AFTERNOON SESSION (The committee met, pursuant to its recess, at 2:30 p. m.). Present: Chairman Spence, Messrs. Brown, Addonizio, Dollinger, Fugate, Cole, Nicholson, McDonough, and Betts. The CHAIRMAN. We will resume the hearings. The clerk will call the next witness. The CLERK. Mr. William A. Walters, president of the California State Apartment Conference. STATEMENT OF WILLIAM A. WALTERS, PRESIDENT, ACCOMPANIED BY PATRICK O'DONOVAN, ASSISTANT SECRETARYTREASURER, THE CALIFORNIA STATE APARTMENT CONFERENCE The CHAIRMAN. You may proceed, Mr. Walters. Mr. WALTERS. Thank you, Mr. Chairman and gentlemen of the committee. My name is William A. Walters. I am president of the California State Apartment Conference whose office is located at 3923 West Sixth Street, Los Angeles, Calif. I have with me, today, my assistant, Patrick O'Donovan, who is assistant secretary-treasurer of the conference. In order to conserve the time of this committee, I shall not read the entire text of my presentation. I would like, with your permission, to submit my prepared statement for insertion in the record of these hearings. Each member of the committee has received copies of my statement and, I hope, each has had time to read the remarks contained therein. The CHAIRMAN. It may be inserted. Mr. BRENT SPENCE, CALIFORNIA STATE APARTMENT CONFERENCE, April 21, 1952. Chairman, Banking and Currency Committee, House of Representatives, Washington, D. C. DEAR MR. SPENCE: The California State Apartment Conference is the official trade association of the rental housing industry in California, the second largest and fastest growing State in the Nation. The association includes 15 groups of apartment owners, in every major city and densely populated area in the State. Its membership totals approximately 40,000 individuals, all of whom have a vital stake in the rental housing business. Through their properties they serve the communities of Fresno, Long Beach, Los Angeles, Richmond, Sacramento, San Diego, San Francisco, San Jose, San Mateo, Santa Barbara, Santa Cruz, Stockton, Ventura and Alameda and Kern counties. We speak therefore from close knowledge of and familiarity with the rental housing business. We have lived with it and made it our business for many years. We have tried to be good citizens; and we have tried to be patient through a longer period of more restrictive and more damaging controls than have been inflicted on any other segment of the American economy. We believe the time is long overdue for the removal of these controls, not only for the relief of property owners but also for the benefit of our tenants, for business in general and for the Nation as a whole. We appreciate the privilege of setting forth, in this presentation, some of our reasons. We hope it will be genuinely useful to you when you are faced with the task of considering whether to extend the present legislation which is shortly to expire. Sincerely yours, CALIFORNIA STATE APARTMENT CONFERENCE, By WILLIAM WALTERS, President. STATEMENT OF WILLIAM A. WALTERS, PRESIDENT, THE CALIFORNIA STATE APARTMENT CONFERENCE It has now been more than 10 years since rent controls were placed on America's rental housing. Originally it was intended as a temporary measure, but each expiration date has brought an organized pressure for renewal. Each time the claims, the arguments, the uncertainties and purported fears have been the same. Each time the temporary emergency has been stretched out; through a war completed, a reconversion period, an uneasy peace, a new defense effort, and a resumption of actual armed conflict. Each time the act has been extended only temporarily for another year, or two, or for a few months, but always it has been extended. Once more strong pressure is being exerted for another renewal. The Banking and Currency Committee of the United States Senate, in fact, has said that this time it will not consider arguments on the merits or lack of merits of rent control itself, but only evidence and suggestions which pertain to maladministration of, inequities in and possible changes of the present law. Fully aware of the difficult task faced by that body, and of the pressures political and otherwise brought against it, we have made certain suggestions for such modification. Those same suggestions are contained in the pages which follow. If controls are to be extended once again, we respectfully urge you to consider them seriously. However, we in California have watched an interesting situation in the last year and a half or so. With a single exception we have seen our major cities decontrolled by the local action permitted under the current law, and we have been grateful to Congress for making that local action possible. We have seen concerted, strenuous, even frantic efforts by the Office of Rent Stabilization and other organized pressure groups to prevent decontrol. Where control once has been removed, however, we have seen an overwhelming confirmation of the beliefs we have long held and a complete refutation of the claims and wild predictions made by rent control's proponents. MANY BENEFITS HAVE FOLLOWED RENT DECONTROL It is a matter of clear record now that in our decontrolled communities the alleged "housing shortages" quickly vanished, a large amount of new or additional housing space has been made available to tenants, there has been an enormous amount of rehabilitation, repair, and renovation, rent rises have been moderate and in many cases nonexistent, a new era of good feeling between owners and tenants has come into being, the much-feared problem of evictions has completely failed to materialize, and a plentiful supply of good rental housing has become available in all rental ranges. We believe that the California experience has demonstrated beyond question the complete falsity