Mention the District of Columbia's rent control law to Frederick D. Gray and his blood boils. He fought the Japanese at Iwo Jima, but he says he found owning a 12-unit apartment building in Southeast Washington a tougher battle. He blames rent control for the "good $50,000" he lost on a building that now is boarded up and vacant.
Across town, real estate manager Byron L. (Chris) Christenson grouses about the difficulties of managing rental property and contends that the administration of the city's rent control law is "a comedy of errors." Nonetheless, last year he sent $767,638 in profits to the owners of the 820 apartments he manages.
William Boone, president of the Southern Columbia Heights Tenants Union, representing 2,500 tenants in 35 buildings, scoffs at owners' grumblings about rent control. He says that the law's strictures have "really kept rents affordable, kept people from being displaced and having to move out of the city."
Cussed and discussed, rent control has been a fixture in Washington for 14 years, longer than in any American city other than New York. The rent control law here expires April 30, but the D.C. City Council is certain to enact new legislation that will control rents and contain a host of other provisions surrounding the operation of the 120,000 apartments covered by the law. However, it is uncertain what changes might be made to ease the burdens claimed by real estate interests or to include the stiffer provisions sought by tenants.
Nationally, rent control exists in communities in just five states -- Massachusetts, New York, New Jersey (with 109 cities, more than any other state), Connecticut and California.
Both apartment industry officials and national tenant leaders said the trend is toward making the laws more lenient, in some cases decontrolling apartments as tenants move out.
All of those who now are assessing the District's rent control legacy seem certain their views are correct.
But the opinions of the 400,000 tenants, hundreds of landlords and numerous city officials who have to deal with the law are shaded markedly by their financial positions or by their philosophical viewpoint on providing housing in one of the nation's most expensive markets.
Among other things, rent control has stabilized rents in the city, to the benefit of all tenants.
Almost certainly, along with other factors, rent control has helped reduce construction of new rental housing to virtually nothing and likely has contributed to the abandonment of thousands of rental apartment units.
But the degree to which rent control has fostered these consequences is as debated as is the law itself.
Rents at 95 percent of the city's rent-controlled buildings have been raised a uniform percentage each year under the current four-year-old law, based on the consumer price index in the Washington area for urban wage earners and clerical workers. Since 1981, the automatic annual increases have successively been 10, 8.9, 4.2 and 4.5 percent, with a 4.4 percent raise scheduled to take effect May 1.
A small percentage of landlords have won bigger increases by claiming that their expenses place them in a hardship position, through voluntary agreements with tenants and by other measures. Market Forces Cited
But landlords contend that the chief beneficiaries of the automatic annual increases have not been poor people, whom the law was most intended to protect, but upper-income tenants.
The reason, landlords say, is that the poor most often live in deteriorating buildings in rundown neighborhoods where market forces and the limited financial resources of tenants would likely keep rents as low as they are under rent control.
Conversely, market forces in the city's better neighborhoods almost certainly would have boosted rents well above the controlled levels now being paid by middle- and upper-income tenants living in well-maintained buildings.
This phenomenon particularly galls landlords, while tenants who benefit from it are not complaining.
"I don't deny there is some abuse," said tenant leader Boone. But he said that without rent control the majority of tenants "certainly would not have been able to stay here. Even with rent control, there are people who can't afford the rents."
Donald R. Slatton, executive vice president of the Apartment and Office Building Association of Metropolitan Washington, whose members manage the bulk of the city's privately owned rental housing, said owners believe "if there is a problem of low-income people paying rent, and we think there is, then the whole community ought to take care of it" through rent subsidies.
"Let's help the low-income people and let the high-income people pay what they should," he said. "Are Giant and Safeway forced to sell at restricted rates to everyone because there are some hungry people? Why should we be the one commodity that is controlled?" Rental Paradoxes
Real estate manager Christenson contends that without rent control, market forces would sharply boost rents at Cathedral Court, a six-story, 58-unit building at 3701 Massachusetts Ave. NW, one of 13 properties that he manages for a group of Washington investors who earned the $767,638 profit last year.
Rents at the 52-year-old brick and limestone building vary widely, in part because landlords under rent control can raise rents on occupied units only so much, but they can boost rent by 10 percent when a tenant vacates the unit or to the same amount that exists for a similar unit in the building, whichever is greater.
As a result, tenants living in identical one-bedroom apartments at the building may pay as much as $554 or as little as $465 a month, with similar disparities for two-bedroom apartments.
In the Rodman at 3002 Rodman St. NW, Christenson said, the rent control provision has boosted the one-bedroom rate to $415 a month, while leaving the two-bedroom rent at $400.
"The rent structures just don't make sense," he said.
Despite such a quirk in the rent control law, Christenson said, Cathedral Court turned a $61,871 profit last year, even after he spent $58,338 on capital improvements, mostly for a new boiler.
In the three previous years, the owners reaped $69,346, $80,630 and $107,217 in profits, according to Christenson.
