When Capitalism Fails Local Business

Prairie Dog From the February 2022 issue of  The Prairie Progressive, Iowa’s oldest progressive newsletter. The PP is  funded entirely by reader subscription, available only in hard copy for $15/yr.  Send check to PP, Box 1945, Iowa City 52244. Click here for archived issues. Published with permission.

by Karen Kubby

I am mad as hell. A particularly ugly form of capitalism has bitten me in the ass.

Most  forms of capitalism are ugly. Some are more deeply damaging than others. This is a personal story about my small business in downtown Iowa City. It is not uncommon. When I zoom out from my own experience to see the community consequences, I see many paths for downtown Iowa City and other successful commercial areas. This can happen in an urban area like Iowa City. It can also happen on main street in a smaller community.

This is a story of many small local shops coming together to make improvements to a  commercial district. Organizing and planning, being willing to tax ourselves more to have  the resources necessary to keep the downtown clean, green, safe, and to coordinate events. I have always had a fear that the work done to improve the area where I lease commercial property would result in my small business being priced out of the area. That our  investment of time, money, and energy would result in higher values, increased speculative purchasing, higher taxes that go along with increased value, and higher rents. My fear was realized when my long-term lease was up and the property I leased was sold for an amount almost double its assessed value. The result was that the landlord wanted three times the rent and twice the amount of property taxes.

I realize that the assessed value of certain properties in downtown Iowa City may be lower than its market value. I doubt the market value is twice the assessed value. My conclusion is that my new landlord overpaid for this property as speculative investment.

From conversations with my landlord, I believe he does not care about the overall mix of  businesses in the area, does not care about the consequences of a move on my business, does not care that I got the taxes on that property reduced by 40% in perpetuity because I am a local government nerd and encouraged the previous landlord to apply for a certain tax category within the small window of opportunity in which it was provided, does not care about downtown Iowa City losing a champion of the area, does not care that some cultural flavor has been lost to downtown. He does not have to care. He owns the property.

He didn’t do anything illegal. He had the right to not renew my lease. He has the right to ask whatever rent he wants. Yet he is wrong. My larger concerns about how wrong he is are not just about my business.

I landed on my feet because I am flexible, creative, innovative, and most importantly, stubborn. Another important factor in our survival was the contribution of many volunteer hours. Volunteers helped us pack, physically move, and unpack. No small feat for a store with 240,000 different products, some as small as 2mm.

The landlord at our new location worked with us as a partner to get us into the new space, to help with the build-out, to negotiate a lease that would work for both of us. There are some landlords that see the larger picture and value the local economy.

These larger concerns are about this scenario being repeated throughout the area. One, because this property owner has paid a price far above the assessed value for quite a few
properties downtown. Two, because if he is successful at increasing rent so steeply, other landlords will take notice and follow suit. This puts many small locally owned businesses at risk once their leases are up. It will disproportionately affect women-owned and minority-owned businesses as we are less likely to own downtown property.

If what happened in my case is repeated, there are four likely results. 1) Spaces stay empty. Vacancies are not good for adjacent businesses, that block, or for the entire downtown. It interrupts the flow of activity. 2) Somebody pays this high rent thinking they can make it. Many won’t. It does not matter. That anyone paid this rent for one day makes other landlords take notice. The spot will turn over. Ever changing tenancy is not good for neighbors or the whole of downtown. It makes it hard to market the area and to form an identity. 3) The folks who can pay this higher rent are larger corporate entities. We may see more national brands in our core commercial area. This results in loss of local flavor, less money invested in local banks, and decreased gifting to local non-profits—the Walmart Syndrome of death and decay. 4) A local shop can successfully make it agreeing to this artificially high rent. This is the least likely scenario.

My old landlord tied up a lot of money and paid a higher than market value for buildings that might remain vacant. His lenders may treat him the way he treated me. The capitalist system may bite him in the ass, the way it bit mine.

—Karen Kubby is a democratic socialist business owner of Beadology Iowa, a 35-year full-service bead store just south of downtown Iowa City. Her previous landlord is Tracy  Barkalow and her current landlord is Jeff Clark.

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2 Responses to When Capitalism Fails Local Business

  1. Lauren says:

    I wondered why she moved. Obviously, she’s pissed at having to move, but she’s also right.

    Sent from my iPhone Lauren Robinson Tiffany



  2. Ed Fallon says:

    Great stuff, Karen!! So true.


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