Senator GOLDWATER. That concludes the list of witnesses for the hearing on the Housing Act of 1954. We will now proceed to other matters. (Whereupon, at 3 p. m., the committee proceeded to other business.) The following letters, telegrams, statements, etc., were submitted for the record:) Hon. HOMER E. CAPEHART, AMERICAN FARM BUREAU FEDERATION, Chairman, Senate Committee on Banking and Currency, Senate Office Building, Washington, D. C. DEAR SENATOR CAPEHART: The American Farm Bureau urges you to include a 1-year extension of title V of the Housing Act of 1949 (title IX, sec. 904 of H. R. 7839, passed by the House) in the housing bill now receiving consideration by your committee. In doing so we urge an amendment to title V to define, for the purposes of this act, a farmer and an "eligible applicant" as "an individual who derives not less than 50 percent of his income from agriculture." The purpose of the amendment would be to make the funds provided for the purposes of this title available to bona fide farmers. We understand that the Administrator of the program has experienced difficulty in avoiding loans on suburban type property because of the broadness of the definition of a farmer and of "eligible applicant" provisions contained in title V of the Housing Act of 1949. Many rural areas do not have credit facilities available on a basis comparable to that in urban areas for building, improving or repairing dwellings. Country banks and banks in rural towns largely do not have adequate elasticity for making loans for these purposes on a long-term basis. Other lending institutions are not interested in many areas because of the small volume, relative high per unit cost and other similar reasons. The absence of these credit facilities emphasizes the need for direct loans until the time when other credit may become available. Bills have already been introduced in the Congress which would authorize insured loans for these purposes under the Bankhead-Jones Farm Tenancy Act. We support the enactment of such legislation. Such legislation could be expected to encourage more interest of various lending institutions in this field. However, we are convinced that currently there would not be enough credit from this source to meet the demands in all areas. We believe the Congress in its intent should state that direct loans should not be made available in the areas where insured loans would adequately serve the needs. It is our understanding that banking institutions are giving serions consideration to a proposal whereby larger banks would join with smaller banks in making long term loans for title V and other purposes. Under this proposal, for example, a large bank would provide 80 percent of the loan and a small bank 20 percent. The small bank would service the loan and collect a portion of the interest rate on the 80 percent for the service rendered. It is our hope that interest will develop, as a result of these programs, to an extent that direct loans would not be necessary in a relatively short time. We believe the Congress, in its intent, should state that direct loans for these purposes should cease when credit for these purposes becomes generally available. We observe that the values of dwellings located in rural areas and on farms have taken on new proportions in recent years where they are located on allweather roads and served by central station electricity. Population trends of recent years have been from the cities to suburban and rural areas. This has created a demand for dwellings in such areas, whether or not they are located on acreage or farms. However, to date lending institutions have not given much attention to this trend. We are not in a position to recommend specific funds for the various purposes of title V. We observe that the funds made available in the most recent years appear to be adequate. This would particularly be true in light of the amendment we propose and the possibility that insured loans will become available in some areas. We respectfully urge your support of the inclusion of title V of the Housing Act of 1949 with the amendment suggested above in the housing bill your Banking and Currency Committee is now considering. We ask that this letter be made a part of the hearing record dealing with this matter. Sincerely yours, JOE BETTS, Legislative Assistant. AMERICAN PLANNING AND CIVIC ASSOCIATION, Hon. HOMER E. CAPEHART, Chairman, Committee on Banking and Currency, Washington, D. C. DEAR SENATOR CAPEHART: On behalf of the American Planning and Civic Association and in accordance with a resolution adopted by the board of directors, I would like to express to you our approval of title VII, section 701, on urban planning of S. 2938. It is our belief that the Housing and Home Finance Administrator, under existing legislation, has already exercised a beneficial stimulus to local planning activities. As a group of citizens dedicated to the application of sound planning principles, it is our belief that the provisions for planning in the pending bill would have a further benefical effect upon planning in small cities and towns as well as in metropolitan areas. We also approve of section 702 which would provide further resumption of Federal aid to assist in advance planning of State and local non-Federal