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AREA RENT OFFICE,
Atlanta, Ga., February 8, 1952. To: Members of the Rent Advisory Board.
All area office personnel.
The meeting in Detroit was called to give the chairmen of the rent advisory boards and the regional and area rent directors an opportunity to exchange ideas and to present the problems confronting them in an effort to devise ways and means to eliminate backlogs, improve information, public relations, and rent advisory board activity.
The national office presented several new ideas, one of which is known as the tenant-consent petition, Form D-1--A, and which will be discussed later in this memorandum.
Another technique is a proposed form, D-144, which is only in the formative stage. It is designed for the use of landlords to petition for rent increases in excess of 20 percent. A landlord should use this proposed petition only if a rent increase of 20 percent or more, over the June 30, 1947, maximum rent, has already been obtained by adjustment or lease for the relief of higher costs, and a further rent increase is required to cover the rise in costs that have occurred since the maximum rent date. The requirements are similar to the 5 (a) 18 procedure, but are less involved. As stated, this procedure is not in use in any area office on an experimental basis, and may or may not be adopted.
This meeting reaffirmed the belief that rent control must be administered in each area on a basis that will receive public acceptance. What will work in Wisconsin may not work in Massachusetts. They ran us out of Wisconsin because we were too tight, and out of New York State because we were too liberal. The tenants in Boston and Newark are highly organized, and they object to liberal increases. If this policy is followed, the State of Massachusetts will throw out Federal rent control and enact State rent control.
Therefore, each area rent director should consult with his local rent advisory board and adopt a rent-adjustment schedule which will be realistic, considering the needs in his locality, and one that will be publicly accepted. In Boston, the tenants object to increased cost adjustments for money spent since August 1, 1951, for repairs, painting, decorating, new roof, etc., and are of the opinion that the 20-percent granted is all the landlord is entitled to, regardless of the terrific increase in cost of materials, labor, etc., since 1942. On the other hand, Chicago allows increases in rents (no offset) for the above items. Therefore, each area must solve its own problems.
It was stressed and restressed that the rent advisory boards can do just about anything they wish to do, and that it is indeed rare where the national office, on appeal, has overruled the local rent advisory board.
În each speech that Tighe Woods makes, he calls attention to the fact that rent control is tied in with prices and wages; and as they rise, rents should be allowed to rise also.
Permit me now to convey to you the following policy procedures I learned from the Detroit meeting:
COMPLIANCE 1. Our goal is to obtain better compliance.
2. We should present to the rent advisory board those cases where a settlement cannot be reached through a landlord-tenant conference, before we send it to litigation.
3. In willful cases, where the regulations demand treble damages, the rent advisory board may assess the damage between single and treble.
4. Treble damages should be assessed against large or professional landlords.
5. Small landlords (especially women), who do not follow an order, may be assessed one and a half or double damages (the area rent director should use discretion on a case basis).
6. In cases where the tenant says to the landlord, “The maximum rent is $75 per month. If you will let me have it, I will pay you $100 a month," the damages should be collected from the landlord with all the money going to the United States, and none to the tenant.
7. If litigation has a case and suit has not been filed, it may be recalled by the area rent director and referred to the rent advisory board.
8. If litigation will not accept a case because the landlord is entitled to the 20 percent and says the court will allow the 20 percent anyway, or thinks the case too weak on the self-help angle, it should be sent to them regardless.
GOVERNMENT-OWNED PROJECTS RENTED TO EMPLOYEES 1. All Government-owned housing rented to Army, naval, civilian personnel, or contractors, comes under rent control on February 1, 1952, in all areas critical and noncritical (except new construction since February 1, 1947). This means public housing units, Atlanta Housing Authority (because they are partially subsidized by the United States Army, and the United States Army wishes to stop subsidizing housing projects).
2. They have 45 days from February 1, 1952, to register. However, if they fail, do not call on them to register until after April 1, 1952.
