TESTIMONY OF BETTIN STALLING, CHAIRMAN, COUNCIL ON COMMUNITY AFFAIRS, FBA, DISTRICT OF COLUMBIA CHAPTER OF FEDERAL BAR ASSOCIATION

Mr. STALLING. Mr. Chairman and members of the subcommittee, I appreciate the opportunity of being here to present the view of the council. My name is Bettin Stalling. I am a lawyer and I live in the District of Columbia. I should like to state some of the areas of my experience in real estate law, homeownership, and appraisals.

I served as counsel for the Appraisal Division of the Home Owners Loan Corp. and the Federal Home Loan Bank Board for approximately 5 years; and approximately 10 years as Chicago regional counsel for the Home Owners Loan Corp., which embraced 22 States. I served as chairman of the Illinois State Bar Association, section on real estate law, and chairman of the Real Estate Financing Division of the American Bar Association. I am a former national president of the Federal Bar Association and appear here on behalf of and as chairman of the Council on Community Affairs of its District of Columbia chapter.

Our council has given serious study to the various aspects of housing and this has involved a consideration of certain provisions of S. 698. The council has concluded that the critical housing situation is at the center of the present crisis in our city, affecting its welfare and safety. The Government's taking and threatened taking, for public use, the homes of owners who do not want to sell, is adding to the turmoil and trouble.

Senator MUSKIE. May I interrupt you, Mr. Stalling. That is another vote. I guess we had better go over and make it and come back. (Recess.)

Senator MUSKIE. Mr. Stalling?

Mr. STALLING. I think I was on the last paragraph on page 1. I state that our council has given serious study to the various aspects of S. 698 and concluded that the critical housing situation is at the center of the present crisis in our city, affecting its welfare and safety. The Government's taking and threatened taking, for public use, the homes of owners who do not want to sell, is adding to the turmoil and trouble. Families are being uprooted and losses are occurring in ever increasing numbers. Most adversely affected, in plain and simple language, are the poor, the elderly, the disabled, and people wo do not have the knowledge and capability for learning and understanding their rights. The undeniable fact is that the Federal bulldozer has stirred up distrust and bitterness and racial tensions.

The council believes that widespread individual homeownership is a stabilizing and beneficial influence in the community. Homeownership develops a greater sense of civic responsibility. It gives the whole family a stake in the community. Individual homeownership is proclaimed by the Government as good for the citizen and good for the country. Since the Government has long promoted and encouraged its citizens to purchase and own their own homes, it is the obligation and duty of the Government to foster and safeguard such ownership. Homes are acquired by the poor at great sacrifice, sometimes by all the members of the family. It is important and vital to public confidence and trust in the Government that an owner forced to sell his home for

a public improvement be treated fairly, and be compensated justly. Clearly, he should be no worse off after the taking of his home than before. Equity and justice demand that the homeowner should be made whole in his social and economic affairs to the fullest extent practicable and legal.

The council considers the relocation assistance provisions of title VIII desirable and beneficial. Since any money received is subject to Federal income tax, unless exempted by statute, it is suggested that S. 698 contain an express tax exemption provision. This is to assure that the assistance which title VIII provides will be fully available for its intended purposes.

The council's chief concern is with section 902 which provides that "the fair market value *** shall" be paid as compensation for properties puchased or condemned for public use.

The council believes that to make the fair market value the sole standard of compensation is unrealistic and unfair as applied to all homes. One of the basic rights under our Government is the right of private property. It is one of the most important rights guaranteed by the Constitution. The last clause of the fifth amendment reads: *** nor shall private property be taken for public use, without just compensation.”

The council considers that the fair market value is but one of the indicators of just compensation, and should be weighed along with other evidences when determining just compensation.

The fair market value is an appraisal concept, determined by appraisers, and geared to the marketplace. It is arrived at upon the assumption that the particular home property is on the market. But an owner who does not want to sell his home, does not have his home on the market. This is not a situation of determining the amount a willing seller is justified in accepting and a willing buyer is justified in paying for a property on the market. There is no warrant to substitute an appraisal concept of fair market value as the constitutional equivalent of just compensation.

