Opinion ID: 2185061
Heading Depth: 1
Heading Rank: 3

Heading: The Rent Control Regulation Fails to Comply With the Act

Text: We begin our analysis with the proposition that the Commissioners [the District of Columbia City Council], being mere agents of the Congress, have only such authority to promulgate regulations as the Congress has specifically vested in them in any given field. Jones v. District of Columbia, 212 F.Supp. 438, 441 (D.D.C. 1962), aff'd, 116 U.S.App.D.C. 301, 323 F. 2d 306 (1963). Here the Congress required that in the event of adoption of rent control rules by the Council there be a means whereby increased costs incurred by . . . landlord[s] . . . shall be taken into consideration. . . . [10] An inquiry into the legislative history of this provision in the Act is instructive and reveals the clear intent of Congress that prompt, and therefore meaningful, cost pass-through procedures are mandatory in order to protect the landlords against uncontrollable costs and the rental community from a housing shortage due to the withdrawal of rental property. The committee is well aware that the rental property industry is not as subject as some industries to cost-push influences that require other industries to increase their prices. Rental increases generally result from a demand-pull situation. However, there are certain cost increases over which property owners have no control. Accordingly, it is expected that any controls which may be imposed will allow rent increases necessary to cover increases in uncontrollable operating expenses (fuel, utilities, taxes, etc. ). [11] [Emphasis supplied.] The Senate Report regarding the pass-through requirement further stated: The Council is prohibited from adopting rent controls which would not allow some reasonable pass-through provision to allow for [a] landlord's increased costs. . . . [12]       The full committee decided to amend the bill . . . to restrict the [City] Council from imposing controls that don't allow rental increases to cover legitimate ownership costs. [13] [Emphasis supplied.] Hence, the City Council exceeded its statutory authority if Regulation No. 74-20 did not possess a workable pass-through mechanism. For the following reasons, we conclude that a workable pass-through mechanism is a necessary concomitant of a rent control program. First, the rent ceiling formula of 12.32% increase in § 5 does not satisfy the pass-through requirement since it acts as a single, isolated increase with no future flexibility for compensating for uncontrollable operating costs. That general increase seems more in the nature of an effort to permit rents to catch up with increased costs and to maintain a reasonable return in view of the earlier rent freeze and inflationary conditions. Nor do the provisions in sections 6 and 7 for landlord hardship petitions satisfy the pass-through requirement. Sections 6 and 7 are the implemention of § 45-1623(d)(2) in the Act, which allows the Commission to grant hardship exemptions to landlords. Sections 6 and 7 are not the implementation of the pass-through requirement provision in § 45-1622(a) of the Act since that requirement is separate from the hardship exemption provision in the Act, revealing that Congress treated these two provisions as distinct, non-related matters. [14] Even assuming, however, that sections 6 and 7 of the Regulations constitute the pass-through mechanism, the rent control program still fails to pass muster because administrative implementation of sections 6 and 7 is shown by the record to be bootless as a means of providing a meaningful pass-through of increases in uncontrollable operating costs. This is made unmistakably clear by a recent statement from the Commission to the City Council showing the former's case load status. [15] As of March 14, 1975, [16] 501 petitions for hardship adjustments had been received from landlords. Only 54 of these petitions had been decided by Commission hearing examiners, and only 14 had been reviewed by the Commission. [17] More dispositive for this holding, though, is the fact that 279 of these 501 petitions have been returned to the landlords who filed them because the Commission admitted its administrative inability to decide the petitions within the required 60 days of § 7a of the Regulation. On March 14, 1975, a total of 208 petitions remained to be decided by the Commission. At the Commission's present rate of decision, approximately 5 to 7 cases per week, the Commission will be unable to decide more than one-fourth of these 208 petitions within the next 60 days and will again have to return the undecided petitions to the landlords. As the Commission stated in its report, [V]ery few if any new petitions can be considered in the months ahead. [18] These facts, coupled with the Commission's procedure of giving priority to both the refiled petitions (some of the 279 returned petitions) and the cases remanded to the Commission by the Superior Court after suit by a landlord, convince us that the hardship adjustment procedure is inherently incapable of functioning as the required pass-through mechanism. Despite the fact that a maximum 60-day limit for agency actions seems reasonable, appellants' statutory rights become totally illusory if the system charged with protecting them becomes so lethargic and cumbersome as to be inoperable. [19] Hence, Regulation No. 74-20 was promulgated without even a meaningful expectation of implementing the required pass-through right, despite the purported method of dealing with the matter. [20] For the same reasons we reject the government's arguments in its cross-appeal from the stay of the rollback provision. As the trial court stated in its conclusions of law, the remedy provided by sections 6 and 7 of the Regulation for seeking hardship adjustment . . . is not currently available through the hearing Commission. The order staying the rollback recognized in part the failings of the Commission and the adverse economic position of the landlords, and, although the trial court did not go far enough, it did not err in staying the rent rollback. [21]