The CHAIRMAN. Thank you very much, Dr. Martin. We appreciate your very fine statement. You have given us some very fine suggestions. Next is Mr. Keith Heller, chief executive officer, Cedar Riverside Associates, Inc., Minneapolis, Minn. Senator Mondale, I call on yo to introduce this gentlemen to us. Senator MONDALE. Mr. Chairman, if I might I would like to intr duce an old friend of mine and one of the truly remarkable innovators in housing in Minneapolis and the Nation, Mr. Heller is presidentyou never have to stand while a Senator is speaking because it's too tiring-president of a very creative, unique new effort in the centra. part of Minneapolis in what's known as the Cedar Riverside area. At present, Cedar Riverside Associates is responsible for developing a 350-acre area of Minneapolis. About 100 acres of nonpublic, noninstitutional land is available for this undertaking. This is an excit ing project in many respects and I'm sure those points will be fully dealt with in Mr. Heller's testimony. However, I would like to comment on a few of the accomplishments. Mr. Chairman, this is the first new town-in town project to be approved under title VII of the Housing Act of 1970. I think they have approved six or seven new towns under the 1968 and 197 act, but this is the first new town that has been approved within & city. It's an exciting and, I think, a thrilling effort that is underway. They made a $24 million guarantee to this project and they are now well on their way. I think it's an exciting project as well because it is being done by a private development group as opposed to government groups. of An example of this is that approixmately 500 parcels of land have been obtained without the use of condemnation. The real purpose Mr. Heller's appearance today however, is not to talk about the many accomplishments but to give us some guidelines for improving existing programs and to give us ideas for new legislation. He is going to point out the need for social and economic integration within these develop ments since this is precisely what they are attempting to do, and I think, successfully. We are delighted to have Mr. Heller with us to show us what's hap pening. Mr. Chairman, the other day we heard from a non-profit spon sor in Duluth that used the existing tools in several neighborhood there to try to update and rehabiltate housing. One of the things tha excited me about their effort is that it was personal almost to the house. and to the family, and to the neighborhood. It was not sort of “Let's tear it all down and flatten it and then see what follows." It was a sersitive and personal operation, and that's what I think is unique here as well. It began with Mr. Heller and another old friend of mine. Glor Segal, who just started to buy a small amount of property in this ares and the more they did so the more they become convinced of the fantastic potential of this area and they sought to do it by drawing on th strengths of the area, not destroying them. I don't think they ever used condemnation. I don't think that the ever moved a person out unwillingly. When they bought their propert they tried to make arrangements for the people to continue living in th area. The area is right next to the University of Minnesota, right acros the river. It's the largest single campus in the country-maybe in the world-and they have tried to make it a part of that development. It is also located near another State college and several hospitals. I think it's one of the exciting central city housing efforts going on in the country today, and I'm very pleased to introduce Keith Heller. The CHAIRMAN. Well, we are very glad to have you with us, Mr. Heller. I have been looking over some of this literature you provided us. How much land area is involved? Mr. HELLER. Cedar Riverside contains about 350 acres in total. It's bounded by two freeways and the Mississippi River. Most of it is institutional use and we have been concerned with 100 acres of noninstitutional land of which we now control about 75 percent. The CHAIRMAN. The puzzling question in my mind right now is how in the world did you get that much land together inside the city? Mr. HELLER. By a lot of hard work. The CHAIRMAN. Who owned it? Mr. HELLER. Who? The CHAIRMAN. Many different owners? Mr. HELLER. Many different owners. We have dealt with hundreds of property owners in accumulating close to 500 parcels. The CHAIRMAN. Was there housing on it already? Mr. HELLER. There is housing on it. The CHAIRMAN. Were there homes on it? Mr. HELLER. Delapidated housing for the most part and some comnercial, and it's been a case of a willing buyer/willing seller relationhip all the way along. We have paid market price and we have just gone in over the almost 10 years and assembled the land as our finances vould allow us to. The CHAIRMAN. Do I gather from what Senator Mondale said that vhen you started you didn't necessarily have this new town idea? Mr. HELLER. By no means. The CHAIRMAN. You developed it as you went along? Mr. HELLER. We started out in the area with buying some delapilated housing and trying to improve it to rent to students and staff at he institutions and gradually our ideas grew first to a quarter of a lock, then to a half-block, and whole block, and five