The guaranteed annual payments of interest and capital can be used to draw in one group of satellites, the investors. Businessmen, builders, unions, and tenants follow. The employees in the public-housing agencies are the local headquarters staff of the machine. The tenants are the infantry who deliver the votes. Tenants are corralled and corrupted in one of two ways. First, the PHA has the power to decide where to put the projects. Throughout this land, there are many millions of families with incomes under $90 a week, or even with incomes under $64 a week, the official maximum set in 1947 for eligibility to become tenants in housing projects. Naturally, various allowances must be made for these figures. They include young people just starting out in life; also, many families have two or more wage earners. However, many regulations give the PHA almost unlimited choice of where to put its projects. It can find its "low-income families" anywhere, under the broad definition it uses. So practical politics is free to decide to put the Government houses where they will "do the most good"-that is, where a critcal vote for Senator or Congressman or the electoral college is in doubt. The well-known pattern of political patronage was worked out by WPA. Since it could find needy families anywhere, it simply became a matter to find them exactly where they would be most helpful to the party vote. Thus, when the agricultural vote was in doubt, relief funds were spent in farm States. When city votes became important, the "needy" in the city increased in numbers very rapidly. When a few critical States with a large bloc of electoral votes were hanging in the balance "relief needs" went up in those areas. Housing is the WPA of prosperity. It doubles or trebles the corruption beyond anything ever dreamed of under the old WPA. It will become the crucial but permanent governmental spending fund for propaganda, for votes, for reelection. It is the 1940-48 speeded up version of the slogan of the 1930's "spend and spend, tax and tax, elect and elect." The other way to corral the votes of tenants is direct. We saw references to direct action in Congressman HARNESS' records. But the pressure need not be crude. Most of the votes in areas with public housing would naturally vote for the public-housing party. It is easy to fill the houses with people who see eye to eye with the party in power, the spending party. It is easy to move tenants out who vote against the party building their houses. In the big cities the tenants in some districts vote 92 percent for that party. Langdon Post, who was regional director for San Francisco, for the PHA, said the following in his book, Challenge of Housing: "Danger signals flash from the political thinking and opportunities inherent in a vast public-housing program. This last plum is a new brand of political fruit which has enormous possibilities of exploitation. Imagine the golden opportunities latent in a $500,000,000 housing program in New York City. Commissions, profits, fees, jobs, and finally apartments for at least 200,000 voters. It is a bonanza beyond the wildest dreams of the most optimistic politician." This is the reflection of an advocate and administrator of experience in public housing. When the Federal Government puts a $500,000,000 expenditure into the budget of a city government, the officials of that city look to Washington, and not to the little taxpayers, who pay only hundreds or thousands. Here again we see the development from WPA, WPA was an outright political subsidy paid to cities to meet part of their budget expenses and bring the mayors and other local leaders into line behind the spending administration. WPA repaired streets, it repaired public buildings, it paid a good part of the cost of municipal housekeeping. In return the mayors were required only to speak well in public of the needs for WPA and to get out the vote in the districts where WPA funds were spent. Mayor LaGuardia, of New York, got the largest slice of WPA money. He headed the mayors' conference, which urged on Congress the need for even larger appropriations for WPA. Federal contributions for housing and slum clearance will give city governments vast varieties of funds to spend in exchange for votes. It is strange that so little attention has been paid to Federal subordination of our cities, Federal bribery of city officials with gifts disguised as welfare for the poor, Federal intervention in local government policies, Federal punishment for refusal to follow a centralized policy, Federal impoverishment that makes cities weak and dependent on the taxing powers of the central government. A great deal of attention has been paid to the way the central government took over control of cities and Federal states in Germany. The same thing is happening in England and it is happening here. Here we need no violence and no