homes in older and declining areas. Finally, the existing provisions denying participation in the mortgage insurance program to persons committing various insurance contract or other violations would be incorporated into the new Act.

PUBLIC HOUSING ASSISTANCE PROGRAM

Title II of the bill would amend the United States Housing Act of 1937 to make needed improvements in the public housing program. The bill would modify the subsidy provisions so as to establish separate statutory limitations on the annual subsidy amounts which may be paid for capital and operating costs. The bill would also create a workable homeownership program for low-income families who reside in public housing or are eligible for such housing. The legislation also includes a number of other changes designed to make the public housing program more effective and would authorize additional funds for fiscal year 1973. Public housing subsidy structure

The subsidy structure for the public housing program would be revised so as to provide a more effective statutory framework for the new operating subsidy authorizations enacted by Congress in 1969 and 1970. The 1971 bill proposes to separate the debt service and operating subsidy authorizations and to establish separate statutory limitations applicable to each category of assistance. Existing law provides for a single statutory limitation for both debt service and operating subsidy, with a maximum limit on annual contributions based on the going Federal rate plus two percent times the capital cost of the project involved. Operating subsidy is therefore available to a project only to the extent, and only in amounts, that the debt service requirements of a project are less than the statutory maxiThis means that the amount available for operating subsidy is dependent upon the financing terms for development of a project-the locality which happens to finance the development of its projects at a greater operating subsidy. This is undesirable from the standpoint of achieving uniformity and equity in operating subsidy treatment and could result in the distortion of financing procedures.

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Under the 1971 proposal, the limitation on the maximum amount of annual contributions for debt service is the amount needed for this purpose-i.e., the annual amount of principal and interest payable on obligations issued by a public housing agency to finance the project involved. Consistent with the amendments enacted in the 1970 Act, the maximum amount of annual contributions for operating subsidy would be the annual amount needed to assure the low-income character of the project and to achieve adequate operating and maintenance services. With this change, the present authorization to pay an additional annual subsidy of up to $120 per dwelling unit occupied by a special category family would no longer be required and would be eliminated.

To assure that operating subsidy funds are allocated fairly and equitably, the 1971 bill would require any locality which receives such funds to establish minimum rental requirements. Action on this matter was deferred in connection with the 1970 legislation to permit further consideration as to what the income contribution ratio should be. Under the 1971 bill, it is proposed that a family would be required to pay a rent of not less than one-fifth of the family's income, but not exceeding a fair market rental charge based on the full cost of the housing without subsidy assistance. In order to determine a family's income for this purpose (and for allocation of income for homeownership), the bill proposes to use the existing income definition for private housing programs. Thus, the Secretary would have discretion in defining income, but an amount would be deducted equal to $300 for each minor member of the family, nonrecurring income would be deducted, and the earnings of any minor would not be included in the income of his family. Under present regulations, the Secretary has allowed five percent of gross family income to be deducted, in addition to the deductions required by statute.

The proposed income contribution ratio of 20 percent of family income has traditional acceptability in the public housing program and is used in many local housing authority rent schedules.

Under the bill, any increases in rental would be implemented in two stages: after the legislation has been operative for one year, one-half of the total amount of the required increase would be imposed when the first biennial review of income takes place; the full rental charge would be effective as of the next review of family income.

Localities which do not receive operating subsidy funds would not be subject to this income contribution requirement and would continue to fix their own rents,

subject to HUD's approval. All localities would continue to be subject to the requirement that rents may not exceed 25 percent of family income-based on the special definition of income for maximum rental purposes.

Income limits for eligibility

As under existing law, income limits for admission to public housing would be fixed by public housing agencies, subject to HUD approval. However, the proposed bill would delete the existing requirement that a public housing family must move if its income increases beyond the income limits for continued occupancy established by a public housing agency. This requirement has proved to be undesirable from the standpoint of achieving an economic mix of families in housing developments and has contributed to family insecurity and instability.

