Mr. BARRETT. Thank you, Dr. Weaver, for bringing us a very good statement. Dr. Weaver, I have two short questions I would like to ask you now.

As you no doubt know, the most common objection to our housing block grant proposal deals with the capacity of the cities to handle the block grants for housing. Do you think cities could do so efficiently, with technical assistance and guidance from HUD?

Dr. WEAVER. This of course is in the area of prophecy and conjecture, and since I no longer have to do that officially, I probably can do it with less restraint than I would have done some years earlier. I would answer briefly that it depends upon which ones you are talking about. Obviously, there are some and many that can and have had the experience, others that I think can learn. I believe we are in a period where our choices are no longer whether or not we are going to have these programs operated with the degree of centralization that they had in the past, or whether we are going to have a greater degree of local determination. I think the issue is whether or not we are going to have any degree of national goals and any degree of national real looking at the programs and offering assistance, or whether we are going to simply say, here is the money and you go ahead, spend it for whatever you want to spend it for and do whatever you want to do. I think the desirable approach is one which stipulates a reasonable degree of concern for national priorities, a reasonable degree of surveillance, and a reasonable degree of technical assistance. No one can, I think, categorically say it is going to work. But heavens, if you have bad administration, even with a great degree of Federal supervision, you can have some pretty bad results, as we have seen.

Mr. BARRETT. My other question, Dr. Weaver. Do you think cities. would go overboard in using block grant funds on, let us say, helping with rehabilitation and the existing housing stock, and thus neglect the production of new units?

Dr. WEAVER. Well, I think it all depends upon the sort of program they are given. A program such as this, which recognizes that there is no magic in housing allowances and there is no inherent deviltry in production-oriented assistance or subsidies, would give them an option. I can say, from my own experience that after they get into the operation and many of them already having been in the operation, they soon recognize the difficulties of rehabilitation. So, I have a feeling that there might be a philosophical tendency to do this, because it sounds so appealing, and it is also supposed to be so much more economical that has yet to be proven--but it is so much more difficult. I have a feeling that if they have flexibility, those that have sophistication will want to get a workable mix. Finally, of course, I am of that school which feels that housing allowances alone and housing allowances in tight housing markets would become so inflationary that they would create an undesirable situation.

So I think all of those things will have a built-in propensity toward directing to the balance which, I hope, would be encouraged by the overall type of national priorities and national program that this bill is philosophically or by provision tied into. So that the Federal Government would be giving some direction, not saying you have got to do it, but pointing out what the costs are if you do not do it, and what the benefits are if you do do it.

So I would say that this is a workable bill, and like any other bill, it will have its rough edges, and it is not going to be perfect. But I think it is workable. I think, if I may use the phrase at this point in time, that it is probably a bill which has some capacity to meet the trends and meet the mood of those who have a serious concern for housing in the country.

Mr. BARRETT. Thank you, Dr. Weaver.
Mr. Ashley?

Mr. ASHLEY. Thank you, Mr. Chairman.

Dr. Weaver, let me say that it is a particular delight to welcome you this morning. Your presence here certainly reminds all of us of calmer days in Washington. I think that your statement is first rate, because it deals in hard, concrete terms with the provisions of this bill. It points out what you feel to be its inadequacies in a way that, I can assure you, is not offensive at all to me, or, I am sure, to Mr. Barrett. The statement, it seems to me, really focuses on the basic goals that we share in terms of what our housing community development delivery systems should be aimed at. I think that is a very good thing to do. There are times, as you know, when the art of the possible tends to shape the specific legislation, as distinct from an approach which perhaps more clearly reflects the ultimate objectives that we as a society, have set for ourselves.

I would like to ask several questions and perhaps make a comment or two. Starting on page 3 of your testimony, when you referred to "the need to reverse the trend toward racial and economic stratification, to establish choice as the factor that determines where people live." Of course, as you know, I am fully committed to this objective. It is a fact, of course, that we now do have civil rights statutes, which are helpful in this effort. We have court decisions that continue to be handed down which further our progress.

