the insurance contract. The section further authorizes an adjusted premium charge in the event of termination.

The proposed section 710 creates a special insurance fund (Housing Investment Insurance Fund) as a revolving fund for meeting the payment of insurance benefits, and also of administrative expenses incurred in connection with the program, and allocates $10,000,000 to set up such fund. All income derived in connection with the program is to be deposited in the fund and all expenses, whether in payment of insurance claims or of administrative expenses, are to be paid from the fund. The faith of the United States is pledged to the payment of all approved claims for insurance benefits in the event the fund fails to make any such payment when due. The proposed section 711 provides that no real property acquired by FHA under the yield insurance program shall be exempt from local taxation simply because of such acquisition.

The proposed section 712 provides for the issuance of such rules and regulations as may be necessary or desirable for carrying out the yield insurance program, including such rules and regulations as may be necessary with respect to maintenance and inspection of project records, or as may be necessary for effecting appropriate changes in the insurance base in the event of capital improvements or additions to the project on the one hand, or sale of or damage to part of the project on the other.

The proposed section 713 sets forth the definitions of the basic terms used in the title. Through these definitions, the section provides that the yield insurance program is open to any individual, group, or association, or other legal entity qualified to undertake the construction and operation of the type of project that may be assisted under the title. Through these definitions, also, the section makes appropriate provision for cases where the investor has a leasehold rather than a fee interest in the land on which the project is constructed. The definitions also indicate that a project may include such community and commercial facilities as are necessary or desirable.

Section 702

This section amends three provisions of the National Housing Act which were intended at the time of their enactment to be applicable to FHA's insurance programs generally, so that such provisions will by explicit reference be applicable to the yield insurance program. The provisions affected are section 1 of that act, which sets forth the general administrative powers of FHA, section 4, which provides for cooperation by the Reconstruction Finance Corporation in providing the funds necessary for the proper administration of FHÁ's various insurance programs, and section 5, which requires annual reports to the Congress on FHA activities under each of its insurance programs.

TITLE VIII. LAND ASSEMBLY AND PREPARATION FOR REDEVELOPMENT

This title authorizes a program of limited Federal aid to local communities to enable them to undertake positive and comprehensive steps for the clearance of their slums and blighted areas, so as to make such areas available for redevelopment, with the active participation of private enterprise, in accordance with sound planning principles. Two basic forms of assistance are authorized:

1. Loans, both temporary and long term (but not in excess of 45 years in any event), to finance necessary project costs to the extent funds for this purpose cannot otherwise be obtained, and at an interest rate designed to return to the Government the cost to it of the funds it obtains to make the loans; and

2. An annual subsidy where necessary to enable the land in the slum or blighted area to be made available for redevelopment at prices consistent with proper and sound land use and planning.

The title places the administration of this program of assistance for land assembly and preparation for redevelopment under the jurisdiction of the National Housing Administrator and requires adherence by him to the following cardinal principles in his administration of the program:

1. That any project assisted be related to the improvement of housing conditions in the locality;

2. That Federal assistance be confined to purposes of land assembly and preparation for redevelopment, as distinguished from actual redevelopment of the area; 3. That every project assisted be a local undertaking locally planned, locally approved, and designed to serve local needs in every sense of the term;

4. That plans for redevelopment shall afford maximum opportunity to, and require maximum reliance upon, private enterprise;

5. That there shall be local financial cooperation and participation to the fullest extent consistent with the ability and resources of the locality, and, in any event, in an amount equal to at least one-third of the difference between the project cost and the new capital or reuse value of the land comprising the project area and also to one-half of the Federal subsidy base;

6. That adequate provision be present for the rehousing of the families displaced by the clearance of the area.

Section 801

This section sets forth the general purpose of the title, and declares it to be to assist the several States and their political subdivisions in eliminating slums and blighted areas and providing maximum opportunity for the redevelopment by private enterprise of land in such areas.

Section 802

The purpose of this section is to assure that aid to projects under this title will be based upon local determination of need and maximum reliance upon private enterprise. Accordingly, it provides that any contracts for financial aid under the title may be made (1) only with a duly authorized local public agency, and (2) only if the redevelopment plan is approved by the governing body of the locality. Moreover, such approval must include findings that the project area would not be made available for redevelopment without the Federal aid; that the redevelopment plans will afford maximum opportunity for development or redevelopment by private enterprise; and that the redevelopment plan conforms to a general plan for the development of the locality as a whole.

