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That section of the bill that places a superior lien on the real estate for a violation of the law by the tenant creates a most embarassing situation. Nonresident owners especially, as well as local owners of houses used for boarding and rooming purposes, may feel compelled to immediately notify such tenants to vacate if this bill passes the Senate and is signed by the President. Trustees of estates will have no choice, as they dare not run any risk whatsoever. Those owners might find this necessary, in order to preserve their holdings, and in many cases avoid the risk of holders of mortgages demanding payment of loans maturing during the life of the law. If this action is taken, the patriotism of these owners might be questioned, as thousands of Government clerks in such quarters will be inconvenienced, and our Government handicapped in its work to win the war. Such a condition should be avoided, if possible; and we earnestly and sincerely appeal to you gentlemen for wise legislation, so that the housing problem may be properly aided.

We respectfully suggest that a rent administrator or appraiser, with a board of appeals, be appointed by the President, District Commissioners, or Supreme Court of the District of Columbia. In that way tenants who are overcharged for rental would obtain relief and protection. With such machinery created, only a few cases will develop, and the expense of such a bureau would be nominal. No other method seems practical and equitable to both tenant and landlord.

We will endeavor to answer all questions in reference to local rental matters. This association is represented here by a special committee, of which Mr. Bates Warren is chairman. Information and data as to local conditions have been assembled and will be submitted for your consideration by Mr. Warren, who will now address you.

Senator POMERENE. Your statement thus far seems to indicate that there is some necessity for relief. I say that because you suggest the appointment of an administrator and a board of appeals.

Mr. FAIRFAX. Yes, sir.

Senator POMERENE. What facts are there which have led you to believe that there was a necessity for relief?

Mr. FAIRFAX. The information that has come to my knowledge that there has been some charging of excessive rentals, and the fact that the town now is practically filled up with people, and the information that more people are coming here; and my experience impresses me with the fact that many of those who are coming here are making overtures and bids for property now occupied. The real estate men of Washington want to avoid that condition, and regulate it in such a way as not to create a condition of chaos in the city.

Senator POMERENE. Give the committee the benefit of the information you have as to these excessive charges.

Mr. FAIRFAX. I do not know that I can recite any particular cases right now, Mr. Chairman.

Senator POMERENE. You have such information as compels you to believe that there are these excessive charges prevailing here in the District, have you?

Mr. FAIRFAX. In a small percentage of the property now occupied, some such condition does exist.

Senator POMERENE. You have referred to the fact that there is an increase in the cost of maintenance of real estate, etc. To what extent do you think this increase prevails ?

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Mr. FAIRFAX. Mr. Warren, the chairman of that committee, will be able to give you more definite information in that respect; but my experience would indicate that there is an average increase right through of from 50 to 75 per cent in the cost of maintenance, repairs, and the different items that go to make up the total.

Senator POMERENE. Another question: What increase in rates do you think there should be over those prevailing, say, in 1916 ?

Mr. FAIRFAX. I would not like to advocate any percentage, because that is a thing that I do not believe could be fixed in such a way as to afford any basis that is fair to both tenant and landlord.

Senator POMERENE. You are in the real-estate business here, are you?

Mr. FAIRFAX. I am; yes, sir.
Senator POMERENE. How long have you been engaged in it?
Mr. FAIRFAX. About 27 years.
Senator POMERENE. Have you any other business outside of that?
Mr. FAIRFAX. No, sir.

Senator POMERENE. During this time you have been familiar with real-estate values here in the city, have you?

Mr. FAIRFAX. Yes, sir.

Senator POMERENE. You know, do you not, generally, what, if any, advance there has been in real-estate values or in other values ?

Mr. FAIRFAX. In a general way.

Senator POMERENE. Are you not able to give us some judgment, out of the abundance of your experience as a real-estate man, as to what would be probably a fair advance of rentals in this District ? I am speaking generally.

Mr. FAIRFAX. Taking what as a basis, Mr. Chairman?

Senator POMERENE. I referred to the rentals of 1916, taking that as a basis.

