on a straight line basis), as an operating expense item used in the formula is limited to two percent of the assessed market value unless and only to the extent any additional amount is approved by the Rent Administrator. These two items mentioned above were the subjects of lengthy consideration by this Committee and the Council. Some members considered these as vulnerable areas for exploitation by unscrupulous landlords while others considered these as legitimate expense items and the limits as being inflexible and in need of some exceptions in hardship situations. The margin of approval was narrow. Landlords may automatically increase rents by an amount up to five percent, to bring their rate of return for the housing accommodation up to the eight percent allowable floor. Additionally, the proposed act requires a semi-annual report by the Commission and an annual review by the Council of the provisions of the act.

The rationale for this rent increase formula is further amplified in Section II (Findings and Intent) of this report.

In addition to the rent ceiling established by the above formula, the proposed act provides for adjustment in rent ceilings to allow for: (a) substantial rehabilitation (b) increase or decrease in related services (c) capital improvements (d) hardships petitions.

6. Vacancy decontrol for identical units

This existing provision, providing for equalization of rents or identical units upon vacancy, was retained in the proposed act. It was the contention of the Committee that the existing provision provided a mechanism for a more equitable range of rents within a building. 7. Code Compliance

The proposed act prohibits rent increases above base rent (February 1, 1973) for any rental unit not in compliance with the housing regulation. This is a significant strengthening of the code compliance prerequisite, which is currently left to the discretion of the Commission in considering or reviewing a rent increase.

8. Eviction Control

Eviction control is also tightened by a ninety day (rather than thirty day) notice requirement for all evictions except those due to nonpayment of rent, illegal action, or violation of a tenancy obligation by a tenant. This bill also requires written notice to vacate specifying reasons and filing copies with the Rent Administrator.

The notice requirement for evictions for condominium conversion (180 days) and for substantial rehabilitation (120 days) was retained. 9. Prohibition on Withholding of Rent

The proposed act eliminates the controversial "13(f)" provision of Regulation 74-20 prohibiting withholding of rent by a tenant unless such rent is deposited in an escrow account. As indicated in the Legislative Report of July 26, 1974, accompanying Regulation 74-20, this provision was never intended to abrogate case law (as feared by some tenants) and has been interpreted in keeping with existing case law by the D.C. Superior Court. The committee considers this provision confusing and redundant, in view of existing case decisions (Bell v. Tsintolas, 430 F. 2d 474 (1970), Javins v. First National Realty, 138

TS. App. D.C. 369 (1970), and Brown v. Southall Realty, 237 A2d 831 (1968).) which have upheld the withholding of rents under specified conditions.

The committee, however, thought safeguards on tenants monies were necessary. Upon the filing of a petition, the amount of the increase under the rent stabilization and hardship sections are to be placed in an interest bearing escrow account to be awarded by the Rent Administrator after a final decision has been rendered. The intent of this provision is to immediately provide landlords with rental fees due them and not cause undue financial difficulty while safeguarding the increment of increase during the administrative procedures before final decision.

10. Civil Damages

Unlike the existing regulation, the proposed act provides civil damages as well as criminal penalties for certain violations by landlords. If a landlord demands or receives excess rent or reduces services, the tenant may be awarded treble damages or a minimum of $50 (whichever is the greatest amount) by the Rental Accommodations Office. This provides the Office a significant enforcement tool and is intended as an incentive to compliance to some landlords in the city, who are believed to be in wholesale non-compliance with the rent ceiling provisions of the current regulation.

PURPOSE

II. FINDINGS AND INTENT

The extension of rent controls for two years and the proposed changes in the program reflect the findings and intent of the Committee as itemized below. The Committee finds that:

1. Extension of a rent control program in the District of Columbia is a necessity, in view of the continuing housing crisis.

Documentation presented to the former City Council in January 1974 indicated the following (1) a vacancy rate in the District of Columbia so low (2.7 percent) as to constitute an emergency according to the U.S. Department of Housing and Urban Development; (2) a declining supply of low and moderate income housing and disproportionate rent increases among low and moderate income units.

According to all indications, this critical housing shortage, particularly for lower income families, is continuing to accelerate. A recent study by the Washington Center for Metropolitan Studies indicates that "the Washington Metropolitan Area is heading into what may well be the most severe housing shortage in its history", more pronounced than in the nation as a whole.1 The continuing decline in the housing stock was documented at the January 22, hearing by AOBA as well as tenant groups. The Metropolitan Washington Planning and Housing Association testified at this same hearing that a low income family in the District (below $5,000) currently pays an average of

1 Metropolitan Bulletin, No. 15, January-February 1975.

35 percent of its income for rent. Against this background, the vast majority of witnesses at the January 22 and April 9 hearings supported or recognized the need for a continued rent stabilization. EXtension was supported by the Executive Branch as follows:

The Executive strongly supports continuation of controls over rent in the District of Columbia. [W]e believe the vacancy rate is at least as low as it was in August and that the inflationary pressure to increase rents is such that removal of controls would be catastrophic particularly among thhe elderly and the low and fixed income population.

2. The rent stabilization program should be extended for a minimum of two years after its enactment.

It is the conviction of the Committee that the projected long-range housing crisis and the need to stabilize rents over an extended period of time require enactment of a rent stabilization program for two years or longer. For this reason the Committee strongly recommends that the life of the proposed bill extend midway the year 1977, with the proviso that the rent stabilization formula be reviewed annually by the Council.

3. An equitable rent stabilization program responsive to the housing crisis and the inflationary spiral should include the following: (a) mandatory rent ceilings; (b) some allowance, in such ceilings for rising operating costs; (c) a division between landlords and tenants, of the most rapidly spiraling operating costs; (d) provision for regular review of the rent ceiling formula adopted.

