STATEMENT OF HON. HARRIS B. MCDOWELL, JR., A REPRESENTATIVE IN CONGRESS FROM THE STATE OF DELAWARE

Mr. Chairman and members of the subcommittee, I appear in support of my bill, H.R. 6538, to establish a Department of Urban Affairs and Housing, and other bills for this purpose which are being considered by this subcommittee. President Kennedy has called for the creation of such a Department of Urban Affairs and Housing. He asked Congress to help stem the "appalling deterioration of American cities" and to establish a Department of Urban Affairs in order to help make cities better places in which to live.

There is nothing new or startling in such a proposal. We have become an urbanized nation, with 75 percent of our people living in cities.

Such a migration to our towns and cities has created vast, new problems which can be handled only by such a new Cabinet-level Department.

The Department of Agriculture was created more than a century ago, and was authorized and directed to concern itself with the problems and well-being of a farm economy.

Today, our cities are decaying at the heart. They are faced with heavy burdens in many areas, and as the problems have increased the tax base has narrowed.

The problems range from juvenile delinquency to health, sanitation, water, sewage, outmoded transit systems, and other matters.

We must learn to live in cities without killing ourselves with auto exhaust fumes.

Cities can be made humane and beautiful, with green spaces where children can develop properly, not as delinquents but as law-abiding and law-respecting citizens demanding no more for themselves than they would demand for others. This will strengthen our country and make it safer in the future.

My bill, therefore, would create a Department of Urban Affairs and Housing headed by a Secretary at the Cabinet level.

The U.S. Conference of Mayors and the American Municipal Association are among the groups urging the establishment of the new Department.

This new Department will not overlap or duplicate the work of any other Federal Department or Agency. Its functions will be those currently assigned to the Housing and Home Finance Agency, plus, of course, such new functions as may be added in the future by legislation enacted by the Congress or by reorganization which may be adopted.

My bill, H.R. 6538, adds no new programs or operations, nor does it transfer to the new Department any functions which are now vested in any Federal Agency other than the Housing and Home Finance Agency.

This legislation simply elevates the status of the Housing and Home Finance Agency, and assigns to the new Department which it would create, additional responsibility for leadership in coordination of all the activities of the Federal Government as they may affect urban areas.

We should bear in mind that the Department of Health, Education, and Welfare was similarly created by raising the status of the Federal Security Agency only a few short years ago.

President Kennedy asked Senator Joseph S. Clark, Jr., of Pennsylvania, to act as the principal Senate sponsor of the bill to establish a Department of Urban Affairs and Housing. I was struck particularly by the following statement which Senator Clark made at that time:

"This measure," he said, "recognizes that the greatest social change in America in modern times-and especially in the years since World War IIhas been the explosive growth of our major metropolitan areas, bringing in its train a host of problems new in magnitude and complexity if not in kind. I want to emphasize, however, that the new Department will be concerned not just with the problems of our great metropolitan centers but with the problems of all urban areas, large and small alike, incorporated or unincorporated."

Among the responsibilities of the Secretary of the new Department of Urban Affairs and Housing would be the conduct of continuing comprehensive studies, and making the findings public, with respect to the problems of housing and urban development.

He shall, in addition, provide technical assistance and information to State and local governments in developing solutions to urban problems; and he shall encourage comprehensive planning by State and local governments with a view to coordinating Federal, State, and community development activities at the local level.

In a widely hailed speech before the National Housing Conference on March 13, 1961, Congressman Frank Thompson, Jr., declared that:

"The President, in his message on housing, pointed out that residential real estate-now worth about $500 billion--is the largest single component in the wealth of the American people. Yet this enormous investment is being eroded on every side by carelessness, by bad laws, by misunderstanding of its nature. It is threatened not only by deterioration but also by wild and disordered growth.

"The population of the United States is increasing at a rate which, by the year 2000, will bring us to a citizenry of 300 million persons. Current trends indicate that this growth will take place almost exclusively in our metropolitan areas; the United States may be a Nation of great open spaces, but in the future we are going to be a city-dwelling people and we are going to have to learn how it's done. The beginning of this shift in living habits has been inauspicious-suburbs have multiplied upon suburbs, sprawling mile upon unplanned mile across our countrysides, removing working people even farther from their places of employment, stealing from the central cities vast segments of the middle-income families which are a principal source of their tax revenue, killing our transit systems with a surfeit of automobiles, and strangling downtown areas in a network of traffic-jammed streets."

