talked about. On the basis of the surveys, we would assign a certain amount of rent supplement to every area throughout the country on the basis of need, and so forth. You would then come into your local FHA office. You would come in with a proposal.

The proposal would provide you would have an economic rent of say $100 a month, and you would expect to have this proportion which would be more than 50 or a majority with rent supplements.

Mr. RHODES. You have to have more than 50 percent in your project? Mr. WEAVER. Yes; you would set up a tentative schedule so the FHA could put aside an amount of money so they would be able to meet your need. Then as you entered tenant selection this would be revised, and watched, so it would not be too far away from your estimate, but not holding you exactly to it. And then when you are tenanted up completely, you would get a rent supplement agreement which would be the amount of your rent supplement based upon your occupancy at that time, plus a 10-percent contingency, and that would be what it would be for that project.

Actually, you would draw less because the incomes would increase and the amount of supplements could go down.

REVISION OF PROJECT WHILE IN OPERATION

Mr. RHODES. Suppose my units Nos. 1 to 25, which are the rent supplement units, are not renting. From 25 to 100, I am having no trouble. I am getting people in who are not eligible for the rent supplement. May I make any change? May I at any time during the period that the financing on the project is outstanding either lower the number of rent supplement units or raise the number?

Mr. WEAVER. Yes, and no. I think your question is a little academic, if I may say so, because the possibility of your renting the units with the rent supplement is much higher than the probability of renting them without it. So it would probably be the reverse. Mr. RHODES. It is an interesting question.

Mr. WEAVER. Once you are in occupancy, the amount of actual rent supplement will vary depending upon the turnover you have, depending on how incomes go, and so forth. There is every reason to believe that the actual amount of rent supplement paid out each year will be less than it was the year before. But if you should have an adverse economic situation, or if incomes should go down in that area, you would be able to turn it over up to the amount that was guaranteed.

This is a guarantee you are going to get this assistance, so the thing is going to rent. The guarantee comes in the rent supplement, not on the other side.

EXTENT OF CONVERSIONS

Mr. EVINS. It is your interpretation that 4,000 units is about all you possibly can convert in the first year?

Mr. WEAVER. Yes; 3,000 conversions, and 1,000 new construction. Mr. EVINS. In any event, most all the conversion will have been completed in 1 or 2 years?

Mr. WEAVER. I would say all the conversions will be completed in 2 years. You might get one project straggling along that could not get going.

Mr. JONAS. I have read the section you cited carefully. I do not care to argue with your lawyers, but I do not interpret that language as being mandatory, but permissive. The language merely makes these units eligible to be considered as housing owners.

You would not be required, as I read this section, to make the conversion. Making conversions is going to cause you a lot of trouble if you convert units already partially occupied.

Mr. WEAVER. I agree with your last statement, but I have to point out as a practical Administrator that permissiveness in this area is practically the same as a fiat. On what basis do you say as Administrator that you are not going to permit any of these people to do what the law says you are permitted to do to get this conversion? Mr. JONAS. Is the initiative coming from the sponsors?

Mr. WEAVER. Surely.

Mr. JONAS. You are not trying to get them to convert?

Mr. WEAVER. They are lined up at the door. We have correspondence from practically every eligible one.

Mr. EVINS. You may proceed with your statement, Doctor.

ADMINISTRATION OF RENT SUPPLEMENT PROGRAM BY FHA

Mr. WEAVER. The administration of the rent supplement program will be delegated to the Federal Housing Administration.

This makes sense, of course, from the standpoint of economy and efficiency, since every one of these projects will be undertaken under an FHA-insured mortgage, which FHA would have to process in any event. To assign the program elsewhere for operation, or to set up a new staff for it, would run the risk if not the certainty of duplication and added administrative expense.

The normal costs of FHA in reviewing these projects from an underwriting standpoint for the purpose of mortgage insurance will be borne from FHA's insurance funds, as in the case of other FHA programs, and will ultimately be met from fees and premiums. The budget for this purpose includes an increase in the FHA nonadministrative expense limitation for the current year, which I shall refer to again shortly.

