are talking about now. I think there is a lot of room for exploring in that direction.

The CHAIRMAN. Take a manufacturer, he might be interested in half a dozen houses for maybe a half a dozen of his employees, and he would make his own terms. The worst that could happen to him would be that he would end up owning six homes, which he could well afford to own, and he could sell them or rent them or do whatever he wanted to. The advantage that the manufacturer or businessman has is that he doesn't put up any money unless the mortgage comes into default. Then he steps in and buys them.

Mr. RAFSKY. Don't you think it is necessary, as part of that process, in order to avoid the high expenses of small-building operations, to encourage the pooling of building, so that you can cut costs?

The CHAIRMAN. Yes. This idea could possibly work better in smaller cities of under 500,000, than in larger ones.

Mr. RAFSKY. I think it depends upon the amount of unused land that is available. In Philadelphia we have two large tracts that would lend itself to this kind of home building.

One of the things I have indicated is the need perhaps to encourage home builders to pool their resources and engage in projects of that type wherever possible.

Another suggestion I have listed is that perhaps the Government can do better in terms of guaranteeing construction loans for home builders, insuring them, as well as the mortgages in order to encourage home building and to reduce their costs.

I also wonder about the possibility of what FHA might be able to do, to sort of say, "It is our priority to help finance homes in the $3,000 to $5,000 income bracket." I don't know how much they have explored that, and I think that might be another incentive.

Of course I think it is the responsibility of the local government to keep building standards in such a way so that they are not expensive, and to eliminate those kinds of building practices which incure greater expense and operation.

I believe, too, that in terms of Federal legislation, funds for a research program in this field can be mighty helpful as well. I have not listed in my own testimony certain types of incentives like tax inducements, which might also be applied to this field.

The reason for this indefinite presentation in effect is that we feel that in order to avoid half-baked solutions for people whose money is involved in this venture, it ought to be discussed with the home builders and our mortgage-finance people and our bankers, to find out what are some of the practical approaches along this line. We really have a problem that hasn't been solved.

I have a word about public housing. I recognize it is not before your committee

The CHAIRMAN. It isn't in the bill.

Mr. RAFSKY. We have stated our problem to the House Appropriations Committee, which is handling that. But if you think of an overall package, it has to be part and parcel of it, and I cite the income levels of families living in blighted areas.

The last point I make is on the problem of minorities. We have had a special study made in Philadelphia, which indicates that 46 percent of our dwelling units, which were classed as substandard in the 1950 census, are occupied by nonwhites. And whereas almost half of these

families live in areas certified for redevelopment, only one-eighth of the white families do.

So, it seems to me our thinking has to be applied to that particular rea of trying to provide accommodations for all, regardless of race, reed, or color, and we feel, again, that the bill, perhaps except for a aken nod to the FNMA provisions authorizing special mortgages inder this direction, special mortgage financing, that there it little lone to take that into account.

Here again we suggest that special attention by FHA, working with the private home-financing industry, might result in encouraging reater opportunity for housing more minority groups.

I sum up by saying that as far as urban renewal is concerned, the est is money. As far as the liberalization of the mortgage provisions 3 concerned, we need new and fresh approaches to meet the needs of iddle-income groups.

We certainly need a substantial low-rent public-housing program, e believe far in excess of the President's recommended 35,000 units. Finally, an opportunity for housing, with at least minimum standrds, for all groups in our society.

The CHAIRMAN. Let me ask you this question: Changing the name urban development" to "urban renewal," will that require a change the Pennsylvania State law?

Mr. RAFSKY. It does not. Our counsel for the redevolpment authory says it will not.

The CHAIRMAN. Thank you very much. Your statement is very elpful, and we are glad to have this colloquoy with you. I hope we n find the answer. It is not easy.

