LONG-RANGE PROGRAM The majority report states the problem with respect to "the long-term emergency looking forward over a period of 10 years," but makes no affirmative proposal covering the last 6 years. Its statement ends with a 4-year program in sight or contemplated by public redevelopment and venture capital plans. We must go beyond it and raise our sights. The majority report suggests that the number of public-housing family units required in the whole 10-year period is at least 150,000, representing families which cannot be provided for by private capital or capital by fiduciaries. The New York City Housing Authority in a recent report estimates that more than 500,000 families in New York City live in substandard housing at low rentals. It is fair to assume that investment or fiduciary capital, represented by progressive banks, insurance companies and similar financial institutions will provide for more than half of this number. Approximately 200,000 families will have to be provided for through Government assistance, either by way of subsidy or loan of Government funds at low interest rates. I believe that 200,000 families is more nearly the correct figure. The representative of the New York City Housing Authority who appeared before your committee reported that its total program for the next 4 years, taking into account existing projects, post-war program and newly contemplated projects, through funds to be made available under the Wagner-Ellender-Taft bill, and total appropriation by the State of the remaining $80,000,000, will provide for 57,000 families. Where do we go from there? It matters little if the number of families to be provided for is at least 150,000, as the committee suggests or 200,000, or even higher. The fact is that more than 75 percent of our ill-housed families will still be unprovided for and the bulk of our slums will remain unless we take bold and decisive action. At the rate we are going, we will not clear the slums and rehouse our families in adequate, decent and sanitary homes within our or the next generation. The piecemeal policy, in the main the result of limitation of available funds, should be ended. We will not achieve a comprehensive housing program over a 10-year period by waiting for additional State and Federal assistance. The city must take the initiative and assume the responsibility, although it should strive for additional aid from the Federal and State Governments. To the extent that such aid is received, to that extent can the city program be reduced. At this time when public interest is aroused by the desperate urgency of the situation, public officials may expect public support in taking bold and decisive action. Recently a proposal was advanced which is bold and decisive, yet also sound and well-considered, and which I believe merits most serious consideration. Under this plan the 150,000 to 200,000 families could be rehoused within a period of 10 years and the slums cleared. Informal advice received from bankers familiar with the financing of housing undertakings, indicates that the billion or more dollars required for so extensive a program can be borrowed at low interest rates if the necessary subsidy is provided. Constitutional limitations eliminate real-estate taxes as the means of raising the subsidy money for such a program. The plan proposed is the imposition of taxes, principally a limited sales tax, although not limited to that method, to be earmarked for housing purposes, so that it cannot be diverted as is the case with the existing sales tax of 1 percent. It is to be remembered that the tax was originally paid by the citizens of New York to keep their neighbors from starving. When the relief emergency passed the tax was cut in half. It is now proposed restoring it to its original level to promote a program to rehouse our families and clear our slums within a period of 10 years. At best, the legislation would be permissive, leaving it to the city to take action. I am fully aware of the objections against a sales tax as falling upon the groups in the community who can least afford it. However, the fact is that the principal expenditures of a low-income family for food, shelter, and other necessities of life are not subject to a sales tax of the type now in effect. Moreover, if we are to end the piecemeal policy of rehousing our families of low income and clearing our slums the proposed sales tax seems to be a most feasible method of raising the subsidy money which would begin at approximately $3,000,000 a year and reach in the tenth year the sum of $33,500,000. It would mean every slum cleared and every slum family rehoused. Taxes are never welcome, but if the slums are to go in our time, this appears the way to do it. Any program of extensive rehousing and slum clearance must, of 75674-4813 course, be done within the framework of a comprehensive city plan. It is emphasized that this 10-year program provides for redevelopment of slum areas by private as well as public activity. RELOCATION OF TENANTS The committee very wisely recommended that the public housing law be amended to provide for the payment of all necessary costs and expenses in connection with the removal of tenants who must vacate premises to make way for public housing and that such items be charged to the housing project. It was generally believed that this was the public policy of the State but apparently the law requires clarification. However, the committee declined to apply the same principle in the case of redevelopment companies or any company obtaining the benefits of eminent domain, condemnation, or tax exemption. I fail to see a distinction and believe that any company which obtains the basic powers of Government itself should also bear the necessary expense and costs in connection with the removal of tenants displaced from their homes to make way for housing whether it be for public or redevelopment housing. Respectfully submitted. EDWARD WEINFELD. Mr. SMITH. Mr. Egan, will you state your position and give us your background? STATEMENT OF JOHN TAYLOR EGAN, COMMISSIONER OF THE PUBLIC HOUSING ADMINISTRATION Mr. EGAN. Mr. Chairman and members of the committee, I am Commissioner of the Public Housing Administration. I was appointed as