STATEMENT OF PAUL GOLZ, PRESIDENT, AMERICAN INSTITUTE OF HOUSING CONSULTANTS, INC., ACCOMPANIED BY CHARLES L EDSON OF FROSH, LANE & EDSON, WASHINGTON, D.C., GENERAL COUNSEL Mr. GOLZ. Well, thank you, Mr. Chairman, for giving us the opportunity to be here and I take the liberty, with your permission, to summarize the brief statement we have submitted. My name is Paul Golz. I make my home in San Francisco. I am the president of the American Institute of Housing Consultants, an organization of consultants to sponsors of federally assisted housing projects. Accompanying me is Mr. Charles L. Edson of Frosh, Lane & Edson, Washington, D.C., general counsel to our organization. First, I wish to thank you for this opportunity to be heard on the subject of Federal housing legislation, a subject of vital concern to our members. As consultants to developers and sponsors of low- and moderate-income housing under all the Federal programs, we must live with this legislation and its resulting rules and regulations on a daily basis as our job is to make these programs work in the real world. Thus, my comments today represent no theoretical ruminations about housing policy but result from vivid experiences of day-to-day practitioners. We support the general thrust of section 101 of the Housing Consolidation and Simplification Act, the consolidation of the confusing array of existing insurance and subsidy programs into eight basic authorities with relatively simple and flexible terms. The need is obvious: even professionals such as ourselves have difficulty dealing with the present jumble of numbers which mask a welter of confusion. However, the committee should bear in mind that this effort is mainly a housekeeping and tidying one and is not directed toward the major substantive problems facing the section 236 program today: having enough subsidy available to build an economically feasible project for the lower and moderate income families that the program was designed to benefit. We hope that in the near future your committee will focus on ways to broaden and deepen the section 236 subsidy mechanism so it can be a more effective tool to house those who need it. We support the prototype concept set forth in section 3 of the proposed act, provided that realistic prototype costs are adopted for each area involved. If we are to profit from the public housing experience of establishing prototypes we must be ever vigilant to see that prototype limitations do not become a more rigid restriction than the fixed costs which they replace. In this regard, we suggest that the Secretary of HUD, before promulgating prototype figures, consult with an advisory committee composed of housing builders, developers, and consultants to the industry so that a realistic input can be made on building costs in the various areas of the country. We applaud the provision in section 502 (f) (2) allowing a subsidization of 20 percent of the families living in what is now designated as section 236 units to a greater extent than normally provided in the program. These families would only have to pay 30 percent of the basic rental instead of the 100 percent which is normally the case. However, we do not believe that this provision should replace the rent supplement program but, on the contrary, that the rent supplement :program be expanded in the following ways: The law now limits to 40 percent the number of units in a section 236 dwelling that can be rent supplemented. We believe that this figure should be raised to 60 percent to accommodate a larger number of families requiring such special assistance. Of course, the authority to I have 100 percent rent supplemented units in market rate financed buildings should be continued. The provision in appropriation riders which requires a local governing body resolution in order to have the program in a given community should be deleted. This provision frustrates the purpose of the program in many situations. We realize that your body is powerless to remove this restriction but urge you to use your good offices toward this end. If I may dwell on this for just a moment, we consider the availability of rent-supplement funds essential in order to develop socially signifiI cant projects, to accomplish economic integration. We cannot do so if we are stopped by local bodies in our efforts to provide some of the housing units in a given project for people who are not able to pay even the low, subsidized units under 236, and while your committee may not be able to accomplish a waiver of these present requirements, we urge that this committee use all the power it has to make this change effective. Related to this latter discussion, in its Housing and Urban Development Act of 1970, the administration proposed the elimination of the requirement now set forth in section 23 (a) (2) of the U.S. Housing Act for local governing body approval of the location of leased housing in the community. The administration's draft bill of January 1971 also contained this salutory deletion but its final version retained the requirement of local government approval. We feel that section 23 (a) (2) frustrates the placement of leased housing where it is very much. needed and thus endorse the administration's 1970 provision removing this roadblock. This is about in the same vein that I mentioned. before. I would now like to address some comments to the Housing and Urban Development Act of 1971 (H.R. 9688) because it contains many new and thoughtful concepts in the housing area. We state our strong support for title III of that act providing funding for improved counseling and management activities in federally assisted housing. As more and more concerned people in the field are beginning to realize, we must give real attention to the increasing management problems and, even more important, channel funds in that direction. We applaud the mechanism of utilizing portions of the HUDFHA insurance premium toward that end. In that regard, we believe that section 302 (a) should be amended to make clear that all of the mortgage insurance premium charged by HUD-FHA during the construction period-which, by the way, is 1 percent on the balance of the loan-and during the first year of occupancy should be devoted to improved management and tenant counseling