Housing and Urban Development Act of 1972

program back to a cross section of income_occupancy, which it once had and assist its future social and economic health.

In the field of construction costs, we oppose the prototype provision of the present bill because we believe it would lead to poor quality in housing sites, design, and construction. The provision would put heavy pressure on local public housing agencies to bring all costs under the 110 percent of prototype ceiling regardless of the considerations in particular locations and circumstances. This provision, in our judgment, is a step back from current law, which is working very well. In some cases, its adoption would mean that local agencies might not be able to build at all.

Appendix D to my testimony contains what I think is a very fine statement by the Hartford, Conn., housing authority spelling out some of the dangers of this provision, which would mandate that the 110 percent cover all development costs and requ're that site costs and abnormal foundations also be included, which would again be very limiting on the selection of sites.

One of the other problem in the public housing program, as you are all aware, Mr. Chairman, is the operating costs in relation to welfare rents. We believe that a major amendment is required to the pending bill to require public welfare agencies to make payments in public housing equal to operating costs for the units occupied by tenants receiving public assistance. We believe that this amendment is absolutely necessary to assure the solvency of public housing.

As the committee is well aware, the 1971 Emergency Housing Act requires that the public housing authorities reduce rents for tenants receiving public assistance to 25 percent of their incomes, if the public welfare agency indicated that it would not reduce the basic assistance grants to these families.

The national impact of the 1971 amendment is calculated at a rent loss of from $60 to $70 million for local housing authorities, which must be made up by Federal housing operating subsidies.

The amendment which we propose would provide that regardless of the fact that no tenant in public housing should pay rent in excess of 25 percent of his income, including a tenant receiving public assistance, that operating costs agreement be required between welfare agencies and housing authorities to make up the difference between the welfare tenants' rent, which would continue to be at least 25 percent of his income, and the operating costs in public housing. We believe that such an amendment would redress the loss in rental income under the 1971 amendment and provide a sound basis for computing the welfare contribution to public housing. It would reduce the requirement for housing operating subsidies by at least $60 million annually.

In the field of FHA housing, Mr. Chairman, frankly, we prefer many of the Senate bill's provisions and we join in the chorus of others, including Mr. Gunther, who have testified against the local governing body approval of assisted housing applications. This provision, in our judgment, would effectively halt all FHA-assisted housing of any volume in any location except in our center cities.

Everyone recognizes the need to develop more housing opportunities for all income groups in suburban and new rowth areas, yet this provision would place still further obstacles in the way of such opportunities. The momentum we have achieved in the production of

FHA-assisted housing in recent years, will be lost if this provision is adopted.

Likewise, we oppose the prototype provision of the pending bill, as it applies to FHA 402 and 502 housing.

Here the 110 percent of prototype, including all land and site costs, again can only lead either to being unable to build housing or to poor quality housing.

We join Mr. Gunther in recommending a ceiling of 120 percent of prototype costs for FHA-assisted housing, not just in cases where exceptional designs may be proposed.

In the all-important question of income limits, Mr. Chairman, NAHRO supports and urges increasing the maximum entry income limit above the 80 percent of medium income presently contained in the bill to at least 90 percent of the median income. This is necessary to insure the financial solvency of the proposed developments, but more importantly, to foster further economic integration of such housing. We should note that these families receive less subsidy since they would be able to pay a greater amount of rental.

The 80-percent figure contained in the bill would actually result in reducing the income limits for FHA assisted housing in many localities, further exacerbating the financial and economic problems of multifamily developments.

Mr. Chairman, NAHRO appreciates the opportunity to present its recommendations to this committee.

(The prepared statement of Mr. Walsh follows:)

PREPARED STATEMENT OF ALBERT A. WALSH, PRESIDENT, NATIONAL ASSOCIATION OF HOUSING AND REDEVELOPMENT OFFICIALS

Mr. Chairman, and members of the Committee, I am Albert A. Walsh, President of the National Association of Housing and Redevelopment Officials (NAHRO) and Administrator of the Housing and Development Administration of the City of New York. Our Association represents over 1,800 local housing, urban renewal and housing codes agencies in over 2,500 local communities, and includes some 8,000 individual members.

Mr. Chairman, the bill before you the proposed Housing and Urban Development Act of 1972-is the product of the initiative of the Subcommittee on Housing in its study panels and in its extensive executive sessions. The bill has many positive features, and we commend the Subcommittee for its work.

However, Mr. Chairman, the bill also has serious defects, which if left to stand, could seriously impede housing and community development activity. In fact, a few of the provisions represent a regression from current housing law. My task today is to indicate the priority amendments which NAHRO believes are required, before this bill becomes law. Without them, in our opinion, the bill would not be workable, and could do serious damage to our current efforts.

Since the time for oral testimony is limited, I am listing below the titles of 21 amendments which we believe are essential. Full detail on each of these amendments is contained in Appendix A, and we urge the Committee to adopt them. We also have some additional exhibits which I will refer to, and I respectfully request that they be filed for the record. In my oral statement, I would like to concentrate my attention on those amendments marked with an asterisk on the

list.