3. If large projects, they register in triplicate, on their stationery, at rents they were receiving February 1, 1952. (If small projects, they may use D-804.) The rent received on February 1, 1952 is the rent.
4. The FH A-insured rents will be accepted as established by the FHA in critical areas.
5. Public Housing units, Housing Authority units, Federal-aided projects, etc., are to be allowed the 20 percent, even though they were previously brought up to comparability.
6. Public Housing was told to increase their rents to comparability because Congress was tired of subsidizing these rents.
7. In some areas, tenants filed thousands of complaints when the 20 percent was granted on Public Housing units because the property had deteriorated or services had been decreased. If you run into such a situation, please proceed in the following manner:
(a) Do not revoke any orders without first giving the local representative a chance to repair the property or restore the services.
(6) Consider the class and construction of the property before considering to revoke the order (such as converted barracks).
(c) If the local representative will not cure the complaint, refer the case to the RAB before proceeding to revoke the order. If the RAB says "0. K.," then go ahead. This could become a national issue, and Board approval must be obtained.
1. First, consider, "Is it to the public welfare," such as building a school, hospital, expanding a defense plant. If you think so, then issue the certificate.
2. As for parking lots, nonhousing rental, etc., then do not issue the certificate.
3. Good faith: If the facts cannot be determined in the area office, then refer the case to the RAB for an oral hearing to determine whether it is “retaliatory."
RENT ADVISORY BOARDS The chief discussion on this subject is the failure of some of the rent offices to review a complaint from the landlord or tenant, and making no attempt to correct an error, or explaining to the landlord or tenant why the increase was a certain amount. Instead of the area office doing this, they tell the landlord or tenant to appeal to the board. This results in bad public relations and puts an unwarranted workload on the board, which results in the use of “panels" and an unjustified amount of oral hearing which could be prevented, if the area office tried to handle the complaint instead of passing the buck to the Board.
1. Very few offices use the stamp.
An area office should attempt through correspondence or personal interview to correct errors and to explain the position of the area office, and, failing to satisfy landlord or tenant, then advise him of his right to appeal to the RAB or national office.
PRIOR OPINIONS The meat of this subject is: (1) Have the RAB approve a rental value schedule and give copies to the contact representatives, examiner-inspectors, etc., so that any person calling on the telephone or at the office may receive an on-the-spot
decision. The final increase will be the amount given over the telephone or in person. This saves the landlord writing us a letter and the office writing back. Send a copy of the prior opinion to the tenant, if the unit is occupied.
TENANT-CONSENT PETITION, FORM D-I-A This form was adopted in May 1951 and placed in effect in several offices on a trial basis in order to determine whether or not it should be adopted on a national basis.
The comments coming from the landlords and tenants in areas where it has been in operation is about 50 percent pro and 50 percent con. It is designed to promote better relations between landlords and tenants, to eliminate docketing and a waiting period of from 7 to 14 days.
When the form is received, it is screened. If it is in order, and there are sufficient grounds and the increase requested does not exceed the amount allowed. under the adjustment schedule, it is stamped and mailed to landlord and to tenant, with one copy retained in the area office. If the requested amount is less than the allowable amount, the increase granted is the requested amount, the case is not docketed.
This procedure is optional with the landlord, as he may use Form D-1-B if he wishes, and the case will be processed under the D-1-B procedure. The D-1-B procedure may also be used if the tenant refuses to sign the D-1-A consent.
The results of the experiment with the D-1-A are as follows:
1. A review of the D-1-A petitions filed showed coercion in only 5 percent of the cases.
2. The tenants succeeded in getting repairs made when the landlord filed for an increase due to an increase in services.
3. The publicity was on the ground that the agreement must not exceed the allowable amount under the schedule and was therefore favorably received by the public.
The reaction to the adoption of this procedure was about half for and half against it.
In my opinion, the form will work if it is confined to increases for major capital improvements, increases for services, furniture, furnishings, and equipment, increase in the number of subtenants, and increase in the number of people living in the dwelling unit.
