In addition, payments under this provision would be made only to such otherwise eligible families and individuals for whom no public housing is available. There would be inspections by public authorities to ascertain that the units being occupied by the assisted families meet prescribed standards.

Clearance and redevelopment of urban renewal sites benefit the community as a whole. However, it frequently imposes a hardship on displaced families by requiring them to pay a higher proportion of their income for shelter cost. While such families benefit by the move from substandard to standard accommodations, the very limited income of the families involved make such adjustments burdensome, especially in the first few years as new family expenditure patterns must be developed. It is a legitimate cost of urban renewal to assist these people to accommodate themselves to their greater housing costs. Further, it will make their relocation in compliance with section 105 (c) of the Federal urban renewal law easier to accomplish and more meaningful in terms of the human problems involved.

In fiscal 1963, almost 20,000 families were displaced from urban renewal sites and an estimated 5,000 from public housing sites. The latter figure should remain fairly stable, but urban renewal displacement will gradually rise. There are now approximately 100,000 families scheduled to be displaced from urban renewal projects that are in the execution stage.

Many of the families to be displaced are of low and moderate income and have several children. A sample survey of displacees in 68 urban renewal projects indicated that two-thirds of the families were of 3 or more persons, including almost 30 percent that were of 5 or more persons. Dwelling units with 2, 3, and 4 bedrooms will be required by many of these families and standard units of the required size generally command rents that force the relocated families of moderate income to increase their housing expenditures.

It is estimated that from 25 to 30 percent of the families displaced by urban renewal will be offered public housing by virtue of low incomes and the availability of public housing in adequate volume and size distribution in the areas where the displacement occurs. The remainder will have to seek higher cost housing on the private market.

A recent survey of 789 families relocated to private housing from urban renewal projects in nine cities provided significant data on the economic costs for the families involved. (The nine cities were Augusta, Ga.; Wilkes-Barre, Pa.; New Haven, Conn.; Louisville, Ky.; Baltimore, Md.; Norfolk, Va.; Madison, Wis. St. Louis, Mo.; and New York City.) The median income for the families in this sample was $3,264 per year, or $272 per month. The median rental paid before relocation was $54 per month for a rent-to-income ratio of 19.7 percent. The median rental paid after relocation was $65 for a rent-to-income ratio of 23.7 percent. The following table summarizes the changes in rent-to-income ratio for all of the families involved:

Change in rent-to-income ratio as a result of relocation in private housing

There were variations among the different cities both in incomes and rents. Thus, in Baltimore, the median income was $260 per month, about the same as for all cities combined, and the median rent changed from $61 before relocation to $73 after relocation, or from 23 percent to 29 percent of income. In Louisville, with the lowest median monthly income among the nine cities ($160) the median rent before relocation was $44, equal to 28 percent of income before relocation, and $49, equal to 31 percent of income after relocation.

Rent-to-income ratios generally are increased as a result of relocation, as is substantiated by the available records on gross rents (including utility costs) paid before and after relocation by the 789 families displaced from urban

renewal project sites in nine cities. Increases in rent-to-income ratios of more than 5 percentage points were experienced by 43 percent of the relocated families.

In addition to showing that a sizeable number of relocated families have generally had to pay an increased percentage of income for rent, the data also showed a pattern of relatively high rent-to-income ratios after relocation. Fifteen percent of all relocated families in the nine cities (including those who experienced decreases and had no changes in rent-to-income ratios), had to pay 40 percent or more of their reported income for rent after relocation. The majority of all the families in the nine cities (over 50 percent) had rental payments equal to 20 to 39 percent of income after relocation.

Furthermore, these high rent-to-income ratios often arose because of substantial increases in required rent payments. Thus, 19 percent of the relocatees in all nine cities had to pay rent increases which absorbed an additional 10 percent or more of their income. Another 24 percent had to pay rent increases equal to 5 to 9 percent of income.

These increases in rent-to-income ratios are economic burdens placed upon families who are involuntarily displaced by urban renewal projects designed to benefit the community as a whole. As a matter of equity, urban renewal funds should be provided for rent supplements for a limited period, to help the displaced families adjust to the increased economic burden that has been thrust upon them. The same would hold true under the public housing program for those families that are displaced from public housing sites.

It is expected that by the end of the 2-year period, during which monthly payments are made to these displaced individuals and families, several things would have occurred. There should be a sizeable increase in the supply of standard low-income and medium-income housing. Many of the families involved will have increased their incomes and thereby augmented their rentpaying ability. And, finally, the payments for 2 years will provide help during a transitional period during which families can make an adjustment, with a minimum of hardship, to the new scale for housing expenditures. Rehabilitation assistance to elderly homeowners in urban renewal areas

Elderly homeowners are among those who are affected the most by urban renewal. Many of these elderly persons and families have lived in their homes for years and have either paid off their mortgages or have reduced them to very low balances. They are living on pensions or small incomes from savings and are both reluctant to leave their homes and unable to finance the improvements required by the urban renewal plan to bring the properties up to standard. Often it is impossible for them to buy other homes with the proceeds they receive from the sale of their homes in the urban renewal area.

