HOUSING ACT OF 1961

THURSDAY, APRIL 27, 1961

HOUSE OF REPRESENTATIVES,

COMMITTEE ON BANKING AND CURRENCY,

SUBCOMMITTEE ON HOUSING,
Washington, D.C.

The subcommittee met at 10 a.m., pursuant to adjournment, in room 1301, New House Office Building, Hon. Hugh J. Addonizio, presiding.

Present: Representatives Addonizio (presiding), Mrs. Sullivan, Mrs. Griffiths, and Messrs. McDonough, Widnall, Fino, and Derwinski.

Also present: Representatives Miller and Harvey.

Mr. ADDONIZIO. The committee will be in order.

Before we begin, may I just indicate that unfortunately the chairman of our subcommittee has had to return to Alabama to attend a funeral, so of necessity he will not be here this morning.

Our first witness is Mr. Nathaniel S. Keith, representing the National Housing Conference. I understand that you have someone with you?

Mr. KEITH. Yes, sir, Mr. Chairman. I have with me Mr. Laurence Henderson who is executive vice president of our organization and Mr. Warren J. Vinton, who is a member of our board of directors. Mr. ADDONIZIO. You may proceed.

STATEMENT OF NATHANIEL S. KEITH, PRESIDENT, NATIONAL HOUSING CONFERENCE; ACCOMPANIED BY LAURENCE HENDERSON, EXECUTIVE VICE PRESIDENT, AND WARREN J. VINTON, MEMBER, BOARD OF DIRECTORS

Mr. KEITH. Mr. Chairman, to conserve the time of the committee, if agreeable with you, I would like to file our complete statement and summarize our comments.

Mr. ADDONIZIO. Thank you, I appreciate that.

Mr. KEITH. Mr. Chairman, we are very happy to have this opportunity to be here before this subcommittee in strong support of the principles of the important legislation now being considered by your committee and recommended by the administration. Our organization is well aware of and deeply grateful for the consistent leadership and insight which this subcommittee has applied to its consideration of these basic problems even during the years when your legislative proposals were faced with indifference and opposition in the executive branch of the Federal Government. It is therefore most gratifying to appear before the subcommittee this year in broad support of a

constructive and far-reaching program presented by the President and by the Housing and Home Finance Agency.

Your consideration of this program occurs at a time of crisis in the housing economy. Despite the pressures of increasing population, housing production in the United States has dropped to the lowest level in a decade. Unemployment in the construction trades is substantially the highest in any major American industry and the lagging rate of homebuilding is a depressing influence on the current operations of the major industries which supply the materials and equipment for residential construction.

All this is occurring against the background of multiplying needs for housing and community development and the shocking neglect of the 14 million American families living in substandard or deteriorating homes.

The National Housing Conference is now in its 31 year of operation. Our organization was originally founded by a group of publicspirited citizens, in the midst of the catastrophic depression of the early thirties, to focus public interest and support for the provision of decent, safe and sanitary housing for families of low income. We were, I believe, of some influence and help in securing the enactment of the Housing Act of 1937 which established the present low-rent public housing program. As recognition grew of the breadth and depth of the complex problems and needs in the field of housing and community development, the position of the National Housing Conference kept pace with this broadening horizon.

We were in the forefront of the public organizations pressing for the enactment of the broad legislation which eventually was embodied in the Housing Act of 1949 and which established the national goal of "a decent home and a suitable living environment for every American family."

Our frame of reference is today, as it has been for many years, the whole range of issues involved in the creation of healthy and rewarding communities for the American people: good housing for all segments of the population; schools, parks, playgrounds, and recreational and cultural facilities; the redevelopment and renewal of slums and blighted areas; the revitalization of the central cores of our cities; the provision of land for modern industry as the essential economic base for healthy communities; solutions to the traffic problems which are congesting and blighting metropolitan areas throughout the country; and preparing these metropolitan areas for dealing with the unprecedented population growth lying immediately ahead through sound and imaginative planning and through the preservation of open spaces.

The prospects in this whole area are grim and paradoxical in view of the potentials of our American system. While there has been substantial accomplishment since the enactment of the Housing Act of 1949, progress has not kept pace with underlying needs. Slums still disfigure our cities, and housing within their means is desperately needed by hundreds of thousands of families including elderly families of limited means and families displaced by urban renewal, highway programs, and other public and private developments.

While central cities are all to frequently losing population, suburban areas are experiencing a growth with which they are often unable

to cope. Metropolitan planning and development are notoriously lacking. Unplanned suburban sprawl and economic stratification, lack of community facilities, and an absence of mass transportation are an increasing menace to metropolitan areas.

The economic and social health of our country demands that we resume and accelerate our progress toward the national housing goal. Our resources of labor, material, and land are amply sufficient to rebuild America in keeping with our ideals in less than a score of years, but we desperately need to find administrative and financial devices which are necessary to mobilize these resources.

It is heartening and exhilarating, therefore, to find informed and incisive recognition of the crisis in housing and community development by the present administration, and to have presented a set of substantive and constructive proposals to solve this crisis, or at least to make a far-reaching start on its ultimate solution.

In his eloquent message to the Congress on "Our Nation's Housing," the President recognized the needs for housing and community development in all their ramifications, he recognized the implications of the advance in our population towards the 200 million level, and beyond to the 300 million level by the year 2000; he recognized the deep impact of all this on the national economy, and he recognized the breadth of this complex of problems and the consequent breadth of the solutions required.

In our view the program presented by President Kennedy in his message to the Congress on Housing and Community Development and its reflection in this legislation that you are now considering is the most important and far-reaching legislative proposals in this field that have been considered by the Congress since the enactment of the Housing Act of 1949. Furthermore, this program is presented to Congress and to the Nation at a time of serious crisis in the housing industry, a period of substantial unemployment in the construction industry, a period in which the problems of the blighted housing, deterioration of the central core of cities, the extension of suburban sprawl, are all adding greatly to the problems confronting communities throughout the country and which certainly call for decisive

action.

