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 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 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 we are to honor the commitment of "a decent home and a suitable living environment for every American family."

These two pieces of legislation hold the promise for reversing serious trends which have been occurring in the field of public housing in recent years. I am saddened to say that these provisions have not been implemented in the vigorous manner Congress intended. Bureaucraticmachinations have undermined much of the hope and confidence which these provisions gave tenants and housing authorities.

Despite the provision for $75 million in new authorizations specifically earmarked for the three purposes enumerated above the administration requested only $33 million in appropriations for fiscal year 1971 even though administration figures indicated that operating deficits alone stood at the $100 million level.

In addition, HUD saddled these provisions with a restrictive interpretation which ignores specific language in the Senate-House conference report as well as statements made by members of the Senate and the House Banking and Currency Committees at the time this legislation was enacted.

Senate bill 4086 would codify congressional intent as embodied in sections 212 and 213 of last year's Housing Act. It is unfortunate that additional legislative action on this subject is necessary. However, there appears to be no alternative at the moment.

Let me address a few points directly. 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 subsidies did not enable local welfare agencies to cut back on their commitments. At the same time, the Secretaries of Housing and Urban Development and of Health, Education, and Welfare were charged with the responsibility of establishing policies within their respective departments which would aid the implementation of this provision. To date, confusion reigns at the local level with respect to the ability of welfare tenants to benefit from the provisions of the 1969 act.

Section 1 of S. 4086 is, therefore, designed to prevent local welfare agencies from reducing public assistance payments as a result of the payment of HUD subsidies. I further urge the Secretaries of HUD and HEW to report to the Senate Banking and Currency Committee concerning actions taken by their departments to agree on common

policies regarding public housing rents paid by welfare recipients and to effectuate congressional intent regarding this subject.

Misinformation also 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 the 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. However, they continue to complain about the absence of information concerning the availability of funds to meet deficiencies arising as a result of 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.

Among the operating the maintenance services which would be eligible for Federal subsidies if tenant rent payments were insufficient to cover their costs are the following:

Tenant counseling on family budgets and on care and upkeep of property;

Guard and other costs relating to the physical security of project residents;

Tenant access to available community services relating to employment, health, welfare, education, and personal counseling;

Effective management-tenant liaison on all aspects of housing administration, management, and maintenance;

Recreational equipment and facilities;

And adequate and timely repairs to structures, including the removal of all code violations pertaining thereto.

HUD has failed entirely to implement this aspect of last year's legislation and, therefore, legislative action is required to reaffirm congressional intent on this subject.

Section 2 of Senate bill 4086 clarifies the fact that the determination of tenant incomes must reside with local housing authorities subject only to HUD oversight with a view toward correcting abusive practices. The Department already possesses the latter authority and, therefore, statutory changes are unnecessary.

Income determination regulations recently promulgated by HUD served as a vehicle for altering longstanding policies concerning local autonomy and, therefore, further contributed to local confusion on this subject. We must not reverse time-tested practices of providing local flexibility to meet individual needs and circumstances.

In defining income pursuant to the 1969 act, HUD has taken a very narrow view of possible deductions. Thus, if a four-person family includes a husband who earns $4,000 per year and yet is temporarily disabled because of medical reasons and incurs substantial hospital bills in the process, the latter expenses are not deductible. This inequitable solution also arises with respect to other deductions which are not allowed. Rather than seeking the enactment of a provision which increases the burden on low-income families, I urge the retention of authority at the local level to determine income and deductions. Section 3 of Senate bill 4086 which is designed to codify congressional intent concerning sections 212 and 213 of the 1969 Housing Act specifies that the Secretary of Housing and Urban Development is required to amend annual contributions contracts to provide payments up to the statutory maximum allowable contribution for three purposes:

To assure the low-rent character of the projects involved;

To achieve and maintain adequate operating and maintenance services and reserve funds;

And to cover any public housing agency's operating deficit, including deficiencies in reserve funds, for the fiscal year which includes December 24, 1969.

The provision authorizing payments "to assure the low-rent character of the projects involved" does not mean that public housing tenants should be required to pay 25 percent of their incomes for rent. It does mean, however, that payments in excess of 25 percent represent a disproportionate share of their incomes which cannot be tolerated and which are prohibited since the enactment of the Housing and Urban Development Act of 1969.

The Department of Housing and Urban Development has requested a total of $19.5 million in fiscal years 1970 and 1971 to satisfy partially the requirement in last year's act that funds be provided to cover operating deficits, including deficiencies in reserve funds, for the public housing authorities' fiscal year which included December 24, 1969. As previously mentioned, the need for such funds approximates $100 million. In light of the fact that HUD has indicated its willingness to discharge this obligation at the earliest possible date, I am hopeful that this can be accomplished by the end of the next fiscal year.

With respect to the provision for a continuing flow of funds to public housing authorities designed to achieve and maintain adequate operating and maintenance services and reserve funds, I believe this aspect of last year's provision represents potentially the greatest hope for improving the quality of living in public housing. Specifically, I foresee the channeling of Federal funds to public housing authorities designated to enable them to increase operating and maintenance services such as those mentioned earlier in this statement.

