lead to deferred maintenance and the depreciation of the building and surrounding neighborhood, the report says.
Rent control also “has the potential to perpetuate business models that are unsustainable” and doesn’t solve underlying problems including lack of financing for small businesses or a short supply of quality spaces, the report says.
While state law forbids cities from enacting rent-control policies on residential units, it does not clearly bar rent control on commercial spaces.
But the committee opposed it partly because “if there’s rent control on commercial property but not residential, and it’s in the same building, the developer could recoup the increasing costs over time by increasing the residential rate,” said Joe Mirabella, spokesman for the city’s Office of Economic Development.
The committee also discussed, but did not recommend, creating a legacy business program to provide promotional support, tax and financial incentives for businesses in operation for at least 20 years.
The committee said that while it backs the promotion of legacy businesses, it believes that “direct financial support using city funds would generally be restricted in Washington” due to the state’s prohibition against gifting public funds to specific businesses or individuals.
Nevertheless, City Councilmember Lisa Herbold said Wednesday she intends to pursue funding in the 2017-18 city budget to develop a legacy business-preservation program.
“Independent small businesses often define a neighborhood, and they need our help, lest they become the most recent victims of displacement as the economy booms,” Herbold said in a news release. “It would be absolutely devastating to see a neighborhood business district become exclusively chain stores.”
The committee’s recommendations to bolster commercial affordability include:
• Creating a new entity that would provide support services, including technical assistance and help in navigating city processes, to small businesses and small-scale building owners.
• Advocating for financial incentives including tax exemptions for property owners who support local small businesses.
• Making policy changes to prioritize long-term lease or sale of underutilized public property to small local businesses; encourage affordable commercial space within mixed-use developments, public spaces and transit-oriented properties; and promote small-scale commercial pockets in residential areas.
• Reducing permitting requirements for “light impact” small business projects.
Murray said in a news release that he would take several actions in the short-term, while directing the Office of Economic Development to explore implementing the committee’s recommendations.
Among the short-term actions, the mayor said the city would turn the second floor and plaza space of King Street Station into affordable food and retail space with $360,000 in funding from the federal Community Development Block Grant, and possible other matching funds.
He also committed to creating a consulting team to help small businesses and small-scale property owners with real-estate and business issues, and to partnering with a nonprofit lender to provide loans for low- and moderate-income owned microbusinesses.
The city said the actions are needed because retail rents have soared. Asking retail rents are 7 percent higher than before the recession, and 28 percent higher than the post-recession low in 2012.
Space is also getting harder to find, with a retail vacancy rate in the third quarter of 1.9 percent, down from the pre-recession rate of 4.1 percent, according to the city’s news release.
What space is available is also getting bigger — often too big for small businesses, according to the city.
About 94 percent of businesses in Seattle have 50 or fewer employees, according to the committee’s report.