vacant lots. These references are not made with any particular desire to criticize the two well planned experiments in better housing, but to emphasize their total lack of influence on neighborhood conditions. As a matter of fact, with some rare exceptions, conditions have become even more acute. An examination

of the condition of tax delinquency in this area will further prove it. More than 18 percent of the 842 parcels are now more than 2 years in arrears."

The partial list of mortgagees that are not in the business of making loans will serve to show how widespread is this problem of recapturing our cities.

"Baron de Hirsch Fund, New York, Association for Improving Conditions of the Poor, New York Protestant Episcopal Public School, Russell Sage College, Society for Prevention of Crime, Society of American Jurisprudence, Church Mission to Deaf Mutes, St. Luke's Home for Aged Women, Society for Relief of Destitute Blind, Church Society Foundation of Long Island, New York Post Graduate Hospital, St. Luke's Hospital, General Synod of Reformed Church of America, Clergymen's Retiring Fund Society, Colored Orphan Asylum, Roman Catholic Orphan Asylum, Jeanne D'arc School for Friendless French Girls, Wesleyan University, Trustees of Columbia University, etc."

No wonder he declares that "owners and mortgagees should do a little more collective thinking. * * *"" I should say a lot more collective thinking and acting.

The December issue is devoted to the property inventory of Lower East Side, the territory from James Street to Fourteenth Street, and from Third Avenue and the Bowery to the East River, containing 8,062 parcels. The article should be read in full; it is almost impossible to brief it.

Seventy-two buildings torn down in 1935, wiping out $225,700 in assessments, with 20 more applications pending. Two and one-half percent of all privately owned property in the area is now closed or boarded up above the ground floor, 232 in number with 1935 assessments of over $5,000,000. In addition some owners have reduced the heights of their buildings.

New laws of New York require certain changes and improvements in multiple dwellings.

The tenements likely to be affected by such law have an assessed valuation of $30,000,000 and Mr. Platzker questions the financial ability of such owners to make such changes. This would mean further boarding up or nonuse of housing. Would this be more desirable and more advantageous to the district and to its values, than if some way could be worked out of making it financially possible and desirable for such owners to modernize their holdings and for existing mortgagees to preserve their equities?

The Honorable Langdon W. Post, chairman New York City Housing Authority, says that the expense of complying with such laws will amount to more than $7,000 per unit. "I believe", he says, "that at least half of the 66,000 old law tenements will be subject to nearly all of these new requirements and it is safe to say that in more than half of the cases where the violations are placed the owners will not find it worth while to make the necessary alterations to comply with the law."

After discussing the serious tax arrears and tax-exempt problem, Mr. Platzker shows that 1966 parcels in the district with an assessed value of over $44,000,000 are unmortgaged, covering an area of 4,000,000 square feet an increase in 2 years of 2,000,000 square feet, due in part to private mortgagee foreclosure.

The private mortgagees have a prime interest in 2,322 taxable parcels, more than 400 of which are in arrears of taxes from 2 to 5 years. The majority are individuals or estates but others include philanthropical and educational institutions and societies of all kinds.

Referring to institutional mortgagees, he says:

"Quite contrary to common belief and opinion, the financial institutions have no controlling interest in lower East Side property. The savings banks, the trust companies, commercial banks, insurance companies, mortgage and title companies plus those with saving and loan associations, H. O. L. C. and city of New York mortgages only equal 46%1⁄2 percent of 3,754 taxable parcels in the area. To the credit of this group, it should be said that the properties upon which they have a first-mortgage interest show the least number of tax arrears."

The foreclosures of 1935 averaged almost 20 a month, with a rise rather than a decline in prospect due to tax arrears on properties mortgaged to private mortgagees.

Mr. Platzker concludes as follows:

"This study clearly shows that neither the private mortgagees nor the owners of unmortgaged property can afford to stand aloof much longer. Their investments are more at stake today than at any time in the history of lower East Side.

The unmortgaged owners and the private mortgagees have potential control of 53% percent of lower East Side's taxable property. They should become more acquainted with present conditions in the community and help solve its antisocial

conditions.

"Even a prolonged policy of foreclosure will not and cannot by itself solve the condition that underlies the declining ability to make so many properties pay. There are only two possible solutions for obsolete and growing obsolete properties; they should be torn down if it is economically wise to do so, or they should be thoroughly modernized. In the meantime, more than 10,000 cold-water apartments are begging for occupants who cannot even pay the meager rent of from $3 to $5 per room. Only 12 percent of lower East Side's tenements were erected since 1902."

