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Mr. MacCHESNEY. The Senator has asked me a pretty difficult question to answer quickly.

Senator COPELAND. I know that.

Mr. MacCHESNEY. I have before me the fundamental facts in the case of Munn v. Illinois, which I used in my brief in the Supreme Court to sustain the license law which you have before you. There is a certain fundamental difference. There has been in the history of regulatory legislation a constant growth, and there always will be. in the power of the Government to control in the interest of the people. Originally it was held that the Government could only go to the extent of controlling those enterprises which depended upon a public franchise, such as the railroads. * Munn v. Illinois went beyond that. But that case and nearly all the cases, or practically all of them, have based the power to regulate upon what they call the monopolistic element, like a warehouse or telephone or gas, or either franchise or a natural monopoly, because of the governmental privilege to carry them on.

Senator COPELAND. Would that be true in the bread case?

Mr. MacCHESNEY. No. The bread case is a very difficult case to distinguish, so far as attempts to fix the price are concerned. So far as property is concerned, so far as quality is concerned, under the sanitary legislation you do fix the quality of housing. You say that they shall not occupy more than such a percentage of the superficial area: that they shall not go above ground bevond a certain height in the air.

Senator COPELAND. But that is for the public health.

Mr. Mac CHESNEY. Yes; and that is true with reference to bread on everything except price. The regulations with respect to foodstuffs come clearly within that principle.

Then, let me call your attention to the fact that if food or clothing can not be manufactured at a profit there is the option upon the part of the manufacturer as to whether he will continue to manufacture it or not, whereas the property is static, it is reachable, and can not get away from you. Therefore in a sense you come under another series of decisions which I would be glad to go over with the Senator.

You have referred to the bread case. I am trying to show that as to the single question of price it is very difficult to differentiate between the right to control the price of bread and the right to control the price of housing, but I am not saying that Congress has not the power to control the price of housing when it reaches an unreasonable amount. I would like to discuss that point in a minute. I am not trying to get away from it. All I am saying is that on the price question it is difficult to distinguish, but there is a line of decisions which hold that where there is an option as distinguished from where it necessarily applies, that you have gone further than you should. In the matter of property, I claim a man has no option so far as standing buildings are concerned. If he does not like this community you say he may shift, but he is not able to shift. He has his house and you impinge this legislation on him whether or no. When it comes to the question of how far you can go in legislation, I can discuss the question of price there.

This act not only controls rentals, but it controls conditions and conduct, and it controls the ownership of property. It does not do any good to anathematize legislation, but this legislation goes to the

extent of depriving the owner of the fundamental ownership of his property. In my judgment, and I can say this truly, the Supreme Court of the United States would have to go very much further than it has yet cared to go if it undertook to sustain the bill. In my judgment it is extremely doubtful if they would go that far. No man can say how far they might go if they thought there was an emergency existing.

Senator COPELAND. I agree with you fully if it were a State case, but in your mind do you not distinguish at all between the District of Columbia and a State?

Mr. Mac CHESNEY. To this extent only, that I think where the Government is responsible for calling thousands of people into service and where the rates of pay fixed and the conditions under which they live are within the control of the Government, that it has a peculiar responsibility to those people; but I do not believe that Congress has any more right to put that burden upon the real estate owners of Washington than a state legislature would have to put it upon the property owners of a State capital, for instance.

Representative Blanton. Where there are thousands of applications from parties living in the States, far distant, some of them, to take those very positions of the employees of the Government who have been called to Washington--and who as you said, can either shift or stay here-does that principle apply? If they do not like conditions, if they do not like the salaries they are paid, they can leave, especially when there are thousands of others wanting to come and take their places.

Mr. MacCHESNEY. I ought to agree with you, but I can not do it. I can not do it because in my judgment a government which employs people and takes the best years of their lives and trains them and takes their service owes them an obligation, and I claim, as I have claimed heretofore before the highest courts of this country, that the freedom of the laborer to work where he pleases is subject to very great limitation, because under practical conditions a man can not go where he pleases, and when he reaches my age and beyond he can not change without dire disaster.

