Smith, Rosemary Berry, Indianapolis, Ind.: Letter to Senator Cape Spiegel, E. M., president, National Association of Home Builders: Letters, statements, reports, etc., submitted by-Continued Schmirer, Mrs. Albert, Indianapolis, Ind.: Letter to Senator Cape- Schultz, R. E., president, Property Owners, Inc., of Anderson, Ind.: hart__ Page 1045 1020 1052 1247 1049 1257 Stewart, A. J., National Association of Real Estate Boards: Letter to Senator Bush___ 808 Letter to Senator Capehart. 822 832 Sullivan, Francis M., national legislative director, Disabled American 1260 Teninga, Cornelius, Chicago Real Estate Board: Exhibits to accom- 1066 Vanderslice, R. L., executive director, Chicago Residential Hotel Statement and exhibits. 926 Newspaper articles.. 948 Increases in rents in 34 large cities, etc.--. Ward, Wm., Association of Retired Railway Employees, Inc., Indi- Weitzer, Bernard, national legislative director, Jewish War Veterans: Werner, Charles, Indianapolis, Ind.: Letter to Senator Capehart_ STANDBY ECONOMIC CONTROLS WEDNESDAY, MARCH 18, 1953 UNITED STATES SENATE, COMMITTEE ON BANKING AND CURRENCY, Washington, D. C. The committee met, pursuant to call, at 10:05 a. m., in room 301, Senate Office Building, Senator Homer E. Capehart (chairman) presiding. Present: Senators Capehart, Bennett, Bush, Payne, Goldwater, Douglas, and Lehman. The CHAIRMAN. The committee will come to order. Our first witness will be Mr. A. J. Stewart, of Louisville, Ky., for the National Association of Real Estate Boards. Mr. Stewart, I see you have quite a long statement. Mr. STEWART. Mr. Chairman, my statement is not quite as formidable as it looks. I think the prepared text here that I would like to read is about 20 pages. The CHAIRMAN. Suppose you proceed then, in your own way. I can see now the number of witnesses that we have, and we will no doubt have to go on all day. Let me say this: that we will go on all day today and tomorrow, and if we do not get finished tomorrow, Thursday, we will finish on Friday. We purposely held Friday off so that, if you folks could not get finished and were not satisfied on Thursday, we would then have all day Friday. While we do not want to waste any time, and we do not want to have a lot of repetition, nevertheless we are going to take whatever time is necessary in order to hear all of you folks and do a good job. You may proceed, Mr. Stewart, in your own way, please. STATEMENT OF A. J. STEWART, ACCOMPANIED BY CALVIN K. SNYDER, REPRESENTING THE NATIONAL ASSOCIATION OF REAL ESTATE BOARDS Mr. STEWART. Mr. Chairman and members of the committee, I am A. J. Stewart, vice president in charge of real-estate activities for the Citizens Fidelity Bank & Trust Co. of Louisville, Ky. I have been associated with the bank for over 33 years. It has been my job there, among other things, to supervise the collection of several million dollars of rentals annually, which have been largely concentrated in Kentucky, but scattered throughout the Nation, in Canada, and in Mexico. I am appearing for the National Association of Real Estate Boards. Our association is comprised of 1,131 real-estate boards with a membership of 49,743 realtors located in every State in the United States. Our offices are at 1737 K Street NW., Washington, D. C., and 22 West Monroe Street, Chicago. Our authority to appear before this committee on behalf of the realtors of the Nation is in the policy statement of the association approved in convention in November 1952. [Reading:] We believe that a healthy rental inventory can be achieved only through the absolute decontrol of rental property. We urge the Congress to end rent control on April 30, 1953. We pledge our support to an orderly transition to a free market. We appreciate the opportunity and privilege of representing our association's point of view on the subject of rent control. Mr. Chairman, may I say at the outset that our association most strongly supports a free competitive market and abhors any kind of price control, whether on wages, goods, or rents. We do not favor such controls at a time when our Nation is not in a state of war declared by Congress. We feel that any type of standby law will serve as a deterrent to the speedy restoration of a free economy. We shall submit evidence to show that if a standby bureau is created, or retained to be ready in the event controls may be needed, such authority will stimulate active employment of latent powers. With your permission, Mr. Chairman, we shall direct our testimony toward rent control, which, as I understand, is the subject of the hearing. As part of my testimony, I shall include certain documentary evidence to support these statements: 1. Continued Federal rent control cannot be justified, in our opinion, on economic or any other grounds. 2. Nothing constructive has been accomplished in Federal designation of critical areas for rent control that could not have been accomplished by local communities without the expense of maintaining the Federal bureaucracy and the harassment caused by it. 3. Housing and rent problems in areas part of or adjacent to military areas are being handled successfully and effectively through joint efforts of the local community and the military. 4. Accelerated depreciation for tax purposes has been and may be employed effectively to obtain adequate housing in critical areas. We concur in the President's statement that the great economic strength of our democracy has developed in an atmosphere of freedom; that the character of our people resists artificial and arbitrary controls of any kind; that direct controls, except those on credit, deal not with real causes of inflation but only with its symptoms. We applaud his statement that we must combat wide fluctuations "in our price structure by relying largely on the effective use of sound fiscal and monetary policy, and upon the natural workings of economic law." Throughout the land we see a growing surge of confidence in the administration's plan for decontrol. Weekly, for the past month, new decontrolled items are announced. This pattern will continue until April 30, when complete decontrol will have been achieved. This orderly decontrol directed by the President