in acquiring a home, but our greatest problem today is not with the average family's home needs.

True, interest rates are still high, construction costs are very high, land costs are high and rising, closing costs are burdensome, local taxes are going up, zoning laws and building codes are often outdated, sewers in the suburbs are inadequate for further developments, pollution is growing worse-all of these are problems for the 92% of the American population which has reasonable access to better housing.

The remaining 8%, however, are our biggest challenge right now, for they need the most and have the least, and are the most difficult to help. Yet, if we don't put our brains to work solving their crisis, every major city in the country is doomed. How do we address ourselves to that problem?

(The following are written questions submitted to Mr. Romney by Mrs. Sullivan, along with Mr. Romney's answers:)

Question 1. Why is a statutory ceiling imposed on outstanding annual contributions contracts of $100 million? Doesn't this cut back on recent funding levels? In St. Louis the Pruitt-Igoe project needs as much as $30 million if the buildings are to be salvaged. Answer. From the time the modernization program was initiated in 1968, contract authority to make $67.5 million in annual contributions has been used or allocated for modernization purposes, through June 30, 1972. For each of fiscal years 1971 and 1972, $20 million in contract authority has been allocated for this purpose. The $100 million in contract authorization for modernization provided in H.R. 9661 would include the amount of all annual contributions authority allocated up to June 30, 1972, plus an additional amount which could be used after June 30, 1972. Thus the $100 million authorization would be sufficient to support a commitment in fiscal year 1973 of up to $32.5 million in annual contributions to finance modernization activities, or substantially higher than previous levels of annual funding commitments for this purpose.

Typically, the cost of modernizing a project is amortized over a long period of years, up to the remaining contract term on the original annual contributions contract. (Under H.R. 9661 a new 40-year contract could be entered into to finance the modernization of a project). Thus, for example, the financing for the repair of one large project at a cost of $30 million would not be fully repaid in the first year, or even in several years. The annual contributions with respect to such a project might only be $2 million or even less, depending on the financing arrangements. Stated another way, under financing arrangements currently prevailing, $32.5 million in authorization could support at any given time about $400 million worth of modernization work. With the longer contract terms possible under H.R. 9661, substantially more in modernization costs could be supported with the same amount of authorization.

Question 2. Why have existing requirements that assisted housing under the Sec. 221 and Sec. 235 programs comply with local health and safety laws, such as building and housing codes, been dropped? Shouldn't these protections be extended to all housing insured or assisted under FHA or public housing programs?

Answer. It is true that the redraft provisions in Sections 401 and 402 of the proposed Revised National Housing Act do not contain the language in Section 221(d)(2) of the present National Housing Act which requires that the mortgage be secured by property upon which there is located a dwelling that meets "the requirements of all State laws, or local ordinances or regulations, relating to the public health or safety, zoning or otherwise, which may be applicable thereto, These requirements are presently specified in the administrative instructions for all FHA insured mortgages, although the statutory requirement only appears in Section 221. Because it is intended to carry over these administrative requirements in all programs under the proposed Revised National Housing Act, the statutory language was omitted as being unnecessary.

Question 3. The Administration bill requires a seller's warranty under the home mortgage insurance program only where HUD has given pre-construction plan approval to new housing. This cuts back on the bill you sent up last year whose warranty provisions also covered new housing without pre-construction plan approval. What about that and rehabilitated or existing housing? If a warranty as such is not feasible for rehabilitated or existing housing, what sort of assurances in lieu of a warranty could be required inspection certificates from licensed repairmen as to the estimated useful life of major structural components? Your proposed warranty requires notice of breach within one year. Isn't that too short a period for some structural defects to appear?

Answer. The warranty provision contained in Section 401 (f) of the proposed Revised National Housing Act is a rewrite of the same provision as is now effective under Section 801 of the Housing Act of 1954.

It has been our experience that most structural defects will show up within the first year following construction; and it is for this reason that we have not made the warranty for a longer period. However, the provisions in Section 704 of the proposed Revised National Housing Act (the same provisions as now are in Section 518(a) of the National Housing Act) will continue to provide the added HUD protection to the homeowner against structural defects which are discovered during the first four years of ownership of a newly constructed dwelling that has been approved by the FHA or VA prior to the beginning of construction.

Last year's bill contained a provision that would have allowed the same mortgage limits on a newly constructed house less than a year old that are now available only for housing approved by the FHA or VA prior to the beginning of construction. To compensate for the extra insurance risk involved in permitting such higher loan limits and to provide more protection to the homeowner in lieu of approval prior to the beginning of construction, a special warranty provision was included. Under the proposed provision the builder or seller of the property would have been required to supply a one year warranty against latent or structural defects.

