V. IMPROVED ENVIRONMENTAL LOCATION

A. How can the criteria for travel time to employment and distance to educational commercial and recreational facilities be so specific without taking into consideration regional differences? What would be an acceptable commuting time in Washington, D.C. might be very unacceptable in San Antonio, Texas.

Answer. This criterion has been renamed "Improved Location for Lower Income Families." The objection raised was considered in the revision of the criterion to allow for judging the travel to work in terms of time and cost as it compares to the norm in the housing market area. The specific suggestion of commuting time that should be considered necessary for "Superior" or "Adequate" ratings have been eliminated.

B. How can the same numerical requirements be imposed on projects regardless of the types of housing on tenants involved? e.g., elderly may require ability to walk to commercial and recreational facilities; on the other hand, a young 235 family may readily accept driving to the store but an hour's drive to employment would not be acceptable.

Answer. Considerations of the type of family for which the housing is proposed will be made by the evaluator in judging this criterion. This is one of the reasons why the specific time limits have been elininated from the criteria.

C. After being very specific about time or distance to facilities, the HUD official is required to distinguish between "good" and "average" commercial, educational, and recreational facilities. Define.

Answer. Commercial, educational, and recreational facilities are to be judged as they compare to those available in neighborhoods consisting largely of unsubsidized housing of a similar price range. Thus, comparability to existing facilities is the measure rather than the undefined terms "good" and “average.'

D. When a project is located on the periphery of an urban area where much of the surrounding land is still vacant, would it be reasonable to measure the percentage of subsidized units against the anticipated development of the area?

Answer. The revised criteria specifically provide for giving a "Superior" rating to a project located in a section that contains little or no subsidized housing if the project "will be in the near future accessible to social, recreational, educational, commercial, health facilities and services, and other municipal services that are equivalent to or better than those typically found in neighborhoods consisting largely of unsubsidized housing of a similar price range."

E. The instructions for a "Superior" rating require adequate public transportation. A "Poor" rating refers to low-cost transportation. Why does the requirement for an "Adequate" rating not refer to transportation at all?

Answer. The considerations for an "Adequate" rating under the revised criteria include the availability of transportation.

F. Will the requirement for assignment of a "Poor" rating unless adequate educational, commercial and recreational facilities are not available in the neighborhood or are not easily accessible via low cost public transportation eliminate many desirable sites for 235 amd 236 housing, especially in those cities where public transportation is limited in the suburbs? Wasn't this requirement written for public housing instead of 235 or 236?

Answer. This criterion has been revised so that travel time may be assessed in terms of either public transportation or private automobile. This was done in recognition of the fact that many areas of the country have a very poor public transportation system and that some areas, particularly those outside SMSA's have no public transportation systems at all.

G. What consideration has been given to financial institutions' willingness to lend funds for development of subdivisions where 235 sales are an important segment of the market with the uncertainties that will be created if the regulations as drafted are enforced?

Answer. We see no reason that the implementation of Project Selection Criteria, either in their original form or as redrafted, should have any effect on the willingness of financial institutions to lend funds for subdivision development.

As a whole, the criteria represent a summarization, rather than a change, in HUD policy concerning issuance of contract authority under Section 235.

VI. EFFECT OF PROPOSED HOUSING ON NEIGHBORHOOD ENVIRONMENT

A. A "Superior" rating requires that the proposed project will substantially improve the quality of life and the housing in the neighborhood. If it is the apparent intention to move subsidized housing out of poverty areas, how will modestly-priced housing improve the housing in a neighborhood of higher-priced homes? Will the effect of this requirement be to give a "Superior" rating to the worst slums?

Answer. This criterion has been renaned "Relationship of Proposed Project to Physical Environment" and has been revised to deal with the project's relationship to the physical environment rather than consideration of "quality of life" or "improved living conditions."

Under the revised instructions, a proposed project will be rated "Superior" if it will embody outstanding land-planning and will be free from adverse environmental conditions, natural or man-made; and construction of the project will not impact or disrupt ecologically valuable or unique natural areas.

B. Will the Instructions for assigning a "Poor" rating to projects which will reduce the living standards eliminate projects in better neighborhoods since people who buy or rent subsidized housing generally have lower standards of living than those who live in better neighborhoods?

Answer. Under the revised system, a "Poor" rating will be assigned if the proposed project will embody a poor land use plan; or will be subject to serious environmental conditions which cannot be corrected; or will substantially or unreasonably disrupt the environment or ecologically valuable or unique natural areas. These are environmental considerations and not considerations relating to the individual standards of living followed by the individual tenants or home

owners.

