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April 13, 1973

Everyone is concerned about the
high price of food these days, but
over one-third of all households
are also worried about paying the
rent. (The other two-thirds—
owners rather than renters— have
other types of payments to worry
about.) Rental payments recently
have been rising faster than most
other budget items except food, so
pressures have been arising in
Congress to freeze rents or even
roll them back to earlier levels.

One-third of a nation
The interested parties include 23.2
million renters that accounted for
35 percent of all households in the
1970 Census of Housing. (The
tenants' share of the market
declined over the previous two
decades, down from 45 percent in
1950 and 38 percent in 1960.) In
1970, some 14.7 million renters
lived in apartments and flats, but
a sizable number occupied single­
family housing.

During the first two months of
Phase III, the rental component of
the consumer price index rose at a
5.4-percent annual rate— almost
twice as fast as the rise for nonfood
commodities and nonrental ser­
vices, but of course considerably
slower than the 24.6 percent rate of
increase for food. This rise in rents
far exceeded the 3.3-percent rate
of increase for the Phase l-Phase II
period, and it was also higher than
the 4.3-percent rate recorded
during the pre-freeze period of

In the quarter-century following
World War II, rent-control laws
were stricken from the books
almost everywhere except in New
York City, with its very vocal
population of 1.3 million tenants
in rent-controlled housing.
Even there, the state legislature
voted in the spring of 1971 to
remove controls. But then a new
chapter opened in August 1971—
first the 90-day freeze, followed by
the promulgation of Phase II

Altogether, average rents have risen
roughly 25 percent over the past
decade, in line with the rise in
prices of nonfood commodities, but
significantly below the rise in prices
of food and nonrental services.
Nonetheless, with the acceleration
in rents in the last several years—
and especially in the last several
months— the perennial struggle
between landlords and tenants has
become intensified. This means
that rent is now increasingly a
political issue.1

Price Commission rules provided
that a landlord could: 1 ) increase
his rental charge by 2.5 percent
annually above the base rental after
30 days' notice to his tenant;
2) also increase his rental charge by
the dollar-and-cents amount of
increase of state-local government
taxes, fees and service charges
allocable to the individual unit;
3) increase monthly rents by 1.5
percent of the total cost of major
capital improvements made after
August 15; and 4) in the case of
(continued page 2)


leases which had not been renewed
within 90 days prior to August 15,
establish a new base rent 5 percent
higher than that in effect on May
Decontrol and recontrol?
The scope of these Phase II
regulations was limited soon there­
after by amendments which
effectively decontrolled about 45
percent of all rental units. The
Cost of Living Council exempted
all apartments or houses whose
landlord owned four or fewer units,
as well as all luxury apartments
renting for $500 or more a month.
With the unveiling of the Phase III
program this January 10, the
Administration lifted controls from
those units not already exempt,
although it noted that "landlords
are expected to exercise restraint."
Some landlords apparently failed
to get the message, and reports
soon circulated of whopping in­
creases in rents throughout the
country. As a result, rent-control
legislation soon appeared in the
Congressional hopper.
The Senate acted first, passing a
measure which would impose
controls in areas where rental
vacancy rates fell below 5.5 per­
cent, the 1972 national average.
The Senate measure also would

permit landlords an automatic 2.5percent increase and would permit
passthroughs for higher taxes and
costs. On the other hand, the House
Banking Committee voted last week
to roll back all rents to the January
10 level, and to permit only those
increases needed to reflect higher
taxes, operating costs and necessary
capital improvements.
When lifting controls last January,
the Administration argued that the
recently expanded supply of rental
units would act as a depressant on
rent increases. Vacancy rates had
been higher in the past, reaching
7.4 percent or more in every year
of the 1960-65 period, but at 5.5
percent last year, the rate was
considerably above the 1969 low
of 5.0 percent. As another sign of
easing, the percentage of new units
rented within three months of
completion dropped from 84 per­
cent in the spring of 1969 to 69
percent in the fall of 1972. Thus,
the median monthly rent for new
units, which had jumped from $165
to $187 between early 1969 and
early 1970, moved thereafter within
a fairly narrow range and averaged
$191 during the first three quarters
of 1972.
Building boom
The easing of the rental market has
reflected the sharp upsurge in the
construction of apartments and
flats over the past decade or so.
(Some units are owner-occupied,
as a consequence of the condo­
minium boom, but most are rental
units.) Over one million multiple
units were built last year— four

