EFFECTIVE DATE SEC. 11. The provisions of this Act shall take effect on the first day of the third calendar month following the month in which this Act is enacted. S. 3292 DIGEST OF BILL Section 1.-(a) Establishes a new Department of Housing and Metropolitan Affairs. (b) Provides for seal of office of new Department. Section 2.-(a) Provides for an Under Secretary and three Assistant Secretaries. (b) Provides for the line of authority in the absence of the Secretary, the Under Secretary, etc. Section 3.-(a) Transfers all functions of the Housing and Home Finance Administrator to the new Secretary. Transfers all constituent agencies of the HHFA, together with their respective functions, personal property, records, and unexpended balances of appropriations and other funds, and all other functions to the new Department. (b) Provides authority under the Reorganization Act of 1949 for the President to consolidate other functions and agencies in the new Department. Requires a report from the President by January 3, 1961. Section 4.-(a) Directs the Secretary to conduct a continuing study of problems peculiar to urban and metropolitan areas, and to assist State and local governments in solving such problems. (b) Directs the Secretary, as he deems appropriate, to make recommendations to the Congress as a result of these studies. Section 5.-Requires the Secretary to advise the President in regard to the coordination of Federal programs as they affect metropolitan areas. Section 6.-Abolishes the HHFA and the Office of the HHFA Administrator. Section 7.-Permits the Secretary to establish such advisory committees on urban affairs as he deems desirable. Section 8.-Conforming amendment. Section 9.-Requires the Secretary to make an annual report to the Congress of the activities and accomplishments of his Department. Section 10.-Technical provision. Section 11.-Requires establishment of new Department at the beginning of the third month following the month of enactment of the bill. HOUSING AND HOME FINANCE AGENCY, OFFICE OF THE ADMINISTRATOR, Re S. 3292, 86th Congress. Chairman, Committee on Banking and Currency, DEAR MR. CHAIRMAN: This is in further reply to your letter of April 4 requesting a report from this Agency on S. 3292, a bill "To provide for the establishment of a Department of Housing and Metropolitan Affairs, and for other purposes." For reasons discussed later in this reply I would not favor the enactment at this time of legislation along the lines of S. 3292. This position does not arise from disagreement with the broad considerations of policy often suggested by the proponents of departmental status for the functions of the Housing and Home Finance Agency. On the contrary, I believe it is helpful now to give serious thought to the long-range advantages which might be gained by establishing a new Cabinet department to embrace the Government's responsibilities and functions in the general area of housing and community development. There are a number of factors relevant to this question which I would like to discuss in some detail before explaining why I feel that legislation such as S. 3292 ought not to be enacted at this time. 55869 60-6 FACTORS FOR CONSIDERATION One of these factors is the extremely rapid rate of urban and metropolitan growth since the turn of the century. This has given rise to many urgent and difficult problems which the States and our local communities are unable to cope with alone. In 1900, 24.1 million people lived in metropolitan areas. By 1959, this figure had increased more than fourfold to 100 million. Meanwhile, our total population had increased by less than one and one-third. Thus, the basic underlying factors which have been operating to give national significance to the interrelated problems of housing and community development have been the continuing rapid growth of our population, and, even more important, the major shift between rural and urban living. I am informed that the 1960 census will probably show that about two-thirds of the Nation is now residing in urban communities. As our urban communities have grown in size at a rapid rate, very many of them have broken across municipal, county, and State lines. Technological advances in many diverse fields can be expected to bring about even more rapid urban growth-and change in the years ahead. We may therefore expect even greater strains on traditional patterns of financing housing and related community development and on the fabric of existing Federal, State, and local governmental programs in this sphere. A second factor which is relevant to the issues raised by this bill is the very great importance of Housing Agency programs to the entire national economy. Private residential nonfarm construction during 1959 was almost one-third of total private domestic investment. Soon, this segment of the economy may become even more important as the children born during and immediately after World War II reach marrying age and begin to establish their own households. As your committee has stated in many of its reports, the impact of residential construction on the national economy is multiplied by the countless products used in the construction, equipping, and upkeep of homes and related community facilities. Much of