ognizing that is a very difficult thing to put the lowest income families into such homeownership situations without adequate counseling. And we are in the process of taking additional steps, including the organization of an extensive counseling program, so that we can screen people on the basis of whether they need counseling before they go into homeownership situations, and if they need it, to see that they get it. Now, we are just in the process of getting that organized. And we are very pleased that the appropriations bill this year contains $3 million for this purpose. And we have decided to levy a small fee that would become a part of the mortgage in order to have adequate funds to provide counseling.

So I don't say that we are completely out of the woods with respect to these problems. But we have dealt with many of them.

Mr. STANTON. Our panel spent considerable time on the subject of the allocation of these 235 units. I would have to say from my own experience that I am leaning toward the panel recommendations. You have got some suggestions there too. I have watched this program in my own particular district. In many cases it seems the criteria is where are the vacant lots, where are the water and sewer lines at now? There have been several discrepancies in putting the units and the number of units that were put into already existing subdivisions which downgraded them in a couple of instances, although I am getting good cooperation from your office in looking into a couple of those situations. But it has been the case whereby the applications have come in, and of course it has been left up to the director in the particular area The idea of having the communities themselves work on this pro blem is something that I think has merit if we can work it out. It would be an improvement from what I have observed over the way it working out.

Secretary ROMNEY. You see, at the present time we are pretty much dependent upon the initiative taken by others with respect to where the housing is going to be built. The Department doesn't locate land or sites, it doesn't initiate housing projects, it receives proposals, it receives proposals from public bodies or private organi zations. And then we select from among those proposals. But the deci sion to propose a housing project in a particular place is made by somebody outside the Department. Now, we have established some overall policies that we think might be helpful in certain respects but we are still dependent upon the initiative taken by others. And I don't really believe that we are going to get an adequate approach to meeting the housing need in the metropolitan areas until we can bring about a consideration on a metropolitan basis of how the hous ing needs of that whole area can be best met, and be best met in terms of all the considerations that enter into it. And on the present frag mented approach and on the basis of relying completely on the initia tive of outside organizations, I don't think you are ever going to reach the point where you aren't going to have situations that someone could say are not what they would like to see.

Mr. STANTON. I would have to tell you in all honesty that I am reserving my own opinion on this whole program for a little bit longer. I have got some real doubts.

Secretary ROMNEY. I admit, it is a very fundamental change, if you go that way.

Mr. STANTON. My time has expired.
Mr. BARRETT. Mr. Stephens.

Mr. STEPHENS. Thank you, Mr. Chairman.

Mr. Secretary, I appreciate your being here, and your testimony. I am glad also to see from what you have said here that it looks as f next year we might approach the objective in our goals of 2,600,000 unit starts. And I compliment you on that stimulation of our housing

program.

Secretary ROMNEY. Thank you.

Mr. STEPHENS. I believe in one of the early speeches that you made [ recall that you said, in order to meet that objective, we would have about 600,000 starts that would be by Federal subsidy, and that we vere going to have to depend upon private enterprise for the 2 million. assume that you still feel that that is the right way to do, because I eel that way also. We must use Federal funds to stimulate housing out not take it over.

Secretary ROMNEY. That is right. I am concerned with the constant ncrease in housing costs that is increasing the subsidization. I think ve ought to be moving in the other direction if possible.

Mr. STEPHENS. I have had a plan proposed to me which I am going nto in more detail with the committee later which will help private nterprise. Do you see any objection with stimulating private enterrise by changing some of the national banking laws that would allow ›y removing some of the restrictions-commercial banks to get more ully involved in and to participate more deeply in home financing. Secretary ROMNEY. I think the Treasury made a very construcive suggestion in 1969, which was that financial institutions-and his would have included commercial banks as well as others-have nterest income from socially desirable investments exempt from income taxes up to a certain percent. I think they said 7 percent of the nvestments. Well, that would have encouraged commercial banks and thers to invest in mortgages to a greater extent than they are doing. I think that was a constructive suggestion. In England they have building societies, and they give certain advantages to investments in these building societies in relationship to income-tax payments. And I think some things of this character may well be necessary.