Since the fair market value is a technical appraisal valuation, the services of a real property appraiser must necessarily be engaged. The council observes that the practical operating effect of section 902 would be to place in the hands of appraisers the function of determining the compensation to be paid for all future properties purchased or condemned by all Federal agencies. The unique social and economic circumstances and affairs of a given family in a particular home represent values which appraisers do not include in their limited and technical formulation of fair market value. Many home owners will suffer losses and hardships beyond the assistance provisions of title VIII if the fair market value becomes the maximum compensation for the acquisition. Rather than constituting the maximum, the fair market value should be the minimum, for no one should have his property taken for less than its fair value if such property were on the market. The council suggests that section 902 be amended to read as follows: SEC. 902. If the head of any federal agency acquires real property for public use in any State or the District of Columbia, by purchase or condemnation, the amount paid therefor shall be a just compensation as the head determines to be legal and proper so that those whose property is acquired shall not be worse off in their social and economic affairs than they were before the property is acquired.

In conclusion, the cost of improvements for public use should include the amount necessary to put individual homeowners, whose properties are taken against their will, in as good a position as if their homes had not been taken. The expense of doing this constitutes an element of cost, to be borne by all citizens, as are other costs of improvements. This is but fair. And the Government must be the very symbol of fairness. To be otherwise means the Government will continue to lose, not gain, needed public support of its ever expanding improvement programs.

Gentlemen, thank you for the courtesy of allowing me to present the views of our Council on Community Affairs.

Senator MUSKIE. Thank you very much, Mr. Stalling, for your excellent statement.

Our final witness on the final day of these hearings, is Mr. Harry Graham, legislative representative of the National Grange.

STATEMENT OF HARRY L. GRAHAM, LEGISLATIVE REPRESENTATIVE OF THE NATIONAL GRANGE

Mr. GRAHAM. Mr. Chairman, I have a relatively long statement which has been prepared which I would like to submit for the record and try to summarize in less time than I would spend in reading it. Senator MUSKIE. Fine. It will be included in the record in full. Mr. GRAHAM. There are some parts of it that I think are particularly pertinent and some which are more or less a statement of fact, but it is generally a very real support of this proposed legislation and gratitude to those who have sponsored it, because this, in our judgment, is an attempt to right a long-existing wrong which we hear a great deal about.

I would say to our friends from the Department of Defense if they were here that they may not have any problems with their takings, but this does not correspond to my correspondence. Some of the people are having problems, to say the kindest thing that could be said

about them.

This kind of problem starts when property has to be taken and especially when property is taken that has been in families for a long time, in determining their intrinsic values, and it becomes complicated when no compensating property is available. This frequently happens; not so much in the strip takings for highways as it is in the inundation takings for lakes and that type of project, where you move a whole community, or maybe three or four villages. Then you have a tremendous problem with social relocation, plus the problem of trying to find a comparable property when there is no comparable property. There is such a taking or a suggestion down in Kentucky, at the present time. We are having some correspondence on this, where they would take the most valuable land on all the forks of the Salt River and inundate it. Now, where a property owner could get comparable property in the State of Kentucky is a real problem.

So despite the fact that, as the previous witness pointed out, appraisers have certain rules and one of them is that the fair market price is when a man who is willing to sell but not forced to sell, agrees on a price with a man who is willing to buy but not forced to buy. Well, one of the four factors is absent in eminent domain. The man may not

be willing to sell. So a fair market price, to some extent, can be punitive in this situation.

Other factors come in of the taking of all the comparable property, the fair market price that would be established on the property before the taking began, which is the rule under which appraisers operate, is not possible to accurately determine. He cannot take into account any appreciation of the property due to the projected taking. And I worked for 5 years as a professional appraiser; I know what I am talking about on this subject. Our appraiser is very much bound by what he can do and what he cannot do at this point.

But this just is not adequate nor is it fair to the people who are involved. The previous witness pointed out some of the social implications. Please read what he said on this, because these social implications are pretty tragic sometimes, to say nothing about being important.

