The A.O.B.A. operating cost studies show the average rental rate for a 1,000 sq. ft. unit is presently $265.00. Thus, it is easy to see that our new unit renting for $434.00 will be entering the market at 63.8% higher rates than existing units. With the city's average turnover rate of 45% and vacancy factor of 2% to 3%, this new unit could not compete. Unless rental rates are allowed to rise to meet operating costs and provide attractive returns to investors, equity capital and mortgage financing will become impossible to obtain. 60-419 O 75 18 209 Kennedy St., N.W. Washington, D. C. 20011 September 30, 1975 Chairman, Subcommittee on Commerce, Housing and Transportation District of Columbia Committee United States House of Representatives Dear Mr. Chairman: My name is Milton O. McGinty, an owner of a small general contracting company and the owner and manager of 70 apartment units in Washington, D. C. Forty-two of the units are in the upper Northwest and 28 are in the Southeast. The one-bedroom units average $150.00 per month, including all utilities. Since the supply of rental units in Washington, D. C. does not meet the demand for them and since it is possible that a few unscrupulous landlords would exploit their tenants by charging exorbitant rents, a rent control law could be of value. Such a law could provide for the determination of "fair" rents, which would be based on the locations of the buildings and the accommodations. Then, whenever there was a complaint or another indication that a rent was significantly higher than that of comparable units, an investigation to determine whether or not the rent should be reduced could be made. Instead, the original rent control law as administered and the current one, seemingly, allow for a complete disregard of the actual rents but rather provide for the determination of a so-called "fairrate of return" with the method of determination being obviously absurd. The laws have also compromised the control that a landlord can exercise over his building by denying him the right to terminate routinely a tenancy at the end of a lease (though a tenant can do so) and by making the process of evicting undesirable tenants, at best, impractical or, at worst, impossible. The current law even restricts the use of security deposits, which are the landlord's only insurance against losses incurred when tenants move without paying the final month's rent. It is difficult to understand the rationale for these restrictions which have nothing to do with rent control. Then, in the end, the laws have required the landlord to petition for a higher rent under the most humiliating and reprehensible conditions imaginable. It would seem that landlords would submit their supporting financial data to a commission composed of experts in real September 30, 1975 Page 2. estate management. Instead, the landlord must compile and then disclose his precise financial circumstances to every tenant in the subject property, as well as the Housing Rent Commission, a qualification for which is not expertise in real estate management. If the landlord chooses to defend his written petition orally before a Hearing Examiner (and not to do so would be complete folly), then tenants are likely to appear at the hearing and engage in unrestricted criticism of the building's management although there is no discernible relationships between the question of adequate management and adequate income, unless the income is too limited to allow for proper management. It is not that proper management is unimportant. It is just that the Housing Division of the Department of Economic Development has the responsibility for enforcing housing regulations; and tenants can and do report alleged violations to that office. If the Examiner rejects the landlord's petition and the latter is granted a hearing by the full Commission, then he can again be subjected to irrelevant tenant verbal abuse of a type that is not allowed in courts of law or by normal discretion in most other personal confrontations. In addition to the unfettered criticisms and virulent attacks by the tenants (the reasons for which are understandable), the landlord is subjected to biased questioning by members of the Commission who are designated as "tenant representatives" and obviously and admittedly consider themselves to be defenders of the tenants rather than seekers of truth. Since there is an equal number of "landlord representatives" there is striking evidence that the ultimate decision (which can mean the landlord's survival or ruin) rests within the thoughts of one person the chairperson, the "public member" who, hopefully and presumably, is simply a seeker of truth. - For the purpose of providing myself with an income during my retirement years, in December 1973, I purchased my first building (42 units) at 16th Street and Somerset Place, N.W. In February 1974, I took most of the balance of my life's savings and purchased a 28-unit building on Naylor Road, S.E. Four months later, I had become aware of the impending rent control bill, and I wondered if my carefully made plans for my declining years were going to be destroyed. I talked by telephone and wrote a letter to a man who was helping to write the law. He assured me that it was not the intention of anyone to hurt a small landlord like me. The passage of the bill caused me to lower my rents to the point that I was not certain as to how long I could sustain my financial obligations. I filed a petition to be allowed to increase the rents on both of my buildings at the earliest possible time. September 30, 1975 Page 3. I appeared before a Hearing Examiner with regard to both of my buildings, and in one instance, tenants appeared and castigated me (not because they had documents indicating that my request for an increase in the rents was unjustified but because they believed that I did not manage the building properly. The Examiner (without making any apparent use of the tenants' testimony) accepted my projected costs for 1975 and then rejected my petition, explaining that my principal payments could not be considered an expense and that, therefore, despite an annual income deficit of over $3,000.00, my "rate of return" would be 27.9. Desperate, I requested a review by the full Commission, and my request was denied. I then obtained legal counsel and filed a suit in the Superior Court of the District of Columbia, a suite that I could ill-afford but one that was essential to my very existence as a landlord in the District of Columbia. After a hearing, the Court ordered the Commission to grant me a hearing. At that hearing, I was subjected to more verbal abuse by the tenants than I have ever experienced in my life and to a series of questions by the "tenant representatives" which were specifically and solely designed to elicit answers that would be damaging to me. Ultimately, the one impartial judge, the chairman, displaying unusual intelligence and commendable integrity, voted with the "landlord representatives" and my petition was granted. My other petition is still pending in the Superior Court. I chose to appear before the committee of the City Council that was holding hearings on the second rent control bill, and I believe that I was rejected completely as a landlord. Despite my limited success in my hearing before the Housing Rent Commission, my status as a landlord in Washington, D. C. is still extremely precarious. Now, I cannot properly manage my buildings because of the current restrictions on landlords; and I know that the increase in rent that I was granted will not be sufficient indefinitely. Actually, I am not even certain that it is adequate now because I submitted my petition almost one year ago. Now I appear before you with the fervent request that the necessary action be taken to produce a rent control law that will be in the best interests of all of the citizens of the District of Columbia, a law that will not restrict or demean a landlord or tenant, a law that will prevent exorbitant rents, and a law that does nothing else. Thank you. MOM/cgf Yours truly, Milton O. McGinty September 29, 1975 Throughout the discussions of the last twenty-one months from the initial hearings held by the D. C. City Council on whether there was a need for rent control to the actual enactment of a rent control law (August, 1974) and from that point thereon, it is apparent that not much thought has been given to a very important group in the community that will certainly be very much affected by the recent rent control legislation that was enacted. This group is caught up in the middle of the tug-o-war between the landlord and tenant dispute on rent control. This group is made up of the on-site personnel of the properties, the employees in the management firm which includes property managers, rental clerks, bookkeepers, etc., whose jobs directly depend on the fiscal and physical well-being of the properties in the management property portfolio. They number conservatively around 8,000 persons. This is not an insignificant number, and the persons I am speaking of are real flesh and blood individuals who have the same problems with living today as anyone else including landlords and tenants. They have made sacrifices and adjustments in their daily lives, as everyone else has, to deal with the pressures of a deteriorating economy and yet watch fearfully as even more is demanded from them as the innocent victims of this latest piece of irresponsible legislation goes into effect. on a property As an employee that either would or would not qualify for the unrealistic 5% rental increase, he faces a crippling blow to his ability to stay economically stable. This blow could come in the guise of a substantial salary decrease, freeze on salary increases for the next year or two, or worse yet, loss of job because the property can no longer afford him or her. Another unpleasant possibility is the acquiring of extra duties with no increase in compensation. You might suggest that in any of these cases, the person should be about finding other employment when confronted with such unpleasant realities. There are two major problems when this is attempted. They are as follows: |