our residential construction is federally aided and all of it is affected in greater or lesser degree by Federal governmental policies. The various housing, urban renewal, and community facilities programs of the Housing Agency involve billions of dollars of Treasury funds and have a major impact on the Federal budget, as well as on housing and home finance markets. Our programs affect the livelihood of many millions of persons engaged in the construction industry and related real estate and financing industries, as well as those engaged in producing and distributing the materials and equipment used in construction. Most important of all, Agency programs affect millions of families in their daily life. The Federal Housing Administration has helped about 51⁄2 million families to acquire their own homes and has helped provide housing for over 840,000 families in rental or multi-family projects. It has also insured over 23 million home improvement loans. As your committee is aware, millions of persons have also been affected by the slum clearance, urban renewal, public housing, and community facility programs of the Agency. All these programs, along with planning aids which this Agency administers, now play a vital part in the livability and stability of towns, cities, and metropolitan areas throughout the Nation. It might be helpful in this connection to refer again to a factor which your committee and we in the Housing Agency have often remarked upon. This Agency's functions are unavoidably complex. This is so because they are addressed to so many closely intertwined problems. The housing and community facility needs of our expanding urban population must be considered along with the need to conserve urban areas by preventing blight, to rehabilitate areas which are blighted but capable of being saved, and to clear and redevelop many slum areas. Any Federal or local programs concerned with all of these needs should be concerted programs which deal with the interrelated problems as a whole and not piecemeal. Finally, Housing Agency programs are closely related to the programs of many departments, including the Departments of Agriculture; Commerce; Defense; Health, Education, and Welfare; Labor; and the Treasury. Housing Agency functions play an extremely important part in difficult economic and monetary decisions which are of frequent concern to the Department of the Treasury, the Bureau of the Budget, and the Council of Economic Advisers, and in turn to the Cabinet and the President. HISTORICAL BACKGROUND The need for an overall housing and urban development agency was strongly felt during the defense and war periods of World War II, when housing was viewed as an essential component of the war production effort. In order to provide an effective tool for coordinating the then widely scattered Federal authorities active in this field, the National Housing Agency was established under the First War Powers Act in 1942 by Executive Order 9070. Various emergency modifications of existing statutes were enacted during the defense and war periods, including special mortgage insurance incentives through the Federal Housing Administration; special provision for direct construction of housing for warworkers and their families under a modified lowrent housing program; and the Lanham Act, which provided authority for the construction of temporary and permanent war housing with appropriated funds, as well as for related community facilities. The importance of coordinating these special-purpose programs both nationally and locally was made especially clear during the time when scarcities of war materials gave rise to a system of Federal materials rationing and Federal construction permits. After the end of World War II, a severe national housing shortage made itself felt. This resulted from sharply reduced construction during the depression and the limitations on building which had to be observed during the defense and war periods, and was heightened to the intensity of a national emergency by the needs of returning veterans. The President and Congress naturally turned to the instrument at hand, and a number of emergency measures were adopted utilizing the overall housing Agency as the administrative tool for attacking these new national problems. That emergency in due course was surmounted, and as time has passed and new problems have emerged or been recognized, policies and programs have been developed, modified, and liquidated accordingly. For example, the Housing and Home Finance Agency worked closely with the Federal Reserve Board in making temporary credit controls workable during the Korean war emergency. The major depression of the 1930's, the critical shortages of housing and related facilities in defense areas shortly before and during World War II, the severe postwar veterans' housing shortage, and the need for residential credit controls and priorities during the Korean war period each gave rise to multiple housing programs, many of them temporary. During each of these periods, the lesson was driven home that Federal housing programs, along with certain community development programs, were so closely interrelated that their successful administration depended on a high degree of coordination. Partly