It has always been my aim to be responsible for dwelling units which will provide decent and lasting housing, not only to satisfy the urgent housing needs of the occupants, but also to improve the environment and remove blight from our cities.

These multi-family housing units have been built, are in construction, or are planned for cities ranging from Ft. Myers, Florida to Wilmington, Delaware. After reading S-3639 I would like to bring to the attention of this Committee certain experiences which I believe have impeded or prevented the construction of much needed housing.

Public housing seemed to be maintenance oriented. Under Public Housing programs, with government in fact underwriting the entire cost, quality construction can be provided which will assure maintenance free operation of these housing units for many years to come.

On the other hand, FHA financed housing seemed to be cost oriented. As a result it is virtually impossible to construct at the present time housing under FHA programs which either will not require an inordinate amount of repair and maintenance or which will rapidly deteriorate and as a result will perpetuate the slums it is designed to replace.

Due to the fact that interest, fees and other administrative expenses are being considered part of the construction cost instead of expenses over and above the cost of construction, FHA financed multi-family housing at the present time only has available on the West Coast of Florida construction money allowing the expenditure of $12.00 per square foot. At present wages and material costs it is impossible to build decent and lasting housing on the West Coast of Florida at $12.00 per square foot. Inflation in this country will prevail as long as the federal government and the more than 81,000 state and local governments will continue their spending to increase the demand of individuals for goods and services above the level of their own efforts and the basic law of supply and demand. This will continue to drive up wages and other construction costs and will further aggravate this situation.

On the other hand, under Public Housing plans. $20.00 per square foot are being made available for construction on the West Coast of Florida. Decent and lasting housing can still be built for that amount.

Therefore it is my recommendation that the Housing Act of 1970 provide the following:

1. Adequate money for the construction cost of decent and lasting housing irrespective of the specific program under which such housing is being financed. The method of financing does not affect the basic costs of construction labor and construction material.

2. Construction manuals for all government financed or subsidized housing should be standardized and made uniform. There is no reason why, for example, the size of kitchen cabinets should differ in federally subsidized or financed housing except, of course, with the size of the dwelling unit or the number of persons occupying it. This is especially important for the effective utilization of modular housing as envisaged by operation "Breakthrough."

3. Government closing procedures for all federally subsidized or financed housing also should be standardized. This will result in significant savings in time and money on the part of government officials, private enterprise and individuals participating in such ventures.

4. Payment, accounting, auditing, inspection and change orders procedures also should be standardized and unified. Again this will result in significant savings in time, money and effort of government and private personnel.

5. Finally, wage rates and regulations for federally subsidized or financed housing also should be standardized on a regional basis.

I believe that the above recommendations, if incorporated in the current legislation, will serve the public interest by stimulating the construction of decent and lasting housing for those who need it most.

APPENDIX C

Answers to Questions of Members of the Committee from the Department of Housing and Urban Development

QUESTION BY SENATOR SPARKMAN

Question: It has been suggested by many people interested in the renewal process that the renewal program has not been able to deal (through specific lack of authority) adequately with the problems posed by industrial and commercial obsolescence and with the need in some cities, to relocate low utility land use out of areas that might better be used for housing. As you know, the locational needs of industry and commerce have changed considerably over the last three to four decades, and we have a great deal of land in the inner-city which is stagnant, under-utilized, and adversely affecting the entire innercity. Also, there seems to be a lot of potential opportunities for the use of air rights in renewal. Shouldn't the program be modified to reflect these problems? Answer: Under the existing renewal program, which is generally limited to slum and blighted areas, uneconomic uses may be removed within a designated urban renewal area, even though the buildings are basically sound, if they are incompatible with general plan objectives. In order to make under-utilized land within a renewal area suitable for redevelopment, necessary preparation work would be approved. The construction of platforms and foundations for air rights sites over facilities which have a blighting influence is permitted if the cost of providing the space is not relatively more expensive than providing cleared land for the same use or, if higher, the cost is justified by the achievement of important community objectives.

