to do so. I cannot imagine that we would have other than that goal, either by States or by the Federal Government. It seems to me it is entirely human and right that there should be some relief, and I would be hopeful that one day all States will recognize this and give some property tax relief to the older person of very low income, thus permitting him to remain in his home.

Senator Moss. You pointed out the fact that these rehabilitation loans are available for homes for the elderly, but since such a large proportion of the elderly are low income I wonder how useful that could be to these people who have such a low income anyway. Of course there is a grant part to it but the loan part is the one I worry about. Mrs. MCGUIRE. Are you saying how useful would this be in other than the now restricted areas in which it is used?

Senator Moss. Yes. I am wondering about the very low-income elderly people and their access to rehabilitation. I wonder what availability there really is in this to these people who have such a limited income.

Mr. MCGUIRE. I think the statistics have shown that in the cases. where incomes are low, grants are made and loans are made in combination with them, and the elderly are taking advantage of them. I think we also should consider however, that when funds are provided for the rehabilitation of homes we must determine the economic feasibility of rehabilitation. The structural condition of many of these homes would indicate they should be torn down. Also the effect of the general neighborhood condition might determine whether there should be an investment in a home in a neighborhood so blighted.

Related to home rehabilitation is the kind of existing local controls and local interest in upgrading the total neighborhood or local responsibility for preventing a further slide into blight. All of these considerations relate to the use of either the grant or loan fund as well as the financial ability to repay the loan. These considerations in many instances, will limit the feasibility of investment in the homes for the older person.

Senator Moss. So there would be areas where it would not be desirable to make the loan even if the person applied for one. There is also the limitation, of course, on the income of the person precedent to his application for a loan because, presumably he must be able to make the repayment.

Mrs. MCGUIRE. Yes, that is right.

Senator Moss. Well, we appreciate your very fine paper and your testimony, Mrs. McGuire. We are going to hear further from the General Counsel tomorrow. We appreciate the good work you are doing.

Mrs. MCGUIRE. Thank you.

Senator Moss. We now have the Honorable Richard Coffee who is a State senator from Mercer County of New Jersey, and he will be accompanied by Mr. John Shannon, assistant director of the Ad visory Committee on Intergovernmental Relations.

Would those gentlemen come forward and sit at the table, please. Mr. Shannon does not seem to be here so we will be pleased to proceed with you, Senator Coffee. Glad to have you here before the committee.

STATEMENTS OF HON. RICHARD COFFEE, STATE SENATOR FROM MERCER COUNTY, N.J., AND JOHN SHANNON, ASSISTANT DIRECTOR, ADVISORY COMMISSION ON INTERGOVERNMENTAL RELATIONS

Mr. COFFEE. Thank you very much, Senator Moss.

Distinguished members of the Subcommittee on Housing for the Elderly, I am Richard J. Coffee, a member of the New Jersey Senate from Mercer County. To locate that for you, Mercer County is in the center of the State north and south. My county constituency includes the capital city of Trenton and also the growing area of Princeton which is the second largest metropolitan area in my county.

Senator Moss. I should say, Senator, that Senator Williams who is the chairman of the full Committee on Aging had hoped to be here to welcome you. He is conducting an executive session of another subcommittee and working on the coal mine safety bill and could not be here today. In a statement he submitted for the record he pays tribute to your leadership in the State legislature, and this is one reason we wanted to have you present before this subcommittee. I welcome you myself and pass that on from Senator Williams.

Mr. COFFEE. I would like to say that we in New Jersey are indeed gratified and proud that your distinguished chairman and our distinguished fellow New Jerseyite, Harrison A. Williams, has devoted himself to all the people and that he has served and is serving as chairman of the Senate's Special Committee on Aging.

I am, of course, going to limit my comments to the needs of older New Jerseyites, although I am sure that their needs do not differ materially from those of older people in other States.

It is well established that New Jersey's older population is predominately a homeowning group. According to a Rutgers University study based on the 1960 census, except in the oldest years the proportion of owner-occupied residences is just short of two-thirds, and it drops gradually to 59 percent in the 85 and older bracket. While these statistics are almost 10 years old, I see no reason to doubt that they still apply.

The fact that rapidly rising property tax rates in New Jersey have placed an almost unbearable burden on homeowners has been especially true in the case of those eking out an existence on social security benefits or some fixed and limited income. As in most of our populous States, the base of local government financing in New Jersey is the real property tax. Accordingly, as the services of government increase, so does the burden on the property owner. This hits hardest at our older residents because of their lack of sufficient income, and many of them are facing financial problems which have reached crisis proportions.

I am going to suggest ways in which the Federal Government can help, but before I do I want to point out that we in State government are trying to do all that we can.

STATE TAX RELIEF

For example, we have at the present time a constitutional provision which gives a homeowner 65 or older with an income of $5,000 or less an annual property tax deduction of $80. This is clearly no longer adequate and generates obvious inequities. Furthermore, the burden of these deductions is borne by the taxing district-in New Jersey, the municipality.

I have introduced a constitutional amendment which would remove both the $80 deduction limitation and the $5,000 income ceiling, would extend eligibility to single females at age 62, would include renters of nonsubsidized property, and would make the State responsible for the entire cost of the program.

It has been estimated that the cost of this program would be $35 million or more in the first year of its operation-I have to relate this figure to our total State budget. Last year we reached a billion dollar budget for the first time. To support this tax relief from present State revenues does not appear to be economically feasible, yet the fact remains that many of our older residents desperately need the additional help while most of our municipalities are in no position. to provide it.

I am sure that this distinguished committee appreciated the dilemma, and I would like to suggest that this is a most inviting area for Federal and State cooperation.

I should point out that mine is not the only program which is before our State legislature but all of them are aimed at the same target, referring to other legislation which has been introduced which has greater property tax relief for our senior citizens.

