enabling legislation) against owners of property in the area being benefited, with each property owner being given 10 years in which to pay his assessment. The city would launch the program by issuing neighborhood conservation benefit assessment bonds, secured by assessment liens, but not by the general faith and credit of the city.

Federal insurance as proposed herein, which would include the levying of an appropriate premium, would enhance the marketability of the bonds and, we hope, speed the day when this method of financing could be substituted for the present one of outright grants of Federal funds or at least permit substantial reduction of such grants.

This amendment follows closely the principle of S. 1524, introduced by Senator Long and 24 cosponsors, now under consideration by this committee, which authorizes the Housing and Home Finance Administrator to purchase the obligations of municipalities for specific public projects.

The committee is aware of the Build America Better program of the National Association of Real Estate Boards. This program functions through our more than 1,100 local real-estate boards and National and State officers of the Build America Better Council of the association. Recently our association conducted a survey to determine the number of cities actively engaged in home rehabilitation, code enforcement and demolition of slums, as community functions. The committee may be interested in a tabulation of the data received from 209 realestate boards showing 238 cities actively engaged in Build America Better activities. This is attached as appendix B. Also, attached as appendix C, is a more detailed summary of what 10 large cities are doing in neighborhood conservation and urban renewal. They are offered in partial rebuttal tto the statements made before this subcommittee on May 9 in disparagement of the urbanrenewal program emphasized in the Housing Act of 1954.

Public housing

Section 13 of the bill would continue the expansion of the public housing program beyond its present termination date of June 30, 1955, to June 30, 1958, and authorize the signing of subsidy contracts for 70,000 units in addition to the anticipated unused authorizations of 15,000 to 20,000 for the current fiscal year. In addition, section 13 would remove five of the limitations which Congress placed on public housing in the Housing Act of 1954.

We are in agreement with the objectives sought by this committee the provision of adequate housing for families of very low income who must be relocated from many of the slums of our large cities. However, we sincerely believe that public housing is the wrong approach and that it involves a concept which is alien to our traditions. To care for the needy, the destitute, and those who because of circumstances beyond their control are unsheltered or forced to live in slums is in the American tradition. But to assist only the higher income portion of these by making them the dependents of the Federal Government through supplanting private enterprise and making private initiative unnecessary is fundamentally wrong and self-defeating.

The pending public housing expansion of approximately 85,000 units is hailed as a "tapering off" of the program. It is said by some that the program is a "small" one and that those like ourselves, and many Members of the Congress who favor an expansion of private home ownership and who have therefore always opposed public housing on principle ought not to become unduly exercised. However, we are convinced that any number of public housing units requested by the administration would never satisfy the almost insatiable thirst of proponents of public housing who are so ideologically involved in this subject that their goals bear no relation to need.

For example, when President Truman in 1952 requested 75,000 public housing units a year, no opposition was heard from the new articulate supporters of Government ownership of family shelter as to the insufficiency of this number. However, in 1954 when this administration requested 35,000 units per year, representatives of the National Association of Housing and Redevelopment Officials came before this committee requesting 5 million units 10; the CIO requested 200,000 units per year for a period of 10 years "; the American Federation of Labor requested 200,000 units for a period of 3 years 12; and the Americans for

10 P. 623, hearings, Senate Banking and Currency Committee, on S. 2938, March 9, 1954. 11 P. 492, 499, ibid. 12 P. 951, ibid.

Democratic Action requested public housing "for low income families on a much larger scale *** than heretofore." 13

14

15

Then the Conference on Economic Progress, whose spokesman is Leon H. Keyserling, former President Truman's Chief Economic Adviser, decided early this year that 200,000 units a year, or the 350,000 it recommended in July 1954,1 was too modest. The Conference's 1955 Blueprint for National Prosperity calls for 300,000 to 500,000 public housing units for 10 years, or 5 million more families to be added to the present 455,000 who are subsidized tenants of the Federal Government. Mr. Keyserling, however, makes no pretensions that public housing is designed wholly to assist the poor. In his article, "20 Percent Ratio for Public Housing," ," 16 he visualizes a public housing program of decreasing Federal subsidy because of the wider range of higher income groups who would be brought within its reach.

Mr. Keyserling's 500,000 per year unit need was picked up by the National Housing Conference as the new estimate of current and future need, according to Mr. Wallace Campbell's testimony before this committee on May 13. This progressive "numbers game" is ample justification for our sometimes use of the phrase "political housing" as being synonymous with public housing.