It may also work for increased cost adjustments, but I believe that no adjustment under 5 (a) 11 (i) should be permitted on this form, because it is too dangerous, especially where the landlord and tenant agree to a new rent that is far in excess of comparability, and the office must deny the petition. Would the reaction from the landlord and tenant be, “We agree on a rent, and a Government bureaucrat says we can't have it”?
Mr. FITZGERALD. Mr. Chairman, that concludes our formal statement.
We have a report that we want to file for the record. It has to do with credit restrictions.
Mr. BROWN (presiding). It may be inserted.
(The information referred to is as follows:) STATEMENT OF THE NATIONAL AssociatION OF REAL Estate BOARDS PRESENTED
BY HARRY J. FITZGERALD, EvANSVILLE, IND., IN REGARD TO REAL ESTATE ('REDIT RESTRICTIONS
Mr. Chairman and members of the committee, I am Harry J. Fitzgerald, a member of the Realtors' Washington committee of the National Association of Real Estate Boards. Our association represents 1,123 local real-estate boards and 47,655 realtors throughout the United States engaged in all phases of the real-estate industry. Our offices are at 1737 K Street NW., Washington, D. C., and 22 West Monroe Street, Chicago, Ill.
The National Association of Real Fstate Boards supports and urges the repeal of credit restrictions over real estate, known as regulation X, because:
1. It has penalized the little fellow who could not afford the larger down payments for a home.
2. Congress recognized, when it approved the so-called Denton amendment in 1951, that the credit regulations issued by the Federal Reserve Board and the Housing and Home Finance Agency were too harsh with respect to FHA and con
ventionally financed housing so as to place an undue burden on home purchasers in the low and middle income ranges.
3. Regulation X has not reduced the volume of building or conserved critical materials required for defense needs.
4. The recent suspension of the voluntary credit restraint program was of itself an admission by the Federal Reserve Board that the real-estate credit restrictions were not needed for the anti-inflationary purpose which prompted their original adoption.
5. The suspension of regulation W further points up the gross inequity of continued restrictions on the purchase of homes. This recent action with respect to regulation W is convincing evidence that anti-inflationary objectives are not sought by the imposition of credit controls. If anything, the purchase of homes is less inflationary because it taps the built-up savings and increased incomes and channels them into long-term investments.
6. The increased availability of critical materials as indicated by industry reports and the relaxing of materials controls for nondefense building removes the conservation of critical materials as a reasonable objective of regulation X.
7. If the Congress wants sufficient defense and military housing, and we believe it does, surely it must be aware that regulation X does not further this objective.
The Housing and Home Finance Agency winter issue of Housing Research candidly admits that regulation X penalized the little fellow who could not afford a larger down payment for a home. On page 7 of Housing Research we find that changes in the mortgage market and the number of housing starts “* occurred as a result of a complexity of factors, including the tight mortgage money situation. The latter factor may have been just as much or more responsible than credit restrictions for the developments in the housing and mortgage markets which are discussed.”
The article continues: “* * * In the 1951 period the price distributions of new homes financed under each of these programs (FHA and VA) showed that s smaller proportion of homes purchased were priced at $10,000 or less and a larger proportion were priced at more than $10,000.
"Thus it was estimated that, based on the amount of first mortgage as a percent of purchase price, at least one-third of the new home purchases financed with FH A-insured loans and about two-thirds of the new home purchases financed with VA-guaranteed loans would have been ineligible. The comparable estimate of ineligible conventionally financed new home purchases (those requiring the highest down payments and without any form of government guaranteed or insured loans) 'would have been only 18 percent under the regulations" the article states.
Commenting on another phase of ineffectiveness of the credit regulations, the same article refers to the percent of homes purchased with all cash. We quote:
* * it is evident that the cash home purchases were relatively more frequent among buyers of homes costing less than $5,000 and of homes costing more than $15,000: * * Here is another indication that credit regulations would be partially ineffective in curtailing housing demand.”
