and to protect labor's vested interest so that it is not just thrown on the junk heap.

Mr. HAGGERTY. Senator, I have not seen that decision. I do not know just exactly its full import, but we will have an executive council meeting next month in the city of Washington, at which time our counsel, of course, will explain the whole thing to us; and _whatever action should be taken in light of all of the circumstance, I am sure will be taken.

Senator JAVITS. So you will give consideration to these matters which I have referred to from that point of view?

Mr. HAGGERTY. Certainly, Senator.

WELL-PLANNED PROGRAM OF REHABILITATION IS POSSIBLE

Senator JAVITS. Now, I am very much interested in the research and development aspects of your activities and especially in your rather full treatment of rehabilitation. I happen to believe, though there is by no means an unmixed feeling about this, that the social situation in the slums and ghettos of the country is so grave as to demand a major acceleration of efforts to improve it. From a point of view of time, this can probably be accomplished only if large-scale rehabilitation is undertaken.

Now, I would like to ask you this about rehabilitation. Do you feel that you have an adequate work force in the building trades if you should decide to undertake a major rehabilitation of the American slums and ghettos on a cash basis?

Mr. HAGGERTY. Well, Senator, if you are talking about on a national basis in every large metropolitan city in the country, no.

But if you are talking about a well-organized and planned program in areas where the people are available and the need is greatest, yes. Senator JAVITS. Well, now, this does present a problem, does it not,

because

Mr. HAGGERTY. Yes.

Senator JAVITS. In this case if we do engage in broadscale rehabilitation we may find ourselves limited by labor shortages, may we not?

BUILDING TRADES AND GOVERNMENT COULD COOPERATE TO ELIMINATE LOCAL LABOR SHORTAGES

Mr. HAGGERTY. It may be. We do not know just what to expect. We do not know how far we would go in the planning of the correction of the slum areas.

Basically, I think that if it is run properly, no one city-New York and Philadelphia apparently are the two cities where work is now going on in the program that I know of. There are many other large cities which require attention also. It might be well if the powers that be, within the administration of those trillions of dollars that Senator Ribicoff speaks of, would work this thing out in such a way that we could develop the men and follow it.

This industry is a mobile industry. The construction worker is a mobile worker. He lives in New York, but he may have built missiles or helped build them in Montana or Great Falls for Minuteman, or

down in California, or some other place. He has lived there for the time he worked there. So I think if there is a need for men to be employed in a given area, they can be obtained within reason.

Senator JAVITS. Well, now, Mr. Haggerty, would the building trades be willing to engage with the Government and the industry in some planning activity to deal with this problem of possible local shortages which could inhibit what otherwise might go forward in rehabili

tation?

Mr. HAGGERTY. I might call your attention, Senator, to the Second World War, where the Government did sit down and call labor in and between the parties involved, management as well, they developed boards and commissions that did the job necessary. It could be done again, I am sure.

Senator JAVITS. So that labor could participate in such a national crash program in the rehabilitation field?

Mr. HAGGERTY. They could; yes, Senator. Could and probably are looking forward to doing it. Or hopefully.

REHABILITATION VERSUS NEW CONSTRUCTION

Senator JAVITS. Well, I think that is much to the good.

Now, I gather that, based upon your experience, you have considerable faith in the rehabilitation technique. As you know, Mr. Haggerty, there is a very sharp difference of opinion between those who do support rehabilitation and those who say that, though it costs roughly 50 percent of new construction, it is a waste of money, that it only will result shortly in new slums, and, therefore, it should be discarded insofar as slums and ghettos are concerned. I believe that rehabilitation can be effective but that all of it cannot be done that way; I believe that new construction is necessary, too.

But there is a classic connotation in that regard.

Now, did the building trades have any views upon that basic question of whether or not there is really paydirt for speedy action in the slums and ghettos through major use, massive use-and I notice you point out, it must be massive-of the rehabilitation technique as contrasted with new construction?

Mr. HAGGERTY. Senator, we have not, as a building trades department, sat down and discussed this thing intelligently or in depth, so I would be a little bit hard pressed to give you an answer except that nothing these general presidents, nothing the affiliates of this department-realizing that they would like to do all they possibly can to accomplish the desired purpose, I am sure that they would be glad to discuss it if they have somebody to talk to, to present their ideas and their viewpoints to.

