The figures today are, as follows: Mortgage funds advanced by Public Works Administration__. Total $4,910, 000 644, 090 5, 554, 090 As I stated in my testimony, the project is practically complete, and has been occupied for some months. These figures may be assumed therefore to reflect with substantial accuracy the total final cost. I do not want to close without expressing to you again my appreciation of the courtesy accorded me at the meeting of your committee yesterday. Faithfully yours, NATHAN STRAUS. The CHAIRMAN. Thank you. Mr. Zink is the next witness. STATEMENT OF JOHN H. ZINK, CONSTRUCTION LEAGUE OF THE UNITED STATES, BALTIMORE, MD. The CHAIRMAN. Will you please state your full name for the record? Mr. ZINK. John H. Zink. The CHAIRMAN. What is your residence? Mr. ZINK. Baltimore, Md. The CHAIRMAN. You represent the Construction League of the United States? Mr. ZINK. Yes, sir. The CHAIRMAN. Your offices are in the National Press Building in Washington? Mr. ZINK. Yes, sir. The CHAIRMAN. I understand you only want 5 minutes? The CHAIRMAN. You may proceed. Mr. ZINK. The Construction League of the United States is a federation of 17 of the leading national associations in the construction industry including the organizations of the architects, engineers, general contractors, special contractors of all types, materials producers and material fabricators. In addition, its State branches are located in all sections of the country so that it reflects a general cross section of construction industry viewpoint both functional and geographical. Our industry in 1929 employed 42 million men which is 10 percent of the total number of persons gainfully employed in the Nation. Construction materials were being made in 23 percent of the factories of this country and one out of every five carloads of freight transported consisted of construction material in raw or finished form. From the high point in volume in business in 1929 to the low point in 1933 the industry dropped 75 percent with consequent unemployment and idleness to the employers and employees of the Nation. The league has followed with interest the housing developments of the last few years both from the actual construction side and the angles of finance and economics. It gave its assistance to the preparation of the first Public Works Act under which public housing received its impetus in this country. It later was deeply interested in the provisions of the National Housing Act which it believes is one of the most forward steps in construction and home building stabilization in this country, utilizing as the Act does private financ ing and the stimulation of the normal channels of the business world. Consequently, we feel that the problem of small home ownership under equitable finance and mortgage terms has been assisted by the National Housing Act as administered by the Federal Housing Administration and the Home Loan Bank System. The other important field to which the Federal Government has turned its attention is slum clearance and the provision of adequate housing for the lowest income groups. During the past few months a great number of plans have been advanced for the solution of this problem but the only one to make its way into legislative form is the bill now, before this committee. Reviewing the history of the housing movement in this country two important facts stand as obstacles to a solution of the question. One is the fact that we have not generally in this country built true "low-cost" housing. Rentals have been much higher than could be afforded by the lowest income groups we sought to house and even much higher than the original estimates by the planning agencies. Perhaps one reason for this is the fact that our housing has tended to provide much more than the adequate health and safety standards which we originally set out to accomplish. The result of this situation is the second fact which we wish to point out. Because of the high cost per room the families for whom housing projects were intended have not actually occupied them. We have seen this very graphically in our clum clearance projects where whole blocks have been razed with the idea of providing better housing for the families who lived in the unsanitary quarters. The fact is that this new housing has been occupied by persons who can afford more than the rentals charged. The original slum dwellers simply moved to other sections of the city into slightly better quarters than they originally occupied with the result that they began the creation of a new slum section. The Construction League has always believed that housing is a local function. This because housing involves the formulation of a comprehensive city planning policy with a gradual rebuilding of the older and neglected areas rather than the spotting of one or two Federal projects without due regard to future developments in the housing field. It is our opinion that the Federal Government by itself cannot solve the housing problem. It must have local leadership and cooperation although it is very proper that the Federal Government should develop minimum standards for construction and health, organize a continuing study of supply and demand and assist in the coordination of housing activities. However, by direct Joans and capital subsidy at low