Mr. COLE. A lot of these applications will drop by the wayside. For this reason: Town X or city X applies for an urban renewal project. Before that town or city can receive favorable action it must be able to show that it can place its people that are going to be thrown out. I think, Mr. Cole, you said in your statement that a little better than 50 percent of these people were what you might call prospective customers of low-rent housing. Approximately that. Mr. COLE. A little less. Senator SPARKMAN. City X must show, then, that it has a place to house 50 percent of these people in low-rent housing. How is it going to be able to do that beyond the turnover that occurs unless they can come to you and say, "Give us a hundred units of low-rent housing"? Mr. COLE. Well, our experience has shown that half of these that are eligible fall by the wayside and do not request public housing. They obtain housing from other sources in the market. Senator SPARKMAN. Of course, I was just using that figure. It does not matter whether it is a half or a fourth. If they must have housing available, whatever the number may be, how are they going to do it unless there is something over here that they can negotiate with? Mr. COLE. That is right, but we have not yet found that the inability of low-rent housing to be programed for a community has over a period of time held up any large numbers of them. It may have held up some. Senator SPARKMAN. I realize that it is because you had this reservoir ahead that you could work on. But it seems to me now you are about to work out of this reservoir. Mr. SLUSSER. If I may interject, I think we are still working on the reservoir, Senator Sparkman, but I think Mr. Cole's figures said that of these people that are eligible, a good many never come to public housing. Senator SPARKMAN. I realize that. Mr. SLUSSER. Then you have the impact of the FHA's section 221 program. Senator SPARKMAN. That is true. A good many of them are Mr. SLUSSER. That we will have to consider. So the only thing we can go on is the fact that we match our program closely with the urban-renewal program and the Administrator's certification of a workable program in any community, and through that we keep abreast of what is going on. We believe that what we have now available as a reservoir together with the unused authorization is sufficient to meet the demands that will be made upon us. Senator SPARKMAN. I can see ordinarily that would be true, but it seems to me you are at the point where that is no longer true because you have more applications on hand than you have units. In other words Mr. SLUSSER. That has always been true in the program, sir. I think I recall when I came into office we had something like 350,000 program reservations. Shortly thereafter, the Congress put a limitation on the program, and many of those fell by the way. Senator SPARKMAN. We will move on with your statement. I am sorry to have taken so much time, but I think it has been helpful to get the information in. Senator CAPEHART. It is the heart of the public housing-consideration we will have to give. Mr. SLUSSER. It is our considered opinion that any authorization in excess of this will constitute a nullity insofar as the production of new low-rent housing is concerned in the next 2 fiscal years. We will, of course, promptly report to this committee any change which would call for revision of these estimates. The Agency has experienced year by year the increases in construction costs inherent to the economy which has existed since World War II. Our experience closely follows that of private builders. The cost situation culminated with the total dwelling unit cost for several projects exceeding $17,000 per unit. These circumstances made necessary the establishment of a ceiling. This ceiling was fixed at $17,000 for total dwelling unit cost. This action was taken because private builders are able to provide housing even in the highcost areas within this figure. We fully appreciate that private builders do not absorb the cost of slum land. We also know that where slum sites are used, a substantial portion of the cost may be considered as the cost of slum clearance which is an important objective of the act. This consideration was primary in our reaching the $17,000 ceiling. In its absence, the maximum approvable figure would be much lower. The $17,000 figure is approved only in high-cost areas and for projects located on slum sites. This action was taken with recognition that the specific statutory cost limits do not run to total dwelling unit cost but are established as a maximum for room cost, exclusive of the cost of land, demolition, and nondwelling facilities. However, the act also contains other provisions relating to development costs. One of these requires that economy be promoted in the construction of projects. Another strictly limits Federal subsidies. The $17,000 ceiling was established in the light of these statutory provisions and on the basis of sound business policy. This ceiling is also an effort on our part to produce the maximum number of low-rent housing units under the total authorization for annual contributions. The Agency recommends two additional provisions in the proposed Housing Act for 1958, both of which will amend the United States Housing Act of 1937 and, in our opinion, accomplish improvements in the administration of the low-rent program. The first of these proposed amendments relates to section 2 (1) of the act. The Housing Act of 1957 amended this section to authorize a number of additional exemptions to be used in calculating income to determine whether a family is of low income and eligible for occupancy in a low-rent project and also for rent-fixing purposes. These exemptions include (1) $100 for each adult dependent member of the family having no income, including the spouse of the head of the family; and (2) $600 of the income of each member of the tenant family other than the principal wage earner. The general objectives of these exemptions were to eliminate sporadic, small earnings of tenant families, normally not available for the support of the family from consideration in determining eligibility and rent, and to assist the larger families. The Agency endorses these objectives. However, the $100 exemption will cause a substantial loss in rentals with a corresponding increase in Federal subsidies. Applied to the spouse of the head of the family, it will occasion a $20 reduction in annual rental for a substantial majority of the units in the program. This loss of rental could make insolvent individual projects and will adversely affect the economics of the national program of approximately 450,000 units. Also, the cumulative character of the $600 exemption for secondary wage carners when considered with all other exemptions authorized by law-would permit the occupancy of low-rent projects by families whose incomes are far above the level which may reasonably be classified as "low income." For example, applied to a family of 4 in a program with admission limits of $3,800 per annum and continued occupancy limits of $4,750 per annum, the exemptions for secondary wage earners would permit admission to the project of families having a gross income of $5,000 per year and permit