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providing better housing in better surroundings for families unable to pay economic rent; second, the real property problem of razing or replacing obsolete buildings and rehabilitating slum areas.

The Federal Government should deal exclusively and directly with the human and social problem and work it out jointly with State and local governments.

The Federal Government, in my opinion, should deal exclusively and directly with the human social problem, working out that problem generally with State and local governments.

The real property problem should be left to the State and local governmental agencies which have complete jurisdiction over tenure values, taxation of real property, and such questions.

Most of the discussion, it seems to me, has spoken of Government and private enterprises, forgetting the fact that they have a Federal Government and local government, and that many of the advocates of public housing have short-circuited those local agencies, which it seems to me should be tremendously important in the picture.

Federal subsidy for low-rent housing should consist entirely of contributions toward the rent to be paid by rehoused low-income families. The amount of such rent subsidy should be stated in the bill, whether it is to be a lump sum or in accordance with some sliding scale to be adopted. The Federal rent subsidy should be supplemented by the States, according to a predetermined scale; also by the local government authority according to some flexible provision whereby the local housing authority would have an incentive to efficient and economical management.

Planning, financing, construction, and management of housing projects should be under local housing authorities, which should not receive any direct or indirect subsidies. They should instead be guaranteed an economic rent for every family house, such rent to consist of what the families can pay plus the necessary subsidy, as determined by the official local welfare agency. The local welfare agency should be designated to administer all rent subsidy funds; it should select and certify tenants, as well as determine the contribution it will make toward each applicant's rent, making no subsidy commitments to applicants to cover a period longer than 1 year.

The Federal Government should, during the early stages of the program, assist local housing authorities in creating a market for their debentures. To do so, the Reconstruction Finance Corporation or some other fiscal agency of the Government should be authorized for a limited period to purchase such debentures, which should carry an interest rate approximating the rate currently paid on long-term obligations of the local government authority under which the local housing authority operates. Such loans should be temporary credit accommodations without concealed subsidy.

It should not be necessary to empower the United States Housing Authority to operate as a lending agency. The only functions this Authority should be called upon to perform, other than administration of the Federal rent-subsidy fund, should consist of programs of education and research.

That the program briefly outlined above is a practical one is attested by the fact that it follows very closely the procedure now being carried out most successfully in Great Britain.

63408-36_11

That, of course, suggests a somewhat different approach to the method of achieving the result than is contained in the important section of this bill. If some such idea as this were accepted after discussion, it would call for a change of section 9, and the lump-sum grant of capital subsidy would not be consistent with this philosophy and would come out. The fixed annual contributions which are permitted in section 9, I think, should be definitely defined as contributions toward rent.

Section 10 provides for loans to a limited number of housing agencies, and I presume that means limited dividend housing corporation of the type now existing in New York.

These corporations have not been able to provide new housing for the lowest income groups. Provision has already been made for insuring their mortgages under the National Housing Act. Their earning record has been excellent and they offer a splendid potential field for investment of private capital. The interest-rate provision of section 10 opens an opportunity for interest subsidies, which should not be needed. What such corporations need is a good sales campaign to educate the public as to investment possibilities in the field of medium-grade housing.

Section 11, giving authority for developing and administering demonstration projects, puts the Federal Government into local realestate business, creates widespread opposition damaging to the cause of public housing, and threatens direct competition with private enterprise. Demonstration projects have already been undertaken by the Federal Government. They have been useful in arousing public interest in the problem of raising housing standards.

They have not demonstrated that Federal agencies can build economically or provide for the lowest income groups; they have not demonstrated that local housing authorities can do much more than come to Washington for help instead of trying to solve their local problems in their own local communities. The kind of demonstration project we need is one that will show what a local authority can accomplish with a minimum of Federal guidance, Federal initiative, and Federal financial assistance. I question very much the wisdom of retaining section 11.

Senator WAGNER. A witness yesterday, Mr. McAvoy, suggested a limitation of 10 percent, and would you be for its absolute elimination?