In order to prevent their displacement and to help them bring their property up to the requirements of the urban renewal plan, the bill would add provisions to the FHA home improvement loan insurance law (authorized in the 1961 Housing Act).

Under the new provisions, elderly owner-occupants of one- and two-family homes in urban renewal areas could obtain FHA-insured home improvement loans bearing below-market-interest rates. Repayment of the loans could be deferred until the death of the borrower and his spouse, or until the sale or other transfer of the property. Presently the interest rate could be as low as 3% percent per annum. The amount of the loan could be up to $10,000 per dwelling unit, but where repayment is deferred the amount of a loan could not exceed 75 percent of the sum of the estimated cost of improvement plus the value of the property before improvement. The 75-percent limitation on a loan providing for deferred payment would provide a margin of safety, since the value of the property would be expected to decline during the deferral period while the outstanding balance of the loan would remain constant until the death of the elderly borrower and his spouse.

The low-interest-rate loans would be secured in such manner as may be required by the Federal Housing Commissioner and comply with such other terms, conditions, and restrictions as the Commissioner may require. The loan would be made only if the property to be improved, after improvement with the proceeds of the loan, will meet the standards prescribed by the urban renewal plan. The Commissioner would give consideration to basic underwriting questions such as the life expectancy of the borrower and his spouse, as compared with the estimated anticipated economic life of the property.

A below-market-interest loan would be available only if the borrower is 62 years of age or over, and qualifies as a low- or moderate-income person in accordance with regulations prescribed by the Commissioner. It is contemplated that, at the time the loan is made, the income of the borrower could not exceed the income limit established by the FHA for admission to any FHA section 221(d) (3) below-market rental housing in the locality.

If the borrower (and the surviving spouse) should die or transfer title to the property, any outstanding balance of the loan would become due and payable immediately.

In addition to making the below-market-interest rate home improvement loans available, the regular mortgage insurance provisions of the section 220 urban renewal housing program would be changed to afford similar advantages to elderly persons in cases of refinancing to cover existing mortgage debt and rehabilitation costs. The amount of the new mortgage could not exceed $10,000 per dwelling unit and would be subject to the same limitations as the loans I have described. An administrative regulation would be adopted prohibiting these liberal financing terms from being used to refinance an existing mortgage without substantial improvement of the property with the proceeds of the mortgage loan.

Significantly lower monthly payments would be possible for financing rehabilitation under the proposed deferred principal repayment provisions at the 3%-percent rate of interest. For example, the monthly payment on a $5,000 rehabilitation loan at 3% percent per annum with the principal payment deferred would be $14.06. This is $21.70 less than under the most liberal financing now available. Payments at 3% percent interest without the deferment of principal would be $7.06 per month less than the lowest payments available under existing programs.

The following table shows the lower monthly payments that would result under the proposed program where the loans are in amounts of $3,000, $5,000, or $10,000. Monthly payment at varying interest rates1

1 Assumes 20-year repayment period and excludes any fees charged to borrower. Payment 1st year. Each year monthly payments would decline slightly as mortgage insurance premium declines.

The FHA insurance premium on the loans could be waived and the loan would be purchased by FNMA under its special assistance program. It is expected that FNMA will charge a fee made necessary by the servicing of the loans by private institutions.

It is estimated that there are presently around 6,000 elderly homeowners eligible for the low-interest-rate loans which would be authorized by the bill. As urban renewal activities increase, several thousand elderly homeowners per year will become eligible for such loans.

Land development

TITLE II-MORTGAGE INSURANCE PROGRAMS

The bill would add a new title X to the National Housing Act which would authorize FHA mortgage insurance to assist in financing the cost of land development for (1) residential and related uses in new subdivisions and (2) entirely new communities.

Under this new program, FHA-insured mortgage loans could be made to developers and builders to permit them to acquire land and install the streets, water and sewer plants and lines, and other varied improvements that are necessary to prepare that land for construction of the residential and related structures that are found in well-planned subdivisions. The development of complete communities could also be assisted through FHA-insured loans for development of the building sites, water and sewer facilities, and some required community structures. Such communities would provide a range of housing types, commercial. services, and employment opportunities.

Mortgages could be insured only in the case of projects which represent an acceptable risk. These mortgages would have a maturity and contain repayment provisions satisfactory to the Federal Housing Commissioner, could bear interest up to 6 percent, exclusive of reasonable premiums, charges, and fees, and would cover the costs of acquiring land and developing land up to specified maximum limits and percentages.

This basic authorization for FHA insurance would be supplemented by provisions of the bill relating to the availability of FNMA special assistance for new community mortgages, and FNMA purchase of land development mortgages in its secondary market operations, as well as by provisions dealing with the availability of urban planning grants and public facilities loans in connection with new communities.

Need for the land development program

During the next 10 years, 15 to 20 million families will need new homes. It will be imperative to assure that sites are available for these homes at reasonable prices and in communities which avoid the wasteful sprawl and disorganization of much recent urban development.

