Small Businesses Kept New York Alive. Now Their Rent is Surging.

A yak-hide championship belt hangs in Yamuna Shrestha’s restaurant in Jackson Heights, Queens, where her momos — pillowy meat-filled dumplings from Nepal — have four times been voted the best in the borough.

But the business, Bhanchha Ghar, which opened in a modest storefront beneath the 7 train shortly before the pandemic began, owes more than $150,000 in back rent. Covid restrictions closed the store for months in 2020, and business was slow to recover. While Ms. Shrestha chips away at the debt, she pays her landlord more than $13,300 a month in rent — an 11 percent increase since 2019.

“The rent goes up every year, and it feels unfair,” Ms. Shrestha said in Nepali, during a recent 18-hour workday. “If I could save, I would have paid it back already.”

Three years after the pandemic flattened the Manhattan office market and the commercial ecosystem that depended on it, small businesses in the other boroughs are facing the biggest rent increases in the city, as storefront rents in Manhattan are falling. The burden is landing mostly on store owners in predominantly Black, Latino and Asian neighborhoods, according to a new analysis of Department of Finance data.

Now, the owners of many of those small businesses, many of whom did not qualify for pandemic-era public loans and grants, worry that sharp rent increases and a lack of protections for commercial tenants could shut down their stores, just as the economy is gaining momentum. These businesses helped fuel the city’s recovery while the rest of the economy faltered, and many store owners say they fear they will be left out of the resurgence.

At risk, they say, is the soul of the city: the minority- and immigrant-owned businesses that create a path to the middle class and provide hard-to-find goods and services in ethnic enclaves.

“For the first time in New York City history, their existence is being threatened,” said Annetta Seecharran, the executive director of Chhaya, a nonprofit community development group. “Their No. 1 problem is rent.”

From 2019 to 2021, the latest year for which data was available, the median storefront rent per square foot jumped 23 percent in Brooklyn, 14 percent in the Bronx and 9 percent in Queens; rent was flat on Staten Island and down 11 percent in Manhattan, according to an analysis of Department of Finance data by the Association for Neighborhood and Housing Development, a nonprofit housing coalition.

In districts where the rent rose, people of color made up 72 percent of the population, the analysis showed, raising concerns about displacement and gentrification.

“As these businesses get drowned out by this tide of rising rent, culture disappears,” said Paula Segal, a lawyer with TakeRoot Justice, a nonprofit legal services group.

The neighborhoods that had the biggest storefront rent increases included the Rockaways in Queens, where monthly rents rose almost 38 percent, and several neighborhoods in the Bronx, including Concourse and High Bridge, where they rose 33 percent, the analysis showed.

Before the pandemic, a 3 percent annual rent increase was typical, real estate agents said.

Rent fell the most in Lower Manhattan, where they dropped nearly 17 percent, according to the report, which analyzed rents based on City Council districts.

“Early in the pandemic, people talked about these huge discounts tenants were getting,” said Lucy Block, a senior research and data associate with the group. “In Manhattan that might be the case, but that’s definitely not happening in the outer boroughs.”

And the rent continues to climb. In a survey by the Association for Neighborhood and Housing Development of more than 100 small businesses in Queens, the Bronx and the Lower East Side of Manhattan, rising rent was the top concern, with nearly two-thirds of business owners saying their rent rose at least 10 percent last year, according to Gina Lee, a program coordinator with the group.

A spokeswoman for the mayor’s office said in a statement that the city was “doing everything we can to make sure small business owners are able to keep the storefronts they worked so hard to build,” including the Commercial Lease Assistance Program, which provides free legal services to small businesses. The program has helped nearly 2,000 businesses with their leases, she said.

The rise in rents coincided with a surge in the creation of new businesses, especially outside Manhattan, where commercial corridors were reviving faster than districts reliant on office workers, according to an analysis of U.S. Chamber of Commerce data by the Center for an Urban Future, a public policy think tank.

Applications for new businesses jumped 30 percent between 2019 and 2021, said Jonathan Bowles, the group’s executive director. The largest increase was in the Bronx, which saw a 66 percent jump.

