1. FHA section 221(d) (3).-Not more than 5 percent of the rent supplement payments contracted for may be made available to below market interest rate projects serving low and moderate income families. To be eligible, a project in this category must be approved for instance after August 10, 1965—the date of enactment of the 1965 act.

2. FHA section 231.-Together with section 202 (see item 3 below), not more than 5 percent of the rent supplement payments contracted for may be made available to these projects serving elderly or handicapped families and individuals. To be eligible, a section 231 project must be under private nonprofit sponsorship and be fiinally endorsed for insurance after August 10, 1965.

3. Section 202 elderly projects.-Within the total 5 percent limitation described immediately above, projects for the elderly financed with direct Federal loans under section 202 of the Housing Act of 1959 may convert to a rent supplement basis. Both new and existing projects are eligible to participate, but for existing projects approved prior to the enactment of the 1965 act, not more than 20 percent of the dwelling units in an individual project may receive the benefits of rent supplements.

Until experience is gained through actual operation of the rent supplement program, the Agency has used as a planning assumption that the average annual rent supplement payment (including a 10 percent reserve for contingencies as described elsewhere in this justification) will be $600, or $50 per month per unit. On this basis, the liquidating cash estimate is broken down as follows:

The administration of the rent supplemental program has been delegated to the FHA by the Administrator. This work will be in addition to the handling of applications for mortgage insurance which will be processed under FHA's nonadministrative expense limitation.

A functional analysis of the new activities that will be undertaken by FHA follows:

1. Initial negotiation and revision of rent supplement contracts with housing owners.-Applications by housing owners for eligibility under the rent supplement program will be processed under the nonadministrative expense limitation in connection with the proposed mortgage insurance for the housing units to be made available to low-income tenants on a rent supplement basis. When this work is completed, the rent supplement contracts will be negotiated and revised as needed by the special field staff.

2. Certification of tenant eligibility.—Applications by tenants for rent supplements will be received in the field office and processed by the special rent supplement staff as described in detail above, including determination of the rent supplement which will be payable to the particular tenant after he is found eligible.

3. Recertification of tenants' income.-The law requires recertification of the tenants' income, except the elderly, at intervals of not less than 2 years.

4. Disbursement of rent supplement payments.-The housing owner will submit a voucher to the local FHA office monthly for rent supplements, citing each tenant's name and the supplement payable. The field office will verify the accuracy of the voucher in accordance with the terms of the rent supplement contract and the certificates of tenants' eligibility, certify the voucher, and forward it to the Comptroller's Division for payment.

Expense summary

The details of this estimate are as follows:

Staffing

Central office:

Office of Associate Deputy Commissioner for Operations, to direct the program and to develop policies and procedures for its implementation.. Comptroller's Division, fiscal and accounting work related to disbursement of rent supplements...

Field office: Negotiation for rent supplement contracts with housing owners, review and determination of tenant applications and income certifications and recertifications, and field review of vouchers for rent supplement payments..

Total.

Expenses:

Personal services--

Travel and transportation of persons

Rents and communications__

Printing and reproduction_.

Supplies and materials_.
Equipment-.-.

Total___.

EXTENT OF AUTHORIZATION

Mr. EVINS. This is a new program. It is expensive, as has already been pointed out. It involves subsidy payments to persons displaced by governmental action, 62 years of age or older, physically handicapped, occupying substandard housing or an occupant or former occupant of a dwelling which was extensively damaged or destroyed as a result of a natural disaster. These are the several categories.

The Administrator just pointed out who will do the building and the statute stipulates, as shown on B-2, that $30 million is authorized now, an additional $35 million on July 1, 1966, another $40 million on July 1, 1967, and still another $45 million July 1, 1968. In other words a total annual level of $150 million is authorized. My question is, How much can you use now for the next year?

PROGRAM LEVEL, 1966

Mr. WEAVER. We can use the $30 million that we are asking for. This is the amount that would be available to us to work with the sponsors so they would know that this amount of money would be available. By the end of the year we will have sponsors, we believe, in the various stages of development of projects. Some of them will be already closed. Some of them will be approaching closing. Unless we have the money available, we will not get the projects developed.

Mr. EVINS. This is a new program, in which we are without much experience. As somebody said when they recommended it, they did not think they would get it for 10 years, and now that you have it, you do not want to enter into a crash program, do you? You want to feel your way based on experience.

Mr. WEAVER. I think there are two things here, sir. The first thing is the need is extremely pressing. I think we would be derelict in our

duty if we did not move as quickly as we could to meet the needs of these people who are suffering from bad housing.

Second, I think we have a moral responsibility when as a result of Government action people are displaced from their homes, to see they get safe, decent, and sanitary homes.

Third, I think at the present time, with housing starts not too high, we ought to do the most we can to give the economy the "shot in the arm" that this program can give it to increase housing starts. We believe we can get these $30 million worth of rent supplement programs underway, and we are going to try our darndest to do it. In fact, we believe it so much that we practically have our regulations on this complicated program ready, and they probably will be issued by the time the appropriation is passed.

Mr. EVINS. Did you not tell us this morning that you could use just about $900,000 the first year?

Mr. WEAVER. No, sir. I said we could expend $900,000 the first year, but we have to be able to obligate or commit an amount much larger than that if we are to get the program off the ground.

Mr. JONAS. I do not understand this. Are you asking for a $30 million appropriation?

Mr. WEAVER. No, sir-for the authorization of $30 million; and for the appropriation of $900,000 to be spent this year.

Mr. JONAS. The appropriation language refers to but $900,000.
Mr. WEAVER. There are several parts to that language, sir.
Mr. JONAS. I read them all. The reference to $30 million-

Mr. WEAVER (reading):

Provided that the maximum payment in any fiscal year for rent supplements required by all contracts which may be enacted under such section shall not exceed $30 million.

