regarding the bill you are sponsoring which would authorize grants for the conduct of Older American home-repair projects (HR 16570). There is no doubt that such a program as you propose is desparately needed and could provide adequate housing for the elderly without entailing the tremendous expense and long time lag connected with new construction.

To give you in more detail the thinking of this Office regarding the proposal, I am enclosing a copy of an issue paper developed by this Office in conjunction with the All-University Gerontology Center of Syracuse University concerning the need for home repair loans to older persons. This Office is proposing State level legislation which would provide loans rather than grants for the purpose of home repair projects for the elderly. I believe that some of the data contained in the paper might be useful to you as you promote HR 16570.

If you have any questions regarding material in the paper please let me know and we will be glade to respond or direct you to the staff at Syracuse University who performed most of the research for this paper.

Sincerely,

Enclosure.

WARREN G. BILLINGS,
Assistant Deputy Director.

NEW YORK STATE LEGISLATIVE PROPOSAL ON AGING PROJECT

ISSUE: NEW YORK STATE SHOULD CREATE A MECHANISM TO PROVIDE FOR HOME MAINTENANCE AND REPAIR LOANS TO ELDERLY HOMEOWNERS

Background

There is a severe housing shortage in New York State with the elderly among the most severly affected. Presently, adverse economic conditions are compounding the housing shortage. However, even assuming that the economy will eventually normalize, there is still no expectation that the housing shortage will be abated in the foreseeable future. This is because most solutions to the housing shortage must be long-term, due to the nature of the problem: specifically, the planning, funding, and actual construction of any significant new housing is a costly and time consuming operation. Experience has shown that the "solution" of the past-construction of large housing projects-is neither the most desirable nor economical. Compounding the problem, much of the existing housing in New York State is well beyond its prime; present construction is frequently geared toward replacement of unserviceable or demolished housing, rather than toward the provision of additional housing.1 The housing shortage condition is further exacerbated by the large postwar "baby boom" population now entering the housing market. A consequence of this influx will be a continued imbalance in the demand for housing relative to the supply of housing.

A reliable indicator of the housing shortage situation is the rate of housing starts per four month period. In the four month period from March 1974 to June 1974, the rate of private housing starts was 4 percent below the average from the preceding four month period. More indicatively, these March to June figures fall 30 percent below the corresponding period in 1973. In 1972, approximately 2,378,500 private and public housing units were started across the country; in 1973, there were approximately 2,057,500, or 321,000 less, housing starts. The above figures represent both public and private housing unit starts, and reflect a significant decline in new housing.

In publicly owned housing, the decline is most severe. This particularly affects older persons since, although they comprise only about 10 percent of the general population, they represent 40 percent of those eligible for public housing.' Nationally, there were approximately 35.4 thousand publicly owned housing units starts in 1970; 32.3 thousand in 1971; 21.9 thousand in 1972; and 12.2 thousand in 1973. In the region encompassing New York State, public housing unit starts have decreased from 7,200 in 1971, to 1,100 in 1973. Furthermore, the period of time from 1 Center for Urban Social Science Research, Rutgers University, Housing Costs and Housing Restraints (New Brunswick, New Jersey, Rutgers University, 1970), p. 205.

U.S. Department of Commerce/Social and Economic Statistics Administration/Bureau of the Census Construction Reports: Housing Starts (Washington, D.C.: U.S. Government Printing Office, 1974), Series C20-74-6, p. 2.

3 Ibid., p. 3.

Special Committee on Aging, United States Senate Housing for the Elderly-A Status Report (Washington, D.C.: U.S. Government Printing Office, 1973), p. 8.

U.S. Department of Commerce/Social and Economic Statistics Administration/Bureau of the Census. p. 6.

start to completion of new housing has also become very long; in 1973, most structures with 5 or more housing units took more than two years to complete.* These figures in part reflect the effects of the Federal moratorium on housing. In January of 1973, all new Federal commitments for subsidized housing programs were halted. This freeze affected three housing programs for the elderly: the Interest-Subsidy program for rental housing, the low-rent Public Housing program, and the Rent Supplement program. However, the figures also reflect a generally declining new housing trend, largely the result of economic factors, including inflation and high mortgage rates.

An examination of waiting lists for housing offers another reflection of the shortage condition. Waiting lists for the elderly for public housing, in New York City alone, number 32,000. This figure does not reflect total need, as many authorities cease processing applications beyond a certain point, and because many elderly families see no point in applying for housing when lists become excessively long.

