The benefit of being awarded “Legacy Business” status in San Francisco is widely misunderstood and frequently misrepresented.

Businesses that apply and are approved for Legacy Business status by the City are eligible to receive a grant of $500 per full-time employee per year, capped at $50,000 annually. And landlords who provide leases to Legacy Businesses, with terms of at least ten years, qualify for a grant of $4.50 per square foot of leased space per year, up to $22,500 annually.

But beyond the aforementioned financial support or subsidy, which is provided by way of the City’s Legacy Business Historic Preservation Fund, being deemed a Legacy Business doesn’t confer any special protections.

Being a Legacy Business doesn’t doesn’t change or extend the terms of an existing lease. It doesn’t prevent a landlord from raising the rent or ousting a business when a lease expires. And it doesn’t prevent the re-development of a Legacy Business’s current home, such as for Britex or the Elbo Room.

Comments from Plugged-In Readers

  1. Posted by Bobby Mucho

    By no means should the city provide a blanket protections for every business that’s been around for more than a minute. Though, I do feel that specific sorts of business, that provide culturally focused services & goods (e.g. art & music venues, educational facilities like 826 Valencia, etc) should get more than just access to financial aid—assuming they’re a viable business with support from the general public.

  2. Posted by Stakes Is High

    It’s the 21st century. Why isn’t San Francisco, of all places, capable of generating ideas rapidly, creating an inexpensive/lean pilot program and following through with [funding] the ideas that work best?

    Also, why isn’t all of Market St and Union Square (at a minimum) filled with solar power trash compacting cans like so many other cities? We need more of this and less of paying businesses to stay open.

  3. Posted by R

    The idea of the legacy business historic preservation fund is absolute trash. We shouldn’t be giving profit driven businesses public funds. I understand the desire to preserve neighborhoods but cities are organic, changing places. Propping up old businesses is a silly waste of taxpayer dollars that would be much better spent pretty much anywhere else. If the community truly values the business, the business wouldn’t need the subsidy.

    • Posted by two beers

      Many otherwise viable long-time small businesses simply can’t afford the insane rents that landlords are now asking. There’s no “free market” when landlords have the option to sit on crazy high rents at their leisure or pull property from the market altogether, artificially suppressing supply. A landlord can do this with a paid-off property, claiming a reduction of revenue as a loss against other profits, and enjoying taxpayer subsidies like Prop 13.

      A vacancy tax is one way to get closer to fair price discovery. Considering the epic amount of vacant commercial property in SF right now (has anyone walked around the Mission, SOMA, or Upper Market lately?), this would be a way to help small businesses without going the city-funded legacy biz route, which is really just another form of taxpayers subsidizing landlords to artificially prop up rents.

      Your “organic, changing place” won’t make for a very organic walking experience when every storefront is either a chainstore, pot palace, doctor’s office, or gym/yoga salon.

      • Posted by Dave

        This vacant space is a conundrum for me. I see it on Taraval, in Lakeside Village, Ocean Ave. and large parts of the Mission. To be fair West Portal is close to fully rented out as I’m sure Chestnut/Lombard are – I never get over that way so I can’t be certain on the latter.

        Yet SF has among the lowest retail vacancy rates in the country.

        If owners leave their retail space vacant, as you mention, I assume it does not get counted in the retail vacancy stats?

        As to a vacancy tax, it might have a hard time standing legal scrutiny. Beyond that, the shifting dynamics of retail make the small independent retailer more problematic. How many independent candle shops or coffee shops or boutique clothing shops can be sustained today? Even in large metro areas.

        • Posted by Stakes Is High

          The candle shop analogy has some merit (being there is a lot of that sh*t around SF), but more and more commercial property owners have been running out longtime, profitable businesses by doubling, or in some cases, quadrupling rent for these businesses. No matter how popular, successful or otherwise worthy a retailer is there’s absolutely no rational way to navigate those sorts of increases.

          The other end of the spectrum is that SF becomes saturated with an endless supply of yoga studios, co-working spaces and CVSs.

          • Posted by Chris

            SF is already overrun by yoga studios, hair salons, and over-priced boutiques. And, this is much less a result of rent hikes (no matter how successful a yoga studio is, do you honestly think it has more cash to beat out all other tenants?), and instead is a result of of SF zoning, including chainstore restrictions. Combine this with the strong move of people buying more good online, and you end up with block after block of coffee shop, hair salon, gym/studio, real estate office–and maybe a couple of banks, bars, or restaurants thrown into the mix.