As far as the basic problem in terms of choice is concerned, it seems to me this may well be a matter of supply. We seem a little less caught up these days on the matter of where blacks can live, if they can afford to live in a given community. What we are concerned about, it seems to me, is the availability of housing, both new housing and existing housing, within the means of families, particularly of low and moderate income, and even somewhat higher than moderate income today, as it turns out, with the median-priced homes now somewhere at the high $30,000 level.

We, of course, will not abandon supply. It seems to me that the administration approach does. We do not opt for existing housing or put particular emphasis on existing housing as distinct from new housing. What we try to say is that each community should have a range of options from which to draw in its effort to be responsive to its particular housing needs. It is quite true that among these options there is rehabilitation and other options that are not supply-oriented, but there are options that are supply-oriented as well. I wonder if we can do any better than that at this juncture.

Dr. WEAVER. Well, I think that I would agree completely with what you have said, and as I said, I think the philosophical problem does not exist here. I think we have both of the same objectives and ends. I think that maybe I can answer that and comment on that by commenting on something else. One of the reasons why I am very fearful about going to the housing allowance as the method of solving the

problem of low- and moderate-income housing is because of one of the things it is supposed to do and does not do. It is supposed to guarantee wider choices. It guarantees wider choices within certain constricted markets, but if you have an area where the jobs are, and where the cheapest housing rents for $450 a month, there is no housing allowance that I can possibly conceive of, except by an act of God, that is going to be able to bring that housing down to be rentable to somebody with low and moderate income. So, you have got to have a production oriented type of activity, if you are going to provide any housing in that particular area for your low- and moderate-income families.

Mr. ASHLEY. I agree. As I understand the administration approach, if we have a fully operative housing allowance system-a doubtful matter at best-they would then cut out any support for the supply side, on the basis that the private market would respond to the $8 to $11 billion a year that would be flowing into the pockets of people for shelter.

Dr. WEAVER. I think it would respond by raising the rents for them and for everybody else.

Mr. ASHLEY. That is the first thing it would do. But I have never found builders, either in private or public talk, who do not admit that they would rather build for the family that can afford a $60,000 house.

Dr. WEAVER. Sir, this is particularly true in rental housing. They would much prefer to build luxury rental housing than low- and moderate-income housing for a very good reason. It is more lucrative, and it has got less problems.

Mr. ASHLEY. Precisely. They are totally responsive to our economic

system.

Dr. WEAVER. If you believe in the system, this is inevitable.

Mr. ASHLEY. That is right. I am glad that you pointed out on page 4 that under our bill new public housing could be built, because most certainly, it could be under the financing mechanism that you go on to describe. But I think that there has been a tendency to overlook that. It is quite true that we do focus on management in that part of the bill, but we do make provision for new public housing under the block grant.

Dr. WEAVER. It seemed to me that this was possible, but even, in reading your statement, if I may say so, you say that there would be no more housing under section 137, or whatever it is. But what you are saying is under existing law. But it could be, somebody might assume that under no other law would there be any building.

Mr. ASHLEY. That is right. We were talking about the 1937 act, which goes to the 40-year annual contribution contract type of financing, and not to the continued availability of public housing construction.

Dr. WEAVER. Somebody else, a lawyer friend of mine, pointed out that the annual contributions were limited, so you could not have any increase in the amount of public housing. I insisted that you did not have to use the annual contributions, you could use the block grants in lieu of annual contributions.

Mr. ASHLEY. Thank you, too, for your comments on the metropolitan housing proposal. I must say that your word "abandon" with. respect to this proposal is not entirely accurate. You do not "abandon" your wallet if it is being fleeced. [Laughter.]

Dr. WEAVER. I stand corrected.

Mr. ASHLEY. Finally, Dr. Weaver, I can understand the concern. you express on page 7 of your statement that a distribution formula based on population, poverty doubled twice, and housing conditions might result in concentrating even more low- and moderate-income housing in our central cities. I must say, though, that the distribution formula would produce a contrary effect. According to our calculations, 44 percent of the housing block grant funds to be distributed would go to central cities. Approximately 31 percent would go to the suburban communities in metropolitan areas, and the remaining 25 percent would go to rural, nonmetropolitan areas.

