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And even by the banker's standard we are not really collateralizing the parcel. We are just giving the illusion to the machine, the tabulating mechanism, that we are collateralizing the parcel. Because that old shell is going to collapse right around that new boiler, and there is no secondhand market.

We need a new state of the art. Americans, God bless us all, have always been great believers in action orientation, and money orientation. In this particular area we have run out of state of the art. We are going to need some new tools.

Right now the Census Bureau has had to admit that it does not know how to measure housing quality. I am sure you are familiar with Census Bureau working paper No. 25. They can measure whether a building has a toilet or not, central heating or no, and that is it. We are going to need stepped standards. If we put our guy into business with a Federal program which involves him in an overimprovement, we are not doing him a favor. We are not creating an economical viable entity. And in this clash between morality and economics there is only one winner. And that is immobility, nothing is going to happen. Now, I don't say these things casually. I say them from rather hard-bitten experience in the field.

I think we have the beginnings of a bill. We have a long and hard and hard-nosed road to travel in order to have an administrative mechanism that is implementable in the field, and that provides us with the things that are going to enable that citizen to secure stability and a new form of life.

Mr. BARRETT. Mr. Brownstein.

STATEMENT OF PHILIP N. BROWNSTEIN, FORMER FHA COMMISSIONER ON COUNSELING AND MANAGEMENT

Mr. BROWNSTEIN. Thank you, Mr. Chairman.

It is a real pleasure for me again to appear before this committee. Mr. BROWNSTEIN. I have been asked to comment on title III of H.R. 9688 which deals with counseling and improved management activities, two of the most difficult areas that face us today, because no matter what is here done, the fact is that we are seeking skills that are very difficult to come by. And what this proposes to do is increase the capability of HUD for improved housing management practices and ownership counseling services in the subsidized housing programs. Certainly we have learned that the provision of housing alone is not a complete answer. As we move toward the achievement of the housing goals set in the 1968 Housing and Urban Development Act, at least in the subsidized fields, it becomes evident that we must now be concerned with the preservation of the existing housing stock along with that which will be produced in the future.

It is with this in mind that the comprehensive counseling program envisioned by the Housing Subcommittee report and by title III so the proposed Housing and Urban Development Act of 1971 repreefnts an important and necessary adjunct to the existing housing policy. It generally is recognized that an effective social program requires an effective delivery system and followup. More fundamentally, it denotes a growing understanding of the varied problems which the poverty cycle has created and which, unless dealt with, can frustrate the ultimate chances for the success of any program designed to provide increased housing opportunities.

Underlying the various provisions in the title are a number of farsighted policy considerations. For example, those dealing with federally assisted rental housing projects recognize that tenants who qualify for occupancy in public housing by meeting low-income criteria are, by and large, people who have been trapped outside the economic mainstream for some time and who have missed out on practical instruction in family budgeting, homemaking, and indeed the utilization of everyday household equipment. We are here dealing largely with people who have previously been denied the opportunity to live in decent housing and who probably have never known a stable home environment, and who have never had the responsibility of carrying out on a planned basis any sort of a continuing program. Counseling may correct these deficiencies and provide the means of successfully coping with everyday living. Another matter dealt with in title III includes the encouragement of an active role by management to try and strengthen rental projects by creating a sense of community and commonality of interest. This atmosphere would be reinforced by recruiting and training members of the local community for the management staffs of federally assisted rental housing and establishing more effectively an evaluation of management programs for federally assisted projects prior to construction.

This problem was dramatized in a front page article in the July 21 edition of the Wall Street Journal title "Housing the Poor." The lead line is "Baber Village is a landlord's nightmare." It points out that this project, which was one of the first undertaken in the rent supplement program and for which ground breaking occurred only about 3 years ago, already has some units boarded up, windows broken, as well as other deficiencies and deterioration. The article is replete with the problems of housing poverty-stricken tenants who mistake a garbage disposal unit for a dishwasher, or create plumbing problems through such lack of knowledge as flushing discarded clothing down the commode. It points up also the problems created by the lack of competent management.