Acting Commissioner on December 22, 1947, and was subsequently appointed as Commissioner, confirmed, and sworn in on the 25th of March 1948. Prior to that I was with the agency in several capacities. I was regional director in New York City from 1942 to 1944. I then acted as Assistant Commissioner for Management Operations from 1944 to the summer of 1947, at which time my title was changed in connection with a reorganization of the agency to Assistant Commissioner for Operations. Prior to coming with the Government in 1935, and with this agency, then known as the United States Housing Authority, in 1938-prior to that I had been a practicing architect, registered in New York State and practicing from 1922 to 1935. I had my architectural training at Columbia University and went through the schools in New York. Mr. SMITH. I did not quite get what your position was with the Government from 1935 to 1937. Mr. EGAN. I was senior architect on the Greenbelt project out here in Maryland. Mr. SMITH. That was a Works Project Administration project? Mr. EGAN. It was an emergency relief project under the Resettlement Administration. Mr. SMITH. You may proceed, Mr. Egan. Mr. EGAN. The low-rent housing provisions of S. 866 are contained in title VI. In discussing these provisions, I would like to commence with the so-called financing amendments which are contained in section 604. I am beginning with these amendments because they will not only apply to any extension of the low-rent program, but will also be of great utility in connection with the financing and refinanc ing of the projects which have already been developed. First, let us consider the basic financial plan of the low-rent housing program, as background for the discussion of the financing amendments. As you know, the low-rent housing projects are owned and administered by local housing authorities. These authorities are set up by their respective local governments pursuant to State enabling laws, and the members of the authorities are appointed by the mayor or other local officials. They are in no sense the agents or the creatures of the Federal Government. The local authorities plan their own projects, select and acquire the sites, construct the projects through contracts with private builders, and own and operate the projects. The role of the Public Housing Administration is restricted to the administering of financial assistance to the low-rent projects, the furnishing of necessary technical advice, and the review of local actions as to conformity with the provisions and objectives of the act and of the contracts made pursuant thereto. Under the original United States Housing Act (Public Law 412) approximately 117,000 family dwellings have been built. In addition, there are 25,000 dwellings which have been contracted for under the original act, but which were deferred during the war, and are now unable to proceed because of the existing cost limitations which have not been changed since they were originally set up in 1937. An additional 51,000 dwellings have been built under the provisions of Public Law 671 which authorized the use of Federal low-rent housing funds for the construction of housing for workers in essential war industries. Mr. FLETCHER. Mr. Chairman, may I interrupt at this point? Mr. SMITH. Mr. Fletcher. Mr. FLETCHER. You say that they are not under the Federal Government-and I am certainly inclined to agree with you in that regard--but are they under the local government? Does local government have control over these? Mr. EGAN. Mr. Congressman, the local housing authorities are really creatures of the State; they are local agencies of the State as I understand it, sir. I do not know how the State statutes in every State operate in that regard, but the appointive power generally is in the locality as far as the members are concerned. Mr. SMITH. I have heard discussion to the effect that they did not seem to be under the control of anyone. They seemed to be at loose ends, as it were. They were almost sufficient unto themselves. No one had control over them. This power to appoint-do they also have the power to remove? Mr. EGAN. I believe they have, Mr. Congressman. Mr. FLETCHER. Or is it for a term that cannot be changed? Mr. EGAN. I know in some States, under the State housing laws, that the appointing power has the removal power, regardless of the period for which the individual member has been appointed. Mr. FLETCHER. It seems to me there should be a well-fixed responsibility in this regard. If it is the Federal Government's responsibility, which you say it is not in this particular case, then, that would be clear cut. If it is not, it should be a local responsibility or a State responsibility. Somewhere, somehow, we should fix the responsibility for the proper management, and over-all supervision of these. I raise the question because it has been raised a number of times in connection with projects which are now operating, supposedly, as local, low-rent hous ing projects, but for which there seems to be no direct responsibility on the shoulders of anyone. Mr. EGAN. Congressman, I would be very glad to give you a statement to try to clear up that point. I will have our lawyers go into that for you and point out just where the responsibility does lie. Mr. FLETCHER. That I would appreciate very much. Mr. EGAN. We will do that, sir. (The information is as follows:) RESPONSIBILITY OF LOCAL HOUSING AUTHORITIES TO LOCAL GOVERNMENTS 1. Local housing authorities are created by State housing laws of the particular States in which the authorities are located. 2. The local housing authority for any locality is organized pursuant to a resolution of the local governing body. The members of the local housing authority or commission are appointed by the local officials, usually the mayor of the city. Upon the expiration of their terms (usually 5 years) their successors are reappointed in the same manner. 3. The members of the local housing authority may be removed from office by the appointing officer for inefficiency, neglect of duty, or misconduct. A typical clause appearing in the State statutes is as follows: “Removal of commissioners.