HOUSING

WEDNESDAY, MARCH 26, 1947

UNITED STATES SENATE,

COMMITTEE ON BANKING AND CURRENCY,

Washington, D. C. The committee met at 9:30 a. m., pursuant to recess, in room 301, Senate Office Building, Senator Charles W. Tobey, chairman, presiding. Present: Senators Tobey (chairman), Buck, Capehart, Flanders, McCarthy, Taylor, Fulbright, and Sparkman.

The CHAIRMAN. The committee will come to order.

The first witness this morning on S. 866 is Mr. J. H. Deckman, National Home and Property Owners Foundation, Washington, D. C. STATEMENT OF JOSEPH H. DECKMAN, NATIONAL HOME AND PROPERTY OWNERS FOUNDATION, WASHINGTON, D. C.

Mr. DECKMAN. My name is Joseph H. Deckman. I appear here as a member of the executive committee and chairman of the housing committee of the National Home and Property Owners Foundation.

I appear here in opposition to S. 866, because in our opinion this is primarily a public housing bill, and the foundation is extremely opposed to any form of socialization of property or any other part of our economy, and after last November we felt that we did not have to worry with this question for legislation any longer. But we find it cropping up and, as a matter of fact, we are so agitated that we are forming local chapters in every crossroads community of this country in order to oppose this sort of thing.

The CHAIRMAN. Tell us something about the National Home and Property Owners Foundation. What is the organization? How long has it existed? What are its ramifications and its financial strength?

Mr. DECKMAN. It was organized approximately 2 years ago. It will be 2 years this coming September. It was organized for the purpose of protecting property in this country.

We feel that without property rights there can be no human rights. We know the Constitution was based on the preservation of property and that is the reason why we are formed.

We feel that the taxpayer, the property owner, who has to bear the burden of the taxes of this country is a disorganized majority who are not being heard, and it is our purpose to organize them and give them voice in the halls of Congress in the way of testifying on bills of this nature.

The CHAIRMAN. On this question of property rights versus human rights, which would you give first consideration to in the country as legislators, human or property rights?

Mr. DECKMAN. You have to do it both simultaneously. If you destroy property rights, you destroy human rights. When you consider human rights first, you have to consider property rights. Every country which has attempted to destroy property rights has destroyed human rights. Wherever public housing has been put into operation. on a large scale, the human rights disappeared.

You go back into ancient Greece and Rome, where the gevernments were democratic in form and they began to pass out sops to the people who wanted more and more of the government help, and financially they disappeared, and dictators and tyrants came into being, and the countries lost their greatness.

We feel that the two subjects would have to be considered simultaneously. That is the way we look at it.

As to the financial strength of the foundation, in the past few years we have raised a little less than $400,000 to operate our organization, and it has been spent in preparing factual information and dispensing that information to the property owners of the country, a very nominal sum, I would say, considering the vested interests of 16,000,000 property owners. It is a very small amount to spend in their behalf compared to the other pressure groups of this country who are spending millions.

I appear in opposition to 866_ on the basis that it is primarily a public housing bill. The reason I say that is that it is approximately 71⁄2 billion dollars authorized to be appropriated under this bill, and over 7 billion dollars of it is for public housing. That is found in sections 8, 9, 10, and 11. And if this sum which is three times the sum that has ever been authorized before is put through this Congress, it will be the end of privat eownership of the homes and private ownership of property because the tax burden will become so great that the taxpayer cannot stand it.

The people who foster public housing, Mr. Nathan Strauss is one of them, in his book, "The Seven Wonders of Housing", stated that after the lower third of the population is housed in public housing, the tax burden will become so great that the middle third will want to be housed, and they, too, will have to have it. You can imagine if twothirds of our economy is housed in government-owned housing, tax exempt and subsidized, that our economy cannot stand it.

That is what this bill, if passed, would begin in this country. To understand how this works, you have to understand the United States Housing Act of 1937, which is a pattern for the type of financial arrangement that is carried out in the formation of this bill. The $7,000,000,000 I speak of will be all loss to the taxpayer, due to this financial hocus-pocus that you set up in the United States Housing Act.

