A New York congressman this week introduced legislation that would impose a national three-year moratorium on the conversion of apartment buildings to condominiums and cooperatives.
Rep. Benjamin S. Rosenthal (D-N.Y.), a House deputy majority whip, said he is afraid the "condomania" sweeping this country will eliminate private rental housing.
During the moratorium Rosenthal has proposed, a presidential commission would be set up to study conversion issues.
Rosenthal cited figures showing that while 100,000 rental units were converted to condominium ownership between 1970 and 1975, the projected figure for this year alone may range from 130,000 to 250,000. The result is the displacement of elderly renters and low- and moderate-income families, he said.
The Rosenthal measure would also require developers to provide relocation assistance of up to $400 for displaced tenants. It would block the granting of federal housing funds to communities that refuse to restrict conversions or guarantee adequate housing, and would change the U.S. tax code to discourage condominium conversion.
The Rosenthal bill is expected to generate some controversy, however. Several critics said that many legislators will see it as an intrusion on states' rights, and maintained that there are not adequate statistics to support the need for a national moratorium.
Such a moratorium "would appear to be a slight case of overkill, to say the least," said G. V. "Mike" Brenneman, a local condominium coverter who is chairman of the condominium committee of the National Association of Realtors.
"If there are problems associated with conversions, they are problems that exist in certain urban areas, and certainly are not national," Brenneman said. "The degree of those problems varies enormously."
A three-year conversion moratorium was one of the recommendations urged at a hearing held in June by the Senate subcommittee on housing and urban affairs, chaired by Sen. Harrison A. Williams Jr. (D-N.J.). One speaker who suggested the moratorim said that the level of conversions, if unabated, "will generate the worst national housing crisis since the end of World War II."
But a spokesman for the subcommittee said that Rosenthal's bill "is not a rational way to deal with the problem. . . . We can't view it as a serious piece of legislation."
He noted that because the bill refers not only to housing but also to tax code matters, it may have to be reviewed by two committees. "It's a hard enough to get things out of one committee," he said.
The spokesman said the Senate subcommittee is looking at a number of ways to deal with the conversion problem. Such measures include trying to assure the adequacy of federally subsidized rental housing and requiring local governments to assess the impact of conversions on their housing needs. The Department of Housing and Urban Development is expected to complete a study next March surveying the impact of conversions, he said.
Washington is only one of more than a dozen cities that have enacted local moratoria on conversions.
The current emergency moratorium in the District will expire at the end of October. A special commission set up to recommend permanent condominium conversion legislation is expected to complete its report soon.
Washington, southern California, Chicago, southern Florida and San Francisco were cited by Rosenthal as areas where conversions have become a serious problem. The issue is particularly troublesome in cities that have low apartment vacancy rates, and some localities -- including the District -- have regulations that restrict conversions of low-rent units when vacancies are below a certain level.
Rosenthal's proposal grew out of anti-inflation hearings he held last spring, according to his legislative assistant, Jeffrey Kaplan.
People testifying at the hearings kept bringing up their concern over condominium conversions, Kaplan said. "There had been no awareness of it as a national problem on the Hill," he added.
Kaplan said there is "no direct interest" in conversions in Rosenthal's home district in Queens, but said that in his role as chairman of the House subcommittee on commerce, consumer and monetary affairs, Rosenthal has become interested in the issue as a "consumer concern."
One provision in the Rosenthal bill would change the Internal Revenue Code to tax the profits on conversion as ordinary income, rather than capital gains. Local developers say that will not affect actual converters, however. Those in the real estate development field who administer the conversion have their profits taxed as ordinary income, they said.
The profit of a landlord who sells an apartment building to a converter currently benefits from capital gains taxation -- meaning a tax of about 28 percent as compared with a possible income tax of 70 percent, they said. Rosenthal's bill encourages tax incentives to landlords to keep and rehabilitate their properties as rental housing.