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DEMONSTRATION CITIES AND URBAN DEVELOPMENT

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would like now to recognize the chairman of the full Committee on missioner Banking and Currency, the Honorable Wright Patman of Texas. ain tecit Mr. PATMAN. Chairman Barrett, H.R. 12341, the demonstration cities bill, is another bold and imaginative proposal in keeping with the landmark pieces of housing legislation that this committee has reported to the floor of the House of Representatives in recent years. arrying Itake great pride in sponsoring this administration bill.

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I am convinced that this bill is an important and essential supplement to the Housing and Urban Development Act which we passed in the first session of this Congress.

The Demonstration Cities Act will show not just a few cities but all cities, large and small, can rebuild and restore their blighted neighborhoods. What we learn in the cities where the demonstrations take insur place will point the way to all other cities in search of solutions. The using proposal offers a wide variety of new tools to attack the problem of central cities, and there will be great flexibility in the program. These demonstrations will be carried out and largely completed over a 6-year al span, but long before that period ends we will be learning new techniques and new solutions from these pilot cities.

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This program puts new tools and new powers in the grasp of local leadership and private initiative. Solutions will be shaped by local (9) officials, with a minimum of Federal direction and a maximum of Federal assistance.

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This program will, more than any other, call into play the creative federalism which the President first described in his Great Society address.

The major objective in the proposed Urban Development Act is to bring into physical being the needed projects planned for metropolitan areas. New grants are proposed to assist in planned metropolitan derevelopment. But this is not money for planning. It is money to help Act communities pay for the facilities they need-water and sewer systems, highways, mass transit, airports, parks and open space, and the like. These grants would be made to cities that work together to plan for the orderly growth of their entire urban area.

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Another section of this act would attack the problem of urban sprawl permitting FHA to insure mortgages for privately financed land development. This program would make it feasible at long last to open new outlying areas to well-planned large new communities in which both small and large builders could offer housing and facilities for families of all income groups.

To make these new proposals work, of course, it will take large-scale financing through both the Federal Government and private lenders. As we well know, housing and urban development take tremendous Capital outlays. This means that billions of dollars must be borrowed every year just to keep up with the most minimal needs of this area. And virtually all of this money comes out of the private money

market.

Therefore, when we consider any housing bill or urban development bill, such as the one before us today, we must take into consideration the conditions of the money market. No program is affected more in housing by the changes in interest rates and the availability of credit. Money and the cost of money are integral parts of housing.

We can sit here and pass what we consider to be great housing bills We can congratulate ourselves on a job well done. But, if at the same time we allow the money needed to finance these programs to be priced out of the reach of millions of low-income and middle-income Amer icans then what have we really accomplished?

It is tragic that today interest costs are the biggest single factorthe biggest single cost-in housing. Today, a $20,000 home mortgage will require $20,881 in interest charges over the life of the 30-year loan. This means that the money-the interest-is worth more than all the lumber, the glass, the plumbing, the woodwork, the craftsmanship, the land, and everything else that goes into a house.

So let us not take a "head in the sand attitude" that interest rates and housing are separate subjects. If we are really serious about providing housing and urban development then we also must be serious about holding down interest rates.

Dr. Weaver, this is the first time you have appeared before the com mittee since you were named Secretary of the new Department of Housing and Urban Development. I want to congratulate you or your appointment.

Unhappily, I realize that one of your first actions as Secretary was to approve the order raising the interest rate by one-fourth of 1 per cent on FHA mortgages. As I said at the time, I regard this increas as highly regrettable. I realize, Dr. Weaver, that this was forced or you by the fact that the Federal Reserve Board, acting in defiance o the President and the Congress, raised the discount rate to banks of December 6. I realize that you had little choice; in effect, Federa Reserve Board Chairman William McChesney Martin served as Secre tary of your Department insofar as the increase in FHA interest rate is concerned.

Of course, I have made no secret of the fact that I disapprov strongly of the Federal Reserve dictating policy to the Secretary o Housing and Urban Development or to any other part of the execu tive or legislative branches of this Government. This is poor publi policy which can lead to the destruction of many of the great housing and urban development programs which your Department wil administer.

