in acquired or leased dwellings. This "flexible formula" was added to section 10(c) of the United States Housing Act of 1937 by the 1965 act.

At the same time, the Congress enacted a separate comprehensive section 23 of the United States Housing Act for short-term (1 to 3 years, renewable) leasing of privately owned existing housing. This incorporates the same "flexible formula" limitation on the maximum amount of annual contribution or annual subsidy that could be provided with respect to such leased dwellings.

Thus, both section 10(c) and section 23 contain “flexible formula" provisions which permit paying the same annual subsidy with respect to leased or acquired existing housing as would be payable for newly constructed public housing in the community.

The amendment proposed by the bill would make it clear that the same "flexible formula" provisions could be used for the leasing of housing to be constructed as well as for the leasing or acquisition of existing housing. Important additional benefits would be derived from application of the "flexible formula" provisions to leasing proposed privately owned new construction as well as to privately owned existing housing.

This would be particularly true in the very promising prospects of joint ventures between public housing authorities and private owners in creating lowand middle-income developments. Presently such developments of new construction may only be financed under the 40-year, standard low-rent financing provisions. These provisions are not suitable for leasing at desirable shorter terms, which are often the only terms available from the private owner. Applying advances in technology to housing and urban development

Over the years, the focus of Federal attention in providing assistance to housing and urban development has been on financing techniques. For example, downpayments required in connection with FHA-insured mortgage loans have been kept to a minimum, loan maturities have been extended, and interest rates have been lowered-in some cases to below-market rates. By these means the cost of housing, in terms of monthly payments, has been lowered to a point where many families have been enabled to purchase new homes or rent new apartments who otherwise could not have done so.

In the area of urban development, programs of loans and grants have been devised to help communities meet the problems of urban blight.

There are, however, definite limits to what liberalization of finance can accomplish in the face of the continuing rise in housing costs and the increasing complexities of urban living. During the third quarter of 1965, for example, the median sales price of single-family homes sold was $20,300, 7 percent higher than the $18,900 median price for homes sold during the third quarter of 1964. During the same period, slightly more than 20 percent of new homes sold for less than $15,500, nearly 5 percent less than in 1964. Coupled with this is the harsh fact that, as of 1964, half of the Nation's families could not afford to purchase homes priced at more than $14,000, or to pay rents exceeding $110 per month assuming a 5-to-1, income-to-rent ratio).

Equally important is the fact that over the next decade the housing industry must increase its annual production by one-third-from 1.5 million to 2 million units if it is to accommodate the expanding housing needs of American families. In addition, between 1960 and 1975, our urban population is expected to rise from 125 million to 171 million, placing added strains on our already burdened urban facilities, such as water, sewer, and transportation.

Considerable technological advances are being made by private industry and State and local governments both with respect to the cost and quality of home construction and with respect to meeting the complex problems of urban development. Constant experimentation is being carried on in such areas as housing design, materials, and construction techniques, and in making our urban centers safer, healthier, and more attractive places in which to live.

The problem is sometimes misunderstood as being entirely a lack of technological progress. Rather, it is important to note that these continuing advances in technique are often slow to be applied. Builders are reluctant to risk making major changes in designs or materials for fear of adverse market reaction. The home buyer does not readily accept deviations from traditional housing design or materials. Labor is often unreceptive to cost- or time-saving innovations for fear of economic loss. And communities that could benefit enormously from the application of such new urban techniques as large-scale centralized treatment of wastes or new methods of intracity transportation are often slow to move along these lines.

These are some of the practical problems that have held back progress. It is here that the Federal Government can and should assert leadership, so that the great technological strides that have been made in recent years, and that continue to be made, can be harnessed to the benefit of all Americans. This is what the bill seeks to accomplish.

The bill would direct the Secretary to encourage and assist the housing industry to reduce the cost and improve the quality of housing through the application to home construction and rehabilitation of advances in technology, and to encourage and assist the application of advances in technology to urban development activities.

