H. CON. RES. 399, 94th Cong., 1st Sess., by Mr. Stuckey, on September 17, 1975

1

CONCURRENT RESOLUTION

Resolved by the House of Representatives (the Senate con

2 curring), That the Congress disapproves of the action of the 3 District of Columbia Council described as follows: The Dis4 trict of Columbia Rental Accommodations Act of 1975 (Act 5 1-46) passed by the Council of the District of Columbia on 6 July 29, 1975, signed by the Mayor of the District of Co7lumbia on August 18, 1975, and transmitted to the Congress 8 on September 8, 1975, pursuant to section 602 (c) (1) of 9 the District of Columbia Self-Government and Governmental 10 Reorganization Act.

Mr. STUCKEY. Before I begin my statement, do any of the members have a statement?

Mr. FAUNTROY. I thank you for delaying until we could all get here and express my appreciation to you and members of the committee for your concern with an issue that is of course of vital interest and importance to the people of the city.

Mr. Chairman, I have been in contact with the Office of the Chairman of the City Council and after some discussion, I think that perhaps as a result of a meeting we have scheduled later on today that we may be able to resolve some of the differences that have been raised around this particular piece of legislation in a position as to eliminate. the necessity for either hearings or action on this question by this committee, not unlike the fashion in which we were able to resolve the previous matter before us with respect to the revenue package for 1976. We are all aware of the demonstrated concern on the part of the members of this committee and of the Congress too as far as possibly allowing the local elected government to handle the affairs of the city with as little interference from the Congress as possible, to see to it that of course the Federal interest is protected, but at the same time respect the integrity of the elected government. I think we have a golden opportunity to in fact do that again. For that reason, Mr. Chairman, I respectfully request that we delay the commencement of these hearings until such time as we see that the process which has been started this morning will or will not lead to a reasonable resolution of the whole problem.

Mr. MCKINNEY. Mr. Chairman, I would like to emphasize and reiterate my pleasure at Congressman Fauntroy's suggestion, and I, too, want the city to run its affairs. I think that the City Council's willingness to reconsideration some of the poorer aspects of this bill is probably the best way that this committee and the City Council can cooperate.

I find myself in a very difficult position again because I don't want to discuss the city's affairs. I want the city to run itself. And yet I also find myself here on a committee where I would have had to lead off with a statement that as a District of Columbia landowner and resident, though not a voting resident, I have a conflict of interest and would have to exempt myself from any action on this subject.

At the same time, however, having been a 5-year member of the Housing Subcommittee of the Banking and Currency Committee, I did see before us a rent control bill which I felt would destroy the city's base, much as they have been destroyed across the country.

In fact this morning it was interesting to check out that the new rate for abandonment in the city of New York is 37,000 units a year. This is the type of thing that has brought that problem about.

There are ways that the City Council can solve this problem and I think that this committee has an obligation to help them. I will once again come back to the subject that I hope this committee can act very quickly on a decent, fair, low enough commuter tax to give the city the tax base it needs to help its people through public housing and other areas and that we can all get together and convince the Congress that their Federal subsidy of the city is on a worldwide and national basis a very-it is just too small.

I thank the Delegate for working with the City Council and I thank the chairman for considering this motion. Perhaps we can come back with a bill that will protect the residents of the city without destroying the housing base of the city at the same time.

Mr. STUCKEY. Thank you, Mr. McKinney. The Chair at this time would like to address the question to the Congressman from the District of Columbia. As he well knows we do have a time limitation on a bill, a veto bill before the Congress, within which we have to act. Are we speaking of a reasonable time limit?

I think the gentleman stated that there was a meeting in the process of being set up I believe for this afternoon.

We are speaking of some type of action or trying to come up with some other bill. I think the gentleman himself used in the spirit of compromise like what was worked out on the tax bill.

The Chair is trying to make sure that the Congress' prerogatives are protected because of the time limit. Are we speaking of something that is in the spirit of working out something that would be coming back to the Congress?

Mr. FAUNTROY. Let me assure you, Mr. Chairman, that while we do have a very tight schedule to keep, that we are going to work within that time frame and if not, we can resume the process which you have begun now or plan to begin today in a timely fashion.

This is undertaken with the best of faith in wanting to resolve this in a fashion that the Congress will not have to take action.

Mr. STUCKEY. Thank you, Mr. Fauntroy.

The Chair would also like to state that I am a resident of the District of Columbia, although a nonvoting resident, but I do want to see the city run its own affairs.

Before the gentleman from the District of Columbia, I was favoring statehood in preference to Home Rule. I do want to see the city control its own destiny.

It makes me feel good to see this spirit of compromise in trying to work out something fair and agreeable to all parties.

If there are no objections, at this point, the Chair would go along with the gentleman from the District of Columbia and his motion. that we temporarily delay the hearings on this veto of House Concurrent Resolution 399.

Does the gentleman have any specific time, a week or what?