pressure. It is all being done with money. And it was no less authority than Mr. James A. Farley who just recently reminded us that the New Deal, above all else, depended upon "the boughten vote" to remain in power. Where the cities of a nation come to depend more on the central government for their revenue than they do on their own taxpayers, the cities are no longer self-governed. They are driven and managed, by silken reins or by crude pressure, from Washington. When the cities of a nation all get their policy laid down for them by the central government and can be punished if they fail to go along, the constitutional foundation of the Federal system is giving way. The cities are being coordinated into one huge monolith central State apparatus designed in and directed by Washington. To sum up, the Federal housing bill must be defeated for moral, economic, and constitutional reasons. The sordid past of public housing schemes here at home and abroad prove beyond a shadow of doubt that the fraudulent promises are not met. The really poor and trluy deserving people are simply cheated. That kind of deception is immoral and should not be encouraged by any part of our governmental system, whether national or local. The devastating impact upon our free economy of a public-housing scheme with billions of Federal dollars has been pointed out in detail. Even if the Federal Government initially limits itself to 10 percent of housing, its wastefulness and corruption must crush any free-building enterprise and drive it out of business through inconceivably unfair competition. Finally, but above all, the constitutional integrity and political self-government of this Nation demand that a drastic stop be put to any further expansion of a system of legalized party tyranny by spoils. Give the corrupt politicians in Washington and elsewhere these billions of housing dollars and you can bid farewell to the limited, constitutional government under which this country grew into the productive, inventive, and humanitarian giant of all time. Gentlemen, let us not cross the bridge of public bribery into the alien world of state socialistic compulsion. Let us stay on this side of that bridge and here remain free, guarding our constitutional government, that our children and children's children may know the everlasting meaning of the American life, liberty, and pursuit of happiness. Mr. TALLE. Does any other member choose to ask any questions? As I understand it, then, the open hearings on the pending bill are now concluded and on Thursday morning at 10 o'clock the committee will meet in executive session to consider the bill. Tomorrow morning at 10 o'clock the committee will consider H. R. 6570 in open hearing. (Whereupon, at 5 p. m., the committee adjourned.) 75674-48- -68 ADDITIONAL STATEMENTS AND INFORMATION SUBMITTED TO THE COMMITTEE ON THE SUBJECT OF HOUSING Statement of Charles F. Sander, National Legislative Counsel, Army and Navy Union VETERANS MUTUAL COOPERATIVE HOUSING CORPORATION Recommendations to the United States Senate and House Banking and Currency Committees from the Army and Navy Union, United States of America, endorsed by the United Veterans Board of New York City Membership: United Spanish War Veterans, Veterans of Foreign Wars, Disabled American Veterans, Catholic War Veterans, Jewish War Veterans, Army and Navy Union, United States of America. THE PROPOSAL ARTICLE 1. Veterans.-Thousands of veterans are without homes and apartments and are desirous for joining together for mutual ownership on investment in single homes and multiple dwellings. It is agreed that private capital cannot build homes and houses for profit due to the high cost for materials and labor. It is therefore proposed: ART. 2. Housing.—It is proposed to join together groups of responsible veterans and form a mutual cooperative housing corporation under States housing laws-a nonassessable, nonprofiting stock corporation for investing in land and new residential homes and houses. ART. 3. Corporation.-The corporation shall have articles providing for the right to buy idle land, contract to build homes and houses, enter into agreement for mortgage loans, sales of bonds, and do anything and everything under the housing laws for the good and welfare of the corporation's stockholders. ART. 4. Investors.—The veteran investor shall join with other home-seeking veterans and organize a committee who is to follow the plan as laid down to wit: (a) Agree to fill out an application covering right for screening, character, job status, wages, financial responsibility, family number, rooms desired, terms agreeable, manner for accepting rules and regulations on management, etc. ART. 5. Private capital. The parties to the group will approach a financial institution interested in erecting new residential homes and houses under terms as put forth by the investing veteran group. 