Unlike many States of the Union, New Jersey is somewhat unique in its physical makeup. The community makeup runs the gamut from rural southern Jersey with its agrarian-based economy to the highly urbanized and industrial-based economy in the northern section of our State. Each area presents similar and quite distinct problems for the elderly. The property tax structure varies in these areas considerably.

RISING TAXES, DECLINING TAX BASES

It is readily accepted that the severest situation facing the elderly as a result of the increasing taxes on real property exists in our urban areas. Cities such as Trenton, Newark, and Camden are faced with declining tax bases and ever increasing demands for governmental services with the result that these large cities have reached the point where their tax rates are literally driving homeowners from the city. In this mad rush, property values have plummeted and homes are selling anywhere from $5,000 to $10,000 below what their realistic market value should be.

Caught in this dilemma, and most seriously threatened, are the elderly. Living as they are on fixed incomes with a sizable portion of their resources invested in their homes, they are being drained on one hand by very high tax rates and soaring maintenance costs while, on the other hand, they cannot afford to sell because of the financial loss they would incur. Too, the market for city residences has dried up

significantly. Unless massive State and Federal aid is aimed at these cities to drastically reduce the tax burden or to give adequate property tax relief to these senior citizens, they will continue in the grip of a financial bind from which there is no escape.

While it is true that tax rates in rural areas are generally much lower than in the cities, New Jersey cannot take much consolation in this fact. My State is, as you know, the most urbanized State in the Union, and the rural areas are steadily shrinking. It will not be too long before the process of growth will bring to the present nonurban sector many of the problems which are now being faced by the cities and by the suburbs, particularly in the field of education.

Since education is and always has been a national commitment of the highest priority, I am of the opinion that this is an area which cries out for increased Federal aid. Former Secretary Cohen touched on this point when he testified prior to my appearance.

I know that in New Jersey our communities are staggering under the burden of rapidly rising school costs, that State aid is inadequate, with no prospect that it can be significantly increased in the near future, and that too many of our children are being educated in hopelessly outmoded facilities.

VITAL ROLE OF SCHOOL AID

I just recently served on a commission in my home State which is called the Public Aid to Public School Districts Commission. We have completed our work and have made a recommendation that New Jersey almost immediately raise an additional $200 million to place in a new formula as State aid to public school districts. New Jersey happens to be a little bit low in our opinion in its State aid to public schools. I am referring now to elementary and secondary level education $200 million-let me compare that amount and show you what it means to a State like New Jersey to raise this kind of money. If we enacted a State income tax, as an example, at the same rates that New York State presently has, we would raise in the initial first year approximately $450 million. The recommendation of this commission was that immediately $200 million be given to the local school districts for State aid for schools. Of course if we talk about $200 million or any amount near that, we are talking about perhaps a new tax in New Jersey which would have to be a State income tax.

Increased Federal aid to education not only would better serve our national commitment, but in a more practical way could help to materially reduce the property tax which hangs like an albatross around the neck of each impoverished elderly homeowner.

Turning now from the area of tax relief as a means of saving homeownership for the elderly, there is another emergent problem to which I would like to address myself. There is and probably always will be the elderly who, no matter what tax deduction programs exist, will be unable to maintain homeownership due to their very limited financial status. While I believe the majority of governmental leaders would like to be in the position to guarantee homeownership for the elderly, we know that this is not economically possible. Therefore, an alternative must be provided to insure that this group of senior citizens

will be afforded decent, safe, and pleasant housing facilities. In my estimation, any new federally financed housing programs most certainly must include an adequate amount of housing for the elderly. These housing units should be architecturally designed with the senior citizen in mind and include the various safety devices and newly developed conveniences that will ease the burdens of old age.

OBSOLETE, LARGE HOMES

Another area of housing which has proved troublesome and is especially present in our urban areas are the large homes owned by the elderly which because of their present life style are obsolete. Quite often these large older homes house one or two people whereas they were designed to accommodate a younger and larger family. Here again the senior citizen is trapped. As a general rule, these houses are mortgage free and represent a major lifetime investment for the elderly but, because of their size, cannot be sold for their true worth. I suggest that through a governmentally financed program these houses could be bought from the elderly and renovated to serve as homes for the poverty stricken larger families which are predominant in our urban areas. In turn, the senior citizen could be given, in lieu of the purchase price of the home, a newer, smaller and safer residence which would be less costly to maintain while at the same time safeguarding his sense of security and human worth.

A program such as this, I believe, could beneficially serve the interest of all parties concerned. The senior citizen would still be a homeowner and could live in dignity, as could the lower income family, and the cities' problem of decaying houses which blight our urban neighborhoods could be alleviated.

There are and will continue to be a great variety of solutions posed to this critical problem of housing for the elderly. My own State has just in this past year proposed a $12 million bond issue aimed at providing housing for the poverty stricken. This is but a drop in the proverbial bucket, for a recent study by the New Jersey Department of Community Affairs has projected that there are 600,000 housing units which are substandard in our State which is 30 percent of all New Jersey housing. Out of this it is estimated that 90,000 are inhabited by the elderly.

These, gentlemen, are very brief comments which understandably merely scratch the surface of the problems existing in the field of housing for the elderly. I sincerely trust that I have been of some assistance today and have added in some small part to the body of knowledge that is being gathered by this subcommittee, and out of these hearings I would hope will come some meaningful relief for our overburdened senior citizens.

I thank you for the opportunity of testifying before your esteemed committee today.

Senator Moss. Thank you, Senator Coffee. You have indeed contributed to our information and knowledge on this subject. The leadership that you have demonstrated in the New Jersey Senate in this field of the elderly is one that makes us particularly want to share your views.