Mr. FAUNTROY. I can only assure you that it will be within the timeframe that will allow the Congress to act if you are not satisfied with what we are able to come up with. As soon as we close this meeting, I will check with the District.

VOICE. There is an objection.

We citizens feel we should have a right to say what we have to say. We do have objections as citizens.

Mr. MCKINNEY. I think you would have to go through your elected delegate on that and this is his motion that we temporarily suspend the hearings until we hear something from the District of Columbia government.

VOICE. Citizens have nothing to say.

Mr. FAUNTROY. Mr. Chairman, I appreciate the sentiments expressed here and I am aware that the city council had extensive hear

ings on this subject and are aware and responded to many of the legitimate concerns of residents of the District of Columbia.

I am just hopeful that we can resolve it in a fashion that we might have to repeat that process on the Hill on the one hand and on the other that we avert a congressional action that would disrupt the integrity of the elected government.

Mr. MCKINNEY. I would suggest that we do have testimony from a great many of these people here which I certainly intend to read. I would suggest that we recess for 3 days.

Mr. STUCKEY. If there are no objections

Mr. FAUNTROY. No objections.

Mr. STUCKEY. The subcommittee will recess for a period of 3 days and convene back in this room on Monday, October 6, 1975.

[Whereupon, at 10 a.m., the subcommittee recessed, to reconvene on Monday, October 6, 1975.]

[Subsequently, the statements, testimony and other exhibits proposed for the October 1, 1975, hearing of the subcommittee, were filed for the record as follows:]

STATEMENT OF HON. W. S. (BILL) STUCKEY, JR.

Good morning ladies and gentlemen. Today we begin 2 days of hearings on the District of Columbia's Rental Accommodations Act of 1975 and the posibility of congressional action to veto that act. This forum has been provided for all parties to express their views on the issue of rent control in the District. Notice has appeared in the Washington Star on September 14 and in the Washington Post on September 18.

I recognize the reality that there will exist rent control legislation affecting the Distrist but such legislation should be equitable in its application and effect. Rent control should be just that and not a veil for profit control.

It is my belief that the Rental Accommodations Act of 1975 will adversely affect the Federal interest in two ways. First, it is in the interest of the Federal Government that the District's tax base remain strong and healthy. The Urban Land Institute in an independent study states that the fiscal picture for the District "will not improve unless something is done to increase the tax base, that is, property values, resident incomes, retail sales, and various other bases of taxation." The District's own office of budget and management systems has concluded that "the city faces a projected fiscal gap of roughly 6 percent per year" unless action is taken to alter revenue and expenditure patterns. Since this specific piece of legislation affects the housing industry and its support of the city through taxes. any adverse reaction will directly affect the tax base of the District. The net result would be an erosion of the tax base which would thereby necessitate an increase in the Federal payment to keep this city fiscally sound. The Urban Land Institute further states that the "general attitude of the District council toward intervention in the housing market has created such uncertainties with regard to future rental operations that investors are wary of investing in rental housing in the District. Housing investment is a long-term proposition and therefore requires that

there be a reasonable assurance that the investor will be able to rent the property at rents sufficient to pay for operations, maintenance, interest on invested capital, and return of invested capital."

Second, the Department of Housing and Urban Development has insured through the Federal Housing Administration 52 projects which are apparently subject to rent control in the District. This accounts for more than 9,000 units which fall subject to rent control regulations in light of the decision in Columbia Plaza v. Cowles handed down by the United States District Court for the District of Columbia on September 10, 1975. This holding appears to conflict with the HUD Rule 403.2 which states in part that "HUD will assert exclusive jurisdiction over the regulation of the rents of such a project when the delay or decision of a local rent control authority jeopardized the Department's economic interest in the project." If a HUD-insured project were to financially collapse, mortgagors would look to the Federal Government for restitution. The cash flow problems arising out of the controls placed by the act on the rate of return could place a large number of units in jeopardy. The effective result would be a Federal bail-out.

The problem of a fair return was addressed by the Library of Congress in a report dated July 10, 1975, in which they stated that "if the rate unduly penalizes landlords, tenants will eventually pay the price in terms of gradual disinvestments by owners and lenders. A fair rate should reflect rates obtainable in alternative investments that have comparable risks and permit landlords to earn about what they would in a normal or balanced market." They conclude that "unduly restrictive rates of return may be economically unfeasible."

In conclusion, I would have to agree with the Urban Land Institute that "rent control and other regulatory measures at the very best only temporarily neutralize the effects of demand pressure and cost increases. In the long term, they cause disinvestment and deterioration and all the ill effects that those events imply for the low and moderate income population and for the city as a whole. A more beneficial response to demand pressure would be to allow construction to proceed to alleviate the growing shortage." I would hope that we in Congress who have oversight responsibilities for the District could work with the officials of the city government to alleviate the many problems present in the Rental Accommodations Act of 1975.

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