will reach 20% of income for elderly tenants when one remembers that 10% is deducted at a minimum, for most families there will be a $300 dependent exemption for the wife which will be more than 10% (the median income for elderly families is $1658 and the average size 1.97 persons); and "extraordinary medical expenses" administratively defined to be those in excess of 3% of income are a real likelihood for elderly families. These rough calculations compel the conclusion that the conditioning of operating subsidies by the administration bill will result in the 25% of income rent ceiling becoming a floor for many of the poorest tenant families in urban authorities most needing subsidies. This is exactly the result that Congress in Conference Reports on the '69 and '70 HUD Acts stated it did not wish to occur. The operating subsidies should be conditioned upon need and available for advance authorization. 7. Inconsistent Income Definitions The income definition presently contained in §2(1) of the U.S. Housing Act, discussed supra, was adopted by Congress in the '70 HUD Act. It attempts to resolve the difficult problem of line-drawing to isolate income truly available for rent or ownership payments for thousands of low-income families, by providing for disastrous illness or injury, giving necessary administrative discretion to recognize situations not statutorily covered. It contains sound social policy in the form of self-help incentives by exempting all full-time students' and minors' income and giving a $300 deduction for income generating expenses of the secondary wage earner. It is very close to the present income definitions in the §§235, 236 and Rent Supplement programs: gross income less 5%, temporary or annual income, earnings of minors and $300 deductions for income generating expenses of the secondary wage earner. It is very close to the present income definitions in the ss235, 236 and Rent Supplement programs: gross income less 5%, temporary or annual income, earnings of minors and $300 deductions per minor. It presently needs simplification to avoid difficult problems like who is a dependant and who is a secondary wage earner. The administration on bill retains the '70 HUD Act definition for purposes on the public housing rent ceiling alone. But in other respects it is retrograde, choosing an inconsistent and far less generous definition ($300 per resident minor) than either the '70 HUD Act or existing programs. NTO urges that the '70 HUD Act (§208), if simplified be used uniformly. See RNHA 402(j), 502(j)(2); RUSHA §83(1), 9(a). Failure to Ensure a Suitable Living Environment for Federally-Assisted Since 1949 it has been the national goal to provide "a decent home and a suitable living environment" for every American family. Increasingly Congress has realized that structures alone are not enough. Good design, community and commercial facilities, tenant participation and employment and supporting social services are essential if we are to get away from the drab, isolated, deteriorating and vandalized prisons that constitute too much of our assisted housing. Sections 211 (barring the exclusion of tenants from public housing governing boards, 903 (authorizing advice and assistance to low-income tenants and homeowners in. Federal programs) and 904 (training grants for low-income housing management) of the 1970 HUD Act are evidence of this recognition. The administration bill attempts to turn back from this development in several respects, 1. Nondwelling Facilities RNHA 3 authorized the Secretary of HUD to set maximum mortgage amounts based on 110% of area prototype costs for new dwelling units of various sizes and types suitable for low-income families assisted under the Act. As presently worded no allowances is made for the additional cost of community or commercial facilities where necessary. NTO recommends that a proviso be added increasing the mortgage maximum to 125% of prototype costs where these facilities are shown to be needed. Under $501(1) the Secretary may approve the inclusion of nondwelling facilities in multi-famil projects only if they contribute to the economic feasibility of the project. The economic benefits to the project of some social services such as a day-care center, playground or co-operative laundry are not always easy to quantify in advance and an unnecessary barrier is erected thereby. The burden should be reversed: such as facilities should be approved, where necessary unless they imperil the economic feasibility of the project. 2. Exclusion of Two-to-Four-Unit Housing Recent studies conclude that small multiunit dwellings with a residen landlord are better maintained tran large complexes or where the landlord is absentee. Section 402(h)(2) of RNHA limits homeownership assistance to single-family dwellings and §501 (h) (1) limits project insurance and assistanc to five or more dwelling units. NO urges that an eligible two-to-four-unit owner should be able to receive $402 assistance for the mortgage payment attributable to the unit he lives in and $502 assistance for the other one-to-three-units if occupied by eligible tenants. 3. Nonfinancial Homeownership Assistance Difficulties in the present administration of the $235 program indicate that several types of nonfinancial assistance to low income home purchasers is necessary; first, protection against unethical sellers and selling practices; second, training and counseling in home maintenance; third, liasion with mortgage lenders to erase problems with delinquencies especially where the purchaser has irregular income sources. covered by the administration bill (705). 4. Declaration of Policy in U.S. Housing Act Only the first is The proposed policy provision (RUSHA 2) completely neglects the broader social objectives of the public housing program: the provision of necessary social services, tenant participation in all phases of activity from construction, to management and policy-making, and equity and partnership in the landlord-tenant relationship. The omission of these objectives, together with the deletion of express rule-making authority given HUD in §8 of the present Act, will prevent any effective leadership by HUD to improve local housing authority management policies. Too many local housing authorities are run by commissioners who have no understanding or experience of the problems of poor people and, in some cases, are out of sympathy with the social objectives of the program they administer. The policy declaration must be strengthened and should provide that local housing authorities must have tenant representatives on their governing bodies a presently successful innovation in the more progressive authorities. It has been a basic policy since the Economic Opportunity Act of 1964 that the relief of poverty problems cannot take place without the full participation of low-income persons. 