The "Christian Science Monitor" of May 11, 1961, in an article by Richard L. Strout, linked the property tax to urban blight.

This great newspaper reported that witnesses before the Housing Subcommittees of the Senate Banking Committee repeatedly asked: "If tax abatement is the way to get factories modernized, wouldn't it be a good way to get cities modernized, too?"

The Christian Science Monitor also reported that:

"Witnesses pleaded that the United States follow the practice now current in some Scandinavian and Caribbean countries and France and Italy. Instead of higher taxes in improved property, they are putting higher taxes on land to encourage people to use it for productive purposes instead of speculation."

"Australia and New Zealand are lightening taxes to encourage home and private improvements. They encourage the homebuilding industry by making land cheaper and by removing tax penalties for improvements."

I feel sure that these are some of the problems which the new Department of Urban Affairs and Housing will study and report on.

I include as part of my remarks the May 11, 1961, article from the Christian Science Monitor to which I have referred, and the text of the speech to the 30th annual meeting of the National Housing Conference.

[From the Christian Science Monitor, May 11, 1961]

PROPERTY TAX LINKED TO URBAN BLIGHT

(By Richard L. Stout, staff correspondent of the Christian Science Monitor) WASHINGTON.-If tax abatement is the way to get factories modernized, wouldn't it be a good way to get cities modernized, too?

That is the question asked by mayors and housing authorities who gave testimony here for 2 weeks on slum conditions before the Housing Subcommitee of the Senate Banking Committee.

The Kennedy administration asks Congress to give industry tax concessions up to $1,700 million as an incentive to modernizing plant and equipment to keep them competitive with rivals in Europe and Japan. American manufacturing plants are rapidly getting obsolete, the administration declares.

The proposal leaves some housing authorities almost inarticulate with frustration.

SLUM SHADOW CITED

Residential real estate in the United States, they declare, is now worth about $500 billion and the shadow of slums is spreading.

But instead of getting tax rebates for modernizing slums most communities slap on a higher tax on property that has been "improved."

In other words, according to this argument, the Federal Government proposes to give tax concessions for modernization in one field, while municipalities are following just the reverse policy in another.

President Kennedy's program of tax incentives for industrial modernization, it appears, is going to be used heavily as an argument for reversing tax policy in another field-the urban areas.

PROFIT MOTIVE UNDONE

Planning authorities at the Senate hearings here charged that today's municipal taxes harness the profit motive backward.

A "slumlord" who buys property and lets it deteriorate, they charge, is benefited by taking a depreciation allowance. If he sells for less than he paid he gets a tax rebate.

If the same man tried to improve his slum dwelling by painting or renovating it, he would be taxed higher on the higher value.

Witnesses pleaded that the United States follow the practice now current in some Scandinavian and Caribbean countries and France and Italy. Instead of higher taxes on improved property, they are putting higher taxes on land to encourage people to use it for productive purposes instead of speculation.

Australia and New Zealand are lightening taxes to encourage home and private improvements. They encourage the homebuilding industry by making land cheaper and by removing tax penalties for improvements.

Housing authorities in the United States do not object to the Kennedy tax abatement proposal for private industry to stimulate modernization. But they say American cities are deteriorating further and faster than factory plant and equipment, and that these are just as much part of the social capital of the Nation as are factories.

"If sum clearance and home modernization are good things," one visitor commented, "they should not be penalized by higher taxes."

President Kennedy in his special message on housing March 9 said the housing industry is one of the largest employers of labor and that residential construction accounts for 30 percent of total private investment. He urged Congress to make available $2,500 million in a 4-year program to arrest and remove blight and revitalize our cities. He proposed a new Cabinet Department of Housing and Urban Affairs.

The Federal Government helps cities combat spreading slums, but the tax provisions of most urban communities defeat the project, according to some authorities.

The remedy for skyrocketing land prices, declared a series of articles in House and Home magazine, is taxes.

"Today's taxes make misuse of land more profitable than good use," it declared. "Slums are subsidized by undertaxation, developments are penalized by overtaxation. Speculators are subsidized by public improvements for private profit. The only way to prevent land-price inflation is to tax land more heavily." Representative Frank Thompson, Jr., Democrat, of New Jersey, recently declared the U.S. enormous investment in residential real estate is being eroded "by carelessness, by bad laws, by misunderstanding of its nature."

