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As you know, the National Housing Conference is a private nonprofit organiization representing housing officials, labor, religious, welfare, and veterans groups and individual citizens concerned with all aspects of improving the housing conditions of the American people.
Your bill would make a vital contribution to better housing conditions. One of the most serious bottlenecks restricting housing production is the high and rising cost of land, and in many areas, the complete lack of land for low and moderate priced homes.
The roots of this problem go back many years. When our population temporarily leveled off in the 1930's, it was generally thought that our period of growth had ended and little was done to plan for the expansion of our urban centers. World War II caused a further sharp cut in such investment. Even when the birthrate rose sharply after the end of the war, most experts dismissed it as a momentary phenomenon. Because so few people foresaw the continued rapid population growth which has since become a fact, the construction of community facilities fell far short of our needs.
In 1955, the Department of Commerce estimated that we had, at that time a backlog of needed water and sewer works amounting to $10 billion. Moreover, the Department's report projected an additional requirement for the current decade of $6.2 billion to overcome obsolescence, and another $9.1 billion to accommodate population growth. To meet these needs, we should be building water and sewer works at the rate of $2.53 billion a year. The actual rate has fallen far short of that requirement. In 1958, the Nation spent only $1.4 billion for the construction of these facilities about 55 percent of the amount needed.
Our failure to provide adequately for these necessary facilities has cost us dearly. As an immediate effect, there has been a tremendous inflation in land costs. No other item of housing cost has risen as much or as rapidly as has land. Industry reports show that a doubling of cost over the past decade is common in a great number of communities. Moreover, the increase in land prices has a “leverage” effect on the cost of the whole house. This is because builders and lenders feel that the value of a home should bear a relatively fixed relationship to the value of the land on which it is to be built. In the case of new homes sold under FHA, land equals about 15 percent of the total value. Thus, if the market price of a lot doubles from $1,000 to $2,000, the total sales price of the home which would be constructed on it will jump far more than just the extra $1,000 in land cost. The builder will now place a home costing around $13,000 on this land instead of the $7,000 one which he would have built at the lower land cost. Since 1950 this has been a major cause of the rapid rise in sales prices of new homes built.
These facts have an important bearing on the so-called flight to the suburbs which has occurred on a wide scale in this country. In many cities, this has raised questions of the basic financial health of the central city and the balanced growth of the area. Basically, this trend only reflects the natural population expansion which most communities have experienced. However, this process of growth has been distorted by the inflated land prices of most suburban areas which has meant that only higher income families could afford to live there.
In addition to adding to the cost of new homes, the lack of community facili. ties has forced many towns to resort to protective large-lot zoning or arbitrary limitations on the number of homes which can be built there. These measures discourage the natural spreading out of population in urban areas or restrict it to upper income families. This forces high-density usage of the land in the central cities, and, in the case of urban renewal efforts, severely limits efforts to rehouse the families which must be displaced.
This, of course, not just a large-city problem. It is a problem which has to be faced by every community which has expanded, or hopes to expand, as well as to the many places whose present facilities are obsolete.
The shortage of community facilities and the resultant inflation of land values has limited families of average income in their choice of housing, and has distorted the growth patterns of many communities. Moreover, in a great number of instances, these shortages are creating hazards to health and are restricting economic growth. It is imperative that this problem be given the full answer which it demands.
Your bill H.R. 5944 gets directly to the heart of this problem. In most cases, interest is the largest single item of cost in undertaking public works. Today, our towns and cities are faced with financial demands which stretch their resources to the limit. Many of them, particularly small communities, could not afford even the interest which the money market would require them to pay. Yet the health of our people and the health of the cities in which they live demand that an answer be found. Every measure which will reduce the cost to the community of meeting these needs will make it possible to do that much more toward catching up with our requirements. Every year that passes without a meaningful attack on this problem is a year in which the backlog grows, and at some date we will have to face up to the problem.
We strongly endorse this measure and urge every Member of ongress to vote for its passage. Respectfully,
FRANCIS X. SERVAITES,
AMERICAN MEDICAL ASSOCIATION,
Chicago, Ill., April 29, 1959. Hon. BRENT SPENCE, House of Representatives, Washington, D.C.
DEAR CONGRESSMAN SPENCE: The American Medical Association was requested to comment on H. R. 5944, the Community Facilities Act, introduced by you.
As you know, this bill is concerned with the improvement and construction of community health facilities, especially water purification and sewage treatment and disposal plants, hospitals, and nursing homes. It proposes establishment of new Federal lending authority to assist local communities to finance such facilities.
The American Medical Association has taken no official action on this bill and therefore this statement is based on past actions and established policy. In line with our continuing effort to bring about better health to the Nation, we agree that an effort to improve, expand, and establish needed health facilities is commendable.
The American Medical Association recognizes that community programs to protect the public health depend to an important degree on the availability of pure, uncontaminated water, and on the disposal of human and industrial waste products. Although most large cities and towns probably now conduct sanitation programs embodying these two essential services, there remain a significant number that need new or improved plants and facilities.