Mr. FAIRFAX. Of course, back in 1916 there were, I suppose, from eight to ten thousand vacant properties in the city, and under those conditions I do not know whether there really was any fixed rental. I have in mind numerous cases in those days, back in 1915 and 1916, where tenants who were occupying places threatened to move, and we would reduce the rent materially to hold them, in spite of the fact that the rent of the man next door in similar quarters would continue at the old scale; so it would be hard to say just what the percentage should be under those conditions.

Senator POMERENE. In any event, you think it should be controlled by legislation do you? Mr. FAIRFAX. I think it should be regulated in some way.

Let each case be considered as an individual case, and let all of the circumstances and conditions be considered on a complaint that might be made by a tenant who feels that he is overcharged. That is the only way in which I think it could be done in a simple, fair, reasonable

Senator POMERENE. Do the members of the committee desire to ask questions?

Senator HOLLIS. Mr. Fairfax, which is considered the more stable class of real estate for an investment—an apartment house or an office building?

Mr. FAIRFAX. At the present time?
Senator Hollis. Generally speaking.

manner.

Mr. FAIRFAX. In the City of Washington I think an apartment house in normal times would be considered the more stable of the two.

Senator HOLLIS. Take trust funds that are being invested in real estate. What rate is considered a fair return on apartment-house property? I am speaking of newly invested funds now.

Mr. FAIRFAX. A net return?
Senator Hollis. Yes; above taxes and all expenses.

Mr. FAIRFAX. It should net about 8 per cent from 7 to 8 per cent net.

Senator HOLLIS. Are you aware that that is about twice what is considered a fair return in eastern cities-Boston, for example ? Just to put an illustration, one of the first modern office buildings in Boston was the Ames Building, where the Old Colony Trust Co. was, and I understood that the trustees were entirely satisfied if they got a net return of 4 per cent out of that office building. It was all they planned to get. I may be mistaken, but that has been my information.

You see, it makes a great difference what basis you start with in figuring what would be a fair return. In my own part of the country a gross return of 10 per cent on the investment is considered good. Out of that all repairs and taxes are paid.

Mr. FAIRFAX. Of course, in a great commercial city like Boston, where there is a great appreciation in land values, the owner naturally, perhaps, would be content with a less rate of interest than he would in a city like Washington.

Senator Hollis. Are not your land values constantly increasing in Washington ?

Mr. FAIRFAX. Slowly.
Senator HOLLIS. Slowly, are they?

Mr. FAIRFAX. In some places there has been considerable depreciation.

Senator HoLLiS. Then you think that for a basis a net return of 7 to 8 per cent on the investment should be figured ?

Mr. FAIRFAX. Yes, sir; because against that there must necessarily be some depreciation on the building charged off from year to year.

Senator HOLLIS. Yes, but you do not mean to take that out of that, do you?

Mr. FAIRFAX. Yes, sir.
Senator HOLLIS. You would take that out?
Mr. FAIRFAX. That would be taken out of the 8 per cent.

Senator HOLLIS. What percentage should be charged off for an apartment house in Washington ?

Mr. FAIRFAX. A new building? Of course it depends upon the age of the building.

Senator Hollis. But you have got to take the building when it is new and charge it off right down, so that it should be a constant rate.

Mr. FAIRFAX. We would charge off about 2 per cent, perhaps, for the first 10 years, and then, of course, it would increase as the years

go on.

Senator HoLLiS. If you have in your charge an apartment house now, and an apartment should become vacant, say, the 1st of April,

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how would you fix what the new rental of that apartment should be? You probably would rent it up to the 1st of October, would you not?

Mr. Fairfax. That is usually our period for leasing apartments.
Senator Hollis. What would be your basis of reckoning?
Mr. FAIRFAX. You mean taking an entirely new apartment?

Senator Hollis. I am speaking about an apartment in an apartment house.

Mr. FAIRFAX. And it would become vacant at this time?
Senator Hollis. The 1st of April.
Mr. FAIRFAX. You ask on what basis I would rent that?

Senator Hollis. What would be your basis of reckoning what you would have to get out of it in order to get what you call a reasonable return?

Mr. FAIRFAX. I think the total rentals from any apartment should be between 15 and 20 per cent on the value of the property.

Senator Hollis. I was talking about an unfurnished apartment. Most of them are unfurnished.

