for this subsidy, that it is unbusinesslike, but nevertheless, that is the case.

Almost anyone would agree, it seems to me, that if we are really going to carry out a comprehensive long-term program the success of that program will depend very largely in the future on the amount of private and local funds at low interest rates, which may be brought into the field of low-rent housing, a brand-new field for both private and local investment.

There is one way in which you are never going to get any private or local funds into it, and that is with a variable differential subsidy, because it will be subject to every kind of political fluctuation, changeable every month and every year, and there will be no private investors, or even any investors in the bonds of local house authorities of such places.

Any bringing of such funds into important fields of low-rent housing, the Federal subsidy should be provided for in a clear-cut contractual guaranteed basis.

Once that is done it will probably be possible for the large number of local housing authorities set up in the last couple of years, that have the power to issue bonds, to issue bonds and get money at a reasonable interest rate.

As a matter of fact, I understand that a representative of a banking or investment house testified the other day of the general interest such companies as his own might have in such bonds of local housing authorities. I am sure if anybody would have asked him if he was interested in housing projects where the subsidy was provided on a changeable basis from one month to another, or one year to another, he would have walked away and said he would not touch it at all.

There is one other thing which I would like also to say a few words about. There has been considerable discussion on the subject of demonstration projects; that is, the power of the United States Housing Authority set-up under this bill to select, construct, and manage lowrent housing projects. Some of the people who have testified have thought this power should be eliminated altogether, while others feel that such projects should be confined to about 10 percent of the program.

Some sort of limitation probably will be desirable later on. Certainly everyone who is seriously interested in the success of this measure, and of the housing movement in general, hopes that the responsibility for construction and management will be decentralized as much and as soon as possible, but it cannot be done immediately, or it cannot be done immediately all over the country.

In the meantime let us not be carried away by unrealistic obstructions about local rights, democracy, and the like. As a matter of fact, the power in the bill for the United States Housing Authority to construct is by no means just an effort of a bureaucracy in Washington to put something over on local governments. It is at the request of local governments interested in housing that such a power would be in the bill, because there are so many local difficulties at the moment in the first few years, in initiating the program, that the local groups who want housing done will be the first ones who will ask for the United States Housing Authority under its power to construct demonstration projects.

The reasons why the local governments cannot go right out and construct projects themselves in every instance are several. First of all, there are a great many States-probably as many as a dozenwhere it is absolutely illegal and unconstitutional at the moment to pass an enabling act for local housing authorities. These matters will take some years to correct. In some places the legislation and changes in the constitution are going ahead at the moment, but there are large areas of the United States which absolutely could not take advantage of this bill in any shape or form for the next year or two unless the United States Housing Authority had the power itself to construct in cooperation with local groups.

This, of course, is a very technical and complex problem, and many cities and States have no administration in existence, and therefore not to say that this authority should be invested with the power is to prevent those States and cities from having the benefit of the bill. In a year or two, of course, they will all know how to go ahead.

Finally, there are certain special cases, such as the mining and mill towns, for example, such as outlined in the letter I read before, where there probably never will be real effective local authorities.

In addition to that, many of the local governments are in very bad shape financially, which means they perhaps are undoubtedly influenced by some of the financial interests from whom they have to borrow their working funds; and they are also in bad shape due to the difficulties and complexities at the moment of the real-estate tracts, which means in many cases they are perhaps undoubtedly influenced by the local real-estate interests, which means, further, that many local municipalities, while they would be only too willing in the next year or two to go ahead with the United States Government on a housing project, might find it very difficult to themselves set up a local housing authority.

It is not true that the power of the United States Housing Authority to construct will trample democracy into the ground. As a matter of fact, the bill provides for a safeguard in the regulation and recognizes the need for sponsoring local demonstration projects by local authorities themselves.

The CHAIRMAN. Thank you very much for your statement.
The CHAIRMAN. Mr. Grimm, will you come forward?

