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Since 1942 Akron has protested rent control discrimination and House Resolution 90 by Congressman Ed Rowe, February 1, 1943, further stated our case. The administration and legal personnel have always placed the burden of proof on the landlord even in our United States district courts. The lawyers of today will not take cases pertaining to rent control because the principles involved are against their ethics.
We do not think rent control is needed but if you think such a law is necessary, we want to plead with you to give it careful consideration and write a fair law and not a discriminatory law against one group of people such as now exists. If you will stop to realize how large an industry you are trying to control you will see the necessity of this request.
In 1943 rents were frozen on approximately 16,000,000 units. At an average value of $4,000 per unit this amounts to a $64,000,000,000 industry. A freeze at this time would include more than double this dollar value.
We want to add one suggestion for consideration if the Senators and Congressmen can he persuaded to let their common sense tell them what to do instead of using this gigantic industry as a political football. Let rent control die with the present law. Mayors in decontrolled cities in the Akron area say that they have had no bad reaction due to decontrol of rents. In fact, since removal of controls, property owners have been able to make much needed pairs and improvements, which were impossible under control. Ninety-eight percent of the candidates running for city council and mayor, on a recent poll, claim that the administration of rent control has done them a great injustice.
If it should become necessary to freeze industries we would like to make the following suggestions to rectify the inequities that have been imposed upon us as an industry.
1. National boards and local boards be established that are representative of the industry with the powers to investigate and adjust gross inequities.
(a) The national boards should consist of 5 members, 2 landlords, who are owners of at least 10 rental units, 2 tenants and 1 member of the National Association of Real Estate Boards. all to be appointed by Congress.
(6) The local boards should consist of five members to iron out gross inequities. This board to be composed of 2 landlords who are owners of at least 10 rental units, 2 tenants and 1 member of the local real-estate board. Members to be appointed by the local governing body. 2. Frozen rents should be allowed to increase up to 60 percent at option of the
This would not be enough in some cases, keeping in mind that rental units should show a 7 percent net return on the present day value. In case of disagreement on values, most communities have professional appraisers that are available.
3. The new rent law should go into effect and be dated as of the 1st of the following month after passage, with an escalator clause to be used at the option of the owner in accordance with the Bureau of Labor Statistics.
4. Wages, materials, and rents should all be freed from controls at the same time.
5. The wording of this law should be specific and explained in detail so that there will be no misunderstanding of the intent of the law, and no directives or regulations should be allowed by the Administrator,
6. Penalties for infractions of the law should be determined by local courts. 7. The right of contract between landlord and tenant should be respected.
8. Equal representation and legal counsel should be available for property owner for protection of his interests.
It is inherent that this is a free country and we are trying to protect our freedoms and constitutional rights. This law is a long step toward Marxism, and we are certain that anyone who believes and spreads propaganda of riots and bloodshed following in its wake if rents are decontrolled either has a selfish motive or believes in the principles we are now fighting against. This law has failed and has oppressed people of thrift and integrity. It has formed a bitterness within us the taste of which we will not lose for years to come.
Are there any questions?
TESTIMONY ON BEHALF OF CONTINUATION AND STRENGTHENING OF RENT CONTROL
SUBMITTED BY CITIZENS' COMMITTEE FOR RENT CONTROL, CHICAGO, ILL.
The Congress, in considering the need for the last extension of rent control in 1950, heard reports and statistics from the Chicago area, which showed that the
creation of additional housing units had fallen behind the rate at which families in need of housing had increased in number. Sample census and survey reports showed this shortage of housing units to be above the 100,000 figure mark. Committees of the Congress have repeatedly stated that rent control is a temporary safety measure needed to protect the whole economy until a normal relationship is established between the number of housing units and the number of families in the market for shelter.
We must report to the Congress at this time that no progress has been made in the Chicago area toward reducing the numerical difference between supply and need for adequate housing. Figures included in this report to you show that the small net gain in construction over demolition and other losses failed to keep pace with the increase in the number of families needing shelter. In the 10-year period, new plus old housing units increased 12 percent, but families increased 15 percent.