I doubt if more than 5 percent of the Members of Congress who passed that bill understood it. It took me 6 months of diligent effort to figure out how it worked and while I am not a lawyer, I would say that it would take a Philadelphia lawyer to figure it out any sooner, and I daresay that the percentage of Members of Congress has not increased to a great extent in its understanding today.

The bill in its purpose was very fine. It said that it was set up to clear slums, and to house the needy people of this country. To do this, they set up local housing authorities which have been greatly publicized as being local in character.

They are local to the extent that local citizens are on them, but they are no more local than the local post office of the United States Post Office Department, or the branch stores of the A. and P. chain stores. They are all tied back here to Washington under their financial arrangement.

The financing is very unique. The way it operates is that the local housing authorities are permitted to borrow from the U. S. Treasury the money needed for the purchase of land and construction and interest rate of 1 percent greater than the going rate of interest, which is to be paid back over a period of 60 years.

Simultaneously with the borrowing of that money, the old U. S. Housing Authority, which has now become the Federal Public Housing Authority, gave a contract to the local housing authority to pay them an annual subsidy, amounting to the going rate of interest, plus 1 percent, plus one-half of 1 percent more.

This one-half of 1 percent more pays back the principal by the fact that as the principal is reduced each year, the amount of interest comes down, and the one-half of 1 percent plus the percentage that goes for the other adds up, so that at the end of 60 years the principal and the interest is paid off, and by this method. the public housers say that the Government houses its needy and clears the slums at no cost to the taxpayer.

Actually what they do, they take the money out of the Treasury, build the project, and annually they go to the taxpayers pockets again and get the money to pay back the Treasury, so they take money out of one pocket, put it in the other, and state that in this process they pay cff the debt which of course you can see pays off nothing.

Proof of this statement is found in an excerpt from the independent offices appropriation bill for 1941 on page 101. The Congressmen in the House are questioning Mr. John Ilder on this very subject, and Mr. John Ilder is the head of the National Capital Housing Authority here in Washington, the executive officer, and one of the foremost public housers in the country, as he headed the first public housing agency in the United States, the old Alley Dwelling Authority, back in 1934. He says

Mr. Fitzpatrick is questioning him on this subject. [reading]:

You feel if you can borrow sufficient money to continue building these projects, in time they will be self-liquidating, Mr. Ihlder; under title I they will be selfliquidating?

Mr. STORM. Under title II, which is the United States Housing Act, they never will.

Mr. IHLDER. So long as the subsidy is paid.

Mr. FITZPATRICK. This subsidy is only a small amount of the investment.

Mr. IHLDER. The subsidy amounts to the interest and amortization.

Mr. CASE. What do you mean by amortization?

Mr. IHLDER. The return of the principal.

Mr. CASE. In other words, the subsidy does pay back the cost of the building. Mr. IHLDER. Yes.

The amount of the Federal subsidy is found on page 114 and Mr. Wigglesworth is questioning Mr. Mandel of the National Capital Housing Authority, at that time in the accounting department. Mr. WIGGLESWORTH. What does the Federal subsidy amount to?

Mr. MANDEL. One-half percent more than the interest rate on the contract we have with the United States Housing Authority.

On contract 87 we pay 3 percent on that money to the United States Housing Authority. Their agreement with us for subsidy would be one-half percent more than that or 3% percent that they will pay us annually.

On the second contract, No. 183, the interest rate went up to 3% percent a year, and we have to pay them, the contribution contract would be 34 percent. Figuring the one-half percent in over a period of 60 years will almost wipe out the capital cost. In other words 3% percent would pay out the interest we have to pay annually, and the additional one-half percent over 60 years will just about wipe out the capital cost.

So you see by their own testimony the cost is 100 percent.

For your further information, if you care to, you can go into this analysis of the United States Housing Act by Representative Frederick Smith of Ohio, who is an authority.

The CHAIRMAN. Is he an authority?

Mr. DECKMAN. Yes, sir. His analysis has never been refuted, and he prepared this analysis back in 1939. It appears on page 83483 of the Congressional Record, Monday, July 24, 1939. His analysis is completely factual, breaking down the percentages and working the whole matter out so that it does come out to 100 percent subsidy.

