The D.C. City Council voted this week to exempt owners of small numbers of cooperative housing units from the city's rent-control law.
The emergency legislation has the effect of reversing the city's Rental Housing Commission, which had held that owners of such units did not qualify for the so-called small-landlord exemption.
Sponsored by council members John Wilson, John Ray, and Polly Shackleton, the special measure clarifies a section of the District's Rental Housing Act of 1980 giving property owners who rent out four or fewer housing units an exemption from rent control. The new legislation left unchanged the requirement that all rental units be registered with the D.C. Rental Accommodations Office.
The council's action came in response to protests about the September Rental Housing Commission decision placing all rented co-op units under rent control. The RHC, an independent body that sets procedures for the administration of D.C.'s rent control laws and hears appeals of rulings made by the RAO, said the rent control law provides a small-landlord exemption only for "natural persons" who own rental units.
Co-op residents do not hold title directly to their units, as do owners of condominiums and single-family houses. Rather, a cooperative association--usually a corporation--holds a master title to the property, and the co-ops' residents own stock in the corporation, giving them the right to occupy a unit.
Since the cooperative project is not a "natural person," all rented co-ops are subject to the D.C. rent control law, the RHC concluded. In its official opinion, however, the RHC commented: "The application of the 'natural persons' test to distinguish cooperative from condominium ownership is a matter the city council may wish to review."
In most instances, condos and co-ops receive identical treatment. D.C.'s homestead exemption tax relief provision applies to cooperatives as well as to condos and single-family houses. Under both federal and state laws, co-op owners can take the same tax deductions for mortgage interest and real estate taxes as other home owners.
Of the 9,560 co-op units in D.C., about 15 percent are rented out, estimates G. V. (Mike) Brenneman, past president of the Washington Board of Realtors and head of a real estate firm that specializes in condominiums and cooperatives. About one-third of this area's condos are rentals, Brenneman believes.
Following the RHC's September decision, the RAO's Chief of the Compliance Division, Norman Smith, sent notices of noncompliance to co-op rental unit owners in at least one cooperative project. Owners of about one-fifth of Harbor Square's 445 co-op units received notices, estimated the association's president, Dr. Mary Beth Minden. Smith also sent notices to the Edmund J. Flynn Co., a real estate firm that manages a number of rental co-op units for their owners.
Members of Harbor Square and other of D.C.'s 120 co-ops contacted a number of the city council members and hired attorneys to draft proposed legislation to clarify the standing of co-ops under the rental housing law.
At the council session Tuesday, several council members raised questions about the emergency resolution, citing a letter they had received the day before opposing the legislation. The letter claimed to be based on data gathered at the Rental Accommodations Office. Concerned about errors and distortions in the letter, council member Wilson called John Hampton, who was named acting rent administrator last week, to testify.
Following Hampton's explanations, the council approved emergency legislation that will be in effect for 90 days after Mayor Barry signs it and that is not subject to congressional review.
On Wednesday council member John Ray introduced permanent legislation that would take the place of the temporary measures. Favorable council action on that is expected before the 180-day period expires, according to Margaret Gentry, an aide to Ray.