VII. RELATIONSHIP TO ORDERLY GROWTH

A. Why is a project which is part of an improvement program to upgrade or stabilize an area assigned only an "Adequate" rating?

Answer. This criterion has been renamed "Relationship to Orderly Growth and Development." In the revised version of this criterion, a project will receive a "Superior" if it is located in and is consistent with plans for a neighborhood undergoing improvement via Urban Renewal, Model Cities, New Communities or other similar Federal, State, or local programs.

VIII. EMPLOYMENT AND UTILIZATION OF EMPLOYEES AND BUSINESS IN PROJECT AREA

A. Why is a "Superior" rating given on the basis of what the developer plans or promises to do with reference to employment and utilization of employees in the project area instead of what may actually be done?

Answer. This criterion has been renamed "Project Potential for Creating Minority Employment and Business Opportunities." At the time an application or request for contract authority is reviewed under the Project Selection Criteria, all that can be known are the plans of the housing authority or developer. However, they must comply with their plans or lose the priority status assigned on the basis of the Project Selection Criteria rating.

Mr. BARRETT. Mr. Reuss.

Mr. REUSS. Thank you, Mr. Chairman.

Mr. Secretary, I am very pleased at your constructive comments on the various bills on which you are testifying.

Secretary ROMNEY. Thank you.

Mr. REUSS. I would think, from the thoughtful and constructive nature of these comments, that it is going to be no great feat for the Republicans on this committtee and the Democrats on this committee and your Department to get together and work out a bill which will be a landmark piece of legislation.

Secretary ROMNEY. We share that feeling.

Mr. REUSS. I would ask you about two or three of the things in H.R. 9688 which are particularly dear to my heart, and on which I have read your comments. The first one I will ask about is title 7,

"State and Metropolitan Development Agencies." The thought there, obviously, was to give some sort of Federal recognition and support to State development agencies, of which there are two examples extant, New York's UDC, Urban Development Corporation, and the Province of Ontario's Ontario Development Corporation, which is very similar. Both of them, I think, are fulfilling a real need. They take the existing state of the housing legal structure and do the best they can with it on a large scale. You were not in the least bit unfriendly toward title 7 in your comments.

Secretary ROMNEY. No. As a matter of fact, I have many times encouraged other States to adopt similar programs to the New York State program. And from what I know about that program, it is functioning very well.

Mr. REUSS. The worst you could say of it is that it should be made sure that we don't overlap with title 5-that is, the metropolitan agency title—and title, 8; that is, the Urban Development Bank. That effort must be made.

Secretary ROMNEY. We are just being a little cautious, because until we can see how these things fit we really don't know how they would work out, Mr. Congressman. And I think that is one of the basic points that we make there, that we can't see from such information that we had just how one would relate to the other, and we thought there might be some overlap in some instances.

Mr. REUSS. Certainly the intention is not to overlap, and we will work with you at getting ironclad language to make sure that there is no overlap. That is what we want to try to eliminate.

Let me turn now to the planning section, title 9, and particularly to that part of it where major emphasis is placed on encouraging States develop plans for modernizing both their own governmental machinery and that of their local governments. In a very large measure you are responsible for that section, because you many times in your testimony in the last 2 years have deplored the fragmentation of local government which makes your whole housing and urban development task so much more difficult.

Secretary ROMNEY. That is right.

Mr. REUSS. And in this suggested addition to the planning section we wanted to give some incentives to States to get on with the job of taking a whole look, as you did in Michigan, at their local government, their relations with it, and see if some reforms can't be made. In drawing up a laundry list of possible reforms, we used the best work of the Committee for Economic Development, which you are familiar with, of the ACIR, the Advisory Committee on Intergovernmental Relations, and the various organizations of Governors and mayors. So we think that we have got a device for focusing attention on this. Now, here again your principal difficulty with the program, as you have set it forth, is that it would earmark $25 million a year. And you make the point that whenever you earmark things, that may be forcing a State to do something which it wouldn't otherwise do, and under certain circumstances it could seriously impair the unearmarked pot. Well, I think you have a point there that will certainly get consideration. I don't think it would seriously disadvantage the idea we are talking about if we didn't earmark any fund specifically but simply said, out of the total $100 million or $150 million, however much is authorized for planning, we allocate such amounts as the Secretary

deems desirable for a State and local government modernization program. If we could do that, that would go far, it seems to me, to reduce the difficulty that you saw with the program. Because I think, from what you have testified so many times, that you are for trying to get States into doing what they ought to do.

