Court Opinion

ID: 6893063
Source: CourtListenerOpinion
Date Created: 2022-07-23 21:46:40.144182+00
Date Added: 2024-06-11T16:05:53.547543
License: Public Domain

MAGRUDER, -Judge
(dissenting in part).
I feel obliged to dissent from the court’s opinion in so far as it holds that the rent regulation is mv-alid as applied “to the luxury class of housing accommodations which rent for $100 or more per month.”
The statutory and constitutional validity of the maximum rent method of rent stabilization is now well settled. Chatlos v. Brown, Em.App.1943, 136 F.2d 490; Wilson and Bennett v. Brown, Em.App. 1943, 137 F.2d 348; see Bowles v. Willingham, 1944, 321 U.S. 503, 64 S.Ct. 641, 88 L.Ed. 892. In Spaeth v. Brown, Em.App. 1943, 137 F.2d 669, 670, we said: “Congress clearly authorized the Administrator to stabilize rents at the level at which they stood in the particular area in question on the most recent date which did not reflect increases resulting from defense activities.” Incidentally, the Administrator’s selection of March 1, 1943, as the maximum rent date for this area is not challenged in the present case. The justification for this method of rent control is that rentals are thereby rolled back and frozen as of an earlier date at levels which landlords and tenants had worked out for themselves by free bargaining in a competitive market, prior to the time when defense activities had injected into the market an abnormal factor resulting, or threatening to result, in rent increases inconsistent with the purposes of the Act. In most cases, at least, rents so fixed are deemed to be “generally fair and equitable,” in compliance with the statutory standard. Madison Park Corp. v. Bowles, Em.App.1943, 140 F.2d 316, 323, 324. However, in Chatlos v. Brown, supra, and in other cases, we have recognized that, with the freeze date rents as a starting point; the Administrator, in order to comply with the statutory requirements, may be under a duty to make appropriate adjustments to take account of increases in taxes or other costs of general applicability occurring since the maximum rent date, to the extent that such . cost increases have not been offset by other factors. But this has to do with the general fairness of the regulation as applied to the industry as a whole.
In the case at bar, the opinion of the court holds that the regulation is “generally fair and equitable” in freezing rents as of March 1, 1943. Since the regulation meets this test, I find nothing in the statute, nor in our previous decisions, which would make it the legal duty of the Administrator, in the situation here disclosed, to make special provision for the so-called luxury group of housing units, comprising a mere three per cent of the housing accommodations in the area, so as to assure the owners of such housing units as a group “net returns comparable to the prewar net return of the group as measured by the operating results of the year 1939.” The administrative burden of rent control will be much too greatly enhanced if the Administrator is obliged to afford to each small segment or possible grouping in the industry its own particular net profits enjoyed by it in,a representative prewar period. Furthermore, the grouping here is based solely upon the price charged, which was not the case either in Adams, Rowe & Norman v. Bowles, or in Heinz v. Bowles, cited by the court, where there were important historical differences and distinctive economic factors which set aside one group apart from the industry as a whole. But even granting that a case might be imagined where the application of the regulation to the luxury group of apartments would result in such extreme hardship as to render it “arbitrary or capricious” for the Administrator to refuse relief under his broad power in Section 2(c) of the Act to provide differentiations and reasonable exceptions, no such extreme situation is presented here. The' regulation froze rents as of March 1, 1943, at levels which the landlords themselves had worked out by free bargaining with their tenants at a date just before the inflationary pressures of defense activities had resulted, or theatened to result, in rent increases inconsistent with the purposes of the Act. Statistics set forth in the court’s opinion show that the landlords in the luxury group are doing considerably better under price control than they did in the year 1943 (in which the maximum rent date fell) and in the three years preceding. In the six months ended June 30, 1944, the net operating income of landlords in this group indeed fell short only by 3.48 per cent of their net operating income in the year 1939. So far as the figures disclose a trend, they indicate that operating results for this group are continuing to improve under price control. In view of these figures, and bearing in mind that *995the regulation is “generally fair and equitable”, I cannot say that the Administrator has been “arbitrary or capricious” in refusing to accord special treatment to this particular small group of landlords. It may well be that the Administrator would have authority to do so under Section 2(c) of the Act, which affords him a wide margin of discretion, but it by no means follows that he has a duty to do so. I find no abuse of discretion here.