2. Contract terms shall be for the financial institution to buy land as recommended by the veteran group; erect the number of rooms as contracted for by the group; upon completion, agree to deed over in fee simple homes and multiple dwellings erected; terms acceptable to veteran investor, acceptance on the part of the insurer (the Government), approved by the State and municipality where erection of homes and houses take place. ART. 6. The Government.-Under laws of the Congress and Senate of the United States granting authorization and power for financial aid and assistance as made and provided for, incorporated in the NHA or RFC, parties to the agreement shall proceed for the purposes intended. Special agency shall be initiated by the Government for protection and benefits all parties to the agreement are entitled to. ART. 7. States, etc.-States laws shall be made effective on aid to the veteran investment, local laws for special concessions for economy, and other housing laws necessary to meet. ART. 8. Example.-A cost on investment per room based on today's estimate room cost of $2,000 per room (land and building), cost on management, operation, etc. (rough figures), fairly accurate, follows. Capital, $7,000,000. Improved land and building (3,500 all accommodation rooms). Corporation shares, 1,000 nonassessable, nonprofiting. Annual income 500 3-room apartments, monthly rent $40; annual income return (12 months). $240,000 500 4-room apartments, monthly rent $50; annual income return (12 months). 300,000 Total annual income (1,000 apartments). 540,000 Interest, 3 percent per annum, $4,000,000 mortgage.... Annual management-operation cost $120,000 120,000 60,000 90,000 35,000 1. Taxes, assessed value $3,000,000, 3 percent per annum. 2. Fuel (oil, coal), 3,500 tons, $10 a ton, per annum_ 3. Repairs allow first 5 years' estimate per annum. 20, 000 4. Wages, executive and personnel per annum.. 5. Insurance, liability, fire, per annum, estimated_ 6. Light service per annum. Total investment and management-operation cost--. 30, 000 10,000 2,500 487, 500 52,500 Balance remainder at close of annual cost and investment_-_ Insurance fund set aside for protection to payment of mortgage and bonds rate of one-half of 1 percent from balance. ART. 9. Planning.-The corporate investment is applicable to groups of small homes, two-family houses, and multiple dwellings. ART. 10. Special.-Where special grants are had-10-year period of tax exemption on improvements made (only land taxable), deferment on interest covering equity bonds, cost per month on rooms is lowered. 2. Can be used for substitution for tax housing subsidies. SPECIAL FEATURES ARTICLE A. Classes.-There are three classes of the cross section of our American families; the first, those who must receive financial aid and assistance through tax subsidies for low-cost housing developments; the second, the middle-class American families whose wage income per week averages from thirty-five to fifty dollars, by mutual cooperative housing; the third need no help as they come under the high-wage bracket income-earning class, we treat with the majority, the second class. ARTICLE B. Capital.-Private capital cannot build at today's high cost for.room construction unless room rental per month can be paid, equal to $20 a room. Under this plan millions of homes can be erected, financial institutions with billions lying idle can find a profit-sharing market for protective investment, the Government protected on insuring mortgages, protected on purchase of equity bonds for resale to the public, with the veteran investors able to meet the investment cost. A drop in material costs adds to the protection on lower rental investment in mutual cooperative housing; also special articles for unemployment, sickness, death; investment can be agreed upon for an absolute guaranty against loss on investment and homes; again developing character neighborhoods with an investment in the area is an attraction, placing the building industry in the security market will destroy speculation which creates high costs for rooms, the years for prospering business, creating, steady employment with high-wage income for labor add to the feature for such operations, and the reduction in cost for crime, sickness, defeat of lowering the morale by family congestion should be taken into consideration for public and Government support and endorsement of the proposal. ARTICLE C. Agency.