public works which would maintain a continuing and adequate reserve of planned public works (exclusive of housing) to permit prompt action when needed. I would be glad to appear before your committee if you wish to ask me questions but if this letter is made part of the record, I thought it might save the time of the committee to put our statement in writing. Sincerely yours, U. S. GRANT, 3d, Major General, USA, Retired, President. PLANNING COMMISSION, DEPARTMENT OF PLANNING, Hon. EDWARD A. GARMATZ, House of Representatives, Washington, D. C. Baltimore 2, Md., March 8, 1954. MY DEAR MR. GARMATZ: The Planning Commission of Baltimore City, has studied with great interest House bill 7839, which we understand is similar to Senate bill 2938. We believe we have now in Baltimore probably one of the best organizations for the development and coordination of public housing, redevelopment, and law enforcement, with the planning commission acting as coordinator, in the country. We believe that all three of these programs are necessary for a comprehensive attack on slums and blight. In our opinion, this bill is a very carefully worked out program to reenforce the kind of coordination which we have established here in Baltimore, and will make it possible to eliminate the slums and blight on the basis of a comprehensive plan of neighborhood renewal. Since we have already gone far in developing a very extensive planning program for a neighborhood renewal, we are happy to know that the essence of this bill is that of neighborhood renewal on a comprehensive planning basis. There is only one reservation this commission has regarding the entire program, and that is, we question the wisdom of permitting FHA loans, with only a 5 percent equity on the part of the owner. It is our opinion that a 10 percent equity would be safer. We highly recommend the passage of this bill, with the suggestion that the equity on FHA loans be 10 percent. We would like to take this opportunity to congratulate the President and his Housing Advisory Committee, and Mr. Cole and the HHFA for a job well done. Very truly yours, THOMAS F. HUBBARD, Chairman. YALE UNIVERSITY, Hon. HOMER CAPEHART, Senate Office Building, Washington, D. C. DEAR SENATOR CAPEHART: In the course of more than 5 years of service as chairman of the Housing Authority of the City of New London, Conn., I have developed rather strong convictions with regard to low-rent public housing and its administration. Those views are largely expressed in the enclosed article. I trust that the comments I make therein will be considered by the Banking and Currency Committee during its study of S. 2938, the Housing Act of 1954. So strongly do I feel on these matters that I am prepared, if the committee desires, to testify at public hearings on the bill. Respectfully, MORTON S. Baratz. [From Social Research, Autumn 1953] PUBLIC HOUSING: A CRITIQUE AND A PROPOSAL By Morton S. Baratz1 I It is now more than 16 years since Franklin Roosevelt saw one-third, of a Nation ill-housed." In the intervening period huidreds of public housing projects have been constructed under the auspicies of the Federal Government, and State and local governments as well. Nevertheless, public housing programs remain under attacks, not only by the vested interests-realtors, landlords, and private builders-but also by persons less intimately affected. In cities large and small during 1952 public housing projects were submitted to general referendums, and in a large number of communities the projects were rejected by clear majorities of the voters. The program of the Federal Government, authorized by the Congress in 1949 to proceed at the rate of 135,000 housing units per year for 6 years, was reduced to 35,000 for fiscal 1953--and escaped by a narrow margin being cut to 5,000. It is noteworthy, too, that no responsible official in the new administration mentioned public housing in more than perfunctory terms, either during the campaign or during the administration's first months in power. The resistance of the building industry and allied services to public housing is easy to understand. But why should groups in the community with no financial stake in residential construction be so opposed? There seem to be several factors, of which three are specially relevant. First, there is a widespread resentment against paying someone else's rent. The notion of rugged individualism remains a powerful influence on men's convictions, if not on all their actions. Second, there is a prevalent feeling (not totally unfounded) that public projects are being occupied by families who do not belong there, whose incomes are more than adequate to enable them to pay for privately owned quarters. This complaint is related to the first, since the critics profess sympathy for the plight of the poor, but contempt for those who take advantage of a good thing. Third, the fear of socialism continues to attract new recruits for the opposition. The case in support of public housing has tended to become more elegant with the passage of time. In their essence the arguments are substantially these. First, the residential construction industry is typified by small firms; still utilizing handicraft techniques; housing, as a result, is characterized by high costs per unit of output