In the homeownership programs the problems may be even more acute, but the social rewards could be greater. I recall that when we were testifying on section 235, Dr. Weaver and I pointed out that there were going to be responsibilities that were assumed by the respective homeowners as well as privileges, and that a good many problems might well be anticipated in that program. It was also strongly emphasized that that program ought not to be measured in terms of the failures, but rather in terms of the successes, and that there were going to be a good many cases in which the people put into the housing were not going to be successful, but that if a respectable number of them did turn out to be satisfactory homeowners, and did bring up their children in a decent environment, the program would be worthwhile. And I certainly still believe that this is how the program must be measured. Counseling is one of the ingredients that could help bring this about.

In the case of homeownership, the responsibilities are on the individual. There is no resident manager to call if the water heater goes out or some shingles blow off the roof. There is the further problem of the salesmen who converge on new home buyers to sell them various items that no homeowner can do without, and all for only a small payment each week. Unless curbed, an array of installment contracts can become so burdensome as to cause default in the mortgage with a

resultant frustrated and embittered former homeowner. What is needed is someone in whom this person has confidence and to whom he can go before signing the installment contract. In addition, training programs in family budgeting, recordkeeping, maintenance, and other related activities are essential if the venture is to prove successful. It is contemplated that HUD would conduct studies of typical homeowner problems and disseminate consumer information in a continuing educational process. The bill recognizes that conditions change over time and that continuing studies are needed to produce valid criteria for selecting families for homeownership assistance who stand the best chance of achieving that goal. And that I believe to be very important. It would serve no useful purpose to put families into homeownership who are not ready for homeownership and not ready to assume the burdens of ownership.

The Housing and Urban Development Act of 1968 recognized that counseling was an essential ingredient in achieving the social objectives of the housing goals. Several sections of that bill dealt with counseling, and provided authorizations for counseling. However, these counseling programs were never funded, and while efforts have been made to obtain volunteer groups for providing counseling services, this has proved to be far from adequate. The appropriation which recently passed Congress for fiscal year 1972 does for the first time contain an authorization which is $34 million for counseling, and this will make it possible to get the program launched.

The bill now under consideration has the virtues of the provisions in the 1968 act consolidated as a coherent functional unit, but it would authorize the payment for counseling from premium receipts. Tying counseling costs to receipts from premium charges establishes a logical relationship since the owner's contribution to the fund is in part put back into the costs of training him to be a better educated and more responsible homeowner. Thus, it is less likely that he would default on his obligation. Likewise, some funds from the financing of rental and cooperative housing for lower income families would be devoted to teaching tenants homemaking techniques and helping stabilize their community life for the purpose of promoting a better housing environment. This well may result in avoiding the kind of deterioration that has occurred in certain of the subsidized housing projects.

The authorization for the use of premium income relates to the special risk insurance fund. This fund was created in recognition of the fact that high risk mortgages were being insured and that there was every likelihood the premium income would not be sufficient to cover all of the losses. Using a part of the premium income to provide counseling and better management may appear to make the fund less likely of being self-sustaining. However, one must balance against this the number of cases that are saved which otherwise would go to foreclosure. For every home which is foreclosed, acquired by HUD, and resold there is a loss of about $3,000. For this amount, 30 families could be counseled at a cost of $100 each for every foreclosure that is averted. In addition, there is the social benefits which would accrue that would far outbalance the monetary savings. In the rental housing field, the percentage lost on acquired projects is considerably higher and even greater rewards could be anticipated if the improved management proves successful.

What makes successful homeowners or tenants from among our needy population? The complete answer to this question is not known. We do, however, know what causes failures. Large concentrations of poor people in the same housing complex clearly have proved unsuccessful. Lack of adequate management, provision of tenants' services and counseling of tenants have resulted in abuses of the housing stock. We know what has not worked and now we must concentrate our efforts in determining what will bring about successful housing projects. Providing counseling to the tenant and the homeowner, together with improving the management for low-income families and giving greater attention to these matters before the housing is built should help remedy the tragic deterioration of federally assisted housing. Thank you, Mr. Chairman.

Mr. BARRETT. Mr. Kummerfeld.

