The long-running battle over the District of Columbia's controversial legislation controlling the conversion of rental properties to condominiums and cooperatives is set to heat up soon, with City Council hearings scheduled for next month on a proposal to extend the current controls for five more years.
A bill introduced last month by Councilman John A. Wilson would continue the current legislation with only a small number of changes. "I think the laws worked well," commented Brigid Quinn, Wilson's executive assistant. "Developers have been able to work with tenants and have been able to make money.
"It's not hurting the developers."
As they have before, real estate industry representatives have expressed strong disagreement with that point of view. "The impact of this legislation is a negative one on the real estate market," stated James G. Banks, executive vice president of the Washington Board of Realtors. "Developers have accommodated themselves to the reality of this legislation, but it's much less attractive to investors than it would be without the controls."
The two major changes Wilson has offered to the existing law would guarantee elderly residents lifetime tenancy and would make it easier to convert vacant buildings to condos or co-ops if some of the units were sold to lower-income persons.
The proposed bill, cosponsored by seven other council members, would continue the current statutes' three major tenant protections: a required resident vote in favor of any conversion, a tenant association's right of first refusal to buy a building, and guaranteed tenancy for elderly residents in converted properties.
Under the present law, which expires this September, persons 62 and older with annual incomes of $30,000 or less are assured they can remain as renters in a converted buillding only "for the life of the act."
Under Wilson's bill, these elderly residents would be guaranteed lifetime tenancy
The proposed legislation also would remove the total prohibition that now exists against the conversion of rental buildings that have become vacant since Jan. 1, 1980. Instead, owners would be permitted to convert those properties if they sold at least 35 percent of the units to lower-income families. "This bill would allow 65 percent of a building's units to be market rate," explained Quinn. "That's a prety good incentive.
"Now they owners of vacant buildings can't bring any units to market. This way they can still make a lot of money with their buildings."
Under the Wilson proposal, the low-income provision would apply to single persons currently earning a maximum of $18,120 a year and range up to a top of $32,400 for a family of eight or more.
D.C.'s first emergency legisation imposing controls on conversions was passed by the council in 1976, primarily in response to the large number of condominium conversions then going on. Between 1970 and 1979, the Washington area had the highest proportion of its rental housing--7.73 percent--converted to condos and co-ops of 37 major metropolitan regions surveyed by the U.S. Department of Housing and Urban Development.
In 1979 and 1980 alone, nearly 9,000 D.C. rental units were converted to condos. With the imposition of the new law and with the sharp drop in the demand for condo units because of higher interest rates and increasing prices, the number of conversions plummeted to 2,199 in 1981 and 758 in 1982.
Earlier this year, the D.C. Superior Court held the current law constitutional. That judicial decision was the only one that has dealt with the basic legitimacy of the statute, which went into effect in August 1980.
In a 1970 ruling on the manner in which earlier conversion controls had been enacted, the Superior Court declared that the city council had acted improperly by repeatedly using its emergency-legislation authority to extend the original 90-day conversion moratorium of 1976.
In December 1980, the Superior Court decided, however, that the ruling would be applied only prospectively and not retrospectively, thus blocking the conversion of large numbers of properties with pending certificates of eligibility to convert.
Federal courts so far have refused to rule on the constitutionality of the legislation.
Public hearings on the proposed extension will take place on May 23 before the D.C. council's Committee on Consumer and Regulatory Affairs, of which John Ray is chairman. The committee is compiling a list of persons who will testify.
Also set for a council hearing next month is another measure introduced by Wilson to promote home-ownership opportunities for lower-income families.
The Lower Income Home Ownership Tax Abatement and Incentives Act of 1983, which is cosponsored by nine of the council's 13 members, would provide special consideration to nonprofit goups selling properties to lower-income persons and also would encourage investors to help lower-income families purchase homes through shared-equity arrangements.
Under the bill, nonprofit groups buying residences to rehabilitate and then sell to lower-income persons would be exempt from real estate brokering license requirements, the restrictions on the conversion of vacant buildings to condomiumns and cooperatives, and the 1 percent transfer and 1 percent deed recordation taxes. Also, the residences would be free from property taxes for up to five years.
"It's a form of creative subsidy for poor people now that many government subsidies have dried up," commmented James M. Dickerson, director of MANNA, a Washington, D.C. group that hopes to use the provisons of the proposed legislation to rehabilitate and sell housing to moderate-income families.
The same benefits would apply to investors who helped moderate-income families purchase such residences through equity-sharing arrangements.
To qualify for these incentives, the families would have to have at least a 5 percent interest in any residence purchased with the help of an investor. In addition, the contract between a family and an investor would have to specify a time when the residents could buy the property outright.
The same income limits would apply for the home-ownership incentives as are in the condo extension provision on converting vacant buidings.
The bill may be expanded to provide inducements to for-profit developers to sell to moderate-income persons because only a limited number of nonprofit groups have the financial resources to make use of the incentives, according to Wilson's assistant, Quinn.
Hearings on the home ownership bill will be held before the council's Finance and Revenue Committee on May 16.