FPHA for an additional program, we have not approved or disapproved any of these submissions. We have not examined their compliance with the law. They represent the communities' own submissions. We are not submitting them to the committee now with any thought that they stand approved in any sense of the word.

Now, this program cannot go forward without the enactment of section 707. We believe that it is a modest program in terms of the relationship of this additional public-housing program to the total anticipated housing program. The additional public housing represents about 10 percent of the total estimated need of 1,250,000 housing units a year, excluding farm housing.

In terms of the housing needs of families of low income, the Administrator's testimony on housing needs shows that the proposed additional public-housing program is also modest.

The size of the program in relation to the total anticipated housing program, and the many safeguards which the legislation includes, are assurances that no public housing will be provided that will compete with private capital in its appropriate sphere. At the same time that private enterprise is being provided with opportunities for larger markets and for reaching lower-income levels than it has served in the past, public housing should be allowed to proceed in its own appropriate sphere. It serves low-income families who are not in a marginal but in a submarginal group. For these families, the choice does not lie between private and public housing the only possible choice is between slum houses and decent homes subsidized from public funds.

An increase in the annual contribution authorization is necessary if we are to build projects which will house these low-income families decently. In view of the acute shortage in the existing supply of housing, it is self-evident that low-income families will suffer most from the shortage as, even under more normal housing conditions, they have been unable to afford decent homes. Without this additional authorization, these low-income families will be left in slumsthe present slums and the new ones that will arise from the increase in housing congestion among low-income families. Our cities will continue to bear the mounting costs of crime, disease, fire, juvenile delinquency, and destructive community attitudes that multiply in such slum environments. Additional low-rent housing projects are also needed to provide housing for returning veterans of low income who are unable to afford decent housing provided by private enterprise.

An additional public-housing program will be needed not only as part of a comprehensive housing program to serve all income groups but also to enable bousing to make its large contribution to the maintenance of postwar full employment.

There are many who believe that the amount of the additional authorization is inadequate. There are sufficient factors to support such a view. However, there are many uncertainties in our present economy which render it impossible to make any reasonable estimate of the amount of public housing to be ultimately needed or the rate at which it should be provided. In the light of these conditions, the proposed program, together with the provision for acceleration, is reasonable, though admittedly modest.

Are there any questions about that, sir?

The CHAIRMAN. No. If anything, there will be greater need, probably.

Mr. KLUTZNICK. We hope that private enterprise will be able to meet a greater portion of it.

The CHAIRMAN. I hope so, too.

TECHNICAL AMENDMENTS: SECTION 708

Mr. KLUTZNICK. This section includes various technical amendments, some of which are necessitated by substantive amendments in the proposed General Housing Act.

Subsections 1 and 2 provide merely for a change in the term "public housing agency" to "local public agency," without any substantive change in the definition. The purpose is merely to reflect the fact that in some cases the agency undertaking public housing may be the city or some other public body which is not concerned with public housing alone.

Subsection 3 is designed to make it clear that FPHA, which is a Government corporation, continues to be subject to suit in its operations under the United States Housing Act and Public Law 671 (where it succeeds to USHA operations which were conducted in a corporate capacity), but is not subject to suit in those operations where it succeeds to functions which were conducted in the name of the United States involving the use of funds appropriated pursuant to the Lanham Act and other war housing statutes. Since the personnel of FPHA is necessarily assigned to work without distinction of their functions, the salaries of all employees would be subject to garnishment. The property of FPHA would be held in its name, and FPHA would be subject to the Government corporation control legislation. Subsection 4 is designed to make it clear that the financing and other amendments to the United States Housing Act apply to projects initiated under Public Law 671 so that these projects can get the benefit of improved local financing through private capital.

Subsection 5 would amend the "equivalent elimination" provision of the present act. Under that provision it is required that one substandard dwelling unit be eliminated for every new low-rent housing unit that is constructed. The only amendment that is intended here is to make it possible in computing equivalent elimination to count urban redevelopment projects which may have no public housing in connection with them, or urban redevelopment projects that may not have any Federal assistance, but which would include the tearing down of houses. It would enable us to count any houses that are of a substandard type that are torn down after the commencement of a low-rent housing project, because they do diminish the number of substandard houses in the community.