One major problem in meeting this demand is that of land and land development costs. Both the builder and the home buyer are paying more and more for land. The average market price of the building lot for FHA-insured houses has risen from $1,035 in 1950 to $2,715 in 1962. Land and site improvement costs, formerly only 10 to 12 percent of a new house, now approach 20 percent of total development cost. A continuation of this trend will by itself price a substantial number of families out of the new home market.

Equally important, however, is the need to assure that urban growth does not merely follow the all too common pattern of development which provides neither the variety and convenience of the city nor the open space associated with the country. Very often, suburban home buyers have found their new neighborhoods to be lacking in good design and in the public facilities which can later be provided only at the cost of drastic increases in local tax rates. Suburban development has frequently failed to take advantage of the economies to be realized through the planned and coordinated use of areawide sewer and water systems, park systems, and other public facilities. Moreover, wasteful land-use patterns have developed which make difficult the adjustments that are required as population pressures continues to grow, with resulting demands for higher density uses. These patterns of development also in many cases tend to separate people from employment opportunities in ways that not only reduce their own areas of choice but also strain transportation facilities and seriously restrict the tax base of the communities in which they live.

Urban areas will continue to grow, and at an increasing rate. What is needed are means of affording greater economies and encouraging higher quality in such growth.

The new land development program would assist in meeting this need.

Those living in subdivisions developed with assistance under this program would benefit both from decreased site development costs and higher standards in subdivision design, area planning, and the provision of community facilities. Those living in new communities could receive even greater benefits. Public facilities for such communities could be planned and built on a broader scale, with resulting additional savings. There could also be greater opportunities for providing a balanced range of types and prices of housing, for minimizing travel time and costs through the coordinated location of residential, commercial, and industrial sites, and for planning the various amenties that will create convenient and satisfying places to live and work.

Conditions for all land development

Proposals for FHA mortgage insurance to assist in land development have been advanced a number of times in recent years. In this sense our proposals

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are not new, and we have in fact drawn substantially upon prior suggestions. We have, however, also sought to make a fresh and intensive study of the various basic problems which are necessarily involved in a program to assist in the development of land to meet the needs of our growing urban population. Our program is a broad one because we are convinced that only such a program can truly meet these needs.

In formulating this program, we have had certain objectives which we believe should govern any form of land development. These include assurances that land development will be consistent with overall, comprehensively planned development of the area; adequate planning of the land development itself; the provision of adequate water and sewerage systems; assurances that land, when acquired, will not be held unnecessary but develop and promptly made available for use; and the creation of specific safeguards against possibilities of abuse. All of these matters are covered in the bill, and the provisions in question apply to any form of land development, whether the land is being developed to provide subdivision sites or sites for new communities.

Thus, under the bill, land development must be consistent with a comprehensive plan, or with comprehensive planning, for the area in which the land is situated. The bill also requires that the development be in accordance with a plan appropriately directed, as the case may be, to the elements of a well-planned subdivision or new community and that it be carried on with a view to assuring that the land will be made available for use within the shortest reasonable period consistent with sound and economic growth or urban development. Further, the bill deals specifically with the matter of water and sewerage systems by requiring not only that these be adequate but that there be public systems wherever such systems are feasible. It also contains a variety of different kinds of safeguards against abuses. They range, for example, from cost certification to a requirement that any nonpublic water and sewerage system be subject to adequate regulation. Cost certification provisions would permit periodic checks during development to assure that the outstanding loan amount, based on estimated costs, is limited according to the permissible percentage of actual costs incurred during development and is reduced as parcels are completed and sold or otherwise released from the lien of the mortgage.

Special conditions for new communities

Under the bill, mortgages could be insured to assist in financing the various kinds of preliminary site work involved in developing land on a broad scale for complete new communities. These mortgages could not exceed the lesser of (1) 75 percent of the value of the security on completion of land development; (2) the sum of 75 percent of the value of the land before development and 75 percent of the cost of developing the land; or (3) $50, million per new community. The percentage limits would be modified in the case of water and sewer plants and major transmission lines, where these are not provided by a public body. For such facilities, the maximum would be the sum of 75 percent of the estimated value of the land before development and 90 percent of the cost of providing such lines and plants.

A new community is distinguished from even a large subdivision partly by size and location. It should, normally, be planned for a population of 25,000 or more, and some are now being planned for populations of 100,000 or more. It need not be established on wholly undeveloped land, and may even be built around the nucleus of a small existing community, but it requires large tracts of land and, unlike the usual subdivision, will as a practical matter usually be found some distance beyond the nearest built-up area. More basically, however, the new community differs from the usual subdivision by reason of the fact that it is planned so as to provide, within its limits, more of the amenities and services required for daily living.

Many advantages can be derived from developments of this kind, where they are feasible and consistent with the overall planned development of an area. Greater size, for example, permits the provision of facilities on a scale more reasonably assuring long-term economies. Similarly, because such a community breaks away from existing neighborhoods and employs relatively low-priced land, there are greater opportunities for establishing sound and better balanced landuse patterns, including the provision of adequate open space as well as land for higher density residential, commercial, and industrial use. Finally, it is possible in such communities to make available a full range of housing types and prices including, particularly, housing for low-income families, so as to serve a wide spectrum of the population.