We must further report to you, that because of the factor of price, the Chicago area builder has suffered a materially reduced market for the homes he can build. Typical costs of new construction in Chicago, whether single family or multiple units, fall in the area of $3,000 per room. Of the families who now need housing, 292,000 according to the best sources of information, 130,000 earn $3,000 or less, and cannot afford to buy or to rent new construction. In fact, almost all housing constructed in this area in recent years can be rented or purchased only by those earning more than $5,000 per year. A small fraction of those in the market for housing have such incomes. It follows that the need to regulate the Chicago rent market is a desperate need, which will continue until a practical solution to the matter of supply is in actual operation.
Since the end of War II, Chicago, the Nation's second largest city, has produced new housing units at the astonishingly low rate of about 5,000 per year. It has managed to contain its increasing population only by means of doubling up families, converting single-family units to multiple-family use, and by various forms of temporary housing. Since relatively few of these people are in the market for the new housing being built, they must solve their individual housing problems by seeking housing in this limited market of existing housing. Those least able to compete are the families with children, both because of their added living costs and because landlords consider children undesirable in a tenant family.
If Congress does not renew and strengthen the rent control law, the amount of widespread human suffering and hurt-particularly to the families of defense workers, small-business people, and those living on fixed income—will be incalculable.
The housing shortage, grown more serious in the last year, now poses a serious problem as we move into the period of increased production for national defense. Chicago is a major center for the manufacture of electronic, and farm equipment, and leads in the making of stamped and fabricated parts. Its industry will supply a major share of the parts and subassemblies which will be subcontracted by prime contractors all over the country.
To do this job, Chicago must have, and can secure, needed skilled labor. The Illinois Department of Labor reports that the unemployed labor supply now in the city is dangerously near rock bottom. At the same time it is noted that defense orders held by Chicago businesses have in the main been "pilot" or token orders only. Full production, expected soon, will mean Chicago will draw on the labor force now living in the small towns and rural areas of the State as it did in World War II.
The ability of the city to provide for the influx of such additional labor is seriously curtailed by the shortage of housing. Rent control is an absolute necessity for the efforts of both industry and government to make the best possible arrangements for this necessary and increasing labor force.
Lack of rent control would strike a body blow at the manufacturing potential of the entire area. Such a program must be recognized as vital, not only as a part of the machinery by which Government attempts to prevent inflation, but as an indispensable part of the machinery by which the people of this Nation prepare to defend ourselves and our fundamental way of life.
Since the end of World War II we have all hoped that rent controls could be removed. We hoped that the extent of peacetime residential building would be such that there would be an end to the tragic housing shortage and consequently an end to the need for rent controls. Unfortunately, as we have seen, this is not so, and the Korean War and international tensions postpone indefinitely the time of full conversion to peacetime building.
During the years that rent control has been in operation, it has served a valuable function. It has prevented runaway rents throughout the country; has protected
the honest, fair-dealing landlord against the unscrupulous acts of a few; and has prevented wholesale evictions and their consequent tragic social costs to family and community life.
There are a number of weaknesses in the present law. Tenants hesitate to report wide-spread bonuses, overcharges, and curtailment of services for fear of evictions on technical grounds, and other, more subtle, types of retaliation by unscrupulous landlords. There is no argument against legitimate increases which recompense a landlord for increases in operating expenses, and the cost of rental housing has been going up. Chicago's average monthly rental is now the third highest in the country. Unfortunately, a large part of this cost reflects increases obtained illegally, increases for which the remedies provided by the rent law and its administrative staff have proved too slow, too remote, and too ineffective. We need a stronger law and better enforcement to restore public confidence in rent control and to prevent the type of violations we have noted here.
SOME SUPPORTING DATA
The census reveals that Chicago is a city of over 3,600,000 people in a metropolitan area of about 5,400,000. The same source establishes that there are 1,330,000 families in the city alone, and 1,108,000 dwellings to house them.
If these 1,108,000 dwellings were a fixed housing asset of the city, Chicago could then count each new construction as a gain in solving its problem. But Chicago is a city in which there has been no sustained program of repair and good upkeep. Therefore, 173,000 of these homes, according to the census, are in the late stages of decay and deterioration. The Chicago Community Inventory report shows that in the central areas, the heart areas of Chicago, two startling facts appear simultaneously. First, the total number of housing units” in these areas has increased 25 to 40 percent. Yet in the same period, and in the same areas, the total of new construction has been less than the total demolition. The 66,000 "additional housing units” were created by making as many as six or seven tiny units from one former housing unit.
