New York City has been the symbol of opportunity and freedom since the 1800s. It has endured two recessions, the global financial crisis, and the tragedy of 9/11 to remain the global center of cultural and economic activity. The city is diverse, with more than 800 languages spoken across a metro-area population of 19.8 million people and more than 8.3 million living within the city.
New York City is the largest metropolitan area in the United States. The city is the commercial center of the country and the magnet of entertainment, fashion, finance, media, and culture, with dozens of the world’s top publicly traded companies headquartered in New York. The region’s economy generated $1.35 trillion in gross metropolitan product in 2012—larger than that of Spain. The economy is growing annually at a rate of 3%, which outpaces the growth rate of the U.S. economy and other developed countries. New York City and its economic and cultural communities recognize the challenges that the city faces.
Benchmarking Against Others
Among the cities under review, the 2014 Regulatory Climate Index ranks New York City in 10th position, with the first place representing the most efficient regulatory environment.
New York City is below the average performance of the 10 cities covered in the report in 2014. The largest city in the United States is also the most burdensome for small businesses and entrepreneurs across areas of business regulation.
What New York City is Doing Well
- New York City has a fair environment for businesses when they have to deal with construction permits. The city has invested in improving the efficiency of its zoning regulation and construction permitting process. Permit costs are slightly more than 1% of total construction costs. In addition, New York City has developed a com- prehensive statistics portal to access detailed information on construction permits in the city.
Where New York Needs Improvement
- Starting a Business in New York City is a straightforward process; however, city law requires that the company post two advertisements in local newspapers regarding the new business. This is an antiquated law and unique to New York City among the 10 cities covered in this report.
- New York City receives the lowest marks for Registering Property, which is driven by a high number of procedures, time, and cost. Transferring the sale of a commercial property in New York City is a very costly process and nearly $200,000 more expensive than the closest city on the Index. The cost is a result of high rates for real estate transfer and real property tax. Furthermore, New York City is the only city in this report that requires a mortgage recordation tax.
- New York City ranks last in Enforcing Contracts. Business owners are saddled with a high number of procedures, wait times that can exceed a year and a half, and high administrative costs compared with the other cities in the report.
- Entrepreneurs and small businesses face a moderate tax burden in a city where the cost of doing business is already high. Small businesses in New York City are subject to high corporate and employment taxes.
New York City is an economic and cultural powerhouse. New York City has emerged as a hot spot for start-up technology companies—an East Coast counterbalance with the financial wherewithal to match Silicon Valley. Applied Sciences NYC, Cornell Tech NYC Campus, Columbia Institute for Data Science and Engineering, and New York University’s Center for Urban Science and Progress have all developed programs to spawn the next class of urban-focused über-technologists. These efforts show the commitment of the city, business community, academia, and other parties to making innovation a critical driver of economic growth.
Despite New York City’s prominence as the largest urban economy, it is encumbered by increasingly high costs of living and doing business. These costs are 1.5 times the national average. These challenges are reflected in data from the Partnership for New York City on the scaling of small companies in the city. Research shows that between 2003 and 2010, New York City saw no net growth in the number of firms with 50 or more employees. Moreover, of the 220,000+ businesses in the city, 88% have fewer than 20 employees. The Partnership also found significant challenges for business with local employment regulations.
The city government, business community, nonprofit organizations, and professional organizations have banded together to work through the challenges. New York City has become a global leader in reaching its citizens through digital channels and engaging with constituents on city issues. The city has passed legislation to eliminate unnecessary regulatory burdens on small businesses and has created a direct channel to communicate with the city’s Commissioner of Small Business Services. Moreover, businesses cite the tax and regulatory burden as excessive in the city. Job creation and economic growth depend on a strong partnership between government, the private sector, professional organizations, and educational institutions; New York City is on that path.
Overall, New York City has a poor performance in the assessment across 5 areas of business regulation benchmarked against the 10 cities in the report. Entrepreneurs and small businesses face a number of procedures for compliance and high adminis- trative costs to comply with regulations in the city. These regulations are already on top of expensive costs of doing business. New York City is 10th in the overall ranking and should intensify its efforts to make local regulations more welcoming for small businesses and entrepreneurs.