The connection between the Russian invasion of Afghanistan and rent control in the District may not be immediately obvious. However, it is very likely that the proportion of the federal budget earmarked for defense in the coming years will increase dramatically at the expense of domestic programs, especially those designed to aid the poor and to provide housing assistance.
In the face of these worsening prospects, rent and condominium-conversion controls must be continued until sufficient public funds are made available to subsidize all tenants who cannot afford market-rate rents.
In the District, at least $200 million in subsidies would be required each year. However, considering that $200 million represents almost 15 percent of the total D.C. budget, that there are currently no D.C.-appropriated, rent-subsidy dollars and that pitifully few federal dollars are earmarked for District tenants, achieving this goal does not seem realistic. At the other end of the spectrum, the Apartment and Office Building Association recently proposed a mere $12 million in subsidies in exchange for the total elimination of rent control. That amount would barely scratch the surface of the need.
Since $12 million in subsidies is woefully inadequate and $200 million or more is not very likely, what can be done? We propose the following:
1) The city council should fund the existing rent-supplement program at $25 million to $50 million, a level Rep. Charles Wilson (D-Tex.), chairman of the House Appropriations Subcommittee on the District, has indicated he could support and that the city budget can absorb.
2) Authorization for the existing rent-control program should be extended when it expires in September.
3) Those landlords who obtain D.C. or federal subsidies for all tenants who need them to ensure that their monthly housing cost does not exceed 25 percent of income, should be allowed an increase in rent above the level otherwise applicable to those units. This would serve as an incentive for owners to apply for subsidies and to remain in the rental business.
For those landlords who still want to get out of the rental business, we suggest that their activities be controlled as envisioned in D.C. Bill 3-222, "The Rental Housing Conversion and Sale Act of 1979." Contrary to The Post's criticism of the conversion controls envisioned in that bill, the bill would change the ground rules without interfering with the fundamental operation of the private market. It would give tenants a strong voice in whether their housing could be converted, and it would clarify and strengthen tenants' opportunities to purchase their own housing. Passage of the bill would thus require owners, developers and converters to cooperate more actively and enter joint ventures with tenants, a process that some members of the private market have already begun. In increasing numbers, tenant organizations (including lower-income ones) have been and will be succeeding in purchasing their housing.
An important goal of this tenant-purchase process should be to ensure that moderate-cost housing remains moderate over time. Conversion of rental housing results in displacement because the price of market-rate condominiums generally is so high. However, even where the initially converted unit is modestly priced, it quickly becomes too expensive for lower-income purchasers if the resale value is not controlled.
For this reason, we strongly support tenant-initiated conversions to "low-yield" cooperatives, which strictly control resale value. Thus, when one modest income household vacates the unit, another can afford to move in. Bill 3-222 recognizes the importance of low-yield coops by providing stronger negotiating rights for tenants committed to that approach.
The stock arguments against such control cannot be supported by the facts. Opponents, including The Washington Post claim that rent control is responsible for deterioration in our city's housing stock, for an absence of new rental until construction, and for massive conversions of rental units to condominiums, cooperatives and other higher-income uses. Rent control is no such ogre.
In late 1979, a General Accounting Office study found that last year private, unsubsidized rental construction nationally was the second lowest in the past 20 years, and that this year unsubsidized construction will represent only 25 percent of all new rental units, mostly for higher-income tenants. This is the pattern in many parts of the country, regardless of whether rent control is in effect. The fact is that few renters are willing or able to pay the rents need to cover the tremendously inflated cost of new units. Thus few are built.
A similar set of factors is at the root of condominium conversions, even in such cities as Chicago and Houston, which do not have rent control. First, most people who can afford to pay $600 per month for housing would prefer to own property to gain the tax savings and the equity. Second, changes in the capital gains tax provisions have made it particularly advantageous for landlords to sell their apartment buildings. Third, condominium conversions produce greater short-term profits for investors than maintenance of apartment buildings as rental properties.
While some landlords blame rent control for their failure to properly maintain their units, the majority of them would not maintain them any better if they could get higher rents; because of the acute shortage of affordable housing, landlords know that tenants have few alternatives. In any case, the higher rents would mean many evictions of the current lower-income tenants. In addition, because the rent-control law allows rent increases only for units that meet code standards, rent control affords tenants a strong, often effective tool for forcing recalcitrant landlords to repair their units.
In its attempt to eliminate rent control totally, the rental housing industry had advocated more limited decontrol proposals, most often lifting of controls on "luxury" units and on units as they become vacant. The arguments for partial decontrol do not withstand scrutiny.
To begin with, no one can agree on what rent level is "luxury," and whatever level is chosen becomes a target for owners who will try to find ways to raise their rents to that level, legally or illegally. The experience of conversions of "high rent" buildings to condominiums has demonstrated this phenomenon. Luxury decontrol dwindling supply of moderately priced rental units. Contrary to conventional wisdom, many renters in "luxury" units often need to be protected (e.g., elderly tenants who have been longtime residents of the same units). Finally, decontrolling units as they become vacant in the District, which has such a highly mobile population, would result in virtually no units under rent control after only a few years.
For all these reasons, continued strong rent and condominium-conversion controls coupled with expanded public subsidies are absolutely necessary to alleviate the District's problem.