Notwithstanding this degree of flexibility, present urban renewal authority would not extend to certain additional circumstances as when land is underutilized but the area is not blighted within the meaning of the present law. In any case, such authority should be used only when the costs involved in making underutilized lands available would be either equal to or less than the market value of the reclaimed land or when the amount of necessary subsidy is reasonably related to the public purpose to be served. The latter test would be most likely to be met when the land in question is strategically located for some specific purpose that cannot be served by other available land. We would not favor any proposal that would involve the use of subsidies for the creation of platforms or similar preparatory work or for removing natural obstacles (as in the case of land under water or ravines) in order to create higher utility land when the economic or social value does not warrant the subsidy required. Both the Department of Housing and Urban Development and the Office of Management and Budget would, of course, want to carefully review any proposal, including the detailed safeguards, to extend the urban renewal law.

If any such proposal were to be approved, it should be carefully integrated with the present urban renewal program so as to avoid the creation of separate categorical programs with varying benefits and varying requirements applicable to overlapping situations.

QUESTIONS BY SENATOR HOLLINGS

Question 1: Mr. Secretary, in the April 2, 1970. message from the President concerning the Second Annual Report on National Housing Goals, it was indicated that the mobile home industry might contribute greatly to meeting the current housing situation.

Could you please tell me of any specific plans or recommendations that HUD might have concerning mobile homes?

Answer. We have had very little activity under the new FHA programs, authorized by the Housing and Urban Development Act of 1969, for financing the purchase of mobile homes. We believe this results from the present restriction

on the discount rate which provides the lender with an effective net yield of not much more than 8 percent per annum, whereas, the net yield on non-insured loans is considerably higher and in the range of 12 to 14 percent. In the Administration-proposed Housing and Urban Development Act of 1970 (S. 3639) we are proposing that the discount rate on mobile home loans be established by the Secretary at such rate as he determines necessary to meet the loan market. Until the Secretary has this authority to set a realistic discount rate, we do not anticipate an increase in the activity under our mobile home loan program. Question 2: Do you feel that the expansion of Federal participation in the mobile home or modular home area in any way conflicts with the conventional housing industry?

Answer. Departmental activity in the mobile home or modular construction field does not conflict with the conventional housing industry. The production of housing in the past few years has not kept pace with the demand for new housing. We are interested in the development of factory produced housing insofar as it results in reducing housing costs and increases the production facilities for housing. No single method of housing production will be able to satisfy the nation's housing needs. We are certain that the demand for housing will be sufficient, for a long period of time, to provide opportunities for producers of all types of housing.

Question 3: Under the Soldiers' and Sailors' Relief Act, state and local jurisdictions are prevented from taxing the personal property of service presonnel. Under a 1968 case in a Federal court in Pennsylvania, the mobile home has been considered to be personal even though it was permanently attached to the land and connected to water, sewerage and electrical facilities and, therefore, specifically exempted from local taxation. Many jurisdictions are suffering from this ruling in that they are required to provide these facilities but are not receiving proportionate tax benefits. Do you feel there ought to be some adjustment, especially if there is consideration given to Title II funds, which are considered with real estate mortgages, as opposed to Title I funds, which are limited to chattel mortgages?

Answer: The FHA will accept for Title II home mortgage financing, mobile or modular homes that are constructed to meet FHA minimum property requirements and are permanently affixed to the land. If in some states, such as Pennsylvania, this type of housing is still considered personalty, the lender would be precluded from using the FHA home mortgage programs. We believe that the appropriate solution to this problem is a change in the State law.

Question 4: Under the present law, FHA will guarantee a loan for the purchase of a mobile home to be used as the buyer's principal residence and FHA insures loans on mobile home parks. Do you feel that it would be advisable to consider the use of Section 235 and 236 concerning rent and loan subsidies?

Answer: We have just placed into operation our new FHA program, authorized by the Housing and Urban Development Act of 1969, for financing the purchase of mobile homes. We have not had sufficient experience in the program to make a judgment as to whether a subsidy is needed comparable to the type available in Section 235 and Section 236. After we have had more experience with the program we will be able to make a determination on this question.