While the profits are handsome, Christenson said they are not substantial on a percentage basis when one considers that the building is assessed by the District as worth $1,073,000. The rent control law guarantees owners a 10 percent return on their equity in buildings, the assessed value minus any outstanding mortgage.
Since there is no mortgage on Cathedral Court, the net return should be at least $107,300 a year, a figure it has seldom approached.
"The building is profitable," Christenson said. "It's the best one I've got. But there's no way you'd put $1 million into the purchase of a building where you're going to get 6 percent return."
Under another provision of the rent control law, Christenson could seek to recover, over six years, the cost of the capital improvements through higher rents.
But Christenson, wearied from lengthy delays in settling rent disputes at the city's Rental Accommodations Office, said it is hardly worth the effort.
"In my opinion," Christenson said, "the rent control law is not so bad. It's the administration of it. It's a comedy of errors. Where my owners get penalized is that they can't afford to spend the time and money for lawyers to get an increase every time we make a capital improvement. Automatic increases do not keep abreast of the costs."
During the City Council's recent hearings on the law, one landlord testified that he had to file 3,000 pages of documents to justify his rent increase.
"We do know the rent control law imposes administrative burdens on the industry, more so on those which are less well managed and organized," said John Hampton, the city's rent administrator.
Nonetheless, Hampton, a former tenant activist, said he believes that one of the law's prime benefits is that it has "prevented owners from abruptly changing the population they're serving. It's made it difficult for an owner to abandon serving low- and moderate-income tenants. You can't physically force them out. You can't make the rents sky-high.
"It's an antieviction, antidisplacement mechanism," he said. "Those mechanisms can be burdensome, but they serve to protect the whole tenant population."
Tenants have a first right to buy their building if an owner wishes to sell it. But when the impoverished tenants at 2841 Gainesville St. SE turned down the chance to buy their building, Iwo Jima veteran Frederick Gray sold the building in 1980 for $90,000. Even so, Gray said that during the 9 1/2 years he owned the building he lost "a good $50,000, and that's very modest."
He said that during the first two years he owned the property, during national wage and price controls but before the city's rent control law took effect in 1974, he was able to pay his bills on the building and make a $3,200 profit. But he said that with the inception of rent control he could not raise rents enough to cover his expenses.
"The tenants took advantage of me," said the 59-year-old Gray, a retired construction supervisor for the National Park Service.
"They tore up the venetian blinds, stopped up the toilets and scraped the paint off walls. Then they'd go to Landlord and Tenant court and tell the judge they would have paid the rent if Mr. Gray had only made the repairs. I borrowed money repeatedly -- $35,000 to $40,000 -- to subsidize the property," he added.
Now, with the property sold but sitting boarded up and vacant, he said, "I wouldn't own a building in the city if they gave me 10 free ones. I would rather go back to Iwo Jima and fight the Japanese again than own rental property in the District of Columbia."
Gray, a small-time owner, is convinced that rent control spelled his demise as a landlord. But large owners, such as Perpetual American Federal Savings Bank, have been stung as well.
Thomas J. Owen, the bank's board chairman, told the City Council, "Perpetual has already walked away from 255 units in eight locations because tax liens, water bills and repair assessments make it impossible for us to recapture our $940,000 investment." He said Perpetual expects to abandon 75 units in the next year.
City real estate tax delinquencies on apartment buildings, one barometer of financially troubled properties, have risen sharply in recent years, from $903,586 in 1981 to more than $4.3 million last year. The city is owed $13 million in unpaid water and sewer bills at apartment buildings from 1980 to 1984, according to city records.
In Hampton's view, however, rent control should not be the scapegoat for such ills. In numerous cases, he said, D.C. buildings have failed simply because they are in "neighborhoods that cannot attract the tenants with incomes high enough to cover the cost of repairing the building. It's got nothing to do with rent control." Abandonment a Problem
National tenant leaders note that abandoning of apartment buildings also has been a substantial problem in such cities as Chicago, St. Louis, Detroit and Cleveland, none of which has rent control.
Similarly, Hampton said the fact that only 723 new nonsubsidized apartment units have been built in Washington since 1979 is a function of high interest rates, not rent control.
Apartment construction has been curtailed nationwide in recent years, not just in cities with rent control.
Newly constructed apartment units here are not subject to rent control, but that provision has not stimulated construction.
The law, says D.C. City Council member John Ray (D-At Large), has "stifled development of housing for moderate-income people, renovation or new construction. We're going to continue to lose our middle-income people, primarily blacks, to the suburbs.
"With rent control," Ray said, "the perception of potential housing investors is that it's easier to do it elsewhere, rather than get bogged down in a nightmare." Ray has introduced one of the two rent control bills before the City Council. A major feature of his legislation would lift rent controls on apartments when they become vacant.
Slatton, of the apartment owners' trade group, said a Houston firm recently called him about building an apartment complex in the District.
"The minute I mentioned that the District has rent control, he got scared. He felt that the government that enacts rent control would do some other things.
"They decided on Alexandria," he said.