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Provisions of S.2182 Mr. Chairman, in our testimony before the Subcommittee on July 27, we said that we would comment at a later date on two provisions in S.2182 (1) the shift to taxable bonds for public housing and (2) the proposed block grants for housing. After deliberation, it is our judgement that any shift at the present time from taxable bonds to finance housing would cause further disruption and uncertainty in an already disrupted program. The whole issue of all tax-exempt bonds should be studied and reviewed. It would be wrong to single out cne segment of the tax-exempt bond market, ie, public housing bonds, and change it to taxable bonds without a thorough study of the effect of this change within the context of the whole tax-exempt and taxable bond market.

We also recommend against the full-scale adoption of housing block grants at this time because they would, in our judgement, complicate the already difficult transition to potential community development block grants. Most localities would find it difficult to absorb and manage both housing and community development block grants. We do, however, favor an extensive testing of the reservation and commitment of housing program funds in conjunction with community development programs as provided in S.2182, or demonstrations on the potential utilization of block grants related to community development.

Mr. Chairman, we appreciate the opportunity to present our views to you and the Subcommittee.

PREAMBLE TO NAHRO PROGRAM POLICY RESOLUTION FOR 1973-1974

327 Attachment #1

An End to Drift and Delay: Getting Housing and Community Development
Action Moving Again While We Debate Future Directions

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In the preamble to its Program Policy Resolution for 1971-73, NAHRO set forth the proposition that a second American Revolution -- political, technological, economic and cultural was shaking the foundations of the nation. It called for a massive and sustained commitment and effort to identify problems, to develop new approaches and to assign resources sufficient to respond to this upheaval.

In October 1973, NAHRO reasserts its conviction that only such a commitment and effort is sufficient to respond to the nation's housing and community development requirements over the next decade. The body of the 1973-1974 resolution sets forth in detail NAHRO's recommendations toward such an effort in six basic areas of housing and community development concern. We believe these directions for the future should be urgently pressed.

In October 1973, the 40-year old efforts of the United States to provide decent housing for lower income families and a sound living environment in American communities is adrift on a tide of uncertainty, with no clear direction or national commitment. The last few years have witnessed administrative organization and reorganization, "new directions" and "new re-directions" of our federal housing and community development programs, culminating in a total termination or suspension of activity under these programs in early 1973.

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The 1970 legislative initiatives of the Administration in special revenue sharing for community development and consolidation and simplification of existing housing programs and the alternative initiatives proposed by the Congress have been discussed and debated for almost three years. In the meantime, the strong commitment of the 1968 Housing and Urban Development Act to national housing goals and to a progressive urban renewal effort have gradually eroded not because of basic shortcomings in the programs themselves, but because they have not been pursued with determination or with a flexibility to make adjustments in administration as experience unfolded. The constant recitations of the "myths" of program "failure" have camouflaged the "reality" of solid "achievement" made through these programs despite a constantly shifting urban environment.

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The Administration's strategy to decentralize major federal assistance programs under the title of "New Federalism" is still under debate. While general revenue sharing legislation was adopted by the Congress in 1972, "special" revenue sharing proposals for manpower and education are now dormant. Only in the field of community development is special revenue sharing legislation, involving a formula for allocation of federal funds, still alive. In this instance, the Congress has developed its own "block grant" alternatives to guarantee that federal funds for community development will be focused on the urgent needs to eliminate slums and blight, to preserve the existing housing supply, to provide housing for lower income families, and to revitalize local communities. NAHRO's views on the essential components of any community development block grant programs are covered in detail in the body of the resolution. But while the debate goes on, local community development efforts founder, and low- and moderate-income citizens of our nation suffer from inadequate housing and community resources.

The Administration's long anticipated new directions for federal housing assistance, announced in the Presidential Message of September 19, propose no immediate or significant new housing effort for lower income families. Rather, there is a tenuous conclusion that "direct cash assistance" to families may be the best long-range approach, with a final decision not likely until late 1974 or early 1975, pending further study. In the meantime, a minimal program of housing assistance is proposed involving 200,000 additional units including the pipeline of demand in the Section 236 and rent supplement housing programs, and a revised Section 23 public housing leasing program.

