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A better relationship between tenants and owners is evident. Tenants who are dissatisfied have an opportunity to find other quarters, while owners have the right of selection in maintaining occupancy in their properties.

Decontrol of rents has removed inequities between tenants in rent values so that all can be placed on a fair and equitable basis.

We believe that residential rental owners of Portland have maintained a commendable restraint since decontrol of rents in Portland, Oreg. Comments editorially by Portland's two metropolitan newspapers indicate this fact. In an editorial on March 15, 1951, the Oregon Daily Journal stated : "Portland's landlords have shown considerable discretion since rent ceilings were removed,

The Portland Oregonian in an editorial dated March 15, 1951, stated : “Portland's experience with decontrol has been generally satisfactory. Some instances of 'gouging' have been reported, but the great majority of landlords have shown laudable restraint in raising rents

It is extremely discouraging to those who believe in free enterprise to have a law enacted, general in its provisions, which might enable the head of some Federal Government agency interested in building up his own organization or bureau to impose unnecessary controls upon areas where such controls are not needed just because there are some areas in which controls and restrictions might be needed.

While rent controls in some areas where there have been extreme shortages of housing facilities may have been beneficial to the particular tenants who have been secure in rentals far below the parity of other commodities, rent control in itself has always caused a shortage of rental units and could never help cure such a shortage in defense or war effort communities where any such shortage exists.

Rent controls have tended to increase the housing shortage by permitting people to occupy more space than they need at a price far below the parity of other commodities.

We believe that where extreme housing shortages exist in areas designated by the Government for promotion of its war and defense program of production, such shortage can only be overcome either by the Government providing the needed housing itself to meet the emergency or by removing the shackles from free enterprise and providing the incentive for private construction in such areas without the probability of losing its investment.

To continue governmental controls when and where they are not needed tends to weaken the faith of the people in their own Government. It is a strange philosophy under which subsidies are given to encourage production of food and other essentials and at the same time inflicts penalties and restrictions upon those providing shelter where the demand is in excess of the supply for such shelter.

The CHAIRMAN. Mr. Vanderslice, I suggest you go right ahead at this time.

STATEMENT OF R. L. VANDERSLICE, CHAIRMAN OF THE EXECUTIVE COMMITTEE, NATIONAL APARTMENT OWNERS ASSOCIATION, EXECUTIVE DIRECTOR OF THE CHICAGO RESIDENTIAL HOTEL ASSOCIATION

Mr. VANDERSLICE. Mr. Chairman, I am R. L. Vanderslice, chairman of the executive committee of the National Apartment Owners Association and executive director of the Chicago Residential Hotel Association. I would like to briefly summarize and supplement my prepared statement, and ask that it be entered in the record as though read.

The CHAIRMAN. Without objection, that will be done.

Mr. VANDERSLICE. I represent the class of properties referred to by the Housing Expediter before this committee last week as being of doubtful paternity.

The CHAIRMAN. You are going to make this a part of the record ? Mr. VANDERSLICE. Yes. I have only 312 pages, sir.

The CHAIRMAN. That is all right. I don't want to cut anybody short. It is just one of those things. We have so many witnesses.

Mr. VANDERSLICE. I appreciate that, Mr. Chairman.

I represent the class of properties referred to by the Housing Expediter before this committee last week as being of doubtful paternity. I am appearing before your committee on behalf

of the Chicago Residential Hotel Association to recommend that Federal rent control should be ended now with respect to residential hotels in the city of Chicago, which are the only hotels under Federal rent control in the entire country.

The discriminatory control inflicted upon Chicago residential hotels is without justification and unprecedented in the history of Federal legislation. From 1947 up to the present, all hotels throughout the entire United States have been free of Federal rent control with the single exception of Chicago residential hotels, which were recontrolled on April 1, 1949.

The principal reason which prompted Congress to decontrol all hotels in 1947 was because Congress recognized that hotels were primarily a service industry. The rapidly rising costs of hotel services placed this class of rental accommodations wholly apart from the ordinary bare-space living accommodations without hotel services. This reason for decontrolling hotels in 1947 applied to all hotels throughout the United States including Chicago residential hotels, for Chicago residential hotels are hotels that offer to their occupants all customary hotel services such as maid service, furnishing and laundering of linens, telephone and secretarial or desk service, use and upkeep of furniture and fixtures, and also, in addition, usually kitchen and dining facilities.