This year's bill, the proposed "Housing Consolidation and Simplification Act of 1971", carries over the present concept of limiting housing less than one year old that has not been approved by the FHA or VA prior to the beginning of construction to a lower ratio of loan to value than is available where such prior approval is obtained. For this reason, the special warranty provision contained in last year's bill has not been included.

We do not believe that a statutory requirement for a warranty with respect to existing housing is needed. We have recently placed into effect, in connection with Section 518(b) of the National Housing Act, the requirement that a seller of an existing house that is financed under Section 235 place in escrow 5 percent of the proceeds of the sale to serve as a fund that can be used by HUD to repair any structural or other defects that are encountered during the first year of ownership. Also, the seller is required to reimburse HUD for any expenses in addition to the amount placed in escrow that may be incurred in repairing structural or other defects that are encountered during this first year. These requirements would be carried over in administering the new assisted program under Section 402 of the proposed Revised National Housing Act.

Mr. BARRETT. Mrs. Dwyer.

Mrs. DWYER. Thank you, Mr. Chairman.

Mr. Secretary, has this program that you have unveiled this morning been discussed with city mayors and county officials and State governments such as Governors?

Secretary ROMNEY. You mean the housing program or the special revenue sharing?

Mrs. DWYER. Special revenue sharing.

Secretary ROMNEY. Yes. Special revenue sharing has been discussed extensively with Governors and mayors and county offiicals.

Mrs. DWYER. What has their reaction been?

Secretary ROMNEY. The general reaction has been favorable. The urban community development revenue sharing program doesn't affect Governors as much as it does mayors and county officials, because the money goes to local officials. But the general attitude is a favorable attitude.

Now, there are some differences with respect to some details. And you will find some who would like to continue the categorical programs, and some who are not adequately informed yet as to how this would operate, and who are fearful that they might fare worse under the new proposal than under the present proposals. The hard facts are that all would be assured of doing well or better under the new proposal, and they would have freedom of action.

Now, you have some mayors who don't want to be responsible. After all, this shifts the decisionmaking from Federal officials. And there are those who like to be able to pass the buck and say, well, after all, the Federal Government is responsible for that, those bureaucrats. It has been a pastime in this country to blame the Federal bureaucrats. This shifts the money and the responsibility and the accountability to local officials. And I think it makes a lot of sense. You have some divided viewpoints, but in the main they are for it.

Mrs. DWYER. It is going to be a tremendous undertaking to sell this program throughout the country, is it not?

Secretary ROMNEY. I think it is pretty well accepted. Floyd Hyde here is very close to the mayors. He would have been president of the League of Cities if we hadn't persuaded him to come and join us. And he has been close to the mayors and the local officials in this connection.

Floyd, do you have some comments you want to add?

Mr. HYDE. I might just echo what the Governor has said generally. But more specifically, Mrs. Dwyer, just to give an example, at the recent meeting of the board of directors of the League of California Cities, which is the largest State in population, they unanimously endorsed this specific proposal. But I think on balance, as the Secretary indicated, I would say the mayors do not oppose it in principle, at least in any forum in which I have discussed it. And I think I have appeared before most of the State municipal leagues during the last 2 or 3 months that have met in one form or another. In varying degrees they have a problem about specific details here or there in the bill. But I think it is safe to say that the fundamental concept is widely supported by the vast majority of mayors and local officials. Mrs. DWYER. Thank you, Mr. Chairman.

Mr. BARRETT. Mr. Ashley.

Mr. ASHLEY. Mr. Secretary, on page 36 you refer to a part of the goals report which reads: "What really counts is whether there is a sufficient total supply of decent housing available in the right places, and whether all Americans have the basic opportunity and wherewithal to get decent housing." With respect to a determination of the right place for housing, I am curious as to the extent to which there has been implementation of the first section of title 7 of last year's housing act which established the mechanism for an evolving national growth policy. Can you tell me, Mr. Secretary, whether that identifiable unit in the Domestic Council has yet met?

Secretary ROMNEY. Yes, sir.

Mr. ASHLEY. How often?

Secretary ROMNEY. Well, we have had several meetings of the task forces that have been designated to go to work on it. And we have had a meeting of the principals, the Čabinet members who are members of that committee last week.

Mr. ASHLEY. I see.

Secretary ROMNEY. But I convened representatives of the departments who were designated by the principals ahead of time so that we would have a meaningful meeting. And a great deal of work went into the preparation of the materials we looked at, the materials having been prepared for the purpose of identifying the areas of research and effort that should be undertaken, and how

we could secure the best possible assistance not only from within the Government but from outside the Government organizations who will be in a position to contribute in the formulation of the report that is called for, and also in the broader tests of further development of urban growth policy-which I really think should be called national growth policy rather than urban growth policy, because it involves rural as well as urban considerations.