Now, the President has this Financial Structures Commission that has been studying this whole question of equitable distribution of available money and credit. And I assume they are going to make a report at a reasonable date here. And presumably they will make some recommendations in this area.

Mr. STEPHENS. We would have to change some of the national banking laws in order to give the banks a fuller opportunity to participate, because we do limit them in some respects to what they can do so far as direct loans are concerned.

Do you feel that we ought to encourage the banks to more fully finance or to get into the financing of housing?

Secretary ROMNEY. The General Counsel has a comment with respect to the Federal Reserve.

Mr. MAXWELL. There is one Federal Reserve regulation under the Bank Holding Company Act that was passed last year which seems to inhibit the activities of banks in participating in the construction of housing, particularly subsidized housing, which our Department is hoping that maybe we can get

Mr. STEPHENS. Liberalized.
Mr. MAXWELL. Yes, sir.

Mr. STEPHENS. In other words, in general you would favor changes in bank laws and regulations?

Secretary ROMNEY. Not enough of the available credit is going into housing.

Mr. STEPHENS. Yes.

Let me ask you this. Last year in your open communities proposal you advocated that we ought to put through some low-income housing units in suburban areas regardless of the local zoning lawsSecretary ROMNEY. No, Mr. Congressman, I have never recommended that.

Mr. STEPHENS. Maybe I am misstating it.

Secretary ROMNEY. You are very clearly misstating it, because I have never advocated at any time that we put low-income housing into a local community if the zoning laws didn't permit it.

Mr. STEPHENS. Well, anyway, we did turn that down in the committee.

Secretary ROMNEY. I have indicated that we need to get a better distribution of housing.

Mr. STEPHENS. Let me ask you this. I know that it was proposed directly to this committee, and we turned it down-I say we, the majority didn't pass it.

Secretary ROMNEY. We submitted an amendment, Mr. Congressman, that would have prevented a community from changing its zoning after it learned that low- and moderate-income housing was going to be located in the community. That is the Black Jack case. And the administration is proceeding against Black Jack because we concluded that we didn't need that amendment that we submitted because we believe the law prohibited it anyway, the Constitution.

Mr. STEPHENS. My question involving this is: Is the point system accomplishing that now? When one comes to ask for funds, are they told by HUD that they have got to have zoning regulations changes or something of that nature? Is the point system being used to advocate putting low-income housing units in suburban areas?

Secretary ROMNEY. What the point system would do is to implement the President's equal opportunity policies in housing by encouraging the location of housing on a wider basis, encouraging the location of low- and moderate-income housing. And what we have proposed, we haven't finalized this yet, what we have proposed is that we would give preferential treatment to those who submit housing proposals that would be outside of areas of present minority concentration.

Mr. STEPHENS. Thank you.

Mr. BARRETT. The time of the gentleman has expired.

Mr. Secretary, I would like you to turn around and see John Culver, one of our distinguished Members from Iowa.

Mr. Culver, come up and make yourself heard. Sit up here with Mr. Gonzalez.

Mr. Culver also has a bill pending before the subcommittee.
Mr. Blackburn.

Mr. BLACKBURN. Mr. Chairman, before I begin my time I would like to make a parliamentary inquiry.

Inasmuch as we are scheduled for further meetings this afternoon, are we just to continue the 5-minute rule as our time arises?

Mr. BARRETT. I am glad you asked that question, because other members have come in after the statement was made.

After we finish the 5-minute rule this morning we are going to recess until 1:30, and go up to about 3:30 to give the Secretary a half hour to go to another appointment. Would that be adequate time? Secretary ROMNEY. Thank you very much. That is plenty.

Mr. BARRETT. And on our return we will go into the 10-minute rule. Mr. BLACKBURN. Thank you, Mr. Chairman. This will allow me to develop separate lines of questioning.

Mr. Secretary, of course it is always a pleasure to have you before 1s. I remember the great honor that I had in accompanying you on a visit to St. Louis once, which I found most informative.

