has been made, in the last 2 or 3 years, that it is better to carry it on in the way that we have in the last 2 or 3 years, or should we stop it for 2 or 3 more years until we get a new program?

Governor DUNN. I do not think we should bring it to a halt for a period of 2 or 3 more years. Senator, there must be some ground on which adjustments can be made in what is happening nationally with our housing assistance programs and our financing programs that would permit us to get back into the business of getting people back in low- and moderate-income housing.

If there is not, then I think we are in dreadful circumstances at this time.

Senator PROXMIRE. Furthermore, you say in your statement:

Congress and the administration should give careful consideration to an overall housing program which provides a balance between subsidies to "producers" of housing and housing "consumers.'

That is what the administration seems to oppose. You say, "The lack of a significant production assistance program," and you are concerned about that.

You go on to say that your feelings that a program of production "rehabilitation assistance is necessary to meet the variety of housing needs with which we are faced." They do not have that in their program.

You say we should have it. When we pass that, if they do not use that, we do not get anywhere.

Governor DUNN. I agree. I cannot agree that everything that is done from the executive branch of Government is accurate or necessarily correct.

Senator PROXMIRE. In fact, this is the difference between your position and the mayors.

Twelve of them representing Republicans, Democrats, all sections of the country, were unanimous that we should mandate this.

You speak, as I understand it, for the Governors, and it is your position that we should have a somewhat more cooperative rapport with the administration.

Governor DUNN. I think that would be the best way to go.

Senator PROXMIRE. You do come down on exactly the same side in terms of substance and direction, that we need a production program if we are going to get housing in this country.

Governor DUNN. I do not think there is any doubt about it.

Senator PROXMIRE. And we should pass that kind of legislation, rather than just what the administration asks for.

Governor DUNN. I certainly would agree with that.

Senator PROXMIRE. Thank you.

The CHAIRMAN. Senator Tower?

Senator TOWER. On this business of production and new housing, Secretary Lynn has testified that 235 and 236 have not worked as they had hoped.

Do you have any alternative suggestion to those programs, or should we continue sections 235 and 236 housing programs?

Governor DUNN. I think there has been a great deal of discussion across the country that these programs have not been effective in part because they have not been properly administered at the levels at which they have to be administered in order to be productive.

As far as I can see, the subsidization of interest, the subsidization of rents, is not an impractical approach if these approaches can be made to work. So, I do not condemn the two programs at all, Senator. I think they probably have had a great deal of merit, or they would not have been legislated initially.

But apparently it is not working to the satisfaction of the national administration, nor is it working to the satisfaction of those who are hungry for housing opportunities, so I think we need to go beyond that. I think we need to go beyond it with a program that will permit the kind of activity in the private sector to develop housing on an adequate basis to meet the demands that are going to be generated when the President, or through the President's program for financial assistance, when it becomes active or effective, indeed if it does.

Mr. LINCOLN. If I might add a little to what Governor Dunn said, one of the things that happened in several of the housing programs which had been operated by a number of States is that the State agencies have been able to take the existing programs, particularly 236, and improve substantially on them by simplifying the process and procedures, cutting down on the processing time, establishment of considerably lower default rates than have been typical of the programs, and perhaps a higher quality, though that is a qualitative judgment.

We feel the State programs have been able to improve upon 236 within the existing framework of that program.

Senator TOWER. In that we are Southerners and Republicans, we tend to be particularistic, which is a euphemism for States' rights. To what extent do you think the provision of housing should be a State responsibility rather than Federal, and in addition, any thought you might have on that, you talk about flexibility. Would you suggest extensive revenue sharing to achieve that type of flexibility and let the State actually formulate and implement policies of its own? Governor DUNN. Senator Tower, I would much prefer to follow a pattern which I think has been very well established through the concept of general revenue sharing and which I hope very much will be supplemented by special revenue sharing legislation in the near future. I think the States are in a much better position. Thirty-one States have given every indication of being aggressively interested in solving the problems of housing from that level of government.

I believe the States can more effectively deal with these problems than can the national agencies through regional offices. So I would certainly say that any sort of national housing program should involve the States to a tremendous degree in their implementation.

I am confident, as long as the Federal Government is involved in a particular area, they are not going to release or relinquish some controls, at least over a period of time until some sort of assessment can be made of the success that is being realized, but I would suggest that the more responsibility which can be transferred to the Governors with the accountability whatever degree you and your ingenuity can build it, would be the most practical approach today.

Senator TowER. Well, you mentioned rural housing, and the administration proposal is inadequate in terms of recommendations for rural housing.

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I think very often our mentality on housing has tended to be dominated by the situation that exists in the urban areas of the Northeast, without adequate consideration being given to problems we have in Tennessee, Alabama, and Texas.

What additional comments do you have on rural housing? I think probably, you have answered that question by giving the States a degree of flexibility and returning to them some of the resources we preempt from them.

Governor DUNN. That is the only way it seems to me the peculiarities of any region or State can be dealt with effectively.

The FHA loans have been, in my State, a very substantial contributor to better housing for some of our people in the rural areas and we are pleased with the results.

In fact, we are pleased in Tennessee with the results of some of the other programs, 235 and 236, because they have not been failures.

I would not want to leave Senator Proxmire with the idea that I am not for legislating and acting as soon as humanly possible, regardless of whatever attitudes might exist in the national administration about housing.

I think we have got to move, and the sooner the better, and we want to cooperate in this direction with all possible haste.

Senator TOWER. Thank you, Governor, I think you have given us good testimony here today. I think it has been well balanced. Governor DUNN. You are very kind, and I thank you, sir. The CHAIRMAN. Senator Brock.