Hospitals and nursing homes likewise constitute essential elements in a community health program. AMA has demonstrated its continuing interest in both types of facility by supporting, since its inception, the Hill-Burton Act, and by endorsing that portion of the housing bill that provides for Government-guaranteed mortgage loans for proprietary nursing homes. The financing problems of the Nation's hospitals in terms of construction, renovation, and repair are a continuing challenge. AMA strongly supports a rapid expansion of nursing homes, both proprietary and nonprofit.
AMA recognizes the hospitals' needs for funds to finance plant and equipment for the training of many paramedical groups, especially nurses, and the housing of interns and residents.
Traditionally AMA has urged local financing of local programs. AMA is aware that some communities refuse to support a level of public expenditures sufficient to meet minimum needs.
When situations have arisen that seemed to demand Federal financial participation, we have supported grant-in-aid programs administered by the Public Health Service or Government-guaranteed loans of the FHA type. Sincerely yours,
F.J. L. BLASINGAME, M.D.
STATEMENT OF Hon. RICHARDSON DILWORTH, MAYOR OF PHILADELPHIA, ON
BEHALF OF THE COMMUNITY FACILITIES ACT OF 1959 (H.R. 5944) The act before us is a splendid example of one way in which the Federal Government can help, at little cost to itself, the communities and municipalities which have felt increasingly the squeeze between the demand for facilities for their residents and the means available to satisfy these demands.
The bill before us is particularly useful because it specifies a rate of interest which will make its use advantageous for a wide variety of communities. As of May 1, the 20 bond index of municipal bonds with high credit rating was 342 percent. Other municipalities with lower credit standing may have to pay about 442 percent. The municipal securities market is also affected by the issuing of bonds by authorities, whose specific revenues are pledged as collateral. Their attractiveness to the investor encroaches further on the sale of municipal bonds, particularly of smaller communities with poorer ratings. While an interest rate of 2% percent makes loans under this bill extremely useful to cities such as Philadelphia, it is of truly vital importance to smaller communities, which otherwise could not build these facilities at all. Another general advantage of these provisions lies in the fact that the lower interest rate in many cases make the loans self-sustaining, so that the revenue derived from the users' charge for these facilities (e.g., sewers) may be sufficient to pay the interest on the loan. This would make it possible, where this is not otherwise the case, to build these facilities without regard to the municipal debt limit.
The construction of such facilities creates employment, particularly for construction workers. In addition, the very existence of these facilities may generate additional employment in metropolitan areas, many of which were hard hit by the last recession and have not been able to fully recover their old level of employment. Many community facilities are a prerequisite for industrial development and it is important that large and small communities alike be given the wherewithal to develop their industrial potential, which means employment opportunities. This in fact has been fully recognized by a splendid bill introduced by your chairman (Representative Brent Spence) in both the last and this session of Congress, which is proposing to help economically hard-hit areas to become attractive for newly growing and expanding industries. This bill contains provisions which gives both loans and grants for those public facilities which will increase the employment potential of the community. It was passed by the 85th Congress, but unfortunately the President did not think that helping depressed areas and those men who had lost their jobs was important enough, and so he vetoed your chairman's bill. The bill before us provides a different approach to the same kind of problem, and will therefore supplement in an important way the remedies of the Area Redevelopment Act.
It is scarcely necessary to give example of the dramatic possibilities this bill holds out for hard-pressed communities : A new youth detention center, so that juvenile delinquents are not jailed with hardened criminals; a new pumping station to provide water for a new development of low-cost housing; a filter station to purify the water which new industry has used to cool their products; storm flood relief; new parks and playgrounds, health centers, etc.
In addition, the bill also specifies help to hospitals for the purpose of their repair and modernization. This is of particular importance in any community for the following specific reasons: (1) The Hill-Burton Act provides for construction of new hospitals, but not, at this time, for repair or improvement of old ones. Furthermore, it is well known that this act gives a low priority to urban areas. While it would be important to amend that act so that it would provide also for grants for improvement of old hospitals, it is of great importance that the bill before us gives the communities a chance to modernize its old facilities, even though only on a loan basis. (2) All existing nonprofit voluntary hospitals in any community you can think of have been given to the community by private contributions of one kind or another without any cost to the public. This gift made it possible for these hospitals to use all their revenues for operating expenses. As the latter went up, deficits in the running of hospitals began to develop—by now a general occurrence all too well known. But worse yet, throughout all this time no provision had been made for the depreciation and replacement of the hospital structure itself, while it continued to grow older and more obsolescent. No community can afford to abandon the existing hospitals with the present demand and need for medical care. Therefore, it becomes particularly important to help communities to modernize and improve these facilities--an action beyond the financial ability of most hospitals or communities. (3) The only alternative would be to borrow money on the general market at a high interest rate, which would push these hospitals further into the red and would lead to an increasing need for some kind of public subsidy.
The level of bonded debt of most large communities is high. Prudent cities attempt to lower this burden, both for the sake of the taxpayer and for the sake of getting an improved rate on the bond market. Philadelphia is approaching the point where they hope to redeem in any year more old bonds than issue new ones, and will, I hope, reach it during my administration. It is particularly important that Federal loans help cities to get closer to this point of financial balance between redeemed and issued bonds. The bill before us does just that.