However, there are important-indeed, absolutely vital-costs of administration of the new program that have nothing whatever to do with underwriting or with mortgage insurance. Obviously, it would be highly improper to impose these costs on the insurance funds, and accordingly the supplemental budget requests an appropriation to FHA to cover the costs of noninsurance functions delegated to the Commissioner by the Administrator in connection with the rent supplement program.

Among the functions involved are these:

The extensive and time-consuming developmental work with sponsors and potential sponsors, to help them develop viable projects, overcome their organizational deficiencies, and in general assure that they have the capability of originating and carrying through these projects.

The very complex process of working out with each sponsor the rent supplement contract-as distinguished from the commitment for mortgage insurance.

The processing task of screening eligible tenants, including verification of age and income, or of displacement, in accordance with criteria to be established by the Administrator.

The task of making local arrangements for inspection of properties, where removal from substandard housing is the basis of eligibility, to assure that the individual or family actually is now housed in substandard housing-or, where no other more convenient local method is available, the actual inspection of these properties.

These are only examples of the most significant workloads which FHA will have which cannot be financed from the insurance funds. Commissioner Brownstein can go into as much further detail on this aspect of the budget as the committee may desire. The appropriation request for FHA expenses of administration is $850,000, and I most urgently recommend its approval in full as vital to the successful undertaking of the rent supplement program.

Mr. JONAS. This means you plan to dispense $900,000 during the year, and you want $850,000 for administrative expenses?

Mr. WEAVER. Yes, sir, because we are building up a program which will have a long-term lead, and which will result in much greater expenditures later. It is a $30 million program we have, sir, not a $900,000 program.

Mr. JONAS. All I said was you are planning to spend $900,000 in rent supplements, and you want $850,000 for administrative expenses. Mr. WEAVER. For a $30 million program, yes.

The expenses are not related to that expenditure figure, they are related to the supplement figure.

GRANTS FOR BASIC WATER AND SEWER FACILITIES

Another new program initiated by the Housing and Urban Development Act of 1965 is grants for basic water and sewer facilities. Section 702 authorizes grants to local public bodies and agencies to finance up to 50 percent of the cost of expanding, enlarging, and improving basic public water and sewer facilities. Sewerage treatment works, however, are not eligible.

The basic requirements for eligibility call for conformity to an areawide water and sewer program, and provision for reasonable foreseeable growth needs of the area. Prior to July 1, 1968, assistance may be extended to communities where the need is urgent and a comprehensive plan is actively underway, though not completed. A community under 10,000 population in a metropolitan area and struggling with excessive unemployment and financing problems may be eligible for up to 90 percent grants.

One stipulation in the act requires certification by the Secretary of Health, Education, and Welfare that any waste material carried by the facilities will be adequately treated. This certification by HEW is expected to require a specific check of each prosposal.

BASIS FOR DETERMINING FINANCIAL NEED

Mr. EVINS. How do you determine whether a community is suffering from a financial strain? Is that left up to the Housing and Home Finance Agency, or is it left up to the Department of Labor or HEW?

Mr. FRANTZ. As I recall the specific provision, it requires they must have had unemployment for the preceding 12 months at least 100 percent in excess of the national average. Almost by definition they are in bad shape.

Mr. WEAVER. The act says:

In the case of a community having a population of less than 10,000, according to the most recent decennial census, which is situated within a metropolitan area, the Administrator may increase the amount of a grant for a basic public sewer facility assisted under this section to not more than 90 percent of the development costs of such facility, if the community is unable to finance the construction of such facility without the increased grant authorized under this subsection, and if in such community (1) there does not exist a public or other adequate sewer facility which serves a substantial portion of the inhabitants of the community, and (2) the rate of unemployment is, and has been continuously for the preceding chalendar year, 100 percent above the national averageMr. EVINS. Who makes that determination?

