basis which does not require identical apartments to be on wide differentials.

A good friend of mine, who is a public official in Louisville, making $15,000 a year, and his salary is well known, asked me 3 years ago to do everything I could to get an apartment. I found one of the best apartments at the Cumberland which was available, like which there is no other downtown, and I worked out with him at that time a rental of $116 a month. We paid $800 dollars to redecorate and $600 for new furniture. That was agreeable to him and he wrote me a letter accordingly.

Three months later, the rent-control authorities came in to Louisville and said we had to substantially reduce that rental, and he was willing to be of any help he could on it with them, but there is nothing we could do. I think the rental was reduced $6 a month, and the result is that it is an unhappy investment for us and an absolutely unfair situation, and here is a man who is getting a public salary of $15,000 a year, and we were doing him a favor to rent him this apartment.

Inequities result from differentials for identical apartments. Since local expediters say that existing regulations do not permit such relief, although actually the law authorizes any regulations necessary to correct any and all inequities, the extension of rent controls—if any, indeed should make mandatory the issuance of necessary regulations to accomplish this and other fair adjustments.

You will remember, Mr. Chairman, when I appeared before you in 1950, you had put into the record of the proceedings a requirement that rentals be adjusted from the lowest price to the highest price for each type unit. As of that time there was no economic reason why this type of apartment renter should be protected from an economic standpoint. The Rent Administrator has ignored the law and the intent of Congress, every 2 years, in applying the regulations, so as a result its administration has been a blot on the fairness and good faith of governmental agencies generally.

Our latest fiscal audit on the Dartmouth-Willow Terrace operations shows a net profit of only 3.5 percent of our income, after taxes, compared with 10.1 percent in 1950. That, gentlemen, indicates how the growing cost of operations with our frozen inequities is eating away our profits and those of the widows and orphans who have their investments in the operations. Don't you reasonably agree that we are entitled to relief?

As for the Capitol Apartments in Frankfort, which we have hoped would give promise to the promotion of other private-financed apartment housing in communities that badly need it, our latest fiscal audit shows a deficit of more than $5,000. And this in the face of repeated requests, and refusals by the authorities, for rent relief for more than 2 years. Our previous fiscal audit showed a deficit of more than $3,000. The audit before that showed a deficit of more than $1,500. Talk about accelerated depreciation, gentlemen, here is a good example of accelerated deficit with no cure in sight.

We talk about accelerated depreciation. This is an example of accelerated deficit. The attitude of both these groups of bureaucrats is the same the way they carry out the Federal intent of the law, and how you can figure profits without figuring interest and depreciation

on a property, under the American system, is more than I have been able to figure out.

With reference to the Capitol Apartments, we now have been informed by the Federal Housing Administration that we cannot figure our depreciation at the accelerated rate of 3% percent, instead of the 2%1⁄2 percent, as the law provides. Yet we have been doing that for 2 years, and in our returns to the Treasury Department. Now the FHA tells us we can't do it. If you cannot use the depreciation permitted by law, it will do you no good.

Gentlemen, in closing, I want to say that, if it has not been entirely evident, I am thoroughly aroused over this matter. I think it is absolutely unfair and economically iniquitous. At the risk of censure of my own party, I want to say further that there seems to be a public clamor for a change in political administration. If we get a change, it is going to be due-more than anything else to the fact that all of us in my party have allowed bureaucracy to become so strong that we have lost control of it. Gentlemen, it is within your power to restore part, if not all, of that control to its constitutional place.

Thank you.

The CHAIRMAN. A great part of your complaint is that comparable apartments have varied rents, and you feel they ought to be adjusted equitably so that each person renting a comparable apartment should pay practically the same. Is that not one of your complaints?

Mr. GRAHAM. Yes; I will just illustrate by the Dartmouth. Here are the richest people in Louisville. It is a luxury apartment. You remember you and I drove by there to look at it one day.

The people that are in there do not need any protection by you gentlemen. Now there may be certain groups that do. I will not argue that question from an ideological or economic or political standpoint, but these are the richest people in Louisville, but still some pay $230 a month and some $239 a month for exactly the same facilities. If there is any fairness in that, I am crazy.

