Percentage of increase in prices of various supplies and equipment used by hotels

All of this presents a picture of an industry in which volume of business has declined since 1947 not only in the occupancy of hotel rooms but in the food and beverage business of hotels. It shows an industry in which room rates have not increased as much as operating costs.

Not only is the section applying to hotels in the bill before you unnecessary, but it is highly inequitable and unfair to hotels.

Section 105 H. R. 3871 proposed to insert a new title "Rent Stabilization"-the Defense Production Act of 1950. Under this heading section 452 gives the President the power to establish and maintain maximum rents and to make adjustments therein. Paragraph (a), subdivision (1) of this section provides for a continuation of maximum rents for accommodations for which maximum rents are now in effect. This subdivision would not include hotels. Subdivision (2) provides for the imposition of maximum rents for accommodations for which no maximum rents are now in effect. This subdivision would include hotels.

There is an important and unwarranted distinction made between these two subdivisions. Subdivision (1) allows for adjustments in maximum rents to compensate landlords for increases in costs of operation and maintenance for which they have not been previously compensated. No such allowance is made in subdivision (2). On the contrary, it specifically eliminates any increases in rent which occurred after January 25, 1951. The subdivision goes even further and gives the President power to establish maximum rents based upon the May 24-June 24, 1950, levels.

If such power was exercised and hotel rates rolled back to the May 24-June 24, 1950, level, it would completely disregard the substantial increases in wages and other costs which have taken place since that time. Obviously, the injustice of such a roll-back is apparent.

I am certain that this committee has no desire to impose Government controls on any industry unless it is in the public interest. You decontrolled hotels in 1947 and each year since then you have re

affirmed that decision. The facts presented demonstrate clearly that the Korean hostilities have not changed the basic economic conditions in our industry. The defense program will not change this condition in the foreseeable future. There is no reason for rent control in hotels. Thank you for the privilege of appearing before you.

The CHAIRMAN. Mr. Sherrard, what percentage of the hotels belong to your association?

Mr. SHERRARD. We have 6,000 members, sir-about 80 percent of all the rooms in the industry. The Census Bureau says there are about 25,000 hotels, but they consider anything of five rooms or over a hotel.

The CHAIRMAN. Both transient and residential hotels belong to your organization?

Mr. SHERRARD. Yes, sir.

Mr. CHAIRMAN. Are there any questions?

Mr. KLUCZYNSKI. Mr. Chairman.

The CHAIRMAN. Mr. Kluczynski.

Mr. KLUCZYNSKI. Are there any hotels under control now?

Mr. SHERRARD. New York has a separate State law, sir, and Chicago was left under rent control in the last bill passed by Congress. Mr. KLUCZYNSKI. The only city in the country?

Mr. SHERRARD. The only city in the country that I know of, sir. Mr. KLUCZYNSKI. Do you think that is fair?

Mr. SHERRARD. I do not.

Mr. KLUCZYNSKI. You would be for an amendment then to take the hotels out of this Defense Production Act?

Mr. SHERRARD. I would, sir, and Senator Douglas in the hearing in the Senate, was the gentleman who was responsible for it being in last time, would agree that Chicago should have the same treatment as the rest of the country.

Mr. KLUCZYNSKI. You mentioned a report of Horwath & Horwath which shows in 1951 a vacancy of about 15 percent in the hotels.

Mr. SHERRARD. Which table are you referring to, Mr. Kluczynski? Mr. KLUCZYNSKI. On the first page. On page 2, you have a table which shows Chicago, March 1951, 72 percent occupancy. Mr. SHERRARD. Yes, sir.

Mr. KLUCZYNSKI. That would leave a 28-percent vacancy; is that right?

Mr. SHERRARD. Yes, sir.

In the month of April Chicago had an occupancy of only 68 percent. Mr. KLUCZYNSKI. So you think that Chicago is discriminated against, being the only city under control.

Mr. SHERRARD. We feel very definitely that it is, sir.

Mr. KLUCZYNSKI. That is all, Mr. Chairman.

The CHAIRMAN. I notice you have some advertisements of residential hotels. There were none in the District of Columbia.