I have dwelt upon and quoted from the foregoing experience of lower East Side, not alone because it demonstrates that they are alert and awake to their problem, not merely to indicate that this problem is one common to all cities, but to show what may be expected in any city if the trend is not arrested, and to point to the necessity for a frank facing of the facts and the careful accumulation of the statistics and conditions in an entire district before seeking arbitrarily to remedy the condition in any one part of such a district.

Other cities and sections of cities may be approaching their problem in similar or even different ways than is the lower East Side. Naturally, I have not and could not accumulate such experience, but if experiments are being made, and I hope they are, it only serves to show the desirability of coordinating such efforts, that all may have the benefit of the experience of each city or district in the solution of this common problem.

"Land Usage", a publication sponsored by the land-utilization committee of New York of which Mr. Arthur C. Holden is chairman, in its January issue contains invaluable information as to the method of approaching the ultimate goal of reclaiming our cities.

Six steps necessary to the completion of a pooling operation are stated to be: (1) Analyze economic condition; (2) organize owners; (3) reorganize mortgages; (4) achieve solvency through savings in operating costs; (5) arrange new financing; and (6) build, step by step.

Mr. Holden says: "It is my personal belief that organizations of property owners in depreciated neighborhoods, acting as a unit, may become the vehicle for the expenditure of credits applied with the double purpose of putting men to work and of transforming the antiquated and outworn sections of our cities and towns, step by step, into communities which will meet the needs and possibilities of twentieth century life."

This issue of this paper is particularly interesting and useful to one considering the problems under discussion, coming as it does from sources possessed of long experience and expert knowledge of that problem.

Whether the solution of this problem, however, is a local one or a Federal one is perhaps a matter of debate. Logically and theoretically, it probably is a local one, but if anything is to be started now, an experiment made, the Federal Government having embarked upon slum clearance as a partial solution, must show the way or else the job simply will not be done. Some communities, will, some will not. Some can, some cannot. After all, our local governments depend for income to perform their governmental tasks upon taxes levied upon the very blighted areas which so badly need to be reclaimed and our taxpayers can scarcely bear their taxation cross now without thinking of additional burdens. Moreover, the problem must be dramatized somewhat like the Federal Housing Administration dramatized the housing problem and the long-term mortgage and as the Home Owners Loan Corporation dramatized the long-term mortgage through the splendid work that it did in caring for the distressed mortgagee, thereby avoiding the collapse of the mortgage market. The Home Owner's Loan Corporation experiment wrote a splendid page in our history. So I think must some Federal agency focus attention nationally upon this city problem, because since it affects practically every city in our Nation it becomes not only a local problem but in this emergency at least a Federal one. With the tremendous facilities that the Federal Government has, it could work out a comprehensive program and arouse the interest of the money lenders of the Nation and so organize them as to solve this problem.

Only a great agency can do justice to this task. It is not a task for an individual. It is a task for some responsible governmental agency. The money lenders of the Nation must be aroused to the task in conjunction with some such great Federal agency. Later the task of solving the problem can be localized. But the start must be from a Federal source as I see it. Our municipalities are

burdened and overburdened with debt and since their chief source of revenue is taxes on real estate anything that involves a further direct tax is headed for defeat if indeed it even sees the light of day.

It may be some time before formal recapture or reclamation districts can be set up and before this problem can be handled in a formal manner, but in the meantime, a proper governmental agency could be educating the mortgage investors of the country to doing this work of reclamation and redemption themselves and by the use of Federal Housing Administration insurance and governmental statistics and engineering advice and perhaps some Public Works Administration funds bring about the elimination of poor housing and the construction of decent housing by that fine combination of private initiative and governmental suggestion and advice which is so typically American. All this can be done

better now than at any other time because so much of the real estate in our cities is owned by mortgagees, individual and institutional, and they are ready to accept reductions in their investment knowing full well that unless some comprehensive plan is developed for saving their cities they may lose their entire investments.

As a matter of procedure, the first step would be for an official body in charge to locate an area or unit or district in the given city in which modernization and rehabilitation can best take place. One of the important considerations in determining such fact would be the extent to which the ownership in such district would be likely to be cooperative. That in turn I feel would be answered by the number of properties owned by former mortgagees and the number of properties substantially encumbered by existing mortgages.