NAHRO'S RECOMMENDED AMENDMENTS

(FULL DETAILS SHOWN IN APPENDIX A)

COMMUNITY DEVELOPMENT

*1. Addition of auth ity for general purpose local governments to delegate community development functions to local urban renewal agencies.

*2. Increased flexibility in the provisions for local non-cash contributions. *3. Strengthening of the loan provisions.

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4. Separation of the 312 rehabilitation loan program from the community development block grant, and linkage of housing to community development. *5. Expansion of the definition of "hold-harmless" communities to provide full protection for communities below 50,000.

PUBLIC HOUSING

*6. Addition of a provision to require that public welfare agencies make payments to local housing authorities equal to operating costs for housing units occupied by tenants receiving public assistance.

*7. Revision of the "prototype" provision to exclude the cost of land and site improvements from the 110 percent of prototype ceiling. (See Appendix D.— letter from the Hartford, Connecticut Housing Authority).

8. Elimination of the requirement for continued occupancy limits.

9. Clarification of the 50 percent earmarking of Section 23 leasing units for existing housing to assure that if contracts for existing housing units do not fully utilize this 50 percent earmarking, that the balance of the units can be used for new development.

10. Clarification of the Secretary of HUD's authority to utilize the Public Housing authorization for the experimental housing allowance program to indicate that it shall be used only to the extent necessary to conduct a meaningful experiment.

11. Removal of the requirement for approval by the Appropriations Committee of new authority for operating subsidy.

12. Addition of a provision providing authority to convey public housing to cooperative or condominium ownership.

13. Application of the vendor payment provision by public welfare agencies to apply to tenants receiving public welfare now in occupancy in public housing, as well as to initial occupancy by new tenants.

14. Elimination of the requirement that housing authorities remove all of a family's possessions and belongings from a project if rent payments are 60 days in arrears.

FHA MORTGAGE-ASSISTED HOUSING

(SECTIONS 402 AND 502)

*15. Removal of the requirement for local governing body approval of Section 402 and Section 502 housing development.

*16. Alteration of the income limits to set them at 90 percent of the median income in the local area.

*17. Adjustment of "prototype" requirements to provide for a 120 percent of prototype mortgage ceiling.

18. Provide for an additional authorization of $200 million for fiscal year 1973 to support the additional occupancy by very low income families, provided for under the Act.

19. Provide for additional operating assistance by the federal government in the event of increases in operating costs in multi-family housing due to such factors as rises in taxes, utilities and maintenance.

20. Authority for local public bodies and agencies to receive mortgage insurance to acquire and rehabilitate housing on a limited basis.

21. Authority for public housing agencies to utilize FHA mortgage insurance for assisted housing.

COMMUNITY DEVELOPMENT AMENDMENTS

Mr. Chairman, the community development changes we recommend are designed to provide needed flexibility to determine the local administrative structure for planning and implementing a community development program; needed flexibility to use local investments to meet the local financial share required; and needed flexibility to obtain the capital to finance the local program. They are as follows:

1. Flexibility to Designate Local Public Agencies to Undertake Community Development Programs.-In many states units of general local government cannot perform the activities permitted under this bill; these are granted to local public agencies. In other areas, local government has supported the creation of separate agencies to perform them because of local bonding problems and the added flexibility which can flow from a separate agency. We therefore recommend an amendment, as contained in the Senate bill, to permit the unit of general local government to designate one or more public agencies to undertake in whole

or in part the community development program (including the ability to contract directly for funds with HUD) when it is determined at the local level to be the best approach for that community.

2. Local Share Requirements-Added Flexibility.-While we support the proposed 90% federal-10% local share formula, we recommend three modifications. First, the bill would restrict the use of non-cash local contributions; only those activities otherwise eligible for grant assistance could be counted. This would preclude using such related and integral facilities as local investments for schools, libraries and hospitals, which are now counted under the urban renewal statute. We recommend an amendment to include as eligible local contributions the value of related public improvements and facilities when integral to the success of the local program. This would reduce the financial burden of the local share and give communities more ability to negotiate on the timing, location, and mix of these supplementary facilities.

Second, we recommend an amendment to permit the use of a portion of existing urban renewal excess investment credits to meet the local share under this new program. These outstanding credits would be decreased to reflect the reduced local share. Communities have accumulated these in carrying out the provisions of existing law and have planned to use them to support additional federal activity. Without this amendment, these would be eliminated. Some examples of the extent of these excess credits is attached as Appendix B.

Third, the bill implies that local share must be met annually. We are opposed to this and recommend an amendment to permit up to two years to meet the local share. Excess deficits or credits incurred in one year could be offset the following year, providing flexibility in timing the activities.

3. Expansion and Clarification of the Loan Section (Section 309). -NAHRO is concerned about the limitations placed in the loan section. This is a much more restrictive version than is now provided in the urban renewal statute. We therefore recommend changes in this section after its review by local financial officers and public agencies. It must be expanded to include loans to cover the acquisition costs of all property whose acquisition is approved in the community development plan and it must be extended to permit borrowing to cover gross operating costs pending the receipt of grant funds and proceeds from the sale of land. Further, authority to permit the community or its designee to use the loan agreement to go to the private market and obtain funds there when the rate for borrowing is less-must be included in the bill.