blocks, and finally, n 1968, to the entire hundred-acre tract, and then after that, we coneived this idea of a new town in town and it seemed that title VII egislation was written especially for people like us, and we are very rateful to be the first. The CHAIRMAN. The reason I ask this question is because one of the reat obstacles to new town development is the acquisition of land of ufficient area. We often hear about the new towns in England. I have isited the new towns in England, where control is rather centralized. The Government can condemn the land pretty much as they please. Of course, we don't have that in this country and I just wondered ow in the world you ever overcame such tremendous difficulty in acuiring that much land inside a city. We are very glad to have your literature and I have been interested 1 looking it over. We are glad to have your statement. As you know, ne statement will be printed in full in the record and you may proeed to present it as you see fit. STATEMENT OF KEITH HELLER, CHIEF EXECUTIVE OFFICER, CEDAR RIVERSIDE ASSOCIATES, INC., MINNEAPOLIS, MINN. Mr. HELLER. Well, I think Senator Mondale has given a great deal of background of our development The CHAIRMAN. Well, I started to say a few minutes ago that after all of the very fine statements he made, I didn't see much room left for your testimony. Mr. HELLER. As he said, Dr. and Mrs. Segal and I began acquiring land in this area back in 1962, really. We were joined in 1968 by Henry T. McKnight, who is also involved in the new town of Jonathan in Minnesota, and we have been joined more recently by a number of other investors. You spoke of the problem of land assemblage and I have a section urban in my statement devoted to this. Cedar Riverside became an renewal area in 1968, under a very unique urban renewal plan. We understood there were only one or two other plans like it in the Nation The urban renewal plan recognized acquisitions of private developers and institutions in the area and said that the bulk of Cedar Riverside would be designated as conditionally excluded from acquisition under urban renewal and if the private developers and the institutions tinued to develop according to the urban renewal plan their land would not be taken, but they would have the opportunity of asking the housing authority to condemn any holdout parcels so that a total development would be possible. COL We had acquired a great deal of land before the urban renewal pro gram was enacted. However, it's probably fair to say that for a quisition since then there has been this threat of condemnation exist ing and although we don't expect to have to use condemnation on any of the remaining parcels, because in absence of this threat there is a problem very definitely of assembling land-particularly in the inner city, and some sort of stopgap condemnation procedure really becomes necessary. I personally feel this can best be done under an urban renewal pla such as we have, although it could be done under a State housing agency as the case of New York or it could be done, as someone sug gested, through some Federal condemnation power for new towns but you can acquire 90 percent of the land, perhaps, privately and make a reasonable development. You can acquire 100 percent of the land with the aid of public condemnation and make a much better development, and it's the better developments we are looking toward I am not speaking to specific legislation, but there were some specif suggestions I did have as to possible legislation in these areas. our first-stage development, which is now underway. It's 1,299 units. One of them has to do with integration. We are rather proud of about one-tenth of the total housing of 12,500 units plus related com mercial and cultural that we intend to build on our 100 acres over the next 20 years. We have separate structures in this 1,299 units for the two extremes of housing-117 units of low-rent public housing int structures and 222 units of semiluxury FHA housing in another structure. The balance of the buildings-I think nine in all in the projectare built under section 236 in a unique type of subsidized and unsub sidized housing-552 units of subsidized and 408 units of unsubsidized such that we'll have the subsidized and unsubsidized units existing side by side, on the same floors, in the same buildings. This, I understand, may be a national first in incorporating an unsubsidized program within section 236, and it was also made possible by some particular State laws that we have in Minnesota, but this is the step toward integration. We wish that it were possible to integrate further because we feel very strongly that economic integration should follow social integration in the United States, and that some of the housing programs especially the 220, which leads to a semiluxury ghetto apartment pubic housing program, which leads to low-income ghettos; even the 236 program, which leads to low- and moderate-income ghettos, which create continuation of ghettos in our society, which is unfortunate. I had asked a week or so ago some of the representatives of HUD lealing with unsubsidized housing in FHA if it would be possible inder a, perhaps, legal condominium description arrangement, to have 220 housing and 236 housing existing