Much Chicago slum housing rots, decays, and burns down in the course of a vear. More of it is being destroyed under meager slum clearance and public housing programs. Badly needed as these programs are-and we would not wish to see such building progress held up-this construction adds thousands more to the number of Chicago families in need of shelter.
The Chicago City Council has decided that public housing must be built mainly on slum land and not on the city's 20 square miles of vacant land. Thus, existing housing-inadequate though it is-is torn down, so that other housing may be built. People living in these areas are then thrown into the heart-breaking competition for the little available shelter. Necessary superhighways and new hospitals are being built in low-income residential areas from which thonsands are being ousted. There is no available housing at the price level they can afford ready to receive them. A private housing project is being built on an area formerly housing 2,700 families. The new project will provide for 1, 100 new units in the next few years, but at rentals which the former residents of the area cannot afford to pay.
The effect of Federal restrictions on credit and materials struck Chicago building as it did building elsewhere. At this moment, and for the period during which the national emergency continues to restrict materials, Chicago building will not meet the numerical loss in housing units, and will do nothing whatsoever to meet the huge backlog needed for shelter in this city.
The Illinois Department of Labor sets $200 million as the total of defense orders held by industry in this area up to February 1951. This is, of course, a small amount in terms of the manufacturing facilities in the area. Meanwhile the Ford Co. is reopening a huge plant to make plane engines, and other facilities are being readied or converted for war production. In the face of this situation unemployment in the entire area reached a low of 81,000. The department of labor considers 35,000 unemploved to be rock bottom. That is, in a period of actual full employment, 35,000 people are “between jobs, ill, idle because of plant conditions,” etc.
Thus Chicago, facing a need for many tens of thousands of workers to man its expanding industry is almost without a labor reserve at this time. The surrounding area, beyond the commuting distance, contains many available wrokers, and Chicago industry in the last war drew from neighboring farm States. Whether these workers, who left Chicago at the end of the war, will be able to return to
meet the coming need of Chicago's industry depends directly on their ability to find housing they can afford in and around the city.
According to the Illinois Department of Labor, the city of Chicago will need 300,000 additional workers if full mobilization and production goes ahead.
Some indication of the inflationary effect of freeing rents from control is found in the scales of rental charges for uncontrolled and decontrolled shelter in Chicago. The New York Life Insurance Co. project, with financial aid from the Government plans to charge $20 to $26 per room. Another publicly aided project, Chicago Dwellings Association, will charge $25 per room. Private builders are currently charging as much as $50 per room for non-luxury new construction. Decontrolled units are currently renting in the $100 per month level, and upward, almost without regard to physical condition.
The above facts must be considered in the light of the ability of Chicago area people to pay rent. The State Department of Labor's latest published figures show that the average weekly earnings of Chicago's employed workers is $67.33 per week. Thus "free market" or uncontrolled rentals are approximately a half month's earnings for the average employed worker.
CONCLUSIONS AND RECOMMENDATIONS
Shelter for the Nation's people is, in this year and the next few years to come, an element as important as any in the provisions for production for defense. It is the element which can curtail or facilitate production in a given area. It will be the controlling factor in the allocation of many contracts. Whether rents are controlled effectively is likewise a major item in the whole effort to prevent run-away inflation. No rent control, or ineffective control, will of itself upset and overthrow the balance Congress and the administration are attempting to maintain between prices, wages, and supplies of goods.
A year ago the chief justice of the Chicago municipal court predicted that lack of controls on evictions would cause serious and violent disorders, this is still a correct analysis of the potential situation.
For the strongest of economic, humanitarian, and national security reasons the Congress is urged to continue and extend rent controls. We urge that controls be extended for the duration of the emergency in the housing situation. Short-term controls are unrealistic in the light of the present national and international scene, since under present circumstances the hope of sufficient residential building to meet the demand is most remote.
To strengthen the act and restore general confidence in the effectiveness of rent control we urge that the new law contain provisions to accomplish the following:
1. Penalties and criminal sanctions strong enough to discourage violations of the act.
2. Fuller investigative powers for the Administrator and his staff.
5. Fair controls on new construction, converted units, and other forms of residential housing not now under controls.
6. Controls on commercial rents.
STATEMENT OF WAGER FISHER, BRYN MAWR, PA. Hon. BRENT SPENCE, Chairman.