Mr. HOLDEN. I am questioning in my first suggestion that the Federal Government should not enter into the real-estate business. I have taken the right of the American citizen to read the Constitution, but, as a layman, I am not supposed to know what is constitutional and what is not. It seems to me it is not only legal but an entirely practical consideration, since real estate is so localized and under local State jurisdiction, that we will find fewer obstalces in carrying out the program if the Federal Government steers clear of actual realestate operations.

I believe it is possible to get cooperation of groups of citizens and businessmen, if they think the Government is not going to do the job. They are either negligent because they think it is somebody else's business or they are opposed to it.

I believe that local communities are nearly ready to take some responsibility if the responsibility is placed there, and to do them rightly or wrongly, they had the notion that as long as it is the Government's business it is not their business, even though they may not be opposed to it.

We have had some demonstration projects of various types, and I think they have served an extremely useful purpose. I think they have dramatized to the people the need for mass attack on this problem. In this connection, they have not proven that the Federal Government or its agencies can build houses economically, and they have not proven that they can provide for the lowest-income groups. The costs per family have been very high, they have been higher than the average cost per dwelling as shown by the 1930 census. They have not demonstrated that local housing authorities can do very much for themselves.

It seems to me that a demonstration project that would show on a fair-sized scale that a local authority could arouse public interest in its own community, with some Federal guidance and some Federal assistance, that kind of a demonstration project in the long run would have much broader results than a demonstration project carried on directly by the Federal Government.

These suggestions are a rather different approach to the problem of the method of carrying out the objective. This objective is absolutely vital to the future progress of this country, I believe.

I think in the separation of the social welfare aspects of the problem from the real-estate aspect, would go all of the way down the line.

I have suggested that the local welfare authorities take care of providing for the families so far as supplementing their rents, and that the local housing project be required to operate just as a business would; in other words, I think the business side of the program should be as nearly as possible conducted in a business-like way with the maximum of business responsibility, and the social aspect handled separately as a welfare program. In that way we will avoid the confusion that has arisen in connection with the projects themselves and out of the discussion of the proposals that are being made.

The modifications here suggested would, I admit, radically change this bill. They are not suggested in a spirit of controversy, but with a desire to contribute a point of view that will, I hope, be helpful in finding the most practical method of achieving the results the bill aims at.

In introducing this bill and getting this problem before the public for discussion, Senator Wagner has added one more item to his long list of outstanding public services. The eminent people who have endorsed this bill as it stands, are people whose earnestness and sincerity of purpose and knowledge of the housing problem are beyond question; they too have rendered a public service. However, I earnestly request this committee to give very thorough consideration to the basic differences of opinion that exist as to the best method of doing the job that needs to be done in public housing.

The CHAIRMAN. Thank you. The next witness is Mr. Nathan Straus.

STATEMENT OF NATHAN STRAUS, PRESIDENT OF THE HILLSIDE

HOUSING CORPORATION, LTD., NEW YORK

The CHAIRMAN. Will you state your full name for the record ?
Mr. STRAUS. Nathan Straus.
The CHAIRMAN. And you reside where?
Mr. STRAUS. New York City.
The CHAIRMAN. What are your official connections, if any?

Mr. Straus. I am president of the Hillside Housing Corporation, a limited-dividend housing corporation, and am a member of the New York City Housing Authority, but I do not speak for it, deferring to allow the chairman to speak officially for it.

The ChairMAN. Has the limited corporation of which you are president undertaken a housing project?

Mr. STRAUS. Yes; it has undertaken and completed it.
The CHAIRMAN. Where is it located ?
Mr. STRAUS. In the borough of the Bronx, New York.
The CHAIRMAN. Is it a completed project ?
Mr. STRAUS. Yes; it is.

The CHAIRMAN. I will probably ask you some questions about it later. You may go ahead with your statement.