and high prices. Second, the persisting inequality in the distribution of income and wealth compels some families to forego adequate shelter. Their incomes are not sufficiently high to enable them to buy housing of a good quality. These low-income families must, therefore, accept accommodations in substandard dwellings, that is, in the least desirable. Since the rents of these buildings are relatively low, the owners have little incentive to maintain them. The buildings deteriorate gradually, developing into the blighted areas and slums which deface our great urban areas. Third, the community must thus provide I am indebted to William J. McKinstry and James Tobin of Yale University for their criticisms and suggestions. They are not, of course, responsible for any errors in my reasoning, nor do they necessarily agree with my policy recommendations. standard housing for those in need or it must suffer the costs of the poor health, juvenile delinquency, social tensions, and so on, which flourish in the slums, Public housing is essentially an effort to increase the welfare of some persons in society, without at the same time injuring the welfare of others. In this fashion the general well-being is raised. Even ardent advocates of public housing concede that the present program conflicts with individual freedom of choice-itself an important aspect of maximum welfare. Public housing amounts to a subsidy to certain persons in the form of goods rather than money. It reflects a general feeling in the coinmunity that individuals in need of better housing could not, even if they had the requisite income, be relied upon to buy it. Such housing is provided for them by society, although this represents a restriction on the freedom of choice of the families who accept subsidies--a limitation on their freedom to spend their incomes as they see fit. This intrusion upon freedom of choice is not, of course, without precedent. Compulsory education is a notable case in point. But, as I shall point out, public housing programs may result in a more serious interference with freedom of choice than has been recognized to date by students of the housing problem. There is evidence, moreover, that public housing programs may be inconsistent with the long-run interest of our society in a growing output of goods and services. These assertions are not idly made. They are the outgrowth of careful observation and reflection during more than 4 years of service as the unpaid chairman (formerly vice chairman) of the Housing Authority of the city of New London, Conn. Much of the discussion which follows is based on that experience. But conversations with other housing officials, in and out of Connecticut, have indicated to me that the problems I have raised are national, not local, in scope. My argument revolves around these two points: first, the market for shelter has been divided in half, necessitating an elaborate and cumbersome system of rationing in one segment of the market; and second, the administration of the rationing system has adversely affected incentives to work and has contributed to a reduction in the size of the labor force. II The housing market is at present divided into two reasonably distinct parts. On the one hand, private landlords and builders are providing modern facilities for families earning roughly $6,000 or more per year (though the minimum figure varies in different parts of the country). On the other hand, federally subsidized projects are serving families earning an average of $3,500 per year or less. In a few States, including Connecticut, there are State-aided programs designed to accommodate families with incomes too low to enable them to purchase private accommodations, but too high to qualify them for admission into the low-rental public projects. To assure that rentals are kept within the ability of tenants to pay, it is necessary for public housing officials to establish a strict system of price control. Rentals in federally subsidized projects currently average around $35 per month for 4 rooms (not including utilities); in the self-supporting moderate-rental projects in Connecticut they average $52 per month; and in equivalent private housing, despite wide variations from city to city, they average $90 to $100 per month. Enforcement of the established prices requires that the local housing authority delineate clearly what income groups qualify to enter the projects. Moreover, a system of rationing must be devised to apportion the available apartments among the eligible applicants. The rules established by housing officials administering the moderate rental program in Connecticut are illustrations of the problem. Eligible families are defined as those with incomes not in excess of $3.500 per year, plus an allowance of $300 per year for each dependent. This means that a man and his wife, with 2 children, may be admitted to a public project if their combined gross income does not exceed $3,500 plus $600, or $4,100. The applicant family must, furthermore, have been resident in Connecticut for at least 2 years immediately before the application. In most cities the local housing authorities have imposed an additional rule that the tenants must have been residents of the city for 1 or 2 years (as the case may be) immediately