We respectfully urge your support of the inclusion of title V of the Housing ct of 1949 with the amendment suggested above in the housing bill your anking and Currency Committee is now considering. We ask that this letter › made a part of the hearing record dealing with this matter.

DEAR SENATOR Capehart: On behalf of the American Planning and Civic Assoation and in accordance with a resolution adopted by the board of directors, would like to express to you our approval of title VII, section 701, on urban anning of S. 2938.

It is our belief that the Housing and Home Finance Administrator, under isting legislation, has already exercised a beneficial stimulus to local planning tivities. As a group of citizens dedicated to the application of sound planning inciples, it is our belief that the provisions for planning in the pending bill ould have a further benefical effect upon planning in small cities and towns well as in metropolitan areas.

We also approve of section 702 which would provide further resumption of ederal aid to assist in advance planning of State and local non-Federal public orks which would maintain a continuing and adequate reserve of planned blic works (exclusive of housing) to permit prompt action when needed.

I would be glad to appear before your committee if you wish to ask me quesons but if this letter is made part of the record, I thought it might save the ne of the committee to put our statement in writing.

My Dear Mr. GARMATZ: The Planning Commission of Baltimore City, has udied with great interest House bill 7839, which we understand is similar to nate bill 2938.

We believe we have now in Baltimore probably one of the best organizations r the development and coordination of public housing, redevelopment, and w enforcement, with the planning commission acting as coordinator, in the untry. We believe that all three of these programs are necessary for a comehensive attack on slums and blight.

In our opinion, this bill is a very carefully worked out program to reenforce the nd of coordination which we have established here in Baltimore, and will make possible to eliminate the slums and blight on the basis of a comprehensive plan neighborhood renewal.

Since we have already gone far in developing a very extensive planning program r a neighborhood renewal, we are happy to know that the essence of this bill is at of neighborhood renewal on a comprehensive planning basis. There is only one reservation this commission has regarding the entire proam, and that is, we question the wisdom of permitting FHA loans, with only 5 percent equity on the part of the owner. It is our opinion that a 10 percent uity would be safer. We highly recommend the passage of this bill, with the ggestion that the equity on FHA loans be 10 percent.

We would like to take this opportunity to congratulate the President and his ousing Advisory Committee, and Mr. Cole and the HHFA for a job well done. Very truly yours,

THOMAS F. HUBBARD, Chairman.

YALE UNIVERSITY, DEPARTMENT OF ECONOMICS, New Haven, Conn., March 1, 1954.

Hon. HOMER CAPEHART,

Senate Office Building,

Washington, D. C.

DEAR SENATOR CAPEHART: In the course of more than 5 years of service as chairman of the Housing Authority of the City of New London, Conn., I have de veloped rather strong convictions with regard to low-rent public housing awi its administration. Those views are largely expressed in the enclosed article. I trust that the comments I make therein will be considered by the Banking and Currency Committee during its study of S. 2938, the Housing Act of 1954. So strongly do I feel on these matters that I am prepared, if the committee desires, to testify at public hearings on the bill.

It is now more than 16 years since Franklin Roosevelt saw "one-third of a Nation ill-housed." In the intervening period huidreds of public housing projects have been constructed under the auspicies of the Federal Government, and State and local governments as well. Nevertheless, public housing programs remain under attacks, not only by the vested interests-realtors, landlords, and private builders but also by persons less intimately affected. In cities large and small during 1952 public housing projects were submitted to general referendums, and in a large number of communities the projects were rejected by clear majorities of the voters. The program of the Federal Government, authorized by the Congress in 1949 to proceed at the rate of 135,000 housing units per year for 6 years was reduced to 35,000 for fiscal 1953--and escaped by a narrow margin being cut to 5,000. It is noteworthy, too, that no responsible official in the new administration mentioned public housing in more than perfunctory terms, either during the campaign or during the administration's first months in power.