Despite congressional intent to the contrary, HUD regulations promulgated concerning this legislation conditioned the payment of funds on "satisfactory standards of management and tenant responsibility." While I certainly agree with the need for management and tenants to act responsibly, I do not believe the payment of funds for improving the quality of tenants' living accommodations can or should be made dependent on the performance of absentee managers or that vague and possibly unconstitutional standards should be allowed to govern and possibly intimidate legitimate actions on the part of tenants.

I have given thought to rent payment provisions contained in the administration's proposed 1970 Housing Act. However, I have concluded that these provisions are not workable in their present form. This legislation would require public housing tenants to pay 20 percent of their incomes under $3,500 for rent and 25 percent of their earnings above that dollar amount for rent. The HUD proposal would result in substantial rent increases for many low-income families, particularly families with children. I do not believe that would be acceptable.

Section 4 of Senate bill 4086 requires the Secretary of Housing and Urban Development to file, as part of his annual report on housing goals, a documented statement of the current effectiveness of statutory construction cost limits for title II of the National Housing Act, plus a recommendation as to the appropriate cost and mortgage limits for the ensuing 20-month period. These cost and mortgage limits would automatically become effective unless Congress acted within 60 days. Recent experience has shown that the failure of cost ceilings to keep pace with rising costs has curtailed much-needed public housing construction as well as other federally assisted construction.

Section 5 of this bill deals with the section 23 leasing program. Clear authority would be given to HUD to extend the program to newly constructed housing as well as to existing units. The evidence indicates that the section 23 leasing program has been highly successful and deserves broad congressional support. Its effectiveness can be expanded still further by confirming its coverage of units which are planned or in the process of construction as well as those which currently exist.

Section 6 of S. 4086 would extend the term of the lease to 10 years with an option to renew for an additional 10 years. Section 7 would remove the requirement for local governing body approval prior to undertaking a leasing program. The latter practice has merely served to inhibit the expansion of this worthwhile program.

Finally, section 8 of the bill is designed to clarify any uncertainty as to the right of tenants to serve as commissioners of local housing authorities. Certainly, those residing in public housing are in the best position to understand the needs and concerns of local residents and to respond accordingly. We should encourage participation by those persons whose well-being is most affected.

I have also introduced two companion pieces of legislation-S. 4087 and S. 4088. I will not discuss S. 4087 which deals with the problem of abandoned properties and neighborhoods since extensive hearings were held on this proposal yesterday. I am gratified by the support of the many witnesses who testified on the bill.

Senate bill 4088 would establish a housing allowance program on an experimental basis. Federal subsidies would be available equal to the difference between 25 percent of a tenant's monthly income and the maximum fair market rentals for standard housing in the community involved. The benefits provided for public housing tenants under the "Brooke amendment" would thereby be extended to those persons who qualify for public housing, but are unable to obtain housing accommodations.

I have offered this particular proposal with the hope that it will prove successful and will generate much-needed relief to low income. families in the future. The housing allowance would be limited

those tenants who qualify for public housing and to those communities where the Secretary of Housing and Urban Development determines that an adequate supply of standard housing exists. The latter requirement is included in the proposal to prevent the payment of housing allowance funds from being translated into rent increases because of the shortage of available units.

While the housing allowance concept is not new, it is one of the few proposals which may enable low-income families to meet their housing needs on reasonable terms, avoiding the expenditure of a disproportionate share of income for rent.

I have offered these three bills with the hope that serious consideration will be focused on the concerns of low-income families during this session of Congress. There is a growing sense of hopelessness among this segment of our population which must not be perpetuated. The promises of recent years have too often lost their credibility with low-income families as well as local officials who are often frustrated in their efforts to meet local needs. It is no solution merely to rescramble existing programs, if we do not provide the necessary funds and wherewithal to address the pressing problems at hand.

I believe, however, that we are up to the tasks at hand. I am confident this committee, the Congress and the country can find creative answers to the problem being discussed here today.

The first witness will be Mr. Eneas Kane who is the president of the National Association of Housing and Redevelopment Officials. Mr. Kane is well known in the housing field and brings exceptional expertise to this committee. We are very pleased to have you with us, Mr. Kane.

And Mr. Kane, will be accompanied by Mr. Daniel Finn who is the Administrator of the Boston Housing Authority, a longtime personal friend and fellow classmate at the University of Boston and responsible for a very distinguished housing authority, not only in Massachusetts, but in the country.

We are very pleased to have both Mr. Kane and Mr. Finn in this first panel.

Mr. Kane, would you introduce the persons at the table with you? STATEMENT OF ENEAS KANE, PRESIDENT, NATIONAL ASSOCIATION OF HOUSING AND REDEVELOPMENT OFFICIALS; ACCOMPANIED BY DANIEL J. FINN, ADMINISTRATOR, BOSTON HOUSING AUTHORITY, JOHN D. LANGE, EXECUTIVE DIRECTOR, NATIONAL ASSOCIATION OF HOUSING AND REDEVELOPMENT OFFICIALS, AND MARY K. NENNO, ASSOCIATE DIRECTOR, RESEARCH, NATIONAL ASSOCIATION OF HOUSING AND REDEVELOPMENT OFFICIALS

Mr. KANE. Thank you, Mr. Chairman.

On my left, we have Miss Mary Nenno, associate director for research in NAHRO, as a resource person.

And on my far right, Mr. John Lange, the executive director of the National Association of Housing and Redevelopment Officials. Senator BROOKE. Miss Nenno and Mr. Lange, we are pleased to have you both with us.

You may proceed.