continued occupancy in the project of families with a total income of $5,950 per annum if, in addition to the head of the family, 2 other members are wage earners. If any member of the family is receiving veteran's disability compensation, under the provisions of the Housing Act of 1948, the family income may be further increased by the amount of such compensation. If the 2 secondary wage earners are minors earning the modest sums of $2,500 per annum each, under a provision of the Housing Act of 1949, for continued occupancy purposes, the family could have an income up to $9,800 per annum. When applied to large families of unusual composition, these various exemption provisions could make families eligible for low-rent housing who have gross incomes far in excess of average. The limits for admission and continued occupancy on which these examples are based are among the highest now prevailing in the program and are approved for high-cost areas only. The Agency assumed that it was not the intention of the Congress in enacting the 1957 amendments to authorize occupancy of low-rent projects by families who are not low income and who are fully able to provide themselves with decent, safe, and sanitary housing without public assistance. Also, that it was not the intention of the Congress to jeopardize the financial solvency of the program. Hence, in administering these amendments, the exercise of the exemption for secondary wage earners has been limited to families that are clearly low-income under conditions prevailing in their communities. The $100 exemption to spouses has not been permitted. However, because of the present statutory language, local authorities have challenged our right to establish these policies, and we are finding it difficult to enforce them. We are, therefore, recommending legislation which will place a ceiling of $600 per family on the total exemptions for secondary wage earners and eliminate the $100 exemptions for spouses. This legislation also will grant an exemption of $100 for adult members of the family, except the head of the family and his spouse, and extends this exemption to all members of the family regardless of 25834-58-11 whether they have income. The purpose of this provision is to eliminate sporadic earnings, small pensions, and similar incomes from consideration in determining both eligibility and rent. It also will make more equitable the position of large families. The proposed law will not disturb exemptions previously granted by the Congress to minors and will incorporate in the basic act the present law granting exemptions to veterans receiving disability compensation. We believe that we should call attention to the fact that in some cases because of applicable State laws the exemptions for secondary wage earners accorded by the 1957 amendments cannot be fully utilized by the local authorities. The housing authorities laws of many States require that tenant familities pay a rental based upon a percentage of the family's gross income. Normally, this is one-fifth or one-sixth in accordance with the size of the family. The Federal law requires that a gap of 20 percent be left between the upper rental limits for admission to a low-rent housing project and the lowest rents at which private enterprise is providing a substantial supply of decent, safe, and sanitary housing. Instances have been encountered where the exemption of secondary wage earners could be applied but the rental required under State law would make the family ineligible under the gap requirements of the Federal law. The second amendment proposed by the Agency relates to the disposition of federally owned low-rent projects. The original Housing Act expressed the intention of the Congress that the Agency "as soon as practicable *** sell its Federal projects ***" However, this law, in the next section, ties the Agency's hands by limiting the disposition of these projects to sales to local authorities only. The House subcommittee concerned with the appropriations of the Agency has repeatedly urged us to divest ourselves of the remaining projects in Federal ownership. The Agency endorses the philosophy of the original law that federally owned low-rent projects be disposed of by conveyance to local authorities for continued low-rent use in all cases where there is such a need. However, we have encountered cases where this cannot be accomplished. There are no local authorities in the State of Oklahoma, nor is there State enabling legislation authorizing their creation. Hence, the Agency has been unable to divest itself of PWA projects located at Enid and Oklahoma City. We also have been unable to dispose of a PWA project at Indianapolis, Ind., because the governing body of the city will not approve transfer of the project to its local authority. These situations have been repeatedly called to the attention of the appropriate local officials without results. The proposed amendment would confer upon the Agency, in addition to its authority to convey projects to local authorities for low-rent use, also the right to dispose of such projects on the private market. If this amendment becomes law, we would give preference to conveyances to local authorities for low-rent use, and, in the cases mentioned, would extend a reasonable time to the communities to take such action as would make such disposition possible. We urge the enactment of this proposed amendment not only as a means of accomplishing final disposition of the PWA projects but because it will be helpful in the future with reference to low-rent projects which may be returned to the Federal Government under conditions where conveyance to a local authority would not be feasible. This concludes my prepared statement. Senator SPARKMAN. Thank you, Mr. Slusser. The staff has worked out a table on that exemption matter which I believe, if placed in the record, would give some help. I suggest it be properly titled and without objection it will be placed in the record. (The table referred to follows:) Senator SPARKMAN.. Mr. Slusser, are you far enough along on those single-family units at Cedartown, Ga., to know how well they are going to come out? Mr. SLUSSER. Well, they came out very well, sir. They are all occupied. Senator SPARKMAN. They are occupied now? Mr. SLUSSER. There were 20 units and 175 applicants. Senator SPARKMAN. How did the cost run? Mr. SLUSSER. We are very pleased with that. The actual construction cost plus the cost of the land-what we call a turnkee job-is about $10,200. We think we are a little high, because we were in a demonstration project and we had some bugs, which we still need to work out. Senator SPARKMAN. $10,200? Mr. SLUSSER. $10,200. That, of course, does not include local authority overhead. Senator SPARK MAN. Are they individual family or two family? Senator SPARKMAN. They are individual? Mr. SLUSSER. Individual and duplexes. Senator SPARKMAN. And duplex? Mr. SLUSSER. Yes, sir. Senator SPARKMAN. I saw some housing of that type down near Mobile that you acquired from one of the defense programs I presume is was. Mr. SLUSSER. No; we acquired that from FHA. Senator SPARKMAN. FHA? Mr. SLUSSER. Yes. That was at Montgomery, Ala., I believe. Senator SPARK MAN. This was Mobile. Mr. SLUSSER. Oh, that is war housing. |