Mr. MULTER. Now, percentagewise, can you tell us the ratio of office buildings, or offices, to stores, in these 88 cities? Do the offices. make up 50 percent, 80 percent, 90 percent of the commercial properties? Can you tell us that?

Mr. Cook. I would say-and now you are asking me for my personal opinion-that the office space would represent somewhere around 85 to 90 percent.

Mr. MULTER. Of the commercial properties.

Mr. Cook. Yes, sir. But that is a figure that to the best of my knowledge is not available anywhere.

Mr. MULTER. Now, your figures are based upon office space and store space?

Mr. Cook. Yes, sir.

Mr. MULTER. You have given us no facts or figures with reference to industrial space, factory space?

Mr. Cook. That is correct.

Mr. MULTER. I assume you didn't include them because you didn't have the facts and figures available.

Mr. Cook. Yes, sir; I stated that they were not available, outside of the actual vacancy figure of 4 percent on loft buildings. I had no figures available of the same type as to those.

Mr. MULTER. Do you know what the average rent per square foot is, of offices in the city of New York?

Mr. Cook. I do not; no, sir.

Mr. MULTER. If I suggest it is in excess of $4 per square foot, would you think that was right? Is there any representative of your group here from New York who can assist you?

Mr. Cook. Yes, sir.

Mr. MULTER. Would you have him come up and give us his name and address and answer the question if he can?

Mr. Cook. This is Mr. Brown of New York.

Mr. MELVIN BROWN. My name is Melvin Brown, and my business address is 1560 Broadway, New York City. I am president of my own building management and brokerage concern, and I am vice chairman of the commercial rent control committee of the Real Estate Board of New York, and chairman of the rent control committee of the Midtown Real Estate Owners Association of New York, two boards comprising practically the bulk of Manhattan real estate.

Now if I may, I would first like to answer your question as to how long it took to get the New York State commercial rent control law into action.

The agitation for such a law started in about 1943.

Mr. MULTER. Well, let's start with the enactment of the law.

Mr. MELVIN BROWN. The enactment of the law occurred in March 1945. There was set up no administrative body. The contents of the act provided for the usual negotiations between tenants and landlords for new leading and renewal leasing, subject to the restrictions of the

act.

Originally, I think, so far as loft buildings were concerned, there was a freeze date as of, if I recall correctly, March 1943, in the case of the loft buildings, and June 1, 1944, with respect to store and office buildings, plus a 15 percent increase from the rates at those freeze dates.

They were provided in the law at the time a reference to the court, Supreme Court of New York State, for the adjusting of any particular

situation that a landlord might have wished to bring before the court, because of hardship or inequities.

Mr. MULTER. It was necessary to resort to the court only if the parties could not agree?

Mr. MELVIN BROWN. That is correct. In the first law, as I recall it, there was no arbitration provided. Now, there has been, as I said before, no State or city administration of the commercial rent control law. It has been a matter that has been handled expeditiously between the landlords and tenants, and in some cases by the courts. You may recall that a special term of the supreme court was created in New York City for the hearing of these cases.

Mr. MULTER. They have been operating under the law expeditiously, you said; which means, of course, that if the landlord thought he was entitled to an increase he could get the increase fairly quickly. Mr. MELVIN BROWN. Well, he couldn't get it fairly quickly, Congressman Multer, in the early days due to the fact

Mr. MULTER. But he can today, now we have had the interpretations of the law by the courts, and a reenactment of it by the legislature. It is operating fairly smoothly and expeditiously now.

Mr. MELVIN BROWN. It is operating very smoothly now, due to the intelligent efforts of the New York Legislature to sit down with both landlords and tenants, every year, to review what changes have occurred in the past year that would either justify the legislature in tightening up the act or in relaxing the act.

Mr. MULTER. Is it fair to say that it is operating satisfactorily to landlords and tenants?

Mr. MELVIN BROWN. It is, except for the fact that the obviously desirable situation for a landlord is a free market.

We are still limited to 15 percent increase.

Mr. MULTER. Are the landlords now getting a fair return under the operation of that law in New York?

Mr. MELVIN BROWN. Largely, yes, sir, as to the commercial buildings.