The resistance of the building industry and allied services to public housing is easy to understand. But why should groups in the community with no financial stake in residential construction be so opposed? There seem to be several factors, of which three are specially relevant. First, there is a widespread resent ment against paying someone else's rent. The notion of rugged individualism remains a powerful influence on men's convictions, if not on all their actions. Second, there is a prevalent feeling (not totally unfounded) that public projects are being occupied by families who do not belong there, whose incomes are more than adequate to enable them to pay for privately owned quarters. This complaint is related to the first, since the critics profess sympathy for the plight of the poor, but contempt for those who take advantage of a good thing. Third, the fear of socialism continues to attract new recruits for the opposition.

The case in support of public housing has tended to become more elegant with the passage of time. In their essence the arguments are substantially these. First, the residential construction industry is typified by small firms, still utiliz ing handicraft techniques; housing, as a result, is characterized by high costs per unit of output and high prices. Second, the persisting inequality in the distribu tion of income and wealth compels some families to forego adequate shelter. Their incomes are not sufficiently high to enable them to buy housing of a good quality. These low-income families must, therefore, accept accommodations in substandard dwellings, that is, in the least desirable. Since the rents of these buildings are relatively low, the owners have little incentive to maintain them. The buildings deteriorate gradually, developing into the blighted areas and slums which deface our great urban areas. Third, the community must thus provide

I am indebted to William J. McKinstry and James Tobin of Yale University for their criticisms and suggestions. They are not, of course, responsible for any errors in my reasoning, nor do they necessarily agree with my policy recommendations.

andard housing for those in need or it must suffer the costs of the poor health, venile delinquency, social tensions, and so on, which flourish in the slums. ublic housing is essentially an effort to increase the welfare of some persons in ociety, without at the same time injuring the welfare of others. In this fashion e general well-being is raised.

Even ardent advocates of public housing concede that the present program onflicts with individual freedom of choice-itself an important aspect of maxium welfare. Public housing amounts to a subsidy to certain persons in the -rm of goods rather than money. It reflects a general feeling in the community at individuals in need of better housing could not, even if they had the requisite come, be relied upon to buy it. Such housing is provided for them by society, though this represents a restriction on the freedom of choice of the families ho accept subsidies-a limitation on their freedom to spend their incomes as ey see fit.

This intrusion upon freedom of choice is not, of course, without precedent. ompulsory education is a notable case in point. But, as I shall point out, public -using programs may result in a more serious interference with freedom of oice than has been recognized to date by students of the housing problem. here is evidence, moreover, that public housing programs may be inconsistent th the long-run interest of our society in a growing output of goods and services. These assertions are not idly made. They are the outgrowth of careful obsertion and reflection during more than 4 years of service as the unpaid chairman ormerly vice chairman) of the Housing Authority of the city of New London, nn. Much of the discussion which follows is based on that experience. But versations with other housing officials, in and out of Connecticut, have inated to me that the problems I have raised are national, not local, in scope. My argument revolves around these two points: first, the market for shelter s been divided in half, necessitating an elaborate and cumbersome system of ioning in one segment of the market; and second, the administration of the ioning system has adversely affected incentives to work and has contributed to eduction in the size of the labor force.

II

The housing market is at present divided into two reasonably distinct parts. the one hand, private landlords and builders are providing modern facilities families earning roughly $6,000 or more per year (though the minimum ire varies in different parts of the country). On the other hand, federally sidized projects are serving families earning an average of $3,500 per year or 3. In a few States, including Connecticut, there are State-aided programs igned to accommodate families with incomes too low to enable them to purse private accommodations, but too high to qualify them for admission into low-rental public projects.

o assure that rentals are kept within the ability of tenants to pay, it is essary for public housing officials to establish a strict system of price control. tals in federally subsidized projects currently average around $35 per month 4 rooms (not including utilities); in the self-supporting moderate-rental jects in Connecticut they average $52 per month; and in equivalent private sing, despite wide variations from city to city, they average $90 to $100 per th. Enforcement of the established prices requires that the local housing hority delineate clearly what income groups qualify to enter the projects. reover, a system of rationing must be devised to apportion the available apartits among the eligible applicants.