Cost limits for public housing dwelling units

The Housing and Urban Development Act of 1970 established flexible cost ceilings for public housing dwelling units, replacing the statutory dollar limits on construction costs per room. Under existing law, dwelling unit construction costs for the public housing program, excluding the cost of land, site improvements, and nondwelling facilities, cannot exceed by more than 10 percent the appropriate prototype construction cost in the same housing cost area, as determined by the Secretary, taking several factors into account.

The 1971 bill would modify existing law so as to include the cost of land acquisition and site improvements in the prototype cost limit. However, special considerations with respect to the cost of land or site improvements such as the cost of land in the inner city-would permit approval of costs above the established limits. The proposed cost limits would be the same as the prototype costs applicable to mortgages assisted under the private homeownership and rental programs. Homeownership for low-income families

The proposed public housing homeownership program would permit public housing tenants and low-income families eligible for public housing, including cooperative or nonprofit associations formed by or for the benefit of such tenants or families, to purchase low-income housing. With the aid of this new program, an individual family would be able to own its own home or a dwelling unit within a multi-family structure. An eligible cooperative or nonprofit entity could own entire projects. Newly developed or acquired housing, as well as existing authorityowned or leased housing now operated as rental units could be purchased. This would replace the program authorized by the Congress in 1965 under section 15(9) of the U.S. Housing Act which has not been workable because the required monthly payments are beyond the financial means of families of low income-in order to purchase public housing units the purchaser's payment must be sufficient to cover principal and interest, in addition to utilities, taxes, insurance, and maintenance.

The proposed homeownership legislation would provide subsidy assistance up to the full amount of the principal and interest payable by the local housing agency on the debt it has incurred in constructing or acquiring the property. The purchasing family would be required to contribute 20 percent of its income to "monthly homeownership expense" (monthly amounts for principal and interest, insurance, taxes, and utilities), but in no case could the purchaser's income contribution be less than the full cost of operating the unit-the cost of insurance, taxes, and utilities. The program provides for the conveyance of the property as soon as the low-income family undertakes the obligation to purchase the property by executing a mortgage to the local housing authority. Thus, the family would enjoy all the benefits of homeownership immediately.

There would be no downpayment required. Interest would be established either at the maximum rate applicable to mortgages insured under the private subsidized homeownership program or at the rate on the public housing agency's principal debt on the project, whichever is greater. If the purchaser makes the required allocation of income and otherwise fulfills his obligations, his mortgage would be amortized, over a period not exceeding forty years, as if he were making full principal and interest payments.

The potential for a successful public housing homeownership program has been demonstrated under several homebuyers' programs developed through administrative action-such as Turnkey III. These programs have served and will continue to serve a valuable function for families which do not have sufficient income

to bear the minimum homeownership expenses required under the proposed new program. The proposed new program would facilitate the objectives of these homebuyer programs by permitting the low-income family to acquire full homeownership status at a much earlier date.

Authorizations

The bill would authorize an additional $150 million of annual contract authority for fiscal year 1973. Of the total contract authority for the program, $200 million per annum would be earmarked for operating subsidy and $100 million per annum for modernization of existing projects. Existing law does not set aside specific amounts for these purposes. The changes in the 1971 bill reflect the proposed separation of debt service and operating subsidy authorizations and the establishment of separate statutory limitations applicable to each category of assistance, as well as the new definition of "low-income housing project" which would make it clear that the modernization of an existing project may constitute a separate project for purposes of assistance under the Act.

Definition of "elderly family"

The definition of "elderly family" would be modified to make eligible for public housing a single person who is at least 50 years of age. Under existing law, such persons must be at least 62 years of age to be eligible for public housing. Financing provisions

Several amendments are proposed to facilitate the financing of project capital costs by permitting local housing agencies to issue obligations which are more acceptable to private investors. To permit bond issues with flexible maturity schedules, the bill would delete the present requirement that annual contributions be fixed in uniform amounts and paid over a fixed period of years. The bill would also provide for the issuance of obligations with balloon payments at the end of the term, by authorizing a combined pledge of both the Federal annual contributions and loan commitments. The National Bank Act would be amended so as to permit investment in such obligations.