The Secretary would be further directed to conduct research and studies to test and demonstrate new and improved techniques and methods of applying advances in technology to housing construction, rehabilitation, and maintenance, and urban development activities. He would also be directed to encourage and promote the acceptance and application of new and improved techniques and methods of constructing, rehabilitating, and maintaining housing, as well as the application of technology advances to urban development activities, by all segments of the housing industry, communities, industries engaged in urban developments activities, and the general public.

When this program is funded its administration would be handled as part of the Institute of Urban Development recommended by the President in his 1965 message on the cities.

The research and studies would be designed to test and demonstrate the applicability to housing construction, rehabilitation, and maintenance, and urban development activities, of advances in technology relating to (1) design concepts, (2) construction and rehabilitation methods, (3) manufacturing processes, (4) materials and products, and (5) building components.

Research and study projects could be undertaken either directly by the Secretary or by contract with public or private bodies or agencies, or by working agreements with other Federal departments or agencies. Each project would be required to be completed within 2 years.

Provisions of title III of the Housing Act of 1948 and section 602 of the Housing Act of 1956 presently authorize the Secretary of Housing and Urban Development to undertake and conduct studies relating to the reduction of housing construction costs through the use of new and improved techniques, materials, and methods. However, these existing provisions authorize such studies to be undertaken as part of broader research functions such as the collection and dissemination of data relating to market analyses, housing inventories, mortgage market problems, and the housing needs of special groups such as the elderly. This bill recognizes the importance of a program designed specifically (1) to reduce housing costs through application to home construction of technological advances, and (2) to assist and encourage the application of advances in technology to urban development activities, by directing the Secretary to undertake such a program and authorizing specific appropriations for that purpose. Rehabilitation and code enforcement grants

This bill would repeal a provision in the Supplemental Appropriation Act, 1966, which limits the amount of urban renewal grant authority that can be used in fiscal years 1966 and 1967 for grants for rehabilitation and code enforcement.

The limitation that would be repealed is inconsistent with the general purpose of the rehabilitation and code enforcement grants. Authority for these grants was added to the Federal urban renewal law by the Housing and Urban Development Act of 1965 to encourage more conservation and rehabilitation and thus lessen the need for large-scale slum clearance and redevelopment. The limi tation in the appropriation act limiting the total amount of these grants hampers the achievement of this purpose.

Repeal of provision for sale of Forest Hills project, Paducah, Ky.

Section 1005 of the Housing Act of 1964 would be repealed. This is the provision that directed the sale of an FHA-acquired rental housing project in Paducah, Ky., to the Paducah-McCracken County Development Council for use of the Paducah Junior College. Over a period of almost 2 years, the FHA has not been able to put this provision into effect and there is no foreseeable change in circumstances under which it can be put into effect.

The Paducah Junior College, after enactment of the 1964 provision, received private land donations more appropriate to its needs and lost interest in acquir62-551-66-pt. 1—8

ing the project. The development council proposed other uses for the project but has been unsuccessful in its efforts to obtain financing. The repeal of section 1005 is desired to permit consideration of other means of disposing of the property.

Technical amendments

A requirement in the Federal urban renewal law would be repealed under which contracts for supplies or services which exceed the amount of $1,000 may be made or entered into only after advertising for bids.

The provision that would be repealed is inconsistent with a general Federal statute which imposes the advertising requirement on all Federal contracts of this type which exceed $2,500 in amount. The repeal of the provision in the urban renewal law would remove this inconsistency.

In addition, provisions in the urban renewal law and the urban planning grant law would be amended to make it clear that references in those laws to the Area Redevelopment Act include also references to laws which are supplementary to that act. These amendments were inadvertent omissions from the Housing and Urban Development Act of 1965.

A 1954 prohibition against FNMA's purchasing loans insured or guaranteed prior to August 2, 1954, would be repealed. This provision was appropriate in 1954, as it protected the fledgling secondary market operations from being inundated by offers of existing mortgages. However, it no longer serves this purpose. While repeal of this provision would make eligible for purchase a few mortgages of an age of 12 years and upwards which are now not eligible, the number involved is negligible.

TITLE II. CONFORMING NOMENCLATURE IN STATUTES TO DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT ACT

This title has no legal significance except to correct the wording of certain statutes to conform to existing law as provided in the Department of Housing and Urban Development Act.