In the next 40 years the population of the United States will reach 300 million, Mr. Thompson said, with new dwellings needed for at least 120 million. He urged a new look "at the consequences of our taxing systems," including "tax deductions for home improvements."

STATEMENT OF HON. FRANK THOMPSON, JR., A REPRESENTATIVE IN CONGRESS FROM THE STATE OF NEW JERSEY

It has seemed to me in recent weeks that there is in official Washington an air of excitement, a feeling that purposeful changes are afoot. I suppose this feeling is usual in the opening months of the administration of any new President. But from my admittedly partisan point of view, I like to think that something more is afoot than just a simple change of personnel in the Office of Chief Executive. Students of American history say our political habit has been to alternate periods of great governmental creativity with periods of governmental "resting." Without getting into the question of whether the past 8 years were ones in which it was wise to rest, I think we can all agree—on the basis of the steady flow of executive messages from the White House to the Congress if nothing else that once again we are entering upon one of those creative eras.

The problems facing the 1960's, upon which this new creativity must be brought to bear, are many. But one of the most crucial is the problem of housing. The President, in his message on housing sent to the Congress last Thursday, pointed out that residential real estate-now worth about $500 billionis the largest single component in the wealth of the American people. Yet this enormous investment is being eroded on every side by carelessness, by bad laws, by misunderstanding of its nature. It is threatened not only by deterioration but also by wild and disordered growth.

The population of the United States is increasing at a rate which by the year 2000 will bring us to a citizenry of 300 million persons. Current trends indicate that this growth will take place almost exclusively in our metropolitan areas; the United States may be a nation of great open spaces, but in the future we are going to be a city-dwelling people and we are going to have to learn how it's done. The beginning of this shift in living habits has been inauspicious— suburbs have multiplied upon suburbs, sprawling mile upon unplanned mile across our countrysides, removing working people ever farther from their places of employment, stealing from the central cities vast segments of the middleincome families which are a principal source of their tax revenue, killing our transit systems with a surfeit of automobiles, and strangling downtown areas in a network of traffic-jammed streets.

Nor have the steps taken to correct this situation had the results intended. Public housing, intended to eradicate the slums, not only has not kept up the race against the spread of urban blight; it has on occasion turned into slum itself. Freeway systems intended to solve the traffic problems of the inner city, have rather merely increased the flow of automobiles downtown, poisoned the air with noxious exhaust fumes, and replaced the already sparse greenery of cities with jungles of concrete.

Title I developments, hailed as a means of restoring portions of the cities' lost tax base, have too often resulted only in depriving innocent people of their homes and businesses and replacing usable buildings with tracts of bombed-out blocks which stand vacant and untaxable for years and finally provide vast profits to private entrepreneurs.

I do not intend these criticisms to be interpreted as an attack on the strategies which have been developed in our efforts to build ourselves rational and attractive communities in which to live and work. I have studied the legislative recommendations of the National Housing Conference, many of which use current programs as a jumping-off point, and can say that most of the recommendations I can support without qualification.

But I am troubled by the fact that liberal approaches to the problem of housing America, the type of approach I take these recommendations to be, have tended to become frozen into their own kind of orthodoxy. Obviously existing programs need more money. But also-perhaps even more-we need creative new approaches to these problems.

I'm not an expert on housing problems. I have no completely worked-out set of proposals in my briefcase which I can sell to you tonight. All I have are a few thoughts which may stimulate you-who are the experts-and grow in time into new plans and programs.

First, let me remind you of those figures I mentioned in passing earlier. Present estimates are that the United States will grow to 300 million persons in the next 40 years. Since existing housing is inadequate for the needs of our present population, we know right now that in these four decades we must build new dwelling places for at least 120 million people. We know we cannot do this by rampantly destroying existing housing without multiplying our problem manifold.