rates the Federal Government tends to create opposition to local developments which are without capital subsidy. The net result is that the local planning function is destroyed, the source of local capital dried up, and the community learns to rely only on the Federal Government for housing assistance rather than taking the initiative and leadership locally. The uncertainty of the field of competition between private industry and Government in the fields of financing construction, operation, and maintenance of housing tends to dry up at the source the private initiative of new projects which might otherwise be naturally stimulated to provide sound low-cost housing and remove from the relief rolls substantial numbers of unemployed. Because the Construction League has always firmly believed in the use of private enterprise and facilities in all construction problems it feels that it must voice its opposition to any capital subsidy as proposed in the bill before you. We strongly feel that the development and management of housing projects should be left in the hands of private enterprise in order that private initiative and business may be maintained. Government exists for the citizens but when the Government becomes landlord, and its citizens tenants, the economic basis upon which this country was built is in jeopardy. We have heard that the so-called low-cost housing in this country has so far rented for about $12 per month and the ideal is in the neighborhood of $6 per month. The charge is made that private enterprise simply cannot build down to that level and consequently a capital subsidy is necessary from the Federal Government. In this connection it might be well to point out that it has become accepted practice to include in our low cost housing certain items over and above what is necessary for health, safety, and comfortable living which tend to force rentals per room above what we had anticipated. Private enterprise can and is building down to low-cost levels. This is exemplified by a project which we understand the Federal Housing Administration has committed itself to insure a mortgage for at Crossett, Ark. This project is being financed by private capital and an 80-percent mortgage taken by the banks in that State. It involves the construction of 3- and 4-room single-family detached houses to rent at $6 per room per month; and the construction of 5- and 6-room single-family detached houses to rent at $6 per room per month. As another example of low-cost housing being done entirely by private enterprise and by private capital we should like to cite the Meadville, Pa., project on which a Federal Housing insured mortgage for 80 percent is held by the Pennsylvania State workmen's insurance fund-entirely private capital. The interest rate is 4 percent, and operators have agreed to pay no dividends until the mortgage is substantially reduced. The rooms in this project rent for about $7 per month, and the contract states that rental is not to exceed $7.30 per room. All rooms are in single-family detached nouses with ample recreational facilities. These are the only projects we know of either in operation, under construction, or proposed by any agency of the Federal Government which achieves the standards we are looking for in housing the lowest-income groups of this country. And, strangely, they are being built entirely with private capital, privately managed, and are in no way subsidized by the Federal Government. This is ample demonstration that private enterprise can handle the situation. Agreed that it is simple construction; however, it is durable, meets safety and health requirements, provides recreation room, proper lighting, plumbing, and the other necessities. It is low-cost housing in the true sense of the word. Nevertheless, as we have stated before, this country has not yet generally built housing on a large scale down to the rentals which the lowest-income group can afford. Accordingly, we recognize the fact that some sort of assistance is necessary for the lower-income groups until such housing can be widely built. We should like to recommend that in lieu of capital subsidy any assistance given should be in the form of rental subsidy on the basis of a proper-means test. The effect of this is that private enterprise in the development_and management of housing projects is stimulated, the Federal Government does not assume the responsibility for heavy annual expenditure over a short term of years, but by spreading the rental subsidy over a term of years the annual burden on the Federal Treasury is eased. If rental subsidy is given on the basis of a proper-means test, we will have accomplished the principal objective we aimed at in the housing of this country-the rehousing of the same dwellers rather than attracting families who can afford an economic rent, and merely sending out slum dwellers to other old sections of a city. By this method of rental subsidy the Government pays the difference between an economic rent and what a family is able to pay, and, as the income of our lowest financial group increases and it is able to afford more rent, the burden on the Federal Government immediately decreases. Consequently, as the country assumes a firmer and more stable economic basis, the subsidy can be either greatly