50 percent of total unemployment today is due directly to the retardment in the heavy industries, and another 35 percent is chargeable to the service trades that are directly affected thereby.

For these reasons, Mr. Chairman and members of the committee, the whole country awaits the time when the sound of the rivet and the saw are joined more loudly in the chorus of economic recovery. When we consider the long-time deficit that has accumulated, the existence of unhealthful quarters that must be replaced, and normal growth in the future, it is very conservatively estimated that the country needs at least 10,000,000 new family units during the next 10 years. A building program of this magnitude will absorb both the unemployment in the durable goods industries, and the overflow of the technologically unemployed from other fields. Ministering to a widespread and basic market, housing will provide the most stabilizing and stimulating influence that can be devised.

THE GOVERNMENTS ROLE IN HOUSING

I take it we are all in agreement that a building program of this magnitude must be predominantly the task of private industry. But none the less the Government has an inescapable supplementary role to play, a role justified by the success that has met our recent efforts in connected but none the less distinct fields.

The major housing activities of the Government to date have been set in the context of the emergency needs of early 1933. It was then imperative to save home owners from eviction, to repair dwellings that had become delapidated or decayed, and to rescue the investors in real estate from complete ruin. To these tasks the Home Owners' Loan Corporation and the Farm Credit Administration have applied themselves assiduously and successfully. Ninetyfive percent of the loans made by these organizations have been used to repay business and banking debts, and it may be said that they have contributed mightily toward saving our financial system from disintegration. But today the problem before the Nation is positive rather than negative. Instead of saving old homes, new ones must be built. Rather than refinancing old investments, areas must be developed for the operation of new capital.

It is true that some agencies of the Government have been designed to stimulate new construction. The Reconstruction Finance Corporation is empowered to issue secured loans for building purposes. The Federal Housing Administration is authorized to insure building loans by private enterprise. But such undertakings can do no more than to facilitate the financing of homes for people who can afford homes and who have credit standing. This kind of assistance, if taken alone, may promote another short-lived building boom for the well-to-do, but it can never clear the slums. It may restore the residential industry to its 1926 status as an uneven luxury trade, but it can never create the solid foundation for permanent economic stability. A foundation must be at the bottom and not at the top. In housing, this means provision for the large market at the bottom of the economic structure who need housing most.

At the present time, about 18,000,000 families in America, or 60 percent of the Nation, have incomes of not more than $1,000 a year.

This means they can spend only $200 to $250 a year for rent. But taking the country as a whole, at least $315 per year is necessary to provide a family of five with 312 rooms of decent and sanitary quarters, at an average rate of $7.50 per room per month. The provision of safe and sanitary housing for low-income groups is thus a distinct and separate problem in its own right. By universal admission, it cannot be mixed, either administratively or substantively, with reorganizing the mortgage market, or stimulating the flow of credit into profit-seeking construction for the well-to-do. By universal admission, it requires partial public financial support to remedy a threatening social and economic evil.

PROVISIONS OF THE BILL

The bill now before this committee is directed toward the problem created by low incomes, which, as we all recognize, affects directly the welfare and even the safety of every economic group. The bill provides for Federal grants and loans to the States and localities to assist low-rent housing for people of low income. The fact that "low-rent housing" and "slum clearance" are frequently used interchangeably, calls for a word of explanation. If we use the phrase "slum clearance" in the narrowest sense, to mean merely tearing down old buildings and clearing away areas, it seems obvious that there is no justification for Federal aid. That restricted kind of slum clearance benefits only the owners of the old tenements and of the land; or if the land is used by the locality for parks and playgrounds, it means that the Federal Government is indulging in a worth-while but secondary purpose. Mere wrecking can be done by the localities alone. More important, merely tearing down the old, either drives the inhabitants of the buildings into other slums, or it accentuates the housing shortage and forces all rentals upward.

