Atlanta Is the Latest Big City To Support Legacy Businesses

Friedman’s Shoes, established in 1929. The Busy Bee Cafe, 1947. Zesto’s, 1949. Walter’s Clothing, 1952. Manuel’s Tavern, 1956. Southwest Paint & Decorating, 1973. Criminal Records, 1991.

These iconic small businesses in Atlanta have survived multiple wars, multiple recessions, urban renewal, the 1996 Olympics and the global financial crisis. For Atlanta City Council Member Jason Dozier, these are just some of the legacy businesses that have come to define the city itself – and now they need the city’s protection to keep enduring.

Lately, these and other long-established local Atlanta businesses are facing a wave of speculative investment capital that’s wreaking havoc in the city’s real estate market, not just in housing but also in commercial real estate. And that’s on top of the impact that COVID-19 has had on small and local businesses, from rental arrears that piled up during the height of pandemic shutdowns to shifts in longstanding patterns of where potential patrons shop and eat.

That’s why Dozier spearheaded legislation, which passed Atlanta City Council unanimously in August, to create a new Legacy Business Program that promises support to protect long standing businesses that have “contributed to the history, culture, and identity” of Atlanta.

Working with the Atlanta Department of Finance, Dozier determined that Atlanta had around 500 businesses that are at least 30 years old. Many, though not all, are Black-owned. All were established while Atlanta was still a majority-Black city, which hasn’t been the case since 2021.

“I have a barbershop that’s about to celebrate 50 years in my district as well,” Dozier says. “There were other businesses that have closed that unfortunately didn’t stand the test of time as much as we would like them to, so there’s this recognition that the ones we still have today, we want to make sure they can last the test of time going forward.”

The stakes of protecting Atlanta’s legacy businesses, especially with the FIFA World Cup around the corner, just gained a bit more clarity. The presence of Black-owned businesses in a neighborhood correlates with improved wellbeing for the children in that neighborhood, according to a new report from the Atlanta Wealth Building Initiative, published the day after Dozier’s legislation passed. The report recommends several measures to protect those businesses, including the establishment of a legacy business program.

“When you think of the business as an asset to the community, you begin to realize that it isn’t just about profitability,” says researcher Jarryd Bethea, primary author of the report. “It’s about how [business owners] embed themselves and interact with the community. Black children being able to see professions they could be in. It also provides local employment for the individuals living in that community, so they have more educational attainment and maybe are spending less to even get to work.”

How cities are protecting their legacy businesses

San Francisco became the first city to create a legacy business program back in 2015. Since then, the city has added around 400 local businesses to its legacy business registry. Restaurants or bars and entertainment venues are the most popular category, with 107 establishments listed in the registry. There are also 19 grocery stores, 12 clothing stores, 11 coffee shops, 10 bookstores and six ice cream shops.

Getting listed in San Francisco’s legacy business registry makes a business eligible for marketing support from the city; technical assistance for everything from finances, grant applications, legal, marketing, real estate, zoning, succession planning to other business challenges; and “rent stabilization grants,” payments that go directly to landlords in exchange for extending long-term leases to legacy businesses. Criticism of the San Francisco program’s structure has led the municipal government to consider changes requiring landlords share at least a portion of the rental assistance grant with tenants, the San Francisco Chronicle reports.

More recently, Los Angeles, Denver, San Antonio, Boston, D.C. and Laurel, Maryland have all launched legacy business programs.

“I’ve just seen a huge takeoff in the last several years of a lot of cities catching up and starting new initiatives in this area,” says Dr. Willow Lung-Amam, director of the Small Business Anti-Displacement Network, a project of the University of Maryland’s National Center for Smart Growth Research and Education.

“[What the pandemic] continues to show us in real-time is the vital role of small businesses in communities, and that they are an essential asset and something that is worth investing in and keeping,” Lung-Amam says.

“If you lose residents, you’re going to lose small businesses. If you lose small businesses, you’re going to lose residents. If you lose the nonprofits and the vital anchor institutions in your neighborhood, you’re going to lose all those things, too.”

The new legacy business program in Atlanta will start out very small. Dozier’s legislation only allocates $900,000 in funding — just $300,000 in new city dollars, along with $600,000 from funds previously set aside under an earlier grant program for commercial storefront improvements. Both grant programs will be implemented by Invest Atlanta, which is currently drawing up the legacy business program rules.

Dozier’s bill authorizes Atlanta’s legacy business program to assist businesses that have been in operation at least 30 years — a point of criticism for some who believe it should cover businesses in the 15 to 2o year range.

Denver and Boston support legacy businesses at just 10 years old. Los Angeles and San Antonio support businesses at least 20 years old. San Francisco, the first such program, supports businesses at least 30 years old, but it now operates alongside an “anchor business” program that supports businesses that have been around for 15 years.

Why legacy businesses are particularly vulnerable

A lot of it has to do with the peculiar nature of commercial real estate, retail and storefronts. Typical commercial leases run for 10 to 15 years, if there’s a lease at all. Often there’s just a handshake agreement between the tenant and the landlord — in those cases, especially, the landlord is likely local or still has a sentimental connection to their old neighborhood. If the landlord likes the business, has a personal relationship with the business owner, and the business owner reliably pays rent, a handshake agreement can last decades. Pandemic shutdowns strained and even disrupted many handshake agreements.