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The end result of this drifting and delay as to the future direction of federal housing and community development activity is a near standstill in our national effort at the same time as more families are priced out of private housing market opportunities, more of our existing housing supply slides into deterioration, and more local communities struggle to maintain economic and social viability, with consequent severe negative impacts, including hopelessness and despair, on the families and individuals whom these programs serve. NAHRO believes that there are important new approaches which must be pursued if we are to respond to the nation's housing and community development needs in the decade ahead. Not the least of these is a national urban growth policy and strategy. The body of this resolution describes many of the new directions that should be pursued.

But NAHRO also believes that the nation should not countenance a further stalemate in our national effort. The association calls for action to keep housing and community development programs moving, while we debate and adopt future approaches.

NAHRO calls for the immediate adoption by the Congress and the implementation by the Administration of a 2-year program (through fiscal year 1975) which would authorize existing housing and community development programs to initiate new program activity with an authorization at the fiscal year 1972 level of activity. In order to make the 2-year program most productive, NAHRO recommends the quick adoption of the perfecting changes in existing housing programs both legislative and administrative, particularly the essential provisions now pending in major legislation before the Congress.

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NAHRO believes it is time to end the drifting and delay, and get on with the job.

STATEMENY OF JOHN P. CONNOLLY, COMMISSIONER, BOSTON HOUSING AUTHORITY

Mr. Chairman, I come before you today to testify on S. 2182, the Housing Act of 1973, and in particular, chapter II, section 201, of that bill. The section contains provisions very much like the Administration's interim legislation; S. 2507, Title 3, Sec. 301; dealing with public housing and Sec. 504 of H.R. 8879, and all would have largely the same effect. This latter bill was entered by Rep. Widnall of New Jersey in the lower chamber. I would like to group the similar provisions in the several bills I have mentioned here as the Widnall Amendment, as these provisions have come to be known generally.

All seek to raise additional money for public housing and seek to raise it from the tenants, particularly the very poorest tenants. All, I believe, would have a disastrous effect on the public housing program.

The Widnall Amendment would mandate three important changes in the existing law, and although these changes can be seen as distinct, they have overlapping effects that tangle on each to the extent that we must urge the defeat of these provisions, whether appearing in H.R. 8879, the Administration bill S. 2507 or Chapter II, section 201 of S. 2182.

The three changes in law are as follows:

1. The amendment would establish a minimum rent for public housing at 40 percent of the cost of operating a unit, that is, the cost to the housing authority of maintaining each apartment, a cost that varies, of course, with the size of the apartment or unit.

2. The amendment would repeal that part of the so-called Brooke Amendment which applies the Brooke standard of rent payment (25 percent of income) to welfare recipients. Instead, it would force welfare recipients to pay whatever figure is inserted by the Welfare Department in the recipient budget as a line item allotment for shelter, or 25 percent of income, whichever is greater. (I should note here that this provision is absent from the Administration's proposal.) 3. The amendment would change the statutory definition of income for rent determination under the Brooke Amendment, that is, the deductions and exclusions from gross income that are allowed in order to arrive at a net income figure. The Brooke standard of 25 percent of income is applied to this net figure. Elimination of deductions that are subtracted from gross income in order to arrive at net income for rent, of course, raises the amount of net income and, consequently, the rent. The major deduction eliminated under Widnall is an important one which allows elderly tenants to exclude 10 per cent of gross income and families, five per cent.

The overall effect of the amendment, obviously, would be to raise more revenue for housing authorities. The obvious fault is that it seeks to raise it from the tenants of public housing and would raise almost all of it from the very poorest tenants. Consider the effect on the elderly of Number 1 above, the 40 percent minimum rent and Number 3, the elimination of a major deduction (from printout figures of calculations at the Boston Housing Authority a set of which is enclosed.) In one elderly project in Boston (Pond Street), an elderly person, receiving Social Security payments of $1106 a year, has deducted 10 per cent of that figure to arrive at her net income for rent, $995 a year. She pays 25 per cent of this figure, $21 a month. If the Widnall Amendment is approved, she would lose that 10 per cent deduction and pay either 25 per cent of the $1106 or 40 per cent of the cost of operating her one-bedroom unit, whichever is greater. It costs the housing authority $87.27 a month to maintain a one-bedroom unit and 40 per cent of that would be $34. Twenty-five per cent of the full $1106 would be $23 a month. Her rent would be the greater of the two figures, or $34 a month. You can see that, in this case- -which is typical of thousands of elderly living on Social Security in Public Housing the rent would increase by 61 per cent and the tenant would be paying 34 per cent of her total income for rent.

