providing the 6 million low-income housing units that are estimated to be needed by 1978. In fact, HUD's policies and practices to date, and its proposed legislation will altogether destroy public housing. In 1969, Congress recognized the magnitude of this financial crisis in public housing and enacted the Sparkman and Brooke amendments (1969 Housing Act) to provide additional funds to cover operating costs and otherwise to assist authorities in fulfilling statutory obligations to provide "decent, safe, and sanitary housing within the financial reach of families of low income."

In the language of Senator Brooke, of Massachusetts, speaking for himself and for New York's Senator Goodell and California's Senator Cranston

* These provisions have not been implemented in the vigorous manner Congress intended. Bureaucratic machinations have undermined much of the hope and confidence which these provisions gave tenants and housing authorities. In the face of this crisis, the administration has introduced a bill into the Congress which will supersede the existing provisions for lowincome housing. We believe this law will have further devastating impact on the Nation's low-income housing program for the following

reasons:

1. It proposes to repeal the Brooke and Sparkman amendments, as well as other aids, which were intended to subsidize operating costs of public housing, and, instead, would drastically increase rents for many families. Further, by changing eligibility requirements, the bill would ultimately replace the present poor with families of higher income. Where are the poor to turn?

2. It imposes further restrictions on cost limits with respect to public housing construction that will make it impossible to build in many cities. Where any building at all is possible, it will mandate secondclass housing for the poor.

3. It seeks no additional authorization of funds for building new housing.

We implore HUD to discharge faithfully its statutory responsibility to implement the law as established by Congress, and we call upon the Congress to enact the following amendments to existing law:

LEGISLATIVE RECOMMENDATIONS

1. We urge the Congress to enact S. 4086, which Senator Brooke has introduced, to enable authorities to meet operating costs and to provide tenant services. This legislation would in fact be unnecessary if HUD had fulfilled the clear intent of Congress by implementing the Sparkman and Brooke amendments of 1969.

2. Millions of poor people need decent housing. The national goal stated by the Congress in 1968 has been all but abandoned. The need increases daily through growing blight and Government action such as highway programs and urban renewal. If we are to meet minimal present needs, statutory cost limits must be increased by at least 20 percent as provided by S. 4093, introduced by Senator Goodell and $150 million additional authorization of funds for this fiscal year must be granted as provided by S. 4079, introduced by Senator Mondale.

The foregoing in no way represents our sense of the magnitude of

the social need in the Nation. It is simply the bare minimum absolutely necessary to continue our public housing program. Our Nation's housing needs in fact demand the appropriation by the Congress of all the money necessary to do the job, and a national administration committed to the task.

Senator BROOKE. Thank you, Mr. Bernstein, for your statement. Let me say that I am more pleased the Council of Large Housing Authorities has been called together and has a meeting here in Washington, D.C. It gives me pleasure that you have seen fit to support this legislation.

I would like to ask you-I hoped to ask Mr. Kane this-how do you answer HUD's claim that the Sparkman amendment removes an effective limit on Federal contributions to local housing authorities in payment for debt services only, and thus that it follows national definitions of rent income are mandatory?

Mr. BERNSTEIN. I am afraid I could not give you the technical answer to that. I would have to refer to one of the technicians we have here from Boston, or perhaps Mr. Kabot might be able to answer from his experience.

Mr. KABOT. If you recall, Mr. Chairman, the original Housing Act of 1939 indicated that the maximum debt service would be paid to housing authorities. However, this has never been in effect from the day that the law was put on the record. I can go back to 1950, when we floated a 40-year bond issue for 23% percent.

The maximum going interest at that time, Federal interest rate, was a little over 3 percent. However, when we got ready to sign in the contributions contracts and get the projects approved and the permanent financing approved, the Federal Government at the time insisted that our maximum debt service would be the interest rate at which the bonds were floated. As a result, Newark, plus many, many authorities throughout the country, has lost millions of dollars in revenue, which could be used today so desperately to first maintain a reserve and then to give, most importantly, adequate services to the tenants.

On the question that you asked, Mr. Chairman, I cannot give you HUD's thinking in saying that the maximum subsidies cannot be attained. I think this has been in the law, and many of us believe that this has been in the law right along but it has never been implemented.

Senator BROOKE. Thank you, Mr. Kabot. Would you now read your statement.

STATEMENT OF NATHAN KABOT, ASSISTANT EXECUTIVE DIRECTOR FOR ADMINISTRATIVE SERVICES, THE NEWARK HOUSING AUTHORITY

Mr. KABOT. The current financial situation of the Newark Housing Authority is precarious. It's legally required reserves of $5 million have evaporated completely under the pressure of rising costs, and an increasing cost/income gap. The Newark Housing Authority now operates with over a $700,000 deficit.

