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RULES AND REGULATIONS
preempt state and local action; which $103.2 Reninle!TECN.
Durant to section 8 of the Unite contrlhute to such chains. Moreover, with respect to KUD-ownel projects, they terfere in the remulation by loc id rent $40.3.6 Rental larges.
Thic Department will generally not In- States llousing Act of 1937.
control boards of rents or unsubsidized
The Department finds thnt It is in th
nntional interest to sort exclusive Ju It 13 for these reasons that the Dapart. by ITUD. Ilowever, BIOD w!!! nasert cxment is adding to Charic IV of Touc 21 clusive Jurisdiction over the relation
risdiction over the routton or the rent MC Part 103,"Local Rent Control," of the rents of such a project then the
of studied projects with mortgan
v hirin it insures or holds. Therefore, th that formally scis fcrth UUD's sosit!on
delay or clccision of a locul re:t control
or rent regulation by loca
rent control boards feliat pursuant t Department shall sort exclusiia juris. $ 403.3 Proredures.
slate or local law as piled to subsidize diction over the maxi:un rentals for
(a) The local HUD office slal process
projects with mors which are in 24 unsubsidized projects with mortgages InSardor held by HUD only when it doems
a mortuagon's repuest for anroval of sured or held by HUD).
increases in the inaximum permissible $.103.7 Procedures,
(2) The mortror all be respx.usible rent control authority (or by iclay in
for notifying tl.clical lid os.ce silica Project Servising liandbouk, without minA decisioo). Ilowever, the Deregard to the existence or terms of :
ever a local rer.t control bort: kesan partment has exclustic Jurisdiction over
action to prevent the niortor froir local rent control oruuance. The inortthe rents or subsidized projects will 63 cor should sinultaneously unit 3
inaplementing a KUD-approved rent mortgages Instired or held by IUD and
(b) Uron reelrins such botification,
the local HD filce hail prointly c.. local jurisdiction. Where the local ront control board ap
vey the Department's positlon on this ***
(b) Tic niortsagor is responsible for piores a loxer 122x22numi rent level than
subject, es reficcted in th's Subpar to inforinin's the locul IIUD occ, 1f the JIUD docs.
the local reat control bord. If the local rents for the project approved by the
Tent control bord then frils to ppprve This recuintion is tcing adopted as an local boare! are lower than those npfute ini rule to be clective uprilica
tic ront schedule approved by NUD. tho proved by BUD, or if the ward fuis to 102, lecotuse the Department considers
local JiUD oilco shall promptiz notify act within a polod of thirty (30) ciays
the one of General Counsel, the Ofice is vital to ved further morthese fusur. following the filing of the application.
of Loan 11.:nagement, and the Kerinal 6C c!us caised by local rait control Tho mortugor shall furnish the local
Subpart C--HUO Owned Projects
The Dipartit has exclusive forsunts. Alliclesnit inte vial !icerca su
Lurr te les cl All pro or .:.! 25, 1975, will be cur: - (c) Vincent all the 2017:19
315! 04.0, Inte: :!c of the existe erillinre a nurvie is adopied. Fii: 35 inst", e nei 201, tho
HCC or the terms of any local rent con
Whenever a local tout control board
takes nyanlo provent the Depart. 1:s sub.nitted will be available during control board coordincs the Dept
mc: irowizpia rert increase
tic !oco1 19 ocell popli; c01s Dours Cilic above exdress for nonls com.cnc interest in 1:2 project CX3in!en by interested persoas. nililie loco! : !!! not 10 y 13
vey the Dipuent's positiori on th's
subject to trucal ont contret burd. ile Desi! moat has doleriolacu that position to the easisiaction of Use local if (hte local ronitici vor:d then fils an D801291a! Impact St: tenent is
to purctic rentcivile instituta!!y
noillying On Colie able for noction et the above addessfice's repost godinake a decentnenie. tion to the Orice or Ceneral Courlit
Olice of Lon il cuut, aad 11:e Rc.
15 irable, cl action will bucur Critice, s omenciert is ef:: Smarta 1, sulature ojccta
eindependently of at action taken fectiicicbary 23, , by 'Taortor.
