FNMA-The Federal National Mortgage Association has proved to be essential in launching new programs of mortgage insurance, in meeting temporary and local area mortgage shortages, in financing new types of housing and new types of risk, and in veterans housing programs. A permanent secondary mortgage facility that will met these needs is essential. The provisions in the bill do not meet these needs. The amount authorized in the bill is limited and appears inadequate to meet these special purpose needs. We hope that the wording on page 45, lines 12 to 16, is sufficiently broad to permit FNMA to purchase all special purpose mortgages. We object to the provision in the bill which prohibits FNMA from purchasing mortgages offered by, or covering property held by, a municipal instrumentality.

Urban renewal.-We are heartily in favor of broadening the slum clearance and urban redevelopment concept to the more inclusive idea of urban renewal which includes rehabilitation and conservation as well as clearance and redevelopment. As mentioned earlier, however, the most important point we wish to make in connection with the proposed urban renewal program is that this broadening must not impede the slum clearance and urban redevelopment program as such. It is imperative that cities not be precluded from undertaking urban renewal projects involving only slum clearance and urban redevelopment. For many reasons it may be that at a particular time it is in a city's best interest to undertake such a project, rather than the broader type of project envisaged in this bill. One of these reasons is the question as to whether the locality has sufficient authority under State enabling legislation to permit it to undertake the broader urban renewal type of project, and in this connection we should like to raise a question on the use of the term "urban renewal" to cover slum clearance and urban redevelopment.

Since à locality under this bill applies for assistance to carry out an urban renewal project rather than an urban redevelopment project, we are not sure whether the local governing body and the local public agency have the authority to pass the necessary resolutions making reference to urban renewal rather than to urban redevelopment. State enabling legislation for urban redevelopment makes no mention of the term "urban renewal" and it may be that the substitution of the new term for the old may in effect preclude localities from participating in the urban renewal program. Therefore, we should like to suggest that the language of the bill be changed to make it clear that a locality may submit an application for a "slum clearance and urban redevelopment" project and that such an application will be honored by HHFA as an application for an urban renewal project under the terms of the bill.

Although we think it important to continue the redevelopment program as such, we think it is equally important that cities be given assistance to accomplish rehabilitation and conservation. We have long recognized that there are areas in our cities which are deteriorating but not to the extent as to require clearance. Our cities need financial assistance and other encouragements in making a broad scale attack on these lesser slums. In general the type of Federal assistance provided in the legislation is desirable. We point out, however, that if cities are to do comprehensive urban renewal projects in conjunction with a workable program as outlined in these amendments, nearly all States must pass additional enabling legislation. As most of our legislatures meet every 2 years, an immediate expansion of activity under this title cannot be expected immediately. It is important for Congress to recognize, therefore, that immediate results in any volume will not be forthcoming under the proposed bill. The major activity for some little time to come will have to continue to be the slum clearance and urban redevelopment program with a gradual expansion of operations to include the gamut of activities envisaged under the urban renewal concept.

Under the present slum clearance and urban redevelopment program, we have encountered situations where cities have put up more than their one-third share because of expenditures for certain public facilities. HHFA has ruled that such expenditures are not reimbursable the Federal grant cannot be paid to cover an excess of local expenditures for such public facilities. Under urban renewal a good part of the cost of a project will be made up of public improvements such as streets, street lights, parks, playgrounds, and the like. Language in the present bill clears up this problem to some extent, but we feel that the bill should make it clear that a true - formula is intended and that technicalities should not be allowed to force cities to bear more than one-third of net project cost.

We also feel that the inclusion of inspection costs as part of the cost of the project as provided on page 78 of the bill is an unfair charge against the project.

We think that these costs are legitimate Federal expenditures, made to assure the proper expenditure of Federal funds and that they should be part of the administrative costs of HHFA.