Americans are the most wasteful people on earth. We are the Nation which devised the throwaway milk carton, the paper plate, the nonrefillable tin can. We have gone further than that, developing the automobile with built-in obsolescence, the furniture which scarcely hangs on to its veneer till it's paid for, the refrigerator, stove and washing machine guaranteed to be out of fashion in 5 years' time. And now we are moving in the direction of the automatically obsolescent house. In Europe, to which so many Americans travel to find the beauty they cannot find at home, there is nothing unusual in finding families occupying houses 300 and 400 years old. On this side of the Atlantic, on the other hand, we are docilely learning the dictum that if a house is secondhand it must be inferior and if it's been built more than 25 years it must be getting ready to fall down.

But

What lies behind this mania for consumption, consumption, consumption? Simple. The belief that high consumption will keep our manufacturers churning out goods and hence counteract tendencies toward unemployment. once again I remind you-just 40 years from now we are going to need new dwelling units for 120 million new Americans. I tell you we can't afford to let existing housing decay and then be torn down for as yet unthought of urban renewal plans. In my more nightmarish moments I wonder where those millions of board-feet of lumber, those countless tons of clay for bricks, those

endless bags of cement needed just for the houses of that 120 million are going to come from.

No, we are going to have to learn to preserve what we have and build upon it. We must ponder long and hard before we kill existing neighborhoods. Carelessly uprooting people from a neighborhood in which they have lived a lifetime in order to replace their houses with something better may indeed provide sounder buildings and spruce up the area. But too often it scatters around the city confused and resentful people who vent their justified hostilities upon their new dwelling places and cause more slums.

One time when families moved to public housing developments, they went voluntarily hoping they were finally getting the break that would permit them to build themselves a new and better life. Now, too often, they go because the place they lived in previously is being torn down and public housing is all they can afford. Construction specifications of public housing units frequently are an insult to the tenants. No doors on the closets, no baseboards on the walls have become symbolic of project living. What wonder is it that projects go sour and decay from the inside out?

Would not the cost be less in the long run, when renewal of a neighborhood seems indicated, to plan it honestly, step by step, with the residents of the area, to carry it out plat by plat with a judicious mixing of vest-pocket, low-income projects, privately financed middle and upper income units and rehabilitation and retention of the bulk of the existing structures? Then persons necessarily displaced could just move across the street, retaining unbroken their neighborhood ties, and when the renewal job reached completion, could sit back proud in the knowledge that they themselves had made their neighborhood what it was. Perhaps we should take a new look at the consequences of our taxing systems, devising means of encouraging desirable trends in housing. Do we want homeowners to keep their residences in tiptop shape? Perhaps we should permit tax deductions for home improvements?

Do we want to launch an attack on profiteers in slum real estate?

Perhaps we should change the tax laws to forbid real estate investors from depreciating the same piece of property again and again as it goes from hand to hand. Perhaps we should determine a slum building's value for property tax purposes not on the basis of its worth as a structure but rather on the potential worth of the land it occupies and the rental income it produces.

Let me cite to you an example reported recently in Look magazine of how our present tax laws stimulate the spread of slums. An investor purchased a six-apartment building in Chicago for $25,000, and with the aid of a little plasterboard and chicken wire he converted it into a 24-apartment structure housing 72 people. Rental collections of more than $1,800 a month enabled him to recover the full amount of his equity in less than 18 months. He was aided in his depradations by depreciation-available only to investors, not to homeowners-and by the tax base on a building with a market value of only

$25,000.

Are we convinced that owner-occupied property is generally better maintained than property owned by investors? Then perhaps we would be wise to provide Government-insured mortgages on houses of all vintages, not just on recently built ones.

I sometimes wonder if we Americans are not overly dedicated to the principle of ownership of property in fee simple. Perhaps we could make our Government dollars go further if instead of buying properties in entirety before re developing them, our redevelopment authorities just purchased selected rights within the affected areas. This type of control would be cheaper than outright seizure, yet more effective than zoning ordinances. For example, it is generally acknowledged that open spaces between built-up areas are to be desired. Yet we cannot by zoning fiat declare that there shall be no subdivision of a given tract of land if its location justifies it. And the cost of buying the section for parkland appears to the affected municipality to be prohibitive. Perhaps in this case we should study the possibility of buying not the entire tract but only the right to subdivide it.

Are we concerned that the natural leaders "graduate" from low-income housing projects leaving a vacuum behind them because their incomes increase beyond the maximums permitted? Perhaps we should consider the possibility of abolishing these income restrictions to residents already in the projects, raising the rent instead.