TESTIMONY OF JOHN A. PETTY, SECRETARY, WASHINGTON REAL ESTATE BOARD

(The witness was duly sworn by the chairman.)

Mr. BRANDENBURG. Your name is John A. Petty?

Mr. PETTY. It is.

Mr. BRANDENBURG. You are secretary of the Washington Real Estate Board?

Mr. PETTY. I am.

Mr. BRANDENBURG. Are you familiar with rental conditions and property in the city of Washington?

Mr. PETTY. Yes, sir.

Mr. BRANDENBURG. Have you studied the proposed rent law? If so, please state to the committee your views about it.

Mr. PETTY. If the chairman will permit me before going into that I would like two or three minutes to correct a wrong impression that has gone broadcast in the papers last evening and this morning in reference to a statement made by the chairman yesterday. I find upon reading the typewritten transcript of the hearings that his statement does not exactly meet with the construction the papers put on it. However, I want to say just a word about it. The chairman, Senator Ball, said in his statement:

Word was sent back to me that they were not willing to go into any proposition of that kind.

The Senator was referring to a conversation that I have had with him in respect to a model license law for real estate brokers. I never authorized anyone to send word to the Senator that we were not willing to go into the proposition. I have not seen the Senator personally since that conference, and I have only written him once. That letter was in reference to the sale of his own home, for which I was trying to cooperate through some members of our board in assisting him in securing a sale. That letter was dated December 19, and that is the only letter I have written the Senator.

I think the Senator must have misunderstood some phase of the situation. What actually happened was this: The Senator was good enough to give me an interview in response to a request that I wrote him on December 5 asking that I might have an informal conference relative to local rent conditions. I received a letter on December 8 stating that he would see me. I think I saw him the following day for just a few moments and made arrangements for a conference the next day. At that conference the Senator told me that in his judg ment there would be no rent legislation this year, as he did not think it was necessary, and he had so told the President. He referred, however, to some criticisms of certain evils that he said existed in the real estate business and on his own initiative brought up the question of a license law.

We discussed rather fully the subject of the license law and the benefit that it would have on real estate business in Washington. I told the Senator that such a license law was now in force in 18 States based on a model law adopted by our national association and that we were contemplating requesting Congress to give us the law in the District; but in view of the fact of this being a short session we did not think they could possibly get it through and we are trying

to get things in shape so that we would be prepared at the next Congress. The Senator said, "Mr. Petty, I think I can get that law through for you this year," or substantially to that effect. I said, "All right, Senator, that sounds very interesting." I was very much enthused. He said, "Will you go back and get me the law and write that up and give me the substance of it?"

The Chairman. I asked you to go back and consult with the real estate people first.

Mr. PETTY. That is correct. You also, Senator, unless I misunderstood you, suggested that I submit to you the substance of the law.

The CHAIRMAN. My impression and statement was that you go back to the real estate people, present the situation and proposition to them, and, if they were favorable, to prepare a bill along those lines and that the committee might consider it.

Mr. PETTY. Yes, sir. Did you not also say, unless I misunderstood you, that you would be in town during the Christmas holidays and that you thought probably that would be a favorable time to get together?

The CHAIRMAN. Yes.

Mr. PETTY. To have a conference with maybe Mr. Warren and Mr. Saul.

The CHAIRMAN. And I was here during that time except on Christmas day.

Mr. PETTY. To go back, my executive committee meets once a week. It was on Friday that I saw you, and we met the following Thursday. After that meeting I reported to the executive committee of the board what you said. One member of the committee said, “If there is any chance of the Senator getting the bill through, the Lord knows it would be a splendid thing. Let us go to it." Let us go to it." They immediately moved to engage counsel. The CHAIRMAN. Was there not meeting?

very serious objection in that

Mr. PETTY. There was absolutely no objection on the part of any member.

The CHAIRMAN. Then why was I not communicated with later? Mr. PETTY. Just a minute.

The CHAIRMAN. One person who was present at the meeting said there was so much objection to it that it was dropped.