4. Exclusion of the Section 312 Rehabilitation Loan Program for Consolidation/ Linkage of Housing to Community Development.-NAHRO opposes the inclusion of this program in the consolidation for the following reasons: State Constitutional provisions against the making of gifts or loans to individuals (e.g., Texas and Alabama); the inability or reluctance of some communities to service those loans; and the lack of insurance against default against these loans. Inclusion of this program could lead to diluting rehabilitation efforts in communities.

The mechanism to make such loans with funds received from the Federal Government does not exist in most municipalities. In fact, I believe I am correct in saying that the City of New York is one of very few-if not the only localitywhich now has such a municipal loan structure. In many States, there are serious constitutional issues. Our local housing codes and rehabilitation officials tell me that, at the very least, amendments to State laws and establishment of municipal loan agencies would take an extended period of time. In the meantime, their local rehabilitation activity would be stalled. We recommend that the structure of the 312 loan program remain as it is under current federal law, as a separate program, but that it be linked with the community development program by requiring that it be used only in those areas designated as a part of the community development program.

5. Hold-Harmless for Towns and Cities Below 50,000.--The Subcommittee's bill would limit hold-harmless protection only to communities which during the past five years have had active urban renewal projects "pursuant to commitments for assistance entered into during such five year period." This underlined restriction would preclude hold-harmless protection for 305 cities now conducting active renewal programs, since their original commitment was made prior to July 1, 1967. This represents over 30 percent of all communities in the renewal program. A list of these cities, covering 39 states, is attached for your review (Appendix C). Eliminating this language and making these cities eligible for a holdharmless amount is possible within the authorization of the bill. A HUD computer estimate, which included the vast majority of these cities, places total

hold-harmless requirements for all cities below 50,000 at 332 million dollars. This would cover 644 cities, 399 of them outside of metropolitan areas and 245 of them smaller cities within metropolitan areas. We urge your support of language to clarify the bill and permit a hold-harmless for all communities now participating in the renewal programs.

PUBLIC HOUSING AMENDMENTS

Mr. Chairman, the amendments to the public housing program which we recommend are absolutely essential for its financial solvency, particularly in jeopardy because of the rent reductions mandated by the Congress in the Housing Acts of 1969, 1970 and 1971. Further, these proposed amendments would assist in moving the program back to a cross-section of income occupancy, which it once had, and assist its future social and economic health.

Our concerns, as amendments 6 through 14 indicate, are:

Providing quality in design and construction (through an adequate prototype standard);

Insuring the financial solvency of public housing (by requiring payments by public welfare agencies equal to operating costs);

Assuring a sound economic and social base (by eliminating continued occupancy limits and by providing for authority to convey public housing to cooperative or condominium ownership, where appropriate);

Assuring that operating subsidy will be available when critical needs arise in local housing operations (by eliminating the provisions requiring Appropriations Committee approval of the use of new operating subsidy);

Assuring that available public housing authority for new units will be fully utilized (by providing that any balance in housing units remaining after requested units are contracted for under the 50 percent earmarking of Section 23 leasing authority be available for other uses; and by restricting the use of public housing contract authority for housing allowance experimentation to the amount necessary to conduct a meaningful experiment);

Promoting a healthy relationship between management and tenant (by removing the overly-restrictive provision requiring housing authorities to remove all of a family's possessions and belongings if rent payments are more than 60 days in arrears).

We oppose the prototype provision of the pending bill because we believe it would lead to poor quality in housing sites, design, and construction. The provision would put heavy pressure on local public housing agencies to bring all costs under the 110% of prototype ceiling regardless of the considerations in particular locations and circumstances. This provision is a step back from current law which is working well. In some cases, its adoption would mean that local agencies might not be able to build. Appendix D contains a statement by the Hartford, Connecticut Housing Authority which spells out the dangers of this provision. Operating Costs for Welfare Agencies.—A major amendment is required to the pending bill which would require public welfare agencies to make payments in public housing equal to operating costs for the units occupied by tenants receiving public assistance. We believe that this amendment is absolutely necessary to assure the solvency of public housing. As the Committee is well aware, the 1971 Emergency Housing Act required that public housing authorities reduce rents for tenants receiving public assistance to 25 percent of their incomes, if the public welfare agency indicated that it would not reduce the basic assistance grants to these families. For many housing authorities, this 1971 provision superseded special welfare rent agreements with welfare agencies whereby rents were related to the operating costs of the public housing-resulting in reductions in some cases from rents of $60 to $70 a month to less than $20 a month. While the rents set in special welfare agreements were less than welfare agencies paid in private housing for families receiving public assistance, they did recognize the need to cover public housing operating costs. Public housing still contributed the cost of "debt service" to the welfare agency. The national impact of the 1971 welfare amendment in public housing is calculated at a rent loss of from 60 to 70 million dollars for local housing authorities, which must be made up by federal housing operating subsidies.

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Housing and Urban Development Act of 1972: Hearings, Ninety-second Congress ...