STATEMENT OF DONALD D. KUMMERFELD, DIRECTOR, CENTER FOR POLITICAL RESEARCH, WASHINGTON, D.C., ON HOUSING BLOCK GRANTS TO STATE AND METROPOLITAN HOUSING AGENCIES

Mr. KUMMERFELD. I appreciate this opportunity to discuss the important housing and urban development proposals contained in H.R. 9688. While all parts of the bill are interrelated, I will address my remarks primarily to the housing block grant system established under title V

During the past four decades the Federal Government has created a series of programs to stimulate production of subsidized housing for occupancy by those who cannot otherwise afford decent housing. Despite the handicaps of complexity, fragmented administration, frequently hostile public opinion, and the absence of meaningful objectives, these programs are now providing generally acceptable housing in impressive amounts-currently more than one-half million units per year. For the most part this housing provides better shelter and living environments for many low- and moderate-income families than they would otherwise be able to purchase in the private market. Yet, just as the existing housing subsidy system is attaining a solid record of achievement in quantitative terms, it is being challenged increasingly by traditional critics and supporters alike. The committee is undoubtedly familiar with the rising tide of dissatisfaction with the existing system.

The most serious criticisms, in my view, can be summarized as follows:

1. The existing subsidy programs are unnecessarily costly and inefficient;

2. The housing benefits provided are inequitably distributedeither geographically, by income or in terms of housing condition; and 3. Housing subsidy programs are not responsive to peculiarly local housing market needs and conditions.

Constructive responses to these defects in the present system appear to be taking two basic approaches: First, replacing the existing production oriented subsidies with consumer-oriented subsidies through housing allowances, rent certificates and the like; and second, reforming the existing system to remove or at least ameliorate its principal defects.

Both the administration and the Congress seem to agree that more experience with the consumer subsidy approach is needed before the existing production oriented system can be safely abandoned; hence, the emphasis on reform. There also appears to be agreement that the existing patchwork of complicated, inconsistent programs needs to be consolidated and simplified along the lines of H.R. 9331, the Housing Consolidation and Simplification Act of 1971. However, while the reforms proposed in H.R. 9331 are worthwhile and necessary, I do not believe they are sufficient to meet the most critical defects in the existing system-inefficient and costly production, inequitable distribution of benefits, and lack of responsiveness to local needs and conditions.

The housing block grant system authorized under title V of H.R. 9688 provides, in my view, a constructive practical approach to these problems. The title V block grant approach will:

Provide more equitable geographic distribution of subsidy funds on the basis of local housing needs and conditions.

Give State and local elected officials more effective control over subsidized housing in their communities and provide flexibility for them to create a housing strategy appropriate to their local housing market situation.

Attack rising costs and inefficient production by increasing competition for subsidized housing project development and stabilizing markets for potential builder-developers.

Establish a mechanism to relate housing location to job opportunities for low- and moderate-income families in metropolitan areas. Eliminate many of the local fiscal barriers to expansion of low- and moderate-income housing in metropolitan areas by subsidizing associated public service costs.

Encourage local initiative and experimentation in solving housing problems through financial and technical support for locally initiated new approaches.

While few would argue with the desirability of these objectives, there will be considerable skepticism about the feasibility of the proposed block grant system. Title V requires cooperative local decisionmaking on matters of community sensitivity and political significance. In many cases the proposed block grant system will create great pressure on individual units of local governments to agree to low and moderate income housing strategies that are not perceived to be in their immediate interest. As Dr. Schussheim noted in his paper presented to the panel on housing production, an areawide block grant proposal requires a shift at the local level from beggar-myneighbor policies to be-a-neighbor policies.

Despite the obvious difficulties in achieving necessary participation and cooperation of local governments in many areas, I believe the proposed system is workable. There has been considerable progress in recent years toward a State or areawide approach to housing, planning and development. All SMSA's now have regional planning bodies which are preparing areawide housing plans as part of the 701 planning process. More than 200 have metropolitan councils of governmentCOG's-which could well become metropolitan housing agencies with title V responsibilities. Approximately 20 States have now established some kind of official State housing agency. Several of these State agencies are already receiving reservations of HUD subsidy contract author

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