As of now, we are talking to ourselves, but we are not bad people to talk to ourselves.

INSTANT REHABILITATION MAY BE FEASIBLE IN SOME AREAS

Senator JAVITS. Well, Mr. Haggerty, I gather from reading pages 13 and 14 of your statement that this was intended to express the building trades support of the rehabilitation technique with respect to slums and ghettos. It seems to me the whole thrust of these statements

is that you think that there is a lot to be gained from rehabilitation as contrasted with exclusively new construction.

Mr. HAGGERTY. Well, I am an amateur on that end of the business, I never was on the financial end of the construction business or the employer's side. I have always been on the other side. As a man in that position and knowing the people as I do, I think that there are several methods that should be utilized in developing programs and assistance to provide destruction of the slums as fast as possible. And I came out of one. I know what they are.

Senator JAVITS. So do I.

Mr. HAGGERTY. So that they are not new. If they could do this with the self-help program, with the destruction of the dumps that we happen to see around them-and basically, the whole picture-there is not just one system that should be utilized. One area might warrant the type that we are talking about-instant rehabilitation. You may have buildings which would take this type of thing and not be continued for some time to come. There are many features to a construction program which could be developed by the industries themselves: that is, the employer I am talking about now, the contractor as well as labor and the Government.

JAVITS' MEASURES TO MAKE REHABILITATION PROFITABLE

Senator JAVITS. Well, I might tell you that, in anticipating your statement or views like it, I have submitted a series of measures designed to make rehabilitation profitable in terms of accelerated appreciation, to make financing available through Government-guaranteed mortgages and loans for this type of rehabilitation, very much on the FHA model. I have endeavored to show by these measures, which I would like to submit for the record, that inducements have to be given to make this profitable and worth while.

Mr. HAGGERTY. Well, this is the system we live under, the so-called free enterprise system. It has to pay to be accepted, and I think you will find there are several methods underway-I am sure you have. You probably know more about it than I do. You have got the conventional system being used in New York by the-oh, what is the name of the outfit, the big outfit in

Mr. Fosco. Gypsum.

Mr. JAVITS. You are thinking about U.S. Gypsum Co.

Mr. HAGGERTY. U.S. Gypsum; yes. I have too many papers in front of me here. I cannot find them. They have developed three buildings there, and from their figures, they are making a good profit and they are doing a good job with what they have. In Philadelphia you have another type and in New York you have this instant rehabilitation.

Now, from all these trials and errors, we might find one which will work, and be beneficial, or several at the same time.

Senator JAVITS. I am equally interested in getting private enterprise, but I thoroughly agree with you that it must be on a massive scale. The only workable inducement will be to provide tax incentives, accelerated depreciation, and the ability to get money at reasonable

rates, et cetera.

(The bills which Senator Javits referred to follow :)

EXHIBIT 209

[S. 1198, 90th Cong., first sess.]

A BILL To assist in the provision of housing for low income families by providing Federal guarantees for certain obligations issued by local housing agencies

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

FINDINGS

SECTION 1. (a) While the Congress, in the declaration of national housing policy set forth in the Housing Act of 1949, established the goal of a decent home and a suitable living environment for every American family, experience has demonstrated that this goal is not being met for the millions of American families. Therefore, to further implement the declaration of national housing policy, and consistent with the provision thereof that any governmental assistance should be utilized where feasible to enable private enterprise to serve more of the total housing need, the Congress hereby determines that there is an urgent need for a supplementary system of housing finance to enable private enterprise to provide homes of sound standards of design and construction for families of low income.

(b) The Congress further determines that there are means available to State and local governments to further assist private enterprise to meet this need at little or no direct cost to such governments by (1) granting exemptions, in whole or in part, from taxation on the increased value of real property, (2) assisting in the assembling of sites through the use of the power of condemnation and eminent domain, and (3) promoting the use for such housing of sites which have been cleared under the slum clearance and urban renewal provisions of the Housing Act of 1949, as amended.

PURPOSE

SEC. 2. The purpose of this Act is to assist the States in providing satisfactory housing in well-planned, economically sound residential neighborhoods for families of low income whose needs are not being effectively served through existing programs of assistance to private and public enterprise. Such assistance is to be provided through the establishment of a Federal guarantee program for obligations issued by local housing agencies to raise funds in order to make loans to eligible borrowers for the provision of such housing.