Model cities program

TITLE III MISCELLANEOUS AMENDMENTS

The model cities statute would be amended so as to delete an unnecessary provision which places a special limitation on the amount of grants which may be made to a city demonstration agency. Under this provision the grant made for approved model cities activities is subject to an additional ceiling based on the aggregate amount of non-Federal contributions required for Federally assisted projects carried out as part of the local model cities program. The original purpose of this provision, to provide an incentive to cities to concentrate Federal resources in selected neighborhoods of great need, is accomplished under basic policies applicable to the model cities program. The special limitation serves no useful purpose and its deletion would eliminate burdensome administrative requirements at the Federal and local levels.

Labor standards exception

The bill would amend the Davis-Bacon Act to provide that the labor standards requirements of that Act do not apply to a contract for the repair of a one- to four-family residence acquired by the Secretary of HUD under a contract of mortgage insurance if the aggregate amount of the contract does not exceed $5,000.

College housing

The bill would eliminate the dollar amount sublimitation on the aggregate amount of loans which the Secretary is authorized to make under the College Housing Program to hospitals operating nursing schools or approved internship programs. The bill would also amend the Housing Act of 1950 to increase by such sums as may be necessary the aggregate amount of contracts which may be entered into to make annual debt service grants to help finance college housing facilities.

New Community Development Corporation

Title VII of the Housing and Urban Development Act of 1970 would be amended so as to change the name of the Community Development Corporation to the "New Community Development Corporation." This change is needed to identify more accurately the nature and purpose of the Corporation.

Interstate Land Sales Full Disclosure Act

The bill would add a new subsection to the Interstate Land Sales Full Disclosure Act which would authorize the Secretary to promulgate rules and regulations under which he could make a finding that a fiduciary holding only legal title to lots in a subdivision is exempt from the provisions of the Act. In some areas, subdivision land trusts are used instead of more conventional construction and development mortgage financing in order to facilitate passage of title from land owners directly to purchasers of developed lots. In such cases, although the trustee holds bare legal title to the subdivision and performs certain ministerial functions only, such as deeding a lot to a purchaser after receipt of the purchase price and distribution of the proceeds to the developer, subdivision landowner, and development lender as may be provided for in the trust, the trustee may personally be subject to all the requirements of the Act, including penalties applicable to a developer. In most instances, this is neither desirable nor necessary to protect the public interest. The bill would not eliminate the requirement that a subdivision held in the name of a trustee be registered. The developer would still be required to register. However, the fiduciary (trustee) could be exempted from the responsibilities and penalties provided in the Act if the Secretary finds that it is not necessary in the public interest to retain jurisdiction over the fiduciary where there is satisfactory jurisdiction over a true developer who has an entrepreneurial interest in a subdivision.

Flood insurance premium equalization payments

The National Flood Insurance Act of 1968 would be amended by deleting section 1334(b)—the detailed provisions for calculating the amount of premium equalization payments for a specific payment period. The detailed requirements of the present subsection (b) apply solely to the "regular" program initially authorized by the Act prior to authorization of the "emergency" program in 1969. Repeal of subsection (b) would permit the amount of the premium equalization payments to be based upon all factors affecting the actuarial results of program operations. It is proposed that the amount of payments to be made in any one period would in the future be based upon regulations governing the terms of the agreement between the Federal Insurance Administrator and the National Flood Insurers Association, the association responsible for the operational aspects of the program. The regulations and the agreement will provide for incorporating the relevant experience data accumulated in the "emergency" program in the determination of premium equalization payments under the "regular" program.

Through the use of a balancing formula so constructed as to continuously take account of properly weighted experience data reflecting actual flood insurance losses and expenses, it is expected that the amounts of subsidy payments made to the flood insurance pool, operated by the National Flood Insurers Association on behalf of insured owners of existing property, will be related to actual program experience over a reasonable period of years rather than, as under present provisions of law, to a calculation based upon highly theoretical estimated actuarial rates without any test based on experience.