The trend continued last year, according to the city’s Economic Development Corporation. There were 279,488 businesses in the third quarter of 2022, a 4 percent increase from the same period in 2021, with the fastest growth seen outside Manhattan. Collectively, small businesses provide 26 percent of New York City’s jobs, the E.D.C. says.

“The pandemic really unleashed this wave of entrepreneurship,” Mr. Bowles said, in part because so many workers in industries like retail and hospitality lost their jobs and saw an opportunity to be their own bosses. “But it’s far from a given that most of these new businesses will be able to survive and grow.”

Anwar Althary, 46, a Yemeni businessman who owns cafes and juice bars in the city, said there was a brief period early in the pandemic when landlords were offering discounts. He took advantage, opening his newest shop, Hemo Cafe, in Bay Ridge, Brooklyn, in 2020, renting a space that could have commanded around $1,000 more per month.

But last year, a new landlord bought the building next door, which is home to another business that Mr. Althary operates. He is concerned that the owner will raise the rent and make him pay a portion of the property taxes.

Mr. Althary already owes substantial back rent across his businesses, he said, because of pandemic disruptions, and he was forced to permanently close two of them last year. He said he applied for an loan through the Small Business Administration to help pay down the debt, but did not qualify, because he was missing paperwork.

“I have a mountain on my chest,” Mr. Althary said in Arabic.

He was not alone in being turned down. The federal agency received just over 1 million loan applications for its pandemic relief program in New York State; only 339,000, or less than a third, were approved, according to an agency spokeswoman.

Somia Elrowmeim, a board member with the Alliance of Yemeni American Businesses, said many immigrant-owned businesses did not qualify for public grants and loans because they did not keep sufficient payroll records and in some cases employed undocumented workers.

Unlike some residential tenants, store owners who rent their spaces have no right to renew their leases and are not protected from large rent increases when they expire, said Rolando Gonzalez, a lawyer with the Legal Aid Society.

Many store owners, especially in immigrant communities, operate on monthly lease agreements, Mr. Gonzalez said.

Christian Ramos, 43, the owner of Blue Chus Shoe Repair in the Kingsbridge section of the Bronx, said that he and most of his neighbors had month-to-month leases.

He has been in the same spot for 19 years and said he was current on his $3,500-a-month rent. But he recently had to pay back $12,000 in arrears that accumulated when sales slowed because of the pandemic. He did not qualify for a public grant, he said, because his business did not make enough revenue.

Instead, he paid back the debt by setting up tables outside of his store, selling shampoo and other household products. “I basically had to start a second business,” he said.

He worries that new development could spur landlords to seek out higher-paying tenants, at the expense of longtime merchants.

“We’re fine for now,” he said, “but I don’t know what will happen later.”

Some store owners feel that as the city gets back on its feet, they are being overlooked, said Nancy Martinez, the chair of REMA 4 US, a merchants’ group in Far Rockaway, Queens.

“It’s like they’re trying to move everybody out,” she said, referring to a burst of new residential development in the area that forced street closures and hurt local businesses.

The resulting loss of foot traffic, coupled with Covid restrictions, led Jeanetth Hutchinson to close her long-running Far Rockaway flower shop at the start of the year, to settle about $19,000 in rent arrears.

Ms. Hutchinson, 64, said she still wanted to work, but her industrial refrigerator was lost when she vacated the store, which makes storing flowers difficult.

She said she hoped to set up a sidewalk table to sell what she can, but she can’t afford the monthly rent at nearby storefronts, which start at $1,000 more than what she was paying.

“You just cannot survive,” she said.

For Ms. Shrestha, the Nepali restaurant owner, paying down her six-figure debt is a means to another end: reuniting with her two children, whom she hasn’t seen since leaving Nepal in 2008.

Ms. Shrestha has legal permission to work in the United States, but her immigration status is “withholding of removal,” a kind of limbo that would bar her from re-entering the country if she were to leave. She said she was turned down for an $83,000 loan from the Small Business Administration because of her immigration status.

Once she is able to pay down the store debt, she can refocus her attention on bringing her children to New York, she said. “I want to be together with my family — that’s my main concern.”