            So many SF neighborhood commercial strips look nearly the same.

      • Posted by NOPA

        The rents are high because of scarcity. And the landlord has the option to rent or not rent because its their property and they paid for it. If you don’t like that then you are welcome to buy the property and rent to whom you please. Keep in mind that commercial contracts are often signed for 10 or 20 years, so having a vacant storefront for several months while the landlord preps the space and fights a tenant that is a good fit is not out of the ordinary.

        Ultimately, I don’t understand why we tolerate the city subsidizing corporations like this. If a business can’t make it, then tough luck; change business models.

        Also, are people really now calling Prop 13 a subsidy? LOL this thinking is everything thats wrong with San Francisco. Take an economics course.

        • Posted by two beers

          So, then we agree that rents are high due to landlord-induced scarcity. We just disagree on the ethics and economic-viability of it.

          • Posted by Chris

            SF overly restrictive zoning also plays a strong role in creating vacancies by preventing certain tenants from moving in, even when they would be viable businesses and offer goods and services people would gladly buy. And, societal changes like the rise of online shopping have dramatically altered how consumers shop.

            Finally, with your own private property you owe no one anything, aside from keeping it clean and safe and not otherwise creating a nuisance, and paying your assessed taxes. Own a property is a business, like running any business, it is not like running a charitable organization. If people want charity, they can look to the many wonderful non-profits that operate locally and nationwide.

        • Posted by j ramos

          Mayor Ed Lee gave Tech companies exemption from City Payroll taxes. Legacy businesses pay those payroll taxes. LOOK IT UP. You are ill informed and your arguments carries no weight.

          • Posted by sparky-b

            j ramos,

            I think maybe you should look it, you may be the one who is ill informed.

            start here.

            [Editor’s Note: Or perhaps with the City’s page for the actual program or the mechanics of the fund, both of which are linked above.]

        • Posted by Stakes Is High

          Plenty of these businesses are viable and in many cases profitable, but can’t deal with 400% increases. Property owners should 100% be held accountable for vacancy in such a “hot market”. Shuttered spaces, sitting dormant for months (or years) on end only attract vagrants, trash and graffiti.

          • Posted by two beers

            Vagrants, trash, and graffiti are communist plots to lower my property value, and should be treated as capital offenses. OTOH, it’s my god-given right to leave my properties vacant and boarded up, making the street dangerous, and attracting the vagrants, trash, and graffiti that we must be ever-vigilant towards..

        • Posted by two beers

          “Finally, with your own private property you owe no one anything, ”

          In the normative or positive sense? Owning property is subject to many laws and regulations. Vancouver is considering a vacancy tax to deal with landlord-induced shortages that make a mockery of free market price discovery. Owning property doesn’t confer absolute rights, as you noted with your declamation against zoning restrictions. If landlords insist on acting as a cartel, don’t be surprised at legislation addressing this behavior.

          • Posted by Chris

            Did you bother to read the rest of my post? I clearly stated that a property owner needs to take care of their property and abide by the law and not create a nuisance.

            Also, how the hell is charging what the market will bear, acting like a cartel? I am sorry you dislike the free market, but that is life. Businesses open, and businesses close.

            And, again, you conveniently ignore the fact that local laws and regulations play a not so small part in why there are commercial vacancies. If the city would loosen up its restrictions a bit on chains and franchises, you would find many of these spaces would and could be filled I am sorry, I like variety, too, but even in my own neighborhood, there are MORE THAN ENOUGH pretentious hair salons, fancy coffee houses, and realtor offices. It would be nice to have a few “ordinary” stores, even though they may be one of the “dreaded” chains or franchises, which by the way, would pay taxes and hire people and likely donate to local charities, just like a non-chain/franchise would do.

            Also, you ignore the fact that times have changed. People do a good portion of their shopping online now–there simply is not the need for all of the same types of stores as we used to have in the past. Businesses need to change with the times.

            Finally, you can wait for the legislative fix you think is coming, but I would not hold my breath. I have read vague little threats that “legislation is coming” for many years from certain people like, and guess what? It never comes. Why? Because it is ridiculous. Now, I do realize the the Board of Supervisors has a history of passing more than its fair share of ridiculous legislation, and this is where the courts have frequently stepped in to shut them down.