It

Having then determined upon the district either through the use of the existing information in possession of local groups, governmental or otherwise, the next step would be to work out a program for the development of that district. might take the form of tearing down every other house to give light and air; it certainly would involve the creation of a common courtyard in the rear of the houses in such area, establishment of recreational facilities for the area; the proper placement of stores and in general, the building up of a very nearly self-contained unit. With this as a basis, the property owners and mortgagees in that district might be called together and the proposal submitted. The idea would be to form a corporation to which the various property owners and mortgagees would convey their respective interests in the property to be developed accepting in exchange therefor stock in the new corporation. The money to develop the program might come in part from loans by either the mortgage investors already interested in the area or by others, such loans to be secured by mortgage on the real estate, or perhaps by the bonds of the corporation. If sufficient funds cannot be obtained in that way, a modest advance perhaps might be made by some Federal agency. The loans or bonds might perhaps be insured by the Federal Housing Administration. The corporation, of course, would be under supervision in the public

interest.

Owners in the area that might prove stubborn or selfish, or who might wish to take advantage of the effort to develop the area might be eliminated in one of several ways. The property owned by such a reactionary in poor condition, the city would certainly be more apt to condemn and cause the building to be torn down. If that did not work, tenement-house laws might be enforced or zoning regulations invoked. The area as a whole would be protected by zoning regulations and other environmental protections so as to prevent future blight or invasion. If streets intervened in the area, the city fathers could perhaps be prevailed upon to eliminate such streets so as to make for a compact unit. If upon the completion of the development or during its development neighboring sections of the city should desire to be included in the development, that could be arranged for, or if such inclusion was not feasible another corporation might be formed and so on until a complete job had been done.

I want to make it perfectly clear that I am not undertaking to work out a comprehensive detailed method of solving the problem. I have not had the time so to do, even if I possessed the engineering and architectural skill which would be necessary to prepare such a detailed program. What I seek to do is to arouse the interest of the mortgage investors of the country to the problem, knowing full well that if they are so aroused, they can and will procure the necessary service to work out the required program. Consequently, do not permit valid objections and justified criticisms of the mechanics of working out a solution of this problem to interfere with the recognition of the problem and the devising of a solution of the problem.

I feel confident that if the mortgage investors of the country are aroused to the problem confronting them, that with the initiative and resourcefulness shown in solving their problems they will successfully dispose of the instant problem,

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and, organized so to do through some Federal department, they will conquer the army of blight and waste now occupying so many of our cities and forever drive them forth, and that in so doing they will not only be aiding and protecting the depositor, shareholder, and policyholder in their various institutions, but will be improving the health of their community, minimizing vice, reducing crime, and improving the morale and citizenship of our city populations.

THE OLANDER REAL ESTATE CORPORATION,
Toledo, Ohio, April 7, 1936.

To the COMMITTEE ON EDUCATION AND LABOR

United States Senate, Washington, D. C. GENTLEMEN: I hand you herewith a copy of my communication of yesterday's date, addressed to the Hon. Robert J. Bulkley, in connection with Senate bill, specifically marked S. 4424.

This letter is self-explanatory, and I am directing it to your attention in behalf of the American people especially those of the low-wage and low-bracket groups, and particularly in behalf of the 14,000,000 Negro citizens, the greatest majority of whom are in the low-wage group, and who occupy the Nation's slum areas. The records on file in the Federal Housing Division, manifest the interest I have taken in this problem, and the work that I have done in the past 5 years in connection with the establishment both of a local housing program, and the formation of a definite national constructive housing program, and I will appreciate the sincerity of your interest in the observations made in the attached communication. Yours truly,

Hon. J. BULKLEY,

United States Senate, Washington, D. C.

O. J. SMITH. APRIL 6, 1936.

MY DEAR SENATOR: I write you in connection with the Wagner bill, S. 4424, introduced by Senator Wagner, April 3, 1936, specifically a housing bill, to provide financial assistance to the States and political subdivisions thereof, for the elimination of unsafe and insanitary housing conditions, for the development of decent, safe, and sanitary dwellings for families of low income, and for the reduction of unemployment, and the stimulation of business activity, to create a United States housing authority, and for other purposes.

There are several objections to this proposed measure, based upon: First, a question as to its real benefit toward the elimination of slums; second, its effect in providing low-rent housing for the low-income group; and third, its effect upon the reduction of unemployment and the stimulation of business activity.

First, there is no definite provision in the bill for a definite specific Federal procedure for the elimination of the Nation's slums; it is not an improvement in any measure over present housing legislation, or the facilities in existence to effect a national slum-clearance program.

Second, there is no provision in the bill guaranteeing any provision toward effecting low rents for the low-income group; page 12, line 15 (b), of this bill specifically states that "not in excess of 45 percent of its development or acquisition cost will be allowed." It is perfectly plain that this allowance cannot, and will not, effect low rentals to the low-income group any more so than the present allowance of the Federal Housing Division, and therefore is not effective in the matter of providing low rent.