Mr. JONAS. I know. That is not an appropriation.

Mr. WEAVER. It is an authorization.

Mr. FRANTZ. Section 101 of the act provides that the Administrator may enter into contracts, but not in excess of amounts that are stipulated in appropriation acts. So, this would have the effect of releasing for use $30 million in contract authority as provided in section 101. Mr. WEAVER. This has to have appropriation action.

TOTAL COST OF PROGRAM

Mr. EVINS. Doctor, as now authorized this program could go up to $6 billion over the 40 years if we gave you all the money you could expend. Have you really calculated how much this program will cost?

Mr. WEAVER. It will cost less than the maximum amount. I cannot tell you the exact amount because the families involved will increase their earnings and the amount of the supplements will be declining as the years go on.

Mr. EVINS. They will not be declining. It will be increasing.
Mr. WEAVER. I mean each year.

Mr. EVINS. Most of these programs are for a year or two years or 3 or 5 years, but these will be contracts for 40 years.

Mr. WEAVER. The amount each year will be declining for a program which existed the year before.

Mr. EVINS. Yes; but not for the overall program projected for the future.

Mr. WEAVER. No, sir.

Mr. EVINS. I cannot see otherwise than that it will go up to possibly $6 billion.

Mr. WEAVER. I would be willing to guarantee it will not go up that much, but it will go up, certainly.

Mr. JONAS. Do you mean you construe this as being contract authorization?

Mr. FRANTZ. Yes, sir.

Mr. JONAS. Back-door spending, in other words. We just got through closing that door for Mr. Slayton. Now you want us to reopen it?

sir.

Mr. WEAVER. It is the only way a program of this type can be done,

Mr. JONAS. I do not see why. You told us this morning you could not spend more than $900,000, and you got two-thirds of that in

conversion items.

Mr. WEAVER. I think there are two items here. First, the amount that we are authorized to enter into contracts for. In accordance with the law, this is language which comes before the Appropriations Committee to authorize that amount. Then we come up annually for appropriations to meet those requirements for the year. The authorization is for the $30 million. That is what we are asking for.

Mr. JONAS. You will be up here in January, and you have only 4 months between now and then.

Mr. WEAVER. We will not come back on this in January.
Mr. JONAS. You will come back for $35 million.

Mr. WEAVER. No, sir; we cannot.

Mr. JONAS. For fiscal year 1967.

Mr. WEAVER. For 1967 we can, but not for this year.

Mr. EVINS. If we give you the $30 million and you enter into contracts with various builders to build this housing and have 40-year contract periods, do you estimate the payments are going to run more than $5 billion?

Mr. WEAVER. I could not give you a round figure. I can say with assurance, that they will not represent for any one year the amount of that year times 40, because each year the amount of the $30 million which you have authorized will be less than the $30 million. There is a 10-percent contingency, in the first place. In the second place, incomes will rise and, as incomes rise, the amount of the subsidy will go down. You will never spend the total amount that vou authorize. At least, certainly it is inconceivable that that would happen unless you had a 30-year depression.

Mr. EVINS. You would like to have the full $30 million. You can spend $900,000. As Mr. Jonas pointed out this morning, you want about $850,000 in administraitve expenses to disburse this $900,000 for the first year.

Mr. WEAVER. No, sir; again, we want the $850,000 to initiate a program involving $30 million.

Mr. EVINS. Any questions on the rent supplement program?

USE OF MANAGEMENT ORGANIZATIONS

Mr. JONAS. I have one question which arises out of my reading of this interesting paragraph on B-7. I understand now you are going to make contracts or enter into arrangements or authorize arrangements to be made with management organizations that will assist these prospective tenants in making up their applications and assist the sponsors in keeping the projects full of tenants; is that right? How much is that going to cost?

Mr. WEAVER. They will be doing a little more than that, sir. They will also in many instances actually become the operators, the managers of the projects. There is a standard fee which we will develop for this. We have had some experience. What has been the experience on this?

Mr. BROWNSTEIN. Whatever the management fees are locally we would expect will be applicable here, but I think what Mr. Jonas also has in mind is that there will have to be a somewhat unique role played here because many of these sponsors who are well motivated just do not have the necessary knowledge that it takes to put together a project of this kind, nor to operate it successfully. The key to the success of these programs is good sponsorship with continuity, with knowledge, with motivation. All of these things are essential. They are going to require some counseling.

LOCAL APPROVALS IN PUBLIC HOUSING

Mr. EVINS. What approval is required by a local community for a public housing project?

Mr. WEAVER. A public housing project involving as it does local money, involving as it does certain tax action, has to be approved by the local government, because it involves local participation. The rent supplement program is just like any other FHA housing program. The sponsor has to meet all of the local requirements of government. These vary in building regulations, zoning, codes, and whatever else there may be in the local community.

LOCAL CONTROL OF RENT SUPPLEMENT PROGRAM

Mr. EVINS. What administrative regulations do you propose to insure that these projects are in harmony with the plans of the local community?

Mr. WEAVER. Any project that comes in involving construction has to be in conformity with any planning requirements that exist under local law, but these are local planning requirements.

Mr. EvINS. Urban renewal and public housing are tied into a community plan. The rent subsidy is not tied into a community plan. Mr. WEAVER. It is indirectly, as I mentioned this morning. It is not tied in to the same degree, though.

Mr. EVINS. Why should it not be in the law?

Mr. WEAVER. Because it operates in a different area. Some of these will operate in cities. Some will operate outside the city.

Mr. EVINS. Is it your plan to force on communities projects and programs which are not tied in with the community development plan?