ventional market without any assistance from the Government, since even use of FHA would be forbidden.

It is contended that this method would result in less expensive projects. Yet, the principal factor in driving up the cost of projects under the present programs, the prevailing wage requirement under DavisBacon, would be retained.

We have discovered that HUD is planning to implement the 20 percent requirement administratively with respect to the present section 23 leasing program. This is completely contrary to the provision of section 23 (c) which gives the local housing authority the sole discretion to determine whether more than 10 percent of the units in a structure shall be leased. This is another example of the very disturbing trend of HUD to entirely ignore the law.

We see little benefit from this proposed major modification of the public housing leasing program and much of detriment. We believe it would be much simpler to retain the present programs than to try to structure an entirely new one with all the problems attendant thereto.

I now would like to turn to H.R. 10036, introduced by the chairman and Congressman Ashley. It has been proposed as an alternative to the administration's proposals. It embraces both housing and community development legislation and follows the action of the Banking Committee last year to a considerable extent.

There is much that we agree with in H.R. 10036, but, unfortunately there are also significant provisions with which we must disagree. We are also in the process of preparing detailed comments on this very important bill, and I would like to ask permission to submit these comments for the record within the next week.

[The comments by the National Association of Home Builders on H.R. 10036 are attached to Mr. Martin's prepared statement and may be found on page 907.]

Mr. BARRETT. That may be done without objection.

Mr. MARTIN. Thank you. I would, however, like to at this time touch upon some of its major features. The most significant new aspect of this bill is the proposal to institute a program of block grants for housing.

Under this proposal, commencing July 1, 1975, the Federal Government's efforts to assure that its low- and moderate-income citizens are able to obtain housing would be turned away from the present federally directed activities toward major reliance upon local governments using Federal funds under Federal guidelines.

We e see many problems with this proposal. First, why is this cumbersome and complicated allocation process necessary? We realize that there have been reports by GAO and others indicating that the allocation of funds under the present programs has not necessarily been on a reasonably proportional basis. However, we have seen no evidence that would indicate that this is a result of any malfunction of the present system. Instead it is our belief and understanding that the areas, which have not received their so-called share of housing subsidy funds, are primarily those where cost levels have exceeded the allowable mortgage limits under present law.

Hopefully the shift to a prototype approach contained in the bill, for the purpose of calculating the maximum permissible mortgage amount, will eliminate many of the problems presently experienced in providing housing in higher cost areas.

NAHB RESOLUTION

MORTGAGE FINANCE COMMITTEE

ATTACHMENT "B"

September 22, 1973

New Orleans, Louisiana

RE-AFFIRMATION OF THE NATION'S HOUSING GOALS

WHEREAS, since the present Administration took office, both conventional and FHA/VA mortgage interest rates have risen sharply to all-time highs, and

WHEREAS, the recent partial abdication of Regulation Q has resulted in increased interest rates paid on savings and time deposits, and

WHEREAS, the Federal Reserve Board's actions to control inflation by inhibiting credit availability have resulted in record high interest rates, and

WHEREAS, the above actions together have created enormous outflows of funds from thrift institutions gravely injuring the housing industry and the American public hoping to buy or rent a new home, and

WHEREAS, increases in the FHA/VA mortgage interest rates have never been accompanied by any lasting reduction in points, and

WHEREAS, Administration proposals for changes in the structure of the U.S. financial system would only result in a further decrease in the supply of mortgage funds while permitting enormous windfall profits in tax abatement to lending institutions instead of giving a tax credit to the consumer as NAHB has proposed, and

WHEREAS, the combination of these actions has created complete chaos in the mortgage market, driven mortgage interest rates to historical highs, prevented and will prevent many thousands of American families from obtaining decent housing, and will inevitably have the effect of causing unemployment and higher costs in the housing industry, and

WHEREAS, we do not believe that this Administration had originally intended to produce this chaos but believe that unqualified administrators and mistaken policy has led us to this edge of disaster in contravention of the President's own statement to the effect that "The housing of our people is and must be a top national priority", and

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most vigorously. All evidence indicates that the 235 and 236 programs have worked extraordinarily well, despite some problems and difficulties. One should not look at the limited number of failures under these programs, but instead at the vast majority of successes.

We wonder whether the people have really rejected these programs, or whether we have not fallen victim to the administration's cold, calculated decision to do away with these programs solely for the purpose of reducing the budget, reinforced by frequently hysterical and inaccurate press reports which focus on the few failures and ignore the many successes. There is no question that the administration was enamored with housing subsidies in 1969, 1970, and 1971 when production under the programs provided a much-needed spur to an economy rapidly headed into recession.