          • Posted by two beers

            If property owners can remove their properties from the market at their discretion to restrict supply, then they are acting like a cartel, are distorting the “free market,” and are charging what a _distorted_ market that they helped distort can bear.

          • Posted by Chris

            Two Beers, you simply do not understand what the term “cartel” means. ANY business owner in ANY industry has the right to remove his or her goods and services from the market. In our society, we do not compel business/property owners to stay in business. Again, you seem to be confusing a for-profit business with a not-for-profit organization (Perhaps, you might want to spend more of your time volunteering and less time posting on discussion forums).

            Also, you keep ignoring my valid point that San Francisco’s own rules and regulations, and not just zoning rules, are a major reason why it is so very expensive to be a commercial landlord, which in turn means a good portion of these costs get passed down to commercial tenants. Furthermore, vacancies often exist because landlords are prohibited from renting to viable tenants who would provide goods and services residents and visitors would gladly purchase. It is one thing to keep a coal-belching factory out of a neighborhood, but it is quite another thing to say, “Oh, your little upscale clothing store has 12 locations, so you cannot open here, even though you sell the exact same stuff that a ‘locally owned’ store would sell, and even though you would offer the same or better salaries and benefits to your employees.”

            In addition, you keep ignoring my point about how online retail has drastically changed consumer shopping habits and the need for certain types of stores. Some “legacy” businesses will simply go out of business because they are no longer needed. At the end of the day, rent increases have nothing to do with it. For example, all across the world (read the NY Times, London Times, Indianapolis Star, etc.) gay bars are closing because Grindr and other on-line dating apps, along with changing social attitudes, have eliminated one of main reasons for their existence. Gay bars in Indianapolis are certainly not closing because of rent increases.

            So, rail all you like about your imagined “cartels.” I would look elsewhere for solutions, and the first place I would start is with rolling back some of San Francisco’s overly restrictive regulations on property use. And, no, I am not advocating a free-for-all. There are many examples of cities that have reasonable zoning and other property controls without creating unduly burdensome regulations and controls.

          • Posted by anon2

            People can act in concert without necessarily conspiring with each other or forming a cartel. They may just all be following the same conductor. In this case, the conductor is a common financial dynamic.

            If you are offering a long term lease in a strongly rising market (commercial leases or rent controlled residential) you do have an incentive to hold your product off the market to avoid getting trapped in a below market long term contract. This common dynamic reduces supply, which feeds back to put further upward pressure on prices. When prices decline this dynamic reversed and extra supply gets thrown into a already declining market.

    • Posted by spencer

      totally agree. if a for profit business can’t survive on its own, then it should fail. a better business will take over the space and we will all be better for it. should we bring back legal movie rental businesses and prop them up? lets look forward not backwards

  4. Posted by Kraus

    The last gun shop in SF, “High Bridge Arms” would definitely have qualified as a “legacy business” yet it was run out of business by the City — in order to be replaced by a pot dispensary. I guess some “legacy” businesses are deemed more worthy than others.

    • Posted by barnesto

      to be fair High Bridge Arms was run out of town due to over-regulation not a rent increase.

      “High Bridge Arms, the city’s last gun shop, is closing because of a new city ordinance that requires gun sellers to video-record all commercial firearms sales, as well as give the Police Department weekly updates on ammunition sales. The legislation, sponsored by Supervisor Mark Farrell, is symbolic of the city’s enduring distaste for what was sold inside.”

    • Posted by Stakes Is High

      As they should be. In no way should it be a universal acceptance system. Businesses should have to meet criteria (whatever it’s supposed to be).

      • Posted by spencer

        and every pot business should certainly be run out of SF for attracting crime

  5. Posted by Patrick

    I should be able to get a free drink at the Elbo Room, seeing as my property taxes are paying their rent.

  6. Posted by S. B.

    What is not mentioned in this post is the writer’s motivation for attacking the program. Who cares if there are businesses that receive a minor amount of money from SF? The City throws grant money around to nonprofits with oversight that ranges from poor to non-existent.

    The City’s main business is tourism, and tourists like old businesses that have been around for a long time. You get it back in sales tax revenue many times over (or our exorbitant hotel tax). Hotel occupancy in SF is 20% above the national average. Pretty sure they’re here for the Buena Vista and not Boba Guys.

    • Posted by SocketSite

      We’re neither attacking nor condemning the program. But we are trying to debunk some myths and misunderstandings as to how the program actually works, the benefit of being deemed a Legacy Business and the protections it does not afford.

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