The rent stabilization program provided in the proposed act embodies the above ingredients. It was devised pursuant to consideration of the following: (1) the continuing, but declining inflation spiral (8 percent in 1973, 12 percent in 1974, and a projected 6-7 percent in 1975), according to the U.S. Labor Department Consumer Price Index (CPI); (2) disproportionate increases (as compared to the CPI) in the costs of electricity, gas, and heating oil since early 1973; (3) the need for some automatic increases as a means to render rent stabilization more administratively feasible; (4) the proposed 2 year life of the act; (5) proposed annual review of the formula.

It is the finding of the Committee after review of the above factors that the proposed rent ceiling formula adequately allows for increased operating costs, and is equitable to the interests of both landlords and

tenants.

4. The proposed rent stabilization program must be structured to assure that, with adequate funding, it will provide expeditious administration and broader enforcement of the law.

The record of rent control in its first nine months has been replete with administrative problems which have stymied effective implementation of the hardship provision and prevented any broader measures to assure compliance with the regulation. The inability of the Commission to keep abreast of the hardship caseload is well documented in public testimony and the press. Equally disturbing is the fact that the Commission has been totally unable to institute any general enforcement programs to check on compliance by landlords not involved in hardship petitions. This fact was documented by

former Chairman Timothy L. Jenkins at the January 22 hearing and by Commission member Florence Roisman, who stated:

We... have tens of thousands of registration forms in our office but we do not have the resources to check those registration forms. . . So, with respect to the properties that have been registered, where the columns are filled in, no one has the slightest notion whether those rents are in fact within the ceiling . . And I would add to that that there are . . . Thousands or perhaps tens of thousands of units in the city subject to regulation that have not been regis tered. And as to those, clearly we have no idea whether those units are within the ceiling. . .

The Committee is determined not to allow repetition of the administrative and enforcement problems described above. The Committee has taken measures to assure adequate funding for the Commission by (1) increasing substantially the Mayor's budget request for rental control implementation and (2) providing for payment of a two dollar per unit annual registration fee. In addition the Committee has drafted the proposed act with an eye to making it as administratively feasible and self-enforcing as possible. The following provisions, while serving multiple purposes, are intended to lighten the administrative load of the Office and the Commission: (1) the revamped administrative structure, as embodied in these separate agencies; (2) the automatic increase of up to five percent for landlords whose rate of return is less than eight percent; (3) the substantial increase in the specificity of data to be used in consideration of increases: (4) and the exemption of small (two units or less) rental accommodations where landlords occupy one of the units which will significantly decrease the number of units covered by the rent stabilization provision.

5. It is the intent of the Committee that the Rental Accommodations Office make general compliance with the act a priority goal and function. To this end, it is expected that the office will systematically check registration forms, eviction notices, and other statements filed with it; institute field checks to measure compliance in all parts of the city; receive and process complaints; mount citywide educational campaigns; and institute such other enforcement measures and programs necessary to assure broad compliance with the rent accommodation

act.

6. The continuing housing shortage and decline in new housing stock in the District of Columbia require specific incentives to increase and improve the housing supply. Specific new incentives are provided as follows in the proposed bill: (1) All new construction for which the initial certificate occupancy was issued after February 2, 1973, is exempt. (2) All units which have been boarded and vacant for two years are exempt for the duration of the act, provided they are returned to the market and are in compliance with the housing regulation. The 1970 Census reported 16,000 abandoned, unoccupied units in the City. (3) Compliance with the Housing Regulation is made a mandatory prerequisite to any rent increases above base rent. This strengthened provision can be a significant incentive to improvement of the housing stock if adequately enforced. The Committee intends to monitor such enforcement both by the Rental Accommodations Office and the Housing Inspection Division

The financial implications of the proposed act may be summaried as follows:

1. Workload and Budget of the Rent Accommodations Office and Rent Accommodations Commission.

The anticipated workload and budget requirements of the Office and Commission are reflected in the Council's fiscal year 1976 budget submission to the Mayor (a total of 669,600 dollars for the implementation of the Rent Accommodations Act) and the additional General Fund credits established in the proposed act and explained elsewhere in this Report.

The proposed funding provided to implement the proposed act reflects the strong conviction of the Committee that the success of any rent stabilization program affecting 190,000 units is dependent on adequate funding specifically allocated to that program. Testimony presented at both the January 22 and April 9 hearings, and the experience of the past year confirm this position. During the past nine months the administration of rent control has been significantly handicapped by the lack of adequate resources. While the Committee anticipates that the nature of the workload will change from concentration on individual cases to a more general compliance program, the Committee does not expect any reduction in the workload as compared to the previously unmanageable load of the current commission. The Committee anticipates that the combined budget request and General Fund credits will enable the Office and Commission to handle petitions expeditiously and assure broad compliance with the act.

2. Anticipated Revenues

The anticipated revenues resulting from the proposed act will total approximately $380,000 ($2 annual registration fee for each of the 190,000 rental units in the city).

3. Impact on other agencies

The inability of the Housing Rent Commission to process large numbers of hardship petitions within the 90 day limit has impacted significantly on the workload of the Office of the Corporation Counsel (Environment and Consumer Protection Section) and the Superior Court of the District of Columbia. Currently a total of approximately 400 petitions have been returned by the Housing Rent Commission. Numerous landlords whose petitions were returned have exercised their right to take such petitions to Superior Court. The result is a major increase in workload for the Court and the Corporation Counsel, which is involved in defense of the Rent Control Regulation in each of these cases. A special Task Force, including five attorneys and administrative support, has been established by the Corporation Counsel to handle the load. While it is impossible to assess the dollar cost to the Court and the Office of the Corporation Counsel, the impact on staff use is clearly considerable.