Dr. Weaver, I want to emphasize my concern over what rising inter est rates are doing to these programs. I want to urge you ver strongly to take an active part in doing everything possible to kee down interest rates. As I have noted earlier, the cost of money is no becoming the dominant factor in all housing. Therefore, I hope yo will be a crusader against any effort to price money-and thereby hous ing-out of the reach of the people who need housing, slum clearanc and urban development programs the most.

As you know, the Full Employment Act of 1946 instructs the Fed eral Reserve Board to coordinate its policies with the administration However, the current Chairman of that Board has chosen to ignore th law, and he apparently has no intention of coordinating with the Se retary of Housing and Urban Development or any other person in th executive or legislative branch.

I hope, Dr. Weaver, that you will take concrete steps to see that you Department is represented on the councils that are involved in settir monetary policy. You must insist that the housing programs be co

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using sidered before such actions as that taken by the Federal Reserve Board it the son December 6 are put into effect. I think you will get a sympathetic be prear from the President. And, if you think you need legislation in this me area, I am sure that this committee will be sympathetic. I don't think anyone sitting on this committee wants to see housing programs, on e fact which we spend many long hours, destroyed by the willful actions of a mort one-vote majority of the Federal Reserve Board.

Again, let me say that the bill before us is an imaginative and skillnore fal answer to many of the problems of urban and suburban developrafts ment. It deserves early consideration by the Congress. And I congratulate my colleague from Pennsylvania, Bill Barrett, for so rest promptly calling his subcommittee together to work on this legislation. bout Thank you, Chairman Barrett.

be ser Mr. BARRETT. Thank you, Mr. Chairman.

Dr. Weaver, will you be kind enough now to introduce your asthesociates for the benefit of the members of the subcommittee? tment

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YOU STATEMENT OF ROBERT C. WEAVER, SECRETARY OF HOUSING AND URBAN DEVELOPMENT; ACCOMPANIED BY ROBERT C. WOOD, UNDER SECRETARY; PHILIP N. BROWNSTEIN, ASSISTANT SECRETARY FOR MORTGAGE CREDIT; CHARLES M. HAAR, ASSISTANT SECRETARY FOR METROPOLITAN DEVELOPMENT; HOWARD an WHARTON, DEPUTY URBAN RENEWAL COMMISSIONER; MRS. MARIE C. MCGUIRE, PUBLIC HOUSING COMMISSIONER; AND ASHLEY FOARD, ACTING GENERAL COUNSEL

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strSecretary WEAVER. Thank you, Mr. Chairman, and thank you, Chairman Patman.

I have with me this morning two gentlemen who have not appeared before this group before. The first is the Under Secretary, who comes e first with the credential of being the Chairman of the task force which as appointed by the President in connection with this Department and its program. And he is, as you know, an authority on the matters of the governmental difficulties of our urban communities, particularly with the metropolitan governmental problems and the proliferation of governments which harass us in the urban field. He was formerly a professor of political science at MIT, and now is the Under Secretary. Mr. Wood.

Mr. Wood. Thank you, Mr. Chairman.

Secretary WEAVER. And the second gentleman that I introduce to you is the Assistant Secretary for Metropolitan Development. He is authority in land use, and planning. He has been long active not nly as a student in this field, but also as an operator, being used in Consultant capacity, being used in a program development capacity. He also served on the task force. And he brings to us some unique alents. And he is the Assistant Secretary, Mr. Charles Haar, formerly professor of law at Harvard University.

Seretary Haar.

Mr. HAAR. Thank you, Mr. Secretary.

Secretary WEAVER. We have some old friends, as you know, but I think we should have them identified for you again. Unfortunately Commissioner Slayton could not be here, but his deputy, Mr. Howard

Wharton is here representing the Commissioner of Urban Renewal Mr. Wharton is on that end of the table. And sitting next to him i a lady that you all know who has been for 412 years the Commissione of the Public Housing Administration, Mrs. Marie McGuire.

And sitting next to me on my left is the Acting General Counsel Mr. Ashley Foard.

And now I have left one for the last, because he is in a unique posi tion. He is both old and new. He retains an old title, which is that of Federal Housing Commissioner, but he has acquired a new title And that is the Assistant Secretary for Mortgage Credit. Mr. Philip N. Brownstein on my extreme left.

And we are all delighted to be here. And we are all very pleased to have this opportunity to present the administration's program or housing and urban development as embraced in the legislation that is now before us.

