the floor, and I think this is going to dominate the thinking of the Senators, that there has to be something here that offers a response to those situations that require new construction. You are not going to get this bill through unless it has that. Secretary LYNN. I ask you to take a look at the construction proposal that the President has made. Senator WEICKER. Thank you, Mr. Chairman. The CHAIRMAN. Mr. Secretary, we are grateful to you and your men who have stayed with us for such a long time and I think you have served to clear up some of the sections that gave difficulty. I hope the committee has succeeded in getting some of its impressions across. Secretary LYNN. It has, Mr. Chairman. The CHAIRMAN. Fine. I would like to ask about something said earlier about this study, and you said that-I know that you used the expression "the goals,' but you did use "goals," after all. There is one paper particularly that I wanted to be sure that you made available to the committee. That is the part of the National Policy Housing Study. It is entitled "Forward Housing Goals for the United States, Concepts, Methods, and Measures." I understand you have a series of papers, is that right? Mr. Moskow. I believe we submitted that to the staff of the committee this past summer, Mr. Chairman. The CHAIRMAN. Well, has it been changed, or is there a final one? Mr. Moskow. No, the copy we submitted to you was an advance one that is not yet ready for final public distribution. Secretary LYNN. We will certainly see that you get the final version as soon as it is ready Mr. Chairman. The CHAIRMAN. Fine. You don't know when it will be available, this week or not? Secretary LYNN. Mr. Chairman, let us check whether or not there is any finalization of the contractor in that regard and get back to you very promptly. The CHAIRMAN. Well, the final draft, whether it has been printed or not. We would like very much to have it. The committee stands adjourned until 10 o'clock tomorrow morning. [Whereupon, at 1:20 p.m. the committee recessed until 10 a.m., October 3, 1973.] [The following information was received for the record:] THE GENERAL COUNSEL OF HOUSING AND URBAN DEVELOPMENT, Hon. JOHN SPARKMAN, DEAR SENATOR SPARKMAN: Secretary Lynn has asked me to respond to your letter requesting clarification of various items pertaining to the President's 1973 housing message. This response supplements the testimony the Secretary gave before the Senate Committee on Banking, Housing and Urban Affairs on October 2, 1973. The answers to your questions are furnished as an enclosure to this letter. I hope they are helpful and responsive to you. We will be happy to supply any further assistance that you desire. Sincerely, JAMES L. MITCHELL. RESPONSES TO SENATOR SPARKMAN'S QUESTIONS 1. The President stated in his message that authorization has been given to process an additional 200,000 housing units, 150,000 of which will be units for new construction. These units are authorized for the following purposes: (a) meeting bona fide commitments requiring action; (b) completing the process of those subsidy projects which had moved most of the way through the application process by January 5; (c) utilizing the Section 23 leasing program to implement the Administration's building program. Would you please provide us with your estimate that will be used for each of the above purposes during FY 1974? Answer. The additional 200,000 units announced by the President will be used for meeting bona fide commitments as well as for utilizing the Section 23 leasing program. None of these additional units are for the purpose outlined in part “b” of the question-completing the processing on subsidized housing projects. There are approximately 100,000 such units in the pipeline currently and, to the extent that quality processing proves such projects to be feasible, the units would be over and above the 200,000 announced by the President. Further, it is not possible at this time to provide a precise breakdown between categories "a" and "c" of the question. All bona fide commitments which meet feasibility criteria will be honored. Many of them, however, may be honored as part of the new leasing program rather than under the original subsidized housing program. Considering all factors, it is anticipated that more than half of the 200,000 units would be under the Section 23 program. 2. Since the subsidy programs were suspended on January 5, what amount of contract authority was committed by the Department in the period from January 8, 1973 through June 30, 1973, for the Section 235, Section 236, the rent supplement, and the public housing? What is the number of housing units that come under contract and commitment under each of these programs during this period? Please give the same information for the period of July 1, 1973, through the present. Answer. During the period since the January 5, 1973 suspension of the subsidized housing programs, the Department has continued to approve for processing those cases which had reached a certain stage in processing or where it was determined that a bona fide commitment had been made. Because of the Department's insistence on quality processing, not all such cases actually reached the reservation stage during fiscal year 1973. Further, to the extent that quality review finds a given proposal to be infeasible, no reservation of funds was madeor will be made. The following tabulation identifies the units and contract authority which were approved for processing subsequent to January 8, 1973 for the periods requested above. HUD's accounting records do not indicate which of these actually reached the reservation stages in the periods shown. It is known, however, that the greatest proportion of the units approved for processing in FY 1973 did not secure firm fund reservations in that year and are being carried into FY 1974 for funding as necessary. 