K. I. CRAWFORD,
Asi Sailor 10 ut iuri.
11025int Manser.cat 23-032.Jindricts
TK 1700.75 5073 * ?2-9175:12:181)
1.130:08 or ?! NUD,
i rce114 suosi); It! 107.1 c!:
(1) 11r riscont.:'!*. Yorice.
Ar! t. Cik inte
10 Art; (b) lu'5-!>>ketinin 12
ST!1:10:pm!! 9 501-
STATEMENT PRESENTED TO HEARINGS BEFORE THE
SUBCOMMITTEE ON COMMERCE, HOUSING, AND TRANSPORTATION
OF THE HOUSE DISTRICT COMMITTEE
City-Wide Housing Coalition
D. C. Public Interest Research Group
October 1, 1975
The City-Wide Housing Coalition, the Metropolitan Washington Planning &
C. rent control. We are outraged at this threatened Lotervention of Congress in such critical local concerns, and so we make this joint statement of protest.
First of all, we protest this kangaroo-court-type hearing. Your witness list demonstrates utter disregard for the rights and protection of the serenty-five percent (75%) of D. C.'s residents who rent their homes. This is no representation of the District of Columbia. Where are the 600,000 tenants in the city? Only our four housing/public interest groups were Dotified of these hearings just last week. And our efforts to have a more representative witness list were rejected under the guise of time limits. With only sparse representation of tenants and tenant unions on the one hard, and this largely white, suburban set of non-residents from the real estate and business community on the other, we must call this "hearing" for what it is -- a sham. The inclusion of real estate profiteers who care nothing for the well-being of tenants, and of financial institutions who have guaranteed urban deterioration in D.C. through their racist reclining practices, are examples of the shallow and unjust farce you
have here today.
Secondly, we must go on record to strenuously oppose any such intervention
this most important legislation.
But now, despite this overwhelming concentration of work by landlords and tenants through the legitimate legislative process of deliberation, landlords deceptively come crying to Capitol Hill for special favors. But tenants have not come pleading for extra-legislative favors, even though many tenants also felt sold out by the City Council's capitulation to the Mayor's veto and the Council's adoption of so many pro-landlord compromises. The ultimate outcome of D. C.'s rent control law is a greatly watered-down version which is literally filled with pro-landlord loopholes, because of the threats, bluffs, and lies of landlord special interest groups, and precisely so that Congress would not be upset so as to insure elimination of any possibility of a Congressional veto. (As you know, the Council weakened its professional tax provision last week to help overcome a Congressional veto. But what you also should know is that the City Council, with the Mayor, already significantly weakened the rent control law before its final passage for precisely the same reason.)
It is simply unthinkable for Congress now to capitulate to the inappropriate and unjustified demands for special favors by the city's absentee landlords and their expedient Congressmen, while denying the democratic process of the local home rule government and the severe housing and economic needs of seventy-five percent of our city's residents.
We don't see you threatening to veto rent control in Boston, or in Cambridge, or in New York City, or in Montgomery County, Md., or in Prince Georges County, Md., or in any of the other cities in the country who have some form of rent control. And there's a good reason why not--because it would make a mockery of the democratic process. And just so, in this year preceeding the nation's Bicentennial, we submit that this threatened veto itself mocks the basic principles of democracy and justice.
Finally, we address the rent control legislation itself. As we have said, the Rental Accomodations Act of 1975 is already a weakeneu bill in terms of the protections afforded tenants. During the City Council's deliberations on the bill, tax benefits were removed from the income side of the rate of return formula and a fictional 2% depreciation "expense" was included. Furthermore, the Council was pressured by landlords to use assessed market value in the denominator of the formula as opposed to built-up equity, or the landlord's actual investment in the property. This allows landlords to earn a return on the full value of the property rather than on his actual investment. Finally, the Mayor's veto caused further weakening of the bill by raising the rate of return floor from 7% to 8% and by pushing the automatic rent increase figure from 4% to 5%.