Therefore, there has to be another factor brought into this besides just a fair market value. Previously-it has been 5 years since I worked in this field-we were not allowed to make any allowance at all for moving expenses. We could work a little of it into the appraisal, hide it somewhere so the negotiator might have a chance at arriving at a settlement. But you could not itemize it as such. So the man who was being moved had no way of knowing there was any allowance being made for this.

I think the allowances for relocation are reasonable. I would question, though, the $5,000 limitation on this. I know one man who has been relocated three times due to highway takings-this is par for the course-once now from Philadelphia, another a little farther north in Pennsylvania, and the last time up into New York, where U.S. Interstate 81, took him out again. Well, you do not move a large farming organization-and this was a large operation-150, 200, or 300 miles for $5,000. It is impossible to do it. There should be some kind of basis on which the total costs of moving-this can become more than the actual cost of a moving van-comes into play. The cost of trying to operate land that is not as good as what you had before is important. If you have good bottom land, you have class one land, this is one thing. But sometimes none of that is available. You take all of your return out, all of your capitalization, and put it on class three land. How much of a loss have you taken at that point? On just your capitalization-you are over capitalized, even on the same amount of land. because it is not as productive.

These are some of the problems that I think you are getting toward in this. I hope that you can do something to expedite this whole proposal in the direction that you are taking.

Now, there are some other factors that enter into this. I just want to throw into the picture this problem of irregularity of takings. This enters into the other question of the remainder of the land. For the Government to be required to take the remainder of the land sometime when it is an uneconomic unit, my experience, would be completely impractical. I have seen uneconomic units of 800 acres, because they were separated from the barns and the buildings. Now, this 800 acres is worth something to somebody, probably the adacent landowner. It may not be worth as much, because he has it locked in, so the man has no access. So he is in the position to drive the hardest possible bar

gain. But we compensated for this in our appraisal by putting 90 percent damage against isolated land. It is much better to pay the man pretty close to the value of the land, let it move at a very modest price over into somebody else's ownership, keep the land in the county and in the township, keep it on the tax rolls than to have it go into the Government where the only way you can get it out is by an Act of Congress, as you know. It takes a private bill to move it out. This is just too difficult to do.

We can pay him all right so he has no loss and somebody over on the adjacent farm will pick it up.

Now, if it is just a small amount of land, we believe the Federal Government should pick up the transfer costs. I have seen pieces of land no bigger than that newspaper lying up there, that were left. I have seen them take pieces of land that size, too. These get pretty minuscule.

I have also watched some irregularity of taking where-and I remember a house on Long Island on the interstate up there—which I appraised. The line of taking went up to just about the middle of the house, if you think of it being like a square. Then they moved 6 inches away from the foundation of the house on two sides, went on down the middle of the far side and went on down the line. Now, by any rule of reason the house should have been taken, because no residence is worth anything when you have no land against it, unless you are a townhouse and then you have made provisions for that kind of situation.

Now, this kind of irregularity gives an appraiser and the landlord fits. We could not appraise this one-when we came up to the building, we would allow 60 percent damage and we would go further when they jogged around it like this. But here is something sitting here like a sore thumb that has no business being on the right of way and they have no way of moving it. This irregularity of some of these takings is a problem that somebody could very well deal with so they would run relatively straight lines. It is better for the Government anyway. They get an irregularity and they have the problem of fencing around it and all of the interstates have to be fenced. They had better take the house and get it out of the way, because what they saved was about 30 percent of that house and they left an angry community. This is not the way to run a government, in my judgment.

The negotiating that goes on after the appraiser has conducted his business is a real problem. We were instructed to arrive at the best value that we could. Frankly, our appraisals for condemnation were higher than the same appraisals for tax purposes. We were making the appraisal level that could be negotiated in our judgment.

Now, this is what happens, and this bill deals directly with it. (I do not know whether you knew this happened or not, from somebody who had really worked with it.) But I do know what has happened. In the State of New York, where I worked most of the time, a man came out from the bureau of public roads. He had a little blue stamp about as big as a nickel. He put that down in front of the appraisal and he placed a figure in that. That figure had no relationship to our appraisal at all. This was the negotiating figure. Then the negotiator from the bureau of roads came out. He second guessed this.