3. Will additional contract authority be required in FY 1974 to meet the authorization be requested for any subsidized program? If not, please disclose authorization for the additional 150,000 units of new housing? Will additional the amount of unspent and unobligated contract authority the Department currently has on hand to meet these additional commitments by program. Answer. The Department will require additional contract authorization in FY 1974 only under the Low Rent Public Housing Program in connection with the Expanded Leased Housing Program. Adequate balances of unused contract authority are available in the other subsidized housing programs to support FY 1974 activity, and no additional authority will be required in those programs. The table below summarizes our current estimates of the unused contract authority available for meeting commitments in the other subsidized housing programs. These figures represent net balances as of June 30, 1973, as adjusted to deduct funds earmarked to meet costs of units approved for processing in FY 1973 but which are going to contract in FY 1974 and funds necessary for interest rate and similar adjustments. 4. How much contract authority is under commitment or otherwise obligated at the present time? Answer. For each of the subsidized housing programs, the amount of contract authority reserved cumulatively since the inception of the program through August 31, 1973, is as follows: Program Rent supplement Section 235 Section 236 Contract authority reserved cumulatively through August 31, 1973 (Dollars in millions) 232.6 408. 6 501. 6 1, 544. 5 Public housing Total 2, 687. 3 5. With respect to the President's message on foreclosures, the Committee would appreciate an explanation of the disparity between the HUD-submitted data showing a default termination rate of less than 5 percent for the FHAassisted units and the 20 percent referred to in the President's message; also the discrepancy between the latest HUD figures on acquired properties amounting to less than 100,000 units and the 280,000 units referred to by you. If the latter number is correct, under what program are they insured, and what Administration action is being taken to prevent such a large number of defaults? Answer. The 1972 cumulative default termination rate for all single family units insured by FHA between 1960 and 1972 was 4.63 percent. For the Section 235 program the corresponding figure was 6.14 percent. The Section 235 data are based on only four years of experience and most of the insurance written was written in the last two years. Additional mortgages are expected to fall into default termination during the remaining term of the 30 year mortgages. The 20 percent estimate refers to the final default termination rate that we expect the Section 235 program to accumulate by the end of the 30 year mortgage life. It is based on age-specific information for the Section 235 program for years one through four while for the remaining 26 years the projection is based on Section 203 (b) default rates adjusted to take into account the lower equity requirements of the Section 235 program. You also asked about a discrepancy between the latest HUD figures on acquired properties amounting to less than 100,000 units and a figure of 280,000 units. The remark about the 280,000 units was made during the September 19 White House press conference on the Housing Message and refers to a preliminary estimate of the total of properties acquired by and mortgages assigned to HUD as forecast for June 30, 1974. The 100,000 unit figure relates only to the inventory of acquired home properties. This 280,000 unit figure included approximately 160,000 units in mortgages assigned to HUD plus about 120,000 units in foreclosed properties estimated to be owned by HUD. More refined estimates are currently under preparation in connection with the FY 1975 Budget. The Department is undertaking a number of steps designed to reduce defaults and prevent foreclosures. I can summarize these as follows: ADMINISTRATIVE ACTIONS 1. The Department has made major increases in Housing Management field staff for loan and mortgage servicing personnel to deal with mounting workload. A corresponding emphasis has been placed on training field staff. 2. To bolster field staff expertise, plans are being made to use Certified Property Managers as consultants and to provide a cross-training program for loan servicing specialists in the field with mortgage banking firms in the area, to familiarize staff with mortgage problems and procedures. 3. Organizational changes are being made to decentralize loan management functions to the field so that decisions can be made more rapidly. 