Mr. ASHLEY. There is no question about that.

I did get a letter from the White House-this was several weeks ago-indicating that as of that date there had just been an agreement as to who should serve on this identifiable unit. And the letterwhich, as I said, was received a couple of weeks ago said that there were plans for bringing together the various department representatives that were to serve on this unit within the Domestic Council. Does that jibe with your recollection?

Secretary ROMNEY. Yes. As I say, our first step was, instead of covening the Cabinet members who were members of that committee—I happened to be chairman of it-instead of convening them I took steps to get from them the people in their departments who could be most helpful in making preparations for our work. And we convened them as a task force. And they were convened repeatedly. And John Price of the White House staff is heading up the staff efforts as far as the White House staff is concerned, and all the departments have designated key people, and they held many meetings. And I met with them a number of times before we convened the meeting of all the Cabinet members last week.

Mr. ASHLEY. There seems to be a feeling, Mr. Secretary, that if we are to have a meaningful growth strategy, leadership must come from the Federal Establishment.

Secretary ROMNEY. I think that is right.

Mr. ASHLEY. And that if it is not, then the States will perforce be obliged on a fragmented basis to assert their best judgments but generally speaking in the absence of any over all kind of strategy. Secretary ROMNEY. I think that is right.

Mr. ASHLEY. What about it

Secretary ROMNEY. I might say this, that the administration has submitted many programs that represent further development of a national growth policy over the past 2 years. I think if we took a look at such proposals as the environmental proposals, including the land-use proposal, the recommendations that each State come up with a land-use program based on the development of areawide and local land use programs, consolidated with a State program, all of these and other things are elements of a national growth policy.

Mr. ASHLEY. Yes. But I think you will agree that there is justification for the feeling that if we have any kind of growth policy at the present time it is lacking in specificity. It would be difficult for Governors to say, well, we know what the general Federal directions

are

Secretary ROMNEY. Let's take a look at another aspect of it. This revenue-sharing proposal, the whole concept of decentralization, is a very important aspect of growth policy. The new communities program is an aspect of growth policy. There are many things

Mr. ASHLEY. Has there been appointed a general manager of the

Secretary ROMNEY. Yes. I don't know whether it has been submitted, but it has been cleared, as I discussed with you some months ago. Mr. ASHLEY. It was my understanding that there isn't a General Manager of the new Community Development Corporation.

Secretary ROMNEY. As I discussed with you some months ago, Mr. Samuel Jackson is being designated as General Manager. I know his appointment has been cleared finally.

Mr. ASHLEY. Has he been sitting in

Secretary ROMNEY. He has been directing the activity, sure, he has been sitting in. On what meetings?

Mr. ASHLEY. On the meetings of the Corporation, the board meetings.

Secretary ROMNEY. Yes; he has been functioning as General Manager.

Mr. ASHLEY. Then why isn't he appointed General Manager? Secretary ROMNEY. There were delays in his clearance in the White House. And if you can explain to me why there are some of those delays I will be very happy to know the explanation.

Mr. ASHLEY. We will get back to that.

Mr. BARRETT. The time of the gentleman has expired.
Mr. Brown.

Mr. BROWN. Thank you, Mr. Chairman.

Mr. Secretary, under the community development revenue-sharing proposal of the administration the beneficiaries of the fund would not be required to file an application, but would be required to file a plan, or a statement of intent, as to how the beneficiary intends to use the funds.

Secretary ROMNEY. That is right.

Mr. BROWN. To what extent would HUD exercise any pregrant authority?

Secretary ROMNEY. As far as we are concerned, if their statement of use conformed with the statutory provisions with respect to the use of such funds-in other words, the statutory definition of community development-they would be free to use the funds. We would not undertake to say whether their use of funds was in our judgment wise or unwise. That is a decision they would make. Our only review would be to make certain that the funds were going to be used in conformance with the statutory definition of community development. Then we would postaudit and see that they had used it in conformance with the statutory requirements.

Mr. BROWN. So the original statement of intent, then, is primarily for reference during the postaudit, to see if they have used the funds in accordance with their plans?

Secretary ROMNEY. Yes; and to see that the use conforms with the statutory definition of how the funds can be used, because Congress will define community development.

Mr. BROWN. I ask you this because of Mr. Widnall's question indicating his concern that a beneficiary might not use the funds, for instance, for rehabilitation to the extent that it should. Would you compare the funds which have been going to this beneficiary, whatever it may be, compare the use of the funds that it has been getting, for instance, for rehabilitation grants, with what it proposed to do with its community development revenue sharing?