There is no panacea for the housing shortage; no single course of action will provide solutions to the diverse housing problems of individual families or of groups. This is because of the large variety of housing requirements of the state's residents. For example, a young and growing family has very different space and location needs than an elderly couple. A young family with children needs to be proximate to schools and playgrounds, and to other young families. The young family needs to have several rooms in its house or apartment. In contrast, an elderly couple may prefer a calm and quiet existence: while they may need to be close to a bus line and to shopping areas, they obviously do not need to be close to schools. Furthermore, an elderly couple may need less space than a young family. It is important that individual preferences in location and lifestyle, e.g., urban, suburban, or rural, be accommodated to assure dignity and quality of life. Therefore, the housing problem must be addressed at the social group or individual family level, in order to satisfy the diverse housing requirements of the state's residents.

Due to the severity of the housinig shortage, a great deal of economic "substitution" has occurred. That is, many families and individuals have chosen housing that is not really suited to their needs, because more suitable housing simply is not available. When housing is in short supply, persons must be flexible in their housing choices; often, they must compromise greatly in order to find housing. Consequently, many persons and families with diverse needs are in competition for the same housing, even though it may not be adequate for all of them.

It is important to note that, when housing is in short supply, measures taken to ameliorate the particular housing problems of one social group generally benefit all those in need of housing. This is because the provisions of housing for one group removes that group from the market, thereby improving the overall supply/ demand ratio. In other words, fewer persons are in competition for remaining housing. It follows, therefore, that it generally is in the best interest of all of the residents of the state, for the state to assist various groups and individuals in meeting their housing needs.

The housing problems affecting New York State's elderly homeowners are especially acute. Approximately 44 percent of New York State's elderly homeowners have annual incomes of less than $4,000. A full 29 percent of the state's elderly homeowners have annual incomes under $3,000. On such limited incomes, it is extremely difficult for elderly homeowners to maintain their homes. Elderly persons with physical limitations are often unable to perform even the simplest of household repairs. (Of course, this problem is especially severe for elderly widowed homeowners.) Being unable to perform even necessary routine maintenance or repair work themselves, many older persons must pay someone else to do these jobs. This work is prohibitively expensive, especially in an inflationary economy.

However, the only available alternative to pay the high cost of home maintenance and repair is for the elderly homeowner to watch his home gradually deteriorate around him, until it eventually becomes unlivable and he must move. This, unfortunately, is often the case. Elderly poor homeowners are often unable to afford needed home repairs, and are unable to obtain conventional home repair or improvement loans due to their advanced age. Consequently, they must sell their homes-often at great loss-and relocate. This has two detrimental effects.

6 Ibid. p. 16.

Special Committee on Aging, United States Senate, p. 1.

$ New York State Office for the Aging, A Study of the Needs and Status of the Aging in The State of New York, Sept. 1972.

First, it aggravates the housing shortage by introducing a new element into the "demand" aggregate for housing. These persons have difficulty in finding housing at all, and, at the same time, make it more difficult for others to find housing. Furthermore, it is likely that whatever housing they will be able to find will not be as adequate for their needs as the homes they were forced to leave. Second, is the trauma suffered as a result of having to leave a home of many years and memories. Relocation is a difficult and stressful experience for any family. But, for elderly persons, it is especially distressing. To these persons, home ownership means physical and financial security, and self-esteem; it contributes to their physical and mental well-being. Home ownership affords elderly persons security and sanctuary from the rapidly changing society. Relocating older people to unfamiliar areas is likely to create insecurity, and otherwise exact a high psychic cost."

10

In those instances where elderly homeowners are able to remain in their homes, other problems often exist. Where a house must, of financial necessity, be allowed to deteriorate, this may lead to hazards and inconvenience in living arrangements. Furthermore, housing deterioration contributes to general neighborhood decline," which has the negative ramification of creating ill-will between neighbors. Also, it should be noted that elderly persons who remain in their own homes could often be better accommodated if modifications to the homes, to compensate for various disabilities, were made. This is especially true in New York State, where most of the homes owned by elderly residents are older homes.1 From the above considerations, it is obvious that measures are needed to assist elderly homeowners to remain in their homes.

There are a few home repair programs in operation that help low-income elderly homeowners. However, New York state has no state programs that aid these homeowners, even though the existing Urban Development Corporation (UDC) includes a weak mandate for the corporation to provide such aid. There are several Federal programs designed to aid low-income homeowners, but most of these programs are not currently funded, and those that are, are of limited scope and effectiveness.