These comments in HHFA's Housing Research also support the fact that regulation X did not reduce the volume of construction or conserve critical materials, its stated purposes for existence.
Increased cost of materials, the controlled-materials plan and the withdrawal of support of Government long-term bonds accounted for the decrease in housing starts, according to Housing Research. On page 11, we find: “*
With lending institutions reluctant to sell their bonds at a loss (due to new Federal policy) there developed a shortage of mortgage money for new loan commitments. The resultant difficulty of obtaining advance commitments added to the credit regulations gave impetus to the decline in new home building." This statement readily admits that the credit regulations did not in themselves cut home building starts but that a change in the flow of money did result in that cut.
Production in this answer to any shortage. Again it has been proved with the most recent announcements by NPA and DPA that, surprisingly, we have more critical materials on hand than bad first been believed. In growing proportions materials are being reported in greater supply and released for nonessential construction. All of these facts point to the need to repeal regulation X as a materials-conservation factor.
If regulation X had been responsible for conserving materials that are becoming increasingly plentiful, or had fairly and effectively controlled new home buying, it might be reasonable to take another look. But today it is neither needed nor wanted. It has resulted in hurting those who needed housing most but could afford it least.
The armed services and the Housing and Home Finance Agency admit that there is little relation between the number of units programed in a critical area and the actual number of units needed by the armed services involved in that area. For example, 100 rental units have been programed in the Fort Benning, Ga., area for suspended credit restrictions. The Army advises us, however, that the housing deficit on June 30, 1952, will be approximately 7,497 units. At Fort Hood, Killeen, Tex., there has been programed 1,000 units for suspended credit restrictions. Yet, their June 30, 1952, estimate of housing deficit is 9,893.
We are certain that the Congress is desirous of bringing about sufficient housing construction in the defense areas. It is obvious, however, this result will not be achieved by the present system of doling out a little relaxation of the credit restrictions here and there. As a matter of fact, a recent issue of the House and Home magazine reports:
“The biggest irony in the defense-housing program was that nonprogramed housing in almost every defense area was rising faster than programed housing.”
Regulation X had two legs to stand on: anti-inflation and conservation of critical materials. Both have been removed after proving unnecessary. Surely, the Congress cannot continue a program which, without any benefit to the Nation, results only in the deprivation of opportunities for home ownership of many of our people.
We support wholeheartedly the repeal of the regulation X credit controls program.
Mr. Brown (presiding). Does any member desire to interrogate the witness?
Mr. COLE. Mr. Chairman.
Mr. COLE. I want to comment on the statement you make on page 12, and frankly congratulate you upon that approach. It is the first time I have seen as lucid and clear an explanation of the real issue involved in this bill today.
I asked Governor Arnall and Mr. Putnam how long they thought we should continue wage-price stabilization and rent control, and one of the gentlemen said, I think it was Mr. Putnam—“As long as war seems possible."
Then, when I queried him on that, he said, as I recall if offhand: "Well, as long as war seems probable.”
Then we had a further colloquy about what that meant with respect to the future economic and diplomatic conditions in this country and the world. It seems to me that Congress should meet that issue very clearly and very squarely, whether or not we must control our economy when there exists in this world another potential enemy. If so, then we should realize and meet that issue, and say that we must from now on, for time immemorial, have these wage, price, and rent controls.
If it is a matter of mobilization, for defense, and purely a temporary emergency, that is one thing, and if that is true, then, I think we should make the determination based solely upon the facts. We should determine whether or not we are taking from our civilian economy materials needed for the construction of military goods. I want to congratulate upon that. I think we must meet that issue and I'think the Congress will do it.
Now do you find, in your research and in connection with the cases which you have
mentioned here, that there are other areas than those mentioned by you—Fort Benning, Ga., and so on-that there are other areas which are making a definité effort to solve the problem locally? You have mentioned a few, but there are other areas, are there?