loans, et cetera, wouldn't it be desirable to limit the proportion of the funds that could be spent on the Model Cities type of activities? Secretary ROMNEY. Well, I think that is a difficult thing to do on a national basis without precluding a community really giving effective evaluation to what their problems are. I do know, for example, that in housing today our software problems are greater than our hardware problems, because what we are finding is that the type of problems that Mrs. Sullivan talks about, the management problems, are tougher than the physical problems. So I am not sure that is a wise thing to do. But in any event, Congress ought to define the way in which the money can be used, and then grant maximum freedom, but let us make sure they use it as Congress says it should be used. Mr. MOORHEAD. I hope you can support the counseling title in the committee bill.

Secretary ROMNEY. I think it is a very important proposal.
Mr. MOORHEAD. Thank you. My time has expired.

Thank you, Mr. Chairman.

Mr. BARRETT. Mr. Stanton.

Mr. STANTON. Thank you, Mr. Chairman.

Mr. Secretary, we welcome you this morning.

Secretary ROMNEY. Thank you.

Mr. STANTON. I wish to add that I was personally pleased to read your statement, and I agree with Mr. Moorhead that those of us who have worked in some of these panels within our subcommittees have certainly got more in agreement than disagreement, and that we shall work toward a very useful program, I am sure.

Secretary ROMNEY. Good.

Mr. STANTON. I also would like to comment in regards to earlier questions of Mrs. Dwyer on urban community development revenue sharing. I have had the opportunity in the last couple of months to speak in New Haven, Hartford, Cleveland, Akron, Youngstown, Baton Rouge, and New Orleans. And the general reaction to the program was overwhelming support. A lot of intelligent questions were asked. I was pleased to see the general knowledge that they have now gained after 3 or 4 months of publicity on the programs. They are ready for them.

Secretary ROMNEY. That is my impression, Mr. Congressman. My impression is that the public is supporting this, generally speaking. Mr. STANTON. That is correct.

Mr. Secretary, I have a couple of questions this morning in regard to the basic housing program, the 235 that we are into now. Many months ago you appeared before our committee. Out of this committee we found many abuses in the initiating of these programs before they are even started. And, of course, your Department went to work. I wondered if you could comment on your own personal feelings in regard to this program from that regard. Do you think you have made considerable progress in overcoming many of the handicaps when this program first started?

Secretary ROMNEY. I know we have made considerable progress. I don't mean by that that the program is free of problems in administration. But we have made considerable progress in tightening up and eliminating some of the administrative difficulties, and also in rec

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ognizing that is a very difficult thing to put the lowest income families into such homeownership situations without adequate counseling. And we are in the process of taking additional steps, including the organization of an extensive counseling program, so that we can screen people on the basis of whether they need counseling before they go into homeownership situations, and if they need it, to see that they get it. Now, we are just in the process of getting that organized. And we are very pleased that the appropriations bill this year contains $3 million for this purpose. And we have decided to levy a small fee that would become a part of the mortgage in order to have adequate funds to provide counseling.

So I don't say that we are completely out of the woods with respect to these problems. But we have dealt with many of them.

Mr. STANTON. Our panel spent considerable time on the subject of the allocation of these 235 units. I would have to say from my own experience that I am leaning toward the panel recommendations. You have got some suggestions there too. I have watched this program in my own particular district. In many cases it seems the criteria is, where are the vacant lots, where are the water and sewer lines at now? There have been several discrepancies in putting the units and the number of units that were put into already existing subdivisions which downgraded them in a couple of instances, although I am getting good cooperation from your office in looking into a couple of those situations. But it has been the case whereby the applications have come in, and of course it has been left up to the director in the particular area. The idea of having the communities themselves work on this problem is something that I think has merit if we can work it out. It would be an improvement from what I have observed over the way it is working out.