I think that that answers a part of your concern. I hope it does. If you need some further reassurance on that, I would say that you must bear in mind, when you say that "the basic approach of the bill is one of voluntary participation," that the housing block grants and community block grants are tied together. One of the conditions of a city or a suburban unit of local government in applying for community development funds is to show that there is a housing component that is responsive to the needs of that unit of government. So that, taking a community in the suburbs where General Electric or one of the automotive companies has located a plant, it would be incumbent upon that community, as a condition of receiving community development funds, to show that they accept the responsibility for a housing component which is responsive to that situation. Absent that, it will not get any community development block grants, let alone housing block grants.

Dr. WEAVER. Well, let me say two things to that, Congressman. The first thing is that, I think if there is anything we have learned or should have learned over the past few decades, certainly over the last decade, it is the fact that housing alone, insofar as it is represented by shelter, is rather meaningless. Therefore, I think that the notion, which is explicitly stated here of tieing in community development with housing, or the other way around, housing with community development, depending on what objective you have, is a very great step forward, and I think, a very, very admirable feature of the bill.

I think the problem that we have here is this. What you say is true but the thing that disturbs me about it, and looking at it from the point of view of an area of interest of long standing on my part, is the fact that when you decide what the housing requirements of a given locality may be, they are based upon the unit of government that is involved. What I would like and what you would like, vis-a-vis the 1971 bill, would be to have it based upon the areawide necessity, because this is the meaningful parameter of housing requirements. Mr. ASHLEY. No question about it. Thank you, Dr. Weaver. Mr. BARRETT. The time of the gentleman has expired.

Mr. Moorhead?

Mr. MOORHEAD. Thank you, Mr. Chairman.

Dr. Weaver, it is a great pleasure to see you again. It is like old times to have you discussing housing and community development with us. It is a great pleasure and your testimony is, as always, excellent.

Dr. Weaver, Secretary Lynn came before the subcommittee and testified that the primary thrust of this administration's policy would be the housing allowance situation.

Yesterday we had two mayors before us. The mayor of Trenton said the vacancy rate in his city was, I think, 2.6 percent, and that a housing allowance program would be of no real use to his community, and I notice on page 3 of your testimony you talk about establishing vacancy rate criteria.

Could you elaborate on that, particularly in light of the Lynn and mayor of Trenton's testimony?

Dr. WEAVER. If I might get a little broader than that by way of introduction, I think that one of the things that is striking is that if you will recall the excellent papers that were submitted in the two volumes that you published in 1971 incident to that bill, most of the housing economists were gung ho for housing allowances. These were the answers to all of the maiden's prayers and were the thing to be substituted completely for production-oriented subsidies.

Now, if you read the literature, there is a much stronger feeling of what I had advocated from the very beginning of a mix between the two, and that mix being dependent upon the nature of the housing market.

When section 23, was introduced by Congressman Widnall, as I recall, I was very strong at that time in saying this would only work if you had a loose housing market. It would not work in a tight housing market, and this is the way I feel. If you want any documentation of the difficulties, both administrative and economic and social of housing allowances, look at the welfare program in New York City which is the largest existing housing allowance program that there is in the country.

Mr. MOORHEAD. Mayor Lindsay told us that this was disastrous from the point of administering that program. But on the other hand, I asked the mayors-even the mayor of Trenton who said he could not use a housing allowance program-if the bill reported by this subcommittee should, as part of the housing block grant, permit the local authorities to determine on their own whether to have a housing allowance program.

Dr. WEAVER. Let me say this. Obviously there are things that housing allowances do very well. If you have an loose housing market, if you have an early stage of abandonment, not an advanced state of abandonment, this will arrest abandonment because it will provide enough funds so that the owner can maintain the property, and if you have standards and codes that require him to do it, you have got a situation which calls for housing allowances.

On the other hand, there is something naive about the notion that housing allowances are going to solve the abandonment problem because here I am, Joe Brown, and I live in a neighborhood which is going to pot, from my point of view, and I stay there because I can only pay $75 a month rent. A housing allowance comes in and permits me to pay $150 a month rent. What am I going to do? I am going to get out of that neighborhood so fast it will not be funny. So that you would accelerate abandonment in certain situations. You will restrict it in other situations.

Now, as the answer to your second question, I feel very strongly that there should be a ground rule, because there are going to be a lot of poor people awfully hurt if the inflationary impact of bad use of housing allowances occur. There ought to be a ground rule that there