Congress has recognized that residential hotels are hotels within the meaning of the Housing and Rent Act. The Supreme Court of Illinois has held residential hotels to be hotels, the Federal courts in Illinois, including the United States Court of Appeals for the Seventh Circuit, have similarly so held, and the State laws and local ordinances of Illinois have classified residential hotels as hotels. Even the Housing Expediter, who only last week told this committee that Chicago residential hotels were neither fish nor fowl, and neither hotels nor furnished apartment buildings in 1948 and 1949, by an official interpretation, expressly stated that hotels, within the meaning of the act, included transient hotels, residential hotels, apartment hotels, and family hotels. It thus seems that only the Housing Expediter is in doubt as to the true character of a residential hotel and even he has no doubts when he correctly interpreted hotels as including residential and apartment hotels.

In his testimony last week the Housing Expediter told this committee what is an admitted fact: that the recontrol of Chicago resilential hotels had been a headache to everybody. His statement is an understatement. He stated that our hotels were of doubtful paternity and he has treated them accordingly. But, in addressing a meeting of this association as Chicago area rent director in November 1946, Mr. Woods stated that residential hotels had suffered most under rent control and were more deserving of a break than any other type of structure, urging us to present our case to Washington.

However, every effort of his Office has been to deny us relief accorded to other controlled housing accommodations. For example:

Congress in 1949 enacted a provision into the law requiring the Housing Expediter to grant fair net operating income increases to all controlled housing accommodations. We were assured that the Housing Expediter would effectuate this clear congressional command by extending the fair net operating income provisions to Chicago residential hotels and he, at first, recognized and gave effect to this intent of Congress by permitting the filing for rent relief by Chicago residential hotels prusuant to this regulation. However, after a substantial number of petitions had been filed, but before any had been granted, the Housing Expediter summarily amended his regulation on January 25, 1950, and completely excluded Chicago residential hotels from obtaining relief under the fair net operating income provisions. Yet every other class of housing accommodations throughout the country then had, and still has, the right to qualify for increases under the fair net operating income provisions. Only Chicago residential hotels are excluded from obtaining rent increases under the fair net formula.

The CHAIRMAN. Why was that?

Mr. VANDERSLICE. He claimed that his formula didn't cover hotels. After some delay he then brought out a formula which was entirely inapplicable for residential hotels, and later on amended his housing regulations and provided a special formula for it which some of them called a Ouija board, others called a gimmick, and other complimen. tary and uncomplimentary terms, and, after trying to get that formula for almost a year, the day before yesterday was the first time I was able to see it and then not through the Expediter's Office.

I have more on that in my report, Mr. Chairman, which I will cover a little later.

I protested immediately to the Housing Expediter and have continued my efforts to end this discrimination. However, as of this date, no relief has been granted to us by the Housing Expediter, despite the clear command of Congress that the fair net operating income provisions of the act should be extended to all controlled housing accommodations.

The CHAIRMAN. That was the act of Congress?
Mr. VANDERSLICE. That is right.

The Housing Expediter has denied us the right to file petitions based on comparability by changing the comparability date in his regulation from March 1, 1949, to March 1, 1942. He has forced Chicago residential hotels to completely absorb all increases in telephone rates; increases in State and local taxes; all wage increases; and all increased costs of furnishings and supplies, electricity, fuel, gas, and similar related costs of operation. The unit cost of items purchased by residential hotels is higher than that of the large decontrolled transient hotels because of the smaller volume.

Furthermore, the Housing Expediter has even refused to permit owners of Chicago residential hotels to dispense with maid service and take a reduction in rent when they found it prohibitive to continue to supply this service. So here we have the picture of the Housing Expediter on the one hand requiring the continuance of maid service

and on the other hand refusing the unfortunate owner the right to obtain an increase to compensate him for the increased cost of providing that service.

Thus not only were Chicago residential hotels unjustly discriminated against by being recontrolled in 1949 but the Housing Expediter has shown a callous indifference to their legitimate needs for rent relief.

Furthermore, the monthly survey of March 1951, by Horwath & Horwath, leading hotel accounting firm, shows that Chicago residential hotels are 86.37 occupied and that vacancies are steadily increasing. If an occupancy of 93 percent in 1942 justified control, then most assuredly the present occupancy of 86.37 percent in Chicago residential hotels, with vacancies steadily increasing, should justify decontrol. Not only does this vacancy factor offer sufficient grounds for decontrol, but it also insures that no excessive rent increases would result from decontrol.

It is important to note that former Congressman Barrett O'Hara, of Chicago, who strongly and successfully supported the recontrol of Chicago residential hotels in 1949, changed his view in 1950 and said, in part, during the hearings before the Committee on Banking and Currency, House of Representatives, December 4, 1950, as follows:

I might say, Mr. Woods, that I take very seriously the mandate of the people at an election. In the precincts in my district where most of the tenants live in hotels—the group who have been affected by the legislation that I fought for in the Eighty-first Congress—the voters declared for my opponent by, in most instances, as much as three to one, so I would judge from that that the tenants in those hotels are against any kind of controls

In conclusion, we feel that property owners should no longer be singled out to carry on the battle alone against inflation.

