participation in the program (42 U.S.C. 3303(a)(2)) and, among many others, the requirement that cities develop and implement Workable Programs as a condition of eligibility for important federal assistances (42 U.S.C. 1451). The importance of these requirements is illustrated under the "Workable Program" statute. Under that law HUD is currently pressing localities in many parts of the country to expand the supply of low- and moderate-income housing; to provide relocation assistance for families and individuals displaced by government action, to provide one for one replacement of certain housing removed from the stock, where the vacancy rate is under 3%; and to permit participation of all persons, including low-income and minority persons, in the planning and implementation of all community development activities. In some localities across the country, city-wide citizen task forces are actively involved in Workable Program planning and project review. These groups are bringing to the < attention of city halls and the Federal Government, the real facts about housing deterioration, inadequate relocation facilities, and the absence of effective planning and are proposing practical alternative approaches. Their activities, including complaints and lawsuits they have filed, have, in many cities, exposed the severity and depth of the housing problem and have permitted HUD to use its considerable powers, pursuant to present performance standards, to minimize the diversion of federal funds away from critically needed programs for poverty and minority communities. Federal involvement of this kind, through performance standards, reporting and public disclosure requirements and supported by local participation is entirely consistent with allowing local flexibility and is essential to ensure that national objectives will be served. Finally, I share the concerns expressed by former HUD Secretary Weaver to the House Subcommittee on Housing on August 5, with regard to the failure of all of the proposed bills to ensure provision for effective participation by the intended beneficiaries of federal development programs, particularly low-income and minority citizens, in community program development and implementation. Across the country, community leaders are demanding a commitment to change and a meaningful role for themselves and their neighbors in making decisions that affect housing and neighborhoods, community economic development, education, local government, police, jobs and all other local issues. That participation is vital to ensure that government programs will be responsive to the real needs of the community. Neither government programs nor private sector initiatives will find acceptance without meaningful local participation. It is critically important that new laws enacted in this area support and do not undercut, community participation structures, such as Urban Renewal project advisory committees and Model Cities citizen organizations, carefully and painfully developed over the past five or six years. A savings clause should be included to protect these groups and the minimum requirements for effective participation should be reorganized and enacted into law. These include the following: 1. Localities must be required to provide to the public timely and accurate information on the precise programs proposed to be undertaken with community development funds; 2. This information must be in writing and must be made broadly available to all concerned groups and individuals; 3. Timely access to key decision makers and provision for independent technical assistance to community groups, must be provided. Without provision for these, local participation cannot be constructive and effective; and 4. Periodic reports on actual progress should be required and should be subject to the same public scrutiny and review as the initial programming. As a final point, provisions should be included to ensure direct representation of minority groups and the poor, and their organizations, on public bodies administering programs, such as urban renewal and public housing, intended substantially for their benefits. Long experience with these programs demonstrates that direct representation is essential if the programs are to be responsive to the Congressional purposes for which they were enacted. Conclusion In conclusion, and to summarize, a broad and growing recognition today exists that the federal housing programs, although large and costly, are not hitting the mark. The programs are not reaching the poor, for whom the law purports to establish the highest priority. The community development proposals before the Subcommittee, while they promise relief from the rigid categorical limitations of the past, threaten to undercut even the limited protections now available to ensure responsiveness of the federal programs to the needs of minority communities and the poor: These protections, federal performance standards and local community participation, need to be preserved and strengthened. Finally, new programs, such as the refinancing guarantee program outlined above, and, in due course, housing allowances, are desperately needed to improve the conditions of millions of people who otherwise will remain