THE HOUSING SHORTAGE: AN AVOIDABLE PARADOX OF PUBLIC POLICY

In the last decade, we have allowed ourselves to drift from a situation of relatively adequate housing supply in most sections of the country to the most acute housing shortage since the late 1940's. Paradoxically, while families double up, occupy mobile homes, or become squatters, housing abandonment has become a crtical problem in many urban neighborhoods.

The combination of code enforcement, low incomes, and the cost of providing decent housing has made private absentee ownership of low income housing untenable. It is impossible for private operators to supply housing meeting minimum standards of decency at costs which low income households can afford and still make a reasonable profit. Yet neither public housing, nor code enforcement, nor urban renewal programs recognize this paramount fact. Instead of seizing the opportunity afforded by the abandonment of housing by present owners to turn over the housing stock to resident or community ownership, we limit ourselves to the unrealistic and unpalatable alternatives of demolition, boarding up, or full-scale rehabilitation. What is needed, now, is a national policy which will promote the transfer of property ownership to its occupants. This means funds for acquisition at distress-sale levels, and for fixing up to meet minimum code standards for immediate occupancy and use.

While, on the one hand, we have permitted our older housing stock to drift prematurely out of use, we have permitted national and local policies to constrain housing production. Nationally, the impact of inflation and inflationary controls has cut new production to less than half the level needed. Locally, zoning and building restrictions caused by or coupled with fear of blacks and poor whites have prevented construction of moderate-cost housing where the market would support anything more expensive.

There are no programs capable of achieving our housing goals and no national commitment to doing 80.

Despite a number of tentative and halting steps, this nation does not haveand pending legislation in our view does not propose any housing programs adequate to meet the needs of low income families while providing freedom of choice and ending racial and economic discrimination. Perhaps a basic reason is that our housing programs for low income families have been limited in legislative scope and funding, and still more limited in the caution with which they are administered. Furthermore, unlike other programs, we have avoided recognition of the profit motive as essential to housing production by the private sector. This country did not got to the moon on non-profit basis, and we will not get private enterprise to solve our housing problems that way either. We have never had anything resembling a national commitment to solve our housing problem. Our goals for subsidized housing, for example, are related to the existence of substandard units, not to the number of families unable to afford decent housing. Nor, despite much rhetoric, does housing have priority within the Federal budget. The Bureau of the Budget in January 1970 estimated net Federal budget outlay for housing in Fiscal 1971 at $732 million, with $449 of this sum expected to be spent by the Department of Defense. This is slightly less than 8 percent of total anticipated federal outlays for social programs. It is $10 billion less than the federal budget for education; $2.5 billion less than that for manpower; almost $20 billion less than for health, and one half billion less than the budget for reduction of crime. (Special Analyses: Budget of the United States, Fiscal Year 1971, p. 110.) While these relationships will change somewhat as a result of Congressional action, the basic point remains: housing expenditures are not only tiny in comparison to need, they are far less than the amounts we spend for other basic social programs.

In housing, as in other programs, we get more or less what we pay for, and we will not meet our housing needs until we are willing to approve programs and appropriations at an adequate level. This level should be determined by the number of people who want and need housing assistance. If this were done, we believe federal housing expenditures would be comparable to present spending for education, health, or other major sectors of the federal budget.

The Need in the Philadelphia Region: At least 350,000 housing units with consumer or producer subsidy. Even in the City of Philadelphia, less than 10% of this need will be met under present programs.

In 1960, the Housing Association estimated that there were in the Philadelphia Standard Metropolitan Statistical Area some 350,000 households with incomes below maximum admission limits for public housing. Some 200,000 of these house

holds resided in the city of Philadelphia. Using estimates of the Delaware Valley Regional Planning Commission, we calculated that during the decade of the 1960's, an additional 60,000 families with incomes below public housing limits would be added to the region's population.

In 1960, the Philadelphia region had less than 20,000 subsidized units, mostly in the city; during the decade some 10,000 additional units received subsidy, again predominantly in the city.