of claims that Federal rent controls are needed. Information which follows shows how decontrolled rents in Los Angeles rose, in 15 months, only half as much as Tighe Woods had offered to allow if only the city council would keep controls in effect in that city. CONTROL FORCED BACK AGAIN ON SEVERAL AREAS You may wonder why, if so much of our State has been decontrolled, we should be so concerned now with the extension of rent control. The answer is that the fear of recontrol by sudden directive from Washington, regardless of local action or local wishes, still hangs over us like a sword of Damocles. Several of our areas, once removed from controls, have been placed back under them; we believe needlessly and unwisely. In one of them, Ventura, as mentioned in greater detail further on, the city council was required to hold additional hearings in order to decontrol the city again. It did so when many vacancies were shown to exist and many rents were shown to be below the former OPS ceilings. The city had been recontrolled by the Housing Expediter after a presumed "fact-finding" survey, but no one could be found in Ventura who knew of such a survey. As long as that continued threat of recontrol is permitted under the law we cannot plan with assurance, build with confidence, know where or how we stand, or enjoy peace of mind and a real freedom from needless uncertainties. Information follows which shows that evictions, the much-feared bugaboo of decontrol, were no problem in Los Angeles, and why they were not. Further details show how rent rises have been far behind the rises in other cost-of-living items, even where controls have been removed entirely. These comparisons are made even more graphically by charts which follow. As those whose business is supplying housing to Americans who do not wish to, or cannot afford to, provide housing for themselves, we have the interests of our potential customers very much at heart. We should like to be able to serve them effectively and efficiently throughout the State, on terms mutually agreeable to us both. We believe it can be done only through a complete removal of rent controls. EXPERIENCE CONFIRMS OUR CONVICTIONS In this brief presentation we cannot go into great detail, and much that we might say has been said in previous years. What we can best add at this time is documentation based on actual experience of the last year and a half. We can now say with conviction that rents will not skyrocket with decontrol— California cities have proved it. Tenants will not be evicted en masse again we have proved it. The widespread fears of what decontrol might bring have been shown to be completely groundless. With new incentive to provide more and better rental housing. Los Angeles property owners have, in one of the fastest-growing areas in the world, kept pace amply with the demand for rental quarters; and Los Angeles, if left to its own volition, will have no more of rent control. We should like for every other community to enjoy, as Los Angeles enjoys, a new freedom from the expensive, inefficient, irritating, paralyzing, choking blight which rent control places on the rental housing industry of a community. RENT CONTROL SHOULD NOT OUTLAST OTHERS Should your committee feel that, because of the requirements of the national defense program or for other reasons, a complete removal of rent control is not feasible at this time, then we respectfully urge that rent control be considered, as we believe it is now being considered, only as a part of the current defense program; and that it be permitted to expire with the remainder of the Defense Act's provisions when the necessities of that act have been fulfilled. It is in that spirit that we present the suggestions which follow for possible revision of the act, with the hope that they may help to prevent some of the arbitrary and even high-handed "interpretations" of the law which in the past have completely nullified or even directly violated what we believe was the spirit and intent of Congress when the laws were written. They are, however, by no means a substitute for the complete decontrol which alone will restore to us the economic freedom we seek. The suggestions follow: 1. We respectfully suggest that the local-option section be expanded, with an amendment that no area can be recontrolled by the Office of Rent Stabilization without prior approval of the local governing body. It might be of interest first to note that with the single exception of the city of San Francisco, every city and county in the State of California has been decontrolled by local action, although not always as quickly and easily as the local governing body intended that it be done. One of the most notable examples of a conflict between the Office of the Housing Expediter and a local governing body took place in California in 1950. It is interesting to see what has happened in that community since the conflict was resolved. DELAY IN DECONTROLLING LOS ANGELES The city of Los Angeles was decontrolled late in that year, over the strenuous protests of the Housing Expediter, who predicted dire consequences if rents in that community were allowed to slip from his control. He made flying trips to the city, appeared before its council, made numerous pronouncement in the public press, and after the council on July 28, 1950, overwhelmingly voted to decontrol the city, managed for 5 months to delay issuing the decontrol order he was under every legal and moral obligation to sign. CITY COUNCIL HAS MORE LOCAL FACTS Two weeks after the council had passed the decontrol resolution, which he admitted had been completely legal and in order, he flew to the city again to plead with the council to reconsider its action. The council, in full possession of the facts of the local situation, refused