The kind of slum clearance embraced in this bill does not mean pure destruction. It may be limited to the repair or renovation of building upon existing slum sites. It may mean the clearing away of the slum site and the building of better quarters on the same spot.. In some cases, it may mean the construction of low-rent homes upon cheaper and economically more desirable land. But in all cases, it places the emphasis rightfully upon stimulation of the building industry, upon reemployment, and upon creating safer and more sanitary homes for the slum dwellers and others of very low income.

Nor is the bill limited to the slum problem in the big-city sense. Its provisions extend as well to the development of low-rent housing for less-thickly populated areas. Where custom requires, these developments may be in the form of a group of one- or two-family dwellings, rather than large apartment units.

The Federal grants for such housing projects are strictly limited to the amount necessary to make it possible to build for families of low income, but in no case are to exceed 45 percent of the construction cost of any project. Any such grant may be made in a lump sum, or all or part of it may be spread equally over a period of years upon an annuity basis. The use of annuities will decrease the original cost to the Federal Government, and at the same time leave to private capital a larger portion of the initial financing. These

grants may be supplemented by Federal loans, in no case covering more than the remainder of the construction cost of the projects.

I want to emphasize the public policy behind this Federal financial assistance. The most important consideration is, that public housing projects should not be brought into competition with private industry. It is the meager character of the assistance to date that has made it impractical to rent the present public housing projects except to people of moderate means. This has brought on the very type of competition with private industry that should be avoided, and in addition has carried us directly into a kind of housing that has no just claim on public funds. For example, the only so-called low-rent housing project of the Federal Housing Administration rents for $12.50 per room per month, bringing it within the reach of only of families of incomes of well over $2,500 a year. To reach those who are really entitled to public assistance, and to get into the field where private enterprise really cannot operate, is the objective of this bill."

In addition to these provisions, the bill contains other safeguards against competition with private industry. Every housing project that receives a penny of Federal assistance, either loan or grant,. will be available only to those families of low income who cannot purchase safe and sanitary quarters elsewhere. If there is competition, it will be only with the miserable conditions of slums and blighted areas.

ENCOURAGEMENT OF PRIVATE INVESTMENT

Furthermore, the loans and grants advanced by the Federal Government need not cover even the major portion of the cost of the low-rent housing projects which they assist. Every inducement may be provided for the investment of private capital, through the purchase of the bonds of the local housing authorities. It is estimated that public funds made available under this bill, if used alone, could build only 245,000 family units during the next 4 years. But if used as appropriate complements to private finance, at least 600,000 new family units for the low-income groups alone will result.

Finally, and most important of all, Federal loans and grants will not be intended to carry the major part of the building program of the Nation. They will be used in connection with only a small fraction of the total home-building needs during the next few years. The construction of 125,000 family units per year with partial Federal assistance, and that predominantly in the form of sound interest-bearing loans, should provide, in connection with the work of the Federal Housing Administration, an example and a stimulus. to the revival of the private construction industry. There is need for the development of 875,000 family units each year by private enterprise alone. If enterprise does its part, every dollar of Federal grant should be matched by $48 of private expenditure for home building, with its connected economic improvement.

ADMINISTRATIVE PROVISIONS

Now, as to the administrative provisions of the bill. While large sums of private capital can be drawn into low-rent-housing bonds,. and while actual construction and material supplies will be obtained

from private enterprise, no one would suggest that Federal grants should be given to private housing ventures for personal profits. We do not make grants to private hospitals for public health service. The bill naturally provides that Federal assistance to low-rent housing shall be extended only through State and local publichousing authorities. But even on this point, there is flexibility to the extent that some loans may be made to limited-dividend corporations regulated by law, in order that they, too, may engage in lowrent housing. Experience indicates that these limited-profit companies cannot get rents down anywhere low enough to satisfy the needs of the lowest income groups. But if they can, so much the better, and this bill is designed to give them an opportunity to try. The bill adheres to the principle of decentralization. All the direction, planning, and management in connection with publicly assisted housing projects are to be vested in local authorities, springing from the initiative of the people in the communities concerned. The Federal Government will merely extend its financial aid through the medium of these agencies. In due time, I believe that this decentralization of administrative responsibility should be followed by decentralization of financial responsibility. But the overwhelming majority of the genuine friends of low-rent housing are convinced, that to place financial responsibility upon the States and localities at the outset would stifle the low-rent housing movement at its birth. The States have neither the legislative machinery nor the financial standing at the present time to cope with the situation.

