A major investigation into the growing nationwide conversions of rental housing into condominiums and cooperatives was launched yesterday by a House Government Operations subcommittee.
Spurred by a controversial cooperative conversion of a Bethesda apartment complex, Rep. Benjamin Rosenthal (D-N.Y), chairman of the House Commerce, Consumer and Monetary Affairs Subcommittee, sent letters to the heads of eight government and private institutions involved in lending and government economic and consumer policy.
One of the subcommittee's letters was sent to Washington Federal Savings and Loan, the lending institution that has provided a $30 million commitment for potential purchasers of cooperative units at the Promenade Apartments, a Bethesda high-rise involved in a bitter tenant-management fight that has become commonplace in the Washington area.
Rosenthal said yesterday that the rapid rise in conversions here and in and other large areas raises significant public policy questions about roles of developers and lending institutions in driving up the cost of housing and the nation's inflation rate.
"This is a classical case of free enterprise at its zenith," Rosenthal said, noting that the although the conversion issue has yet to become a problem in his Queens, N.Y., district, it is a major issue in other cities. Previously, Rosenthal had introduced a bill that would place a three-year, nationwide moratorium on such conversions.
In fact, a recent federal study shows that there have been about 260,000 such conversions between 1977 and 1979 and between 1979 and 1985, there could be as many as 1.1 million units lost from the rental housing base.
"I see questions as to whether savings and loans such as Washington have charters which permit them to make these kinds of loans where no new housing is created," said Rosenthal, who has a house in Bethesda and knows some of the Promenade's tenants.
The Promenade conversion is being done by American Invsco, the nation's largest convertor of apartment units. The Chicago-based firm purchased the building from Maryland builder Nathan Landow.
A subcommittee staff member said the panel plans to hold hearings on the issues, including the frequently controversial tactics used by American Invsco. The subcommittee expects to ask company and government officials, including James Harris, president of Washington Federal, Landow and executives of American Invsco to testify.
Washington Federal's Harris said yesterday that his S&L made $194 million in such loans during the institutions last fiscal year. "We're doing what we're set up to do -- promote home ownership," he said.
But Hrris bitterly complained that the subcommittee's request from the Federal Home Loan Bank Board for the last examination reports for his S&L is bound to wind up giving Washington Federal, which has aggressively promoted itself recently, bad publicity. "It's ridiculous and it's crazy," he said of the S&L's involvement in the House probe. "We'll be pulled through the mud, too."
Among the other institutions Rosenthal has asked for information are the Federal National Mortgage Association, the Internal Revenue Service, the Council on Wage and Price Stability and the Securities and Exchange Commission.