Landlords who testified before the Rental Accomodations Commission (RAC) last week suggested large rent increases, removal of housing units from rent control as they become vacant and rent subsidy programs as ways to stem the tide of evictions and condominium conversions and to encourage investment in rental housing in the District.

"If owners were (restored) to the position they were in before rent control - up to an 11 or 12 percent rate of return on their investment - they would need a 200 percent increase" in rents, said John O'Neill, executive vice president of the Apartment and Office Building Association.

The RAC is required to file as annual report with the City Council, recommending whether or not there should be an adjustment in the rent ceilings allowable under the city rent ceilings allowable under the city rent control legislation. Last week's hearings, attended by about 50 persons, was the second such session held to help the commission gather data before it sends its recommendations to the council. At a previous hearing, tenant groups and housing activists voiced opposition to new rent increases.

"I will once again state unequivocally that rent controls without cost controls creates disaster - a disaster is what we have in the District of Columbia after five years of inadequate rent adjustments," testified O'Neill. "Costs have increased 15 to 20 percent per year since 1974, and the same trend continues today. There is built into the process a one-year time lag before the owner's cost increases are passed on to the consumer."

He pointed to "100 percent increases in water and sewer costs, apartment license fee increases of over 400 percent, a court costs' and filing fees' increase of over 50 percent, and utility rate increases granted by the D.C. Public Utilities Commission average of over 15 percent over the past three years.

"Your agency itself has added thousands of dollars of administrative costs and registration fees to the apartment industry's burden."

Replying to questions from commission members, O'Neill said "25 to 30 percent of (all multiunit rental) buildings are experiencing a negative cash flow. Buildings are operating at little or no profit. Without an increase there will be more conversions."

William P. Norman, a partner in Legum and Norman Realty Co., told the commission that "moderate housing is going to be a thing of the past" if present conditions persist in the rental housing market.

Norman told the commission his firm has been in business since 1943 and manages 5,000 rental units and 1,000 condominium units. He said he personally knew of the conversion of three buildings to condiminiums "because owners weren't making a rate of return."

"Allow and encourage landlords to get (rent) increases," he urged the commission. "Otherwise there will be more conversions. Owners in the District need to be encouraged to provide rental housing."

Several landlords who testified last week suggested "vacancy decontrol," under which an apartment would be exempted from rent controls when it is vacated and a new tenant moves in.

Norman admitted under questioning by commission members that "in the absence of rent control the kind of housing that would be built would be very expensive," and would not be within financial reach of low- and moderate-income families. These are the groups most seriously affected by the city rental housing shortage, say many tenant advocacy groups.

Caroline A. Lewis, legislative affairs director for the Apartment and Office Building Association, said the 2 to 10 percent rent increase that went into effect last March on the recommendation of the commission "helped to partially offset a 16 percent cost increase in 1976 over 1975. However, no allowance has yet been made for increases in 1977 and 1978."

Charles Montange, an attorney with Neighborhood Legal Service who appeared before the commission on behalf of several tenants' groups, suggested that the commission take into account President Carter's voluntary price guidelines and "limit price increases to 5 1/4 percent.

"If rents are permitted to increase more than that, it's clear that a heavy burden" will be placed on tenants, he said.

Representatives from the St. Paul and Augustine Housing Organization testified against any rent increases. Carrie Belk, a resident of Northwest who said she has lived in Washington since 1939, told commission members that her income is $196.90 a month and her rent, $227. She said her daughter helped with expenses.

The commission report to the City Council was due this week, but spokesmen for the commission say it will not be ready until at least early December.