The CHAIRMAN. We set this hearing with Mr. Arnall, several days ago. He has prepared himself on these matters and he will be with us at 2:30 in executive session for a half hour and then in open session at 3.

I hope everybody will be here for Governor Arrall. Is it the wish of the committee that we try to get another room?

Senator DIRKSEN. I was going to suggest that.

The CHAIRMAN. Suppose we get a room over at the Capitol. We will then have to notify everybody.

You may proceed, sir.

Mr. FITZGERALD. Mr. Chairman and members of the committee, I am Harry J. Fitzgerald, Evansville, Ind. I am chairman of the rent decontrol committee of the realtors' Washington committee, National Association of Real Estate Boards. The National Association has a membership of 47,287 realtors and 1,118 member real-estate boards throughout the Nation. Our offices are at 1737 K Street NW., Washington, D. C., and 22 West Monroe Street, Chicago, Ill. We appreciate this opportunity to appear before your committee.

I have been a member of the Evansville Rent Advisory Board since its inception.

It is my understanding that our testimony today is to be limited to the inequities and the administration of the existing rent-control law. Although we are of the firm conviction that inequities are inherent in the rent-control law, nevertheless we shall endeavor to point out some inequities which we feel are susceptible of administrative or legislative remedy.

Therefore, in accordance with the letter we received from the committee, we are filing herewith a statement of the National Association of Real Estate Boards containing reasons why we believe Federal rent control should be allowed to terminate on June 30, 1952. We are also attaching to that statement certain documents to support this position.

We respectfully request, Mr. Chairman, that the statement and its attached documents be made a part of the record at this point. (The information referred to follows:)

STATEMENT SUbmitted by HARRY J. FITZGERALD ON BEHALF OF THE NATIONAL ASSOCIATION OF REAL ESTATE BOARDS

Mr. Chairman, the expressed policy of the Congress in the matter of rent control is to remove the Federal controls from rents as early as practicable. This policy has been restated in one form or another for nine consecutive years.

The Housing and Rent Act of 1947, as amended, actually is the Emergency Price Control Act of 1942 all dolled up in a new suit.

In 1951 the Congress extended rent control until June 30, 1952, despite the administration's recommendation that such controls should be extended for 2 years. It must have been apparent to the committee then that a reappraisal of the necessity for such controls after 1 year was desirable—or, in any event, the consideration of amendments based upon the year's experience with such controls. We cannot help reflecting on the implications of another extension of Federal rent control. Such action strengthens rather than lessens the unfortunate concept prevailing for the last 10 years that rent control may be justified even though the rest of the economy operates in a free competitive market.

We believe, and have stated on several occasions, that the concept was a tragic one because it singled out the property owner as the one to bear the brunt of any dislocation in our economy.

We are of the firm belief that continued extension of rent control has nurtured an “underdog psychosis" on the part of some labor and tenant groups which today find themselves on the threshold of serious belief that rent control has become a permanent part of the social fabric of this country.

Congress felt justified to extend rent control last year because it felt there was an apparent need for the stabilization of wages and prices, and rents were considered as a price.

Defense Mobilizer Wilson made only one reference to rent control in his entire statement to this committee. That was when he lumped together with wages and prices the term "rents." There was no economic justification for rent-control extension except to consider rents with prices and wages.

Subsequent witnesses have casually referred to rents in requesting that wage and price controls be extended. Other witnesses have requested that rents be decontrolled now along with wages and prices. Thus, it has been firmly established that rents are part of price control.

Therefore, any statement applicable to the end of Federal rent control is equally applicable to wage and price control, and vice versa.

The Roy Wenzlick Co. of St. Louis, real estate appraisers and counselors, is well known to the Congress for its economic studies in the real estate field since 1914. Mr. Wenzlick has just issued a brief memorandum, 10 Years of Rent Control. It contains several charts which I think would be of considerable interest to the Congress. With your permission, Mr. Chairman, we are submitting it herewith as part of this statement.

"As I SEE TEN YEARS OF RENT CONTROL

"In March 1942, practically 10 years ago, rent levels on residential dwelling units were frozen at the levels which then prevailed, to "help the war effort.' During the period of World War II, the bureaucrats in Washington insisted that rent controls could not be lifted, and in the postwar period, they still protested that conditions had not returned to normal and, therefore, rent controls must continue. During the war in Korea, they have intensified their opposition to any weakening of rent controls, or to their elimination. They have gone further and have reimposed rent controls on cities which have been decontrolled by either local or State action. In many cases, this has been in spite of opposition of the local groups who felt that a return to rent control was undesirable. "From the standpoint of workability, rent control is more effective than any other type of price controls. It is far more difficult and dangerous to engage in black market operations and, since there is always a large supply of housing accommodations already in existence which will persist for a long period of years, the effect of rent control on the supply is not as immediately apparent as it is when price control sets the price of a commodity below the cost of production. Even a Washington bureacrat has had more sense than to attempt to hold the price of food, for instance, at the March 1942 level. On the government consumers' price index, food has increased since March 1942 by approximately 90 percent. Had the allowable price not been raised, no food would be coming to the market, as the cost of production had increased to the point where it could not be produced without a heavy loss. Under those circumstances, each farmer would raise enough for his own needs, but would not raise crops for sale.