STATEMENT OF PETER GRIMM, NEW YORK CITY

The CHAIRMAN. Will you

Mr. GRIMM. Peter Grimm.

state your full name, please?

The CHAIRMAN. What is your residence?

Mr. GRIMM. 430 Park Avenue, New York City.

The CHAIRMAN. What is your official position?

Mr. GRIMM. I have no official position. My business is real estate. The CHAIRMAN. How long have you been interested in real estate? Mr. GRIMM. 25 years.

The CHAIRMAN. In New York City?

Mr. GRIMM. Yes, sir.

The CHAIRMAN. And also in the suburbs?

Mr. GRIMM. Not in the suburbs, but in the five boroughs of our city. Senator WAGNER. You have held some official positions that would not be called official, but in organizations that are very much inter

ested in municipal affairs particularly, and I think you ought to tell us that for the record.

Mr. GRIMM. I was chairman of Mayor Walker's committee on taxation in New York City; later chairman of Mayor O'Brien's water supply committee; member of Governor Lehman's committee on education; a member of Mayor Walker's committee on taxes and assessments; and chairman of the board of trustees of the citizens budget commission; and a few others.

The CHAIRMAN. Very well; you may proceed, Mr. Grimm.

Mr. GRIMM. I would like to say at the outset I have had the privilege, pleasure, and inspiration of talks with Senator Wagner on this subject and so I am, I think, fully familiar with what is in the Senator's mind, what he hopes and works to accomplish, and I have the greatest admiration and respect for him in that connection and in others.

I am sure, however, he will not think I am presumptuous if I say that while I know about his objectives, I cannot feel happy about all of the means he has taken to gain those objectives in this bill, and before proceeding with a point-by-point examination of the bill itself I would like to make a brief reference to the policy of the Government in the field of low-cost housing during the past 3 years.

In that period there was at one time allocated to the housing section of the P. W. A. variously as much as $400,000,000, then $300,000,000, subsequently cut to some $200,000,000, and finally to $136,000,000.

Of that amount, the total which the Government has been able to spend in the 3 years it has had this money at its command for the worthy purpose of providing publicly assisted housing, it has been able to spend barely $30,000,000, and it is expected that the whole sum finally to be spent will house some 25,000 families. I hold that the theory is too laborious for the end finally to be gained.

The CHAIRMAN. It will be several years before their projects will be completed in order to house that number of people you have mentioned?

Mr. GRIMM. It will take at least another year.

The CHAIRMAN. They have hardly started with some in my State. Mr. GRIMM. The unfortunate thing is after all of this hard work not a single project is yet completed, and I should think it would be self-evident that the methods used to gain so sterile a position finally, show some very fundamental defects, and I should like to examine what those defects are.

The CHAIRMAN. I personally think it was never the intention of Congress to allow Federal funds to be used for the character and type of housing that apparently is undertaken.

Mr. GRIMM. I am satisfied about that, and I make reference to the fact.

I would like to read you these defects, the greatest of which, in my judgment, is that of the centralization in the hands of a Federal bureau in Washington of authority over the whole bureau of public housing:

First. The selection of the site and the determination of the character of the building and the purchase of the site are all centered in this bureau.

Second. Construction of the projects is centered in the hands of this Federal bureau.

Third. The management of these projects is in the hands of this bureau.

Fourth. The ownership and control of these projects are in the hands of the same bureau.

And, finally, the entire financial burden of subsidy is carried by the Federal Government.

It is refreshing to find that these principles, which have done so much to hold up accomplishment in this field of activity, are to be partially abandoned. They should be entirely discarded. It is instructive to observe that reform, as always, rarely comes from within and that the forces which have been pressing for the elimination of these defects, as well as the others I shall hereafter refer to, have come from various sections of the country, various groups interested and disinterested, but always from without; that is, outside the administering agency and its unofficial allies and spokesmen, and against their resistance.

I mention this first because to my mind it is the most important principle and happily the new bill places the responsibility for the initiation and control of the housing projects where it belongs, namely, upon the local governmental bodies.