—For inefficiency, neglect of duty, or misconduct in office, a commissioner of an authority may be removed by the mayor, but a commissioner shall be removed only after he shall have been given a copy of the charges at least 10 days prior to the hearing thereon and had an opportunity to be heard in person or by counsel. In the event of the removal of a commissioner, a record of the proceedings, together with the charges and findings thereon, shall be filed in the office of the clerk." In other State statutes the language is slightly different, but the substance is the same, with small variations as to the method of filing charges and number of days notice to be given. 4. In Michigan and Arizona, the housing authority is actually a department of the city. 5. In practically every State, the local housing authority is required to file periodical reports with the mayor or appointing official. 6. In a number of States, for example, Massachusetts, Illinois, Indiana, and others, State housing boards have been created. The local authorities in such States must either file reports of their activities with the State housing board, or, as in Massachusetts, obtain the approval by the State board of its various activities. 7. In some States, the local housing authorities may not issue bonds or notes without obtaining the approval of State or city authorities. For example, in Pennsylvania, it is necessary to obtain the approval of the department of internal affairs; in Alabama such approval must be obtained from the department of finance; in Indiana the approval must be given by the city council, town board, or county council, as the case may be, after public hearing. It is to be noted that under section 601 (a) of S. 866 the local governing body will have an additional control over the local housing authority, in that no contract may be entered into by the Federal Government for financial assistance to any low-rent housing initiated after July 1, 1948, unless the governing body of the locality involved has approved the provision of such low-rent housing. Mr. EGAN. On projects developed under the original act, the Public Housing Administration was authorized to make loans up to 90 percent of the total development cost. As a matter of fact, on the existing Public Law 412 projects, substantially all of which have been permanently financed through the sale of local authority bonds, the Federal Government has loaned only 62 percent of the total capital cost, while private investors have bought bonds covering 38 percent of the cost. On the projects developed under the defense amendment-Public Law 671-the Public Housing Administration was authorized to make loans up to the full development cost. These projects have only re cently been converted from war housing to their ultimate use as lowrent housing, and have not yet been permanently financed. Substantially all of the capital cost involved has been borrowed on short-term notes from private investors, which are secured by an obligation of the Public Housing Administration to loan funds at maturity, if necessary, to cover both the principal and interest on such notes. Under the original act, and also under the defense amendment, loans made by the Public Housing Administration are limited to 60 years and must be repaid in full, together with interest. Since the interest charged by the Public Housing Administration on these loans is not less than the interest which the Federal Government is paying on its long-term borrowings, there is no cost to the Federal Government in connection with the loans. During the 10 years of operation of this program there has been no single default by a local authority in the payment of interest or principal on funds borrowed either from the Federal Government or from private investors. It is the object of the low-rent program to achieve rentals within the reach of families whose incomes are so low that private enterprise cannot rehouse them, either in new or existing dwellings on the basis of a proper economic return. To make such low rents possible annual contributions are made by local governments through the exemption of the projects from local taxes, and by the Federal Government through the payment of annual cash contributions. The annual Federal contributions authorized by statute are limited to the amounts actually required to achieve low rents, but may not in any year exceed a stipulated percent of a project's capital cost, this percent being the going Federal rate of interest at the time the contract is made, plus 1 percent. Federal contributions under the present act may be paid over a period of 60 years. The maximum amount of the contributions authorized under existing legislation is $28,000,000 per year. The actual contributions paid by the Public Housing Administration are not the maximum amounts authorized by statute, but only the amount actually needed in each year to cover the difference between the rents collected and the operating costs of the projects, including interest and amortization of borrowed capital funds. When times are good the rent-paying capacity of families in the lowest income groups is such that only one-half to two-thirds of the maximum Federal subsidy is required. For example, in fiscal year 1947 the annual contributions paid on the permanently financed projects amounted to only $5,600,000, or 39 percent of the maximum contributions authorized for these projects. In depressed times, substantially full contributions will probably have to be paid in order to meet the needs of families in the lowest income groups. Under the terms of the present act, the annual contributions of the Federal Government are pledged as security for the bonds sold by local authorities to the Federal Government and to private investors. The maturities of these bonds have, in general, been so arranged that the maximum contributions will suffice to cover the debt service on the bonds, including amortization and interest. Thanks to this security, which is required under the terms of the statute, bonds sold by local authorities to private investors have proved to be highly marketable securities. The interest paid by local authorities on all bonds sold to private investors have averaged only 1.98 percent per annum. A few years ago, when interest rates were somewhat lower than today, the |