Dear Sir: This bill now adds landlords to the list of occupations whose products are to be price controlled, in order that the monev in pay envelopes will not lose its buying power. But as these are the occupations which produce the Nation's livables, its goods to live on or consumables, they are necessarily the occupations from which it is proposed to divert enough livables by means of taxation, deficit financing and price control, to keep the pay envelopes of our expanded government and defense industries well filled with the usual quota of housing, heat, clothing, food and all the other items of support expected in pay envelopes, plus enough money for those so supported to pay their increased State, Federal and local taxes.
It is a curious sort of bill, as it seemingly overlooks the fact that the Nation's come producers cannot keep on pouring subsistence into pay envelopes of more
and more non-income producers unless the income producers and distributors themselves are allowed to retain enough of their own products to fill all of their own pay envelopes, or at least enough of them to preserve the businesses which give the rest of the Nation its income to live on. Too much power is given to slow down or even bankrupt important sectors of income-to-live-on production, without corresponding permission to allow increased production of the goods so anxiously awaited in every pay envelope.
Because of the difficulties and inequities which are sure to develop, even if the bill is properly amended, it might be well to limit it to a shorter period than 2 vears. I fear too much persecution and prosecution under this bill if it becomes
The following are some of the difficulties which I foresee:
Speaking from the viewpoint of an income producer, employer, or employee: we can say that our specialized occupations, in their entirety, produce and distribute the Nation's income to live on, not only by producing the goods to live on, but by marketing them and thus creating the money flow which distributes them.
A growing crisis now confronts us income producers. Government's increasing tax and credit demands, taken from our total of sales income and savings, are not leaving us enough to continue a full-scale production of goods and the money to buy them.
One result is that the Government-supported (mostly non-income-producers) with their unreduced amount of tax and deficit finance money for purchasing things, are getting more than their share, while we, the producers, with our suddenly reduced share of a reduced income production and money flow, cannot even buy the remainder of the goods we have already produced. This condition is evidenced by accumulations of unsalable inventories in many lines of consumer goods. It all seems somewhat paradoxical, when so much buying power seems to be going around, but that is what happens when the producers of the money flow are themselves left short by Government overdrafts on it.
The inventories can be used up. But as a reduced rate of income production yields less taxes, government will take more tax money, etc., from our sales income, leave us less for income-producing pay envelopes. At this point the bill's “fair and equitable" comes to a test.
If price controls are used to prevent us income producers from adding to price the additional tax money we are obliged to pay to Government, then our living, employment, and income-producing capacity are instantly reduced. Landlords are embarrassed, the quality of housing and goods deteriorates and producers generally are forced to run on depletion of plant and resources. The next step is rationing. No one wins, not even Government.
Price ceilings and roll-backs should therefore be used with caution, even though they are widely advocated to help out pensioners and those living on fixed incomes n a situation where collective bargaining groups have used their monopoly power to raise the general pay, price, and tax levels. On the whole, it seems to me that if price ceilings involve rationing they are very apt to reduce the average percentage of buying power in the average pay envelope far more than if the incomeproducing occupations are allowed to adjust their prices so that their own pay envelopes could be filled to the maximum point of income-producing capacity. For it would seem at this point that the percentage of buying power in the average pay envelope is at its highest level consistent with the general tax rate. the tax burden would be eased because there is more income to spread the tax over and not as much deficit financing required to make up deficiencies in tax collections.
It therefore seems logical and patriotic that collective bargaining groups should recede from most of the demands they are making for cost-of-living increases, as they merely raise the cost of living for themselves, to Government and to all the others living around them as much or more than they gain by the increase.
As a landlord, I request that, if section 105 of the bill is enacted, landlords be given better protection that we have had under the Housing Expediter's regulation, as rent increases have always been lagging so far behind losses that it is keeping landlords in a perpetual state of bankruptcy.
We should by all means be provided an automatic rent increase to correspond with the 10 to 15 percent pay increases which the administrators of the present act are now granting the collective bargaining units without any thought to what it does to us.