Secretary ROMNEY. You see, at the present time we are pretty much dependent upon the initiative taken by others with respect to where the housing is going to be built. The Department doesn't locate land or sites, it doesn't initiate housing projects, it receives proposals, it receives proposals from public bodies or private organizations. And then we select from among those proposals. But the decision to propose a housing project in a particular place is made by somebody outside the Department. Now, we have established some overall policies that we think might be helpful in certain respects but we are still dependent upon the initiative taken by others. And I don't really believe that we are going to get an adequate approach to meeting the housing need in the metropolitan areas until we can bring about a consideration on a metropolitan basis of how the housing needs of that whole area can be best met, and be best met in terms of all the considerations that enter into it. And on the present fragmented approach and on the basis of relying completely on the initiative of outside organizations, I don't think you are ever going to reach the point where you aren't going to have situations that someone could say are not what they would like to see.

Mr. STANTON. I would have to tell you in all honesty that I am reserving my own opinion on this whole program for a little bit longer. I have got some real doubts.

Secretary ROMNEY. I admit, it is a very fundamental change, if you go that way.

Mr. STANTON. My time has expired.
Mr. BARRETT. Mr. Stephens.

Mr. STEPHENS. Thank you, Mr. Chairman.

Mr. Secretary, I appreciate your being here, and your testimony. I am glad also to see from what you have said here that it looks as if next year we might approach the objective in our goals of 2,600,000 unit starts. And I compliment you on that stimulation of our housing program.

Secretary ROMNEY. Thank you.

Mr. STEPHENS. I believe in one of the early speeches that you made I recall that you said, in order to meet that objective, we would have about 600,000 starts that would be by Federal subsidy, and that we were going to have to depend upon private enterprise for the 2 million. I assume that you still feel that that is the right way to do, because I feel that way also. We must use Federal funds to stimulate housing but not take it over.

Secretary ROMNEY. That is right. I am concerned with the constant increase in housing costs that is increasing the subsidization. I think we ought to be moving in the other direction if possible.

Mr. STEPHENS. I have had a plan proposed to me which I am going into in more detail with the committee later which will help private enterprise. Do you see any objection with stimulating private enterprise by changing some of the national banking laws that would allowby removing some of the restrictions-commercial banks to get more fully involved in and to participate more deeply in home financing. Secretary ROMNEY. I think the Treasury made a very constructive suggestion in 1969, which was that financial institutions-and this would have included commercial banks as well as others-have interest income from socially desirable investments exempt from income taxes up to a certain percent. I think they said 7 percent of the investments. Well, that would have encouraged commercial banks and others to invest in mortgages to a greater extent than they are doing. I think that was a constructive suggestion. In England they have building societies, and they give certain advantages to investments in these building societies in relationship to income-tax payments. And I think some things of this character may well be necessary.

Now, the President has this Financial Structures Commission that has been studying this whole question of equitable distribution of available money and credit. And I assume they are going to make a report at a reasonable date here. And presumably they will make some recommendations in this area.

Mr. STEPHENS. We would have to change some of the national banking laws in order to give the banks a fuller opportunity to participate, because we do limit them in some respects to what they can do so far as direct loans are concerned.

Do you feel that we ought to encourage the banks to more fully finance or to get into the financing of housing?

Secretary ROMNEY. The General Counsel has a comment with respect to the Federal Reserve.

Mr. MAXWELL. There is one Federal Reserve regulation under the Bank Holding Company Act that was passed last year which seems to inhibit the activities of banks in participating in the construction of housing, particularly subsidized housing, which our Department is hoping that maybe we can get

Mr. STEPHENS. Liberalized.

Mr. MAXWELL. Yes, sir.

Mr. STEPHENS. In other words, in general you would favor changes in bank laws and regulations?

Secretary ROMNEY. Not enough of the available credit is going into housing.

Mr. STEPHENS. Yes.

Let me ask you this. Last year in your open communities proposal you advocated that we ought to put through some low-income housing units in suburban areas regardless of the local zoning lawsSecretary ROMNEY. No, Mr. Congressman, I have never recommended that.

Mr. STEPHENS. Maybe I am misstating it.

Secretary ROMNEY. You are very clearly misstating it, because I have never advocated at any time that we put low-income housing into a local community if the zoning laws didn't permit it.

Mr. STEPHENS. Well, anyway, we did turn that down in the committee.

Secretary ROMNEY. I have indicated that we need to get a better distribution of housing.

