STATEMENT OF MARIE MCGUIRE, SPECIAL ASSISTANT FOR PROBLEMS OF THE ELDERLY, HOUSING AND URBAN DEVELOPMENT

Mrs. MCGUIRE. Thank you very much, Senator.

I am delighted to be here, because, as we have indicated before, the work of this committee in exploring into the vital issues affecting older people, is extremely helpful to those administering or trying to improve programs for the elderly.

We, like Dean Cohen, found the task force report interesting, helpful, and very revealing in terms of the economics of aging which this committee is pursuing during the year.

I have before me a brief statement which I would like to read in part and comment on, and a longer statement giving the details of the HUD programs which are responsive to your particular interest now, primarily homeownership, the rehabilitation of homes, and alternate resources in rental programs where they are more appropriate.

Senator Moss. Thank you. The longer statement will be placed in the record in full and we are happy to have you highlight portions of your statement at this time.

(See appendix 1, p. 811.)

Mrs. MCGUIRE. Thank you.

I shall go back a little and reflect for a moment on the fact that our elderly have been in the massive population movements of this century and they have taken part in the great achievements which have made it possible for many to enjoy the high standard of living all of us have today. But as you know and as we know, many older people have been left behind and are not sharing fully in this advance.

Many continue to live in their old homes, which often are in desperate need of repair and which lack some or all modern conveniences. Many of these homes are too large and expensive to maintain on small retirement incomes. Increasing taxes pose a problem even though 17 States have laws of various kinds to help relieve this problem.

At the same time, our senior citizens have gained a vast increase in leisure time-just when their incomes, on the average, are reduced by half. For many, this occurs when their physical abilities have waned, their mobility decreased, and family size diminished. How to use this great increase of free time constructively may be the most serious problem many older people face, even ranking, for some I think, with problems of low income.

HOMEOWNERSHIP VERSUS RENTAL

A major decision which faces most elderly families and persons is the kind of housing they want for later years. Should they remain in their own homes, or should they move into an apartment? The benefits of homeownership vary. Under certain circumstances, living in one's own home can be achieved at a lower total cost than in a rented house or apartment. In some States, tax exemption or abatement offer real advantages to the elderly homeowner. Further, an owned home represents an asset which may be used as collateral for loans or possibly in the future as a source of an annuity.

Many owners, however, particularly those living alone-and I

think this is more often single women-often remain owners simply because they cannot afford more suitable alternatives. While most older people own their homes, many mortgage free, many may be unable to afford the financial burden associated with upkeep and operation. I believe the statistics Mr. Brotman distributed today on homes owned by all the people would substantiate this conclusion. We recognize also that the physical arrangements of their homes can either facilitate or limit social contacts with family and friends and the activities that older people can enjoy.

The sort of housing senior citizens choose is reflected in the HUD study which suggests that the high rate of homeownership among the elderly, 69 percent as compared with 62 percent for the population as a whole, is due mainly to adjustments made earlier in life.

In brief, we want to help older people to remain independent as long as feasible, which is their own primary objective. At the same time, we hope to expand their effective range of housing choices and at rates they reasonably can afford.

We recognize that what may be suitable for one person may have little merit or appeal for another. Certainly, we do not want to tell people what kind of housing they should live in. This is a highly individualistic decision. I think we should be in a position to offer suggestions and choices but not make the final decision for the older person.

Now for just a short while I should like to discuss the various programs in HUD that will appeal to the older person desiring to be a homeowner. The FHA which has the primary responsibility in HUD for homeownership programs and it administers several, the largest and most important of which is the section 203 (b) program. FHA's policies permit the elderly to qualify as mortgagors if their incomes appear sufficient to cover housing expenses and other obligations. This is true even for those who expect to retire shortly, since FHA's primary concern is that their incomes be reasonably related to fixed obligations, including housing expenses, especially during the early part of the mortgage period.