Nationally, in 1960 we estimated that there were at least 15,000,000 households with incomes below public housing admission limits, compared to 600,000 public housing units. With housing costs rising far more rapidly than incomes, the situation is certainly worse today-we shall only know how much worse after the 1970 Census results are available.

The limited subsidy programs available do not serve the very poor, and systematically eliminate those who need help most.

Several years ago, in framing a detailed proposal for housing allowances, the Housing Association concluded that, ideally, housing costs for low income families should be treated as a residual: that is, that the amount low income families should spend on housing would be what is left over after meeting needs for food, clothing, transportation, and incidentals. On this basis, well over half (2 million of the 3.4 million) renter households in metropolitan areas with incomes below the SSA poverty line in 1960 could afford nothing for housing. Recognizing the reluctance of Americans to support meaningful assistance for the very poor on a broad scale, we perhaps wrongly abandoned the residual approach in favor of the more simplistic approach of advocating a norm of 20 percent of income for shelter.

This is the measure against which we have tested the adequacy of housing supply for low and moderate income families, and the economic levels which are served by present and proposed subsidy programs. On this basis, public housing in Philadelphia, with a minimum rent of $33 serves no one with an income below $2000 annually: those whose economic need is greatest. Furthermore, as the attached chart shows, other subsidized housing programs predominantly serve households in the $5000-$8000 income range.

No one, in today's market, should deny the need of families in this income range for housing assistance, particularly if they are to have reasonable choice of tenure or location and an opportunity to occupy new or well-rehabilitated units. This, we assume, is the justification for the new and higher income limits proposed in S. 3639 for subsidized housing programs. In terms of need, they make sense; in terms of where our priorities should be, they do not. All of the present and proposed authorizations are inadequate to provide housing subsidies for the very poor-our term for those with incomes below the Social Security Administration's poverty line. The Housing Association believes that priorities should be given where the need is greatest, not where the cost is least or the provision of subsidies least controversial.

Not only are public housing subsidies inadequate to reach down to the level the very poor can afford, but public housing-despite a veneer of social concern-is fundamentally a real estate operation: projects built and managed by professionals under laws and regulations that put a premium on "efficiency" and cost and corner cutting, not on the needs and welfare of the tenants. Thus the widespread tendency, which the combination of a legal suit and new leadership is changing in Philadelphia, to exclude "problem" families, and to define such families as those who do not conform to middle-class norms.

HUD's vitiation of the "Brooke" amendment to last year's housing act, which we have analyzed in detail, is but one example of the management rather than tenant oriented administration of the program at the federal level. (See our "Racism and Exploitation in Public Housing: HUD and the Brooke Amendment," May 1970). Furthermore, the Brooke amendment, by excluding welfare families, contains a major loophole. In Philadelphia, for example, public housing rents for those on welfare are 53% of the income of a single person, although they drop to 28% for a family of six. More than half of Philadelphia's public housing tenants are on welfare, and thus cannot benefit from the Brooke amendment provisions.

The remedy for the present financial crisis in public housing is more subsidies, not restrictive regulations or tenant repression.

Traditionally, public housing has either excluded very low income tenants or forced them to pay disproportionate amounts of their incomes for rent. This

has been because the subsidy was construed to cover only the capital cost of public housing projects.

During the last decade operating costs have risen sharply; public housing rents have also risen, but by smaller amounts. An estimated 300 to 400 housing authorities have drawn on their reserves, and 39 authorities with more than 1250 units are operating at a deficit.