We object to the language on page 80, lines 12 and 13, which requires the Housing Administrator to approve an area as appropriate for urban renewal. The program presumably stresses local responsibility and local determinations. There is already a condition in the legislation that requires the local governing body to make the determination that the area is appropriate for an urban renewal project. An additional finding by the Administrator implies that he must substitute his judgment for that of the city council. This appears to be an unwarranted interference with local programs and becomes a matter of subjective determination on the part of the Administrator. The Administrator should establish objective eligibility standards in accordance with the proposed legislation and apply these standards when an application for a project is submitted. The provision that an urban renewal plan should be in conformity with the workable program appears to be anomalous and unclear. We concur in the requirement that the urban renewal plan, which is a plan for physical development, should be in conformity with the workable program, but to insert this as a requirement is to increase unnecessarily the administrative work required by HHFA in order for a locality to undertake an urban renewal project.

On page 84, lines 2 and 5, there is an amendment to the present title I which appears to restrict the eligibility of certain local public improvements such as parks, playgrounds, schools, etc., as part of the locality's one-third contribution toward the cost of the project. The language of the proposed bill would require that these facilities be in the project area. We take the position that if a new public facility is constructed to serve the project area in whole or in part, then, to the extent to which it serves the project, it should be considered as an eligible local expenditure for the project. To use happenstance of location as an eligibility criterion seems to us to be completely unwarranted. Frequently these facilities will be built on publicly owned ground just outside or beyond the area. As an example, we point to the proposed Eastwick project in Philadelphia, a large area of 3,000 acres that has not developed satisfactorily because it is improperly drained. Philadelphia plans to clear the slum structures from this site and redevelop it. In so doing, it will be necessary to build a costly pumping station to raise the water drained from the area and empty it into the river. This pumping station must of necessity be located outside the area. Under the proposed legislation, Philadelphia would receive no credit for its rather large expenditures for this facility merely because it will have to be outside the area. We would prefer that the phrase "in the urban renewal area" be deleted and that the principle be followed of allowing credit for those public facilities that serve the project areas. The language of the bill would have the tendency to penalize urban redevelopment projects since they are apt to be much smaller than urban renewal projects encompassing rehabilitation and conservation.

There is some general language in the amendments to title I which differs from the original title I. Title I in the Housing Act of 1949 stressed local determinations and local responsibilities and was based on the principle that if local projects met certain objective criteria toward which the Federal program was aimed, the project would be approved. In the amendments, the phrase "satisfactory to the Administrator" is used in several places. As pointed out before when discussing the approval of urban renewal areas this implies a subjective determination on the part of the Administrator on the eligibility of local projects. We fell that this is a dangerous precedent and may invite the Administrator to substitute his decision and his judgment for that of the locality. It is entirely out of keeping with the philosophy of the program and the administration. These concepts and this language should be stricken from the bill. While on the subject of the philosophy of the program, we should like to point out the difficulties of a locality in carrying a program under excessive Federal controls. We fully recognize the need for controls over Federal funds, including budgets, audits, and prior approval of certain contractual commitments. We do feel, however, that the bill should reflect a philosophy of local responsibility and initiative with a minimum of Federal direction.

The result of an overly complex administrative control procedure has been that a substantial part of the effort in slum clearance and urban redevelopment to date has been in documenting applications for Federal assistance and otherwise conforming to Federal requirements. Quite apart from the job of taking the necessary concrete action to move forward in our battle against the slums.

It has meant that our slum-clearance projects have been retarded and as a result much more costly than they should be. We do not mention these difficulties by way of criticism but merely as a danger which should be kept in mind in the drafting of this new and tremendous program of urban renewal. We fell that it can move ahead rapidly and can be effective only if it is truly a program of local encouragement and assistance. If, however, it is a program of Federal control of local action, the result will be that of greatly increased costs and limited achievement. We would suggest that the language of the bill clearly delineate the respective responsibilities.

We feel also that the $5 million fund to be used for testing programs of rebabilitation and conservation is essential. This is an activity about which little is known. We have little experience to guide those cities that wish to undertake comprehensive rehabilitation and conservation programs. The assistance and experience provided and gathered with this $5 million should be of considerable value.