Mr. FAIRFAX. Yes; I have in mind unfurnished apartments. I say that because, in the case of apartment houses around Washington offered for sale generally, no one asks a higher price than that the rental would show a fuli 15 per cent on the value, and they can not sell them on that basis.

Senator Hollis. In doing this, as I understand you, you would have a certain amount of investment in the building that you would consider; you would consider the appreciation in the value of the land, if any, and you would make up your mind what portion of the whole investment this particular apartment represented, and then fix the new rental on a certain percentage of that?

Mr. FAIRFAX. When the building is first erected, you try to scale the rents

Senator Hollis. No; I am talking about an ordinary apartment house.

Mr. FAIRFAX. I suppose you would be guided by what similar apartments in the building are being rented at. You would not have half a dozen scales of rental.

Senator Hollis. Mr. Fairfax, I have been asking you questions for five or ten minutes, and you have talked about investment, and fair return, and other apartments. You have not said a word about the increased cost of anything that you have had to put into it. Evidently that has not struck your mind in this connection, but it is the thing you talked about at the beginning.

Mr. FAIRFAX. We went back to normal times, Senator.

Senator Hollis. No; we were talking about the 1st of April of this year. Evidently the increased charges that you spoke of in the first place do not engage your mind when you come down to a specific case. You finally come down to talking about what other apartments are bringing. As a matter of fact, is it not the practice to get what you can when you have an apartment to rent, without any special reference to the investment or the cost?

Mr. FAIRFAX. The demand and the supply have helped to fix the price at the present time, and will, perhaps, for the future; but the owners of apartments as well as houses have not increased their rentals, particularly in the last fall, when there was some demand here, in spite of the fact that it costs more for maintenance.

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Senator Hollis. I do not think I care to ask any further questions.

Mr. B. H. WARNER, Jr. Mr. Chairman, may I interrupt just a moment? I got in late, and I do not know what has preceded; but I should like to inquire of the committee if they have made available the reports which unquestionably have been received by the committee from the Commissioners of the District of Columbia, the Army housing committee, and the committee on housing?

Senator POMERENE. We have just begun. If there is anything along that line we will have it later on, if it is desired to put it in the record.

Senator DILLINGHAM. Mr. Warner wanted to know if you had made public anything you had received.

Senator POMERENE. Oh, no; nothing at all.

Mr. WARNER. Has this bill been referred to the parties I speak of for their suggestions?

Senator POMERENE. It has not.

Mr. WARNER. Mr. Chairman, if it is proper, I should like very much to request the committee to be kind enough to do that. These three bodies are the controlling bodies, as I see it, in respect to the rental and housing facilities in the District, and it seems to me it would be very important to the general public if they were to be asked to give their views on the matter.

Senator DILLINGHAM. What three bodies are you speaking of ?

Mr. WARNER. The Commissioners of the District of Columbia; Maj. Z. L. Potter, who has charge of the housing of the employees

Mr. JULIUS I. PEYSER. I am representing Maj. Potter here. Mr. WARNER (continuing). And the Housing Committee of the District of Columbia, the chairman of which, I think, is Mr. Baldwin, assisted by Mr. E. S. Hagan. It seems to me it would be very valuaable for the committee to have that data.

Senator POMERENE. We will take up this matter in some order. Mr. Fairfax has had charge up to the present time, and we were going to hear next some other gentlemen who are here. The other matters will be taken up in due course.

STATEMENT OF BATES WARREN, ESQ.

Senator POMERENE. Please state your name.
Mr. WARREN. Bates Warren.
Senator POMERENE. What is your business?
Mr. WARREN. I am an attorney at law and real-estate owner.
Senator POMERENE. Are you an owner of real estate here?
Mr. WARREN. Yes, sir; I am.
Senator POMERENE. What is the nature of it?
Mr. WARREN. Apartment houses, mostly.
Senator POMERENE. Where are they located ?
Mr. WARREN. In all parts of the city.

Senator POMERENE. Give the names of the properties and their locations.

Mr. WARREN. I own 2029 Connecticut Avenue; 1868 Columbia Road; Beverly Court, at Columbia Road and Ontario; an interest in the Alabama, at Eleventh and N. Do you want me to give all of them?

Senator POMERENE. Yes; proceed.

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