in the same building. This, we hink, should be highly desirable, but they shook their heads and said hey didn't think under present legislation this would be possible, so here is potential of future legislation to provide for even greater ntegration. Senator MONDALE. Mr. Chairman, what's the reluctance of FHA to ningle in the programs? In Duluth we had the same problem, where hey wanted to take a block and have a little 230, a little 236, a little lirect conventional. They said, "You can't do this. All one thing or ill the other." Does it get two offices involved? The CHAIRMAN. It might be well to put that question to HUD itself. However, I'll pass it on to our housing expert, Carl Coan, staff direcor. Do you know the answer to that question? Mr. COAN. No, I don't know the answer to it. I know it's a problem, but I think there could be a way, as Mr. Heller said, of using the ondominium concept of separating a property. As long as you define property you delineate your security. I would think as long as you an draw lines this is security for 236, this is security for 230vhether it be this way or this, I would see no reason why it couldn't be n the same building. The CHAIRMAN. We might submit that question Senator MONDALE. Would you write a letter on that? We might ake some progress (see page 1119). The CHAIRMAN. I notice that a lot of things that they may be doing hat could be changed if the need arose-in other words, a good many hings are not tied down to rigidity, and this may very well be one of hem. I don't know. Mr. HELLER. A second item concerns the plight of the middle-income uilding in highrise; the architecturally esthetic surroundings, oh, vpical of the 221 program, perhaps, to define middle income. We feel ery fortunate in being able to get some of our middle-income housing ut of this unsubsidized portion of the 236 program, but to build midle-income housing in the inner city in highrises that are architecturlly esthetic with the social amenities is almost impossible economially. This may explain why they just aren't being built. If there are ibsidies available for the 236 moderate-income program, it would seem that housing across the way could be enhanced by provision of certain subsidies-not so great, but small subsidies for middle-income housing either through the Federal Government paying a portion of the real estate taxes or, perhaps, subsidizing to drop the interest rate a point or two-not nearly as far as 236, but a little bit-or to provide for some land subsidies, even, but some sort of subsidy program is going to be required, I think, in the future to enable middle-income housing to go up in the inner city, and highrises. Senator MONDALE. Mr. Chairman, I am going to introduce a bill, too. later today. The CHAIRMAN. You say you are going to introduce a bill? The CHAIRMAN. Well, we'll work it out as best we can. Mr. HELLER. I had a specific comment regarding planning grants and the office of new communities. If planning is an essential part of new towns, whether they be in town or out of town, I know a lot of new town endeavors-ours almost was one-come close to dying on the vine for lack of financial support at early stages. The usual provision to obtain new town designation and the new town guarantee is for preapplication to be submitted to HUD. If they like the preapplication, then a formal application is submitted and this is reviewed and acted upon. The time span between the submission of the initial preapplication and the final approval might be a year or two. If there were a way under amendments to title VII in which planning grants of $100,000 or $200,000 or so might be given to new towns whose preapplications look sound and appropriate, this might carry through programs that would otherwise die on the ground in the meantime, while waiting for final guarantee of the bonds. Another aspect of these planning expenses is the income tax ramifications of them. Obviously, housing benefits greatly from tax shelter provisions in the Internal Revenue Code, and these should be continued. If there were specific provision in the code to make planning expense or planning expenses for some specific purpose such as a new town, currently deductible as they are expended. I'm sure this would increase the amount of planning of new towns, which are very impor tant in the future of this country, and would be of tremendous social benefit. Senator MONDALE. What do you do with the expenses? Wrap them into the capital cost and depreciate them? Mr. HELLER. The Internal Revenue Code is very imprecise on this and it appears that under the present purpose of the code, these must be capitalized with the land, which means that, perhaps, they would never be written off at all. Last, since we are involved in 236 housing adjacent to institutions. we have been quite concerned about this 10 percent singles limitation in the occupancy of 236. We understand that a year ago there was some attempt to change this to 30 percent and then that did not go through, and the 10-percent limitation remained. I recognized that the 236 program is primarily directed towards families, but in an institutional setting, 236 housing is to a great extent, college housing, and here you result in causing a single student to pay higher rent than |