While it is possible for low-income elderly homeowners to apply for loans on the conventional market, numerous factors militate against this. For example, assuming that the family head feels he can afford to obtain a loan, he must apply at a bank. Banks require liens as security, discouraging many elderly persons from making loan applications. For many, a mortgage-free home has been a life-long dream. Adding a lien raises old fears of repossession. Furthermore, banks and savings and loan societies do not encourage home improvement loans to poor and elderly people, since they are not considered to be good risks.

There are several directions the state may take in helping to solve the housing problems of the low-income elderly homeowner, and, by extension, of all the State's residents.

The state could, for instance, establish a program of loans with state subsidy of payments. However, under such a program, the poorest of the low-income elderly homeowners--those persons in the greatest need of assistance in repairing and maintaining their homes-would not be able to afford loans unless the program were administered on a sliding scale basis and the State paid the entire cost. Under such circumstances, many older persons, recognizing the program's obvious "welfare" connotations, would not participate. There are, nevertheless, certain positive factors in a subsidized loan program. Banks should not hesitate to participate, as the loan would be guaranteed by the State and the principal would be returned according to a set schedule. Furthermore, cost to the State would be minimal, assuming that the subsidy was limited. Of course, limiting the subsidy would considerably limit the program's impact. Although such a program would be out of financial reach of the neediest low-income elderly homeowners, it would make an excellent follow-up program to loans with deferred repayment (see "suggested solution," this paper). A program of loans with State subsidies would reach moderate income elderly homeowners whose incomes were too high to qualify them for deferred repayment loans, but too low to afford conventional loans.

Paul Niebanck, "Knowledge Gained From Studies of Relocation." in Frances Carp, ed., Patterns of Liring and Housing of Middle-Aged and Older People (Washington, D.C.: U.S. Government Printing Office, 1965), pp. 117-25.

10 Subcommittee on Housing for the Elderly, Special Committee on Aging. U.S. Senate, Housing for the Elderly (Washington, D.C.: U.S. Government Printing Office, 1962), p. 38. 11 Ibid.

12 Supra, at note 8.

Another alternative would be for the State to create an arm within the Division of Housing and Community Renewal, or a quasi-private corporation, to marshal available Federal funds. Although there would be little cost to the state, there would also be little usefulness of such a program, as Federal housing funds have been severely curtailed. Furthermore, Federal aid has consistently been difficult for the low-income elderly homeowner to obtain, since the emphasis of Federal programs has generally been an aid for younger families. It should also be noted that Federal programs are limited to people living in specified urban renewal areas.

Another possibility would be the development of neighborhood rehabilitation projects. Such a program would have one major advantage-it would aid the entire community, providing training and employment, while helping the lowincome elderly homeowner. The disadvantages of such a program are obvious; it would be extremely expensive, both in capital expenditure and administrative costs, and would be unpopular with suburban taxpayers and others not directly benefited by it.

A fourth alternative would be for the State to provide rehabilitation grants. This would be attractive to program beneficiaries because there would be no cost to low-income elderly homeowners. However, the program would be expensive for the State, in funds granted and in administrative costs of preventing fund misuse. Furthermore, such a program would parallel Section 115 of the Federal Urban Renewal Rehabilitation program, a program that though authorized is not presently funded.

Another approach that the State could take would be to fund a program similar to the Office of Economic Opportunity's "Operation Handyman." This program could provide home maintenance and repair services to elderly, lowincome homeowners with fees based on a sliding scale keyed to income. The program could also use the services of older persons themselves, thereby pro viding part-time employment to some older persons. However, such a program would not reach the lowest income elderly homeowners, as there would always be some charge for services.

Each of the above programs has various advantages and disadvantages. Some of the programs fail to reach those in greatest need; others are ineffective because they incorrectly assume availability of Federal funds; some would simply be too costly to implement on a large scale. Therefore, a solution is needed that will aid those in greatest need, without dependency on Federal funds, and without high cost to the State.

Suggested solution

The fundamental problem of the low-income elderly homeowner is that his assets are not liquid. He has spent his economically productive years paying the mortgage on his home, thereby accumulating assets in an illiquid form. The problem is not that he is poor, in consideration of the value of his property; rather, the problem is that his wealth is consolidated in illiquid property.

When in retirement and no longer economically productive, elderly persons should be enabled, if they desire, to reconvert their assets, or a part of their assets, to a liquid form. This would enable them to have the financial solvency necessary to maintain an adequate standard of living. The chief concern is environment-maintenance of a pleasant and comfortable residence is the most significant factor in insuring contentment and emotional well-being.