Now, however, we have inflation and an overheated economy. So, therefore, that which was turned on so readily 4 years ago is just as really turned off if you have no commitment to housing.

We know that this subcommittee has such a commitment to housing, especially for the Nation's low- and moderate-income families, but we urge it not to fall victim to the fickle tendencies of the administration and create a program far more complicated than that which we now have and far more susceptible to misuse and misdirection. Instead, we urge the subcommittees to continue the present programs, making such perfecting and improving changes as are necessary to correct any indicated problems.

Many of the minor failures that were encountered in the administration of the program that Secretary Lynn talked about were the fault of the Secretary of Housing going out in December of one year and encouraging all the FHA offices to issue as many commitments as they could for people to go out and stick a spade in the ground so it would appear housing starts were up in that particular year, and so the economy would look like it was in better shape than it was. We have had that happen on several occasions where various FHA people call builders in and say, would you come in and take a bunch of commitments this month and take out building permits. That type of administration by HUD is responsible for some of the faulty processing that took place.

With respect to the revision of the 235 program, we are encouraged by the provision in the bill which would seem to require HUD to provide counseling to those families receiving assistance. However, we are disturbed by the failure to define "income" in the new section 402, thereby raising the question as to whether the present $300 deduction from gross income for each minor and the exclusion of earnings of a minor from family gross income will be available. This comment also applies to the revision of the 236 program.

We note that the present requirement in section 235 that no more than 30 percent of the funds could be used with respect to existing housing, with some minor exceptions, is not continued.

We know that there are arguments made by many that the present program is too heavily oriented toward new construction and that many families are forced to acquire a new home when they could just as well acquire an older home at less cost to the Government. We do not disagree that there are areas where there is an adequate amount of existing housing available which could be utilized to help lower income families under the homeownership program. We also know, however, that, as a whole, the country has an absolute shortage of enough

NAHB RESOLUTION

ATTACHMENT "C"

September 22, 1973

New Orleans, Louisiana

COMMITTEE FOR HOUSING LOW INCOME FAMILIES

OPPORTUNITIES FOR LOW INCOME FAMILIES

WHEREAS, the President, in his recommendations for housing submitted to the Congress on September 19, 1973, proposed a system of direct cash payments to remedy the housing needs of America's low and moderate-income families, and

WHEREAS, the President has not made a practical recommendation for a homeownership program designed to meet the housing requirements of low and moderate-income families, and

WHEREAS, the date for implementation of this proposal is not until 1975 or later and cannot adequately answer the Nation's current, unmet housing needs,

NOW, THEREFORE, BE IT RESOLVED, that the Administration be requested to release sufficient 235 funds to provide the Nation's low and moderate-income families with the opportunity to purchase homes of their own until a workable alternative is adopted and implemented, and

BE IT FURTHER RESOLVED, that the NAHB reaffirms its support for all the Federal housing subsidy programs, urges HUD to release all impounded housing and community development funds, and urges the Congress to provide sufficient additional funds to keep these programs operating at a level consistent with the National Housing Goals until amendatory or new programs are enacted which are capable of meeting the housing needs of the Nation's low and moderate-income families.

COMMENTS BY THE

NATIONAL ASSOCIATION OF HOME BUILDERS

ON H. R. 10688

(1) The findings proposed in section 102 are entirely inappropriate in that the present Federal housing subsidy programs have, in the last few years, been very successful despite a few difficulties and failures. No demonstration has been made that cash assistance or housing allowances is a more appropriate mechanism at an acceptable cost, as would be stated in these findings.

(2) The proposed amendments, in section 103, to Title XVI of the Housing and Urban Development Act of 1968 should not be adopted. There is no way in which maximum use of the existing housing stock will enable low and moderate income families to obtain decent housing. Furthermore, major reliance upon the disciplines and economy of a free housing market just will not work in providing housing for low and moderate income families. These approaches have been tried in the past and failed. The proposal to eliminate the present 10-year goals and the goal for "the elimination of all substandard housing" are completely uncalled for and the present language of Title XVI should be retained.

(3) The proposed rewrite, in section 104, of section 504 of the Housing and Urban Development Act of 1970 (the authorization of the housing allowance or cash assistance research program) should contain greater safeguards on the expenditure of public funds and the scope of what could be undertaken. This bill would grant HUD an entirely openended authorization. It seems particularly inappropriate that HUD should, at this stage of its involvement in providing housing assistance to the nation, need authority to spend funds to determine "the definition of safe and sanitary housing, as is contained in the proposed section 504(b)(1)(C).

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