The title would make technical amendments in the Federal statutes authorizing the programs of the Department of Housing and Urban Development and other related Federal laws to make the nomenclature in those laws conform to the provisions of the Department of Housing and Urban Development Act. The amendments would make no substantive changes whatsoever in the provisions of the laws.

For example, under the Department of Housing and Urban Development Act, all functions and powers of the Department are vested in the Secretary of the Department. This title of the bill would therefore change the titles Housing and Home Finance Administrator, Public Housing Commissioner, and the Federal Housing Commissioner, wherever they appear in the Federal laws, to the Secretary of Housing and Urban Development. Likewise, the term Housing and Home Finance Agency would be changed to the Department of Housing and Urban Development.

Senator SPARKMAN. The committee will stand in recess until 10 o'clock tomorrow morning.

(Whereupon, at 12:15 p.m., the committee recesssed to reconvene at 10 a.m. Wednesday, April 20, 1966.)

(The following correspondence and attachments were submitted independent of Mr. Weaver's testimony :)

QUESTIONS AND ANSWERS ON CITIES DEMONSTRATION LEGISLATION

Question. What is being demonstrated by the program? Answer. The city demonstration programs would show that coordinated. concentrated programs of physical reconstruction or rehabilitation and social service can revitalize entire sections of our cities. They would show that cities of all sizes and types, and in all parts of the country are capable of mobilizing local resources and integrating them with federal assistance to attack major urban problems on the scale required to create a totally new living environment. The city demonstration programs will show the people who live in slum and blighted neighborhoods that their local, State and

Federal governments are concerned with their condition. They will show that concern for and service to people are essential ingredients in the rebuilding of our cities.

Question. What advantages does this approach have over expanding the present urban renewal and OEO programs?

Answer. Both the urban renewal and anti-poverty programs are expected to be essential components of any city's demonstration program. In addition, this bill would provide a mechanism which will coordinate these and many other activities to provide the maximum impact on the areas involved. Furthermore, this approach has the advantage of providing substantial funds to encourage innovation without being subject to all the administrative restrictions inherent in any more narrowly based grant-in-aid program.

Question. Is it reasonable to expect cities to demonstrate a massive impact on their deteriorated areas in the six years contemplated by the bill?

Answer. Through both the size and concentration of effort, it will be possible to achieve a greater impact on the problems of slums and blight than has heretofore been possible. The demonstration program, by coordinating and providing a sharper focus for various physical and social service activities, will constitute a total attack on major urban problems. It will avoid the fragmentation often characteristic of piecemeal approaches to the problem. Furthermore, because of the relative freedom the cities will have in the use of the supplemental demonstration grant funds, a high level of innovation can be expected to result in the development of new and better methods by each city for dealing with its particular problems. While there can be no absolute assurance of the desired massive impact in six years, it can reasonably be expected, particularly in view of the fact that cities will focus their efforts in selected sections or neighborhoods.

Question. What cities are chosen and on what basis are they chosen?

Answer.-A number of factors will enter into the selection of cities which will participate in the demonstration program. One will be the quality of the proposal submitted. That proposal must show that the city is prepared to make a strong commitment to achieving the purpose of the demonstration program and to deal with the major, social and physical problems that confront it. Acceptable proposals should show a high order of imagination and innovation in dealing with major urban problems, since one of the purposes of this program is to pioneer new approaches to solving such problems.

The decisions on which cities will be selected will also have to take into account both the population size and geographical location, since the intent is to provide the widest possible distribution among cities of all sizes within the limitation of the funds available.

Question.-Will small cities have an opportunity to participate in this program, or will it be a predominantly large-city program? Answer. This bill is intended to aid cities of all sizes. Funds will be so allocated as to establish a definite pattern of participation by cities of all sizes.

Question. When will cities not chosen be given a chance to participate? Answer. This bill is intended as only a demonstration of what can be done rather than a total answer to the problem. If it is successful, we would expect the Congress would want to consider extending this approach to other cities and to consider drawing on its experience in authorizing or extending other programs.