times the 1960 level— and the rapid
1972 pace was maintained in early
1973. A growing share of all new
construction has been devoted to
the building of multiples rather
than single-family housing; the
percentage was 21 percent in 1960
and 35 percent in 1967, but it has
ranged between 43 and 45 percent
from 1969 to date.
Most housing experts are on record
with a forecast of a substantial
decline in apartment building this
year, because of the obvious easing
of the market in a number of major
areas, especially in the South and
West. For example, the National
Association of Home Builders
expects a 12 -percent decline in the
multi-family sector as against a
7-percent drop in single-family
housing. A decline of that magni­
tude reflects the delayed market
impact of multi-family construction,
resulting from the long lead time
required between planning and
completion. Starts apparently
accelerated before the rental mar­
kets at the end of the line could
flash back a slowdown signal.
Completions until recently have
been running below starts; in late
1972, units under construction were
perhaps 30 percent higher than a
year earlier, but those units are now
reaching market and thereby
relieving some of the pressure on
Long-run boom
Yet, over the longer run, heavy
demand for multi-family units can
be expected, particularly because
of the sharp expansion in the

number of young adults in the
25-34 year age-bracket. This group
should increase about 46 percent in
this decade— at least three times as
fast as any other group in the
nation's population. The demand
for multiples also is likely to be
stimulated by the increased prefer­
ence for smaller family size, the
improved amenities associated with
development living, and other
factors such as the rapidly rising
price of land.
The favorable long-term prospects
for the rental-housing market do
not automatically guarantee a strong
future for landlords, even if they
should escape controls. Some
substantial fortunes have been
made in real estate over the past
decade or so, yet landlords' rental
income increased only about 55
percent, from $7 billion to $11
billion, between 1960 and 1972.
(Of course, landlords have also
taken advantage of substantial
tax-shelter benefits.)
During the same period, dividend
income doubled, from $13 billion
to $26 billion, while interest income
tripled, from $23 billion to $73 bil­
lion. It would appear that some
landlords have left the field to their
tenants and have shifted their
investments to stocks and bonds
William Burke

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B U O Z Jjy

(D ollar amounts in m illions)
Selected Assets and Liabilities
Large Com m ercial Banks
Loans adjusted and investments*
Loans adjusted— total*
Com m ercial and industrial
Real estate
Consum er instalm ent
U.S. Treasury securities
O ther securities
Deposits (less cash items)— total*
Dem and deposits adjusted
U.S. Governm ent deposits
Tim e deposits— total*
O ther time I.P.C.
State and political subdivisions
(Large negotiable CD 's)
W eekly Averages
of Daily Figures
Member Bank Reserve Position
Excess reserves
Net free ( + ) / Net borrowed (— )
Federal Funds— Seven Large Banks
Interbank Federal funds transactions
Net purchases ( + ) / Net sales (— )
Transactions: U.S. securities dealers
Net loans ( + ) / Net borrow ings (— )

Am ount
O utstanding



— 107
— 190
+ 38
+ 41
+ 44
+ 71
+ 12
+ 711
+ 500
+ 91
+ 76
+ 129
+ 29

W e e ke n d e d

Change from
year ago
D o llar
+ 8 ,9 6 3
+ 9 ,6 4 5
+ 3 ,3 3 6
+ 2 ,5 5 3
+ 1,459
— 366
— 316
+ 8,391
+ 1 ,3 1 2
+ 402
+ 6 ,6 0 9
— 134
+ 4 ,3 9 9
+ 1,507
+ 3,543

W e e ke n d e d

+ 14.43
+ 2 1 .9 7
+ 2 0 .7 7
+ 1 9 .6 4
+ 22.16
— 5.54
— 2.72
+ 13.81
+ 6.74
+ 16.78
— 0.73
+ 3 0 .2 4
+ 3 1 .4 2
+ 72.69
Com parable
year-ago period

— 108

— 204


— 91

+ 176

— 259


+ 283





’ Includes items not shown separately.

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