Mr. MULTER. What would be wrong, and I will address this question to both of you-Mr. Cook, on the national scale, and you, Mr. Brown, on the local scale-what would be wrong with the Congress setting up a freeze of commercial rents as of now, with no roll-backs, so that they will not rise too fast or too high during this emergency period only?

Mr. MELVIN BROWN. May I answer for New York particularly? Mr. MULTER. Yes, sir.

Mr. MELVIN BROWN. Because, as I understand, no other State in the Union

Mr. MULTER. Isn't the obvious answer that so far as New York is concerned, you would not be hurt by it? Whatever increases you have needed up to now you could get?

Mr. MELVIN BROWN. Congressman, will you let me answer the question? You raised the question. I would like to answer it. I don't want to be rude or discourteous, but I don't want to have the answer put in my mouth.

Mr. BROWN. Proceed, Mr. Witness.

Mr. MELVIN BROWN. So far as New York State is concerned, we already have a State commercial rent control law, which has been adjusted from year to year and which is working fairly satisfactorily,

without any bureaucratic set-up of any kind, without any administrative body of any kind, except in reference to the courts, and to have the Federal Government step in and supersede that would in my opinion create chaos in the real estate industry, and among the tenants in New York City.

Mr. MULTER. Now, to get back to my question, if the same Congress enacts a law similar to that now in operation in New York, with reference to commercial properties, the New York landlords would have no right to complain about it. It wouldn't affect them; isn't that so?

Mr. MELVIN BROWN. No, that isn't so. The answer to it is thisMr. MULTER. Let me put the question this way, sir. I want to get along. We want to make a little time.

If the rest of the country were treated the same way as the city and State of New York is being treated, would New Yorkers have any right to complain?

Mr. MELVIN BROWN. They would have no right to complain about the rest of the country, but they would have a right to complain about the State of New York, and more particularly the city of New York.

Mr. MULTER. Now, let's go to Mr. Cook and see if you can answer on a national scale, sir.

Can you see any reason why the Congress should not freeze rents on commercial properties as of today, at today's rate, giving you the right to go into courts to get an increase, if you need an increase, because of increased costs, so that you should continue to get a fair return?

Mr. Cook. Yes, sir; I can.

Mr. MULTER. Tell us what it is.

Mr. Cook. I think that our charts and figures have shown a lack of necessity for controls around the country, and on the item of expense, both to our Government and to our individual buildings, it would be an unnecessary expense and not justified.

Mr. MULTER. You wouldn't want me to ask your association to guarantee that the situation will not get any worse from here on in, as the defense effort speeds up, and that there will be no increases in office or commercial rents, would you? You couldn't guarantee that, and your organization couldn't; isn't that so?

Mr. Cook. I couldn't guarantee that any more, Mr. Multer, than I could ask you to guarantee that our costs wouldn't rise.

Mr. MULTER. But bear in mind, in my formula, I say that when costs increase you should get an increase in rent, so you would still get a fair return.

Mr. Cook. Yes, sir.

Mr. MULTER. But I say, since no one can guarantee that these prices will not increase, and these rents will not increase, and since it must be obvious that every increase in office rent and commercial rent, and in store rent, must be reflected in the price that must be charged for the commodities concerned, whether it be the office of General Motors or the office of General Foods, or just a little butcher store if those rents go up, somebody must get that increase back by way of a cost that must be passed on to the ultimate purchaser or consumer. That is so; is it not?

Mr. Cook. In theory; yes, sir.

Mr. MULTER. Well, now, then, if we are going to control prices and we are going to control wages and we are going to try to keep the cost of defense procurement down and the cost of living down, isn't it necessary that we keep the cost of rents down?

I am not saying rolling them back. I am saying keeping them at a level where you can get a fair return and won't let them go up unreasonably.

Now, maybe it isn't necessary to do it today, but since we can't guarantee that they are not going to go up tomorrow, or next week or next month, shouldn't we have this stand-by control given to the President so if it does get out of hand he can step in immediately and say, "I freeze the rents as of now"?

Mr. Cook. Without taking up too much more of this committee's important time, I would just like to point out that our high peak of Occupancy was 5 years ago. Since then, our occupancy has fallen off. We are operating in a free market. The law of supply and demand controls our rentals. Whether we have a war or whether we don't have a war, we cannot raise our rentals unless our tenants are willing to pay those rentals, and I offer as the best proof of that our own record, which shows that 5 years ago we were down to a half of 1 percent vacancy, and yet our rental rates have not risen as fast as our

costs.