Question. What kinds of areas will be acceptable for the demonstration area? Must it be the area with the worst problems or can it be a better area where solutions are more likely?

Answer. The bill speaks of demonstration areas as being those of "widespread urban slums and blight". Although technical criteria and definitions of slum and blight will not be applied, at least a part of the area should consist of what would generally be regarded as hard-core slums in which low-income families are concentrated. The demonstration need not deal exclusively with the area of the poorest housing and worst social conditions. It might include areas which are still sound but in which there are unmistakable signs of deterioration. Some cities, knowing best their own local situation, may prefer to begin working in an area of slightly lower priorities in terms of need--but which would furnish much greater promise in terms of improvement for the dollars invested.

Question. The bill speaks of "slum and blighted areas". Does this mean the same thing as it does in the urban renewal program?

Answer. The reference to "slum and blighted areas" in this bill does not have the precise technical meaning that it does under definitions or regulations applicable to the urban renewal program. Rather, it is intended to describe in general terms the character of the areas to be helped. To the extent that a demonstration program does involve undertaking urban renewal projects as such, the areas involved will, of course, have to conform to the definition as used in the urban renewal program as well as the applicable State enabling legislation.

Question.-Section 4(b)(1) of the demonstration cities bill requires that a demonstration program be "of sufficient magnitude in both physical and social dimensions (i) to remove or arrest blight and decay in entire sections or neighborhoods; (ii) to provide a substantial increase in the supply of standard housing of low and moderate cost; (iii) to make marked progress in serving the poor and disadvantaged people living in slum and blighted areas with a view to reducing educational disadvantages, disease, and enforced idleness; and (iv) to make a substantial impact on the sound development of the entire city." What guidelines will be used to delineate "entire sections or neighborhoods"? Does the requirement that a substantial increase in the supply of standard housing of low and moderate cost be provided pertain to sections or neighborhoods where current density levels are already high? If not, does this requirement mean that there must be a substantial increase of standard housing of low and moderate cost in other than the project sections or neighborhoods? What criteria will be used to measure a "substantial impact on the sound development of an entire city"?

Answer. The term "entire sections or neighborhoods" will be interpreted in terms of the specific city involved and its particular neighborhood patterns. The intent is to deal with total cohesive areas rather than just small fragments of a few square blocks.

In his Message transmitting recommendations for city demonstration programs, the President provided some general criteria of what was intended. He indicated that a city program should involve as much as 15 to 20 percent of the substandard structures within the city. For the largest cities, such a program might involve a total of 35,000 dwelling units. For a city with a population of approximately 100,000, the program might involve three to four thousand dwelling units.

The proposed requirement that there be a substantial increase in the supply of standard housing of low and moderate cost is intended to apply to the city as a whole and not just to the area of the demonstration. We would expect that the bulk of the new standard housing of this category would be provided either through rehabilitation of existing housing or the construction of new housing in the demonstration area. However, if one of the problems of the demonstration area were excessive density, then a necessary part of the program would be the reduction of that density and the provision of housing in other parts of the city. It should be emphasized that there is no requirement that all of the activities of the local demonstration program must be carried out within the boundaries of the demonstration area.

The term "substantial impact" is not intended to be measured in precise terms. The objective is that there be major social and physical improvements taking place in a substantial portion of the city so that the city as a whole is a better place in which to live and work and that this improvement will be clearly attributable to the efforts of the demonstration cities program. Question. The bill requires the program to provide for a substantial increase in the supply of standard housing of low and moderate cost. What mechanisms are expected to be used to accomplish this?

Answer. The principal resource would be extensive rehabilitation of existing housing with all Federal aid now available for such work and the additional support to rehabilitation activities which might be provided through the use of the supplemental demonstration grant funds.

Each city will be expected to make full use of existing tools available for the provision of new standard housing of low and moderate cost, such as the low-rent public housing program, the rent supplement program, and the 221(d)(3) program. However, it is obvious that these programs cannot in themselves meet the massive housing needs of the demonstration cities. Rehabilitation will generally provide the largest part of the housing.