are and will be in need of public housing by reason of growing population and a rapidly developing automated industry.

Let me endorse a bill that will reassure the aging as to the security of their housing both in the units of a public complex as well as in rehabilitated housing to which they retain title.

Let me second the efforts here expressed to assist small businesses and displaced families and individuals through rent supplements and financial grants.

Let me underscore the importance of anticipating housing needs of this decade and those in the latter part of this century through the medium of planned communities adjacent to metropolitan areas, through preplanned facilities and services for these developing communities rather than the uncertain, unrelated and unplanned development so often resulting in confusion and inadequacy.

Finally, I would observe that two items are not sufficiently covered in the proposal before us and I recommend your attention to these items. I would list as two important considerations:

(1) Stronger support of code enforcement in cities which propose to share in this program.

(2) Closer study and more effective provision for middleincome and lower middle-income families.

Failure to close in on those who do not enforce the requirements in local building codes only serves to perpetuate the critical conditions regarding adequate housing. It protects those who would prosper by reason of the hardship of the poor, and I don't think any of us ever wish to be identified with this group of profiteers. Obviously, it is the undoing of the very good we hope to accomplish through additional housing and through slum clearance since it tolerates the factors which will produce a new slum in a short period of time. The good we do here is minimized by the open-ended opportunity enjoyed by moneyminded individuals who profit by reason of this neglect. There is no expediency, civic, political, or personal, which warrants the continuation of this abuse.

In other paragraphs, the proposal before us gives expression to the fact that certain financial limitations are not realistic in view of today's economic situation. This proposal suggesting a revision of these limitations upward is in order. I would like to close with the suggestion that a similar revision upward be considered for income limits of people who are eligible for admission to public housing. I am sure that there has been significant change through the years of the life of public housing, but I dare say there has not been sufficient weight given to the housing privation experienced by many families whose breadwinner brings home an average of $100 a week. In cities where the income is this high for those I would truly call lower middleincome wage earners, the housing supply is critically below average for this particular group. I, therefore, encourage such range and flexibility in application as would meet the needs of the wage earner with this amount of income, in proportion to the size of his family.

In closing, may I express to you, the gentlemen of this committee, my gratitude for this opportunity to present my views on the matter of this Housing and Community Development Act of 1964.

Senator MUSKIE. Thank you, Monsignor Gallagher, for your forthright statement. We do value your views and are delighted to have them on the record.

Monsignor GALLAGHER. Thank you, sir.

Senator MUSKIE. Mr. John Haas, executive vice president of the General Improvement Contractors Association. We welcome you to the committee this morning.

Mr. HAAS. Thank you, Senator.

STATEMENT OF JOHN H. HAAS, EXECUTIVE VICE PRESIDENT, GENERAL IMPROVEMENT CONTRACTORS ASSOCIATION

Mr. HAAS. Mr. Chairman, I have brought along a somewhat detailed statement for the record and may I say not only for the record but if possible also for the closer consideration of the members and the staff of the subcommittee. I am not going to read it because I think that it might speak for itself if somebody takes the trouble to go through it. Senator MUSKIE. Thank you very much. It would be helpful to have it that way. It will be printed in full in the record, and I am sure will get the close attention of the committee.

Mr. HAAS. I would like to make a few comments on the highlights of this report.

I want to point out that our group, which I might characterize as rehabilitation contractors or improvement contractors, has only one major concern that is partly reflected in this legislation, and that is the problems of the existing housing inventory. It is somewhat odd that the bills that have been presented in this package, as well as most of the testimony that I have been able to follow in both committees of Congress, have not paid too much attention to the problems of the existing inventory, although I think that this is probably the only major resource of housing that we have available today and that we can deal with. It is not the only resource but it is the only major resource, and because of that, it is too much neglected.

When I speak of resource, I am talking of approximately 50 million homes, give and take a few millions, and it is an established fact that one-fourth of that inventory is defective. Let us say, substandard or defective. If such a percentage, 25 percent, of any other existing item-for instance, military equipment, or automobiles, or food processing machinery-would be defective, this would be equal to a national disaster. But in housing there is not too much attention paid to that. To substantiate it, take for instance, S. 2468. If you look at the bill, you notice it consists of 59 individual items. Only 5 out of these 59 items have a direct bearing on problems of the existing inventory. Even those five items, if you pardon the expression, are not too hot. I will try to point this out briefly.

