The cost items which could be included in the mortgage would be generally similar to the includable items under the provisions of the National Housing Act. For certain "social-purpose" programs (urban renewal, elderly, low and moderate income, and experimental housing) existing law requires that where the mortgagor is also the builder, the builder's profit equal 10 percent of the construction or rehabilitation costs. The revised provisions would continue this specific 10 percent allowance for similar transactions. Specific existing "back-end" allowances where the mortgagor is not also the builder would not be retained in their existing form, but substantially the same result could be obtained through new authority to include allowances for initial operating costs in the mortgage. Labor Standards The existing Davis-Bacon labor provisions would be retained in simplified form. The payment of prevailing wages, as determined by the Secretary of Labor, would be required with respect to laborers employed on the construction or rehabilitation of multifamily housing (except projects with 11 or fewer units), health facilities, and land development projects. An exemption for small multifamily projects is also contained in existing law with respect to four programs, the largest being projects with 11 or fewer units. Existing provisions permitting waiver of labor standard provisions for certain projects where volunteer labor is involved would be retained in simplified form and would be applicable to all programs. Titles VI and VII Insurance Claims and Miscellaneous Provisions Insurance benefits and claim procedures for home and project mortgages would be essentially the same as they are under existing law. The same alternative computation for insurance benefits with respect to home or project mortgages assigned to the Secretary in lieu of foreclosure provided under the National Housing Act would be available. Provisions dealing with modifications in the terms of home or project mortgages would also be similar to those contained in the National Housing Act. The various provisions spread throughout the National Housing Act authorizing the Secretary to acquire, deal with, and dispose of property and claims would be consolidated and simplified without substantive changes. Also retained are provisions authorizing the Secretary to insure mortgages sold by him or executed in connection with the sale by him of acquired property without regard to statutory limitations. The Secretary would continue to be authorized to make expenditures to correct structural defects (or pay the owner's claim or acquire title to the property) to one- to four-family homes inspected prior to the beginning of construction where the defects have been reported within four years of the insurance of the mortgage. With respect to experimental property (home or multifamily) the Secretary would, as under existing law, be authorized to correct unsafe defects to the property at any time. In addition, the 1970 provisions authorizing compensation to purchasers of defective existing homes under the home ownership assistance program would be retained and extended to existing homes in older and declining areas. Finally, the existing provisions denying participation in' the mortgage insurance program to persons committing various insurance contract or other violations would be incorporated into the new Act. PUBLIC HOUSING ASSISTANCE PROGRAM Title II of the bill would amend the United States Housing Act of 1937 to make needed improvements in the public housing program. The bill would modify the subsidy provisions so as to establish separate statutory limitations on the annual subsidy amounts which may be paid for capital and operating costs. The bill would also create a workable homeownership program for low-income families who reside in public housing or are eligible for such housing. The legislation also includes a number of other changes designed to make the public housing program more effective and would authorize additional funds for fiscal year 1973. Public housing subsidy structure The subsidy structure for the public housing program would be revised so as to provide a more effective statutory framework for the new operating subsidy authorizations enacted by Congress in 1969 and 1970. The 1971 bill proposes to separate the debt service and operating subsidy authorizations and to establish separate statutory limitations applicable to each category of assistance. Existing law provides for a single statutory limitation for both debt service and operating subsidy, with a maximum limit on annual contributions based on the going Federal rate plus two percent times the capital cost of the project involved. Operating subsidy is therefore available to a project only to the extent, and only in amounts, that the debt service requirements of a project are less than the statutory maximum. This means that the amount available for operating subsidy is dependent upon the financing terms for development of a project locality which happens to finance the development of its projects at a the time when more favorable terms are available becomes eligible for the greater operating subsidy. This is undesirable from the standpoint of achieving uniformity and equity in operating subsidy treatment and could result in the distortion of financing procedures. Consis Under the 1971 proposal, the limitation on the maximum amount of annual contributions for debt service is the amount needed for this purpose 1.e., the annual amount of principal and interest payable on obligations issued by a public housing agency to finance the project involved. tent with the amendments enacted in the 1970 Act, the maximum amount of annual contributions for operating subsidy would be the annual amount needed to assure the low-income character of the project and to achieve adequate operating and maintenance services. With this change, the present authorization to pay an additional annual subsidy of up to $120 per dwelling unit occupied by a special category family would no longer be required and would be eliminated. To assure that operating subsidy funds are allocated fairly and equitably, the 1971 bill would require any locality which receives such funds to establish minimum rental requirements. Action on this matter was deferred in connection with the 1970 legislation to permit further consideration as to what the income contribution ratio should be. Under the 1971 bill, it is proposed that a family would be required to pay a rent of not less than one-fifth of the family's income, but not exceeding a fair market rental charge based on the full cost of the housing without subsidy assistance. In order to determine a family's income for this purpose (and for allocation of income for homeownership), the bill proposes to use the existing income definition for private housing programs. Thus, the Secretary would have discretion in defining income, but an amount would be deducted equal to $300 for each minor member of the family, nonrecurring income would be deducted, and the earnings of any minor would not be included in the income of his family. Under present regulations, the Secretary has allowed five percent of gross family income to be deducted, in addition to the deductions required by statute. The proposed income contribution ratio of 20 percent of family income has traditional acceptability in the public housing program and is used in many local housing authority rent schedules. Under the bill, any increases in rental would be implemented in two stages: after the legislation has been operative for one year, one-half of the total amount of the required increase would be imposed when the first biennial review of income takes place; the full rental charge would be effective as of the next review of family income. Localities which do not receive operating subsidy funds would not be subject to this income contribution requirement and would continue to fix their own rents, subject to HUD's approval. All localities would continue to be subject to the requirement that rents may not exceed 25 percent of family income based on the special definition of income for maximum rental purposes. Income limits for eligibility As under existing law, income limits for admission to public housing would be fixed by public housing agencies, subject to HUD approval. However, the proposed bill would delete the existing requirement that a public housing family must move if its income increases beyond the income limits for |