Representative BLANTON. I have taken your model license law and worked on it for hours, trying to make it applicable to the District of Columbia, and have introduced a bill based on your model license law, but that of itself does not meet the emergency situation. There is to a certain extent an emergency, not calling for a rental law but for some kind of remedy. What other suggestion could you make to us to meet, for instance, the pyramiding of trusts, to meet false valuations that are put on property here, etc.?

Mr. MacCHESNEY. So far as false valuation is concerned, that would be met to an extent by the license law which has been proposed by the real estate men. The license law places in the hands of a responsible real estate commission the power to control of all the men in the business, not merely the most responsible, reputable men who belong to a local board, but all of them. For instance, here in the District of Columbia there are 119 out of 491 who belong to the real estate board. Those 119 men are respectable, law-abiding, responsible men in business in Washington. Your curbstone brokers and unconscionable speculators are not among their number in all human probability, without knowing what the facts are. But the

license law attempts to place under Government control all the men in the real estate business and it does punish, and in California and other States has absolutely eliminated, false advertising, misrepresentation, false statements and fraud, such as have been discussed


Representative BLANTON. But it does not prevent concert of action to raise rents. It does not meet that one very vital point.

Mr. Mac CHESNEY. It does not meet that, and yet so far as I know nowhere in residential property has there ever been any attempt by concerted effort to raise rents.

Representative BLANTON. But there could be.

Mr. MacCHESNEY. I doubt it as a matter of practical application, because there is not any group of men who are more independent of each other than the owners of particular pieces of real estate. The fact of the case is that you could remedy the unconscionable men, the limited numbers of men, through a real estate license commission, and if you felt that some legislation was necessary--but I do not want to go into these extraneous matters because I want an opportunity to discuss the questions which I came here to discuss with respect to this particular bill.

Representative BLANTON. I shall not interfere further, but on that one point, to carry out my thought, if you go to the scores of markets in Washington this morning you will find that eggs are selling at the same price in every one of them, that loin steak is selling at the identical price in every market, except perhaps a few of the chain stores. There must have been some concert of action to fix the prices on that meat and on those eggs. Could not authority be given to prevent that sort of concert of action in the matter of rents ?

Mr. MacCHESNEY. Let me point out why there could not be. As a farmer, for instance, I have a lot of chickens, a thousand chickens on my farm, Rhode Island reds all laying. I do not have to sell the eggs from those chickens to-day or to-morrow. I can put those eggs in cold storage if I want to and wait until the price is right. When I sell those eggs I can sell them at a price higher than that which prevailed at the time they went into the cold storage warehouse.

Representative BLANTON. There never has been a farmer put eggs in a cold storage warehouse yet. He has sold them to some one else who does that.

Mr. MacCHESNEY. The farmer does not do it, that is true. The farmers are getting together as they should in cooperative movements all over the country. The farmer does not get very far in these days if he depends upon his farm products for his living. I am trying to point out that he does not lose the value of that egg because it is not immediately sold, but the owner who attempted to apply that principle to the real estate business would not get very far; he would be bankrupt and ruined, and why? Because an egg could be held in cold storage warehouse for one month or twelve months.

Senator COPELAND. What are you going to say about milk?

Mr. MacCHESNEY. But a house, if it is vacant one month, loses a month's rent for its owner. If a house is vacant a year, the owner of that house loses a year's rent. Therefore the real estate men could not get together and agree to hold out of the market enough houses

to raise the rents the way they do in the egg market, the butter market, and so forth, because they would not get any rent at all.

Senator COPELAND. You can apply it to eggs and butter, but not to milk.

Mr. MACCHESNEY. No. For instance, you are going to have a distinguished colleague in the Senate of the United States after March 4, the Hon. Charles Dineen, of Illinois, who defended the milk producers' association of Illinois because they got together and agreed to ship only so much milk to the city of Chicago. It was attempted to indict them, but they were acquitted of having been guilty of any crime. The price of milk had been put down by the buyers of milk to such a point that it did not pay the farmers for the feed they had to buy for the cow, let alone anything for their labor or for the question of investment, and they simply destroyed the milk, which seems a terrible thing to do with babies suffering for lack of milk in the city. But those conditions have to be worked out somehow to meet a bad condition without compelling the farmer to work for nothing, and there must be a middle ground.