Mr. KLUCZYNSKI. The District of Columbia has a separate rent bill, sir. They don't come under this act. So I didn't bother to bring any from the District of Columbia. They have a different act. The CHAIRMAN. Yes, sir; that is true, but I was wondering if there were any vacancies in residential hotels in the District.

Mr. SHERRARD. I couldn't answer, sir.

The CHAIRMAN. Thank you for your statement, Mr. Sherrard. We are glad to have your views, and they will be considered when the committee goes into executive session.

Mr. SHERRARD. Thank you, sir.

The CHAIRMAN. Call the next witness, Mr. Clerk.

Mr. HALLAHAN. Mr. R. L. Vanderslice, representing the Chicago Residential Hotel Association.

The CHAIRMAN. You may proceed, Mr. Vanderslice.

STATEMENT OF R. L. VANDERSLICE, CHICAGO RESIDENTIAL HOTEL ASSOCIATION

Mr. VANDERSLICE. Mr. Chairman, I am R. L. Vanderslice, executive director of the Chicago Residential Hotel Association.

I am appearing before your committee on behalf of the Chicago Residential Hotel Association to recommend that Federal rent control should be ended now with respect to residential hotels in the city of Chicago, which are the only hotels under Federal rent control in the entire country.

The membership of the Chicago Residential Hotel Association consists of over 200 residential hotels and similar type furnished service buildings. Our members hotels are not, generally speaking, large establishments; are in large part individually owned; and usually represent the owners' sole livelihood and source of income. Their problems are the problems of any small-business man.

In the Chicago area, there are two types of establishments commonly known as hotels. There is the large commercial hotel located in the Chicago Loop area, catering primarily to transients. The second type is commonly known as a residential hotel. These hotels are located, generally speaking, outside of the Loop area, and are establishments containing straight rooms, straight rooms and apartments, or consist entirely of apartment units.

The term "residential hotel" in Chicago is used synonymously with apartment, family, and residential hotels. They are commonly known as hotels in Chicago and elsewhere. Residential hotels differ from the ordinary apartment building in that not only is bare living space offered but, in addition, basic hotel services such as maid service, furnishing and laundering of linens, telephone and secretarial or desk service, use and upkeep of furniture and fixtures and usually kitchen, dining facilities, and related equipment.

HOTEL RENT CONTROL, 1942-46

Federal rent control was first imposed under the provisions of the Emergency Price Control Act of 1942. All rentals on housing accommodations were frozen in the Chicago area at the rates charged on March 1, 1942, including rentals on all accommodations in residential hotels. Rentals were held to their 1942 levels.

Generally speaking, no relief was given by the OPA for ordinary maintenance costs and repair; the only relief accorded by the regulations being for major capital improvements on a lengthy and wholly inadequate amortized basis, or for increased services.

In the fall of 1946, all wage and price controls were removed. This complete release of controls over prices and wages caused an immediate and rapid increase in the entire price structure. Since rentals of our members remained frozen at 1942 levels, the effect of this skyrocketing increase in cost of operation was extremely serious. The administrative relief obtainable for these increases was negligible.

Rental adjustment petitions were acted on 1 to 2 years after filing, and were effective only on the date granted. Although all rental units were thus adversely affected, it must be remembered that our residential hotels provide not only living space but basic hotel service as well. The rental freeze thus had serious consequences for them.

HOTEL DECONTROL, 1947-49

Congress, at the termination of the Emergency Price Control Act of 1942 on June 30, 1947, enacted the Housing and Rent Act of 1947. It was recognized by Congress that the cost of operation had risen substantially with respect to the services rendered by all types of hotels. Unlike a straight apartment building, residential and apartment hotels provide services customarily supplied by that class and type of hotels. It was the judgment of Congress that "furnished service units" presented a problem wholly different from "unfurnished units" or units which did not receive basic hotel services.

Congress accordingly wrote into the June 30, 1947, act provision that accommodations receiving customary hotel service in any establishment commonly known as a hotel should be decontrolled.