Mr. PETTY. I have no recollection of any objection. I do not know what somebody else in the meeting might have said. To show that we were acting in good faith we employed Mr. Roger J. Whiteford. I wrote to Chicago to get a copy of the model license law with some additional information--as a matter of fact, I had a copy of the law in my office, but wrote to get some additional information from the national association. We sent a copy of the model law to Mr. Whiteford. I went around and had a two-hour conference with him.

On December 19 I wrote this letter to every member of our executive committee:

Inclosed is a copy of the McChesney Act. Please let me urge on you the necessity for cooperation with the executive committee in conjunction with Mr. Whiteford in the preparation of a suggested law to be presented to Congress.

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The CHAIRMAN. To whom was that letter written?

Mr. PETTY. To every member of the executive committee, inclosing a copy of the model law for them to study individually. The CHAIRMAN. That is the executive committee of what?

Mr. PETTY. Of our board. The last paragraph of the letter reads:

I believe Senator Ball is under the impression that I am to furnish him this data during the Christmas holidays, at which time he wants a conference with two or three members of our board.

It so happened a couple of our fellows got out of town during Christmas and in the rush of things we did not get a meeting of the executive committee.

The CHAIRMAN. I think when you have finished that it is proper that I should make a statement, because there is very little difference between your statement and mine.

Mr. PETTY. Except in one thing. The newspapers have reported that the realtors have refused to cooperate. As a matter of fact, this letter is evidence that our executive committee was functioning to cooperate in respect to a license law.

Representative HAMMER. But you did not give any notice to Senator Ball nor explain why you did not do so.

The CHAIRMAN. I had better begin at the beginning. Since you quoted the interview I had with the President of the United StatesMr. PETTY. I beg your pardon. Did I quote it?

The CHAIRMAN. You said that I stated what I had reported to the President.

Mr. PETTY. I certainly understood you to say you had told the President that you thought no rent legislation was necessary.

The CHAIRMAN. That is practically correct. In the interview with the President I stated that I did not think there was an emergency so far as houses were concerned in Washington; that I did not think, without such an emergency, that any rent law could be passed that would be constitutional.

Senator COPELAND. That is by reason of the absence of an emergency?

The CHAIRMAN. I did not think the emergency existed so far as housing capacity was concerned. Incidentally I said, "Mr. President, if there is an emergency it is in the rents charged, and I think probably there are reasons for those exorbitant rents.

I further stated to him that the majority of the real estate people of Washington were very high class, honorable men; that in their apartments there were no vacancies because they gave good service which was satisfactory to the tenants and the tenants did not move out; but that we had certain apartment houses where there were many vacancies and would continue to be vacancies as long as the present conditions existed; that the salaries of employees of the Government were not sufficient for them to rent those apartments. I further said to him that I thought that was caused by just such conditions as the report which I had submitted last year showed to exist with reference to the pyramiding of trusts, making the overhead charges so unreasonably high. I suggested to him two possible remedies. According to my recollection one was to get the Department of Justice to prepare an act making it a criminal offense to do what has been done here by certain real estate people. I did

not suggest to him the proposition which I suggested to Mr. Petty, though I thought of it afterwards. That was, why not let the real estate people here clean house themselves?

I asked a friend of mine who is in the real estate business to see Mr. Petty and see if he was willing to have a conference with me. He saw Mr. Petty and wrote me a letter at his suggestion. That gentleman was Mr. Moore.

We had the conference and I stated to you then, Mr. Petty, that I hoped there would be no necessity for rent legislation. I said, "You people have permitted a condition to arise here in Washington that is going to make it very difficult for us not to do something if we do our duty, and that we have got to do." I suggested this proposition to you as a remedy. You said you would present it to your board. As I said, word was returned to me that there was objection in the board, but I waited during the Christmas holidays and heard nothing from you and I have heard nothing from you up to the present time. It was perfectly natural, when I heard nothing except that there were certain members of the board objecting to any proposition of the kind and to any legislation along these lines, that the fact you reported nothing to me would seem to confirm what I had heard as correct.