This 100 percent is not all, of course, because these local housing authorities have local tax exemptions, and over a period of 60 years that amounts to a tremendous sum of money.

Here in Washington at $1.75 per hundred on the total assessed value of the property, it amounts to 105 percent, which makes 105 percent subsidy.

Further than that, the deficit financing which has been going on in this country, and which the same economic thinkers who propose this public housing as a solution to clearing slums and housing the needy have said that we do not owe anyone anything because we owe it to ourselves, so we can keep on borrowing money, but the trouble with the Congress is that it is having right now to get a budget together to pay ourselves back, and it seems to belie their thinking. When you get down to a matter of this type, which is an annual cost, we probably will not pay off the national debt for 60

years.

When you figure the interest we will have to pay for these projects compounded, you will find that it runs into a tremendous sum of money, as compound interest equals at 2 percent, which is the going rate of interest, equals the principal in 35 years.

So, actually, there is a 300-percent cost for public housing, as I have set up here in exhibit B of my prepared testimony. I set up a million dollar housing project as the basis of the study. The cost of the project would be $1,000,000; 3%-percent subsidy for $1,000,000 over 60 years would be $35,000 a year, times 60, or $2,100,000.

The tax exemptions in Washington, as an example, for $1,000,000, is $17,500 a year; for 60 years is $1,050,000; 2-percent interest on a million dollars at 60 years, not taking the compound interest, is $20,000 times 60, or $1,200,000.

Adding that together, we have $5,350,000. Then we subtract 31⁄2-percent subsidy which goes from one pocket to the other, and that $2,100,000 from $5,350,000 leaves a total cost to the taxpayer for a $1,000,000 public housing unit of $3,250,000

They state at the end of 60 years that we will own the property, so we have some value.

In answer to that, the tax exemptions continue on after the 60 years. So does the deficit financing. So we have a cost running there, so that the 300 percent is really conservative when I say it costs that.

This total cost of course is all hidden within the workings of the United States Housing Act, which I stated before is carried over in S.866.

There is one exception to the tax exemptoin, that is, during the war the public housing units were turned over to war workers, and due to the high salaried people who are how living in them, they have been paying money in lieu of taxes to the different communities. As I will show later, the salaries of those people are rather astounding that are living in public housing, and it is not any more than right and proper that they should pay something.

Senator FLANDERS. In this exhibit B, I am a little confused, perhaps, but what becomes of the rents?

Mr. DECKMAN. The rents are only used, as I will explain, for the operation of the property. The rents pay the overhead, the salaries of the managers, and the electricity and the gas and light bills, and the repairs.

Senator FLANDERS. Is that a statutory rent, that they do no more than that?

Mr. DECKMAN. I will explain that in the next point I am going to make.

I was going to say that all of this cost goes for naught as the projects at most only house 25 percent of the low-income group. The tremendous subsidy is used for the purpose of writing down 25 percent of the rents, and that is all. The rest of the rents are so-called full economic rents, that is supposed to pay all costs.

We have found in our investigations which would take many hours to present, that the rents do not cover all costs, because they fail to allow enough money for repairs and maintenance on some of these projects built out of frame over 60 years. They have not set up sufficient repairs and maintenance funds to have anything left when the 60 years is over.

I state that they only house 25 percent of the indigent, because I have statements here in testimony that we held here in Washington when this whole matter was threshed out back a couple of years ago, and Mr. Ilder in this testimony, on page 165 of the hearings before the subcommittee of the Committee on the District of Columbia, United States Senate, Seventy-eighth Congress, part I, states, and I quote

he is stating that they held conferences with the United States Housing Authority and that at those conferences, there was informal agreement on NCHA limitation that in order to assure a helpful environment not to exceed 25 percent of the families on any property should be clients of public and private relief agencies. In other words, the public housing is for the purpose of housing people who can afford to pay rents and not the needy, which the public housing matter is sold to the public on.

The National Association of Housing Officials

Senator BUCK. I did not get that statement. Public housing is 25 percent of the needy and 75 percent other?

Mr. DECKMAN. And 75 percent who can afford to pay rent. They have an economic rent that I will show you later that a private

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