The elderly benefit from a special provision, however, which permits a mortgagor 62 and over, who is the owner-occupant, to borrow or otherwise acquire the required cash investment and settlement costs. This applies only to persons 65 or over. This applies among others to section 203(b), the basic and largest FHA home mortgage program, the cooperative and condominium programs, and the new section 235 subsidized interest rate program for homeownership.

While these various programs are available to the elderly, only a very small percentage of FHA home mortgages involve principal mortgagors 60 or over at the time the insurance is obtained.

Cumulative figures-that is, by 60 or over-of both the new and existing units insured over the 9-year period 1960-68 show that only 1.1 percent of the mortgagors were 60 or over, or about 37,000 out of 3,500,000.

However, with regard to the new section 235 program we see a different trend. About 3.7 percent of the approximate 1,600 cases insured during the first quarter of 1969, which was the beginning of the administration of this program, involved household heads of 60 or over. This is a substantially higher proportion than in the other

programs and suggests that 235 may have considerably more appeal to the elderly than other FHA home mortgage programs. Undoubtedly, this is because of the added assistance to the older person desiring to be a homeowner through the interest subsidy that exists in the 235 program.

Traditionally public housing has been a rental program for lowincome people, including the elderly, and is the largest program in the Department for the elderly. Today we are exploring homeownership possibilities as well as rental oportunities in public housing. Whether or not they will be of interest to the elderly to any great extent, we don't yet know. The chances are, because of the limited income of people living in public housing, the eventual ownership of public housing units by tenants might be limited, particularly for the elderly.

This committee also is interested in those homeowners who want to keep their homes but who have a problem paying for upkeep and repair.

HOME REHABILITATION

Two home rehabilitation programs have considerable potential as aids to the elderly. These are the section 312 loan and section 115 grant programs. Originally available only in urban renewal and concentrated code enforcement areas, the 1968 act permits their use, under certain conditions, in other areas with a substantial number of structures requiring rehabilitation.

These loans are available for up to $10,000 per unit, or not over $14,500 in high-cost areas, for 20-year terms at 3 percent. Families with incomes of $3,000 or less-this would take in the poverty section Mr. Cohen spoke of-are eligible for grants of up to $3,000, or the cost of rehabilitation, whichever is less. Those with incomes of over $3,000 also are eligible if their housing expenses exceed 25 percent of their incomes. It is possible to obtain both a loan and grant and, in some cases, the 3-percent rehabilitation loan also may be used to refinance the family's existing mortgage in conjunction with the plan. The elderly represent a substantial portion of the recipients of these grants and loans. You will note as of December 31, 1968, a little over 60 percent of the grants and over 20 percent of the loans had been made to owner-occupants 62 or over.

As of this date, some 8,600 grants had been made for a total of $13.9 million. Of these, 5,500 for $8.8 million were made to the elderly, averaging $1,600 per grant. A total of about 5,000 loans for $26.1 million to owner-occupants had been approved as of December 1968. About 1.100 of these loans for a total of $4.4 million were made to the elderly, with the average loan a little under $4,000.

These data indicate that the programs are particularly useful in helping many elderly persons to rehabilitate their homes so that they, too, can live in standard housing.

The 1968 Housing Act included two provisions which expanded HUD's ability to help those subject to relocation. One of these permits HUD to make "additional" payments over 2-year periods of up to $500 per year to assist displaced elderly single persons and displaced families of all ages to obtain suitable replacement housing, either rental or ownership.

In addition to that, it was found that while the appraised value of the house in a relocation area was paid, oftentimes this was not sufficient to provide an adequate and modest replacement house. Therefore, the Congress in its wisdom made it possible to add to the appraised valuation of the home up to $5,000 in order that the house to which they would move would be adequate and they would be able to pay for it. These replacement payments can make the difference for many who want to buy again rather than to become renters.

The home equity plan has been raised by your task force. Studies have been made by the President's Council on Aging and HUD of this problem. You will hear tomorrow from Prof. Yung-Ping Chen of the University of Los Angeles about a current study of the reaction of the older person to the use of home equity to supplement current income. HUD is funding this study.