So you see we are not here to oppose a so-called small public housing program. Our opposition must necessarily be based on more fundamental grounds. Why is the National Association of Real Estate Boards opposed to the further extension of public housing? We will try to answer this as briefly as possible, yet with ample data and argument to support our position.

1. It is politically and morally wrong to require the taxpaying public to subsidize the shelter of a privileged few.-The Department of Commerce " reveals more than 14 million families in the same income levels as the approximately 455,000 occupying public housing (median income of about $2,000 per year). The Federal income tax liability alone of this group is in excess of $2 billion per year (appendix D), a burden aggravated by more and more 40-year commitments for annual subsidies which come into being every time a new annual contributions contract for public housing is executed.

Public housing holds out the false hope to more than 14 million families earning less than $4,000 per year that they too are entitled to have a portion of their shelter costs subsidized by the Federal Government. Unless the Congress is ready to appropriate annual subsidies over a 40-year period multiplied many times greater than the $87 million required for the coming fiscal year, then expansion of the program as provided in this bill is nothing more than the perpetuation of a costly special privilege.

Public Housing Administration in rebuttal of the above allegations has submitted the following facts:

NAREB has misquoted and misinterpreted statistics of the Department of Commerce.

The

The correct figures properly applicable to public housing are printed on the same page of the same publication as those erroneously used by NAREB. figures used by NAREB and the correct figures follow:

The figures quoted are not concerned only with families as NAREB States, but also include single individuals who are not eligible for low-rent housing. Also included are farm families which public housing does not serve.

18 P. 378, ibid.

14 P. 27, Toward Full Employment and Full Production, Conference on Economic Progress, July 1954.

15 P. 37, A National Prosperity Program for 1955, Conference on Economic Progress, February 1955.

18 P. 48, The Housing Yearbook, 1954, National Housing Conference.

17 Income Distribution in the United States, 1950-53, U. S. Department of Commerce, March 1955.

62736-55-23

NAREB also misstates facts when it says public housing holds out hope to families earning less than $4,000. In 1953, to which the above figures relate, $2,700 was the highest net income which an average-sized family in the average community could have and still be eligible for public housing. Based on the correct figures quoted above, only some 4,200,000 urban nonfarm families had less than this amount in 1953, and could be eligible on the score of income. This, of course, does not mean that any such number is or ever will actually be eligible for public housing. Only families who come from substandard housing are eligible for public housing. Many of the 4,200,000 low-income families in 1953 either owned decent homes or lived in communities where they were able to obtain standard housing within their means.

The need for public housing is substantiated, but is only a small fraction of the 14 million figure used by NAREB.

2. Public housing is unnecessary because of the high volume of home construction since the close of World War II and the continuing marked reduction in the number of low-income persons since 1946.-Since January 1946, through April 1955, there have been 9,539,700 private nonfarm housing starts,18 in addition to hundreds of thousands of dwelling units which have been rehabilitated and modernized. For the last 4 years new housing starts have exceeded estimated net household formations.

Public Housing Administration in rebuttal of the above allegations has submitted the following facts:

Garden-type apartment projects and outlying suburban subdivisions far removed from the centers of employment hardly meet the housing needs of lowincome families.

The number of low-income families may now be decreasing, but no figures presented by NAREB, nor any other available, show that by any foreseeable date will low-income families completely vanish. Families who lose their wage earners, whose natural endowment, environment, and income is well below normal, are going to need decent housing which they will find nowhere else than in public housing. And where private enterprise cannot provide decent housing, public housing should.

To the extent that incomes do increase, the cost of public housing will be reduced, because public housing rents are based on income, and the excess of rents over operating cost is used to reduce the Federal annual contributions. Therefore, to the extent that incomes rise more rapidly than operating expenses, the cost per family of public housing will be reduced.

There is no need to be apprehensive about entering into 40-year subsidy contracts for low-rent housing. If family incomes continue to increase, the cost to the Government of low-rent housing will decrease. If the time ever comes when public housing in a locality is no longer needed, the present contracts provide simple mechanisms by which the program there can be curtailed or completely terminated, and PHA will be the first to move in this direction.