preceding their admission to occupancy. The statutes provide that veterans of World War II must receive priority. Finally, there is a strong possibility that the Connecticut law will be amended to exclude "subversives" (as defined by the Attorney General of the United States) from all State-aided projects, just as they are already excluded from federally subsidized developments. Although these broad restrictions help to reduce the number of potential occupants for a given housing project, there has been in most cities a persistent excess of applicants over accommodations. Each local authority has been compelled to elaborate its rationing system. None is more intricate than in my own authority. Initially, there is a provision that so long as the number of applicants exceeds the number of vacancies, citizens of New London shall be given preference. All applicants are then classified according to the urgency of their need, top priority being given to families who show written proof that they are under eviction notice from their present landlords. There are further classifications for families living under extreme hardship-doubled up with another family, or in other difficult conditions-each classification carrying a consecutively lower priority. Finally, a serious attempt is made to deal with each application according to the length of time it has been on file. A lifelong resident of New London who was a veteran of World War II, who is under notice of eviction, and who has been awaiting admission for, say, a year, is still not assured of a place in the project. His credit record is investigated as a precaution against delinquency in rental payments. A paid employee of the authority will inspect the applicant's present quarters to assure that if he is admitted he will maintain the authority's property. The applicant must submit to the authority his income-tax statement of the previous year, as evidence that his gross income is within the amount allowable. He must sign a waiver permitting the authority to inquire of his employer as to his current earnings. And he must swear before a notary public that all of the statements on his application form are correct and that he will report immediately any changes in his income or family composition. Finally, he must agree to file with the authority at any time, upon demand, a new statement of his income, backed by clear evidence. This complex arrangement seemingly shuts out any possibility either that unqualified families will gain admission or that apartments will not be rationed with even-handed justice among those qualified. Yet a variety of administrative decisions are necessary to carry out the rules. Consider some of these questions, each of which my authority has had to deal with in recent months. Are servicemen-of whom there are many in New London-to be admitted? (They are not, unless they or their wives were permanent residents in the recent past and intend to be in the future.) If a man once lived in New London but was compelled by the housing shortage to move to a neighboring town, is he eligible if he works here? (Yes, provided he does not live more than 12 miles from New London.) If an employer requires one of our tenants to work overtime, are the overtime earnings included in the comutation of his allowable income? (Yes, though this is a sore point in cities where there has been much defense-plant activity in recent months.) What income figures shall be demanded of self-employed persons-what their gross receipts were, or what they reported to the Bureau of Internal Revenue? (This is still unresolved.) This system of rationing is workable despite the difficult borderline cases that constantly crop up. But the system raises some fundamental issues. All too frequently the rules compel heads of families to choose between perjury and adequate shelter for their wives and children; too often they decide to perjure themselves. In enforcing the regulations, local housing commissioners are steadily invading the privacy of their tenants. An increasing number of applicants awaiting occupancy are becoming tale bearers against present tenants, in the (unfounded) hope that their own applications will be accented more quickly. Though my own authority has been singularly free of political pressures exerted in the interests of a favored few, there are many evidences that housing commissioners elsewhere have not been so fortunate. To assure that public housing developments are made available to persons within a stated income group, it has been necessary to establish rules for continued occupancy. Typically, the regulations provide that a family may maintain residence in a project as long as its gross income is no more than 20 percent above the income allowed at entrance. A family of 4. for instance, could be admitted with an income of $1,100 per year. It could remain in occupancy as long as its income did not exceed $4,100 plus 20 percent of $1,100, or a total of $4.920. The continued-occupancy provision is intended, of course, to permit gradual accretions to income overtime without requiring the family to withdraw from the public project. Under almost any conditions other than steadily rising levels of income, the 20 percent increase should be sufficient for the needs of most tenants. When |