Surplus property

The bill would amend section 414 of the Housing and Urban Development Act of 1969 dealing with surplus property. Section 414 now permits surplus real property to be transferred by the Administrator of General Services, in his discretion, to the Secretary of HUD for sale or lease by him at its fair value for use in the provision of housing to be occupied by families or individuals of low or moderate income. Property to be used for related public, commercial and industrial facilities may also be transferred. Prior to any sale or lease to a purchaser other than a public body, the Secretary must notify the governing body of the locality where the property is located, and no sale or lease may be made if, within 90 days, the local governing body notifies the Secretary of its objection.

Section 414, as it would be amended by the bill, would provide that surplus real property may, in the discretion of the Administrator, of General Services, be made available at the request of the Secretary of Housing and Urban Development for disposition in accordance with the plan approved by him for the provision of housing and related facilities or for land development which is in furtherance of a new community or a major development or redevelopment program having community-wide impact. Property to be used for the provision of housing and related facilities would be assigned to the Secretary for sale or lease by him, whereas other property would be disposed of by the Administrator of General Services in accordance with the plan and with applicable law governing the disposition of surplus real property. In the case of real property sold or leased

by the Secretary for housing for other than low or moderate income occupants, the disposal would be made on the basis of the property's full market value, whereas property to be used in the provision of housing for low or moderate income occupants could, as under present law, be disposed of at its fair value for the proposed use (and subject to the requirements of present law with respect to approval by the local governing body).

HIGHLIGHTS

HOUSING CONSOLIDATION AND SIMPLIFICATION ACT OF 1971

Title I-Revised National Housing Act

Section 101 of the bill would recast the mortgage insurance programs contained in the National Housing Act into a completely new statutory framework-the Revised National Housing Act. The new authorization would reflect the experience gained over the past three decades with the mortgage insurance operations and would provide a statutory framework appropriate to the present orientation of these operations. In order to assure a smooth transition between the Acts, no specific effective date would be provided for the Revised National Housing Act. Instead, the Secretary would determine the effective date or dates for the provisions of the new Act and he would be directed to establish procedures for the orderly transfer of mortgage insurance operations from the old to the new Act. The proposed Revised National Housing Act would consolidate the confusing array of existing insurance programs into eight basic authorities, with relatively simple and flexible terms. The obsolete and overlapping provisions of existing law would be eliminated and the many provisions now scattered throughout the National Housing Act relating to similar subject matters would be brought together under appropriate headings. The consolidation should facilitate (1) public understanding and utilization of the mortgage insurance programs, (2) effective, prompt, and flexible administration of these programs by the Department of Housing and Urban Development, and (3) Congressional evaluation of the programs and decisions with respect to statutory amendments.

The Revised National Housing Act contains seven titles, with titles three to five providing the eight basic insuring authorities. Home mortgages would be insured under two authorities-unsubsidized (section 401) and subsidized (section 402). Multifamily residential mortgages would also be divided between one unsubsidized (section 501) and one subsidized (section 502) authority. These four authorities would replace a large number of existing programs. Three existing programs covering hospitals, group practice facilities, nursing homes and intermediate care facilities would be provided for in one mortgage insurance program for health facilities (section 503). The existing land development program would be retained (section 505). One supplemental loan program (section 504) would consolidate three existing programs. The existing home improvement and mobile home program would be retained but in simplified form (title III).

Title I of the proposed Act contains general provisions relating to the insurance programs, such as ones dealing with interest rates and maximum mortgage amounts. Title II contains provisions relating to insurance funds, insurance premiums and other fees. Title VI deals with insurance claims, and title VII contains miscellaneous provisions.

Title II-Public housing assistance program

Section 201 of the bill would revise the United States Housing Act of 1937, the program of assistance to local public housing agencies in the provision of housing for low-income families. The revised Act would: (1) modify and improve the public housing subsidy structure, (2) authorize a new homeownership program for lowincome families served by the program, (3) make necessary modifications to financing and other authorities, and (4) eliminate obsolete provisions.

Major substantive changes-Title I

(1) Financing Off-site Components.-The Secretary would be authorized to insure advances of mortgage funds during construction or rehabilitation to cover the cost of materials and components which are assembled and/or stored away from the construction site. This extension of insurance authority is expected to facilitate the financing of Operation Breakthrough type projects which require substantial offsite assembly of component units.