Mr. WEAVER. We make the determination on the basis of these criteria.

Mr. EVINS. What does HEW have to do?

Mr. WEAVER. They have to certify in the sewer projects there is a satisfactory disposition plant for the sewage so it will not be contaminating.

We have to pay them for that.

Mr. EVINS. Proceed with your statement, Doctor.

NEED FOR BASIC FACILITIES

Mr. WEAVER. The backlog of need for basic public facilities is great, and increasing population growth and consumption of water promises greater problems. Inherent in this situation is the danger of disorderly and inefficient development. Both built-up and our developing urban areas are often characterized by basic public facility systems that have been designed and installed without regard for the need for areawide systems, or for economies of scale. The cost of accommodating yesterday's ill-planned system to today's conditions-as, for example, the separation of sanitary and storm sewer systems-puts needless strain upon a community's resources. Individual property owners often suffer similarly when they are assessed for a sewer system to replace septic tank installations which should never have been permitted in the first place.

These circumstances point up the importance of well-designed basic water and sewer facilities to the economic and orderly growth and development of urban areas. The basic water and sewer program, with its requirements for planning and provision for growth needs is designed to promote this essential and orderly growth of our communities.

The act authorizes appropriations of $200 million in each of the consecutive years beginning in 1966. The administration, however, does not feel warranted at this time in increasing the appropriation request for water and sewer grants above the amount which was provided for in the 1966 budget-namely, $100 million. Neither figure, of course, is intended or assumed to be sufficient to meet the entire need, or anything like it. The $200 million authorized or the $100 million here recommended either one can be no more than an effort on the

part of the Federal Government to help, and to encourage and foster the best practice in relating the devolpment of basic facilities to orderly urban planning and growth.

OTHER PROGRAMS FOR ASSISTANCE FOR PUBLIC FACILITIES

Mr. JONAS. May I interrupt?

You just said although the act authorizes $200 million, you are only asking in this supplemental for $100 million.

Mr. WEAVER. Yes.

Mr. JONAS. How much money is available for similar purposes under other acts?

Mr. WEAVER. That is a very difficult question to answer.

There are other acts that provide funds. There are funds in the Department of Agriculture which are intended primarily for small communities--5,000 population is more or less a definition of the point there, I believe.

Under the Economic Development Act in the Department of Commerce, there are funds for grants and loans in areas which are subject to their provision. Also, of course, under HEW, there are provisions, not for this same type of thing, but sewage treatment plants, so we have these three other programs which are in various phases of being funded or passed, and there may be others.

Mr. JONAS. What about community facilities?

Mr. WEAVER. Community Facilities would administer this new program. We have public facility loans there now, but not grants.

Mr. JONAS. How much do you have available for community facilities programs under the regular bill?

Mr. WEAVER. For grants, nothing. It is not a grant program.
Mr. JONAS. But for loans?

Mr. WEAVER. $100 million in 1966.

Mr. EVINS. It is your view most all of these programs are still inadequate to meet the demands and needs?

Mr. WEAVER. I do not think there is any question about that.

Mr. JONAS. I thought under the community facilities program you can make what amounts to a grant if the project is not completed.

Mr. WEAVER. No. We make advance planning grants. These are planning grants, not construction grants.

Mr. JONAS. They are not repayable unless the project goes forward. Mr. WEAVER. That is right. These are minor.

Mr. JONAS. Would it be possible to supply to the committee a table showing a list of all the money that is available for spending for this sort of thing?

Mr. WEAVER. I could give you a list of all the money available in our Agency for this sort of thing. It is very difficult in these other programs. Some have not yet been finalized. I could list the programs that we know that are in this area and try to describe them.

FACILITIES COVERED BY NEW PROGRAM

Mr. JONAS. This program covers everything except the construction of a waste treatment plant?

Mr. WEAVER. No, sir; it does not.