4. ADP systems, referred to as the Foreclosure Alert System, have been designed and are being field tested at the present time. These systems will identify defaults in the subsidized and high risk programs 30 days after delinquency rather than 90 days as is now the case, so that special servicing efforts can be undertaken to avert foreclosure. POLICY ACTIONS 1. A policy has been issued requiring the field offices to process rent increase requests within 30 days, or notify the Assistant Secretary for Housing Management of the reasons for the delay. 2. A policy is being developed and reviewed to: Permit automatic rent increases on our unsubsidized projects for increased costs beyond the control of the mortgagor, such as taxes and utility increases. Broaden the market for existing 235, 236, and 221(d)3 projects by revising various income restritcions to attract and retain a good cross section of incomes. Tighten up on tenant selection procedures by preventing the admission of applicants who failed to pay their rent at their previous residence or who inflicted major damage to the premises. Prevent "project-hopping" by rent supplement tenants, except for bona fide reasons, in order to prevent vacancy problems in older projects that may lack some of the amenities of newer projects nearby. Develop a new management fee system which would provide financial incentives to the manager of the project if he is able to keep the project out of default. 6. Please also provide the Committee with your analysis of Section 23 housing relative to comparative cost per unit, the quality of such units, and an explanation of the superiority of housing built under this program over that built under traditional public housing or FHA Section 236. In computing the comparative costs, do the figures reflect the tax consequences of Section 23 housing relative to other public housing programs? If the eligibility ceiling under Section 23 were to be raised upward, how would this provide housing for "the people who really need help" referred to in the President's statement? Answer. Estimates of the comparative costs of the Section 23 program relative to the turnkey and conventional low-rent public housing programs are based on a study by Frank DeLeeuw and Sam Leaman entitled "The Section 23 Leasing Program," published in The Economics of Federal Subsidy Programs, Part 5. Housing Subsidies, a compendium of papers submitted to the Joint Economic Committee of the Congress of the United States, 1972. These data show that the full costs. direct and indirect, of a typical 2-bedroom unit are $154 a month for Section 23, $219 for conventional public housing and $211 for Turnkey. The DeLeeuw-Leaman data were then related to estimates of housing quality based on data collected for the National Housing Policy Review. The results showed that it costs $1.03 to produce a dollar's worth of housing services under Section 23, $1.23 under the Turnkey program and $1.40 under the conventional program. We do not have comparable data for Section 236 but a National Housing Policy Review study did find that construction under the Section 236 program costs, on the average, 20 percent more than ordinary private construction. The figures for the low-rent housing program are full cost figures including all the tax consequences of Section 23 relative to the other two programs. The estimates for the Section 236 program are for construction costs only and do not include foregone taxes. Finally, our proposed revision of the Section 23 program does not require local housing authorities to change their eligibility ceilings. ADMINISTRATION'S 1973 HOUSING PROPOSALS WEDNESDAY, OCTOBER 3, 1973 U.S. SENATE, COMMITTEE ON BANKING, HOUSING AND URBAN AFFAIRS, Washington, D.C. The Committee met at 10:10 a.m. in room 5302, Dirksen Senate Office Building, John Sparkman, chairman of the committee, presiding. Present: Senators Sparkman, Proxmire, Cranston, Tower, Packwood, Brock, Taft, and Weicker. The CHAIRMAN. Let the committee come to order, please. Several of the Senators have indicated they would be here for the hearing this morning, but we have a rather long schedule, and we can't wait too long. The Senate is in session, and we don't know when we may be called over there. We first have a panel of the U.S. Conference of Mayors. Mayor Alioto, we are delighted to see you. I understand you are going to introduce the mayors. Mayor ALIOTO. I am going to act as chairman, but before that time, Mayor Martin who is president of the Conference of Mayors, will make the opening statement. The CHAIRMAN. We are very glad to hear from you. STATEMENT OF A PANEL FROM THE U.S. CONFERENCE OF MAYORS COMPOSED OF MAYOR ROY MARTIN, CITY OF NORFOLK, VA.; MAYOR JOSEPH ALIOTO, CITY OF SAN FRANCISCO, CALIF.; MAYOR RICHARD HATCHER, CITY OF GARY, IND.; MAYOR NORMAN MINETA, CITY OF SAN JOSE, CALIF.; MAYOR LEE ALEXANDER, CITY OF SYRACUSE, N.Y.; MAYOR THOMAS BRADLEY, CITY OF LOS ANGELES, CALIF.; MAYOR FRANK BURKE, CITY OF LOUISVILLE, KY.; MAYOR STANLEY CMICH, CITY OF CANTON, OHIO; MAYOR JOHN DRIGGS, CITY OF PHOENIX, ARIZ.; MAYOR KENNETH GIBSON, CITY OF NEWARK, N.J.; MAYOR MOON LANDRIEU, CITY OF NEW ORLEANS, LA.; MAYOR JOHN LINDSAY, CITY OF NEW YORK, N.Y.; AND MAYOR PATRICIA SHEEHAN, CITY OF NEW BRUNSWICK, N.J. Mayor MARTIN. Thank you, Senator. We are very happy to appear before this body today to present the mayors' position on the legislation. I am the president of the U.S. Conference of Mayors, and I am here today to emphasize the fact that I am representing all the mayors who make up this great body, the U.S. Conference of Mayors, not just those from the larger cities, but from all classes of cities that have (69) |