The CHAIRMAN. Well, I understand further that you want to exterminate all bureaucrats, all agencies, and all grasshoppers. We always listen to you with pleasure, my good friend, and you always are free to express your views to this committee, and we are always pleased to see you come before us, but that is a pretty broad order. Mr. GRAHAM. Thank you, sir.

Mr. COLE. And some of us are trying to help you.

The CHAIRMAN. You do not expect all of us to act upon that demand for change, though, do you? Because I commit myself now by saying that I cannot go as far as you go in that respect.

Mr. GRAHAM. Well, I agree with you on that, too, Mr. Chairman. The CHAIRMAN. The clerk will call the next witness.

The CLERK. Mr. Harry J. Fitzgerald, National Association of Real Estate Boards.

STATEMENT OF HARRY J. FITZGERALD, REPRESENTING THE NATIONAL ASSOCIATION OF REAL ESTATE BOARDS, ACCOMPANIED BY JOHN C. WILLIAMSON, COUNSEL TO REALTORS' WASHINGTON COMMITTEE, AND ALBERT A. PAYNE, ASSISTANT SECRETARY OF REALTORS' WASHINGTON COMMITTEE

Mr. FITZGERALD. Mr. Chairman, I am accompanied by counsel for our committee, John C. Williamson, and Albert A. Payne, assistant secretary of our committee.

Mr. Chairman and members of the committee, I am Harry J. Fitzgerald, of Evansville, Ind., chairman of the rent-decontrol subcommittee of the Realtors' Washington Committee, National Association of Real Estate Boards. The national association consists of 1,123 local real-estate boards and 47,655 individuals and firms of realtors throughout the country. Our membership is engaged in every phase of the real-estate and construction industry. Offices of the association are located at 1737 K Street NW., Washington, D. C., and 22 West Monroe Street, Chicago, Ill.

We appreciate this opportunity to appear before your committee and again, as we have in past years, present the sound reasons that rent control should be permitted to end. We appreciate only too well the seriousness of the danger of permanent rent control. At the same time we are mindful of the emotion which this subject has engendered in the past 10 years, particularly since the end of World War II even after freedom was restored to all other segments of the economy. Nevertheless, we are confident that the committee will give deep and objective consideration to the facts advanced in support of our position.

This year makes 10 years Federal rent control has been imposed on many of our communities. In many of these localities rent control has become, we fear, a political issue bearing no relation whatsoever to its statutory purpose. For example, Minneapolis and Pittsburgh, two cities which do not meet the criteria for designation as critical housing areas under the Korean action, are still under World War IIl Federal rent control. Both cities are in a more favorable position with respect to a supply of housing than they were in 1940 when both functioned under a free rental market.

Attached to this statement are what we believe to be persuasive charts-exhibits A and B-comparing the number of rental ads, both seeking and offering units, during the past 10 years in those cities. We are confident that a careful study of these charts should leave no doubt in the committee's mind that continued rent control cannot be justified.

This is a rather extensive exhibit. The green areas are the ones that have been under control since 1942-10 long years.

The committee will recall the action taken by the Congress in 1949 extending rent control until December 31, 1949, and for an additional 6 months beyond that date in communities which took affirmative action through their local governing bodies to request such control. We believe that this committee intended seriously that rent control should be allowed to end June 30, 1950, when it passed that law. Then came Korea and with it the movement of some defense workers and military personnel, creating new problems.

However, what happened in the green areas which did not sustain the impact of the defense program? Housing construction continued in record-breaking volume: Over 1,500,000 housing starts in 1950, 1,100,000 in 1951, and an anticipated 1,000,000 in 1952. A substantial in-migration of defense workers and military personnel was experienced in approximately 170 critical defense-housing areas outlined in blue on map-resulting in hundreds of thousands of people shifting from the green areas on the map to the critical areas. Again we must ask: For what possible reason should rent control be continued in these green areas unless it is to condition the public to acceptance and expectance of rent control as a permanent factor in our economic life?

The Housing and Rent Act of 1947, as amended, provides that a community may decontrol itself by resolution of the local governing body upon a finding that there is no longer a housing shortage that requires Federal rent control. Also the Director of Rent Stabilization is authorized on his own initiative to decontrol an area for the same

reason.