The only exception to the strictly decentralized administration is, that the Federal Government may set up a few demonstration projects in order that local areas without adequate instrumentalities of their own may benefit by an experience in low-rent housing. It is provided that these demonstration projects shall be transferred to local agencies as soon as possible. In order to minimize the likelihood of Federal operation even where no local agencies exist, the housing authority is authorized to rent its demonstration projects to cooperative nonprofit associations of families of low income, who have banded together for the purpose of securing decent housing.

The bill contemplates the establishment of a new United States housing authority. The encouragement of low-rent housing will be in years to come one of the most significant undertakings of the Government; and to this work should be devoted the single-minded attention and resources of a permanent and independent corporate agency. The establishment of such an agency will not tend to multiplicity. On the contrary, it will enable the President to gather under one roof the scattered organizations now empowered to do low-rent housing, such as the Suburban Resettlement and the low-rent division of the Federal Housing Administration. The Housing Division of the P. W. A., as the most developed and successful of these agencies, is transferred to the central authority by the provisions of this bill.

As to the main housing work of the Federal Housing Administration, the Home Owners Loan Corporation, and the Reconstruction Finance Corporation, that involves, as I have said, totally separate problems. Other legislation should coordinate the work of such agencies, concerned as they are with mortgage reform and credit extension for people of moderate means.

FINANCIAL PROVISIONS

The financial provisions in this bill are modest. I should like to call to the special attention of the committee, that even some very conservative sources have found no fault with this measure, except that it does not begin on a large enough scale. The money for the loans is to be raised by the sale of bonds, guaranteed as to principal and interest by the United States, and amounting to not more than $100,000,000 for the first year, and not more than $150,000,000 for each of the succeeding 3 years. After that Congress will have to consider new authorizations. During the first year of the program, there may be no need for a bond issue whatsoever, as the bill authorizes the Housing Authority to borrow $100,000,000 from the Reconstruction Finance Corporation, on the basis of equivalent assets now held by the Housing Division of the Public Works Administration. The authorized appropriation for grants is only $51,000,000 for the first year, and there are authorizations for $75,000,000 for the second year, $100,000,000 for the third, and $100,000,000 for the fourth. The total appropriation's under this measure are less than one-half the amount appropriated during the present session alone for the Army. The total loans contemplated are less than one-tenth of those authorized under the Reconstruction Finance Corporation Act to benefit every type of commercial, industrial, and banking enterprise.

This is truly a modest beginning. But it is a start in a direction so obviously proper, that it has won already an amazingly wide range of support. It combines the business desire for more complete recovery with the humanitarian impulse to provide safer and healthier places in which the people may live. I have a very deep feeling that this committee will regard such a proposal with wholehearted favor.

The CHAIRMAN. Thank you very much.

Secretary Ickes, we will be pleased to have your views.

STATEMENT OF HON. HAROLD L. ICKES, SECRETARY OF THE

INTERIOR

Mr. ICKES. It is hardly necessary to dwell upon the necessity for the proposed legislation, nor upon the social evils which it aims to remedy. Millions of our citizens are compelled to live in dwellings unfit for human habitation. Slum conditions do not exist in isolated areas or only in large cities but may be found in practically every community from coast to coast. It has long been known that the slum furnishes the environment most conducive to the existence, spread, and communication of sickness and disease and fosters and encourages juvenile delinquency, crime, vice, and immorality. It is only in recent years, however, that careful study has revealed that the cost of slums, in terms of dollars and cents spent for municipal services, results in too great a drain upon the public treasury to be permitted to continue. Private enterprise has proved itself unable to supply adequate housing accommodations for families of low income at rentals which they can afford to pay. Others, no doubt, will present to you in detail the available evidence on this point.