The figures speak for themselves. Total routine expenses have risen from $55.86 PUM (per unit per month) in fiscal year 1967 to

$75.47 in fiscal year 1970. This 35 percent increase in expenses was much greater than the 9.7 percent increase in total operating income for the same period, from $60.39 PUM in 1967 to $66.23 in 1970. Labor costs alone rose from $17.56 PUM in 1967 to $27.01 in 1970. (These figures don't include such costs as repairs made necessary by acts of vandalism, which have been increasing at a geometric rate.) Such factors as increased employees' salaries and the necessity of acquiring State pool insurance have also contributed to the Newark Housing Authority's growing expenses. State and prospective Federal legislation calling for more stringent controls on furnace and incinerator pollution have required the Newark Housing Authority to purchase sulphur-free, and thus more expensive, oil fuel, and to spend considerable sums of money on revamping existing facilities. (See attached table No. 1.)

The only realistic solution to the Newark Housing Authority's grave financial problems is an increased Government subsidy. Äll other proposed solutions remain inefficacious. Management reforms, per se, one of which was instituted by the Newark Housing Authority as of December 1, 1969, can hardly ameliorate the basic problem of expenditures and income outlined above. Raising the rents of public housing tenants by a significant amount is impossible, in view of the extremely low income of the bulk of public housing residents, and their manifest alienation from the main stream of economic and social life. (See attached table No. 2.) Income mixing is also out of the question, because of the enormous demands made on the Newark Housing Authority by low-income families who are the Authority's primary obligation, for whom the current number of public housing units is far from adequate. The Newark Housing Authority must strive to eliminate this inadequacy. It has become impossible to do this while adhering to the established HUD policy of economic feasibility; many of the tenants of Newark's public housing are welfare recipients, or come from broken homes. (See attached table No. 2.) As Congress reaffirmed in the Housing and Urban Development Act of 1968 (H.R. 17989), public housing must seek the national goal of a "decent home and at suitable living environment for every American family."

An increased subsidy, then. from the Federal Government is the only realistic solution to the Newark Housing Authority's financial difficulties. If subsidies can be made available to farmers not to grow their crops, if tariffs can act as subsidies protecting the textile industry, if airlines and other forms of transportation can receive financial benefits which amount to subsidies, surely local housing authorities, which influence the lives and well being of hundreds of thousands of people, should also be subsidized to the point where they can carry on their operations without fear of bankruptcy, and fulfill their goal of providing decent, safe, and sanitary housing to all Americans who cannot afford it otherwise.

In view of all this, especially the increase in costs, due primarily to inflation, and the inability of the Newark Housing Authority to perform its task of providing low-cost housing to all those who need it, we urge Congress not to repeal the Sparkman and Brooke amendments. The present bill, repealing the Brooke and Sparkman amendments, would effectively deprive masses of poor people of public housing, while raising the rents of many present public housing tenants,

instead of providing an operating subsidy for LHAs. It would also restrict cost limits so as to make public housing construction in many cities impossible, or at least insure second rate public housing for the poor. It also seeks no further funds for new housing.

Therefore, the Newark Housing Authority strongly advocates that Congress enact S. 4086, which would permit LHA's to meet their operating costs, as well as provide and maintain essential tenant services. Aside from this legislation, introduced by Senator Brooke, we believe that the legislation introduced by Senator Goodell, S. 4093, should be enacted. This would increase statutory construction cost limits by at least 20 percent. S. 4093, together with S. 4079, introduced by Senator Mondale, which would provide an additional authorization of funds of $150 million are necessary if LHA's are to fulfill their minimum obligations.

THE BROOKE AMENDMENT

The Brooke amendment, as currently interpreted, would provide little or no help to local housing authorities in their search for fiscal integrity. The current policy now permits subsidies only to those LHA's which no longer have the required surplus. LHA's poised on the verge of bankruptcy will apparently not benefit from the Brooke amendment's proposed subsidies.

The situation of the Newark Housing Authority under the current interpretation demonstrates its inadequacy. As of July 1, 1970, rent reductions in the authority's public housing were put into effect, retroactive to March 24, 1970, in compliance with HUD directives pursuant to the Brooke amendment. These reductions result in a potential net. loss in income of $168,000 per year. Prospective Brooke amendment subsidies will amount to $748,000. With a deficit of $700,000 for the past fiscal year, it is obvious that the authority's benefit from the Brooke amendment is very slight, indeed.

In addition, under the current interpretation, if an LHA finally achieves a measure of financial security, and perhaps even a smaÏl surplus, the Brooke amendment subsidies would be automatically withdrawn, allowing the LHA to gradually return to the same precarious financial position it had occupied. The effect of this policy is to commit local housing authorities to a perpetual staff of crisis management, a situation which, looked at from any point of view, is intolerable.