Question 5: Unfortunately, under the existing law concerning FHA loan guarantees for mobile homes, it is impractical and many times impossible for the elderly to participate. Do you feel there ought to be separate consideration given to this group?

Answer. We have not had sufficient experience in our new mobile home loan program to identify any special problems with respect to its use by elderly persons. If separate considerations need to be given to this group, we will develop recommendations to meet such need.

Question 6: What has been the experience of HUD concerning the interest and participation in mobile home development in terms of parks and residential communities?

Answer: The liberalizations of the terms and conditions for mobile home park mortgage insurance in April of 1969 generated interest in this program. This terest was manifested by a large number of letter inquiries and personal visits the central office. Press releases from the Secretary's Office augmented by ches on the subject heightened developer interest. This interest was coned to participation in the latter part of 1969. Further modification and Falization was accomplished in legislation enacted in December 1969.

Based on a production estimate by the Mobile Home Manufacturers Association of 400,000 units for 1970, FHA set a goal of 100,000 units committed or endorsed for insurance in the calendar year 1970. A projection of statistics presently available indicates that projects encompassing 45,000 spaces are committed or have feasibility letters issued as of June 30, 1970.

Question 7: Has the experience of HUD shown that the use of mobile homes could be equally beneficial to low income rural families as well as low income suburban families?

Answer: Yes. The majority of applications for mobile home park mortgage insurance indicate rural locations. In recent months we have received a number of applications which identify the mobile home park site as being within the confines of, or adjacent to, small rural communities. It is our understanding that in some instances mobile home parks are supplying the replacement for deteriorated rural housing which cannot be replaced as permanent housing, due to the unavailability of long term financing.

Question 8: Has HUD had any experience in working with the question of zoning concerning the development of mobile home parks and what more must be done in this area?

Answer: Restrictive zoning is a major deterrent to more extensive production of mobile home parks. To a large extent negative attitudes and the resulting code restrictions are the outgrowth of early trailer parks contiguous to many metropolitan areas which have become eyesores. The recognition of the mobile home and the well designed mobile home park by the President and the Secretary of HUD as an important adjunct to national housing goals is having a salutory effect on zoning authorities in some areas. The participation by HUD in the mobile home park program and the assurance that parks will be built to FHA standards is also a plus factor with zoning boards.

The presentation by developers to zoning boards of well planned proposals, and the impact of completed well designed HUD insured parks will continue to be helpful. HUD officials have assisted zoning boards by explaining FHA standards and requirements for mobile home park development.

Question 9: In September 1969 hearings were held on a bill I introduced to allow the FHA loan guarantee of mobile homes. William B. Ross, who was then Acting Assistant Secretary for Mortgage Credit and Acting Federal Housing Commissioner, indicated that a study was being carried out by the Bureau of Census on the durability or extent of depreciation of mobile home units. He indicated that a report would be ready in 1970. I am wondering whether that report has been completed or whether or not you have any interim statistics along this line.

Answer: HUD has a research and development contract with the Census Bureau to study the durability of mobile home units. The first series of tests have been completed and field work will be started on a second set of tests in September 1970. We do not have sufficient data at this time to draw any conclusions. It is expected that the study will be completed in the latter part of the summer of 1971.

QUESTIONS BY SENATOR BROOKE

Question 1: I would like to raise certain issues with respect to the so-called "Brooke Amendment” which was enacted as part of last year's Housing Act. As you may recall, that legislation was designed to accomplish three purposes: to eliminate operating deficits which existed in public housing authorities when the Housing and Urban Development Act of 1969 was signed into law; to assure that local housing authorities have sufficient funds to maintain adequate operating and maintenance services and reserve funds; and to make up the loss in rental revenue caused by reducing tenants' rent to 25 percent of their incomes. I am aware of certain provisions in your 1970 proposal which seek to address the same concerns; however, for purposes of the record, I would like to have you review certain provisions which I intend to introduce shortly with a view toward determining whether they accomplish the three aims which I have mentioned (the "Explanation of Proposed 'Housing and Urban Developm Amendments of 1970'" and statutory language pertaining thereto follow

