Mr. EVINS. Are there any questions on "Salaries and expenses, Office of the Administrator"? Mr. SHIPLEY. Out of the 475 new jobs you list here, what percentage will be buildup in the regional offices? Mr. WEAVER. At least 90 percent. Mr. JONAS. I want to get one thing straight with Mr. Frantz. This 475 does not include the 1,200 jobs and $13 million transferred to urban renewal, does it? Mr. FRANTZ. No sir. Mr. JONAS. That is in addition. That is still in the agency. Mr. FRANTZ. Yes, sir. Mr. JONAS. 1,200 jobs and $13 million. Mr. FRANTZ. That is right. Mr. JONAS. That has gone out of the Office of the Administrator to the Urban Renewal? Mr. FRANTZ. In a separate appropriation; yes, sir. Mr. JONAS. It does not represent the 475 new jobs compared with 296 in the same areas last year? Mr. FRANTZ. To the extent those areas existed last year. Mr. JONAS. We are talking about different things. I am talking about the people who were working in the Community Facilities Administration and in the Urban Renewal Administration which, as Dr. Weaver has just said, probably would handle these new programs. The information I had was that there were about 181 new in the 475, as compared with about 294 working on these same problems last year. Mr. WEAVER. No, sir, they were not working on the same problems. I think that is the difference. Mr. FRANTZ. If you will look at the table on page A-2, Mr. Jonas, I think you will see it. Mr. JONAS. That has been put in the record now. AVAILABILITY OF MARKET DATA Mr. EVINS. Mr. Administrator, one further question about these studies. Can you not get almost all the information you want from the Census Bureau, the Department of Labor, and the Department of Health, Education, and Welfare? All of this information about the conditions of the cities is available if it could be collected and compiled. You do not have to run another study, do you? Mr. WEAVER. This is not a census. This is a survey. The census data relate to 1960. This relates to data on two things Mr. EVINS. The last census questionnaire was so voluminous and complicated and detailed that it was the object of much criticism. How many refrigerators do you have? How many television sets? How far have your children gone to school? What is your income? It covered everything. It is all there. Mr. WEAVER. No, sir. In the first place, it is out of date. In the second place, it is not the pertinent data. What we need are data on the housing market conditions now; first, supply, and second, the demand. These data do not exist anyplace else. If they did exist, they would be outdated. The housing market has changed a great deal since 1959 which, incidentally, was when the 1960 census was enumerated. Mr. EVINS. You are going to pay the Post Office to get this information? Mr. WEAVER. We are going to pay the Post Office to get information on the vacancies. This is a part of the data, not all of them. This is not all the information we have to have, according to the statutory requirements, for the rent supplement program. STUDY OF CODE, TAX, AND ZONING POLICIES Mr. EVINS. What about the requirements on code, tax, and zoning policies? Mr. WEAVER. This is a provision for a planning group to come in to set up the study. We have not yet presented an appropriation for the study itself. This is an extremely complicated problem. AIRPORTS STUDY Mr. EVINS. You have a study on the effect of proximity of airports and the Federal Aviation Agency has information on that. They are doing it on the sonic boom, and in other areas such as airport noise, they have run tests. Mr. WEAVER. The Senate apparently did not feel this way, because they put this in the law. They specifically directed us to make such a study. That is contained in the Housing Act. AUTHORIZED EMPLOYMENT AND INCREASES PROPOSED Mr. JONAS. I have one other thing I want to get clear before we leave this tab. How many people do you have in the Office of the Administrator now, 2,116? Mr. WEAVER. No. At the present time, 1,829. Mr. JONAS. Yes, but with the regular 1966 bill just approved, the number goes up to 2,116. Mr. WEAVER. 2,116; yes, sir. Mr. JONAS. You want to add to that 688 for a total of 2,804? RENT SUPPLEMENT PROGRAM Mr. EVINS. We will turn now to tab B, the "Rent supplement program." Mr. Reporter, place the justification pages B-1 through B-17 in the record. (The pages follow :) RENT SUPPLEMENT PROGRAM SUMMARY Section 101 of the Housing and Urban Development Act of 1965 authorized the Housing and Home Finance Administrator to undertake a rent supplement program. The program aims to make it possible for privately built, privately financed, and privately managed housing to be provided for certain low-income families whose incomes are insufficient to obtain standard housing in the private market. The program permits a tenant with rising income to continue to live in the unit, paying a higher rent as his income rises, and even to purchase the dwelling if his income and desires make homeownership an achievable objective. Income The Administrator will set maximum income limits for admission to rent supplement units in each locality. The income limits cannot exceed the maximum limits that can be established for low-rent public housing in the area. limits for different size households will be based on the rent at which standard private units of a given size are available in substantial supply. In addition to having an income below the established limit, to be eligible for admission to a rent supplement unit, an applicant