is expected to cover a period of about 3 months. It's ironic, Mr. Chairman, isn't it, that the "orderly" decontrol of rents has taken 8 years? The CHAIRMAN. I might say that all items have now been decontrolled, except rent. Effective as of yesterday, there is nothing under price and wage control in the United States. Mr. STEWART. Thank you, Mr. Chairman. The CHAIRMAN. So, the President beat you to your statement here by about 6 weeks. Mr. STEWART. I stand corrected, sir. The CHAIRMAN. Yes. Everything has now been decontrolled except rents. Mr. STEWART. It is even more shocking when one considers the relative importance of rents to other groups of goods and services in the Consumer Price Index of the Bureau of Labor Statistics. In A Short Description of the Index as Revised, 1953, immediately following page 8, we find table I, in which rents are given a relative importance of 5.3 percent of family expenditures. This compares with 30.1 percent for food, 11 percent for transportation, 9.7 percent for apparel, 5.4 percent for reading and recreation, 5 percent for "Other goods and services" which include tobacco and alcoholic beverages. Since it is estimated that only 49 percent, or less than half of these families, are tenants, in all fairness it should be pointed out that this figure would be double, or about 11 percent of the renter's expenditures are for housing. In other words, for every dollar spent by a tenant, only about 11 percent, or 11 cents of that dollar, is spent on rent. That same tenant, based on BLS figures, spends 30.1 percent of his dollar for food, and food has been decontrolled; 9.7 percent for clothing, and clothing has been decontrolled; 5.4 percent of his dollar on reading and recreation, which includes radio and television, the prices for which have been decontrolled. He spends 5 cents of his dollar on other goods and services, including tobacco and alcoholic beverages, neither of which any longer remains under control. Senator BUSH. Mr. Chairman, may I ask a question? Senator BUSH. That figure of 11 percent, which you arrive at by approximately doubling the 5.3 percent figure, how did you arrive at that figure of 11 percent on rent? Mr. STEWART. I would say we arrived at that from the BLS figures themselves, the Consumer Price Index, page 8 in table I. Would you care to see it, sir? Senator BUSH. Yes. (The document was shown to Senator Bush.) Senator BUSH. This states, though, that that takes into account all families who own their homes. Mr. STEWART. I would say about 49 percent of the families were renters. Senator BUSH. Is that an official figure, or is that your own figure? Mr. STEWART. No, sir; I think that is an official figure. May I ask Mr. Snyder to speak on that? Senator BUSH. Yes. Mr. SNYDER. If I may offer this explanation, 5.3 percent is an item in the latest Cost of Living Index of the BLS; 5.3 percent represents the total to 100 percent of the persons interviewed; 49 percent of them, BLS tells us, are tenants. Senator BUSH. BLS states that 49 percent of them are renters? Mr. SNYDER. That is right. So, in this statement we have simply doubled this figure to show that being the actual amount of dollar expenditure of the tenant for rent, since only 49 percent of them are renters. Senator BUSH. Well, has your organization made a study of its own on people who do rent, whom you know rent, to show what percentage of the income of the average renting family goes for rent? Have you any studies of your own that support this 11-percent figure? Mr. SNYDER. No, sir, Senator; we haven't. Senator BUSH. I am surprised it is not higher. Mr. STEWART. Senator, I would like to give you my impression from about 35 years of experience. Prior to any imposition of rent controls, weighed by the bracket in which the family income fell, I would say we used to consider it sound that a family could pay from 20 to 25 percent of its income for rent. That was a rule-of-thumb measure. I think that is a reflection, sir, of the beneficial effects of rent controls to tenants, compared to the price of all other commodities with rent control. The CHAIRMAN. One making $300 a month today, if he were renting, would be paying at least $60 a month for rent, would he not? Mr. STEWART. If they were in a frozen unit, I would say they would pay less. The CHAIRMAN. That would be 20 percent. If they were making $200 a month, and they were paying $30 a month, it would be 15 percent, would it not? Mr. STEWART. Yes, sir. The CHAIRMAN. Now, if you get down to 11 percent, a man making $400 a month would be paying $44 a month for rent. Do you not think he pays more than that? Mr. STEWART. In our community I would say there are frozen rents in that category. I have never yet made a survey that would satisfy our purposes in our city. May I continue, sir? The CHAIRMAN. You may proceed; yes. Mr. STEWART. As a matter of fact, the very dollar he earns as part of his wage or salary, with which he is privileged to buy these cost-of-living items, has been set free and his income can be increased without restriction, which is the way it should be. Mr. Chairman and members of the committee, 89 cents of the tenant's dollar will be free to bargain in a competitive market by April 30, 1953. I stand correctd, Mr. Chairman. You say that is already in effect. The CHAIRMAN. Yes. Mr. STEWART. The decision is up to Congress as to whether or not you will give freedom to the rental market as you have to the entire economy. Extension of Federal rent control in any form will place the burden of national economic readjustment squarely upon the 11 cents remaining in the tenant's dollar. Mr. Chairman, it is even more astounding that this burden will fall upon the rental-property owners of less than one-fifth of the total rental units of the Nation. 1. Federal rent control cannot now be justified on economic or any other grounds. Federal rent control was originally imposed by the Congress in 1941, and its few remaining remnants should be removed by the Congress. The most enthusiastic proponents of Federal rent control, in and out of the Congress, have based their pleas for continuation on charges of a housing shortage. No one of them has suggested there |