EXPLANATION OF PROPOSED "HOUSING AND URBAN DEVELOPMENT AMENDMENTS OF 1970"

Last year, Senator Sparkman and Senator Brooke introduced legislation designed to alleviate intolerable conditions in public housing projects throughout the nation. The "Sparkman Amendment" made it clear that Federal assistance to local public housing authorities was not limited to debt service requirements, but could be extended to cover operating needs as well.

The "Brooke Amendment" authorized the Department of Housing and Urban Development to contract with local housing authorities to make payments for three purposes: first, to eliminate operating deficits which existed in public housing authorities when the Housing and Urban Development Act of 1969 was signed into law; second, to assure that local housing authorities have sufficient funds to maintain adequate operating and maintenance services and reserve funds; and third, to make up the loss in rental revenue caused by reducing tenants' rents to 25 percent of their incomes. At the same time, it placed a ceiling equal to 25 percent of their incomes on the rent which public housing tenants pay. Seventy-five million dollars in contract authority was authorized for these three purposes; however, Congressional intent was clear as to HUD's ability to provide funding in excess of this amount-up to the annual statutory maximum as specified in the Housing Act of 1937, as amended-if the newly authorized funds were insufficient to meet the urgent needs which existed. It was also clear that Congress committed itself indefinitely to fund the three activities specified and did not place time constraints on the assistance program embodied therein. Thus, sufficient funds were provided to make public housing authorities "whole" by eliminating past operating deficits; to insure that public housing tenants were not forced to pay a disproportionate share of their incomes for rent at a time when inflationary pressures were driving the operating costs of public housing not forced to pay a disproportionate share of their incomes for rent at a time projects higher each month; and to insure that, in the future, public housing authorities would have sufficient funds to provide those services, repairs, and training programs which are essential if the goal of "a decent home and a suitable living environment for every American family" is to be honored.

The attached provisions are designed to restate Congressional intent as embodied in sections 212 and 213 of last year's Housing Act. It is deemed necessary to codify language contained in last year's Senate-House Conference Report on this subject to insure that Congressional intent is carried out.

Last year's Act withheld rent reduction benefits if such would result in reductions in welfare (or public assistance) payments. This provision was designed to insure that the payment of HUD subsiides did not enable local welfare agencies to cut back on their commitments. At the same time, the Secretaries of HUD and of HEW were charged with the responsibility of establishing policies within their respective departments which would aid in the implementation of this provision. To date, these policies have not been formulated. Section 1 of the proposed "Housing and Urban Development Amendments of 1970" is designed to prevent local welfare agencies from reducing public assistance payments as a result of the payment of HUD subsidies.

Misinformation exists with respect to which tenants will be eligible in computing the rent reduction subsidy benefits. Congressional intent is clear that no family residing in public housing after March 24, 1970 is required to pay more than 25 percent of its income for rent. It is also clear that any deficiency arising in a public housing authority's operating revenues as a result of this statutory ceiling will be covered fully by Federal subsidies.

Thus, the Federal Government is required to pay local housing authorities for the loss in rental income due to the reduction of tenants' rents to 25 percent of their incomes. It was envisioned that Federal assistance would be provided based on a local housing authority's annual budget of estimated cost, in relation to its anticipated income. Local housing authorities should have been requested to submit an amendment to their fiscal year 1970 budgets to reflect the loss of rental revenue due to the rent reduction.

With respect to "adequate operating and maintenance services and reserve funds", it was contemplated that reserve funds should be restored to adequate levels and additional operating and maintenance services should be provided to insure that a sound physical and social environment is maintained. Clearly, neither tenants nor housing authorities could be expected to provide sufficient revenues to attain these goals-given the present state of public housing. Therefore, Federal subsidies were contemplated.