From June 30, 1947, to March 30, 1949, hotels throughout the country were decontrolled. However, Chicago residential hotels did not immediately benefit from this needed exemption extended to establishments offering basic hotel services. Simultaneously with the enactment of the 1947 Housing and Rent Act, the Housing Expediter issued his rent regulations in which he excluded residential hotels from decontrol by adding to the definition of a decontrolled hotel used in the act the further qualification that no hotel which was made up primarily of self-contained units-that is, kitchen, and so forth-was decontrolled.

Although this administratively added condition to Congress' definition of a hotel was deleted after our association had obtained a temporary injunction, a very large number of our hotels had by then negotiated long-term 15-percent-increase leases, which leases were intended to benefit apartment buildings offering bare-space accommodations as opposed to establishments offering basic hotel services which had been decontrolled.

Also, the city of Chicago, effective July 1, 1947, passed an ordinance freezing nontransient hotel accommodations. Thus ordinance was in effect until 1948, when the Supreme Court of Illinois held such regulation invalid as being outside of the State Enabling Act, which, in delegating power to cities to control rentals, exempted "hotels" from the power thus delegated.

This exemption extended from and after July 1, 1947, until the enactment of the Housing and Rent Extension Act effective April 1, This Extension Act "recontrolled" hotel accommodations in residential hotels only in Chicago and New York City. Shortly thereafter, New York City hotels were placed under State control, and were no longer governed by the Federal law.

Hotel accommodations in all cities apart from Chicago, as well as the primarily transient hotels in Chicago, were continued free of control. Thus, from 1949 to the present, residential hotels in the city of Chicago are the only kind or type of hotels in the entire United States presently under Federal rent control.

Last year, Congress enacted the Defense Production Act of 1950. That act specifically exempted rent control from the scope of its provisions. However, a bill has been submitted to extend the Defense Production Act beyond its expiration date of June 30, 1951. There is a section devoted to the further extension of rent control contained in that bill.

That section would extend rent control for a period of 2 years, would make no provision for ending the present discriminatory rule of the Housing Expediter over Chicago residential hotels, would narrow and limit rent adjustments, and would in fact give far wider and far greater powers over rentals than is contained in the present Housing and Rent Act.

ADMINISTRATION OF THE HOUSING AND RENT ACT OF 1947 AS APPLIED TO CHICAGO RESIDENTIAL HOTELS

From the very inception of the Housing and Rent Act of 1949, the Housing Expediter has treated Chicago residential hotels as a wholly unwanted foundling and orphan. It is our belief that the Housing Expediter was never interested in obtaining recontrol of Chicago residential hotels, and his treatment of them is in full accord with that belief.

That Office has ignored our legitimate requests for needed relief, has denied us rent increases granted to all other controlled housing accommodations, and has maintained an attitude of apparent and pained regret that it had to deal at all with the peculiar and special problems created by the recontrol of Chicago residential hotels.

(a) Congress has rightly been solicitous throughout the history of OPA and throughout the administration of the Housing and Řent Act that fair, expeditious, and reasonable rent relief be given to those deserving of it. Congress, in recognition of this fact, enacted as a part of the Housing and Rent Extension Act of 1949, the so-called "fair net operating income adjustment provisions" made expressly applicable to all "controlled housing accommodations," which very obviously included recontrolled residential hotels.

Some months after the passage of the 1949 Extension Act, the Expediter issued adjustment provisions (Form D-106) providing for this relief. Many of our members filed these petitions. They were prepared at substantial cost, since most required the efforts of an accountant or someone similarly skilled to prepare them. These petitions were filed in substantial numbers from August 1949 to December 1949.

Of course, each petition filed qualified for rent relief, varying in amounts according to each case. Although the majority were fully processed, checked, and investigated, to the best of my knowledge, not a one to this day has ever been officially approved and signed. Instead, effective January 25, 1950, the Housing Expediter arbitrarily declared that rent relief could not be obtained for Chicago residential hotels under the fair-net-operating-income provision on the ground that Congress did not intend that the fair net operating provision should be extended to Chicago residential hotels. Every single one of the large number of petitions were summarily dismissed and returned to the landlords.