Because existing mechanisms are not adequate, New York State should facilitate the asset conversion process by creating its own mechanism to provide for deferred repayment loans for home maintenance and repair for low-income elderly homeowners. The program could work as follows: Rehabilitation loans would be granted to homeowners who met certain qualifications, e.g., age, income, and assets. The loans would differ from conventional loans, insofar as the State would pay the interest on the loan until the property was sold, transferred, or devolved. At that time, the new owner would repay the principal and any additional interest on a prepayment schedule, or the loan would be repayed from funds generated through the sale of the property. The loans could have a belowmarket interest rate, as they would be guaranteed by the State. This program would require that liens be placed on the properties.

To this end, the Private Housing Finance Law should be amended by adding a new article, creating an Elderly Home Owners Maintenance and Repair Assistance Corporation. The corporation should be governed, and its corporate powers exercised, by a board of directors, to include the State Commissioner of Health, the State Commissioner of Housing and Community Renewal, the Director of

the State Office for the Aging, and members appointed by the Governor, the President pro tem of the Senate, and the Speaker of the Assembly. The board of directors should have the powers to lend money to low-income elderly homeowners, to guarantee the loan of money, to establish loan amounts and limits, and to determine eligibility for loans. The board should also have powers to require that loans made or guaranteed be secured by first liens upon the improved property, to take, hold, and administer real property, personal property, and monies, and to sue and be sued in the name of the Corporation. Also, the board should have the power to enter into contracts, adopt rules and regulations, and perform other acts necessary and appropriate to effectuate the purposes of the corporation.

Loans made or guaranteed by the Corporation should not bear interest at a rate in excess of one percent per annum less than the rate of interest charged by New York State commercial banking establishments for home repair loans. The terms and conditions of any loan made or guaranteed by the Corporation should not require the repayment of the loan and interest to commence until such time as the improved property is transferred, or leased, or upon the settlement of the estate of a deceased borrower, which ever occurs first. If the borrower dies prior to a transfer, assignment or lease of the improved property, the beneficiary of the improved property should at such time as the borrower's estate is settled assume the obligation for the repayment of the loan and any interest which may accrue during the repayment period. At such time as the borrower transfers, or leases the improved property he should commence repayment of the loan and any interest which may accrue during the repayment period. If husband and wife borrow jointly, the surviving spouse should assume the obligation for the repayment of the loan and any interest which may accrue during the repayment period upon settlement of the estate of the deceased spouse provided that there has not been a prior transfer or lease of the property.

The person obligated to commence repayment of the loan and interest should not be required to repay in full the loan or interest earlier than within three years from the improved property is transferred, leased, or the borrower's estate is settled, where the principal amount of the loan does not exceed the sum of fifteen hundred dollars. There should be a period of six years, where the principal amount is between fifteen hundred and three thousand dollars; eight years, where the principal amount is between three thousand dollars and five thousand dollars; and twelve years where the principal amount is five thousand dollars or more. In no case should there be any penalty for the repayment of any loan and interest prior to the time for which the payment is due.

The corporation should be tax-exempt, and contributions to the corporation should be tax-deductible.

This program would have numerous advantages for the low-income elderly homeowner. For example, he would not be required to make any cash expenditures at the time the loan is granted; neither would he make monthly payments while residing in and maintaining ownership of his home. A large number of this State's low-income elderly homeowners simply cannot afford any cash expenditures for maintenance and repair of their homes. Since these loans would be granted with deferred repayment, many elderly persons could repair homes. who, under more demanding circumstances, would be unable to make necessary repairs. The ability of the suggested corporation to set limits on loans would allow homeowners to obtain loans large enough to maket substantial repairs, some of which would decrease home operating expenses (e.g. storm windows, insulation, roofing). This would free some money from these persons' limited budgets to improve their living standard in other respects.

This program would require a first lien on the homeowner's property. Older persons generally dislike lien provisions, such as are found in traditional welfare programs, because the home may be attached and sold subsequent to the owner's death. The proposed program would allow heirs to repay the loan and keep the home; the elderly person's desire to pass it on is not thwarted. Also, heirs could repay the loan on a lenient repayment schedule, thus avoiding foreclosure and forced sale. Moreover, loans with deferred repayments avoid association with welfare, since they imply no dependency on the part of the recipient to the State. The connotation of “welfare" has been a problem with many programs developed to aid the eldrely. Older people often attach a moral stigma to handouts and do not take advantage of programs designed without their feelings on this subject taken into account.

The program maximizes the availability of the State's resources while minimizing the cost. Because it is guaranteeing loans made by private c the