With your permission

Mr. BARRETT. Mr. Widnall?

Mr. WIDNALL. Mr. Chairman, and Mr. Weaver, on behalf of the minority, I too want to welcome you here with your aids. We know how competent you are in the field, and the staff you have surrounding

you.

When we finished the last housing bill, the omnibus housing bill, recall I was asked by some members of the press, do you think ther will be any housing legislation next time. And at that time I said well, there certainly should be time to digest some of the things and see whither we are going, but I expect there will be some. But I say now that with three bills before us, the Demonstration Cities Act of 1966, and the planned metropolitan development and HUD program amendments, we have a greater mass of proposals before us than a the time we enacted the last omnibus bill. I am pleased that we have started hearings. These are extremely important. And I do fee that they should be full and comprehensive. And as to some of the new ideas that are involved, we should take a good hard look at wha you are trying to do in the urban field, though a demonstration billI think, is a very worthy approach. There are some parts I would like to inquire about. And I would appreciate some information about it.

Secretary WEAVER. Thank you very much.

Mr. BARRETT. Thank you, Mr. Widnall.

Dr. Weaver, if I may, before you start your testimony, lay the ground rules for the benefit of our members. We are going to asl them to give you an opportunity to complete your testimony, and after the completion of your testimony, we are going to give each member 10 minutes in the first round to ask questions. So, Doctor, you will now start your testimony, we will let you complete it.

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Secretary WEAVER. With your permission Mr. Chairman, I shal discuss the objectives and principal provisions of the three bills pro posed by the administration to carry out recommendations of the President in his message on city demonstration programs and to im prove and extend housing and urban development legislation. Thes three bills are: the Demonstration Cities Act of 1966, the Urban De velopment Act, and the Housing and Urban Development Amend ments of 1966 introduced by Congressman Patman-H.R. 12341, H.R

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12946, and H.R. 13064 and by Congressman Barrett-H.R. 12342, to his HR. 12939, and H.R. 13065.

missThe demonstration cities bill is the most important proposal in the President's program for rebuilding America's cities.

Come In his message to the Congress recommending the demonstration cities bill, the President said:

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From the experience of three decades, it is clear to me that American cities require a program that will

Concentrate our available resources-in planning tools, in housing construc

Ir. Phi tion, in job training, in health facilities, in recreation, in welfare programs, in education-to improve the conditions of life in urban areas.

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Join together all available talent and skills in a coordinated effort.

Mobilize local leadership and private initiative, so that local citizens will gran determine the shape of their new city **

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The demonstration cities bill will make it possible for cities of all sizes to undertake such a program.

This bill will help cities to plan, develop, and carry out comprehensire city demonstration programs. These are locally prepared prof of grams for rebuilding or restoring entire sections and neighborhoods Teof slum and blighted areas. It will help cities to provide the public facilities and services, including citywide aids, needed to enable the poor and disadvantaged people who live in these areas to become useful, productive citizens-citizens able to join in the general prosperity this Nation now enjoys. 1This bill will make it possible to improve and substantially increase the supply of adequate low- and moderate-cost housing in the cities. It will make it possible for cities to concentrate their eduAational, health, and social services on the problems of the large numbers of poor and disadvantaged people who live in slum and blighted sections and neighborhoods. It will make it possible to treat the human needs of people in the slums at the same time physical rehabilitation is being carried out.

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To qualify for assistance under this bill, a city must be prepared to plan and carry out a comprehensive city demonstration program. This will be a local program. It will be planned, developed, and carried out by local people. The character and content of the program will be based on local judgments as to the cities' needs.

This bill will provide Federal funds to cover up to 90 percent of the cost of planning and developing the comprehensive city demonration program. It will provide special Federal grants-supplementing assistance available under existing grant-in-aid programs-to help carry out all of the activities included as part of the demonstration program.

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The amount of these special, supplemental grants, will be equal to percent of the local or State share of the cost of all projects or activities which are a part of the demonstration program and financed under existing grant-in-aid programs. I will soon explain more fully the provisions of this bill relating to these supplemental grants. But first, let me emphasize that it will not be easy to qualify for this assistance. This bill is designed to help cities willing to face up to their responsibilities willing and able to bring together the public and private bodies whose joint action is necessary to solve their probles-willing to commit fully their energies and resources-willing to