as a result of this experience, two major organizational developments took place (a) The single unified Agency established in 1942 primarily to coordinate housing programs for special purposes during the war period was put on a permanent basis by Reorganization Plan No. 3 of 1947, which established the Housing and Home Finance Agency. (b) Through a series of actions on the part of the Chief Executive and the Congress, the original rather skeletal mission of the Agency was rapidly rounded out; its supervisory and coordinating functions were strengthened; general responsibilities with respect to such matters as research, economic analysis and policy and program advice were assigned to the Administrator; a major program of slum clearance was instituted in 1949; and in 1950 the secondary mortgage market operations of the Federal National Mortgage Association and the programs of the Community Facilities Service were transferred to the new Agency. Largely following recommendations contained in the December 1953 report of the President's Advisory Committee on Government Housing Policies and Programs, the Housing Act of 1954, through the concept of "urban renewal," opened up a whole new stage in the evolution of housing and related urban development programs. The authors of the report and the act recognized that problems of housing, community development, and urban slums and blight are not capable of solution by new construction and slum clearance alone. Rather, the immensity of the task required that attention be given as well to rehabilitation of existing housing and urban areas where feasible and also to their conservation by programs which will prevent blight before it begins. Any concerted local program of conservation, rehabilitation, clearance, and new development obviously requires that the interrelated problems be dealt with as a whole, both by the locality and the agency administering Federal aid programs. The 1954 act introduced, and later amendments carried forward, the concept that local communities should develop integrated and thoughtfully considered long-term plans of action-the so-called workable program concept-and the administrative machinery necessary to carry out such plans in an orderly and concerted fashion. As your committee knows, the Housing Administrator's approval of a locality's workable program is now a prerequisite to receiving Federal loans and grants for urban renewal, Federal loans, and annual contributions for low-rent public housing, and special FHA mortgage insurance for housing in urban renewal areas or for private relocation housing. The Administrator may not legally delegate to any other official the granting of such approvals. Special FNMA mortgage purchase assistance is also available for FHA-aided housing in urban renewal areas and FHA-aided relocation housing. Federal grants for urban planning, which were authorized by the 1954 act are, under recent amendments, available largely for metropolitan planning which cuts across municipal lines and for urban planning on a regional basis, including work done under interstate compacts. Similarly, the Housing Act of 1959 authorized Federal planning grants to localities for the preparation of longrange, communitywide renewal plans, as contrasted with previously authorized grants for planning the renewal of neighborhoods or specific project areas. The programs mentioned above are not intended to include all of the Agency programs which are focused on the common objective of improving living conditions in our urban areas. They do illustrate, by their number and complexity, the variety and difficulty of the problems involved. The fact that the programs are focused on a common objective adds to the importance of their being administered and reviewed on a coordinated basis. DEPARTMENTAL STATUS Judged against this entire background, and taking into consideration the necessary complexity of this Agency's functions and their importance and magnitude as they affect the well-being of a majority of our citizens, I believe the time is near when the principal responsibilities of the Federal Government in the field of housing and community development ought to be organized into a new executive department. This would make easier the full integration of the Government's housing and community development program with the overall programs of the executive branch. From the viewpoint of the public generally, and of our urban areas, a Government department concerned with housing and community development problems would no doubt be a considerable forward step. Accordingly, the objections which I see in S. 3292 relate only to its timing and to the method of approach. I feel it should be conceded even by the supporters of departmental status that there is no especially urgent need for such a change at this particular point in time. Unlike some of our major program operations which must be quickly geared to rapidly changing conditions in the economy or the residential construction or financing industries, the relative advantages of continuing housing and community development functions in a major independent agency or of vesting them in a new department will not generally make themselves felt over a short-range period. With this in mind, I