The amendment would not change the basic requirement of the present law that for every new house built in an urban area a slum dwelling must be eliminated, but it would not limit the elimination that may be counted only to that which is included in, or caused by, the low-rent-housing project. A community undertaking an urban redevelopment program or a local slum-clearance program will often be faced with the necessity for public housing for the low-income families who will be displaced by such a redevelopment or slumclearance program. Yet, without this amendment, the elimination in the urban redevelopment or local slum-clearance program could not be counted toward the equivalent elimination required to accompany

public housing, even though the public housing project may be intended to take care of the families displaced by such programs.

In that connection I should like to report on the present status of the equivalent elimination program under the United States Housing Act. Chart 29 shows that the number of units we were required to eliminate in the projects under study was 117,000. We have actually completed 102,000 eliminations, or 87 percent, of that 117,000; still to be completed are 15,000, or 13 percent, most of which were deferred because of war stringency and will be completed as rapidly as conditions permit. The total accomplished was actually 120,000 units eliminated, but 18,000 were not counted because they were not required by the statute.

Now, there are several methods of elimination permitted by the statute. One is demolition, the other is repairing up to standard, and the third is compulsory closing of the unit. Eighty-one percent of all units counted in these totals were actually demolished-36 percent off site, 45 percent on site of the low-rent projects. Fifteen percent were brought up to a decent standard by repair, and 4 percent were closed.

We believe that that illustrates that in spite of the war condition there has been a faithful performance which would justify the amendment of this equivalent-elimination provision, as suggested by sub

section 5.

(See chart 29 which follows Mr. Klutznick's statement.)

Mr. KLUTZNICK. That brings me, if there are no other questions about it, to the subject of rural housing. Do you desire to start now,

sir?

The CHAIRMAN. I see it is 12 o'clock. How much longer do we need with you?

Mr. KLUTZNICK. I would like to swim through these two titles if possible.

The CHAIRMAN. That won't take you

Mr. KLUTZNICK. I hope not too long.

The CHAIRMAN. All right; suppose we go on with it.

Mr. KLUTZNICK. Very well.

The CHAIRMAN. I thought at 12:30 we would recess until 2 o'clock. Mr. KLUTZNICK. I might be able, with good luck, to make it by 12:30; I will try.

The CHAIRMAN. All right.

APPLICATION OF THE UNITED STATES HOUSING ACT IN RURAL AREAS: SECTIONS 808 AND 809

Mr. KLUTZNICK. Title VIII relates to housing on farms and in rural areas which is one of the major phases of the housing problem that has been sorely neglected. While less dramatic than the slums of our cities, there are equally bad housing conditions in rural areas, both on and off farms. An adequate remedy for the shocking deficiencies in rural housing is an essential part of a national housing program.

The first part of that title-sections 801 to 807, inclusive-concerns itself with private enterprise assistance and the farm housing program of the Secretary of Agriculture. These provisions are intended to enable families to obtain decent farm housing where they can afford

to pay for it under favorable credit terms which would be made available to them, either through FHA mortgage insurance, or through loans from the Secretary of Agriculture.

We are particularly concerned with sections 808 and 809 which are designed to meet the needs of rural families of low income who can obtain decent housing only through assistance in the form of subsidies. Section 808 would add a new title II to the United States Housing Act and would extend aid to rural families of low income comparable to that extended to urban families of low income under the United States Housing Act.