The purpose of this section is also to assure that all projects assisted will (1) actually conform to the locally approved redevelopment plan, and (2) be consistent with the interests of the locality as a whole. The section, therefore, provides that as a condition to Federal assistance the local public agency must agree to obligate those to whom it sells or leases the land in the project area, to devote the land to the uses specified in the redevelopment plan and actually to begin the building of their improvements within a reasonable time. The section requires that there be a feasible method for both the temporary and permanent relocation of the families who have been living in the redevelopment area and who are displaced as a result of the clearance of the area.

Section 803

This section, together with section 804, sets forth the forms and degree of Federal financial assistance for land assembly and clearance projects. Section 803 itself provides for assistance in the form of loans by the National Housing Administrator. The loan provisions are premised on the expectation that the definitive financing of the cost of the project will basically be accomplished by reliance upon private capital. The section, therefore, authorizes the National Housing Administrator to make such temporary loans as may be necessary prior to definitive financing (so that they may not be made for periods exceeding 5 years following the date of the first such loan for the acquisition of land), and it authorizes permanent loans for only such part of the project area as the local public agency leases for redevelopment. Any loans made under this section (whether temporary or definitive) must bear interest at not less than the rate specified in the most recently issued bonds of the Federal Government having a maturity of 20 years or more at the date the contract for the loan is made (the "going Federal rate," which rate, however, is, for the purposes of this title, to be deemed to be not less than 21⁄2 percent), and the permanent loans must mature within a period not exceeding 45 years from the date of the definitive bonds.

To provide the funds necessary to make these loans, subsection (b) of the section authorizes the National Housing Administrator to issue and have outstanding at any one time obligations in the aggregate amount of $500,000,000 from which amount, however, only $50,000,000 in outstanding definitive loans may be made by the Administrator on and after the date of enactment of the title, which limit is to be increased by further amounts of $50,000,000 at the beginning of each of the second, third, fourth, and fifth years from the date of such enactment.

Subsection (c) provides that, where a local public agency undertakes studies, surveys, and plans for a program of land assembly projects for which Federal assistance is authorized by this title, loan assistance may be made to such agency

and makes the higher ceiling for large OMULLSJA EZlene v me in metrocitan districts of over 5000000 populstion as well 25 10 207 C7 Which heel has that population

In order that the drame increase in building costs, and the now apparent longterm nature of the toysing emergency, may not prevent the provision of housing title V with respect to FHA's programa) : (1) provides for higher room cost limitstions (31,250 in cities or metropolitan areas of less than 500,000 population and $1,500 in cities or metropolitan areas over that population, as compared with

existing limitations of $1,000 and $1,250 respectively); and (2) authorizes an increase in the cost limitations otherwise applicable by not more than $250 per room in areas where it would not be feasible without such an increase to construct the project consistent with the objective of providing housing for veterans of low income, and where there is an acute need for such housing for veterans of low income. This latter authorization is limited to contracts for financial assistance made before December 31, 1949.

In addition, to make possible greater certainty in determining compliance with the cost limitations, particularly at the time of the award of the construction contract, this section would provide that the cost limitations are applicable to the cost of construction and equipment, avoiding the uncertainties involved in making allowances for the not readily ascertainable anticipated overhead.

Because of special cost problems in Alaska, the section also has special provisions permitting higher costs in that Territory if found necessary.

Section 904

Local Financing

The basic purpose of this section is to amend the financing provisions of the United States Housing Act of 1937 so as to make possible 100 percent definitive financing of low-rent housing projects by local capital and thus in effect limit Federal lending assistance for low-rent housing to the temporary interim financing necessary prior to the issuance of definitive bonds. Essentially, this section provides that, in the event of a substantial default by the local public agency in its covenants to FPHA of a nature which would entitle the FPAH to suspend or terminate the payment of its annual subsidies to the local agency, such project is to be conveyed to the FPHA (subject to the right of the local public agency to reconveyance upon a satisfactory curing of the default), and FPHA would continue to make annual contributions to the project. This would assure both (1) that the project will continue to operate as a low-rent housing project, and (2) that those who have furnished the capital funds for its construction in reliance upon the continuance of its low-rent character, and the making of annual contributions therefor during the entire life of the loan, will have their investment adequately protected. With this assurance there is every reason to anticipate that local capital will be willing to undertake the job of furnishing 100 percent of capital cost in long-term loans and to do so at very low interest rates.