As a final comment on this first proposed change in the law, I wish to point out that the impetus behind proposals for a minimum rent is the widely held belief that many public housing tenants are paying no rent at all, and that this situation is causing a serious drain on the program. I want to refer you, Mr. Chairman, to a document sent recently to Sen. Brooke by Secretary James T. Lynn of the Department of Housing and Urban Development in response to a series of questions posed to him by Sen. Brooke. When Sen. Brooke asked how many tenants pay no rent, Secretary Lynn answered "about one-half of one percent of all families in public housing." Furthermore, in noting his assumption that these tenants were welfare recipients, Secretary Lynn put his finger on the cause of the relatively few zero rent cases, that is, pitifully low welfare payments in a few

states.

Both the elderly on Old Age Assistance (OAA) and the families on Aid to Families with Dependent Children (AFDC), would be adversely affected by the second_proposed change, to repeal the Brooke standard for welfare recipients' rents. Take two examples of welfare recipients, one elderly, living in a development for the elderly in Boston (Elm Hill Ave.) and the other, a family on AFDC living in a South Boston project (Old Colony):

The elderly person has a total annual income from OAA of $2156. After taking 10 percent deduction allowed, her net income for rent determination is $1940, and her rent, 25 percent, is $40 a month. Under the Widnall amendment, she would lose the 10 percent deduction. Twenty-five percent of her full income would be $44 a month. However, her budget from the Welfare Department contains a line item marked for housing of $72. Her rent, therefore, would be $72 a month. That would constitute an 82 percent rent hike and she would have to pay 40 percent of her total income for rent.

The AFDC family, a mother and a child living in a two-bedroom unit, has a total annual income of $2543. They take the five per cent deduction and, another allowed deduction in arriving at net income, $300 for the child, bringing the net income for rent determination to $2116 a year. Applying the 25 percent of income Brooke standard to that, they pay a rent of $44 a month. Under the Widnall Amendment, they would lose the five percent deduction, and their net income would be $2243 a year for rent determination purposes. Twenty-five percent of that would be $46 a month, slightly higher than 40 percent of the operating cost for the unit. However, their budget from the Welfare Department contains a line item marked for housing of $96. Their rent, therefore, would be $96. That would constitute a 118 percent rent hike and they would have to pay 51 percent of their total income for rent. The case isn't at all exceptional as an example of what would happen under the Widnall amendment.

I have to note here an important peculiarity of the welfare line item for housing: it has no real relation to the recipient's housing expense. The $96 line item in the welfare budget of the family above is the same in the budget of every AFDC family renting a heated apartment, no matter how small or large the family is, no matter where they live in the Commonwealth, no matter how much they pay for rent. The $72 in the welfare budget of the elderly person is also standard throughout the Commonwealth. Apparently, the figures were included in the Welfare Department's Policy Manual as part of a justification of the welfare budget. One of the major faults of the Widnall Amendment is that it mistakes the line item for housing in the welfare budget throughout the nation for a rational allowance for housing.

You can, perhaps, see what I meant above when I referred to the tangled effects of these provisions. All public housing tenants would be hurt to some extent by the provisions eliminating deductions (number three above) but the elderly would be hurt by at least one and, in some cases, two or three provisions.

It is difficult to estimate how much money would be raised by passage of the Widnall Amendment, although some say it would be $100 million, which, added to sufficient operating subsidy from HUD, would alleviate all financial difficulties of authorities. But it seems unlikely that the Administration, which has always been reluctant to release operating subsidy, would stand by without taking the excuse of the Widnall Amendment to lower existing operating subsidy levels. What is more likely is that the Administration would pull back subsidy funds as the tenants, particularly the poorest tenants, were forced to take on additional weight in the financial support of public housing. The net benefit to authorities would, we suspect, be small.

What has precipitated the problem is the lack of sufficient operating subsidy for the authorities to administer their programs properly. A clear solution, of course, would be the authorization of sufficient operating subsidies and their release by the Administration. That would satisfy the congressional mandate and quiet the authorities. It should be noted, however, that the authorities, in their present complaint, have raised one good point in regard to welfare rents, a point which should be considered in order to arrive at an orderly solution to the problem. In summarizing that point, we can look on the public housing program as part of the national social welfare structure. The cash payments to welfare recipients and the subsidy in the form of reduced rentals of public housing are interlocking parts of a larger social welfare system, a system of many parts and probably none of them satisfactory. Where welfare recipients are tenants of public housing, the two parts of the system overlap, two bureaucracies are involved and both take on part of the financial administration of subsidy.

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