diminished or entirely discontinued. The Construction League has given careful consideration to the facts and ideas mentioned above and has studied the long-term financial and economic implications of the housing question. The members of this industry have literally built this country and will build the housing in question at this moment. Every angle of the problem is irreparably linked with the construction industry, and we have tried to weigh the facts in a broad, impartial light. Our studies and discussions lead us to the sincere conviction that the field of capital financing and management of housing projects should be left to private enterprise; that the Federal Government should not grant capital subsidy to projects; and that if any subsidy is necessary, it should be on rents after a proper means test is made. The CHAIRMAN. I thank you, Mr. Zink. We will now hear Mr. Carroll. STATEMENT OF JOHN CARROLL, VICE PRESIDENT OF THE MASSACHUSETTS STATE FEDERATION OF LABOR The CHAIRMAN. Will you please give us your full name? The CHAIRMAN. What is your present occupation? Mr. CARROLL. Vice president of the Massachusetts State Federation of Labor. The CHAIRMAN. What part of Massachusetts do you reside in? Mr. CARROLL. I reside in Boston. I am also a member of the Massachusetts State Board of Housing. The CHAIRMAN. Who are the other members of that board now? Mr. CARROLL. Mr. Lucy, who is connected with the Home Owners' Loan Corporation, and Mr. Beckard, a banker from Fall River, and Mr. Strickland, residing in Brookline, and Mr. Ryan and myself. I am the labor representative on the board. The CHAIRMAN. You may proceed with your statement. Mr. CARROLL, I do not want to indulge in much repetition, but I have lived with this problem for many years; and if I was charged with the responsibility of drafting this legislation, I would draft it in almost the same detail as it is before your committee, thanks to our Senator from New York, the sponsor of this legislation. However, I want to bring to the attention of this committee that section 13 of this bill, in my mind, tends to defeat, or in other words to harass the practical operation of this legislation, and this is not intended to be any criticism of the Senator from New York State. If you will note in this section 13, article 2 provides that In the case of a slum-clearance project, that there exist in the community concerned slum areas that are not being remedied adequately by private enterprise; and that either (a) the clearance of the area will not make it difficult for the dispossessed inhabitants thereof to secure equivalent dwellings elsewhere at no higher cost to them, or (b) that such inhabitants will be provided for by the development of sufficient low-rent housing, within their financial reach, either upon the site to be cleared or in some other suitable locality. Let me give you my experience of what is going to happen with this clause. Somebody who is in opposition to housing in general is going to ask for a judicial interpretation of the contents of this section, and I want to forcibly bring this to the attention of the committee, that poor people do not altogether live in the substandard areas, and that there are people living in those areas who are in a better position to pay rents required by private-initiative building than a lot of other people now living. Beyond a question of doubt those conditions do exist, and with the insertion of this clause you are going to put those people who are so penurious-and this does not mean by any stretch of the imagination that all people living in substandard areas are of this type, but I want to impress upon this committee the idea that there are people living in those sections that can afford to pay good rents that would be equivalent to the rent that they should pay. The CHAIRMAN. In other words, there are groups of people in our population who could afford to live in better environment and better homes if they choose to, but for penurious reasons they select a location below the rent they could pay. Mr. CARROLL. Yes; and they will deprive themselves of anything in the world to save a dollar, and by this clause we are going to reestablish those gentlemen and ladies in nice comfortable homes, whereas we deprive the men and women who are not so penurious and want to live in at least reasonable standards, and in order to do so deprive themselves of a lot of things they would ordinarily otherwise have—we will deprive them of living in these homes we are to provide. I want also to impress upon you the fact that there is nothing to prevent a chiseling game being played with this clause here, as we cannot produce new buildings for the rentals that are being paid in substandard areas. There also, as I have said, can be a judicial attack from those who are opposed to the problem in general. Otherwise, I am in sympathy with the legislation in its detail, and this is not to be considered as any challenge or any criticism of those who presented the legislation, and I want to say further that this provision of the legislation can be removed from the entire bill without changing the effect in any shape, manner, or form. Let me bring to your attention the fact that Massachusetts, the State I live in, was the first State in the Union to appropriate money, |