Despite the difficulty of obtaining rent decontrol by local action because of the political threats opposing such actions, 467 communities and counties nevertheless decontrolled themselves from July 1, 1950, to March 26, 1952. On the other hand, the Federal Rent Director, who has an even greater responsibility in this matter, has decontrolled only 74 areas on his own initiative. However, even this meager record fades because a majority of these agency-decontrol actions were in areas which the act required to be decontrolled because of the local decontrol actions previously taken in the major portions of the same areas.

The conclusion is inescapable that the Rent Control Director has failed to discharge his responsibility under this section of the law. Whether this was the result of negligence or deliberate bureaucratic thwarting of the intent of Congress we leave to the considered judgment of this committee.

The history of the past 6 years, 5 of which found the property owners bearing alone the brunt of a dislocated economy, glaringly demonstrates that the termination or extension of rent control has not received the more fair consideration given other segments of the economy. We are certain that no member of the committee feels that rents should be controlled while wages and the commodities of the grocer, butcher, and other suppliers are allowed to enter a free competitive market. If so, then we hope that here today we might be permitted to answer such a contention.

Accordingly, any statement we make that is applicable to the termination of Federal rent control is equally applicable to the termination of wage and price control, and vice versa. Our position on the matter of fair treatment to all is firm and unwavering.

The Roy Wenzlick Co. of St. Louis, real-estate appraisers and counselors, is well known to the Congress for its economic studies in the real-estate field since 1914. Mr. Wenzlick recently issued a memorandum, Ten Years of Rent Control. It contains several charts which we believe will be of considerable interest to the Congress. With your permission, Mr. Chairman, we are submitting two of these charts for the record as part of this statement-exhibit D. The CHAIRMAN. They may be put in the record. (The chart above referred to is herewith inserted.)

EXHUIT

Mr. FITZGERALD. We quote now from the conclusion reached on the last page of the memorandum, referring to the study of rents and cost-of-living average in nine decontrolled cities. Mr. Wenzlick says (referring to chart 2):

On

On this chart it will be seen that in the decontrolled cities, rents are now averaging 13.8 percent higher than they did in the average of the 1921-38 period. the other hand, the cost of living, including all items (even rents) is now running 70 percent above the 18-year average and, if rent control is excluded from the cost of living, the other items in the cost of living are now running 81.6 percent higher. The rent dollar which the landlord receives, it will be seen from this chart, will only buy 62.7 percent as much as it would have bought in the period from 1921 to 1938, the 18-year period which included nine good years and nine bad years; or, summarizing this chart in a slightly different manner, the other elements of the cost of living are now 81.6 percent higher than they were in the base period, while the purchasing power of rent is now 37.3 percent lower than it was in the base period.

No one has ever claimed, including the Rent Director himself, that rent control will provide housing. In those sections of the United States having a free rental-property market, there is ample evidence of the efficient use of available rental space and the stimulation of construction of new rental accommodations where needed. The chaotic economic results wildly predicted by the opponents of restoring the free market simply have not occurred, even in such great cities as Los Angeles and Houston. Only good has resulted, in terms of increased construction of rental units and other housing, restoration of good feelings between owner and tenant, and an end to politics in rents.

It is contended that Federal rent control is needed in critical defense-housing areas to help meet the housing needs of servicemen and defense workers and their families. This is illusory, and a closer examination will reveal that rather than solve the housing problem, rent control perpetuates that problem.

Rent control operates under the theory that any kind of housing is adequate so long as the rent charged has the Washington stamp of approval. As a result, many servicemen living in substandard housing at a rent which has been rolled back to what the ORS believes is fair, continue to live in such housing because of the low rolled-back rent. The military is reluctant to declare such housing out-of-bounds because of the human factor involved in separating a man from his family by official orders.

This is no exaggeration and we submit the example of Chanute Air Force Base in Illinois. Here is an area that sustained a great influx of military personnel. Although it has been declared a critical defense-housing area under the Defense Housing Act which is directed at stimulating additional construction, it has not been certified for rent control because of the insistence of the Commanding General that rent control instead of solving his housing problem would perpetuate it.

He charges that rent control would defeat his objective of ridding the area of make-shift housing as better homes are provided. Here is a statement of a military commander on the scene which substantiates what we have been trying to say all these years that rent control is not the answer to a housing shortage, and above all, it is a local problem and must be solved on the local level.

The Air Force has acceded to the wishes of the Chanute Command and did not impose rent control. On May 6, 1952, for the first time