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blocks, the city would spend about $2,500,000 annually or nearly onehalf of its budget to operate 20 percent of its area.
The Illinois Housing Commission made a survey in 1933 of a square mile covering a partially blighted residential area in Chicago. It was found that the city paid $3,200,000 toward fire and police protection, schools, street maintenance, garbage removal and the like in this area. On the other hand, the taxes levied in this area could have equaled only $1,191,352, but 3 years after the due date had been collected only to the extent of $586,061.
The bad effects of slums are not confined to their own cities, and adjacent and remote communities feel directly the contagion of blighted areas.
3. Private enterprise, unaided, cannot provide adequate housing for the group of population most in need: The very existence of our widespread slums demonstrates the inability of private enterprise in the past to make a substantial contribution to the problem. Repair and modernization of single units distributed haphazardly throughout bad areas are swallowed by the surrounding squalor. It is essential that projects of self-protecting size be undertaken with full municipal collaboration. The cost of carrying the easily acquired portion of a large and complicated site while the process of buying the difficult parcels is dragging will discourage the most enterprising private operators.
Assuming ideal conditions in outlying areas, a sound house costing $3,500 placed on a minimal $1,000 lot, with an allowance of $40 per room per year for charges other than financing will necessitate an annual expenditure of $500. A family economically eligible for this dwelling must earn between $1,500 and $2,000 a year.
The cost of housing must be considered separately from the cost of slum clearance. The mere clearing of our slums without rebuilding is expensive. Consideration of the foregoing figures for housing of a most modest livable standard shows the inability of private building enterprise to provide for a large section of our population.
Home ownership is admittedly desirable, but is not universally feasible. Sponsors of one point of view contend that 50 percent home ownership indicates a strong inborn desire for possession. The opposite point of view contends that the renting habits of the other 50 percent indicate an increasing inherent desire for mobility. Regardless of what perhaps should be, the facts remain that a tremendous portion of our population is not economically qualified for home ownership.
4. Financial aid: The less fortunate economic families of our country cannot be adequately housed in decent dwellings without some form of aid, such as capital grants made at the inception of a housing project, or annual payments. As an annual payment involves a small nonreturnable expenditure at the beginning, more building can be accomplished with a limited appropriation in this manner than by the use of capital grants. In 35 cities in which the Housing Division is operating, there is no record of any being unwilling to accept a reasonable service charge in place of taxes and thereby make a substantial contribution to the attainment of lower rent.
5. Local authorities are not now able to assume an immediate program: Large groups of our population have not, in the past, been able, consistently, to pay an attractive return on funds invested by others in their housing. Private investors can be attracted to the field of housing these groups only if some assurance against loss can be given. Local public bodies are not now able, alone, to establish and pursue the necessary program because: (1) the necessary statutory authorization does not exist in most States. Although legislation exists in 20 States, none make adequate provision for grants by States or municipalities; (2) most municipalities lack funds, and constitutional limitations on municipal indebtedness in many cases have already been reached; and (3) with the exception of New York the Federal Government, with superior credit, can offer financial aid at lower interest than State or municipal bodies.
Further education and stimulation is necessary if our communities are to obtain adequate powers. If the Federal Government were to discontinue its aid at once, it is likely that the experience and progress gained in the last 3 years would be lost. Responsibility should be placed with local agencies as soon as possible. This, however, probably cannot be done immediately, but may better be accomplished by a progressive transfer.
6. Absence of conflict with private enterprise: Only the middle and upper groups can pay for the cost of housing plus a reasonable profit to private enterprise. Only financial aid can make possible construction of housing for the lower-income groups. By the use of this aid a new field can be opened to the building industry which otherwise could not be developed by private interests and lowerincome groups can be reached and tenantry limited to them. The profitable field must be left clear for development by private individuals or agencies. Our public-housing program, even in its early stages, has given a stimulus for modernization and rebuilding in areas which otherwise would never have been subjected to improvement. There is not only no conflict between a public program and a private program, but any private undertaking in deteriorated areas is largely dependent upon the stimulus of a publicly initiated development.
7. Summary: In my opinion, the following summary of the housing situation in the country at present is valid :
1. The existing need and future shortage of livable housing for the lower-income groups is so drastic that a national emergency is imminent, the proportions of which have not yet been appreciated.
2. The blighted areas of our cities degrade their population and endanger municipal finance.
3. Private enterprise cannot now or in any near future provide adequate housing at a price within the range of a substantial proportion of all American families. Satisfactory housing in adequate quantity can be made available to the groups in greatest need only by capital grants or annual contributions.
4. Local governments are unable, without Federal aid, to take care of this need.
5. Any program of housing undertaken should be so designed as not to inhibit the best efforts of private enterprise.
I have not been informed whether the Director of the Budget has advised whether this bill would not be in accord with the financial policy of the President. Such views as I have expressed are entirely personal and not official.
The ChairMAN. I understand you to say that the Housing Division of the Public Works Administration has undertaken housing projects in 20 States.
Mr. Clas. No; my reference to the States, Mr. Chairman, was in connection with the legislation. Twenty States have housing authorities, but with the exception of one they are not in position to function without financial aid.
The CHAIRMAN. In how many States has your division undertaken building projects?
Mr. Clas. We have 50 projects in 35 cities, 21 States, the District of Columbia, Virgin Islands, and Puerto Rico.
The CHAIRMAN. Will you give me a list of those projects?
The CHAIRMAN. Are those projects of two kinds, one where the Government undertakes the project itself and finances it completely, and the other where the government undertakes to make loans to private corporations to undertake the projects?
Mr. CLAS. Yes; limited dividend projects.
