HOUSING AND URBAN DEVELOPMENT

LEGISLATION—1971

WEDNESDAY, SEPTEMBER 8, 1971

HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON HOUSING OF THE COMMITTEE ON BANKING AND CURRENCY, Washington, D.C. The subcommittee met, pursuant to recess, at 10:05 a.m. in room 2128, Rayburn House Office Building, Hon. William A. Barrett (chairman) presiding.

President: Representatives Barrett, Ashley, Gonzalez, Reuss, and Widnall.

Mr. BARRETT. The meeting will come to order, please.

We have other meetings this morning and a number of the members are attending them. There is also a hearing on a very important piece of legislation in the Ways and Means Committee.

However, we will proceed now; our members will come in very shortly. Today we resume our hearings on the 1970 housing legislation. These hearings will be concluded on Friday, the 17th.

We have with us today at the suggestion of Mr. Widnall a series of witnesses representing State and local governments.

As you all know, two major proposals now under consideration would greatly affect the operation of State and local bodies. These are the housing-block-grant proposals in the subcommittee bill and the special revenue sharing, community-development-block-grant proposals of both the administration and the subcommittee bills.

We would like today's witnesses to address these proposals directly and let us know what problems they foresee in their implementation. Our witnesses are as follows: First, the National Governors Conference. Our former House colleague, Gov. William T. Cahill of New Jersey, was scheduled to testify but pressing business in the State has forced him to cancel his appearance today.

Instead the Governors Conference testimony will be presented by Leon Charkoudian, Commissioner, Department of Community Affairs, State of Massachusetts.

Second, representing State legislators we have as a panel Mr. Paul Danahy of Florida, Mr. Peter Wilson of California and State Senator Thomas Laverne of New York.

Representing the small town mayors we have as a panel Mayor Frank H. Blatz, Jr., of Plainfield, N.J.; and Mayor Jack D. Maltester of San Leandro, Calif. Mayor Maltester was formerly president of the U.S. Conference of Mayors. And, fourth, representing the Pennsylvania Department of Community Affairs, we have Secretary William Wilcox.

Mr. Charkoudian, will you please come forward, and all other witnesses who desire to testify, we would like them to come forward, also. Mr. Charkoudian you may proceed anytime you are ready, but we do want you to feel at home here; and whatever way you desire to offer your testimony you may do so, and we will be glad to receive it. STATEMENT OF LEON CHARKOUDIAN, COMMISSIONER, DEPARTMENT OF COMMUNITY AFFAIRS, STATE OF MASSACHUSETTS, REPRESENTING GOV. FRANCIS W. SARGENT AND THE NATIONAL GOVERNORS' CONFERENCE

Mr. CHARKOUDIAN. Thank you, Mr. Chairman.
I am Leon Charkoudian.

Mr. BARRETT. Would you pull the mike closer to you so that everyone can hear you.

Mr. CHARKOUDIAN. I head the Massachusetts Department of Community Affairs and I am here for Francis W. Sargent, Governor of the Commonwealth of Massachusetts on behalf of the National Governors' Conference.

Before going into the formal testimony, Mr. Chairman, I should like to commend your Housing Subcommittee for producing its bill this year. Your extensive research, culminating in this bill, has shown that the Congress has developed an expertise in this area centered in the past in the administrative branch. The work leading to this particular bill has produced reports which are extremely valuable to all of us, both on the national and local level.

Today I will not be discussing all aspects of H.R. 9688 but rather some of the titles which are of particular concern to the National Governors' Conference.

I would like to begin by discussing title V, the housing block grants to States and metropolitan housing agencies.

Essentially this aspect of the bill would make up for glaring deficiencies in previous Federal and local housing programs. In our analysis of title V, we recognize there are three primary goals which we enthusiastically endorse: First, the reform of the present housing subsidy delivery system in order that the public policy-type decisions which are now made between private sponsors and FHA will once again be, as they should be, located in the public sector.

Second, the unit production goals should not be the only criteria in the housing program of this Nation. Rather, as all of us have always expected and known, the location of units and their proximity to employment and adequate public facilities are essential considerations.

Third, title V places a heavy responsibility on elected State and local officials. Today the Federal subsidy programs tend to be operated by either private, nonprofit, limited-dividend corporations or the quasiautonomous housing authorities. While certainly they have done good work over the past 30 years, the fact is that the locally elected officials do have a responsibility in the housing area and this particular bill finally makes this very clear and places the responsibility with them. While we support and applaud the goals of title V, we do have reservations regarding the mechanisms established to achieve these goals. Title V requires that the plans developed by the State and metropolitan area be reviewed by the Secretary of HUD to determine

whether or not each plan substantially complies with the requirements of title V. There is a very real danger that the Federal Government; Federal Department of Housing and Urban Development, will second guess those plans which have been developed by local and State officials.