If we are to have a new housing bill, it should be in truth and in fact an improvement over the present legislative facilities, in other words, if we are to have lowrent houses, there is a definite and specific need for a more liberal allowance in the development and acquisition costs of such projects, what this bill should contain in this respect is a provision for a direct Government subsidy, if the administration sincerely desires to effect low rentals for the low-income groups. Third, there can be no reduction of unemployment through this bill, through the stimulation of housing construction, because the bill itself does not provide a definite Federal program of construction. The elimination of slums and the provision of low-cost housing is left entirely as it was before, to local interests and local initiative. Notwithstanding the references to State and Federal housing authorities, we need a mandatory act of slum clearance and low-cost housing by the Federal Government, and until we have such legislation there will be no improvement in construction work and thus no reduction of unemployment.

It is a known fact that if the Federal Government perfected a national program of slum elimination without regard to geographical sections and localities, and made slum elimination mandatory, the elimination of the Nation's slums would provide sufficient employment, through the reconstruction of such areas and the use of durable goods, and their manufacture and transportation that would absorb the Nation's unemployed labor. Therefore, we must have mandatory legislation to effect the eradication of slums and the employment of the Nation's unemployed.

Fourth, this bill further provides for the setting up of a Federal housing authority, as successor to the present Federal Housing Administration, without any pertinent or constructive changes or suggestions in the administration of housing. In the absence of the power to eminent domain by the Federal Government, the Federal housing division has been helpless; its limitations are extended to the new created authority without any correction of such limitations by Federal act. If Congress has not the power to grant eminent-domain rights, then an amendment to the Constitution should be effected, granting those rights, that the majority of American citizens, who compose our low-income groups and inhabit our slum areas might have the right to decent, sanitary, low-rent quarters, and the opportunity for full living.

The transfer of authority from the Federal Housing Division to a Federal housing authority, and thus the States and municipalities, and to political subdivisions, subjects the success of a housing program in this Nation to the influence of Nation, State, and local politics, and experience today has taught the American people that, if politics is to play any part in the provision of decent living quarters at low rents for them, the objective is impossible, therefore, housing in America must be placed upon a nonpolitical, nonprofit basis, with nonpolitical management.

We must have either subsidized private ownership and operation, Government ownership and operation, or Government ownership and private operation, free from political influence.

The bill before Congress now, does not provide these absolutely essential provisions. Finally, one cannot but help questioning the sincerity of the Government housing program, in which it seeks to effect a reduction of unemployment through the accleration of the wheels of the Nation's industry, when they observe the financial gesture of the administration in providing capital for this important objective. This bill provides, page 13, line 21, that, "not more than $25,000,000 shall be loaned in any one fiscal year by the proposed housing authority", for housing purposes, this sum is so insignificant in comparison with the obvious need for finance of the housing needs in the Nation, as to be ludicrous. A survey of the Nation's slums and the need for low-rent quarters, will plainly indicate that not less than $5,000,000,000, per year for the next 10 years is necessary to effect any substantial change in the living conditions of the American people, 95 percent of whom are in the low-wage, and low-bracket groups, which was borne out by a survey in 1929, which was the peak of American finance and industry, that only 5 percent of the American people earned $2,500 per year and more, while the other 95 percent of the American people at that time were struggling to pay high rents or payments on purchased property, and since that time they have either lost their property, or with others are required to pay absorbant rentals for the defective and insanitary living quarters of the Nation's cities, towns, and villages, and today those rents about equal the 1929 rate.

Something then, must be done to effect low rentals for these groups in the Nation, and the provision of but $25,000,000, to be expended in 1 year is far inadequate to aid them.

A copy of this bill was received through your courtesy in this morning's mail, and I am writing you immediately my observation of the inadequacy, defectiveness, and insincerity of this proposed measure, realizing fully the need of a constructive housing program in the Nation beneficial not only to the 14,000,000 Negro citizens, of whose race I am identified, but of others of the white race, who suffer similar housing needs, and I hope that you will study this measure carefully, and the observations that I have made here without previous study, with a view toward effecting a definite constructive national housing program, beneficial to the Nation's people.

Very sincerely yours,

O. J. SMITH.

P. S.-I wish to specifically point out to this committee that, New York has a housing program calling for the expenditure of $125,000,000, in the next 10 ye rs. Certainly then $25,000,000 per year for the elimination of the Nation's slums is quite too inadequate.