275,000 RENTAL UNITS

Now with respect to rental programs for the elderly, I think you will be interested to know that combining all the major programs earmarked as specifically for the elderly, the Department today can report over 275,000 dwelling units of new housing or rehabilitated housing designed specifically for the elderly. This does not include, of course, the great number of older people who live in all HUD programs, not identified as housing for the elderly.

In addition to housing, the FHA nursing home program had made cumulative commitments totaling over 63,000 beds.

As you know, our new section 236 mortgage interest assistance rental program can be used for housing the elderly and the 202 direct loan program is being phased into it. I am sure section 236, which permits interest rates as low as 1 percent, will play a very important role in facilitating the development of housing for our lower income senior citizens, as our other programs have in the past.

In summary then, Senator, for the foreseeable future, I think that the majority of older people will continue to be homeowners. However, multifamily rental housing may very well increase in popularity over time for a variety of reasons, as discussed in my supplementary

statement.

At the present time, senior citizens housing, both conventional and Government-aided, places major emphasis on housing for independent living for the well elderly. Nursing homes are available for those who need skilled care, but little emphasis is placed by the market as a whole on housing for those who need only limited personal care. The need for personal care housing is greatest among the low-income elderly. This subject is now under study by the Department.

Mr. Chairman, my supplementary statement includes further comments with regard to the items discussed here very briefly.

Thank you again for the opportunity to be here.

Senator Moss. Thank you very much, Mrs. McGuire, for a very fine statement. We are pleased to have the more detailed statement also in the record for us to carefully study. As you pointed out, we are going to hear tomorrow from Dr. Yung-Ping Chen on this matter of annuities.

Do you have an opinion as to whether there is a reluctance of the old people to give up their equity in return for an annuity? Is there a built-in resistance to this?

RELUCTANCE TO ACCEPT LIENS

Mrs. MCGUIRE. My own personal opinion, I am not stating the Department position, would be that there has been more reluctance on the part of the general public to accept what is considered a lien on the homes of older people than on the part of the older person himself.

I cannot imagine that an older person who is having a hard time living on a very limited society security income would be reluctant to have an increase in his standard of living, a decrease in worry and concern over tomorrows plus retention of his home. However, I also think that many older people, particularly those who are poor, feel that the only asset they have to leave to their children, the only estate, is their house, no matter how poor, or small or inadequate. There may well be a sentimental reaction to this in the mind of the older person hoping to leave something tangible. Thus we can expect reaction both ways. I would suspect that we will find that many older people and the children of the older people who have home equities, will be very happy indeed, to lighten the burden on the older person during his lifetime. I think this would be particularly applicable to those in the elderly group under the $3,000 income level.

Senator Moss. What is your reaction to the nonprofit corporation proposal that Dean Cohen gave?

Mrs. MCGUIRE. It seems to me it bears some relationship to the publicprivate partnership plan now in the Department. I was wondering whether it is necessary to have such an institute exclusively for older people and their housing needs. However, it is an interesting proposal. Certainly some recognition of the fact, as you stated so well, that older people need help and assistance is indicated. They simply cannot always handle the problems of financing, or overcome their fright that the little money they have in the house may be taken away fraudulently.

I presume the corporation would have the responsibility of taking the old house, selling it, and helping the older person reinvest in a more appropriate residence. I assume what Mr. Cohen also had in mind was that funds now going into housing programs of great variety somehow would be related to such a public-private corporation more sensitive to the needs of the older person in the housing field.

I do not know what relationship this would bear, however, to the present sponsors of housing for older people, many of whom are nonprofit sponsors who have traditionally been interested in older people and are helping many of them to achieve the right housing solution. Senator Moss. In your opinion how much farther can the States go or should the States go in reducing or relieving property tax on elderly people to retain their own homes?

ASSISTING HOMEOWNERS

Mrs. MCGUIRE. Well, it seems to me that we must first decide that older people who want to stay in their own homes should be assisted