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Rent Control? Uncle Sam Allowed 15% Apartment Rent Hikes In 1947

February 13, 2017

Tenant advocacy groups may always be on the war-path about rising rents and gentrification, but the truth is Chicago apartment renters have infinitely more rights and consumer protection now than decades ago.

 

Now, State Rep. Will Guzzardi (D-39th) is urging repeal of the state’s Rent Control Preemption Act, a law passed by the Illinois Legislature in 1997 which prohibits local governments from enacting rent-control ordinances.

 

Since there are no limitations on landlords demanding excessive or unfair residential and commercial rent increases, Guzzardi says this has led to “skyrocketing rents and encroaching gentrification of once stable neighborhoods” in Chicago and throughout Illinois.

 

However, apartment owners and managers argue that Mayor Rahm Emanuel’s aggressive 2015 property tax hike combined with sharply higher water and sewer charges, plus new garbage fees are forcing landlords to raise rents to maintain thin profit margins.

 

Faced with a 28-percent real estate tax increase and substantially higher city utility fees last year, one Lincoln Park 4-flat owner was forced to raise rents 4 percent to 5.5 percent, or about $100 a month.

 

Did you know that when federal rent control was still in effect after World War II, it was perfectly legal for a landlord to slap a tenant with a 15-percent rent hike?

 

In a 1947 lease filed in this writer’s archives, the federal Housing Expediter Office of Rent Control allowed the landlord of a vintage Old Town apartment building to hike rents a whopping 15 percent—the maximum allowed under the law.

 

The rent on the 2-bedroom unit rose to $23 a month from $20. Sounds like a pittance today, but in the late 1940s a good weekly wage was $40, or about $2,080 a year.

 

The federal agency attached a two-page notice to the skimpy two-page “Registration of Lease.” The notice said that the lease may not contain an escalator clause, an option for the landlord to terminate the lease at will, and it can’t include “conditions or covenants which exact penalties, or decrease services.”

 

Today, the tenant friendly 2017 Chicago Association of Realtors’ lease is 19 pages long. Only four pages are dedicated to the actual rental agreement. The remaining 15 pages of administrative boiler plate cover an outline of the Chicago Landlord Tenant Ordinance, allowable interest charges on security deposits, lead-based paint and radon disclosures, and information on bed bugs.

 

In 1947, 70 years ago, if the apartment was furnished prior to rent control, the agency ordered the landlord to maintain the required furnishings and equipment to the same level regulated by the prior lease.

 

In those post-Depression days, Old Town was a blue-collar neighborhood where bath houses were in vogue. Bathrooms in worker’s cottages and frame 3-flats built immediately after the Great Chicago Fire of 1871 often had a toilet and washbowl, but no bath tub.

 

Turn-of-the-century apartment amenities might only include a bare electric light bulb hanging from the ceiling and a coal burning pot-belly stove for heat. Kitchens were equipped with a wall-hung cold water sink on legs. If the apartment had hot water, a ringer-type washing machine—a luxury—sometimes sat in the corner of the kitchen.

 

Because of the post-World War II housing shortage, many larger 3-flats in Chicago were split into 6-flats. If an apartment building had 6 units, it was split into 12 units.

 

After the war, the U.S. Congress was heavily lobbied by real estate interests, so the 15-percent “catch-up” rent increase was allowed after legislators enacted the Rent Act of 1947. The act moved administration of the federal rent control program to the Office of the Housing Expediter, an agency established in 1946 to oversee veterans’ mortgage assistance programs.

 

The Rent Act created new local advisory boards that had power to recommend across-the-board rent increases in entire neighborhoods or types of buildings, noted historian Wendy Plotkin, who wrote about post World War II rent control. That’s how Chicago’s 15-percent rent hike was allowed in 1947.

 

The advisory board, headed by Henry Spaulding, an African American Realtor from the South Side, was the main advocate for landlords. The new board dealt with a wide assortment of rent control violations, from bonus payments (“side payments” above the maximum rents set by the board), illegal evictions and unauthorized subleasing, according to Plotkin.

 

The need for federally imposed rent control as GIs returned home from World War II was rooted in pressures on the housing supply shortage. Nationwide, it was estimated that the nation had a shortage of 4 million to 5 million units at the beginning of the war.

 

The U.S. government attempted to use voluntary rent-control boards at the beginning of the war, but many landlords ignored “appeals to patriotism, reason, civic pride, and a sense of fair play,” Plotkin wrote in 1998, in “Rent Control in Chicago After World War II: Politics, People, & Controversy.”

 

Although rent control officially ended in Chicago in 1953 after the end of the Korean War, the city was subject to federally mandated rent controls between August of 1971 and January of 1973 under the Nixon administration’s wage and price guidelines.

 

Throughout the 1980s, Chicago’s strong real-estate lobby fought rent control. However, in 1987, the city council adopted a Tenants Bill of Rights, the forerunner to the current Landlord Tenants Ordinance.

 

For more housing news, visit www.dondebat.biz. Don DeBat is co-author of “Escaping Condo Jail,” the ultimate survival guide for condominium living. Visit www.escapingcondojail.com.

 

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“The book is Escaping Condo Jail by Sara Benson and Don DeBat. I would say that anybody thinking about buying a condo, or even anybody serving on a condo board, or anybody who has any connection to a condo, this is must reading—all 600 and something pages. Thanks a lot for a great book!”

 

Steve Sanders, “Your Money Matters” WGN TV, December 22, 2014

By Don DeBat

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