he rules established by housing officials administering the moderate rental gram in Connecticut are illustrations of the problem. Eligible families are ned as those with incomes not in excess of $3.500 per year, plus an allowance 300 per year for each dependent. This means that a man and his wife, with ildren, may be admitted to a public project if their combined gross income 3 not exceed $3,500 plus $600, or $4,100. The applicant family must, furthere, have been resident in Connecticut for at least 2 years immediately before application. In most cities the local housing authorities have imposed an itional rule that the tenants must have been residents of the city for 1 or 2 rs (as the case may be) immediately preceding their admission to occupancy. statutes provide that veterans of World War II must receive priority. ally, there is a strong possibility that the Connecticut law will be amended exclude "subversives" (as defined by the Attorney General of the United tes) from all State-aided projects, just as they are already excluded from rally subsidized developments.

Although these broad restrictions help to reduce the number of potentis occupants for a given housing project, there has been in most cities a persistent excess of applicants over accommodations. Each local authority has been compelled to elaborate its rationing system. None is more intricate than in my own authority.

Initially, there is a provision that so long as the number of applicants exceeds the number of vacancies, citizens of New London shall be given preference All applicants are then classified according to the urgency of their need, to priority being given to families who show written proof that they are under eviction notice from their present landlords. There are further classifications for families living under extreme hardship-doubled up with another family, in other difficult conditions-each classification carrying a consecutively lower priority. Finally, a serious attempt is made to deal with each application accord ing to the length of time it has been on file.

A lifelong resident of New London who was a veteran of World War II, whe is under notice of eviction, and who has been awaiting admission for, say, 1 year, is still not assured of a place in the project. His credit record is invest gated as a precaution against delinquency in rental payments. A paid employe of the authority will inspect the applicant's present quarters to assure that he is admitted he will maintain the authority's property. The applicant mis submit to the authority his income-tax statement of the previous year, as evide that his gross income is within the amount allowable. He must sign a waive permitting the authority to inquire of his employer as to his current earning And he must swear before a notary public that all of the statements on b application form are correct and that he will report immediately any change in his income or family composition. Finally, he must agree to file with th authority at any time, upon demand, a new statement of his income, backed by clear evidence.

This complex arrangement seemingly shuts out any possibility either thi unqualified families will gain admission or that anartments will not be ratione with even-handed justice among those qualified. Yet a variety of administrative decisions are necessary to carry out the rules. Consider some of these questions each of which my authority has had to deal with in recent months.

Are servicemen-of whom there are many in New London-to be admitted (They are not, unless they or their wives were permanent residents in the res past and intend to be in the future.) If a man once lived in New London was compelled by the housing shortage to move to a neighboring town, is eligible if he works here? (Yes, provided he does not live more than 12 mil from New London.) If an employer requires one of our tenants to work or time, are the overtime earnings included in the computation of his allow the income? (Yes, though this is a sore point in cities where there has been m defense-plant activity in recent months.) What income figures shall b demanded of self-employed persons-what their gross receipts were, or wh they reported to the Bureau of Internal Revenue? (This is still unresolved This system of rationing is workable despite the difficult borderline cases constantly crop up. But the system raises some fundamental issues. All frequently the rules compel heads of families to choose between perjury adequate shelter for their wives and children; too often they decide to perme themselves. In enforcing the regulations, local housing commissioners steadily invading the privacy of their tenants. An increasing number of app cants awaiting occupancy are becoming tale bearers against present tens in the (unfounded) hope that their own applications will be accented m quickly. Though my own authority has been singularly free of political pre sures exerted in the interests of a favored few, there are many evidences the housing commissioners elsewhere have not been so fortunate.

To assure that public housing developments are made available to res within a stated income group, it has been necessary to establish rules for e tinued occupancy. Typically, the regulations provide that a family may tain residence in a project as long as its gross income is no more than 20 perc above the income allowed at entrance. A family of 4. for instance, could admitted with an income of $1,100 per year. It could remain in occupa as long as its income did not exceed $4,100 plus 20 percent of $1,100, or a t of $4.920. The continued-occupancy provision is intended, of course, to per gradual accretions to income overtime without requiring the family to withd from the public project.