In broader terms, the squeeze between the ever-increasing demands on community facilities and the cities' declining share of total governmental resources makes this bill of vital importance. Most communities have not yet caught up with the delay in construction and maintenance of facilities already badly needed. Furthermore, as the country grows and the majority of our increased population settles in the metropolitan areas, it becomes ever more necessary for the communities to service these increasing numbers properly, which requires new facilities and more services. This is particularly true because our standard of living keeps improving and with it the expectation of improved services. Unless these new facilities and the modernization of old ones, more expensive in an inflationary market, can be financed from a source other than the general municipal money market and at a better rate of interest, this growth will be stunted. It is therefore doubly important to provide the kind of relief specified in this bill. The loans going to communities will act as catalysts to enable them to start on the big job that lies ahead of them. That is why I wish to congratulate the bill's sponsor on its splendid provisions.
Thank you for letting me express my views on this important matter. I hope that your committee will see fit to pass this bill for the benefit of needy communities, large and small.
STATEMENT OF THE AMERICAN NURSING HOME ASSOCIATION RE HOSPITAL AND
NURSING HOME CONSTRUCTION LOANS BY GEORGE T. MUSTIN
I am George T. Mustin, the owner and administrator of a privately owned nursing home, past president of the American Nursing Home Association, and chairman of the legislative information committee. I represent the American Nursing Home Association which is an organization of 48 State associations affiliated in this one national organization, representing approximately 5,000 nursing homes, almost entirely proprietary. To the best of our knowledge, we are the only national nursing home association in existence at the present time.
This association is committed by its philosophy, as set forth in its national constitution, as affirmed by the constitutions of its member States, and by its actions and service since its formation, to ever strive for improved and improving care of the chronically ill. Since an important part of such care is the physical plant in which there is opportunity to render this service, any effort toward better nursing-home housing is entitled to our commendation and support, and we therefore endorse H.R. 5944, a bill to provide long-term loans at low interest rates to municipalities and other political subdivisions of the States. However, it must be borne in mind that the problem of care forms a vast and intricate pattern, and the whole should be examined before plunging into any program which might tend to thus artificially hamper , perhaps downgrade, another segment of the care picture.
Nursing home ownership is under proprietary, private nonprofit or public sponsorship. An association statement before the Senate subcommittee on January 23, 1959, pointed out that private nonprofit homes represent 14 percent of the total number of available beds; public homes, 15 percent; and proprietary homes, 71 percent. Each of these types of sponsorship has its function to fulfill, and no artificially induced imbalance should be permitted to alter the situation because of the possible effects on the whole. As a rule, private nonprofit homes are sponsored by religious or fraternal groups, caring for their own, as is their right, and these homes are usually self-sustaining within the framework of their groups. They are not a charge upon the public and therefore, in our opinion, not within the scope of this discussion. On the other hand, proprietary homes are not so sheltered and must face the usual risks of economic ventures. A law which would give undue aid to one segment of our economy at the expense of another would face strong opposition from those being discriminated against. If these segments were ventures in manufacturing, selling, servicing, or any one of our myriad ventures, then our laws would prohibit such aid. But the proprietary nursing home program, part business and part profession, falls in a twilight zone where it can very well be discriminated against by laws, if such laws propose to offer generous loans to one type of sponsorship while excluding another type.
Let us examine the source of payments for individuals in proprietary nursing homes. In many States, a very substantial percentage of patients in proprietary homes are paid for by city, county, or State governments. It has been estimated that 50 percent of all patients in nursing homes in this country fall into this category. Why has this come about? It must be evident that the proprietary nursing home has reached this position of such responsibility simply because it offers satisfactory, State-supervised care at less cost to the taxpayer than competitive facilities. No other conclusion can be reached.
It is quite true that some States still rely upon public nursing homes to care for their indigent citizens; in some others this system is used in certain areas of the particular States. This association has no quarrel with any State, or any political subdivision which elects to care for its indigent citizens through publicly owned homes. Such care is its responsibility, and it is its decision alone whether to operate its own public home, or to use the services of proprietary homes. We are, of course, referring to the care of indigent citizens. As awards of organized society, they are entitled to be cared for at public expense. But no other person should be cared for in publicly owned nursing homes. Persons able to support themselves, alone, or with assistance from others, including pensio funds, should not be permitted reside in public nursing homes. To allow this would be for Government to be in competition with one of its members, the whole of whom it must rely upon for its existence.
Therefore, this association urges that this bill carry provisions so that nursing homes constructed under these long-term low-interest rate loans would not be in competition with proprietary homes, through the medium of excluding all except welfare patients from being cared for in these homes.
In this manner, the balance between the various types of sponsorship will not be imperiled, and proprietary nursing homes will continue to make important contributions to the Treasury, through taxpayments, as well as to fulfill their ever-growing destiny in the medical field.
Mr. SPENCE. This will complete the submission of testimony on H.R. 5944 and related matters, and the committee will adjourn to reconvene at the call of the Chair.
(Whereupon, at 11:25 a.m., the subcommittee was adjourned, to be reconvened at the call of the Chair.)