Mr. RAFSKY. Thank you, Mr. Chairman.
(Mr. Rafsky's prepared statement follows:)

STATEMENT OF WILLIAM L. RAFSKY, HOUSING COORDINATOR, CITY OF
PHILADELPHIA

The economic soundness and civic vitality of Philadelphia depend upon renewthe city's physical plant, particularly housing. The social and human cost, gether with the sapping of economic strength brought about by substandard using are, I am sure, well known to the members of this committee. The esident's Advisory Committee on Government Housing Policies and Programs mmarized the direct financial burden of slums to a number of cities throughout è country, including Philadelphia.1

The hidden costs, particularly to human beings, are far more devastating en though they cannot be fully measured by the dollar sign. Indicative of high price of inferior housing is the fact that in 1953, 65.3 percent of all ice arrests were of individuals who resided in Philadelphia's officially certified ghted areas, which contain only 25.3 percent of the city's population (see le 1 attached). Similar statistics on juvenile arrests reveal that unless slums are removed, significant numbers of our future juveniles from these eas are doomed to a life of crime. Despite the fact that the cause of crime usually far more complex than physical environment, it would be ostrichlike ignore the fact that in the third largest city in the country arrests of juveniles iding in deteriorated neighborhoods were 46.4 percent of the total, as comed to the area's juvenile population of 25.2 percent of the entire city (table 1). ailarly, our losses of life and property by fire, our health, our welfare probis are concentrated in districts where substandard housing predominates. in the longer range point of view, Philadelphia's survival depends upon the tion of this problem.

A Report to the President of the United States, the President's Advisory Committee on ernment Housing Policies and Programs, December 1953. Appendix 2: Report of the committee on Urban Development. Rehabilitation, and Conservation, exhibit 4. Notes he Cost of Slums to Local Governments. pp. 151-154.

Recognizing the seriousness of the situation, we determined to do everything we could locally to eliminate our rundown residential areas and to provide decent shelter for all. The city already has an extensive program under way: (1) The Philadelphia City Planning Commission maintains high standards which private builders must follow in developing unused land. The commission makes every possible effort to prevent future slums from arising in Philadelphia. (2) Operating under the authority of the State statute, and with Federal funds provided under title I of the Housing Act of 1949, the Philadelphia Re development Authority has demolished 761 substandard dwelling units. An additional 1,320 such units will be razed in 1954. By the end of this year, 103 new dwelling units will have been constructed as a result of the work of the authority. Plans which have already been approved will in the next few years greatly increase this total, including some 12,000 units for one redevelopment area alone, the Eastwick project in southwest Philadelphia.

(3) Although not as great in emphasis, the rehabilitation of existing houses has also been part of the redevelopment authority's program.2

(4) The Philadelphia Housing Authority has completed 4,648 number of lowrent dwelling units since the inception of the Federal program in 1937. By the end of 1954 the total of such units will be 9,157. It now manages 9,336 dwellings constructed under the various Federal programs. Project planning work is continuing with the aid of city funds in anticipation of the resumption of the Federal public housing program.

Nor is the city relying on previous accomplishments and existing levels of programs in its fight against blight. Within the past few months additions! programs have been launched and plans made for an all-out comprehensive attack on the problem.

(1) A new position, housing coordinator, has been created directly under the mayor to bring together the various agencies now working in the field in order to supply a unity of purpose and an effective pooling of resources. It was fel: that the good work of the different agencies, both city and State, was piecemeal and uncoordinated.

(2) A new housing code, bringing up to date the existing law adopted in 1915, is now pending in the city council and its adoption is expected shortly, It will substantially increase minimum housing standards, eliminating, för example, all outside toilets. In addition, revision of our health, fire, plumbing, and building codes are all under way.

(3) Our zoning ordinance of 1933 is being overhauled. One of its primary objectives is to prevent the type of building activity which tends to downgrade residential areas.

(4) Even prior to the introduction of the present legislation, the city started to draft experimental programs applying our entire enforcement machinery to achieve slum clearing, rehabilitation, and conservation. Within the next few weeks we plan to select pilot neighborhoods in which these procedures will be tested. The overall program will be developed with the aid of private groups. both civic and private, including the Real Estate Board and the Home Builders' Association.

(5) Our Commission on Human Relations is developing a program aimed at providing decent shelter for all groups in the city regardless of race, creed, or color. It is particularly concerned in its preliminary operation in finding out what factors have produced a concentration of minority groups in blighted neighborhoods.

In short, we are marshaling the full force of local government to meet a critical situation.