Senator BROCK. I have enjoyed the testimony. I have a certain prejudice toward the Governor. I might say for the record, that in Tennessee, he has led our State to one of the most creative housing programs of any State in the Union.

I think it is an exciting one, and I am very proud of the work he has done and the leadership he has given us.

I agree with so much of what you say that I am not sure where to start. One of the things you mentioned that has not been talked about by some of the other members of the committee that I would like to stress is where you say that States must deal with housing problems by attempting to deal with them as problems in the overall context of total community development—I just could not agree more thoroughly with that statement.

One of the problems we have had with our housing programs in the past is that they have been out of context, and, while I know, Mr. Chairman, that there is a need for better rural housing, it is true that the major problems with the housing and certainly the most visible problems, have been in the urban communities.

Now, whether it is Memphis, or Chattanooga, or Chicago, or New York City, we have seen examples of housing programs placed in the community without regard to the other services in that community. We have seen public housing put into suburban areas with a view toward economics, which is not bad.

As a matter of fact, it is a decent objective to seek, but when you put public housing beyond the reach of public transportation, you can have the effect of putting people who are barely making it, but who are productive, in a position where they cannot maintain their own employment. You thus create a welfare situation.

That is an unacceptable effect of the housing policy, and I think there is a desperate need for more human coordination of various Federal and State programs.

May I also address the point that you raised with regard to incentives for high priorities?

Governor, I agree with you but I am concerned about our setting priorities here. It seems to me that one of the problems, again, in terms of housing policy is that we have tried to establish national priorities when, in effect, they are not the priorities of Tennessee or other States. If we are going to have incentives built into the Senate bill, it would seem to me the priorities might best be determined by the Governors of the respective States.

Would you not agree with that?

Governor DUNN. I certainly respect that observation, Senator Brock, and it is quite in line with exactly what my philosophy has developed into being, having been a Governor now for a little more than 22 years.

The community developments we are making in my State are unique, they are historical. They have not in the past been approached on the long-range planning basis that we are presently approaching them, and I think with all the information in hand and the background and knowledge that is being accumulated by our State through our new department of economic and community development, we are going to be able to take programs that have Federal support and make them work effectively for our people and that, of course, is the whole thing.

It certainly relates to housing as well as other areas of planning and development.

Senator BROCK. You mentioned one other problem that I have been particularly concerned about. The chairman often points out the fact that I was the only vote against the housing bill of 1972. The CHAIRMAN. You just halfway voted against it.

Senator BROCK. That is about the truth. I was halfway opposed to it, but I responded by saying that I did not oppose the national housing objective.

I did not oppose the national housing responsibility. I did not and I do not, but I thought somebody had to draw focus to the fact that we needed to begin to rethink our housing goals, and honestly reevaluate these programs to be sure that people were benefiting from them.

We do not do enough of that in State Government or National Government. One of the comments you made which particularly caught my attention was that you feel that there are some good elements of 235 and 236.

I do, too. You have found at least in some instances, that some of the problem has been improper or inadequate administrative practices on the part of the people who control that program.

That points up, again, the argument that you were making for local and State involvement.

Governor DUNN. Yes.

Senator BROCK. We simply are not going to have enough people in Washington to administer these programs and find out the details they require from the local level. If we can involve more people in the communities in these decisions, they will be better programs.

I very much appreciate your remarkably fine statement. It is very helpful. We are not going to all agree here, but there is going to be more gained by working together than there is by working separately.

As the Senator from Wisconsin points out, if we pass a bill and it is vetoed, we have to override it. I do not want to get to that point. Governor DUNN. I do not, either.

Senator BROCK. I think we can work in cooperation with the administration on a program that will benefit the American people. I think that is what you are suggesting.

Governor DUNN. Thank you.

The CHAIRMAN. Senator Brooke.
Senator BROOKE. Thank you.

Governor, you endorse the matching-funds concept. I am very pleased to see that you do endorse that.

For example, if the State of Tennessee were to choose to match Federal funds for housing, do you envision hard cash matching funds or goods and services?

Governor DUNN. As a Governor, trying to squeeze every single dollar I can from one activity into another where I find the priority demanding, I would think in-kind matches would be the preferable approach.

Perhaps that is a little unkind from your point of view, but from my point of view it is a practical one. However, let me suggest to you that either way, I think that the suggestion has considerable merit, and it should be I hope it will be given evaluation as the legislation is developed.

Senator BROOKE. I feel very strongly about the program, the concept, and I am glad to see that you are endorsing it, but I just wanted to know what you actually meant by asking us to take this under consideration. I appreciate your response.

I will ask you this question, which I would like to ask of some of the others, also.

The administration's proposals seem to create mortgage money for new construction, but it is silent so far as existing housing is concerned.

Now, we have a lot of people in my State who, because of the closing of the Boston Naval Yard and other bases are moving to other States and locations, into existing housing, and they have a very serious problem as to credit.

They cannot obtain it. Did the Governors' Conference take into consideration the proposals creating money for existing housing?

Governor DUNN. Indeed, the Governors' Conference is very much. aware of the fact that existing housing and the need for improvement is very basic, a basic ingredient in the overall concern, and does support programs which make available money for the making of livable, existing facilities.

Senator BROOKE. If people live anywhere, they have to live in existing houses, and it seems to me that ought to be a priority, freeing money for existing housing rather than for new construction.

Governor DUNN. A very major piece of legislation in my State, which was passed this past session, deals with that area of public concern, and we are moving in that direction in Tennessee, to make those funds available.