"While it is not readily apparent, rent control has exactly the same effect on the production of dwe..ing units. The small chart opposite shows the way the percentage of all dwelling units which have been but for rent has varied since the twenties. The relatively small percentage which have been built in the recent past consist either of public housing or of private borrowing on which the Government has assumed practically the entire risk on insured loans. In 1951, almost 40 percent of all rental units built were in public housing developments.) On the other hand, those built during the twenties were built entirely by private capital, financed by private capital, on an uninsured basis.

"The chief effect of rent control has been to make rental units unavailable and to force persons, who would prefer to rent, to buy in a very high-priced market. Like all price controls, it has intensified the situation it attempted to correct. Rents rose because there was a shortage of residential units for rent, and so rent control attempted to soive this situation by preventing the building of additional units.

"The chart below shows the experience of nine cities where rent controls have been lifted.

“The Bureau of Labor Statistics of the United States Department of Labor has for many years collected rent figures for 34 cities of the United States in connection with its consumers' price index. Of these 34 cities, 25 are still under rent control, but 9 are cities in which rent controls have been lifted. In one of these cities, however, Norfolk, Va., rent controls have just recently been reimposed.

We believe, and have stated on several occasions, that the concept was a tragic one because it singled out the property owner as the one to bear the brunt of any dislocation in our economy.

We are of the firm belief that continued extension of rent control has nurtured an "underdog psychosis" on the part of some labor and tenant groups which today find themselves on the threshold of serious belief that rent control has become a permanent part of the social fabric of this country.

Congress felt justified to extend rent control last year because it felt there was an apparent need for the stabilization of wages and prices, and rents were considered as a price.

Defense Mobilizer Wilson made only one reference to rent control in his entire statement to this committee. That was when he lumped together with wages and prices the term "rents." There was no economic justification for rent-control extension except to consider rents with prices and wages.

Subsequent witnesses have casually referred to rents in requesting that wage and price controls be extended. Other witnesses have requested that rents be decontrolled now along with wages and prices. Thus, it has been firmly established that rents are part of price control.

Therefore, any statement applicable to the end of Federal rent control is equally applicable to wage and price control, and vice versa.

The Roy Wenzlick Co. of St. Louis, real estate appraisers and counselors, is well known to the Congress for its economic studies in the real estate field since 1914. Mr. Wenzlick has just issued a brief memorandum, 10 Years of Rent Control. It contains several charts which I think would be of considerable interest to the Congress. With your permission, Mr. Chairman, we are submitting it herewith as part of this statement.

"As I SEE-TEN YEARS OF RENT CONTROL

"In March 1942, practically 10 years ago, rent levels on residential dwelling units were frozen at the levels which then prevailed, to "help the war effort." During the period of World War II, the bureaucrats in Washington insisted that rent controls could not be lifted, and in the postwar period, they still protested that conditions had not returned to normal and, therefore, rent controls must continue. During the war in Korea, they have intensified their opposition to any weakening of rent controls, or to their elimination. They have gone further and have reimposed rent controls on cities which have been decontrolled by either local or State action. In many cases, this has been in spite of opposition of the local groups who felt that a return to rent control was undesirable. "From the standpoint of workability, rent control is more effective than any other type of price controls. It is far more difficult and dangerous to engage in black market operations and, since there is always a large supply of housing accommodations already in existence which will persist for a long period of years, the effect of rent control on the supply is not as immediately apparent as it is when price control sets the price of a commodity below the cost of production. Even a Washington bureacrat has had more sense than to attempt to hold the price of food, for instance, at the March 1942 level. On the government consumers' price index, food has increased since March 1942 by approximately 90 percent. Had the allowable price not been raised, no food would be coming to the market, as the cost of production had increased to the point where it could not be produced without a heavy loss. Under those circumstances, each farmer would raise enough for his own needs, but would not raise crops for sale.

"While it is not readily apparent, rent control has exactly the same effect on the production of dwelling units. The small chart opposite shows the way the percentage of all dwelling units which have been built for rent has varied since the twenties. The relatively small percentage which have been built in the recent past consist either of public housing or of private borrowing on which the Government has assumed practically the entire risk on insured loans. (In 1951, almost 40 percent of all rental units built were in public housing developments.) On the other hand, those built during the twenties were built entirely by private capital, financed by private capital, on an uninsured basis.

"The chief effect of rent control has been to make rental units unavailable and to force persons, who would prefer to rent, to buy in a very high-priced market. Like all price controls, it has intensified the situation it attempted to correct. Rents rose because there was a shortage of residential units for rent, and so rent control attempted to solve this situation by preventing the building of additional units.

"The chart below shows the experience of nine cities where rent controls have been lifted.

"The Bureau of Labor Statistics of the United States Department of Labor has for many years collected rent figures for 34 cities of the United States in connection with its consumers' price index. Of these 34 cities, 25 are still under rent control, but 9 are cities in which rent controls have been lifted. In one of these cities, however, Norfolk, Va., rent controls have just recently been reimposed.