As a city which is the center of a vast economic area, we believe that the Commonwealth of Pennsylvania also has an important responsibility in meeting our housing needs. For that reason, a legislative program calling for the State's participation and assistance in the housing field will be submitted to the next session of the legislature in January of 1955, as well as to the candidates who ar seeking State office this year.

Yet in spite of all this concerted activity and these plans to cope realisticall with the major problem, we know from both experience and careful review that the city of Philadelphia, like most large urban centers in the country, cannot do the job itself. We just do not have the financial capacity even to make a dent in

For details on Philadelphia's rehabilitation activity, see A Report to the President of the United States, op. cit., exhibit 2, Slum Prevention Through Conservation and Rehabüitation, Jack M. Siegel and C. William Brooks.

correcting bad housing because of the heavy fiscal burden we must assume in carrying out the necessary municipal functions affecting safety, health, and welfare, and because our authority to levy taxes is hemmed in by our State constitution. This position, recognized by Congress in 1949, is amply documented in the Report of the President's Advisory Committee on Government Housing Policies and Programs.3 Ironically, the city's single largest source of income, real estate, is in danger because of our slum problem. It will take Federal aid to break this vicious cycle.

We welcome the approach used in the proposed Housing Act of 1954 because it recognizes the limitation of cities in providing remedies for inferior shelters. The bill has a number of constructive features, which we hope will be adopted. These provisions, however, do not go far enough in the approaches and methods endorsed.

I. URBAN RENEWAL

The increased emphasis on urban renewal, as including rehabilitation and conservation as well as redevelopment, gains our wholehearted support. Philadelphia took advantage of the language in title I of the Housing Act of 1949 and has already carried out a rehabilitation program in addition to its redevelopment work. Yet at the end of 5 years, only a little more than 2 percent of the 103,410 dwelling units in redevelopment areas have been removed at a cost of $3,939,775. Rehabilitation of existing homes is an important weapon in the arsenal needed to fight deterioration, but it does not add to the new housing supply which is so necessary to meet the condition of overcrowded slum neighborhoods. If the program is not handled with extreme care, there is the danger that the remedy will be patchwork in that it merely postpones the date of obsolescence, thereby making the money used an unsound investment. It is of the utmost importance, therefore, not to substitute rehabilitation for blocks and areas which require redevelopment. The key is the amount of money to be appropriated to carry out what should be an enlargement of an existing program, rather than a shifting of emphasis. The subsidy available is of specific concern in rehabilitation because the monthly housing cost or rent of the existing dwelling will tend to increase.

The President's recommendation to allot $97 million for urban development and redevelopment in 1955 does not in any way come near the necessary wherewithal to work on a problem of the magnitude of substandard shelter. Even without the new stress on rehabilitation and conservation, the Housing Act of 1949 calls for $250 million in loan funds per year, and $100 million annually for capital grants. Unless the appropriations are substantially increased, we can only resign ourselves to having blight continue to outstrip new or rehabilitated homes.

II. LIBERALIZATION OF MORTGAGE INSURANCE TERMS

The increase in the loan-value ratio and maximum amounts of mortgages which may be insured by FHA, as well as the extension of the maximum statutory term to 30 years of all mortgages will undoubtedly be of some help in preventing any significant decline in new housing starts. At this stage of the economy such bolstering of the home construction market will be helpful. Housing Administrator Albert M. Cole estimates that the proposed legislation would result in about 1 million new home starts in the United States, a significant decline from the past few years. When the approximately 200,000 net gain from conversions is added, the total is scarcely sufficient to meet the need created by new households and by replacement of structures demolished or destroyed. Since the funds recommended for urban renewal will merely continue that program at a snail's pace, the families who live in the 10 million substandard nonfarm homes in the United States can neither turn to the Government nor to the private building industry to provide what is universally agreed to be a necessity of life-housing with minimum standards of decency.

From the point of view of the urban community, the existence of large numbers of substandard housing is not merely another unmet need. Housing cannot be placed in a deep freeze; continued wear and tear means that neglect results in a growing backlog. Unless checked now, blight will erode the economic base of our large cities.