5. Leased Public Housing Finally, the administration bill deletes the requirement of §203 of the '70 HUD Act that a minimum of 30% of new annual contributions contracts authority in public housing be reserved for leasing units in private accomodations. This reservation is sound. The leased housing program has been under-utilized by local housing authorities. Yet it promises an increased variety of housing types and locations to tenants; utilizes the existing housing stock and has far less political visibility. A neighborhood may oppose high rise public housing projects but not scattered leased units private single-family homes or apartments. NTO urges that the 30% minimum reservation be retained. The CHAIRMAN. Mr. Phillips, I understand you were going to add something to that. Mr. PHILLIPS. Mr. Chairman, I have prepared my testimony. Mr. PHILLIPS. I would like to do that. The CHAIRMAN. I think it would be as well to proceed with that, and then we can direct questions to all of you. The same thing goes with your paper. Your paper will be printed in full in the record. You have an attachment that is rather lengthy. I think perhaps it would be proper to make that a part of the committee files rather than lengthen the printing of the record. Mr. PILLIPS. Mr. Chairman, the attachment that you refer to is a detailed exposition of the proposal that I plan to make to the committee. It contains important details which I have not included in my statement. I do not believe the statement would be complete without that being part of the record. The CHAIRMAN. Very well. If there is no objection, it will be included. Mr. PHILLIPS. I appreciate that. STATEMENT OF KENNETH F. PHILLIPS, DIRECTOR, NATIONAL HOUSING AND ECONOMIC DEVELOPMENT LAW PROJECT, UNIVERSITY OF CALIFORNIA, BERKELEY Mr. PHILLIPS. Mr. Chairman, my name is Kenneth Phillips, and I am the director of the National Housing and Economic Development Law Project, which is a center funded by the Office of Economic Opportunity to provide a basic backup facility for Legal Services lawyers, of whom there are about 2,500, as you well know, representing low-income people, without fee, around the country. Our center provides specialized counseling to Legal Services lawyers, in the area of housing law and also economic development. In the housing field, our work begins with landlord/tenant problems but goes well beyond that. We are involved not only in research, but as co-counsel in most of the important housing cases around the country. These include cases in the areas of urban renewal, model cities, in the FHA field, and in public housing. We have been fortunate to work very closely with the National Tenants Organization in important negotiations that they have had with the Department of Housing and Urban Development. On the economic development side, we provide support to some 30 community development corporations. These are nonprofit corporations, concerned with the promotion of economic development in urban and rural poverty areas in many parts of the country. My comments will be on two points. The first will be the need, as we see it, for a basic reorientation of the Federal housing programs. Secondly, I will speak of certain broadly felt concerns about the several community development laws bills that are pending before this and the House subcommittee. As to the first point, the need for basic reorientation of the Federal housing programs, in our experience and that of other legal services lawyers-much of the existing housing that our clients live in is below minimum standards of code, decency, or civility. It is fre quently rat-infested; garbage is strewn all over; windows are broken. A second major consideration as to this housing-and this was fully supported by the Douglas Commission-is that the tenants who live in it commonly have to pay so large a portion of their limited income for rents that the money remaining is not sufficient for the basic minimum costs of food, clothing, and other necessaries. Most of this housing is going to be lived in for a long time. If we project out production figures, on the most optimistic assumptions and take out of the equation housing that is coming off the market and, consider new family formations, the fact of the matter is that that housing is going to be lived in for a long time. Housing that ought to have been replaced long since, is going to be lived in for 10 or 15 more years. But this housing does not receive the benefits of any of the much vaunted Federal housing programs, with the minimal exceptions of section 23 leasing and the used housing programs under section 235. but they are minimal. The National Housing Act requires that the people who live in this housing be given the highest priority; yet while the Federal programs do not reach this kind of housing, the market forces do. Costs are going up relentlessly. The cost of property taxes, which is a direct tax on housing, has gone up steadily as property tax has become the major means of local support for education and welfare. All of the costs of operation and maintenance continue to go up. And when that happens the landlords' common decision is to cut back and not spend 5 cents more on the building than he has to spend. He can't cut back on his property taxes, or on his financing mortgage payments, if he is lucky enough to have financing. The only thing he can cut back on is operation and maintenance costs. When he makes that decision and cuts back on these costs, further deterioration becomes inevitable. If a repair needs to be made and that repair is put off, the problem does not go away. The economic result, in addition to the human cost, is the waste of thousands of units, many of them potentially good units. It is very expensive, as we have heard this morning, to replace that housing. The abandonment process is only the visible part of this iceberg. The pattern of deterioration is a much broader phenomenon. It is paralleled by a second problem; that is, the cutback of municipal services. You see, as you walk through declining areas of cities, not only the deterioration of buildings, but also the results of cutback, in garbage pickup services and police protection services. The two form a parallel lines of decline. The housing programs that cost the Government billions of dollars every year are not on target, they are not reaching these problems. It has been proven time and again that they are not reaching the lowest poor and that they are not adequate to the needs of the cities. Figures recently published in the National Journal show that if HUD continues to operate at its present rate the total cost of obligations, under sections 235 and 236 through 1978, during the life of those mortgages will be $200 billion. The reason the programs are not on target, respectively, is that the builders and real estate interests have magically metamorphised the reality of the collapse of the inner city housing market into a need to build more and more houses in the suburbs. The primary need at this |