services. Let us make clear that we support title III as an addition to, not a replacement of, the tenant counseling provisions in section 237 of the National Housing Act. We next direct ourselves to title V of the act concerning housing bloc grants to State and metropolitan housing agencies. These agencies would be given certain crucial powers, including the power to allocate section 235, 236, public housing and rent supplement funds within their respective jurisdictions. We urge a thorough examination of this approach to assure that we are not creating just another housing bureaucracy. Even more important, we want to assure that these valuable allocations will not be given out on the basis of local political considerations. Although some believe that political considerations are taken into account by HUD in making subsidy allocations today, we feel that the proposed transfer of this authority to a local political unit could produce a far more undesirable situation. We conclude with the following general remarks. First, we commend Secretary Romney and his HUD staff for the efforts that they have made in administering the Federal subsidy programs. During this fiscal year, these programs will account for nearly 600,000 unitsan amazing total in comparison with the fewer than 1 million units created by the public housing program since its inception in 1937. As previously emphasized, these programs are overlapping, complicated and new. Yet, the record indicates that HUD has used these programs as excellent production tools. We feel that much of the processing difficulties HUD faces arises from lack of sufficient staff and we urge increased funding in that direction. However, HUD-FÍA will never have enough staff if its personnel feel that their role is to redo and not review applications submitted to them. In this regard, we feel that knowledgeable housing consultants serve a real purpose in presenting applications to HUD-FHA that do not require the meticulous massaging done in some offices. Finally, AIHC would like to reiterate the basic proposition that for now and the foreseeable future, if low and moderate income families are to be housed, there must be some subsidization. We have all read the warnings of the President's third anual report on the escalating costs of such subsidization: that by 1978 the Federal Government will be paying out at least $7.5 billion annually for subsidy. Frankly, Mr. Chairman, this does not frighten us. We do not think the world will come to an end when in 1975 we conservatively will have a Federal budget of about $325 billion, if approximately 2 percent of that amount is spent on housing. We have heard no clarion call of alarm when in today's budget of $200 billion, approximately the same percentage is spent on farm subsidies. Our only complaint about this projection is that it is too low to meet our housing needs of our Nation. Thank you, Mr. Chairman. (A letter received from Mr. Golz, and a printing of his prepared statement are as follows:) MUTUAL OWNERSHIP DEVELOPMENT FOUNDATION, Hon. JOHN SPARKMAN, DEAR SENATOR SPARKMAN: Making reference to the Housing Consolidation and Simplification Act of 1971 we respectfully request that you authorize the reading into the records of your Committee the statements we take the liberty of making below. We have refrained from asking to come before your Committee to testify knowing of the great number of organizations and individuals who want to be heard on this issue and the limited time your Committee has to accommodate them all. This shall, however, be no reflection on the importance we attach to our opinions as expressed further on. We are of course ready to appear before your Committee if this should be the committee's expressed wish. As an organization actively engaged in the implementation of Government Housing Programs we are acutely aware of their essential importance in meeting the housing needs of this Nation. Dealing on a daily basis with the governmental agencies responsible for administering these programs and the numerous regulations by which we are to be guided, we have come to conclusions which we think could improve the record of accomplishment-namely the best quality of housing at the lowest possible cost on a socially significant basis for eligible low and moderate-income families in need of decent and safe shelter calling for a housing expense they can afford. Since we are dealing here with a most complicated and voluminous legislation and being aware that almost each segment thereof has been addressed to, we have chosen to limit our comments to only a few but essential points. 1. Interest-subsidy funds under Section 236 shall be allocated to otherwise qualified projects only if such project proposal contemplates that a limited percentage of future occupants will be families who may be in need of and who otherwise are eligible for such further assistance as rent supplement affords; and that; In cases where the percentage of project-occupants is limited to no more than 20% of the housing units in such project the availability of rent-supplement funds shall not be predicated by the existence in the locality where such project is located of an approved Workable Program or in lieu thereof have an appropriate resolution passed by that locality's governing body. This is being proposed to assure greater success with the use of federal aids in developing housing for low and moderate-income citizens. We must make every effort to set the basis in 236 projects for "economic integration" and further not permit local governing bodies to prevent, for whatever reason, such economic integration and also prevent us from making available housing for some of the people in that locality who depend on maximum assistance to afford decent and safe shelter. 