And finally, we feel that if Congress is to be realistic about this new program of urban renewal that it ought to recognize that additional authorizations will be needed. The present authorization of $500 million for grants and $1 billion for loans was made for the slum clearance and urban redevelopment program. If that program is to continue and is not to be repudiated, then that authorization is still necessary even though the rate at which the authorization has been used has been much slower than originally anticipated. Additional authorizations should be provided for the urban renewal portion of the program. We propose an additional authorization of $200 million in grants and $400 million in loans to take care of the increased demands that are bound to result from an expansion of the present program.

Workable program.-The principal condition for Federal aids included in the amendments is the presentation by a community and the approval by the Administrator of a workable program for each city for attacking its problem of slums and blight. As we have said earlier, we are in hearty accord with this principle but we caution against excessive or too strict an interpretation in that we may kill that which we are trying to encourage. In order to make it quite clear that progress toward the achievement of a workable program is that which we are seeking rather than the immediate attainment of a full-blown program, we suggest that the language on page 73, line 5 be changed to read as follows: "*** there is presented to the Administrator by the locality evidence that it is progressing toward a workable program ***." In addition we strongly recommend that the term "workable program" specifically include the existence of a positive program to meet the reclamation needs of families displaced because of rehabilitation, conservation, redevelopment, and public-housing programs. Existing legislation and administrative requirements already require this for the last two programs; it should be required in connection with the first two as well as part of the workable program.

Public housing. We have already made our general comments on public housing. The bill, however, includes several amendments and we should like to comment on some of them. We concur in the provision that payments in lieu of taxes are encouraged to be put on a universal 10 percent of shelter-rent basis. We note, however, that changes are proposed so that local housing authorities may pay full taxes and cities may pay an annual cash subsidy. The present wording of the legislation would appear to require generally that the community make a local contribution substantially in excess of 20 percent of the Federal annual contribution. We urge that any change in the bill provide for a local contribution at the 20 percent of the Federal subsidy amount.

On section 503 which provided for the repayment of Federal and local contributions after the public-housing projects have paid all their obligations, we question the workability of this provision. We think it is unlikely that at the end of 40 years a public housing project will be able to continue serving tenants of low income and at the same time have an income sufficient to do little more than pay for the operating costs of the project. We feel that the amount of funds available for repaying the local and Federal contributions will be nominal. We applaud the extension of priority to families displaced because of code enforcement or other governmental action. We should like to point out, however, the need for housing the aged single person and suggest that occupancy regulations under the public-housing program be broadened to make it possible to house such people.

Urban planning.-We support section 701 providing for Federal grants to encourage metropolitan planning and planning in small communities. With

redevelopment and rehabilitation playing large roles in the reconstruction of cities, along with the development of newer areas, it is important that adequate and satisfactory plans be prepared and followed for the most effective contribution to sound economic and physical urban growth. We point out, however, that the present language does not provide for assistance to urban counties of less than 25,000 population, and that planning in such areas is just as important as planning in the small municipality.

Title I, FHA.-We concur in the liberalization of FHA title I loans for rehabilitation, but we believe that it is essential that more positive measures be developed to prevent past abuses in this field.

Builder warranty. We feel that the bill is deficient in that it does not provide that homes built with Federal financial and credit assistance should carry a full warranty as to construction quality.

Minority housing.-We feel that the bill is deficient in that it does not provide any special assistance for housing and minority groups. Special secondarymarket funds should be available to assist in financing private housing for such groups, and other measures should be developed. The problem of minority-group housing is particularly grave with respect to relocation needs arising from redevelopment and rehabilitation programs-urban renewal projects-and should receive special attention.

Rural, nonfarm housing.--We note that the bill does not include any provision for rural nonfarm and small community housing. The problems in this field may be eased by following the recommendations of the President's Advisory Committee with respect to participation loans and special VA procedures. Mutuality. We object to the change in the FHA mutuality system by eliminating the group accounts. Under the system in the proposed legislation, payments to homeowners from this fund would apparently be discontinued.