trapped in sub-human living conditions which have become a national menace and disgrace. UNIVERSITY OF CALIFORNIA, BERKELEY BERKELEY DAVIS IRVINE LOS ANGELES RIVERSIDE SAN DIEGO SAN FRANCISCO EDSITY SANTA BARBARA SANTA CRUZ NATIONAL HOUSING AND ECONOMIC DEVELOPMENT LAW PROJECT EARL WARREN LEGAL INSTITUTE BERKELEY, CALIFORNIA 94720 HOUSING LAW SECTION (415) 642-1811 ECONOMIC DEVELOPMENT SECTION (415) 642-5652 The Housing Consolidation and Simplification Act of 1971 Senate Bill No. S. 2049 The major purpose of the 1971 bill, insofar as the FHA-assisted housing is concerned, is to consolidate the existing FHA programs into two homeownership programs, one for unassisted home mortgages and the other for assisted home mortgages; and two rental housing programs, again one for unassisted and the second for assisted housing. This consolidation is superficially attractive because of the complexity, duplication and general chaos that exists in the legislation now in effect. Consolidation itself will not, however, cure all of the difficulties now being encountered in the implementation of the FHA programs because those difficulties do not necessarily arise from the untidy nature of the existing legislation. And the slowdown in production that will inevitably result from the consolidation of the programs must be considered. In addition to the consolidation, certain major substantive changes are proposed. The first eliminates the current statutorilyimposed maximum mortgage amounts. In their place, the Secretary is given power to determine the development costs of prototype units for each housing market area and to establish maximum mortgage amounts on the basis of those development costs. The second is to make permanent the Secretary's now temporary power to set maximum interest rates for FHA-insured mortgages. A third is to standardize maximum income limits for all FHA-assisted programs and to establish a new basis for determining those income limits. The fourth replaces the use of rent supplements in Section 236 housing with something entitled additional assistance payments. These substantive changes, other technical modifications and the need for new provision on FHA rent increase approvals, are discussed in the following materials. Section 2(c) - Special Risk Insurance for Older and Declining Areas Section 2(c) requires that, with certain exceptions, mortgage transactions must be determined by the Secretary to be insurable risks. One of the exceptions applies to a mortgage on a property "located in an older and declining area where there is a reasonable prospect for revitalization." This provision is designed to replace Section 223 (e) of the National Housing Act. That section authorized insurance of mortgages on properties located in older, declining urban areas if the Secretary found that "the area is reasonably viable giving consideration to the need for providing adequate housing or group practice facilities for families of low- and moderate-income in such to the property is an acceptable risk in view of such consideration." area and Section 2(c) introduces new statutory language to govern the determination whether a transaction in an older declining neighborhood is acceptable for insurance. Under the new section, there must be a reasonable prospect for revitalization whereas under the old section there had to be a reasonably viable neighborhood considering the need for housing. The question thus arises whether the new language reflects an intention, or would be read as reflecting an intention, to establish a stricter standard for insurance of mortgages in older declining neighborhoods. The language "reasonable prospect for revitalization" is ambiguous. One does not know whether the intended meaning is revitalization to a level of reasonable viability or revitalization to the level of perfect stability which has characterized the neighborhoods in which FHA historically was willing to provide mortgage insurance. If the intended meaning is the latter, then the standard would be more strict. Such a standard would be too strict because it would defeat the purposes of the addition of Section 223 (e) to the National Housing Act. Those purposes were to encourage the FHA to provide its mortgage insurance in neighborhoods in which there might be greater risk than in the stable white middle-class neighborhoods but in which there was a great need for FHA's activity. To reintroduce the old strict standards would be to discourage the FHA from operating in neighborhoods where the need is greatest. As a result, the language of Section 2(c) should be amended to include the standard now included in Section 223(e) along with the new standard created by the current bill as an alternative. amended, Section 2(c) would read: As "To be eligible for insurance under this Act, the mortgage an insurable risk, except that the Secretary may accept Section 3 Flexible Mortgage Amounts Section 3 authorizes the Secretary to determine prototype costs for producing assisted housing in each locality and provides that mortgages insured under the various programs shall not exceed certain percentages of those prototype costs. This method of determining maximum mortgage amounts replaces the statutorily-prescribed maximum |