Section 213 of the Housing Act of 1969 was designed to deal with this problem by clarifying HUD's authorization to subsidize operations as well as debt service. Yet HUD, in implementing this provision, appeared to assume that the problems besetting public housing were primarily management inefficiency and tenant irresponsibility. Secretary Romney has recently testified to "the reluctance of these public housing authorities to face up to the problems incident to keeping rents current with inflation. That is one of the real problems here... (Senate hearings on Second Supplemental Appropriations bill, H.R. 17399, p. 43)

In the last year, the Philadelphia Housing Authority has moved to give greater priority to low income tenants and to displaced families. The Authority has also moved to increase tenant participation and responsibility and to provide better maintenance and related services. It has raised rents for welfare recipients. And we are informed that the current anticipated deficit is $5 million.

We are convinced that there is no way for the Philadelphia Housing Authority or any other housing authority to provide decent housing and adequate services to very low income people without substantially increased subsidies.

Public housing is now producer and management oriented; it can and should be transformed into a consumer oriented program.

Where white, middle-income families are involved, this country has shown itself able to adopt broad-scale housing programs capable of meeting the needs of millions of Americans. The FHA is a prime example. These successful programs have one major characteristic: they are consumer-oriented. If house and buyer met the eligibility standards, they were insured. Despite all the complaints, many of them valid, about FHA policies and shortcomings, the fact remains that millions of white Americans have been served by its programs. With minor exceptions, those served by FHA in new housing have been white, middle income families.

Why not extend the benefits of housing programs to the poor and black people in the same way?

There are many ways through which public housing could be more responsive to consumers. Federal legislation could impose new, consumer oriented requirements. The following measures might well be considered:

A requirement that local housing authority boards be composed predominantly of low income people;

A requirement that local authorities certify as eligible all applicants with incomes below maximum admission limits;

A requirement that applicants be given a choice of tenure, type and location of housing, with the subsidy applied against the rental or mortgage payment for a unit of the applicant's choice;

A requirement that the federal government itself construct housing or provide subsidies in communities where local authorities or agencies are unable or unwilling to provide adequate amounts of subsidized housing;

A requirement that tenants be given a voice in the management of large projects:

A requirement that local authorities provide adequate maintenance and services to maintain a decent environment, and provision of the necessary subsidies. The basic direction of the Administration bill is sound, but its proposals do not go far enough.

In the course of preparing this statement, I have reviewed the provisions of the proposed Housing and Urban Development Act of 1970. The Housing Association has long felt the need for simplification and codification of our myriad housing programs, and we are therefore sympathetic to this effort. We are also sympathetic to the need to make eligibility and subsidies more uniform in their effect. Nevertheless, the bill falls far short of the approach required.

There are, in addition, a number of concerns which I hope the Subcommittee on Housing will consider in acting on this legislation:

1. The subsidies proposed in Title I, despite the exceptions provided, do not go deep enough to meet the needs of the very poor, nor is there a requirement that these needs be given priority.

2. The act should require that the Secretary refuse the benefits of participation under the provisions of the act to anyone who has knowingly or wilfully violated the provisions of any Federal, state or local fair housing or employment legislation. Withholding the benefits of federal programs, we believe, is a far more significant sanction than the occasional fines or minor penalties characteristically imposed on civil rights scofflaws.

3. The declaration of policy in the revised Housing Act of 1937 should, in our view, relate directly to the needs of families requiring assistance, rather than placing emphasis on the need "to assist the several States and their political subdivisions" in providing housing.

4. Consumer involvement should be required in the planning and management of public housing projects.

5. In other to avoid unmanageable costs and densities, there should be a writedown available where public housing involves clearance outside of renewal areas. 6. The appropriateness of limiting interest subsidies for rental housing to nonprofits, limited dividend corporations or cooperatives, while providing that public housing can lease from profit-making entities, should be questioned. It would seem that, as with sales housing or housing leased under public housing, the essential criteria should be the adequacy and cost of the housing provided, not the corporate form of the owner.

7. The availability of open space, sewer, water and other Federal grants should be conditioned on the provision, in the locality, of subsidized housing.

AFTER 21 YEARS, HOUSING SHOULD COME OF AGE

Twenty-one years ago, in 1949, Congress declared the national policy of providing "a decent home and a suitable living environment for every American family." It is not time for housing to come of age, to translate this goal from rhetoric to reality. We believe that actions of the scope and magnitude outlined above will be required. We hope the Subcommittee, and the Congress, concurs.

