... a number of our public housing projects... are impressive, but too many are monstrous, depressing placesrundown, overcrowded, crime-ridden, falling apart.

a certain income level, the present approach can actually reward dependence and discourage self-reliance.

The present approach is also very wasteful, for it concentrates on the most expensive means of housing the poor, new buildings, and ignores the potential for using good existing housing. Government involvement adds additional waste; our recent study shows that it costs between 15 and 40 percent more for the Government to provide housing for people than for people to acquire that same housing themselves on the private market.

One of the most disturbing aspects of the current approach is the fact that families are offered subsidized housing on a "take it or leave it" basis-losing their basic right to choose the house they will live in and the place they will live. Too often they are simply warehoused together wherever the Government puts them. They are treated as a class apart, with little freedom to make their own decisions.

Developing a Better Approach

Leaders of all political persuasions and from all levels of government have given a great deal of thought in recent years to the problem of low-income housing. Many of them agree that the federally subsidized housing approach has failed. And many of them also agree on the reasons for that failure.

The main flaw they point to in the old approach is its underlying assumption that the basic problem of the poor is a lack of housing rather than a lack of income. Instead of treating the root cause of the problem-the inability to pay for housing-the Government has been attacking the symptom. We have been helping the builders directly and the poor only indirectly, rather than providing assistance directly to low-income families.

In place of this old approach, many people have suggested a new approach-direct cash assistance. Under this approach, instead of providing a poor family with a place to live, the Federal Government would provide qualified recipients with an appropriate housing payment and would then let them choose their own homes on the private market. The payment would be carefully scaled to make up the difference between what a family could afford on its own for housing and the cost of safe and sanitary housing in that geographic area. This plan would give the poor the freedom and responsibility to make

their own choices about housing-and it would eventually get the Federal Government out of the housing business.

Not surprisingly, our recent housing study indicates what others have been saying: of the policy alternatives available, the most promising way to achieve decent housing for all of our families at an acceptable cost appears to be direct cash assistance.

Our best information to date indicates that direct cash assistance will in the long run be the most equitable, least expensive approach to achieving our goal of a decent home for all Americans-a goal I am committed to meeting. It appears to be a policy that will work-not a policy where success will always be a mirage. However, it may develop that the advantages we now see for direct cash assistance will be outweighed by other factors not presently foreseen or that such advantages may be obtainable in alternative ways which offer additional advantages. In that event, I would, of course, reexamine the situation in partnership with the Congress before moving ahead. But right now, in my judgment, our principal efforts should be directed toward determining whether a policy of direct cash assistance-with first priority for the elderly poor-can be put into practical operation.

As we proceed with new policies for aiding lower income families, we must also move with caution. Too often in the past new Federal programs have been

launched on a sea of taxpayers' dollars with the best intentions but with too little information about how they would work in practice. The results have been less than what was promised and have not been consistent with the Government's obligation to spend the taxpayers' money as effectively as possible.

One particular problem is that past efforts in one area of assistance have tended to ignore programs in other areas, resulting in an inequitable hodge-podge activity which satisfies no one. In this regard, the relationship between housing programs and welfare payments is particularly critical. We must carefully consider the ways in which our housing programs will relate to other programs which also assist low-income persons.

Some field work has already begun with respect to direct cash assistance in the area of housing for those with low incomes. In 1970 the Congress authorized housing allowance experiments involving over 18,000 families and costing over $150 million. We expect preliminary data to emerge from these tests in the coming months and we intend to use these data as we evaluate the possibility of further efforts.

This work should help us answer some important and difficult questions.

What, for example, is the appropriate proportion of income that lower income families should pay for housing? Should this level be higher or lower for different kinds of families-for young families with children, for example, or for the elderly, or for other groups? Should families receiving Federal aid be required to spend any particular amount on housing? If they are, and the requirement is high, what kind of inflationary pressures, if any, would that produce in tight housing markets and what steps could be taken to ease those pressures? In the important case where poor families already own their own housing, how should that fact be weighed in measuring their income level? How should the program be applied in the case of younger families who have parents living with them?

All these questions are critical-and they deserve close examination.

In addition, I am also asking the Congress for authority to take two other steps to help us test the cash assistance approach.

First, we need to expand our experimental programs. to test additional techniques for administration.

Second, we need to develop and put into effect the appropriate mechanisms for measuring the cost of safe and sanitary housing in various parts of the country. Sound, reliable cost information of this kind would be of vital importance to a fully operational program.

If these steps can be taken in the near future, then I believe we will have the basic information needed to make a final decision concerning this approach late in 1974 or early in 1975.

A Continuing Need for Limited
Construction Programs

During the period in which a new approach is being developed, there will be a continuing need to provide housing for some low-income families. We must recognize that in some areas of the country there will simply not be a sufficient supply of housing for the foreseeable future. I therefore propose that the Federal Government continue to assist in providing a limited amount of construction for low-income housing-though I would expect to use this approach sparingly.

To eliminate the many tangled problems which attend the delivery of subsidies under current construction programs, I am recommending a new approach to construction assistance by the Federal Government. Under this approach, the developer would make newly constructed units available at special rents for low-income families and the Government in return would pay the

developer the difference between such rents and fair market rents.

During the remainder of fiscal year 1974, the Department of Housing and Urban Development will continue to process subsidy applications for units which had moved most of the way through the application process by January 5 of this year. In addition, the Department will process applications in cases where bona fide commitments have been made.

I am advised by the Secretary of Housing and Urban Development that one of the existing construction programs-the Section 23 program under which new and existing housing is leased for low-income families-can be administered in a way which carries out some of the principles of direct cash assistance. If administered in this way, this program could also provide valuable information for us to use in developing this new approach.

Accordingly, I am lifting the suspension of January 5

I therefore propose that the Federal Government continue to assist in providing a limited amount of construction for low-income housing-though I would expect to use this approach sparingly... authorization has now been given to process applications for an additional 200,000 units, 150,000 units of which would be new construction.

with respect to these Section 23 programs. I am also directing the Secretary of Housing and Urban Development to take whatever administrative steps are available to him to eliminate any abuses from such programs and to bring them into line as closely as possible with the direct cash assistance approach.

Altogether, in order to meet bona fide commitments requiring action during this fiscal year and to carry out the Section 23 program, authorization has now been given to process applications for an additional 200,000 units, 150,000 units of which would be new construction.

Improving The Operation of

Present Public Housing

There was a time when the only continuing Federal expense connected with public housing after it was built was paying the debts incurred in building it. Other expenses were met from rental income.

As time went on, however, laws were passed making the Federal Government liable for operating deficits. In recent years, as the operating costs of public housing projects has increased and as the income level and rent payments of their occupants have decreased, the cost of such projects for the Federal Government has gone up at an alarming rate. The Federal bill for operating subsidies has grown more than eight fold since 1969-from $33

million annually to $280 million annually-and an addi tional $1 billion has been obligated for capital improve

ments.

Moreover, as efforts have been made in recent years to prevent tenants from paying too much of their incomes for housing, some housing managements have been persuaded that some tenants should pay nothing at all. The Federal Government then picks up a good part of tab, adding considerably to the costs of maintaining these projects.

This growing financial burden for the Federal Government is only one of many problems relating to public housing. Because the local housing authority is responsible for the management of public housing projects while the Federal Government is responsible for project deficits. including those due to poor management, the local authority has little incentive to improve management standards.

There are also indications that even with improved management and a more realistic approach to rents. current Federal subsidies may need to be adjusted to provide for continued operation and maintenance of these projects.

In view of these many problems, I have asked the Secretary of Housing and Urban Development to develop a set of recommendations addressing each of these prob