In addition to substantially reducing the need for Federal loan assistance, the section also adds new limitations with respect to Federal subsidy assistance. It does so by providing: (1) that in any year when the receipts derived in connection with the project assisted exceeds expenditures and charges, the excess must be used for purposes which will reduce subsequent annual contributions; and (2) that contracts for loan and annual contributions based on one going Federal rate may, in the case of a change in such rate, be amended so as to base the loan interest rate, and maximum contribution payable, on the new rate whenever this would promote economy and be in the financial interest of the Federal Government.

Other financing provisions contained in the section:

1. Reduce the maximum loan period from 60 years to 45 years in the case of projects where the annual contributions are limited by statute to a 45-year period. 2. Reduce the minimum interest rate on Federal loans made for projects where the maximum loan and annual contribution period is 45, rather than 60, years, from the applicable going Federal rate plus one-half of 1 percent to simply the going Federal rate.

3. Relate the going Federal rate (which determines the minimum loan interest rate and the maximum annual-contribution rate) to the interest rate on Federal obligations with a maturity of 20 years or more, rather than 10 years or more. (Experience has indicated that by considering as the going Federal rate interest on obligations with the relatively short maturity of 10 years, changes in such rate result in many instances, not from a change in the cost of money to the Federal Government, but simply from the irrelevant factor of the particular maturity of the most recently issued Federal bonds.) Such rate, however, is in no event to be deemed to be less than 21⁄2 percent. Also, under this section, the governing rate is the one as of the date of Presidential approval of the contract for loan or annual contributions rather than the date the contract happens to be signed by FPHA and the local public agency.

99279-47

to aid in financing the cost of such surveys, studies, and plans and other necessary work in such preparation. Such loans would be made on the condition that they would be repaid with interest out of any funds which become available to the local agency for undertaking of the projects involved.

Section 804

This section provides for the subsidy assistance that may be provided by the National Housing Administrator in those cases where such assistance is necessary if the land in the project area is to be available for proper use and soundly planned rec'evelopment at prices consistent with such use and redevelopment.

In recognizing the need and providing for this subsidy-"annual contributions"-the section also recognizes the need for, and immediately provides strict limitations as to the amounts and periods necessary to carry out the purposes of the title. In no event may:

1. The base used to determine the maximum amount of annual contribution exceed the difference between the net project cost and the local grants-in-aid, or the aggregate annual contribution bases with respect to all the projects of a local public agency assisted under the title exceed two-thirds of the aggregate net project costs (thus, local grants-in-aid would have to be made in an amount at least equal to one-half the aggregate annual contribution bases)

2. The contributions payable annually to any local public agency exceed an amount equal to 1 percent above the going Federal rate applied against the annual contribution base or bases;

3. The annual contributions be made over a period exceeding 45 years.

Also, at any time after 10 years following definitive financing of project cost, the Administrator has the right to substitute for the payment of subsequent annual contributions a single lump-sum payment in an amount sufficient to retire the outstanding obligations to which the annual contributions may have been pledged. In addition to these various provisions designed to limit strictly the amount ana period of Federal subsidy, the section further contemplates that the plan of Federal annual contributions be utilized to reduce the Federal loan assistance needed. Toward this end, it provides that payments under the annual contributions contracts may be pledged as security for borrowings by the local public agency, a provision which will facilitate the financing of project costs by private capital at the lowest possible interest rate.

The section authorizes the National Housing Administrator, upon enactment of the title, to enter into contracts providing for annual contributions aggregating not more than $4,000,000 per annum, which limit is to be increased by further amounts of $4,000,000 at the beginning of each of the second, third, fourth, and fifth years after the date of such enactment. The funds necessary to make these annual contributions are to be made available by appropriations of the Congress, and the faith of the United States is pledged to the payment of the annual contributions contracted for pursuant to the provisions of the title.

Section 805

This section is intended to assure that the locality will bear its fair share of the cost of any project assisted under this title and that it will call upon the Federal Government for aid only to the extent necessary. Toward this end, the section provides that the local community must itself participate financially to the extent of at least one-third the net project cost. Such local participation may take the form of direct reduction of project costs or expenditures, by contributions made in cash or its equivalent, and public improvements and facilities in the project area which are primarily of direct benefit to the project and which are necessary to serve or support the new uses of land in the project area. Where a locality undertakes more than one project with Federal assistance, this requirement relates to such projects considered in the aggregate.

Section 806

The purpose of this section is to provide the enabling provisions for financing operations under this title that experience under the United States Housing Act has indicated to be necessary for effective administration. The section, accordingly, provides (1) that the obligations issued by the National Housing Administrator to obtain funds for loans under this title are to be guaranteed by the United States (just as are the obligations issued by the FPHA to obtain funds for loans for low-rent housing and slum clearances); (2) that certain provisions