First of all, most of these five provisions deal with liberalizations or revisions in urban renewal areas. Now, that is fine. Urban renewal is very necessary. It is essential to progress, to health, to decent housing. But we must not forget that the decay of housing isn't restricted to urban renewal areas. We find it everywhere, in every city, town, county, village. Wherever you look, there is decay. How does urban renewal take care of that? I will answer that with a very sad statistic.

Rehabilitation of defective housing is accomplished, according to existing law, primarily by two sections of the Housing Act, 220 and 221. If you look through the reports that are currently and steadily

issued by our housing agencies, you will find, in the latest HHFA report, that there are only 125 communities which have projects consisting of 220 and 221 activities. That is a very small volume. It doesn't mean that all these 125 communities will actually do something about rehabilitation of defective inventory because some of these projects may only include new construction. This means roughly that the urban renewal projects in this country may take care of perhaps three percent or less of the defective inventory.

Also, we find in these five provisions benefits for the elderly. I think nothing is more important and more needed than that. Unfortunately, even those provisions for the elderly are impractical. They will not work. The reason, as I have pointed out somewhat more in detail in my statement, is primarily that they are subject to current requirements of FHA mortgage credit eligibility, and these provisions or regulations, as they now exist, will throw out three out of four applicants who would like to avail themselves of these benefits.

Also, obviously when you read and hear about benefits for the elderly you begin to wonder what about those that have the misfortune to be 61 or 60 or 55 and are in the same need for assistance as those over 62? Now, with one small exception, the present package before you does not present any help or any hope for those under 62. In certain cases of potential beneficiaries, this is very deplorable and I think it should be changed.

Now, let me briefly refer to those five sections in S. 2468.

There is section 102 that deals with the Housing Act, section 220 (h) improvement loans in urban renewal areas. I don't know whether you know this, but in the last two years the Federal Housing Administration has insured four loans under this section-four. The provision that is now trying to improve that section 220 (h), introduces one very important element in theory, namely, it extends it to single individuals. That is fine. But at the same time, it again restricts it to elderly, which means, again, if you are younger you are out of luck. There again, I point out the trouble that applicants will have with FHA eligibility rules, even if that section would become alive, which is rather doubtful.

Section 205 of this bill deals with another ill-conceived failure of the Housing Act-section 203 (k), that is. In section 203 (k), we have been a little luckier, because in the last 2 years FHA did insure 1,200 cases; 1,200 cases for an improvement loan program with nationwide significance is truly ridiculous. Yet, the administration has labored, and the industry has labored, on all sorts of attempts to make this section 203(k) workable; they have failed and they will fail as long as this provision is on the books.

There is, of course, the highly touted change from "economic soundness" to "acceptable risk." One of the preceding witnesses has used the word or the term "snow job," and I can't help wondering if this is not the same type of suggestion, because acceptable risk in FHA language widens the acceptability of locations-nothing else. It does not change the complex procedure of 203 (k), or the regulatory restrictions.

There has been very little difficulty in the past years to get locations that are acceptable to FHA. Because, in a submarginal loaction you won't find an applicant who is eligible for a $10,000 loan on top of

his existing encumbrances. So, the practicality of this "acceptable risk" changeover is very doubtful.

I go next to section 804 which is a good section. It may make improvement under section 220 more workable than it is now.

Section 805 again introduces that wonderful idea that a single individual can be in as much trouble as a whole family and therefore should be eligible for assistance. But again why must he be 62 or over? There are many displaced under 62 who are hardship cases because of displacement through action of Government. Yet, if they happen to be single, which includes divorcees without children or bachelors who have grown old without getting married, they are out of luck. They are not eligible for the benefits of section 221 although they have a certificate of eligibility. I think this is rather ridiculous. But it is on the books. That is the law as it stands now.