Actually, under the present act we are authorized to operate in rural areas. Congress recognized that Federal aid in the form of annual contributions was necessary, not only to meet the problems of badly housed low-income families in urban areas, but also those in rural areas. Before the war we had initiated, through loan and annual contributions contracts with 62 regional and county housing authorities, a program covering 8,406 dwelling units in 319 counties and costing approximately $18,000,000. Before the war brought about a deferral of further construction activity, due to shortages of labor and material, only 515 of these dwelling units had been completed at an average cost per unit of $2,350. In the main, as I indicated earlier, these are three-bedroom houses with a sealed well and sanitary privy. They are individual houses. Their average annual rent was $70 per year. The average annual cash income of the families living in these 515 houses was $422 a year.

There is no gainsaying the fact that this is one of the sorely neglected areas of housing need, and I am not too proud to report that we were unable to do any more than we did before the war. The main difficulty was that we were trying to make an urban formula work in a rural program, and frankly it just doesn't work. Experience has shown that there are inherent differences between a rural and an urban housing program, and that it is not feasible to produce rural housing under the urban formula. Accordingly, the new title II is based upon a recognition of the need for separate provisions on rural housing which are directly responsive to the needs and problems involved. It is calculated to preserve the best elements of the urban formula and to make such changes as are needed in order to do a good job with subsidized housing in rural areas, including both farm and nonfarm housing.

Now, what are those differences? The first provision-the new section 201 of the United States Housing Act-does not establish a difference. It recognizes that there must be a close working relationship between the FPHA and the Department of Agriculture, or, in the case of reclamation projects, the Department of the Interior. This section appropriately requires that before the Federal Public Housing Authority would undertake to approve any project that had to do with housing on a farm, the Secretary of Agriculture would be called upon to certify, first, that the provision of adequate housing on that farm would be consistent with the program of his Department; and, secondly, that the net annual income from the farm is less than the amount necessary to enable the family otherwise to obtain decent housing, along with a certification of what is the normal earning capacity of the farm.

In areas where the Department of the Interior, through its Bureau of Reclamation, would be concerned with a program of this sort, we would be called upon to get similar certifications from that Department.

County or regional housing authorities would then proceed to develop programs in rural areas under conditions that would be decidedly different than those that obtain in urban areas. First, where housing is provided on a farm, the law would permit a variable payment plan. As distinguished from the urban program where there is a monthly agreed rent, the farmer would be entitled to pay less in a year of below-normal farm income, provided he had built up a reserve through payments in excess of the minimum required payment in years of higher income.

Šecondly, under the new section 204, the lessee of a farmhouse would have an option to buy the house. Now, in the urban program there isn't any such option arrangement: it is essentially a rental program. Here, the occupant would have the option to buy the house, and upon purchasing it he would be given credit for any payments that he had made which were applied toward amortizing the cost of the house. Similar options may be granted on rural nonfarm houses.

This provision for options to purchase clearly recognizes the distinction between the rural and the urban programs. A farmhouse is really not separable from the farm, which is a production unit. Accordingly, it is appropriate that the farm owner have an option to purchase the house. This may also be appropriate with respect to rural nonfarm housing. For example, such housing may be located in a small community where there may be need for only a small amount of public housing. When there is an increase in the income of the occupant of such a house so that he can afford to pay full economic charges, there may not be other families in the community who would be eligible for occupancy. It should then be possible to sell the house to the occupant.

Third, the provisions in this title recognize that there must be a flexible plan in making housing available in rural areas, so that the local public agency may provide the housing either through a longterm purchase contract, a long-term lease with an option to purchase, or through financing or other methods most suitable to the particular purpose.

A minimum payment is to be required on rural housing which must be at least equal to the average of the annual principal payments which would be necessary to repay the cost of the house during its useful life. However, where a local public agency provides a house for a low-income family by sale or financing and the owner is unable in any year to meet the necessary costs for adequate maintenance of the house, there may be credited against the minimum payment an allowance for such necessary maintenance costs (upon prior approval by the local public agency) to be incurred by the owner.

Fourth, there is no provision for equivalent elimination or local contributions since both of these requirements which are applicable to urban housing would not be practicable in rural areas.

Fifth, the program provides for subsidy on an entirely different basis. In the urban program the subsidy is related to the development cost. Here, we would be authorized by the new section 206 to