Things can change quickly if a landlord wants to sell the building. They might be willing to give the tenant a shot at buying the property, assuming it’s something manageable like one or two storefronts and maybe a handful of apartments at most. The tenant may or may not be able to access the capital to acquire the property. Women and people of color still face disparities in small business lending relative to their white male counterparts.

In anticipation of a sale, a landlord might want to jack up the rent on a storefront tenant, making the building more valuable to potential buyers. Or after a landlord sells, the new owner may not wish to acknowledge the previous owner’s handshake agreement or may wish to jack up the rent to whatever they think the market can bear.

Different pathways lead to the same result. It’s easy for landlords or investors to evict commercial tenants or demand exorbitant rent hikes that longstanding businesses can’t afford, or at least they can’t afford those rent hikes right away without some investment to grow the business, which takes time.

Commercial tenant rights — such as rights to a lease renewal, reasonable notice of rent increases, or commercial rent stabilization — have been mostly nonexistent until recently. California just passed new legislation creating statewide commercial tenant rights. Commercial tenants also have some rights in New York City created by local legislation in 2016 and 2019, as well as in LA County in 2022. New York City did have commercial rent stabilization in place from 1945 to 1963. It was a state law, and legislators allowed it to expire.

“We need to extend our political imagination into what is possible, and stop drawing these distinctions between people deserving a right to housing but [not having] a right to start a business [in their own community],” Lung-Amam says. “If we’re trying to protect a community and stabilize a community, we have to be thinking about community and its multiple dimensions.”

While legacy business programs usually offer some kind of grant, which may go to cover storefront improvements or payroll, it’s not always the case that it can go toward some form of rental assistance, even though that’s often the most urgent need.

“There’s a real reluctance to support rent relief for small businesses, because [public officials] feel like businesses are sort of market-driven, and they either grow or die on their own devices, and housing is different somehow,” Lung-Amam says. “​​I heard many, many times, ‘We don’t want to subsidize a bad business.’ Well, how do you determine what’s a good business and a bad business?”

It’s reasonable to expect rents to go up over time, and it’s common for small businesses to expect and plan for rent increases. But why would a landlord believe they can charge rents that go beyond what a long-time tenant might anticipate or be able to afford since 10-15 years ago — the last time they negotiated a lease or a handshake agreement? Many other factors can change over that timeframe, and some things are designed to change faster than others.

A business created decades ago established itself under economics that have shifted dramatically, and not just because of the pandemic. Since the 1996 Olympics, relentless boosterism from city leaders, the real estate industry and corporate magnates have pushed the idea of Atlanta as a “global city.” To add fuel to the fire, the plodding construction of the Beltline has attracted waves of speculative investors along the planned 22-mile loop of parks and transportation infrastructure built largely along former railroad lines — even where construction hasn’t started yet

As of May 2024, the U.S. Government Accountability Office estimated that institutional investors own 25% of Atlanta’s single-family rental housing market, higher than any other major city. The standard buy low, sell high playbook puts a target on Black neighborhoods, since real estate in Black neighborhoods is typically valued lower than in other neighborhoods, including commercial real estate.

Racial disparities

In its new report, the Atlanta Wealth Building Initiative found that commercial rents are indeed going up everywhere in Atlanta — but they’re rising faster in Black neighborhoods relative to white neighborhoods. From 2013 to 2023, the average commercial rent per square foot in majority-white Atlanta neighborhoods went from $24 to $39, while in majority-Black neighborhoods rents nearly doubled, going from $12 to $23.

The potential for profiting from a speculative transaction can be high enough that an investor may see it as more lucrative to keep a storefront vacant after jacking up the rent, in anticipation of selling later at a higher price based on higher rent or even just potential for higher rent. Even the troubles in the broader commercial real estate market after COVID-19 haven’t dampened speculators’ expectations of profit, says Avery Ebron, who works at The Guild, an Atlanta real estate development group specializing in community-controlled projects.

“Folks are leveraging that space for perhaps a greater windfall in the future,” Ebron says. “It’s just about making that profit. So they’re okay holding those places vacant, holding high rents, and it’s not going to change. And the World Cup is coming in 2026, so I think there’s sort of an expectation around there.”

Meanwhile, racial wealth disparities leftover from slavery, Jim Crow, redlining and mass incarceration mean Black businesses owners don’t have the same level of access to capital to acquire their own spaces or adjust to the market. Personal net worth has always been one of the biggest indicators of access to capital. According to the Atlanta Wealth Building Initiative, white households in Atlanta have 46 times more wealth than Black households — a net worth of $238,555 for white households versus $5,180 for Black households in Atlanta.

Community banks can use their local knowledge and relationships with local business owners to make loans other banks won’t make based on personal net worth. But community bank lending remains deeply segregated. Out of 19 community banks in the Atlanta area, where Black residents are still the largest segment of the population, 13 community banks are white-owned, and only one is Black-owned.

In addition to rental support, Dozier hopes that Atlanta’s new legacy business program will eventually be able to provide monetary support as well as one-on-one support for legacy businesses to acquire their spaces.

“A lot of these businesses don’t always own the building that they occupy, and they often have to rely on the whims of the market,” Dozier says. “My hope, especially in the early stages of this program, is that as it matures and evolves, that part of the technical assistance and part of the financing assistance we’d be able to provide to businesses will be to acquire the building in which they are currently located.”

Ebron says the new program is a solid step in the right direction.

“A lot of times, these programs enable the city to hear those needs and learn more and how they could go deeper to support these businesses, and I think hopefully that happens with this.”