Mr. STEPHENS. Let me ask you this. I know that it was proposed directly to this committee, and we turned it down-I say we, the majority didn't pass it.

Secretary ROMNEY. We submitted an amendment, Mr. Congressman, that would have prevented a community from changing its zoning after it learned that low- and moderate-income housing was going to be located in the community. That is the Black Jack case. And the administration is proceeding against Black Jack because we concluded that we didn't need that amendment that we submitted because we believe the law prohibited it anyway, the Constitution. Mr. STEPHENS. My question involving this is: Is the point system accomplishing that now? When one comes to ask for funds, are they told by HUD that they have got to have zoning regulations changes or something of that nature? Is the point system being used to advocate putting low-income housing units in suburban areas?

Secretary ROMNEY. What the point system would do is to implement the President's equal opportunity policies in housing by encouraging the location of housing on a wider basis, encouraging the location of low- and moderate-income housing. And what we have proposed, we haven't finalized this yet, what we have proposed is that we would give preferential treatment to those who submit housing proposals that would be outside of areas of present minority concentration.

Mr. STEPHENS. Thank you.

Mr. BARRETT. The time of the gentleman has expired.

Mr. Secretary, I would like you to turn around and see John Culver, one of our distinguished Members from Iowa.

Mr. Culver, come up and make yourself heard. Sit up here with Mr. Gonzalez.

Mr. Culver also has a bill pending before the subcommittee.
Mr. Blackburn.

Mr. BLACKBURN. Mr. Chairman, before I begin my time I would like to make a parliamentary inquiry.

Inasmuch as we are scheduled for further meetings this afternoon, are we just to continue the 5-minute rule as our time arises?

Mr. BARRETT. I am glad you asked that question, because other members have come in after the statement was made.

After we finish the 5-minute rule this morning we are going to recess until 1:30, and go up to about 3:30 to give the Secretary a half hour to go to another appointment. Would that be adequate time? Secretary ROMNEY. Thank you very much. That is plenty.

Mr. BARRETT. And on our return we will go into the 10-minute rule. Mr. BLACKBURN. Thank you, Mr. Chairman. This will allow me to develop separate lines of questioning.

Mr. Secretary, of course it is always a pleasure to have you before us. I remember the great honor that I had in accompanying you on a visit to St. Louis once, which I found most informative.

I must say for my own part, though, I share Mrs. Sullivan's view that when we concentrate our effort on real estate; that is, in improving the quality of real estate and the environment that real estate affords people to live in, we are not really getting into the heart of problem, until we start dealing with the problem of crime that is so rampant in some areas of our cities. Now, I don't want the Department of HUD to become a national police force, and I don't think anybody on this committee or in the Government does. But still the problem of crime in the highly dense concentrated areas exists, whether they are newly constructed public housing or whether they are old housing that is being heavily utilized. Until we do come to grips with this problem of crime, we are really not going to solve our problems.

Secretary ROMNEY. May I make an additional comment beyond what I have said in response to Mrs. Sullivan.

We were in St. Louis. And you will recall that the Pruitt-Igoe public housing project was not only a tremendous concentration itself; but also in the city of St. Louis, the central city, all the public housing and subsidized housing was located pretty much in two great big areas. And Pruitt-Igoe is a tremendous problem by itself, because you have low-income problem families concentrated in tremendous numbers, and the average age of the occupants when it was occupied was 13, so that the size of the families was very considerable on the average. But you not only had that vast concentration, without recreation facilities or other things, but around that public housing project were other public housing projects, and urban renewal areas, and so on. And one of the things we are undertaking to do and have been undertaking to do is to get a broader distribution of this and to prevent its being concentrated so that you have got all the problem families concentrated in particular areas in these central cities. Because that aggravates the whole problem of law enforcement and preventing crime and so on. Mr. BLACKBURN. Let me say, Mr. Secretary, that I understand the logic behind your thinking, which is that, if you have this highly dense concentration of problem families, crime is a predictable adjunct.

Secretary ROMNEY. That is right.

Mr. BLACKBURN. At the same time I am not sure that dispersing the problem families is going to resolve the problem. And I don't think that just concentrating ourselves on the real estate or the