must be in one of the following categories: (a) Displaced by governmental action; (b) Sixty-two years of age or older; (c) Physically handicapped; (d) Occupying substandard housing; or (e) An occupant or former occupant of a dwelling which was extensively damaged or destroyed as a result of a natural disaster subsequent to April 1, 1965. The types of housing owners who are eligible for rent supplement contracts under the program are: (a) Private nonprofit mortgagors. (b) Limited dividend mortgagors. Housing owners would obtain financing from private lenders with mortgages insured by FHA under section 221 (d) (3). The insured mortgages would bear a market interest rate, which is currently 54 percent, plus one-half of 1 percent mortgage insurance premium. Families and individuals who are admitted to the rent supplement units in a project will be required to pay 25 percent of their income for rent. The difference between this amount and the full rent would be paid in the form of a rent supplement to the project owner on behalf of the tenants. Part of the units in a rent supplement project may be units where the full rent would be paid by the tenants. Once a tenant is admitted to a rent supplement unit, his income would be checked at least every 2 years, except that incomes of the elderly would not be checked after initial occupancy. When a check of the tenant's income indicates that his income has increased, the rent supplement payment would be reduced accordingly. When the tenant's income has increased to the point that the full rent can be paid with 25 percent of income, the rent supplement payments would cease. The tenant could remain in the unit by continuing to pay the full rent. Under a lease option part of the program, in row or detached houses designed for possible ownership, the occupant could take over ownership when his income would enable him to pay all monthly charges. He could not acquire any equity through rent supplement payments. The statute stipulates that, subject to annual appropriations, payments under rent supplement contracts shall not exceed $30 million per annum prior to July 1, 1966. This maximum amount may be increased by: (a) $35 million on July 1, 1966. (c) $45 million on July 1, 1968. The statute also authorizes part of the funds appropriated under the above authority to be used for an experimental rent supplement program. Not more than 5 percent of the funds may be used for housing financed with FHA-insured mortgages bearing below-market interest rates (3 percent per annum). An additional 5 percent of the funds may be used for housing for the elderly financed with a direct Federal loan or under the FHA mortgage insurance program for rental housing for the elderly. Administration of the program A major part of the administration of the rent supplement program will be delegated by the Administrator to the FHA. This makes for efficiency in administration since FHA will have to deal with the project owners in the regular course of processing mortgages for insurance. In addition to the functions customarily performed by FHA in its regular mortgage insurance programs, FHA will perform the following duties under delegation from the Administrator: (A) Negotiate the rent supplement contract with sponsors: (B) Review and certify the initial eligibility of prospective tenants for rent supplements; and 53-537-65—16 (C) Carry out a periodic review of tenants' incomes and adjust rent supplement payments to housing owners, within the maximum amount provided for by the rent supplement contract. As part of its regular mortage insuring operation, the FHA will (A) Establish maximum per unit mortgage limits in each locality to assure that projects will not be of extravagant design; (B) Screen the sponsors to see that they are bona fide nonprofit, limited dividend or cooperative organizations with necessary knowledge and capability to carry through proposed projects; (C) Review the qualifications of any proposed management firms to see that they are qualified; and (D) Process the project in accordance with applicable underwriting standards. The Housing and Home Finance Administrator will retain the responsibility for (A) Regional and local allocations of rent supplement funds, based on findings as to need in various areas and adjusted in accordance with active demand; (B) The establishment of income ceilings in each local housing market area; and (C) Market surveys necessary to set such income ceilings and make allocations of rent supplement funds. PROPOSED APPROPRIATION LANGUAGE "OFFICE OF THE AMINISTRATOR "RENT SUPPLEMENT PROGRAM "For rent supplements pursuant to section 101 of the Housing and Urban Development Act of 1965, $900,000; Provided, That the maximum payments in any fiscal year for rent supplements required by all contracts which may be entered into under such section shall not exceed $30,000,000. "FEDERAL HOUSING ADMINISTRATION "ADMINISTRATIVE EXPENSES, RENT SUPPLEMENT PROGRAM "For necessary expenses of the Commissioner in carrying out functions under section 101 of the Housing and Urban Development Act of 1965 delegated by the Housing and Home Finance Administrator, $85,000." Summary of budget request The supplemental appropriations requested above include essentially three items: (1) A statement of the aggregate amount of contracts to make rent supplement payments which may be entered into by the Administrator, recommended at an initial level of $30 million; this statement is required pursuant to section 101 (a) of