At least a portion of the cost of subsidy should be carried by such bodies, as I shall later refer to.

If we have learned anything at all in the past 3 years, it is that so purely a local and difficult business cannot in physically as great a country as this, with local conditions as varied, be handled from Washington. Not to have learned this lesson and not to take appropriate measures to enjoy the fruits of the lesson would be a most serious error. I am, therefore, frankly disturbed when I observe that after the responsibility is placed by this bill upon the local community for the solution of their own housing problems, an escape or a way out is provided for the Housing Authority to continue to do the wrong thing. I refer, of course, to the type of authorized activity known as demonstration projects.

But even in setting up these, a kind of lip service is rendered to the principle of local responsibility. It is provided that these projects may be undertaken only if requested by local interests, public or private. This, in my judgment, is not a sufficient excuse to bring into play a policy so thoroughly discredited and one that is open to so many abuses as that of forcing Federal low-rent housing upon communities which do not wish it.

It must be clear to anyone who reads and thinks at all, that no project would be so unworthy, so ill-advised, so unacceptable to a local community that it cannot find at least two spokesmen or three in that locality to press for it. Under the bill, this would provide legal grounds for initiating the project. The resentment against what is regarded as an intrusion may do much to retard the cause of good housing in such a place for many years.

I hold that there is no longer any excuse or need for Federal demonstration projects. The Federal Government in the housing section of P. W. A. has for 3 years been setting up so-called demonstration projects and will continue to set them up during the balance

of this year. Enough demonstrating has been done, or at least talked about. Now let's get the houses built and build them according to the lessons we have learned.

The second valuable lesson taught by our activities thus far relates to this very subject of demonstration projects. I think it is well to inquire what such projects demonstrate. If they are intended to prove that adequate and sometimes sumptuous dwellings can be produced, regardless of cost, for occupancy by families of low incomes, provided the Government subsidy is sufficient to make up the difference between their cost and the rents which the tenants can afford to pay, they prove nothing that any sensible man does not already know. Every project which has been thus far undertaken by the Federal Government has resulted in that kind of evidence and nothing more.

I see nothing in this bill which leads me to suppose that future demonstration activities in this field will be set up on any different basis than the basis upon which those in the past have been set up.

I do not think that it is the function of the Federal Government to invest huge sums of money to demonstrate that which is self-evident. I fear that the so-called demonstration is simply a device of phraseology, under cover of which the Federal Government may in effect be tempted to continue and repeat the errors of the past 3 years.

The third lesson that we have learned from our recent experiences has been the wastefulness of the capital grant. Believing, as I emphatically do, that Government should aid in bringing adequate housing within the reach of those who cannot now afford adequate housing; recognizing, as I must, the increasing difficulties of maintaining the aggregate national, State, and municipal tax burden; I feel, as I am sure you must feel, that in embarking upon a program of Federal aid in the housing field we should set ourselves the task of making the available funds cover the life of the project and not heavily upon our people in 1 year.

The Wagner bill contains an admirable recognition of that fact in authorizing the Federal Government, through its new agency, to divide the necessary grant in aid of a particular project into annual installments, which resemble or may be made to resemble an annual rent subsidy. I think the form of this recognition may be materially improved and strengthened.

I would like to interpolate here, the reference to the rent subsidy made by the previous speaker, I should like to be able to see it from her point of view, but I cannot. A rent subsidy to my mind is not a variable form of subsidy. In the beginning of the project I would set up and would have the whole sum of the cost of the project cover the amount necessary to service all of the charges, including operation, and I would charge the tenement house that cost.

Now, it is agreed that we can build without the aid of subsidy houses on a national average to bring in rooms at $8 per month throughout the country.

Half of that would be charged to the tenant, the remaining half would be divided between a Federal subsidy and a local subsidy. That would make the subsidy a fixed matter. In order to make it possible for local bodies to pay that one-quarter of the total charge, tax exemption would be permitted to cover it so that cash would not be necessary.