Research programs.-We recommend the reestablishment of the now-liquidating housing research program.

Defense housing.-We feel that title IX, defense housing, should be kept on the books as a standby provision to permit rapid action in case it is needed.

Yield insurance.-In a number of our communities, there have been efforts to work out a feasible project to be financed under title VII-Yield Insurance. We have long felt that this title offered interesting possibilities for securing funds to finance housing developments at lower interest rates than are customary under our current mortgage procedure. A number of prominent investment houses and distinguished bond counsels have spent a great deal of time in trying to work out yield insurance projects. We feel that they have been close enough to success to warrant keeping the title on the books for a few more years and that the FHA should be directed to give its attention toward exploiting its possible workability.

Advance planning.-We are in favor of section 702 providing for the advance planning of public works. We feel it is important to build up a shelf of public works as a hedge against adverse economic conditions.

The CHAIRMAN. All right, Mr. Searles.

Mr. SEARLES. Thank you, sir. I just have a few informal comments, sir, on behalf of the public officials who are actively engaged in redevelopment operations.

I doubled in brass, as chairman of the redevelopment section of our ssociation, with Mr. Winston, and am also the Executive Director of the Redevelopment Land Agency, here in Washington, D. C.

Then I would like to make a few detailed comments on the legislaion itself.

The program of $500 million for grants, and a billion in loans was uthorized in 1949, and the thing is going now full steam. It was in ome respects slow in getting started, in the minds of some. But the easons for this, as we look back on it now, were very understandable. 'here were very severe problems of staffing, both at the Federal and t the local level. We in local agencies had difficulty in finding people ained in various techniques.

Secondly, we had a tremendous amount of planning to be done. In any of our communities, the overall plans of the community were

not in shape for redevelopment and other kinds of projects of this nature. To be worked out within that framework, the plans themselves had to be perfected.

We had a great deal to learn-that is our private contract appraisers did-in setting a value on this slum property which would be fair both to the property owner and to the Government. It was a type of property which in some areas had not changed hands for quite a long period of time.

We also had questions of litigation. In almost every State there had to be test suits in the courts, and we have not had a case by the Supreme Court of the United States, but one is now about to be heard for the city of Washington.

We also had a great deal to learn about the techniques of doing our job, particularly in the field of finding new houses for the families who were going to be displaced by this operation. That appeared to be a very big and perhaps an insurmountable question when we began, but today in a number of cities throughout the country, we are finding that the job can be done, and to the complete satisfaction of everybody concerned.

In Washington, where we have just relocated our first 100 families from project area B, we have before-and-after pictures that are rather amazing in the results. Thanks to the cooperation of landlords, and other real-estate people in helping us find accommodations for these people, many families are finding that they have a bathtub and a sink that they never had before in their lives. So the job can be done and we are now underway.

We understand that this $500 million authorized for grants, that of this $500 million, $246 million, or about one-half, is now committed. In terms of the clearance of dwelling units, when all those dollars become projects, it may mean between 150,000 and 300,000 bad houses eliminated. Actually projects have progressed in the United States today where 6,000 units have been actually torn down. Of the projects now underway, about 77,000 families will have new homes as a result of the clearance operation.

Mr. Slaten, our executive director, has a few pictures of some particular projects that we would just like to pass around showing those which are furthest ahead right now.

In Norfolk, Va.-we don't have any pictures for that-they, starting in 1948, have cleared a large 390-acre area in the center of town where there were 4,000 substandard dwelling units. This area is now going into about 2,000 good low-rent units and then, after a separation by a throughway, will go into industrial use, much needed in the city of Norfolk.

In Baltimore they have two projects for the combined builder, mortgage banker, redevelopment agency team, one of which is now ready for occupancy.

The pictures Mr. Slaten is now passing around show the area before and after clearance, and a little circular, where the new houses are rented. There again that was a project which got a head start because of the local funds involved.

The city of Chicago has just announced a tremendous new project, which will be about their fourth, in Fort Dearborn. Their first project, financed by the New York Life Insurance Co., is now partially