Senator Jones of Washington. I was told of a situation in the District where the manager of an apartment house said that about half of his apartments were vacant. He prefers to have it so, because the prices he obtains from the apartments which are occupied give him a reasonable return on the investment. He said, “I have to make no repairs in the vacant apartments and after awhile I will rent those other apartments and in that way I save making repairs as frequently as I otherwise would have to make them." In other words, he seems to prefer having half of his apartments vacant at a time under the conditions that exist here now.

Mr. MacCHESNEY. He was applying to himself the principle of Senator JONES of Washington. Yes.

Mr. Mac CHESNEY. I never heard of a man who did that, but I do not question that the particular one might do it, but you could not get Mr. A to hold his building vacant in order to raise the price of the building that Mr. B has for rent. That would only be a possible system in a large apartment building with a large number of apartments where the man could average his income. It would not be applicable to the ordinary buildings.

I would be very glad to give all the time the committee may wish to hear from me, but I do not like to trespass upon the time which has been allotted to the real-estate men here. However, I wonder if I may first make a statement with reference to the bill, because I do want to give the committee the benefit of such reflection as I have been able to give it.

The bill attempts to declare that a permanent condition exists in the city of Washington. I call your attention to the fact that so far as this legislation has been sustained, either in New York or here, it has been upon the emergency basis, and that many things are justifiable in a national emergency that are not justifiable as a permanent plan. Undoubtedly the conditions in Washington were very acute, very unusual, and necessitated some sort of action. Whether the particular action taken was wise or not we can leave to you to determine. We do not pretend to pass on local conditions, but we do say the principle of rental control of property is unsound in and of

the eggs.

itself. The extreme limit of any rent control anywhere should be the control by the Government of those cases which are found affirmatively to be unconscionable and excessive, and should never attempt to fix the rate itself. In other words, in the rate-making case, with reference to railroad rates and all that sort of thing, when a rate is fixed it can only be set aside when it is held to be confiscatory by the court. So we would say that the extreme limit to which you should go in rent control would be that a rent commission should not attempt to fix what a fair rate is, but should only attempt to restrain the application of an excessive and unconscionable rent, parallel to the power of a court to set aside a fixed rate.

But even that has an uneconomic feature to it, and that is that the control of private property drives capital out. There is no doubt about that. You attempt here to set up conditions which attempt to place it within the police power by stating that they are clothed with the public interest. That langugage occurs in some of the decisions of the Supreme Court of the United States. It has generally been held that property which is clothed with the public interest is property which is dependent upon franchise which has a natural monopoly or which receives more than its share of favors from the Government. That can not fairly be said of real estate. I do not know what the situation is here, but in my State real estate which represents about 20 per cent of the wealth pays 80 per cent of all the taxes. It is already bearing more than its share of public burdens, and it receives less in proportion than almost any other business does from governmental favor. So that unless you say that anything is clothed with the public interest, regardless of the facts, I hardly see how you can get any power with reference to an individual building in the city of Washington upon real estate owned and paid for by the owner and which does not ask for public consideration.

Senator COPELAND. If you are right about that, how is it we can regulate innkeepers ?

Mr. MacCHESNEY. The innkeeper proposition goes back to the middle ages, Senator. In the first place, an innkeeper was always licensed, and he was generally a man who was just short of a pirate in the old days, and some of us think when we come to Washington that some of them are still alive.

Senator COPELAND. That is the way some feel with reference to the landlords here, too.

Mr. MacCHESNEY. The fact of the case is that legislation, from the time of the middle ages in England, has always recognized the innkeeper as being in a special class by himself. He had to have a license to do business. That was intended to protect the traveler against being robbed, actually having his purse and baggage taken, in the old days. There is a long line of cases that has distinguished between a hotel and inn and all other classes of control. They have regulated the innkeeper not as a property, but as a service, if you please. I think I could show you that.

Senator COPELAND. Is that true of the baker and the miller, too!

Mr. MACCHESNEY. Do you refer now to the New York case? I remember Mr. Roosevelt's restrictions upon the Supreme Court in the baker case very well. I had a good deal of sympathy with some of the things he said. There is a difference, however, baker is sending his products into the public market for sale, whereas


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