Now, Mr. Chairman, I want to thank the committee, thank you and the committee, for permitting me to appear to present our picture here, and I would like at this time, in answer to your question, to submit for inclusion in the record my letter to Senator Douglas of August 23, 1950, in which I take up with Senator Douglas the question of the fair net operating income, and our denial by Mr. Woods' office-raising the legal points—it is rather involved, so I don't want to read it, but ask that it be made a part of the record. I know you gentlemen will be interested in it, but you do want to save time.

The CHAIRMAN. Yes; I certainly do.
Without objection, that will be made a part of the record.

Mr. VANDERSLICE. Mr. Chairman, I also have concluding correspondence, a letter of September 19 to Mr. Douglas from Mr. Woods answering in part that letter, and a letter of November 20, 1950, to Mr. Tighe Woods, refuting the various statements, and then we also have a letter of April 20 signed by Mr. William Barr, of the Office of the Housing Expediter, and general manager, I believe it is.

The CHAIRMAN. And that explains why they didn't give you a raise in rent?

Mr. VANDERSLICE. The explanation is that he slammed the door in our face; we got absolutely nothing.

(The correspondence referred to follows:)

OFFICE OF THE HOUSING EXPEDITER,

April 20, 1951. Mr. R. L. VANDERSLICE, Secretary, Residential Hotel Association,

Chicago 11, III. DEAR MR. VANDERSLICE: In the latter part of January, Mr. Muchin, the assistant general manager; Mr. Sauer, an assistant general counsel; and Mr. Martin, assistant coordinator of program analysis and statistics, met with you and other representatives of the Chicago hotels in Chicago to discuss proposals made by you for changing the rent regulations with reference to rent adjustments for Chicago hotels. At these meetings you made three general recommendations which, for the sake of clarity, I will discuss separately.

1. FAIR NET OPERATING INCOME FORMULA

You recommended that the rent regulations be amended so that hotels in the city of Chicago would be eligible for rent adjustments under the fair net operating income formula. We explained to you at the conference that we had not provided such relief in our regulations because we found it to be not practicable. We agreed, however, that we would make a special survey of the situation in ('hicago in a further effort to come up with a fair net operating income formula for Chicago hotels. In accordance with the agreement reached at this conference we determined upon a category of establishments for the purpose of this survey. It was decided to limit the survey to hotels in which, on March 1, 1949, 15 percent or less of the accommodations were rented on a transient basis, with a further limitation that only those establishments would be considered for survey purposes which had neither restaurants, taverns, or cocktail lounges on the premises. After making this determination, we requested our area rent office to make a complete study of all residential hotels in Chicago and give us a list of those establishments which met these requirements. After receiving this list, we discussed with the Budget Bureau the techniques of making a survey and received clearance from them. For the past few weeks our accountants have been in Chicago examining the books of the selected establishments to determine their net operating income position for the years 1939-46, inclusive, to find out whether it would be feasible to establish a new net operating income formula which would be equitable for such establishments. As soon as this survey is completed I shall be happy to advise you of the results.

2. COMPARABILITY ADJUSTMENTS

You requested us to amend the rent regulations so that Chicago hotels would be eligible for comparability adjustments based upon the rent generally prevailing in recontrolled Chicago hotels on March 1, 1949, the date determining the maximum rent for such hotels.

Mr. Elwood Williams submitted to the Chicago conference a formula for adjusting rents on a “comparability basis within the hotel." Under the proposed formula, the rent director would determine what in a particular hotel the middle of the rental range was for the "lower rent structure" and what the middle of the range was for the "higher rent structure." He would then determine what the middle of the rental range was between the first and the second groups and would, by order, increase all rents in the establishment which were lower than that determined figure but would not reduce rents which were higher than the determined figure. The lower rent structure would consist of units occupied by tenants in possession prior to and through the 1947–49 decontrol period. The higher rent structure would consist of units in which the rent was established during the decontrol period as the units were vacated and rented to new tenants.

We explained to you previously that we did not permit in our regulations rent adjustments to Chicago hotels on the basis of March 1949 comparability because there was nothing in the congressional history of the Housing and Rent Act of 1949 which indicated that Congress intended to adjust rents on this basis and also because it was impossible to determine 1949 comparability since the rates varied widely because of the many ways in which they were established. We pointed out that in many instances the March 1, 1949, rents were the same

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