A report to the President of the United States, op. cit. In exhibit 10, A Statement on Problems of Capacities in Local Financing of Slum Clearance.

These nationwide conditions, when translated to Philadelphia, pose a thorny question. In 1953 Philadelphia added 8,900 dwelling units, exclusive of public housing, to its supply; 5,255 of these units were in new construction (see table 2). The supply of privately created dwelling units is hardly sufficient to keep up with the need as measured by the formation of new households and homes de stroyed in Philadelphia. (It is estimated that the city's in-migration and outmigration cancel each other.) Except for public housing, therefore, we have not been able to reduce the unfilled needs of families having substandard shelter. The proposed Housing Act of 1954 offers us little encouragement in that regard. The present legislation fails completely to recognize that we must produce housing within the financial capability of our low- and middle-income groups.

According to the United States census, 75.7 percent of Philadelphia families had incomes below $5,000 per year as of 1949. Even if a generous 25-percent upward adjustment is made, at least 65 percent of these families still fall below the $5,000 level. The cheapest of the new homes selling in Philadelphia is $10,000. An estimate by realtors of the average price of existing homes sold in Philadelphia last year was $8,400. The rentals for newly constructed dwelling units tend to run $85 per month and upward. A survey conducted last September in Philadelphia revealed that the vacancy ratio in rental units based on a sample study was less than 2 percent. For all intents and purposes, therefore, existing units at low rentals are not available.

The President's Advisory Committee found that in most cities rent, heat, and utilities fell below 20 percent of the total budget cost. If one takes the median family income for Philadelphia, $2,069, as reported by the United States census for 1949, makes a 25-percent upward adjustment to bring it in line with the present, and then applies the 20-percent formula suggested by the President's Committee, the average family in Philadelphia would not be in a position to spend more than $60 a month for its housing costs. If a house, which costs as little as $7,000 requires a monthly housing expense of $62.92, half of Philadelphia's families have no real housing market to speak of and can only turn to the oldest existing homes when they are put up for sale.

The almost hopeless impossibility of this condition is more clearly seen when one looks at the incomes of families who live in Philadelphia's blighted areas. A special study made at our request reveals that even with the 25-percent upward adjustment of the 1949 census figures, the median family group is in the $2.000 to $2,500 category (table No. 3). To meet this difficult situation, the proposed legislation has come up with only a stopgap suggestion which will undoubtedly prove impractical for cities like Philadelphia. The proposed new section 221 to the National Housing Act, providing for FHA 100-percent insurance on a $7,000 home with a mortgage term of 40 years, will have little significance for us. It is difficult to foresee how any builder can construct a home in Philadelphia at this price. Furthermore, the monthly housing cost of $62.92, as listed in the report of the President's Advisory Committee, places it out of the price range of the families who are in greatest need of housing. It is questionable, in the first place, whether mortgage money would be made available to finance such con struction.

Little reliance can be placed on the amendments to section 203 of the National Housing Act insuring up to 95 percent of the value of existing homes for mortgage periods up to 30 years. Aside from the prevailing high prices, even for other than new dwellings, there is no assurance that either FHA or private lending facilities will provide the maximum terms for such housing, particularly for older homes whose prices are lower.

What is needed is a fresh approach, and perhaps the extension of existing approaches far beyond their present limits in order to find the answers for housing for low- and middle-income families. The entire field of incentives and subsidies has to be explored. Perhaps more can be done in reducing downpayments by encouraging direct loans to home purchasers. Builders might be given better terms on construction loans through Government guarantees. More aggressive mortgage market facilities might stimulate an increased flow of funds and bring the interest rate down. More might be done to provide greater

Percentage Vacancy of Habitable Dwelling Units in Philadelphia, September 15, 1953, Government Consulting Service, Institute of Local and State Government, University of Pennsylvania. Philadelphia.

Op. cit.. appendix 3. Subcommittee on Housing for Low-Income Families: Exhibit 4 Estimated Cost To Maintain Families at a Level of Adequate Living.

Op. cit., appendix 1, Subcommittee on FHA-VA Programs: Exhibit 8. Estimated Mortis Mortgage Payment and Housing Expense on Typical Mortgages Insured Under Proposed Section 221.