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we cannot give them what we might call a decent place to live with air and sunlight and more sanitary provisions without some form of Government aid or subsidy.

Mr. GRIMM. That is correct.

Senator WAGNER. So that we are agreed on that. We are also agreed, I think, that after these houses are erected we ought to see to it, so as not to compete with private industry who cannot provide these homes, that only those of the low-income groups shall become occupants of these buildings.

Mr. GRIMM. Yes.

Senator WAGNER. I ask these questions so as to show, so far as objectives are concerned, we agree; but as to the method of reaching those objectives you rather prefer what we call the rent subsidy, year by year, to the definite contribution of a grant which might be covered over a 50-year period.

Mr. GRIMM. Without doubt.

Senator WAGNER. So that when you get right down to it, it sounds as if we are very far apart, but we are not

very Mr. GRIMM. No; and I am happy you stated that. The experiences of foreign countries, so often cited as analogous, are interesting, but they are not analogous because of the difference in the problem here and abroad, but we can keep the rent subsidy, which has been the most effective method used abroad.

Senator WAGNER. Mr. Morrison the other day, I listened to him, and you know he is chairman of the council, I think they call it, of the city of London, and also a member of Parliament, and particularly has charge of the housing phase, or he is on one of the committees having charge of housing in London, and is generally familiar with it. He contradicted that statement. He says the city of Leeds has adopted the method of yearly ascertaining the shortage and paying the difference, and also in the same house different occupants pay different rents, depending upon their means, but in no other place have they tried that method.

Mr. GRIMM. You will remember that was an article we discussed at great length, which was published in regard to that question.

Senator WAGNER. Yes; but he makes that an isolated case in England, and he gave an interesting story of the success England has made both from the economical and social view.

Mr. GRIMM. I advocate we keep what methods we can. Leeds has been pointed out as the outstanding success in the low-cost housing field precisely because the tenancies were put almost on a cost basis, and I do not know of any other public way of doing it. If we are going into this business, it is a serious business and we must go into it meticulously, because we may make more people sore than happy.

Senator WAGNER. Mr. Morrison says in England it has been a definite contribution each year, and charging a different rent.

Mr. GRIMM. That is precisely my formula.

Senator WAGNER. No; you provide for a subsidy here, and under your theory different tenants in the same house having the same type of occupancy may pay different rents.

Mr. Grimm. Exactly.

Senator WAGNER. He says that does not work in England; that Leeds has tried it, but they have abandoned it everywhere else, and they now have the same rent for the same type of rooms.

År. GRIMM. Determined how often-quarterly or semiannually!

Senator WAGNER. I do not know whether it is by the month or every year.

Mr. GRIMM. That would be important.

Senator WAGNER. There is not that ascertainment as to what the man earns; that one man may pay a dollar a month and another $5 a month per room. They have arranged that altogether, and they have one fixed standard.

Mr. GRIMM. I would not advocate anything as wide as that. In my formula, taking the national average of $8 a month per room, and charging the tenant $4, then the balance is to be made up between the local community and the Federal Government, and the $2 which the Federal Government pays would be the subsidy, and there would be almost no variable quantity there.

Senator WAGNER. You would eliminate altogether the provision permitting these demonstration projects?

Mr. GRIMM. Without a doubt. The experience we have had in the last 3 years goes for nothing if we have not learned that.

If you desire, I will leave with you this formula I have mentioned before.

The CHAIRMAN. That may be included in the record. (The matter referred to is as follows:)


1. Any slum clearance or rehabilitation projects subsidized by the Federal Government shall be to replace old housing actually demolished.

(a) The number of family units built shall not exceed the number destroyed.

(b) The new housing may be on the site of the old housing or it may be elsewhere.

2. Any housing subsidized by the Federal Government shall conform to minimum standards of adequacy and to maximum rent schedules prescribed by the Secretary of the Interior,

(a) Housing shall be as low in cost as possible and built to last 30 years. Design, construction, and equipment shal be simple and expensive, of a type suitable to be financed for 30 years.

(6) Average rents of subsidized housing may not exceed average paid by families in slum areas where clearance is made.

3. Tenancy must be strictly limited to families unable to pay an economic rent for unsubsidized housing, new or old, of adequate standards.

(a) Family incomes must be not less than four times and not more than five and one-half times the rent.

4. All housing projects must be initiated, the sites selected and acquired, the building constructed and managed by non-Federal agencies.

(a) The Secretary of the Interior or the coordinating board for housing, if such a body is established, shall have power to collaborate with State, local, or private agencies in the preparation of plans and the organization of projects.

5. Fifty percent of the rentals required to support the housing projects shall be obtained from the rentals actually charged the tenants; 25 percent shall be paid as a subsidy by the Federal Government; and 25 percent shall be paid as a subsidy by State governments, local governments, or private citizens acting jointly or severally.

(a) The Federal subsidy shall be payable in annual installments over the term of the mortgage.

(b) State, local, and private subsidies shall be paid in such form as suits the giver. Tax exemption shall be an acceptable form.

6. The following forms of financing are suggested :

(a) Borrowings by State or local governments, secured by their full faith and credit, the bonds to be sold to banks, insurance companies, private investors, etc.

(6) Borrowings by Státe or local agencies or private corporations secured by mortgages on one or more housing projects, the mortgage to be insured by the Federal Housing Administration and to be sold to banks, insurance companies, national mortgage associations, private investors, etc., or the RFC Mortgage Co.

(0) Eighty percent first mortgage as in (6) plus 20 percent equity financing to be provided by the RFC Mortgage Co.