The CHAIRMAN. For sometime past you have not been advancing money or giving your approval to such projects. Is that true?
Mr. CLAS. Yes, sir.
The CHAIRMAN. When did you abandon or stop the policy of making loans to limited-dividend corporations?
Mr. Clas. I think it was early in 1934, just before I came with the Housing Division.
The CHAIRMAN. Where are those seven projects located ? Mr. Clas. One is at Alta Vista, Va.; two of them are in New York City; one is in St. Louis; one in Raleigh, N. C.; one in Philadelphia; and one in Cleveland.
The CHAIRMAN. From what source could we get a report as to the character of the projects, the benefits that have accrued, the amount of rent that is charged, the amount of investment, and other facts?
Mr. Clas. I can give you complete information. The CHAIRMAN. The other group of projects have been of just what character?
Mr. Clas. About half of the program, Mr. Chairman, is direct slum clearance, and the replacement of the buildings that were in the slum areas, with new buildings.
The CHAIRMAN. In other words, the Federal Government undertakes to purchase land in a municipality, designs buildings, and actually itself, out of its own funds, erects the buildings?
Mr. Clas. Yes, sir.
The CHAIRMAN. Have any of these projects reached the stage of the buildings being completed and reaching the situation where they are available for rental, yet?
Mr. Clas. The project which is the furthest along is that known as the Techwood in Atlanta for white occupancy, one building of
which is used as a dormitory for the students of the university having been completed and occupied. The balance of the project will be completed in units beginning next month.
The CHAIRMAN. But no project which we might call a strictly Federal housing project has been completed yet?
Mr. Clas. Of the Federal program, no.
The CHAIRMAN. That is what I am directing your attention to. What is the plan that your Division has agreed upon as to renting this property, maintaining it, keeping it in repair after you have expended all of the necessary money for the completion of the houses?
Mr. Clas. We originally had a set-up of operating costs and expected to be able to take care of the upkeep from the revenues, but the Comptroller General ruled against that, so at the present time it is going to be necessary for us to wait until we have legislation to take care of that.
The CHAIRMAN. Is the legislation pending before Congress?
The CHAIRMAN. Have you also had constitutional questions raised in the courts as to your authority to engage in housing projects as we have described ?
Mr. Clas. You mean before the Supreme Court?
Mr. Clas. The only one that has come up to the Supreme Court is as to the right to take by eminent domain. Injunctions against housing projects in Boston, Cambridge, and Camden have been sought in three cases now pending in the Supreme Court of the District of Columbia, but though pending for some time, these cases have not been argued, and we are continuing work on these projects.
The CHAIRMAN. Has that been adjudicated yet!
Mr. Clas. It was not brought before the Supreme Court; it has been dismissed on the Government's motion.
The CHAIRMAN. So that there are no legal barriers now to your progressing with the plans you have outlined for housing?
Mr. Clas. Excepting the legislation we referred to a moment ago. The CHAIRMAN. May we have a report of the number and character
a of these projects and the extent to which they have been completed ?
Mr. CLAs. Yes, sir.
The CHAIRMAN. So far as your practical experience is concerned, you have no information now as to the amount of rental you can obtain in any locality for these houses?
Mr. Clas. We know how our rents are set up. We handle these projects on a cost or nonprofit basis, and the rents are determined by two factors: One is the cost and amortization return on the capital, and the other is the actual operating costs.
The CHAIRMAN. Do you agree with Senator Wagner's statement that the cost per room will not be less than $12 on your projects?
Mr. Clas. I think Senator Wagner referred to what private industry could do.
Senator WAGNER. They are limited dividend corporations who have received loans.
The CHAIRMAN. Their minimum is $12!
Senator WAGNER. I think that is about what they charge, isn't it, Mr. Clas?
Mr. Clas. I think they vary from 10 to 12 dollars.
Senator WAGNER. At any rate, they are not within reach of the low-income group?
Mr. Clas. No, sir.
The CHAIRMAN. How much money has been allotted to the Housing Division up to date, and how much has already been spent?
Mr. Clas. I can give you the figures accurately a little later on, and I would rather do that. Our program covers about $142,000,000.
The CHAIRMAN. I think the committee would like to have the benefit of your experience, and also full information as to how these properties are to be rented.
At one time, if I remember correctly, you hoped to be able to sell the properties upon completion to private corporations on a 30year amortization basis, and let it manage the property, collect the rents, and do the repairing, subject to supervision by the Federal Government. Is that plan still contemplated ?
Mr. Clas. No. The Housing Division does not plan to sell projects to private corporations. In some cases consideration may be given to nonprofit corporations subject to public regulation and control.
The CHAIRMAN. Then, I was under the impression, in some instance, if cities or municipalities desired, the Federal Government would sell to them the housing projects after completion.
Mr. Clas. Yes, sir.
The CHAIRMAN. But you have not yet had any practical experience on either of those two alternatives?
Mr. Clas. No; we are working with the New York Authority at the present time and it is likely that the New York Housing Authority will be in a position to take over its project there upon completion, or even before completion.
The CHAIRMAN. The committee would like to get the benefit of your experience and the success or failure which you have experienced in what you have already undertaken to do, and I wish you would furnish us information along the lines I have indicated, the character of the project, the amount of money expended, what your plans are for the operation of the project after completion, whether the Federal Government intends to administer them and collect the rents and so forth.
Mr. Clas. I will be glad to furnish that for you.
The CHAIRMAN. The clerk will have printed in the record at this point the data which Mr. Clas will supply on the activity of the Housing Division of the Public Works Administration to date.
(The additional data submitted later by Mr. Clas is as follows :)