the Housing and Urban Development Act of 1965, which provides that "the aggregate amount of the contracts to make such payments shall not exceed amounts approved in appropriation acts * * The act authorizes this aggregate amount prior to July 1, 1966. (2) A request for $900,000 for liquidation of rent supplement contracts during fiscal year 1966. (3) Administrative expenses of the Federal Housing Administration in the amount of $850,000 for the first year of operation. Administration of the program will be delegated to the Federal Housing Commissioner. ADMINISTRATION OF THE RENT SUPPLEMENT PROGRAM Objectives of the rent supplement program The rent supplement program aims to make it possible for privately built, privately financed, and privately managed housing to satisfy the housing needs of the poor, those living in substandard housing, the elderly and handicapped, the displaced, the victims of natural disasters. This is the portion of our population most in need of decent housing and least able to achieve it. This is the group which private enterprise has been notably unable to serve in the past. The rent supplement program not only provides a tool by which private enterprise can serve the housing needs of the most disadvantaged segment of our population, it provides a tool which is financially flexible and well geared to assist and to adjust to the economic and social upgrading of the deprived, which is an important national objective. The rent supplement program is flexible, because the Federal rent supplement payments can be adjusted to each individual or family need and can be adjusted as incomes rise. It is well adapted to promote the progressive improvement of this portion of our population, because it can avoid the stigma often attached to public housing projects, offers opportunities to avoid economic and social segregation in a particular project, permits tenants with rising incomes to continue in the project, and even to purchase it if their incomes and desires make homeownership an achievable objective. The rent supplement program also makes it possible for the housing produced to be financed with private funds, since the insured mortgages will carry the market rate of interest. PROGRAM POLICIES Delegation of major operating responsibilities to FHA A major portion of the responsibility for administering the rent supplement program will be delegated to the FHA. The law requires that FHA insure the mortgages on housing eligible for rent supplements. Thus, FHA will, in connection with its normal operations, be dealing with nonprofit, cooperative, and limited dividend groups wishing to build and manage housing under the program. Both from the standpoint of logic and simplicity of operation, it seems appropriate that FHA should also assume responsibility for those additional dealings with housing owners and tenants which grow out of the requirements of the rent supplement program. As an adjunct to its normal relation with sponsoring groups, FHA will, under delegation from the Housing Administrator, qualify and counsel prospective housing owners seeking to make use of rent supplements, develop and negotiate the rent supplement contract with the housing owner, make regular payments to the housing owner under the rent supplement contract, review and certify the eligibility of prospective tenants for rent supplements, and carry out the required periodic review of tenant incomes and consequent adjustment of rent supplement payments to housing owners. The Office of the Housing Administrator will retain responsibility for regional and local allocations of rent supplement funds, the establishment of income ceilings for eligibility for rent supplements for each area, as well as the market studies needed to make these determinations. Type of housing to be produced FHA will establish maximum per unit mortgage limits for each locality to assure that projects built under the rent supplement program will be of modest and unextravagant design. The limits will be such as to permit production of essentially the same quality of housing as has been produced under FHA's below market interest rate program (sec. 221(d) (3)) for low- and moderateincome families. The limits established by FHA for the rent supplement program will never exceed those established for the 221(d) (3) below market program in the same community. In general, high-rise elevator buildings will be possible under the program only where there is substantial long-term tax abatement or a significant writedown on the price of the land. New construction and rehabilitation Rent supplements will be available to rehabilitation projects as well as to new construction. However, rehabilitation projects must involve rehabilitation amounting to at least half the cost of the project or result in the creation of standard units in a structure previously containing primarily substandard living accomodations. Eligibility of sponsors The law provides that the housing owner may be a private nonprofit, limited dividend, or cooperative corporation. In the administration of the below-market interest rate program (221(d) (3)) FHA has carefully screened sponsoring and owning organizations not only to establish their legal eligibility under the law, but also to determine their integrity, financial capacity, and motivation. Because the rent supplement program will require these types of sponsoring and owning organizations to deal with tenants of a lower economic and social level, with the added management |