FEDERAL GUARANTEE

SEC. 3. (a) The Secretary of Housing and Urban Development is authorized to guarantee the payment of the principal and interest on obligations issued by any local housing agency in accordance with the provisions of this Act.

(b) Any local housing agency desiring to avail itself of the benefits of this Act shall make application in writing to the Secretary stating

(1) that such agency is authorized and desires to issue obigations to obtain funds to make mortgage loans to eligible borrowers to provide, by rehabilitation or construction, decent, safe, and sanitary dwellings for families of low income;

(2) that such mortgage loans will conform to the requirements of section 4;

(3) that the local housing agency shall approve applications for mortgage loans only with respect to projects which will receive assistance in one or more of the ways specified in section 1(b) of this Act;

(4) that the principal amount of obligations to be issued by the applicant for which a Federal guarantee is sought shall not exceed in the aggregate

(5) that such agency shall maintain at all times such reserve fund to meet losses on mortgage loans made by it as the Administrator shall, by regulation, require;

(6) that such agency will take steps to assure (A) that mortgage loans are not dissipated through speculative devices, (B) that the organization of any corporate borrower and its proposed methods of operation are such as will avoid its use for speculative purposes or the payment of excessive fees, salaries, or charges in connection with any housing project, (C) that bor

rowers will adopt all practicable methods, including utilizing the services and labor of eligible occupants of the dwellings to be provided with the aid of such loans, to reduce the cost of dwellings sold to such occupants or to reduce rentals of units not sold, and (D) that borrowers will adopt methods to assure occupants of the opportunity to acquire (either individually or as a member of a group) ownership of their dwelling units; and

(7) such further information as the Administrator may, by regulation. require. (c) Upon the approval of any application of a local housing agency under this section, the Secretary shall enter into a contract of guarantee with such agency, but the total amount of outstanding obligations with respect to which such contracts of guarantee have been entered into shall not exceed $

(d) The Secretary is authorized to charge a fee in connection with any contract of guarantee entered into under this Act which shall not exceed an amount equivalent to one-half of 1 per centum per annum of the principal amount of the outstanding obligations guaranteed pursuant to such contract.

CONDITIONS APPLICABLE TO MORTGAGE LOANS

SEC. 4. (a) Any mortgage loan made by a local housing agency with funds obtained with assistance under this Act shall be made only to an eligible borrower to finance the development by such borrower of a housing project. No such loan shall be made unless

(1) such agency shall have determined that—

(A) the borrower is an eligible borrower and that, in the case of a cooperative ownership housing corporation, the subscribers thereof are predominantly families of low income, or that, in the case of a borrower other than a cooperative ownership housing corporation, the dwellings in such housing project are to be made available to families of low income;

(B) the proposed housing project will meet a need for housing of families of low income;

(C) the location and physical planning of the housing project will afford reasonable assurance as to the stability of the neighborhood, and the dwellings in the housing project will meet sound standards of design, construction, livability, and size for adequate family life; and

(D) the housing project will not be of elaborate or extravagant design or construction, and such design and construction and the proposed methods of construction and of operation and maintenance are such as will promote such economies as are contemplated to be achieved through (i) increased efficiency in production through the use of new or improved materials and techniques and methods of construction or otherwise, (ii) increased efficiency in operation and management, and (iii) minimum necessary operating services, occupant maintenance, or otherwise; and (2) the borrower shall have agreed with such agency

(A) not to incur or pay any excessive fees, salaries, or charges in connection with the housing project;

(B) to submit to such agency for its approval the terms and conditions under which it proposes to provide occupants in the proposed housing project with the opportunity to acquire (either individually or as members of a group) the ownership of their dwelling units, and with respect to any units not sold, to submit its schedule of rents and charges (and any revisions thereto) to such agency for its approval: Provided. That such agency shall not approve any such terms and conditions or schedule unless it determines that they are consistent with the requirements and purposes of this Act;

(C) to give preference in the selection of occupants for the housing project (as among eligible applicants) first, to families displaced by public clearance or enforcement action; second, to families living in substandard homes; and, third, to families living in overcrowded homes, veterans to have preference in each category;

(D) to maintain any part of the housing project which is not sold to the occupants, including all equipment therein, and all appurtenances thereto, in good condition throughout the life of the mortgage loan, and to establish and maintain adequate reserves for repairs, maintenance, and replacements necessary to so maintain such housing project;