HOUSING AND COMMUNITY DEVELOPMENT ACT OF 1977 THURSDAY, MARCH 3, 1977 HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON HOUSING AND COMMUNITY FINANCE AND URBAN AFFAIRS, Washington, D.C. The subcommittee met at 10:15 a.m. in room 2128 of the Rayburn House Office Building; Hon. Thomas L. Ashley [chairman of the subcommittee], presiding. Presiding: Representatives Ashley, Patterson, Tsongas, Lundine, Wylie, and McKinney. Mr. PATTERSON [presiding]. The Subcommittee on Housing and Community Development will please come to order. We heard considerable testimony from groups and individuals during the past 2 weeks in which the subcommittee has been holding hearings on the community development block grant program. Most of this testimony has been directed at the national policies issues involved, as is proper and necessary. This morning, however, the subcommittee will focus on some of the mechanics of one of the more crucial aspects of the community development neighborhood rehabilitation. The subcommittee fully recognizes that the success of our housing and community development efforts depends not only on the broad community development block grant policy issues but also how they are implemented at the local levels of government. For this reason we are going to hear from local community development program officials who have extensive neighborhood rehabilitation experience. The panel will discuss the advantages and disadvantages of the present block grant program in making effective the several approaches that they have used in neighborhood rehabilitation. In this way the subcommittee hopes to assure that community development block grant assistance is providing local governments with workable tools for effectively improving and conserving housing and neighborhoods. At this time I would like to recognize my colleague from Massachusetts, Congressman Tsongas. Mr. TSONGAS. Mr. Chairman, when you get used to being chairman, you refer to your colleagues as distinguished. Mr. PATTERSON. Distinguished colleague. Junior colleague. [Laughter.] Mr. TSONGAS. Mr. Chairman, like a number of other people I have a conflict of hearings today with the Alaskan lands being heard in the Interior Committee. But I would like to introduce in absentia Hon. Thomas P. O'Neill III, the Lieutenant Governor of Massachusetts. As you know, the Northeast has undergone some severe dislocations over the past few years, and we have finally got ourselves together, not only on the congressional level with the Northeast-Midwest Economic Advancement Coalition, but also in terms of the cooperation among the Governors to address the problems of the older industrial cities and States. And Tom O'Neill and the Governor of Massachusetts, Michael Dukakis, have been very active in pursuing that. And there has also been the establishment of a Washington office of our State, and Tom O'Neill has headed up that particular operation and has been very effective on issues like formula, things of that nature. So, Lieutenant Governor O'Neill, we are delighted to have you here when you get here. I would just like to extend the appreciation of the State of Massachusetts for the invitation to have him speak here today, and I am sorry about the conflict that I have. Mr. PATTERSON. I thank the gentleman. Mr. TSONGAS. I defer to my distinguished chairman. Mr. PATTERSON. Thank you. We have at the council table nameplates and provisions for those who will be testifying this morning. I would like to ask them to come forward as I introduce them. The panel on neighborhood rehabilitation and conservation consists of the Norfolk Redevelopment and Housing Authority, represented by Jack H. Shiver, executive director; and the Boise City Building Department, represented by Cecil Apperson, the rehabilitation supervisor; the Madison, Wis., Department of Housing and Community Development, Sol Levin, executive director: the Redevelopment Agency of the city of Fresno, Calif., James Hendricks, secretary; and the Division of Community Improvement, Metropolitan Development Agency, A. William Benitez, director. Gentlemen, good morning. Welcome to the Subcommittee on Housing and Community Development. We thank you for your patience in waiting for the committee to get underway here. I apologize for any delay and would like to indicate to you the order that we would proceed is as I have introduced you, and you may choose, if you wish, to read your prepared statement or, if you would prefer, you may summarize it. We will insert the prepared statements in the record in each case. We will proceed with Mr. Shiver and go through the remainder of the panel before the questioning and answer period. STATEMENT OF JACK H. SHIVER, EXECUTIVE DIRECTOR, Mr. SHIVER. Thank you, Mr. Chairman. I am Jack H. Shiver, executive director of the Norfolk Redevelopment and Housing Authority, and I appreciate and thank you for this opportunity to addres you on matters of neighborhood rehabili tation, preservation, and conservation as they relate to the development block grant program. I do have a prepared statement which I will file, and I will try to summarize it in 4 or 5 minutes, if that is satisfactory, Mr. Chairman. Mr. PATTERSON. That is fine. Mr. SHIVER. I must begin by saying that in Norfolk we have a very extensive rehabilitation and conservation program. We have in our programs about 6,800 units that we have some influence over, or about 15 percent of our city's housing stock in conservation and rehabilitation. The program consists of five projects in which we have loaned about $6 million using both section 312 and local loans