This has served to raise the housing standards of all our people. In addition, significant changes have occurred in income distribution, further alleviating the circumstances in which many of our people found themselves in the 1930's when public housing was first conceived as a make-work welfare program. The argument for public housing then was social rather than political, the result of low and poorly distributed income aggravated by an average of almost 10 million unemployed, and a desire on the part of the administration to put people to work quickly.20

19

Now we have moved into a period in which, as a result of either the labor market itself or of unemployment and old-age insurance mechanisms set up by both Government and industry, family income is rising in both current and constant dollars despite very minor fluctuations. The argument that public housing is needed because a great number of our population are ill-housed as a result of poor income has no validity.

Appendix E of this statement reveals the extent of the shift in the distribution of incomes. Note that in 1936 (when this program was first conceived) 82 percent of the families and unattached individuals had incomes of less than $4,000 and nearly half of this group, 49 percent, had incomes of under $2,000 in 1950 dollars. The decline in the percentage of low-income groups in the 1936

18 Bureau of Labor Statistics, 1955.

19 According to table D-16 of the Economic Report of the President for January 1955, unemployment averaged 9,580,000 during the thirties.

20 Testimony of then Housing Administrator Nathan Straus before the House Banking and Currency Committe on H. R. 10C63, April 28, 1938, p. 5 et scq.

50 period and the simultaneous increase in percentage of higher-income groups is another argument against the continuation of this 1937 public housing program.

Appendix F represents a further elaboration of this point, based on Federal Reserve data, revealing a further 7.3 percent decrease in the number of families having incomes below $4,000 during the years 1949-53 and a 10.9 percent increase in families with incomes over $4,000.

Appendix G reveals that there has been a reduction of 5 million from 1950 to 1953 in the number of families and individuals with incomes, after taxes, of less than $4,000 (more than 12 million per year). This shift in income distribution, which was accompanied by a shift from unemployment to largely fractional unemployment, has enabled nearly every family with a member able and willing to work to have a chance to earn a living. Of course, families without wage-earners, families dependent on pensions and welfare payments, and those who are sick or incapacitated are still in a special position, but public housing does not take care of more than a token number of this latter group.

Appendix H underscores the fallacy of approving 40-year subsidy contracts for public housing. Here we endeavor to project the number of households in the after-taxes income groups to 1960 and 1965, assuming rises in productivity of only 2 percent per year per man-hour. This assumption is lower than the 22 percent factor suggested by the Joint Committee on the Economic Report in its recent report to the Senate (S. Rept. No. 60).

The four tables in appendix H have sharp implications on the alleged need for public housing. A reduction of about 6 million in the last 5 years in the number of households with incomes of less than $4,000 means a decline of over a million a year in this group. As the incomes of these households move from under $4,000 to over $4,000, these families are able to buy or rent homes of from $10,000 to $15,000, and they move out of homes worth up to $10,000 or they improve these homes.

21

I wish to emphasize that tremendous progress is being made in repair and renovation in the supply of existing homes. The deficit of maintenance which came about during the depression and war years is steadily being wiped out. Clear evidence of this we see all about us in our home communities. The statistics give further support to underscore what we know is going on as homes are restored and brought up to date. The census estimates "1 sugest that at least $8 billion a year is now being spent on owner-occupied homes for improvement and modernization. The Census Bureau has also advised us that over a million homes which were without plumbing in 1940 but were still in use 1950 did have plumbing in 1950.2 Rising income is causing individuals who own their homes to improve them or to sell and buy better homes.

As a million and a half households a year become able to support homes costing over $10,000, vacancies rise in homes costing less than $10,000 and these become available for families with income of less than $4,000. The upgrading of housing is underway continuously as the upgrading of automobiles is underway. Housing standards are rising rapidly, and this rise is made possible by increased incomes, advances in design and equipment, and efficient home building. This upgrading will provide a half million or more vacant units each year which will be available for low-income families at low prices. Such families can move into these existing homes until their incomes and their family size cause them to want to move to still better homes. Change in family size and income are now providing an adequate supply of homes for those in the low-income groups. This is a phenomenon which did not exist in the 1930's and which provides a nearly complete answer to those who say that public housing is necessary because private housing does not meet the demand.