Now I come to another section which I think is quite important, as was mentioned before by Monsignor Gallagher. That is section 404. It introduces two very important facets of public housing. I say it "introduces"; it gives them more weight; it gives them significance and it takes them out of the realm of experimental housing or demonstration projects and tries to incorporate it as a regular part of the public housing program. I am not talking about public housing as a matter of principle because this is none of our business. I would certainly be afraid to enter the big controversy about the pros or cons. But I would say this: For us who are looking at the inventory, these two provisions are extremely important for two reasons. The first section deals with rental subsidy. Rental subsidy experiments have been very successful, especially one of them here in Washington in which I had the fortune of playing a small part. They have been successful all over the country. I think this should be made a generally approved and authorized part of the public housing program.

However, there should be some restrictions introduced into this feature. I am not going to quote the details now. You will find them in our statement.

The second part has to do with scattered site public housing. This is even more controversial than public housing per se, and for good reasons. The program that was originally suggested for scattered site public housing was not sound enough. It was not healthy enough. Some elements should be introduced there which, again, are in our statement, that would make the scattered site public housing a very useful tool, not only for housing families which need that sort of assistance, but also at the same time as a method to improve the existing inventory.

Now, we also have found some very interesting and good ideas in a bill which we hope will also receive consideration by this committee, and that is S. 2031, Senator Clark's bill, which he introduced last August. We have found very interesting provisions in there which are really quite helpful and show a good and sound concern for the inventory. We would very much like to see most of these provisions carried out without really any substantial changes. They are well thought through. They are constructive, and they will help the inventory.

Finally, we also have in our statement submitted a number of recommendations. These recommendations have been discussed through

out the industry, not just by us contractors, and we consider them essential. We consider them essential for a good housing act. Because the housing act, as it exists now, implements one important facet-Government help-and in our era and with our difficulties we cannot very well proceed, in housing at least, without Government help. But the present package as it is before you contain too much Government and not enough help. It is the purpose of our recommendations to at least partly try to remedy this incongruence.

We need certain facets of legislation without which this 25 percent of defective housing is not going to be eliminated or even decreased to any substantial degree.

I would, among these suggestions for improvement, like to single out one, which is not the subject of any of the proposed legislation, but which will come up, I am sure, in the housing act, and that is a change in title I. The change in title I to extend the allowable amount of money to $5,000 and stretch it over a period of 7 years. This is all the more important as the supplemental legislation which was introduced in 1961, 203 (k) and 220 (h) have not been working. It is a consensus of the industry, the industry that is participating in the problems of existing housing, that an extension of title I to $5,000 and 7 years will take away at least half of the problems which we now face in our communities throughout the land, because they will make up for the increases in value, the increases in income, and also the increases in deterioration of the inventory which have taken place in the last few

years.

There is little hope that any other supplemental program or brainchild will come to life that could become a substitute for this improvement loan program of title I. Title I is a good program. It has worked well in spite of FHA. To make it more workable and more useful, it has to be liberalized. This is a very important postulate which has been aired by many organizations throughout the country, and I can only add our own strong recommendation in that direction. This is as much as I can say at this time and if, Senator, you have any questions, I will be glad to answer.

Senator MUSKIE. Thank you very much, Mr. Haas, for your very useful statement. There is a lot of meat in it. I am sure the subcommittee will give it very serious consideration.

Thank you, sir.

Mr. HAAS. Thank you.

(The prepared statement of Mr. Haas follows:)

STATEMENT OF JOHN H. HAAS, EXECUTIVE VICE PRESIDENT, GENERAL IMPROVEMENT

CONTRACTORS ASSOCIATION

Mr. Chairman, members of the committee, my name is John H. Haas; I am a housing consultant and rehabilitation contractor trading as Workshop 221, Inc. in the District of Columbia. I am here today as spokesman for an orgniztion of contractors whose members are engaged in the business of improving the existing housing inventory which is our only major housing resource for millions of moderate and lower income families. This resource and reservoir is deteriorating today at a pace and with an intensity far beyond any other period in the history of this country. This jeopardizes not only the growing demand of a growing population, but it also accelerates the spread of social ills and poverty, especially in our urban areas.

This is not an introduction to a declaration of high-level principles, nor has it anything to do with politics: we are the people who, day in and day out, are called upon to treat the usually pressing problems of existing housing. In doing