From our analysis of the President's message and the provisions of the proposed Housing Act of 1961, we find the following objectives especially noteworthy:

1. For the first time, the vitally important urban renewal program would be adequately funded to permit and encourage long-range programing and action by communities to renew their blighted areas. Likewise, the scope of urban renewal activities would be broadened in terms of industrial and central business district redevelopment and of residential rehabilitation.

2. The low-rent public housing program-which is so urgently needed to meet the shelter needs of low-income families displaced by public action, low-income elderly families and other low-income families forced to live in deteriorated housing-would be reactivated and made a more flexible community tool for reaching this critical area of the total housing market.

3. For the first time, there would be a substantial start toward meeting the housing needs of the most neglected segment of the American

population, namely those families with incomes below the level which can be adequately served by private enterprise under existing programs but above the level served by the low-rent public housing program.

This neglected market comprises approximately one-third of the total American population and is made up of families and individuals who are self-supporting in all other respects but who still cannot afford adequate housing at prevailing market prices, carrying charges, and

rents.

4. There would be full recognition of the inescapable interrelationship between adequate housing and adequate community facilities, sound community planning, solutions to traffic and mass transit problems, and effective measures to control suburban sprawl and preserve the remaining irreplaceable assets of open space.

5. The basic fact of life in the present and future American housing market would be recognized, namely that the only major avenue for attaining the needed annual construction of at least 2 million housing units a year is through measures to serve the presently unserved mass market of moderate income families. All existing FHA programs would be continued and it is to be anticipated that their administration will be improved and that further measures will be taken to encourage reductions in the present grossly excessive long-term mortgage interest rates which in the past 7 years have priced some 5 million families out of the market for new housing.

Nonetheless, the President in his message and the content of the Housing Act of 1961 faces squarely up to the reality that the expansion in housing production to the levels which are required by our expanding population and which are also vitally important to a healthy national economy can be accomplished only through a decisive broadening of the range of incomes which can be served by the private housing industry.

6. While it will be handled through other legislative channels, the proposal of the President for the establishment of a new Department of Housing and Urban Affairs-or, as we would prefer it to be called, a Department of Housing and Urban Development-would give recognition to the stature demanded in the Federal governmental structure by programs which are of vital importance to the overwhelming majority of the American population which live in urban and suburban

areas.

The National Housing Conference strongly endorses and sunnorts these basic obiectives of the administration program and of the Housing Act of 1961 and urges their adoption by this subcommittee and by the Congress. With respect to the content of the Housing Act of 1961, there are certain provisions which in our opinion do not go far enough or could be otherwise improved.

Our comments on these provisions will be brought out subsequently in my statement. In general, however, we are enthusiastically in favor of this legislation which we consider to be the most important measure in the field of housing and community development to come before the Congress since the historic Housing Act of 1949.

We are also in accord with very many of the nossible amendments which have been suggested by the chairman of this subcommittee, and will refer to them in the course of our comments on the major substantive provisions of H.R. 6028 and the other bills now before you.

HOUSING FOR MODERATE-INCOME FAMILIES

The most significant provision in title I of the Housing Act of 1961 is the proposed amendment to section 221 of the National Housing Act which will authorize long-term FHA-insured mortgages to nonprofit rental or cooperative housing projects at less than FHA market interest rates and subject to commitments to purchase the mortgages by the Federal National Mortgage Association.

The minimum interest rate would be the average market yield on all outstanding marketable obligations in the United States. The Federal Housing Commissioner would also have discretionary authority to eliminate the current FHA mortgage insurance premium of onehalf of 1 percent, to reduce the premium, or to impose a premium charge for only a part of the period of the mortgage. Eligible borrowers would include nonprofit organizations, cooperatives, local public agencies, and limited-dividend corporations.

In cases where the interest rate is below the market, or where the FHA insurance premium is waived, occupancy of the projects would be limited to families and individuals whose incomes exclude them from standard housing in the private market. However, there would be no evictions required by Federal law on the grounds that the family's income had risen during occupancy.

This proposal is a major attempt to break through the barriers that now block development of housing to serve the unmet needs of moderate-income families who cannot be served by existing private or cooperative housing development. It would permit minimum interest. rates, under current conditions, of 3% percent. This is generally equivalent to the current rate under the successful college housing program and the rate previously authorized by Congress for direct loans for housing for the elderly in the Housing Act of 1959.

The subcommittee may be interested in our analysis of the rent levels which might be achieved under the minimum interest charges permitted by this formula. Our estimates assume a two-bedroom apartment in a two- or 3-story walkup apartment development involving a total development cost of $12.500 per dwelling unit, which on the basis of experience is about the minimum cost feasible under prevailing conditions in maior metropolitan areas.

On the basis of typical operating expenses, full real estate taxes, the minimum authorized mortgage interest rate, and the complete waiver of FHA mortgage insurance premium. we estimate that the required rental to support such a unit under this formula would be about $97 per month or $21.50 per room per month.

By comparison, the identical unit financed under the prevailing terms for rental housing under section 220 of the FHA program would require a monthly rent of about $130. Thus, the proposed new formula could accomplish a reduction of up to 25 percent in monthly rents as compared with the existing program and a comparable reduction in the required carrying charges on cooperative housing projects. In terms of elevator apartment developments, which will frequently be the most feasible building type in close-in locations in large cities, a minimum development cost of about $15,000 per dwelling unit would appear to be realistic if not optimistic. In such case the minimum estimated rent in a typical development for a two-bedroom apartment would be about $120 a month.