would not want to foreclose the alternative of accomplishing the desired result through a reorganization plan submitted by the President. It has been the general theory of the Reorganization Acts, I believe, that in recognition of the President's responsibilities as Chief Executive he should be privileged to establish such organizational arrangements as may seem to him best for the discharge of those responsibilities, except to the extent that the Congress may deem it necessary to intervene in specific matters and vacate his proposed action in the manner provided by law. Since the Reorganization Act has historically vested in the President important powers to make the arrangements he feels necessary for the discharge of his constitutional responsibilities, and since the creation of an executive department is certainly one of the highest exercises of those powers, it would seem that the use of his legal method of bringing about the desired result ought to have at least very thoughtful consideration. Such an approach would be consistent with that taken in establishing the most recently created executive department-the Department of Health, Education, and Welfare-and in refining and perfecting the organizational structure of other departments. I recognize that the power to transmit a reorganization plan under the Reorganization Act of 1949 expired during 1959. I am not aware of any basic objection to extending this act, and it may well be that it will soon be extended. As you know, the President only last Tuesday urged the Congress to extend the act. I am sure that my comments will be understood as applying quite without regard to which party might be charged at any given time with executive responsibility. I am also sure that I will not be misunderstood in any way as suggesting that Congress is not free to legislate in this field as and when it chooses. Rather, the question that I do wish to raise relates to whether there is more to be gained from such legislation at this time or from making it possible, through extension of the Reorganization Act on a permanent basis (or for at least the customary 2-year period), for the President to have recourse to the alternative approach should he determine to do so. As drafted, S. 3292 would, in effect, establish as of its effective date a Department of Housing and Metropolitan Affairs to which would be transferred all functions and agencies of the present Housing and Home Finance Agency. Provision would be made for future additional changes by the President under "his authority under the Reorganization Act of 1949." The President would be required to submit to the Congress, on or before January 3, 1961, a report of what further action had been taken or was proposed to be taken and the reasons therefor. It seems to me that under these provisions for future actions and reports nothing substantial would be gained which might not be accomplished in one step under a future reorganization plan, or administrationsponsored bill, based on prior study by the executive branch and careful review by the Congress. DETAILED PROVISIONS OF BILL In conclusion, I would like to call your attention to several questions raised by the detailed provisions of S. 3292. It is customary in the departments to vest responsibility directly in the Secretary. This is not done in the bill, perhaps because of the provisions contemplating later actions by the President. We note that section 2 specifies that Assistant Secretaries shall serve as Acting Secretary on the basis of seniority in office. This is a matter which we believe should be left to the discretion of the Secretary. Thus, it may be appropriate at any particular time for an Assistant Secretary to be selected to act as Secretary on the basis of his special area of responsibility. Section 2 also omits the provision, customary in existing departments, for a general counsel appointed by the President. Section 6 of the bill makes provision for abolishing the Office of Housing Administrator but not that of Deputy Housing Administrator. We also note the absence of provisions which would cover such matters as transfers of authority and delegations by the Secretary within the new department; a clear transfer of contracts and contractual liabilities; and a "savings clause" for outstanding regulations and pending litigation. The absence of such a savings clause from recent reorganization plans did not result in technical deficiencies because of the applicability to those plans of the savings provisions in section 9 of the Reorganization Act of 1949. However, special legislation such as S. 3292 should expressly incorporate similar provisions. We have been informed by the Bureau of the Budget that this report is without objection insofar as the Bureau is concerned. Sincerely yours, NORMAN P. MASON, Administrator. EXECUTIVE OFFICE OF THE PRESIDENT, BUREAU OF THE BUDGET, Washington, D.C., May 9, 1960. Hon. A. WILLIS ROBERTSON, Chairman, Committee on Banking and Currency, U.S. Senate, Washington, D.C. MY DEAR MR. CHAIRMAN: This will acknowledge your letter of April 4, 1960, asking the Bureau of the Budget to report on S. 3292, a bill "To provide for the establishment of a Department of Housing and Metropolitan Affairs, and for other purposes." |