-In order to succeed in this enterprise it will be necessary to make a veterans division of housing a part of the agency (NHA or RFC) for the purposes intended-educational, service, and liaison. The committee respectfully urges this. A resolution now in the possession of the House World War Veterans' Affairs Committee chairwoman if enacted into law by the Congress and Senate of the United States, will provide the necessary laws and machinery to make the proposed veterans mutual cooperative housing corporation a decided success. Respectfully submitted. CHARLES F. SANDER, National Legislative Officer, Army and Navy Union, United States of Endorsed by United War Veterans Board, New York City, President C. F. Sander. HOW HONEST IS PUBLIC HOUSING? What about this housing business? Are we really short of housing? Can private enterprise produce sufficient housing? Do we need more Federal subsidies and guaranties? Do we need a vast public-housing program, like the Taft-Ellender-Wagner bill, passed by the Senate but not yet by the House? Whence comes the pressure for public housing? Let's look at the situation realistically. We are short of housing, but not nearly so short as propagandists assert. They say we need 10,000,000 new units. In view of the private building last year, the largest building year save one in our history, and since construction begun so far this year runs 20 percent above last year, 10,000,000 units is a fantastic exaggeration. This exaggeration is for a purpose a purpose we shall discuss presently. Sound studies in housing convince us we need no more than 1,000,000 new housing units. Can private enterprise supply them? Yes, provided that (1) Government action does not continue to inflate the dollar, thus raising prices above the means of purchasers; (2) Government exports do not deplete materials available for construction; and (3) Government itself withdraws as a major factor in housing. Those who advocate public housing, and those who advocate large-scale subsidies and guaranties, usually say "We must have low-cost housing. If private enterprise can't do it, then Government must." This reply assumes that private builders cannot produce sufficiently low-priced housing to meet the need. They can't do what they always have done. Let's see how the present situation came about. No solution can come out of ignorance. A sound solution may come out of facing facts. No builder can afford to spend $10,000 to build a house and then sell it for less than cost. What has made construction costs rise so sharply? The fundamental cause is the fault of Government itself. Government alone is responsible for the shrinkage in value of the dollar. The inflationary spiral (see council letter No. 175) cannot be laid at the door of American business. Since the publication of letter 175, 8 months ago, and despite efforts of large American corporations to keep prices down, the policies of the Federal Government have made inevitable further rises in the inflation spiral. If this trend is unchecked it will end in the ruin of the American economy. A second factor is the war-created shortage of materials and labor. New construction, normal for a growing population, lagged greatly from 1940 until very recently. When materials and labor are short, both are bid up in price by the law of supply and demand. This law, being one of nature's own, has never been repealed. Governments which pretend to repeal it, and act as if their policies have repealed it, sooner or later always come to grief. At any rate, the builders of America are not responsible for it. A third factor is the rise in the proportion of labor cost to the whole cost of construction. This is not the same as the rise of material and labor cost. It has proceeded from different causes. Two primary elements combine to fix the labor-cost proportion in housing construction. The first is the price paid to labor. The second is the actual productivity of that labor. If wages go up equally with other costs, and production remains constant, the proportion of labor cost remains the same. If labor cost rises faster and production remains constant, the labor-cost proportion becomes greater. But if the labor wage rate rises and at the same time labor's productivity sharply declines, the labor cost factor swells out of all proportion and radically pushes up the final cost of housing. This is precisely what has happened. Private builders did not do it—it has been done to them. Labor productivity has been lessened by two devices: The slow-down and featherbedding. The slow-down needs little explanation. Men simply take longer to do the same work. Since they are paid by the hour, the labor cost relative to materials cost shoots up. Statistics and Economics of Housing, a Government publication, prepared this year for the use of the Joint Committee on Housing of the Congress, records certain of these practices. It shows, for example, that in 1940, on the basis of a survey of 64 cities in 28 States, it took 2.2 man-hours to install a toilet. In 1946 it took 3.6 man-hours-an increase of 63.6 percent. Built-in tubs and showers, installed in 6.1 man-hours in 1940, took 9 man-hours in 1946-an increase of 47.5 percent. The average number of radiators installed per day dropped from 6.9 to 4.6, a decline in efficiency of 33.3 percent. |