2. Interest-subsidy funds under Section 236 shall be made available in each jurisdictural area of a given HUD/FHA area office on the basis of a quota that provides that a given percentage of 236 funds allocated to a given area must be utilized to fund such proposed projects as are planned for cooperative ownership and have been otherwise considered feasible and eligible. This is being proposed because experience has shown that: Projects financed under Section 236 and operated as cooperatives have a record of substantially less defaults than 236 rental-projects produced for limited dividend or non-profit ownership; Cooperative projects by and large have little management problems; a lower crime rate among their occupants; greater stability and generally are of greater social significance; Cooperative projects are currently not being funded in many HUD/FHA offices based on the personal biased opinion of those in charge as can be testified to by the non-existence of 236 cooperatives in many states (or section of states where there is more than one HUD/FHA office) and only very limited few elsewhere-while in the few areas where there is receptiveness in a HUD/FHA office many cooperatives are being successfully produced and operated-such as Michigan, California (San Francisco & Los Angeles only), Indiana and Missouri. It is inconceivable that one of the most successful approaches in implementing federally-assisted housing programs is not favored by official policy. It is our opinion based on 20 years of experience in this field that the only way to change this is by appropriate legislation. May we thank you for this opportunity to share our views with you. PAUL GOLZ. Executive Consultant. STATEMENT OF PAUL GOLZ, PRESIDENT, AMERICAN INSTITUTE OF Mr. Chairman: My name is Paul Golz. I am President of the American Institute of Housing Consultants, an organization of consultants to sponsors of federally assisted housing projects. Accompanying me is Charles L. Edson of Frosh, Lane and Edson, Washington, D.C., general counsel to our organization. First, I wish to thank you for this opportunity to be heard on the subject of federal housing legislation, a subject of vital concern to our members. As consultants to developers and sponsors of low- and moderate-income housing under all the federal programs, we must live with this legislation and its resulting rules and regulations on a daily basis as our job is to make these programs work in the real world. Thus, my comments today represent no theoretical ruminations about housing policy but result from vivid experiences of day-to-day practitioners. We will first comment on the Housing Consolidation and Simplification Act of 1971 and then on provisions of the Housing and Urban Development Act of 1971. We support the general thrust of Section 101 of the Housing Consolidation and Simplification Act, the consolidation of the confusing array of existing insurance and subsidy programs into eight basic authorities with relatively simple and flexible terms. The need is obvious: even professionals such as ourselves have difficulty dealing with the present jumble of numbers which mask a welter of confusion. However, the Committee should bear in mind that this effort is mainly a housekeeping and tidying one and is not directed toward the major substantive problems facing the Section 236 program today: having enough subsidy available to build an economically feasible project for the lowerand moderate-income families that the program was designed to benefit. We hope that in the near future your Committee will focus on ways to broaden and deepen the Section 236 subsidy mechanism so it can really be an effective tool to house those who need it. We support the prototype concept set forth in Section 3 of the proposed Act. provided that realistic prototype costs are adopted for each area involved. If we are to profit from the public housing experience of establishing prototypes, we must be ever vigilant to see that prototype limitations do not become a more rigid restriction than the fixed costs which they replace. In this regard, we suggest that the Secretary of HUD, before promulgating prototype figures, consult with an advisory committee composed of housing builders, developers and consultants to the industry so that a realistic input can be made on building costs in the various areas of the country. We have much the same comment directed to the income definitions set forth for the eligible recipients of the present Section 235 and 236 programs in Seetion 402 (i) and 502(j) (2) of the proposed Act. HUDs figures show that the proposed limits based on median income will prove more liberal in all but a few instances. Assuming this to be true, naturally we support this change. However, we are making our own examination of this subject and will inform the Committee should further liberalization be needed. In any event, we believe that if the median income test is established, the Secretary of HUD must have discretion to vary the ceiling when circumstances require as provided in the proposed legislation. We applaud the provision in Section 502(f) (2) allowing a subsidization of 20 per cent of the families living in what is now designated as Section 236 units to a greater extent than normally provided in the program. These families would only have to pay 30 per cent of the basic rental instead of the 100 per cent which is normally the case. However, we do not believe that this provision should replace the rent supplement program but, on the contrary, that the rent supplement program be expanded in the following ways: The law now limits to 40 per cent the number of units in a Section 236 dwelling that can be rent supplemented. We believe that this figure should be raised to 60 per cent to accommodate the large number of families requiring such special assistance. Of course, the authority to have 100 per cent rent supplemented units in market rate financed buildings should be continued. The provision in appropriation riders which requires a local governing body resolution in order to have the program in a given community should be deleted. This provision frustrates the purpose of the program in many situations. We realize that your body is powerless to remove this restriction but urge you to use your good offices toward this end. Related to this latter discussion, in its Housing and Urban Development Act of 1970, the Administration proposed the elimination of the requirement now set forth in Section 23(a) (2) of the United States Housing Act for local governing body approval of the location of leased housing in the community. The Administration's draft bill of January 1971 also contained this salutory deletion but its final version retained the requirement of local government approval |