That is the truth and the whole truth so far as I am concerned. There is very little difference in your understanding of the situation and mine except that it was reported to me that a member or members of the board were opposed to it, and you rather confirmed that in never communicating with me.

Mr. PETTY. Let me say at the start that I have no desire in the world to attempt to contradict you at all, and in my preliminary statement I tried to be as cautious as I could in my language. The difference seems merely to be a misunderstanding which has occurred between us, and it may be my fault

The CHAIRMAN. As to the effect on the board.

It was

Mr. PETTY. When I left you I was certainly under the impression that my next move was to bring to you the substance of a law. The CHAIRMAN. To report what the board had done. Mr. PETTY. There is where the misunderstanding occurs. not necessary for me to do that because I knew that my board had been heartily in favor of it ever since I have been secretary of the board.

The CHAIRMAN. You will remember that I stated to you that I was opposed to any legislation unless the board was favorable to it because legislation would not be effective unless it had a real conscientious desire on the part of the board to enforce it.

Mr. PETTY. I regret that this misunderstanding occurred, but in that respect I thought you were referring to some sort of legislation relative to financing.

The CHAIRMAN. Oh, no.

Mr. PETTY. And for that reason that you wanted to speak to Mr. Warren, who was a lawyer, and Mr. Saul, who was a mortgage man. But be that as it may there is one thing I want to bring up now.

The CHAIRMAN. There were two things I had in mind to correct this condition. One was to make it a serious offense and punishable by law to pyramid trusts and sell the notes at a discount, some of them as low as 30 or 40 per cent discount. Some of those notes have

been sold to renters here, I find, and now the apartments on which they hold those notes have been sold and the notes are worthless, and the holders of those notes are appealing to me for relief on that matter.

Mr. PETTY. My only desire this morning is to broadcast that our organization is heartily in favor of a proper license law that would put within constituted legal authority the right to revoke the licenses of brokers who are unethical or practice wrong doing.

Representative HAMMER. May I ask a question for my own information? You did not notify Senator Ball or give him any notice during the Christmas holidays. Would he have heard from you if this interview had not been published in the newspapers yesterday? Mr. PETTY. He would have heard from us shortly after the 1st of January were it not for the fact that this legislation was proposed, and the moment this legislation was proposed-

The CHAIRMAN (interposing). One moment; you knew and the said that this bill was sent to me to be introduced.

papers Mr. PETTY. I did not infer that you introduced it as your own bill. The CHAIRMAN. The newspapers stated that. I did not prepare the bill and had nothing to do with its preparation.

Mr. PETTY. I did not infer that you had anything to do with it. I merely said that the legislation was proposed and we immediately decided that our efforts should be centered in opposition to this legislation.

The CHAIRMAN. But if you wanted to be constructive in the matter of legislation you would have prepared and presented a proper bill to correct conditions without necessitating the passage of a bill of this kind. All we want to do as guardians of the District of Columbia and its residents, whether they be realtors or tenants, is to see that justice is done. We only want to pass legislation that will protect all.

Mr. PETTY. In respect to the license law we are heartily in accord with that and it would, as I said a moment ago, put in the constituted authority the right to correct abuses in real estate practice. But this legislation or any other similar legislation relative to fixing a control of rents is absolutely wrong, because it can not accomplish the purpose it is designed to accomplish. Unless the Senator wants to go further, I can give some testimony that may be of interest. Representative HAMMER. Have you prepared a substitute for the measure we are considering?

Mr. PETTY. No, sir.

Representative HAMMER. You have not prepared a bill that may be offered as a substitute for it?

Mr. PETTY. We could whip it into shape in a very few days.
Representative HAMMER. But you have not done it yet?

Mr. PETTY. We were in the process of working on it when this thing came out, but there is no connection between the bill you are considering and a license law.

The CHAIRMAN. I can not understand that. When this matter came up you refused to present the other bill because the committee was considering bills tending to correct certain evils that have been presented to Congress. But because a bill has been presented favoring one phase of the situation it does not prevent the com