7. All subsidized housing which involves the Federal Housing Administration or the RFC Mortgage Co. shall be submitted for approval to the coordinating board for housing (the setting up of which is proposed elsewhere), and such approval shall determine the action of the Federal Housing Administration and the RFC Mortgage Co.

8. The Federal Government will agree to subsidize 20,000 dwelling units in 1936–37 and to increase this number at the approximate geometric rate of 50 percent per year for the succeeding 4 years.

(a) The following schedule shows the full 5-year program :

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9. The Federal Government will agree to finance up to 20 percent of the cost of all units constructed each year.

(a) The following schedule shows the number of units to be federally financed :

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10. The following estimate of costs is presented. The Federal subsidy is assumed to be $2 per room per month for 30 years, or one-quarter of an $8 economic rent. A dwelling unit is assumed to cost $3,000.

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The $21,000,000 subsidy would continue annually for 25 years, after which period it would diminish for 5 years to $8,400,000 in 1969–70 and to nothing in 1970–71. The present value of the total subsidy is $390,900,000, figured at 3 percent compounded semiannually. The capital value of the houses built over the 5-year period is $786,000,000.

The CHAIRMAN. Mr. Stewart, will you come forward ?


The CHAIRMAN. Will you state your name for the record ?
Mr. STEWART. A. Joseph Stewart.
The CHAIRMAN. What is your residence, Louisville, Ky.?
Mr. STEWART. Yes, sir.

The CHAIRMAN. Are you appearing in your personal capacity or
as an official?
Mr. STEWART. In my personnel capacity.
The CHAIRMAN. You may proceed.

Mr. STEWART. I might qualify myself as a witness here by saying our first interest in housing was inspired by a desire to find out how it might affect $70,000,000 of real estate my company is trustee for.

The CHAIRMAN. What company is that?

Mr. STEWART. The Fidelity & Columbia Trust Co. of Louisville, Ky. That property is mostly located in Kentucky, but we do have property in almost every large city in the country which we are trustee for.

We have heard a good deal of comment in the press, and particularly from the real-estate boards—and, by the way, I am a national director in the real-setate board, but not representing them herethat it was in direct competition with certain phases of private property since the P. W. A. Housing Bureau was established. The

mayor of Louisville asked me to serve on a committee for the purpose of trying to find out if Louisville would benefit by that and if we wanted a project there.

In that connection this committee thought it proper to contact the real-estate board, the board of trade, and other public bodies there. We first, however, tried to find out from our own standpoint whether we wanted it, and for that purpose we raised a fund through the board of trade and the Industrial Foundation and other bodies to make a preliminary investigation.

As the result of that we found probably 15 percent of the houses mostly located in our central district were almost untenable and certainly would be desirable to take them down if opportunity ever presented itself. We found in most of those districts we had been living next door to them for many years and they were not generally understood.

We also reached the conclusion that private initiative or private capital just could not approach the problem and solve it, because in most cases whole blocks were so disintegrated and obsolete, and insanitary, that any individual trying to improve his own particular property would probably find the environment would render any effort along that line futile.

We also tried to find out just how long it had been since there had been any construction designed to house the workingman. Probably our survey was not complete enough to be perfectly accurate, but we recently concluded that probably prior to 1910 a good many houses were built for workmen. At that time it seemed to be the habit of the small investor with a few dollars, up to, say, $2,500, to build cottages or flat buildings designed to rent at figures within the reach of the average laborer.


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Since 1910, however, it seemed to us that all of the building had been designed to reach the so-called white-collar class, and practically, every building in Louisville, and certainly within a certain district, were built prior to 1910 and was practically untenable.

We then found that practically all of the insurance companies that were accustomed to lending large amounts for residential purposes had zones against this district. I think that situation exists today. I do not think any insurance company or any of the large reservoirs of capital will go into any city, as a general rule, and make loans in districts that might be classed as slums.

Our next conclusion was reached as the result of trying to find out what it costs the city to keep those conditions. We took four districts in Louisville, and in every case we reached the conclusion that to maintain the people of our slums in the asylums, jails, and so forth, the cost was in excess of the amount of taxes, and we reached the conclusion it would not be very long before the majority of the buildings in the so-called slum areas would disintegrate where could not live in them, with the result that the streetcar service, the paved streets, sewers, schools, churches, would all have to be abandoned, and we would probably have a desert around our business section.

That may sound like a far-reaching statement, but I think it is literally true, that the present trend would ultimately cause abandonment of those areas around patricularly the downtown section.

In approaching the problem from that standpoint, and referring to the reports to the public bodies, they invariably endorse the idea of slum clearance and low-cost housing, and they, generally speaking, in the larger number, feel that they would prefer slum clearance.

Senator WAGNER. You approached this, as you testified, purely from an economic standpoint!

Mr. STEWART. We approached it from the standpoint of our selfish interests, if you will. Our interest in Louisville is influenced by the fact that we pay about one-twentieth of the city taxes there, and if we had thought it would hurt our situation, or would compete with any type of building that could be carried on privately, we would have been opposed to it.

The CHAIRMAN. You pay this large sum of taxes because of the fact you have foreclosed mortgages and taken over properties?

Mr. STEWART. No, sir; it is because we are the largest trust company in the South, a very old trust company, and most of the property we represent is as trustee or as owner.

I have read Senator Wagner's bill rather carefully, and I have also presented and gone over it with several bodies in Louisville, and we think it is a very fine approach to this problem.

The CHAIRMAN. We are very glad to have had your views. Mr. Horowitz, will you come forward?



The CHAIRMAN. Will you state your full name for the record ?
Mr. HOROWITZ, Louis J. Horowitz.
The CHAIRMAN. Where do you reside?
Mr. HOROWITZ. Locust Valley, Long Island, N. Y.

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