The District of Columbia needs strong rent control if the racial and economic heterogeneity of its people is to be maintained. This is the way the Housing and Urban Development Committee of the previous City Council described the state of housing in D.C. only six years ago in a special report: "A large portion of the District's housing stock is characterized by appalling maintenance both in private and public sectors; an extreme
shortage of accomodations for low income families, particularly those with four or more members; spiralling rents that place even inadequate housing beyond the reach of many families; and predatory landlord practices that degrade the dignity of low-income families."
Specifically, the housing market in D.C. is currently characterized by the following: vacancy rate of less than 2%, well below the 5% figure considered as a crisis. Overcrowding: 14.9% of the units in D.C. were overcrowded, according to the 1970 Census, compared with 5.4% and 4.6% of the units in the urbanized areas of Maryland and Virginia respectively. Rent as percentage of income: 39.6% of D.C. tenants pay more than 25% of income for rent. By income group, the 1970 Census showed that low income D.C. residents paid more than 35% of their incomes for rent. Inflation is devastating the everyday folks of this city, and tenants simply cannot afford the rent gouging of an uncontrolled market.
The Apartment and Office Building Association of Metropolitan Washington (ACBA) has conducted two income expense analyses in the last nine months which can shed tremendous light on the effect of rent control on the rental housing market, if honestly analyzed. Contrary to the dishonest public outcry of landlords, their first study (January, 1975) actually showed that a little more than 60% of the landlords had in fact increased their margins of profit under rent control (when carefully reviewed by an economist who works here on the Hill). The second study (September, 1975) reveals that the 12.32% increase allowed under the old bill (74-20) was almost adequate to fully recover cost-increases for the average landlord through the end of August. The 5% increase allowed for most landlords under the new bill you are now considering will again allow landlords to increase their profits over
More important, the second study showed a large discrepancy anong landlords. While some landlords experienced declining profit margins over the past two and a half years, many others have had tremendous increases. Anong twelve randomly selected buildings we examined, six experienced increasing profit margins, one by as much as $36,000 over the two year period.
the next two years.
The large variation in increases in income and expenses is the basis for our support of the general rate-of-return approach to rent control. This form of rent control considers each landlord's situation individually and grants autonatic increases only to those who need it based upon their rates of return. This approach is much fairer to landlords and tenants, for tenents can then be assured that, for the most part, any rent increases they must pay are not simply giving their landlords windfall profits.
Finally, we do not take a naive approach to housing or economics. We do not consider rent control the ultimate solution to the housing problems of the city. Indeed, we are working vigorously for a comprehensive housing plan for D.C. However, strong rent control is absolutely necessary to make an emergency housing situation barely tolerable. Rent control must not be vetoed or weakened through Congressional intervention; for to kill rent control would be literally tragic for thousands and thousands of D.C..citizens.
October 1, 1975
D.C. RENT CONTROL--SOME ISSUES & ANSWERS
Prepared by: City-Wide Housing Coalition
A good rent control bill must not only set limits in rent levels for the general case but also provide a mechanism for addressing those cases, both landlord and tenant, which require individual attention because of their specific circumstances. In Act 1-46, the tenant who reports housing code violations can file with the Commission for a rent reduction and the landlord who lacks a sufficient rate of return (or satisfies certain other conditions) can file for a rent increase to recover cost increases. These cases are reviewed and given approval prior to putting any rent adjustment into effect.
But in order to avoid the tedious consideration of all increases on a case-bycase basis, Act 1-46 uses the "rate of return" formula in order to be able to grant automatic increases to those landlords who are most likely to be the ones failing to fully recover recent cost increases. There has been much debate about which formula and which rate-of-return level should be used to construct the fairest representation of the landlord's return on his investment. The following is an outline of some common landlord objections to Act 1-46 and demonstrates clearly that the fairness on the rate of return question and other questions is already biased in favor of the landlord.
1) "There is no 'pass-through right.""
Any across-the-board increase (such as the 12.32% under the old law and
we all know, is now no longer necessary for the City Council to follow, 2) "This is profit control--no increase is allowed if rate of return exceeds 89."
NOT TRUE! The profit calculation is used as a limit only when it is used
3) "The 8% rate is confiscatory because it is computed without debt service."
Landlords were offered and rejected the chance to support a proposal for