We have seen in the past how the heavy hand of the Federal bureaucracy tends to second guess or to review in too fine detail the work of the local officials, to the detriment of Federal programs. Local officials, for their part, sometimes use Federal review to let the Feds decide a tricky or difficult issue and duck a problem which really should be theirs. We feel that this responsibility belongs properly with the public officials.

Title V also provides for insensitive payments of some $3,000 over a 10-year period for each unit of housing built. We have reservations on this because there is no easily determined method for deciding whether the central city or suburban areas get the incentive payments.

Second, there is the problem of existing housing that is subsidized by Federal and local governments; should these units not also get an incentive payment? How can we reward only those who build from now on and thereby penalize the ones who have already borne a disproportionate share of the responsibility?

Moreover, incentive moneys in themselves might not overcome the crucial issue in the acceptance of and the willingness to develop subsidized housing on the local level. The most important determinant of acceptance of publicly assisted housing seems to be the existence of well managed units or a history of well managed units either within a town or neighboring towns. This is acknowledged by an earlier title, title III of proposed legislation, counseling in improved management activities. However, we might suggest that the requirements for training of management officials on the local level and for counseling of tenants be made mandatory before the Secretary of Housing and Urban Development approves any units of housing for a particular region or State.

Finally, in title V, the proposal earmarks 80 percent of the available housing subsidies to metropolitan areas and 20 percent to State agencies. We would recommend that this requirement of earmarking be deleted from the bill because, if for no other reason, there are States where the housing need may occur in larger proportion outside of the metropolitan areas.

Going on to title VIII, the urban development bank, the National Governors' Conference will be meeting next week and discussing the whole issue of the municipal bond market. We do not believe that it is possible for the National Governors' Conference to support the urban development bank proposed in title VIII of H.R. 9688. There is a growing sentiment in Congress to restructure the municipal bond market. For this reason, the National Governors' Conference Committee on Executive Management and Fiscal Affairs will be recommending to the total conference the following criteria which I would like to read at this time regarding the municipal bond area:

These criteria are: (1) The use of any Federal credit assistance programs for State and local governments should be entirely voluntary. (2) Such assistance should be free of Federal interference and intervention in matters of State and local concern, (3) such assistance should be simple, dependable and free of delay; and (4) such assistance should not be viewed as an alternative to Federal grant assistance where the latter is appropriate and necessary.

Now, the urban development bank proposed by title VIII does not meet these criteria. However, the proposals in title VII, the action of a Federal subsidy making up the difference between a market rate of a taxable bond and the rate of a nontaxable bond, is and does meet the criteria of the National Governors' Conference and, therefore, we would recommend that section.

Turning lastly now to title IX, planning and management section of he bill, the goals of this title, improvement of the decisionmaking capabilities of State and local elected officials and provison of funds for modernization of these governments, cannot be opposed by anyone before this subcommittee. These goals were clearly discussed and recommended and passed in last year's work done in regard to the Ash Council.

The National Governors' Conference, in a policy adopted in August 1970, stated that assistance should be provided to plan comprehensively at the interstate, regional, metropolitan, and local levels, to encourage local government to cooperate in solving areawide problems through comprehensive planning, review and coordination, to foster their intergovernmental attacks on problems of national, rural and urban development, and to etablish a method for exchange of development forces among local, State, and Federal Governments.

We wish to go on record in support of the objectives of title IX, planning and management, but we do not feel that certain amounts of the funds should be earmarked for modernization of local government and other amounts are for housing purposes. In addition, we do not feel that the moneys for this generalized purpose of comprehensive planning and modernization of local government should necessarily come through the Department of Housing and Urban Development. The Department of Housing and Urban Development is very functionally very much oriented toward housing and community development, and should, in fact, carry out that mission; but that is different from an effort at generalized governmental reform on the local level and from comprehensive planning considerations beyond just the physical aspects of community development. It is for that reason that I have appended to my prepared statement, which I shall submit, a two-part legislative proposal as an alternative to title IX or H.R. 9688.

The first part would establish within the Executive Office of the President a $100 million planning and management program. Funds would be allocated to the States and through them to the localities by means of a statutory formula.

The second part of this proposal would create within the Department of Housing and Urban Development a functional community development and housing planning program which would be tied to 1.5 percent of the funds appropriated for community development purposes under title VI of H.R. 9688.

In conclusion, Mr. Chairman, I would like to again commend the Subcommittee on Housing for its work. I would like to add that we in Massachusetts have a State program for housing which, in many respects, over the past 20 years has paralleled the Federal Government's programs, including a program of State subsidy for public housing and more recent programs of rental assistance paralleling the Federal program of leased housing.