Do regulations hurt or help business?

Published on Winchester Sun, June 6, 2019

Recently in this column, I talked in a very upbeat way about Winchester’s re-emerging downtown business district.

Despite the excitement and the gains made in recent years by our downtown business community, I’d have to say it’s been a mixed bag.

It seems for every new business that opens on Main Street, another closes its doors.

Just last week, one of our major purveyors of antiques and collectibles closed its doors for the last time.

Businesses come and go for a variety of reasons. A community cannot control all of these variables. But there are things a community can do to ensure all businesses have the best chance to thrive.

One thing they should not do is shoot themselves in the foot by making well-intentioned but misguided mistakes that wind up hurting everyone.

I know of at least two business people who fled downtown because their landlord refused to adequately maintain the building they were occupying.

I thought about this as I recently read an enlightening article by Jeff Siegler. The focus of Siegler’s article was the notion reducing regulations creates an environment conducive to more investment in business districts, particularly downtown.

Here in Winchester, there is a perception — whether true or not — that building codes are not adequately enforced. Usually when discussing this, people are talking about maintenance issues on older buildings in the downtown area.

Whether it’s through writing regulations or enforcing them, some government and civic leaders seem to think easing the burden of property owners will spur more investment and growth.

Siegler begs to differ — he claims just the opposite. Business owners are risk-averse; that is, they seek to minimize potential risks in evaluating investments. If they know their investment is protected by well-conceived and enforced regulations, there is less danger of seeing their investment lose value.

For example, suppose you buy a neglected but grand old building downtown — either to start your own business, or as a rental investment. You buy the property and spend potentially much more money in restoration work to get the building ready to occupy and start generating revenue.

But once open, you find your neighboring property owners are failing to maintain their storefronts. Suddenly, your investment is at risk: a declining neighborhood brings down everyone’s property values.

No one likes to shop in a dilapidated neighborhood.

Government leaders must walk a fine line between over-regulation and not enough.

Many communities have swung too far in the “not enough” category in a desperate attempt to revive their dying central business districts. Yet in most cases, the results are underwhelming.

But it doesn’t have to be that way.

You buy that building and you begin to restore it to its former glory. Along the way, you discover your town has enacted specific rules on how that restoration must take place, and those rules are strictly enforced. Now you may be required to invest a bit more in your project.

But once done, you look around you and see the entire block is as visually appealing and well-maintained as your restored gem. Entrepreneurs want to open businesses on your block and consumers want to shop there. Rents go up. Your investment is paying off.

Best of all, you have confidence your property value will be maintained and the area will continue to thrive. And it’s all because the town leaders made the decision to set up tough but sensible regulations — and to strictly enforce them.

We have a few shining examples of property owners who have successfully rehabilitated properties in our downtown core. I haven’t polled any of them, but I’m willing to make a bet.

I say those that have poured both money and sweat equity into their properties are willing to accept reasonable regulations. These are savvy entrepreneurs who understand the value of a well-maintained shopping district.

Good regulations strictly and fairly enforced are a boon to entrepreneurs, not a hindrance.

But there is one particular type of investor who prefers towns and neighborhoods with few regulations and lax enforcement. Some call them slum lords.

Left to their own devices, these people will buy up all the blighted property they can get their hands on for next to nothing. Then they will rent them for whatever they can get and do nearly nothing to maintain them, either visually or structurally.

Pretty soon, the whole neighborhood is a collection of dilapidated buildings, vacant storefronts, and rampant crime.

If we’re being completely honest here, parts of our downtown core are teetering perilously close to this outcome.

Final thought: I’m still bullish on the future of Winchester’s Main Street. Many businesses and individual investors have staked their future on a positive outcome. But frankly, it could go another way if we aren’t vigilant. Which future will we see?

Pete Koutoulas is an IT professional working in Lexington. He and his wife have resided in Winchester since 2015. Pete can be reached at pete@koutoulas.me.

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