Secretary ROMNEY. No difference in objective at all. And the need for improvement at the State level and encouragement at the area level and the metropolitan areas is just vital. A better structuring of the whole approach is a very necessary thing. So there is no disagreement here with respect to basic objective. As you say, the one point we have really questioned is the earmarking of funds within the overall total, feeling that a greater degree of flexibility could result in the funds being used more to accomplish the purpose than if our hands were tied a bit, that is all. But I think as you say, there are ways to work that out. And we would like to work with you on it. Mr. REUSS. Thank you. My time is up. But I think there is a real meeting of our minds.

Secretary ROMNEY. We are very much encouraged by the thrust of this and some of the other things.

Mr. BARRETT. Thank you, Mr. Reuss.

Mr. Minish.

Mr. MINISH. Thank you, Mr. Chairman.

Mr. Secretary, I have had a number of reports from my district. complaining about the policies of the FHA in connection with properties which they have acquired. The chief complaint seems to be that FHA frequently sells these properties to what I can only call fly-by-night operators. Could you tell me what, if any, standards you require buyers of FHA acquired properties to meet, and whether your proposed revised national housing act addresses itself to this problem. Secretary ROMNEY. It doesn't address itself specifically to that problem.

But inasmuch as Mr. Gulledge handles that, I would ask him to comment.

Mr. GULLEDGE. Every purchaser of property has to meet the same standards of acceptance for his creditability. First of all, it has to be destined for his own ownership. As for a fly-by-night operator-we do not sell property to people who are in turn going to resell it. FHA disposes of its properties to homeowners rather than to in effect brokers who might go out and find somebody else to whom they can charge a separate price, and every purchaser has to meet the same credit criteria. So the concept of the disposal of the property going to fly-by-night people who might just come in for the purpose of acquiring a bunch of units and then doing something else with them would be quite strange. If you have any knowledge of such goings-on we would like to know about it. It is contrary to policies.

Mr. MINISH. We already have notified your office. Your Department is well aware of it.

Is there any followup by FHA to see that your standards are followed?

A

Mr. GULLEDGE. We do the best we can with the resources that we have. Quite often we find that we are concentrating on one problem, and there is another problem developing that we haven't been concentrating on, and we have to shift. I think this gets back to the Secretary's general statement, that we have an administratively

complex job to do, it is almost, as he says, impossible to give complete supervision to all the various facets of all the programs.

Secretary ROMNEY. You have to have a little appreciation of what we have been through. We had new programs we took over right after we came into this area of responsibility, we had the great complexity of programs. And Gene Gulledge has taken subsidized housing production from an annual level of about 150,000 units to up to around 500,000 units here in 22 years with only a few more people. And they are programs that are so complex that they almost defy administration-I keep saying that, and we need them simplified. And of course he has got problems.

Mr. MINISH. We support you on that.

Secretary ROMNEY. But help us get rid of the problems by giving us the simplification.

Mr. MINISH. Mr. Secretary, as you know, under the subcommittee bill, in order to receive a community block development grant a community must be engaged in a program to meet its housing needs. And it can do so in two ways. First, by taking part in a metropolitan housing program; or second, by taking care of its housing needs on its own. If it does neither, the HUD Secretary would be authorized to refuse the community application for water and sewer funds. What is your position on the subcommittee recommendations? Secretary ROMNEY. Well, I have indicated generally that we think the recommendation points in the right direction. And we think it is a constructive proposal overall. We are not quite certain as to how it would work out in detail, the relationship between these various proposals. And that is something we would like to work with the committee on. But the main thrust of the proposal we think is right.

Mr. MINISH. Getting specific on this particular problem, if a city which is a part of an SMSA, or a municipality, decides that it doesn't want any public housing, but has a request in for a sewer grant, what would you do in that case? Would you deny them the grant?

Secretary ROMNEY. At the present time it would depend upon the circumstances. At the present time if the grant was on the basis of comprehensive planning that was funded under 701, they would have to have a housing element in there, or they couldn't get the water and sewer money. On the other hand, if the comprehensive planning had been done by other than 701 money or Federal money, they would be eligible. So in the case of water and sewer applications, at the present time we have a mixed situation.

Mr. MINISH. Suppose this municipality needs a sewer grant to replace septic tanks.

Secretary ROMNEY. Again, the statute, the law you wrote, requires, where the application for water and sewer money is made with 701 funds, a housing element which is a part of a comprehensive plan. So I don't have any discretion

Mr. MINISH. I am not talking about legislation on the books. I am referring to the proposed legislation known as H.R. 9688.

Secretary ROMNEY. I don't know what your proposed legislation is going to provide in that respect. And that is why I say, I am not in a position to comment on it in detail, because I haven't seen the detail. As to the general thrust of the proposal, I concur with it.

Mr. MINISH. When you get an opportunity to study it I would appreciate having your comments.