Mr. MULTER. Are you materially worse off today--I am talking now about the landlords of commercial properties generally throughout the country are you very much worse off today than you were in 1946, when you had your peak of minimum vacancies?

Mr. Cook. We are materially worse off today; yes, sir. Our costs have risen in excess of our increase in income.

Mr. MULTER. Well, now, let's just take that for a moment and let's take your figures.

Mr. Cook. Yes, sir.

Mr. MULTER. First, can you supply us with the cost of construction per square foot as of 1940 and again as of 1950? Do you have those figures available? Or does anyone with you have them available? Mr. Cook. I do not have it available, Mr. Multer.

Mr. MULTER. If you can supply that I would appreciate it.

Mr. Cook. I would be glad to supply that for the record. In fact, it was deliberately left out because we were talking about existing buildings and not new construction.

We will be happy to furnish that to you.

(The information requested was not received in time for printing.) Mr. MULTER. Costs must necessarily be taken into account if we are going to determine what is a fair return and whether or not you are getting a fair return and at what point if at all it should be frozen. Now, let's turn to your chart "income against costs." I think it is the second chart.

Now, there you show the average per square foot, in 1924, was over $2.

Mr. Cook. Yes, sir.

Mr. MULTER. At the end of the so-called boom and bust period, that ended in about 1930, your net income was 95 cents per square foot. Mr. Cook. Correct.

Mr. MULTER. Then because of the busts and the bankruptcies, your income dropped off and you had a large rent roll on your books

that you couldn't collect and by 1940 you were collecting a net of 29 cents per square foot. Is that right?

Mr. Cook. That is right.

Mr. MULTER. In 1950, you were collecting 60 cents net per square foot, is that right?

Mr. Cook. Eighty cents.

Mr. MULTER. That is right, 80 cents. That is about 21⁄2 times what you were getting in 1940?

Mr. Cook. That is correct.

Mr. MULTER. Now, you say that 80 cents per square foot net is not a fair return? Or is it a fair return? Net, that is.

Mr. Cook. Mr. Multer, I would say that that is not necessarily a fair return. You have overlooked the fact that when these buildings were built, during this boom period, our own figures show about 95 cents.

Mr. MULTER. Yes, sir. And at that time it was 95 cents net, based upon a cost of construction which we would have to take into account to determine whether that 95 cents was fair. I think you said it was a fair return, 95 cents per square foot, in 1930?

Mr. Cook. I did not say that, Mr. Multer.

Mr. MULTER. It wasn't a fair return.

Mr. Cook. I would say that would be presumed to be a fair return; yes, sir.

Mr. MULTER. Based on a high cost of construction at that time? Mr. Cook. A cost of construction not as high as today?

Mr. MULTER. No. But a lot of those buildings are still in operation today, and netting 80 cents as of today, per square foot, isn't that so? Mr. Cook. That is right.

Mr. MULTER. Very few of those fellows who owned those buildings in 1930 own them in 1950. They were bought at depreciated values after the bust, weren't they?

Mr. Cook. No, sir. Speaking on a national basis, I could not agree with you on that statement.

Characteristic of most of the cities of this country you will find that the ownership of buildings today is the same ownership, passed on by inheritance, by those people who owned them in 1930.

The picture that you have in mind was more characteristic of New York City than of the country as a whole.

Mr. MULTER. That may be, that my picture is based more on what has happened in New York City than in the rest of the country. Now, let's turn to your office occupancy and rental rate chart.

There we start out with a net of 81 cents per square foot, in 1924, then it drops down to 23 cents net in 1940, and is now up to 87 cents net. Is that right?

Mr. Cook. Yes, sir.

Mr. MULTER. You are better off now than you were in 1924, and much better off than in 1940?

Mr. Cook. Undoubtedly.

Mr. MULTER. Isn't that 87 cents per square foot a fair return today? Mr. Cook. Mr. Multer, if you will pardon me, I don't believe that I said that any figure was or was not a fair return.

The question you originally asked me was whether the buildings were worse off today, in 1951, than they were in 1946.