I must say for my own part, though, I share Mrs. Sullivan's view hat when we concentrate our effort on real estate; that is, in improving he quality of real estate and the environment that real estate afords people to live in, we are not really getting into the heart of roblem, until we start dealing with the problem of crime that is o rampant in some areas of our cities. Now, I don't want the Deartment of HUD to become a national police force, and I don't hink anybody on this committee or in the Government does. But still the problem of crime in the highly dense concentrated areas xists, whether they are newly constructed public housing or whether hey are old housing that is being heavily utilized. Until we do come o grips with this problem of crime, we are really not going to solve ur problems.

Secretary ROMNEY. May I make an additional comment beyond what I have said in response to Mrs. Sullivan.

We were in St. Louis. And you will recall that the Pruitt-Igoe public ousing project was not only a tremendous concentration itself; but lso in the city of St. Louis, the central city, all the public housing and ubsidized housing was located pretty much in two great big areas. And Pruitt-Igoe is a tremendous problem by itself, because you have ow-income problem families concentrated in tremendous numbers, nd the average age of the occupants when it was occupied was 13, so hat the size of the families was very considerable on the average. But you not only had that vast concentration, without recreation facilities or other things, but around that public housing project were other public housing projects, and urban renewal areas, and so on. And one of the things we are undertaking to do and have been undertaking to do is to get a broader distribution of this and to prevent its being concentrated so that you have got all the problem families concentrated n particular areas in these central cities. Because that aggravates the whole problem of law enforcement and preventing crime and so on. Mr. BLACKBURN. Let me say, Mr. Secretary, that I understand he logic behind your thinking, which is that, if you have this highly dense concentration of problem families, crime is a predictable adjunct.

Secretary ROMNEY. That is right.

Mr. BLACKBURN. At the same time I am not sure that dispersing the problem families is going to resolve the problem. And I don't think that just concentrating ourselves on the real estate or the

environmental aspects of the problem family is itself going to solve the problem.

Secretary ROMNEY. I agree with you that the real estate aspect is only one aspect. And as I have said, the human aspects are the most difficult and the most important.

Mr. BLACKBURN. I am afraid, frankly, that until we do come up with some very hard decisions in dealing with the problem families, which may be an uncharitable term, but nonetheless it is a very true term, we are not going to resolve one of the most critical problems that our country is facing

I notice with some interest that we are developing a national schizophrenia on local government; we are saying two different things. Incidentally I proposed, I introduced the revenue-sharing plan for your agency.

Secretary ROMNEY. Thank you.

Mr. BLACKBURN. I support it because I think, to the extent that it will simplify existing programs for local officials, it is justified. At the same time we are finding from the dialog such as that of my colleague, Mr. Ashley, that we have to have national leadership, that local officials need guidance from Washington or they aren't going to be able to do the job. I recall the debate on the welfare reform proposal in which the argument was that welfare is a mess, because we left it up to local officials. At the same time local officials have been saying it is a mess, "because we are trying to meet the regulations that they are handing us down from Washington." I wish that we could develop some consistency, that things were a mess because we can't run things from Washington, or they are a mess because the local people can't run the programs we are handing them. I don't know that there is a simple answer.

I have additional questions relating to building codes and local building codes and the degree to which the national agency, HUD, has seen fit to insist on changes in local building codes, which I think perhaps were detrimental.

My time has expired.

Mr. BARRETT. The time of the gentleman has expired.

Mr. St Germain.

Mr. ST GERMAIN. Thank you, Mr. Chairman.

Welcome, Mr. Secretary.

Secretary ROMNEY. Thank you.

Mr. ST GERMAIN. I will be able to ask you more questions later. S. 1, which is the legislation providing for improved and much needed relocation procedures and payments, also affected HUD programs. And I understand-at least I personally have been contacted that there is a fear on the part of many communities, cities, that these increased payments are going to have to come from their moneys that they have already been granted for this particular fiscal year. And I noted last week that- -was it 20 or 26 new Model Cities were granted additional funding? That was a White House announcement.

Secretary ROMNEY. Twenty.

Mr. ST GERMAIN. Twelve on performance and eight on geographical area. And frankly, I was disappointed, because I thought I had a couple performing pretty well, but they didn't come in in the