With his financial losses mounting under the District of Columbia's controversial rent control system. Walter A. Brown III made a deal: he sold the Mintwood.
The 22, mainly Latino households who rented apartments as The Mintwood, a three-story brick building in the city's Adams-Morgan area, were told they must move out. What will happen to the building after they are gone is unclear. Brown, whose family has owned stock in The Mintwood since 1915, says he sorry he had to sell it.
"It's just a damn shame, because I would still love to own the building," the 44-year-old real estate property manager and investor remarked in an interview.
Sales of apartment houses, such as The Mintwood, have helped stir a continuing controversy over the District's 3-year-old rent control system. At issue is the outlook for the city's 180,000 rented apartments and homes - dwellings that house more than 400,000 D.C. residents, over half the city's population.
In recent years, numerous apartment houses have been sold by owners who have blamed their financial troubles partly or primarily on rent control. Despite a shortage of rental housing here, many of these buildings have been removed from the rental market and converted to condomimium projects or apartment-hotels, hotel-like establishments whose suites include kitchens. How dramatically this trend will affect city housing is as yet unclear.
Many real estate specialists assert that rent control is already taking a severe toll - both by forcing some financially squeezed landlords to sell their apartment houses and by causing others to cut back on maintenance and let their building deteriorate. Eventually, they warn, financially ruined buildings will be boarded up in significant numbers and abandoned.
Many tenant advocates dispute these contentions, arguing, in part, that other economic factors - rather than rent control - hav prompted landlords to sell buildings or reduce maintenance.
Tenant spokesmen emphasize that the city's rent control law is designed to assure land-building. They note that the law also provides some safeguards to prevent deterioration of buildings, by denying rent increases for landlords whose properties violate the city's housing code. To underscore their view that rent control is not to blame for sales of rental buildings, tenant groups have pointed to Alexandria - a city that has no rent control law - where the large Shirley-Duke and Regina apartment complex is closing, mainly because of soaring costs.
Some researchers and other relatively neutral observers disagree, in part, with both of these conflicting viewpoints, saying that rent control is one of several factors that have influenced housing here in recent years. Rising utility rates and other costs, they say, rental housing, even without rent control. In addition, some researchers rnetal housing, even without rent controol. In addition, some researchers note, sales of condominimums developed into a widening economic trend of their own.
The city government is now moving to extend rent control for three more years, apparently assuring a continuation of the controversy. The D.C. City Council passed legislation last month that would keep rent control in effect at least until Sept. 30, 1980. Mayor Walter E. Washington, who has previously said he favors a continuation of rent control in some form, has not yet announced whether he will sign or veto the Council's measure.
Brown's decision to sell The Mintwood sheds considerable light on at least some facets of the rent control controversy here. The Mintwood - 1843 Mintwood Place NW, off Columbia Road - is a modest, well maintained, low-rent building situated on a colorful block of maple trees and brightly painted row houses. Rent for The Mintwood's efficiency, one-bedroom and two-bedroom apartments recently ranged from $67.50 to $145 a month.
Tenants say they wish they did not have to leave, largely because they do not expect to find equally convenient, well kept apartments at comparable rents.
As he stood in the building's hallway one day last month, Ernesto Delaquila, who has lived there with his wife and two sons since 1970, talked about his search for another apartment. His rent at the Mintwood, he said, was $127 a month. In the Maryland and Virginia suburbs, he found he would have to pay almost twice as much - from $235 to $250 a month - and elsewhere in the District, he added, rents seemed to be even higher. Moving to the suburbs, he noted, would also mean some inconvenience. His bartending job is in the District.
There have recently been signs that activists in the Adams-Morgan area may seek to organize an effort by tenants at The Mintwood to hang onto their apartments, but whether such a challenge will take place is as yet nuclear. Brown said that the building's sale was completed Nov. 1 and that he is currently helping tenants find apartments elsewhere.
The building's new owners have not yet disclosed what they plan to do with The Mintwood after its tenants have moved out. Mark Brodsky, a lawyer for the new owners who himself owns an interest in the building, said last week that the building's purchasers have not yet reached a decision. Possibilities, he noted, range from converting The Mintwood into an institutional structure, such as a chancery or dormatories, to selling its apartments as condominiums.
Brown - a low-key, easy-going man who appears to enjoy his work and arrives at his Vermont Avenue NW office, he says, at 6:30 a.m. every day - talked about the mounting losses that led to The Mintwood's sale in an interview during which he pulled financial records from a file cabinet to underscore his statements. He complained about the city's rent control system, saying it has forced him to "subsidize" his tenants.
"To see what I have worked for for 22 1/2 years (in the real estate business) draining me constantly, I'm very embittered by it," he remarked.
Although his principal business is managing rental properties owned by other investers, Brown himself currently holds an interest, he said, in 11 apartment houses, apart from his former stockholdings in The Mintwood. All these buildings are losing money because of rent control, he said. The largest deficit accumulated on any of these buildings, he said, was $14,000: The Mintwood's deficit was $2,151.59 as of Oct. 31. Brown noted that he has had to offset the buildings' mounting losses from his personal income.
To help contend with his buildings' rising deficits, Brown said, he decided to sell one of them. He chose The Mintwood, he added, because it appeared likely to bring him the most immediate cash. He got close to $200,000 for The Mintwood, partly in cash and partly in a promissory note, Brown said.
In theory, Brown might have avoided the financial losses that prompted him to sell The Mintwood if he had taken advantage of the "hardship" provisions of the city's rent control law. If his figures are accurate, he might have filed "hardship" petitions with the D.C. Rental Accomodations Office, which administers the rent control program and might have been given permission to raise his buildings' rents. Such rent increases would probably have allowed him to earn at least some return on his investments.
Brown said, however, that he did not make use of the "hardship" procedures for a number of reasons - reasons that have apparently deterred many other landlords from filing "hardship" petitions.
Initially, he believed that rent control would soon be abandoned or made less restrictive for landlords as a result of new legislation or court action. "I naively felt it would work itself out," Brown said.
When it eventually became clear to him that rent control probably would continue at least for several more years, Brown added, he found the "hardship" procedures forbiddingly cumbersome. He did not want to spend additional money, he said, to hire a lawyer, an accountant or another employee to prepare "hardship" petitions. Nor, he said, has he had enough time to manage the complicated task himself.
Yet Brown found himself confronting an increasingly severe financial squeeze - one that, he said, has already cost him about $50,000 in personal funds.
The Mintwood's own financial history is illustrative. During the 1970s, its rents had remained low. "You hate like the devil to raise the rents on so many old-time people," Brown said. Later, when the building's expenses soared because of rising fuel and other costs, Brown noted, the city's rent control system went into effect, setting limits on how much rent he could charge.