The above argument is derided by proponents of public housing as the "trickle down" theory, but in so doing they fall into the error of contending that private enterprise must provide new houses for everyone. No other industry has been the object of so much reproach as the home-building industry for not producing a new product for all in the lowest-income group. We do not believe the homebuilding industry needs defense from such an indictment which won't stand up under even casual analysis. However, we prefer not to rebutt the allegation in general terms. We contend that private industry in many parts of the country is constructing new housing for families of low income although the greater sup

21 U. S. Bureau of the Census Report H 101, No. 1, December 18, 1954. 22 1940 census, pt. I, Summary of United States Housing, vol. 2, table 6. H. B. No. 1 Summary, table A-4.

1950 census

ply must necessarily come from lower-priced existing houses. Here are just a few examples.

In Newark, N. J., Builder Albert Reniero has developed a 1,600-unit tract financed by FHA with sales price of $7,000, $350 down and $42 per month ineluding all charges.

In Wilmington, Del., Builder Don Loftus has built a 476-unit project for Negro occupancy with prices ranging from $5,650 to $8,250. These are FHA-financed, 30 year terms, and monthly payments range from $37 to $52 which include all charges.

In Houston, Tex., the building firm of Southwest American Houses has built 500 2, 3, and 4-bedroom homes in price ranges from $6,000 to $6,650. Monthly payments of $43 cover everything. In the same city, Jacinto Oaks Co. has just completed a 60-unit project of 2 and 3 bedrooms, for $6,000 and under. Monthly payments are just under $50. This is the city where the San Felipe Courts public housing project-denounced by Judge Roy F. Campbell of the 80th District Court of Texas as not being a fit place to rear a child-(See Appendix I) had 185 vacant apartments as of early this month, which is the customary number of vacancies for this project.2

23

In Denver, Colo., Builders B. W. Fellers, Frank Pryor, Fred McIntosh, Cy Gamble, and Max Tichy have built more than 500 units this year, all single detached dwellings in price ranges from $6,000 to $7,250, with 5 percent down, FHA and conventional financing.

Because time does not permit me to read the list available to us, we are attaching as Appendix J a list of 82 builders in 64 communities in 26 States who during the past 3 years have built low-cost housing with monthly shelter costs varying from $34 to $68. These represent a very brief sampling of what private industry is doing in this field. They should at least cast some doubt on the repeated dogmatic assertions by many proponents of public housing that private enterprise does not build for low-income people.

Public Housing Administration in rebuttal of the above allegations has submitted the following facts:

NAREB's list of privately constructed low-rent homes probably represents a sample of the lowest prices now being achieved by private builders. NAREB states the "monthly shelter costs" for these houses vary from $34 to $68. These figures, however, are not monthly shelter costs at all, but only debt service on the mortgage, taxes, and insurance. They do not cover the very substantial item of repairs, maintenance and replacements, increasing with the years.

Public housing uses "gross rents," which include all shelter costs and all costs of utilities such as heat, light, cooking fuel, and water, whether paid for by the project or the tenants, as the basis for setting rents in relation to incomes. Add the costs of repairs, maintenance and replacements to NAREB's costs of private housing and the figures would rise to $54 to $88 a month. In contrast to such overall housing costs in private housing, the average gross rent in the first half of 1954, including all utilities, in public housing was $35 a month, Public housing supporters welcome the efforts of builders to make their housing available to the lower income groups. It is obvious, however, that the lowest groups renting new private housing must have incomes nearly double those of the families served by public housing.

24

3. Public housing assumes a false premise that people in substandard housing cannot afford to pay an economic rent.—An example of the fallacy of this argument is contained in an official account of the recent approval of a capital grant for Schenectady, N. Y., of $945,540 to help that city clear a downtown slum area and redevelop it for commercial purposes.2 The press release proceeds to state that of the 351 dwelling units to be torn down in the area, 256 are substandard. Of the 207 families, most of them apparently living in substandard units, only 35 are considered eligible for public housing. The "remainder can be accommodated in private rental and sales housing." This means that of the remaining 172 families in Schenectady, N. Y., many lived in substandard housing as a matter of personal preference as to how they desired to allocate their incomes. Yet the proponents of public housing insist on equating occupancy of substandard housing with poverty of its occupants.

Public Housing Administration in rebuttal of the above allegations has submitted the following facts:

23 Statement of Housing Housing Authority director to C. E. Woodall, Houston realtor, May 6. 1955. 24 HHFA (URA) Press release No. 233, May 12, 1955.