Under almost any conditions other than steadily rising levels of income, 20 percent increase should be sufficient for the needs of most tenants. W

ncome and employment are steadily rising, however, the increase in earnings vill soon exceed the 20 percent permitted. In 1 of our projects in New London, 27 families out of a total of 142 admitted they were overincome in 1951. There are several reasons for this. First, remobilization has brought an increased lemand for labor, rising wage rates, and substantial overtime work. Second, he tenants of public housing projects are typically between ages 25 and 40, he years during which the earnings of industrial and commercial employees end to rise most rapidly; this tendency is accelerated during a period of expandng employment. Third, it is from this age group that most of the married women in the work force are drawn. During periods of expansion in the conomy the demand for female workers increases, affording women an opporunity to supplement the family earnings.

What happens when a family's income exceeds the maximum allowable for ontinued occupancy? The family may attempt to hide the facts, preferring erjury and the threat of heavy penalties to the loss of its home. This has appened in my own authority more often than I like to admit, but much less requently than my critics insist.

If the family admits that its income is higher than that allowed, it has little hoice but to buy a home. Not only may purchase be less expensive than renting rom a private landlord, but there are few landlords owning desirable facilities ho will accept families with young children. For most ex-tenants of public rojects the purchase of a home has necessitated the assumption of financial mmitments heavier than their current or future prospects of income safely low. Moreover, to the extent that a family is compelled to buy a house, there an important interference with freedom of choice, since a substantial number ! families prefer to rent rather than own property.

Another option is for the wife to withdraw from the labor force, thereby lowerg the family income so that it is within the maximum allowable. This is a irsh alternative, since the combined incomes of husband and wife are generally st sufficient to permit them a small amount of luxury. Slicing the income by half, or even by a third, may reduce the family to a virtual subsistence level. he loss to society may be greater. On the assumption that the Nation as a hole is better off as increasing amounts of goods and services are produced, ithdrawals from the labor force when demand for all available skills is high e, of course, inconsistent with maximum welfare. Moreover, the elements of mpulsion that are involved represent a further restriction on freedom of oice. (It must be admitted that free choice and increasing output may come to conflict with one another if a worker freely chooses to work less.) The same reasoning applies if a man refuses promotions, overtime work, and tter job opportunities rather than vacate his apartment in a public housing oject. While there is no way to determine how widespread this sort of thing hard experience tells me that it happens. To the extent that it does, it borders tragedy for the man himself and reduces the well-being of the Nation as a hole.

I am not prepared to argue that these social costs of the rationing system offset whole or even in large part the benefits of public housing. Such a conclusion volves, among other things, making comparisons that are not valid. I submit, wever, that the disadvantages of rationing housing units in public projects are fficiently great to warrant some serious rethinking about our methods for oviding high-quality housing for those who are unable to buy it. The incompatibility of the housing laws with prevailing conditions in the onomy is understandable, simply because the laws were drafted during a riod of general economic depression. When incomes are low and unemployent widespread, it is not vital that incentives to work be left unimpaired, or that re be exercised to remove impediments that might prevent a steady expansion the size of the labor force. At such a time there is certainly no fear that comes will rise so rapidly as to strain the system whereby the available homes e rationed. In short, the most efficient use of productive resources is of only hsidiary importance in a period when the fundamental need is to raise the vel of national income and employment. Public housing can, indeed, be a for contributor to a general business revival. What better way is there than blic housing, it was argued in the thirties, to provide better homes at low te and. concurrently, to "prime the numn"? There is no longer an emergency like that of the thirties. Quite the conrv. there is a possiblity that the American economy is faced with a conuing threat of inflation, to last as long as the international situation remains Even if inflationary tendencies moderate or come to an end in the sysn as a whole, the outlook for housing, in the near future favors a large-scale

se.