Mr. STRAUS. In speaking to a committee such as yours, I know it is not necessary to repeat facts and figures of the actual housing situation. You have studied this problem and you are conscious of the human tragedy in it. Whenever we speak of housing in America, the picture of our city slums flashes across our minds.

This is the picture:

At least 10,000,000 families, one-third of the population of the United States, inadequately and improperly housed.

“Od-law” tenements in New York City, condemned in 1900 as unfit for human habitation, are today the only homes known by half a million families. This condition is typical of American cities.

One American dwelling out of seven has no indoor toilet.
One American dwelling out of five has no bathing facilities.

The death rate in slum districts averages 50 percent higher than in other districts of the same city.

The infant death rate in slum tenements is more than twice the average infant death rate in districts outside the slums.

Statisties amply prove that slums breed truaney and delinquency in youth. The delinquent of today is the gangster and criminal of tomorrow.

Those are the facts as you well know them.

What is to be done about them? Such value as my own recommendations may have is the result of many years of study of the housing problem, culminating in an investigation of housing in Europe last summer, as special housing commissioner of the city of New York. I studied housing both on the Continent and in Great Britain and made certain recommendations included in a report which was presented to Mavor LaGuardia. Moreover, I have had personal experience as president of the Hillside Housing Corporation, one of the largest limited-dividend housing corporations in the United States, with Ferderal funds.

The ChairmAS. How many tenements are there in that location or group of building?

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Mr. Straus. Something over 5,000 rooms, 1,415 apartments.
The CHAIRMAN. How many rooms in an apartment ?
Mr. STRAUS. Two, three, four, and a few fives.
The CHAIRMAN. What is the rent per room?

Mr. Straus. $11 per room average, as fixed by the State housing law.

The CHAIRMAN. What dividend is the corporation paying ?

Mr. STRAUS. The corporation pays theoretically the maximum dividend of 6 percent, but I intend to recommend—although I did not intend to say it just now—to recommend the precedent for other housing projects, that the dividend be limited by voluntary action by the board of directors to a maximum of 4.5 percent, because I think that is a step in the right direction, and somebody must take the lead.

The CHAIRMAN. Is it limited now by law or by agreement to 6 percent!

Mr. STRAUS. It is limited by the State housing law to 6 percent. The CHAIRMAN. This undertaking has been a financial success? Mr. STRAUS. I do not think it is time yet, Senator, to say that.

I would hesitate to make that statement on the basis of 3 months' complete operation and 6 months' partial operation.

The CHAIRMAN. How long have you been operating now?

Mr. STRAUS. Six months partially and 3 months completely, and we are 99.5 percent occupied.

If I might digress a minute in my brief statement, I would like to say I believe a thing has occurred in the last few days which is a danger to the whole low-cost housing proposition. I do not know whether my statement is in place before this committee, but I would like to make it, that I believe the statement that a $1,200 house has been perfected is not only untrue but is exceedingly dangerous.

The CHAIRMAN. Who made that statement?

Mr. STRAUS. The $1,200-house statement was made by the Federal Housing Administration.

The CHAIRMAN. What member of it, do you know?

Mr. Straus. It was made officially in a release given out 2 days ago and printed in the New York papers.

The CHAIRMAN. Given out to the press?

Mr. STRAUS. That is where I read it. If I might say so, there is no such thing as a $1,200 house humanly possible in this country today, and I have been actively associated with building problems and low-cost houses for many years.

The CHAIRMAN. I suppose the committee can find out who made that statement and let them come before us and explain it.

Mr. STRAUS. That would be fine, because it constitutes a threat to everyone that is contemplating low-cost housing, and it is the talk in building circles in New York City, and I think it should be contradicted promptly.

No one denies the existence of slums and bad housing. There are, however, great differences of opinion as to what should be done about it.

The traditional cry of “Keep government out of business” is the first objection that we meet when we try to improve American housing conditions. I am one of those who believes that whenever industry can take care of its own problems the Government should keep out of

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