to over 500 individual property owners. We found no magic formula in making rehabilitation and conservation work. I, unfortunately, cannot bring you any words of wisdom on how to make it work in all cases because we have found that in each of our neighborhoods there are different characteristics and different reasons why things work. We have found that we need a number of tools rather than just one to make these projects turn neighborhoods around or stabilize them. One of the interesting things that we have done as somewhat of a new concept is establishment of the local loan program that we have utilized very effectively. We have been able to loan about $3.6 million from a consortium of local banks. Interestingly enough, this local program has also added another very big benefit to our community. Statistics would show that the banks and the savings and loan institutions had pulled out as financing vehicles and were not giving many loans in these neighborhoods. However, as progress was made as the banks loaned to the Authority through the local loan rehabilitation program, they then began to make loans themselves in the neighborhoods where they had once feared to tread. We can account now for over $3 million in private independent financing from the local lending institutions that the Authority or the public sector has little to do with. We have used a number of concepts. The base of it all and the thing that is absolutely necessary, of course, is the section 312 loan program. Section 312 is absolutely necessary in our area, and without it progress would not have been possible. We are happy to say that the administration of the section 312 program works very well in Norfolk because HUD has allowed us to do all of our own administration, so we do not have the bureaucratic problems that some cities have in administering that section 312 program. We have used the leveraging approach of community development block grants by the use of an insurance fund guaranteeing the money in some project areas. We have also used a loan program where we have no insurance whatsoever and no commitment to local banks other than basic trust in the Authority, the neighborhood, and borrower. So we have a variety of programs-really four different ones, in effect. We have used CDBG, basically, as supporting moneys for capital improvements in conservation neighborhoods-that is, streetlighting, landscaping, parks, and other things that those communities did not have. About 20 percent of our grant each year has gone into those types of facilities in our rehabilitation and conservation efforts. One of the new ventures that we are flirting with-and we have not had a lot of success yet, but we have great hope for it--is commercial rehabilitation. Not only do we have five residential neighborhoods under rehabilitation, but we also have two commercial programs, one involving the central business district where we have been working with the SBA 502 loan program and with local bank loans. This program is just beginning to get off the ground. We have had trouble with SBA in Virginia, basically, because they went through a little problem in Virginia not too long ago. But they have a good attitude, and we think that utilizing this program, along with the local banks, will bring some success to our commercial loan program. I guess we have learned a number of lessons. We have had failures, but we have also had considerable success. One of our projects, called Ghent, has, for example, resulted in increased sales values of over 100 percent in 6 years, on the average. Obviously, not all of our neighborhoods have been that successful in rehabilitation, but generally speaking, all of them have been positive, at the least. The lessons we have learned in Norfolk can be summarized with three points: One, we believe that you have got to draw a boundary to identify projects. You have to be open and let everybody in that neighborhood know what is gong on. You have got to have good citizen participation. You have got to have good organization of those citizens, and you have got to get the supporting attitude. That usually just means knowledge: What are you trying to do? What are your goals? What are your objectives? Publish them, let everybody know about them, let everyone react. The second lesson, I think we have learned, is that you must mesh a lot of programs together. We don't think that one individual program-a loan program or anything else, as far as that's concerned, really works by itself. Each neighborhood has different characteristics and different problems, and therefore, you need a different type of tool. We do know that in almost all of these neighborhoods the public needs to lead the way, needs to show that it has an attitude of investment, that it is willing to do the things that the public ought to do to make that neighborhood a viable one. We also believe, by the way, that conservation and rehabilitation is not a house-by-house approach; it is a neighborhood approach. It cannot be done, in our judgment, on a shotgun basis. The other thing we learned is that the leveraging concept of local loans that we have started, has major advantages. Again, I think it is more of an attitude problem than anything else, because the local loan associations and institutions begin to come back into that area and make their own loans once they are involved in support of rehabilitation. As I have mentioned before, we have a number of types of neighborhoods. We have one, for example, where we are just trying to hold the housing in the condition it is in-decent, safe, and sanitary— |