NYT Report: 9 of Every 10 Restaurants and Bars in N.Y.C. Can’t Pay Full Rent

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By Jerri-Lynn Scofield, who has worked as a securities lawyer and a derivatives trader. She is currently writing a book about textile artisans.

Like many New Yorkers, I cannot begin to imagine the place without a thriving restaurant culture.

This is just another respect in which the COVID-19 pandemic has hit the city hard and despite dropping COVID-19 numbers, there’s no end for the restaurant industry in sight

According to the New York Times, 9 of Every 10 Restaurants and Bars in N.Y.C. Can’t Pay Full Rent:

The ongoing travails of the industry were underscored by a survey released this week by the New York City Hospitality Alliance, which found that nearly nine out of every 10 dining establishments had not paid full rent in August and that about a third had not paid any rent.

Outdoor dining alone has not replaced any meaningful proportion of lost revenues. Yet nor will the much touted return of indoor dining at reduced capacity begin to solve the problem either. According to the NYT:

Even as the city prepares to allow indoor dining at 25 percent capacity on Sept. 30, that may not be enough to reverse the steep economic slide of one of the city’s key industries. With the lack of tourists and office workers, many restaurants, particularly in Manhattan, are on the brink of collapse, posing a big obstacle to New York’s recovery.

The 87 percent of restaurants that said they had not paid their entire August rent was an increase from the 80 percent that reported not paying all of their June rent. The survey was based on responses from 450 of the 2,500 businesses that make up the alliance’s membership.

The resumption of indoor dining at reduced capacity will allow restaurants to welcome more diners, but some owners said that would not be enough to offset the loss of outdoor dining because of cold weather or the end of the city-permitted program on Oct. 31.

We seem to have lots our way policy-wise. At the same time as the UK government has provided funds to encourage  customers to dine out, New York dithers about incremental changes that would encourage continued outdoor dining:

Mayor Bill de Blasio said on Tuesday that there would be an announcement about the program in the coming days, though it was unclear if that meant an extension. “What makes sense?” he said to reporters. “What doesn’t make sense? How will that work?”

City Hall officials declined to provide any more details. Among other issues, regulations limit the types of heating devices that can be used to keep outdoor spaces warm.

The city should allow restaurants to use portable propane heaters, which are currently banned, said Andrew Rigie, the executive director of the hospitality alliance. He said heaters hooked up to natural gas lines were permitted but were expensive to install and required special permits.

With policymakers focusing on such small ball strategies, is it any winder NY restaurants are in such a state?

To be sure, the major blow comes from the disease itself, but NYC seems to be doing its best to make things worse and drive the maximum number of bars and restaurants out of business.

But the evictions crisis is not an easy problem to solve. And on solving that problem turns the question of the survival of so any bars and restaurants. Over again to the NYT:

Mr. Rigie cited several reasons that restaurants were still facing persistent financial difficulties.

Socially distanced outdoor dining brings in only a fraction of what a restaurant’s typical income might be, and many establishments were already having a hard time making a profit. Many restaurants are still trying to pay rent owed from the months when they were shut down, making it even harder to cover rent in more recent months

Federal aid through the Paycheck Protection Program, which was meant to help preserve workers’ jobs, offset some costs, but that has mostly run out. The inability of restaurants to pay rent has also dealt a severe blow to many smaller landlords, who have their own bills to pay.

“This commercial rent crisis is not going anywhere, and it’s continuing to get worse, and we need to deal with it in a thoughtful way,” Mr. Rigie said. “Otherwise, we are going to see more defaults throughout the system and more loss of our beloved restaurants and bars and fewer jobs and opportunities for New Yorkers.”

This is not just an issue driven by the greed of landlords. Many smaller landlords are themselves financially stressed and absent federal or state intervention, cannot themselves afford to provide rent relief. According to the NYT:

Whether a restaurant is able to pay rent often hinges on whether landlords and tenants can make deals. About 60 percent of the businesses that responded to the alliance’s survey said that their landlords had not waived any portion of their rent.

Jay Martin, executive director of the Community Housing Improvement Program, which represents about 4,000 landlords who own rent-stabilized apartment buildings, including buildings with commercial units, said some landlords were not waiving rent because they had exhausted their ability to give people a break.

Landlords are struggling to pay mortgages and property taxes, and their income is dependent on rents’ being paid in full.

“We’re at margins that are very thin,” he said.

I cannot even begin to sketch a solution. But I do know to do so requires much more than allowing propane space heaters for outdoor diningin New York city.

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