to reconsider. Mr. Woods then promised that he would sign the decontrol order immediately upon his return to Washington. Instead, he took advantage of every possible opportunity to delay the action, and on October 23, 1950, he wrote a remarkable letter to the president of the Los Angeles council saying that he "had no alternative but to reject the resolution" because of "an acute shortage of rental housing accommodations" and an "expected influx of large numbers of aircraft workers." When President Truman signed the new rent-control legislation in December 1950, however, which specifically approved the decontrol action taken by the Los Angeles City Council, Mr. Woods was forced "reluctantly" to sign the decontrol order on December 20, 1950. What was the validity of Mr. Woods' contentions? How has Los Angeles fared in the 15 months since rent decontrol? The evidence is overwhelming that not a single one of Mr. Woods' gloomy predictions came true. DECONTROL INCREASED VACANCIES The existing "acute rental housing shortage," which, if it had existed at all had been a direct product of his own administration of rent control, vanished almost overnight. From an estimated 4.5 percent vacancy factor at the time of decontrol, the number of vacancies rose steadily as rental properties relieved of controls were placed back on the market or were more wisely utilized. A series of surveys among members of the Apartment Association of Los Angeles County indicated a steady increase in the vacancy factor from 4.7 in January to a high of 9.9 in August, from which the figure declined to 7.9 in Decem ber. The April survey, for example, covered more than 10,000 housing units. Four months after decontrol, the vacancy factor was 8.4 in the units studied. RENTS UP ONLY 8 PERCENT AFTER DECONTROL Nor did rents "skyrocket," as Mr. Woods and his associates so dogmatically predicted. The largest number of vacancies in the April survey was in the moderate bracket where rents fell between $49 and $75. The next largest was in the $36 to $48 group. Decontrol had resulted in several hundred actual decreases in rents, and several thousand of the units had remained unchanged. Approximately 62 percent of the total showed rent increases, but owners reported having spent almost a million dollars in rehabilitation and renovation, and the rents had increased an average of less than 8 percent. This was about half the increase of 15 percent that Mr. Woods had promised he would grant Los Angeles if only it would remain under his control. In the last survey of the series, completed in December 1951, the vacancy factor was 7.9, with the largest number of vacancies in the $41 to $50, the $51 to $60, the $61 to $70 and the $31 to $40 rental brackets, respectively. The "influx of large numbers of aircraft workers" clearly was able to find adequate rental housing at moderate rents. The "rioting and bloodshed" and the "thousands turned out into the streets" which the advocates of rent control said would come to pass with decontrol simply failed to materialize, and a new era of good feeling between owner and tenant has rapidly come into being. Rent decontrol has worked well in Los Angeles. Recent issues of the two Los Angeles Sunday newspapers-the Times and the Examiner-have shown column after column of classified advertising of apartments and houses for rent. The rentals are as low as $5 per week, with most of the offerings in moderate rental range. Some stress "children welcome." The list of "wanted to rent" advertisements, on the other hand, fills less than half of a column, and consists in good part of advertisements with unusual stipulations such as "must have real fireplace and view," "large room at least 20 by 20 suitable for a dancer's private practice,' or "wish living quarters in exchange for gardening services." WOODS' CLAIM OF "SHORTAGE" A GREAT HOAX The much-heralded and loudly touted "housing shortage" in Los Angeles, the basis of Mr. Woods' dire warnings and predictions of terrible things to come and of his refusal for 5 months to sign the decontrol order, ended with the termination of rent control, in spite of the growth of the community, the muchrooming defense plants, and the demands of the tourist traffic. Los Angeles does not want the chaos of rent control forced back upon it through any vindictive whims of the defeated Director of Rent Stabilization. The city council is constantly on the scene. Its members can tell, more readily, more rapidly, and more accurately than Mr. Woods, what the needs of the community are. At the same time, they are much more directly responsible to the people of their own community and subject to their wishes as expressed at the polls. We believe that in all such circumstances, where a local governing body has investigated the facts and has voted for decontrol, it should again be consulted before rent control is ordered from a distant office. We believe that the Los Angeles experience shows, more forcefully than words could convey, the wisdom of local control, and that the same story can be told about every decontrolled city in the State. It is for this reason, and in the light of this experience within our own State, that we respectfully request that the local option provision in the new rent-control legislation be amended to correct these evils. THE GREAT "HOUSING SHORTAGE" MYTH Was there a housing shortage in Southern California in 1950, when on the census of housing in Cali- The statistical report revealed Beverly Hills Burbank Glendale Hermosa Bch.. rent-while Rent Control Ad- Total Rent Sale 283 210 73 106 71 35 206 114 92 88 128 319 144 175 Torrance San Marino.... El Centro The census study tended to rent or for purchase through- ing places. out the State and the figure for area was 3%. 516 253 263 From the Los Angeles Times |