EXCERPTS FROM HOUSING GRANTS FOR THE VERY POOR, PHILADELPHIA HOUSING ASSOCIATION, 1966

COST OF PROGRAM AND SOURCE OF FUNDS

Estimating the cost of the housing subsidy program is somewhat like estimating the cost of the space program. We know our objective, but we have only very crude measures based on Census figures that are now five years old by which to calculate costs.

With this caveat, we make the attempt. The calculation is based on 1960 Census "cross-tabs" for renters living inside of all standard metropolitan statistical areas in the United States.' Basing the subsidy, as recommended above, on the cost of units by household size, we find that using the residual approach the subsidy would be $2.3 billion annually; requiring recipients to pay 20 percent of income would reduce this figures to $1.7 billion annually; requiring recipients to pay 25 percent of income for shelter would reduce it to $1.4 billion annually. These costs are for subsidy alone, and do not reflect the cost of administration. (See Appendix C for the calculation.)

We estimate that $50 million would be needed annually to provide housing subsidies for all renters in the Philadelphia standard metropolitan area with incomes below the public assistance standard, using the residual approach.

We recognize that this amount is astronomical compared to present public expenditures for housing. In 1964, cash income from all housing and community development programs exceeded expenditures by $80 million.2

It might be pointed out that the federal government now gives subsidies, in the form of income tax deductions, to home owners, and that these subsidies benefit the affluent far more than the poor. It has been calculated, for example, that in 1962 the federal government spent $820 million to subsidize housing for poor people ($157 million for public housing, $552 million for public assistance, and $111 million for income tax deductions). At the same time, the government "spent" $2.9 billion to subsidize housing for the affluent in the form of income tax deductions. (Roughly $2 billion of this was tax saving from deducting mortgage interest payments.) Furthermore, this tax saving benefits the wealthy far more than the poor. We mention this not to argue the merits or demerits of our present tax structure; rather, we wish to point out that an equivalent amount spent on housing the nation's poor would go a long way toward solving our most critical housing problem.

Nor, we believe, can it be argued that we cannot afford a housing subsidy program. The total cost is a fraction of the revenue foregone by the tax cuts of 1964 and 1965, and the stimulus to the economy would certainly have been as great. Indeed, it has been calculated that at present tax levels the amount available for new expenditures will increase at a rate of approximately $4 billion annually, after allowing for increased population growth. Therefore, were it not for increased defense spending, a housing subsidy could easily be financed if given a high enough priority.

Because of the magnitude of the amounts involved, and the very great difficulty of state and local governments in meeting present needs out of tax revenues, we recommend that the entire cost of the subsidy program be paid by the federal government.

With the federal government shouldering the cost, it is doubtful if state and local governments would refuse to participate in the program. Thus, it would be widely available soon after adoption. Furthermore, it would minimize local resistance to the federal standards for eligibility of recipients and controls over the quality of housing. Finally, it would deal effectively (for housing, at least) with the situation that arises in most public assistance programs, where the minimum standard is set at one level, but the actual amounts provided are much lower.

1 We have here considered only incomes and housing costs of renters, making the wholly arbitrary assumption that the needy owners will be counterbalanced by renters who have assets and by underreporting of income in the Census. (For example, 15 percenter of renter households in the PSMA with incomes below $2,000 reported paying more than $80 per month in rent; data from the BLS survey of consumer expenditures and income show that average expenditures exceed average income for a substandard proportion of low income families.)

2 The net cost to the federal government of these programs varies widely. In 1956, for example, income exceeded expenditures by $628 million (the highest amount on record); in 1959, the year of heaviest net expenditures for housing and related programs, the net cost to the government was $970 million. Source: Annual Report of the Council of F nomic Advisers, January 1965, Table B-58.

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