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The CHAIRMAN. At this point in the hearing, there will be printed a letter from the Philadelphia Housing Association concerning the bill and making specific recommendations with reference thereto. (Letter referred to is as follows:)

PHILADELPHIA HOUSING ASSOCIATION,

Philadelphia, pril 27, 1936. Hon. DAVID WALSH, Chairman, Senate Committee on Education and Labor,

Washington, D. C. DEAR SIR: I have been requested by the directors of this association to forward to you and the committee now considering the Wagner bill (S. 4424) certain judgments concerning this bill which they believe should be brought to your attention. .

Our association has been in operation since 1909 and is the oldest local housing organization in continuous service in the United States. During this time it has been engaged in technical research in the housing field (physical economic, and social) and has secured the correction of over 100,000 unsafe and insanitary housing conditions and in other ways improved housing conditions. Its judgment, therefore, as to the Wagner bill arises from technical knowledge and practical experience.

Our association believes that since the Wagner bill involves an expenditure of almost a billion dollars it should be drawn so that it will assure the erection of houses for families of low income. In its present form there is little likelihood that it will produce any considerable amount of low-cost housing.

The bill has many good points in it with provisions for low interest rates, decentralization of control, limited-dividend construction, diversification in slum-clearance practice, the use of slum sites where advantageous for park or playground purposes, elastic amortization periods, and other equally good provisions, and, in view of the very few municipal authorities in the country. authorization for the Federal authority to erect demonstration projects and compensate municipalities for tax losses involved through Feleral ownership.

On the other hand, though, the bill gives no assurance that the authority set up will provide low-rent housing any more than the Public Works Adminis. tration with equal opportunity has so provided. The very definition of the term “families of low income”, interpreted in the light of the definition of “low-rent housing”, throws the whole proposed program open to "luxury" hous. ing. Since the promoters of the bill have stressed the present inadequacy in the housing of familiies with incomes of $1,500 a year and under, there is no reason why this limit should not be set in the bill and definite assurance thus be given that such families will have safe and sanitary houses provided for them. Without this limitation there is no assurance that the authority will provide suitable housing below the $7.50 to $11 per room per month now being erected by the Public Works Administration, or a room rent too high for a majority of the low-income group. This figure ($1,500) should be adjusted from time to time as the cost of living changes.

In like manner the definition of the term "slums" is too elastic. This defini. tion includes six general defects which taken together, or in “any combination of these”, will make a slum. As the definition reads, any politically minded authority could readily become a relief agency for distressed owners of slum properties and not for distressed occupants of such properties. They could also spend large sums on areas which municipalities themselves, by the enforcement of their local regulations, could clear up. It would be advisable to insert the words, following the ones here quoted, "which cannot be corrected by the enforcement of local laws."

It should be noted that one of the chief obstacles in the way of the present Government program to encourage more housing is not that the scope of »u« activities is too limited, but that there is no coordination of the work of the several governmental administrations in charge of such. It is alleged this will be corrected by the Wagner bill, but the contents do not indicate any such probable result. Only those administrations or bureaus which are operating in the field of "low-cost housing and slum clearance" can be merged. There are thus left functioning such independent units as the Federal Housing Administration insuranee agency, the Federal Home Loan Bank System, ss well as the Cnited States Housing Corporation. These agencies might, with an increase in efficiency, be merged in one comprehensive administration, with á recluction in personnel and in cost to the Government.

The outstanding need in Federal stimulation of housing is that adequate funds actually be made available for financing builders and buyers. The Federal Housing Administration falls far short of a practical plan and of being a workable unit. With adequate construction loans and low interest rates, lowrental housing can be provided for more families than by the set-up of the Wagner hill. For the lower-income groups not served by such assistance, rent subsidiaries instead of grants should be allotted. The cost to the Government would thereby be reduced and the funds allotted for housing would be spread over more families, while the stimulus to new construction through the ordinary channels of building would be measurably increased, with increasing activity in the durable-goods industries.

This principle is recognized in the provision in the Wagner bill for granting loans to limited-profit agencies. But the sum provided for such purpose, not over 25 million dollars a year, is too small and the 85 percent figure is too low. It should be 90 percent at least. The principle is also recognized in the Federal Housing Administration, part 3, permitting the creation of mortgage lending agencies, but again it has not been used.

Too much emphasis cannot be placed on the necessity to safeguard Government construction and operation against the chiseling practiced by the public when dealing with the Government. The experience of the United States Housing Corporation during the past 3 years in Philadelphia with the mortgagors who purchased wartime housing is sufficient warning of this need. It seems to us sound policy to extend every practical aid to builders to enable them to supply low-cost housing and restrict Government construction and management to the housing of those families whom, even under a liberal program, builders cannot provide for.

Furthermore, even then, safeguards should be thrown around the use and expenditures made by the Government for such construction. As the bill reads the authority is given practically unlimited control over interest rates, depreciation allowances, audits, and the sale of certain obligations and securities. Many of the safeguards which Congress has seen fit to throw around the expenditures of other governmental appropriations are waived here so that the authority becomes its own judge of its activities and expenditures. The occurrence of such phrases as "without regard to the provisions of any other law governing the expenditure of public funds” in section 6, and “any rule of law contrary to this provision shall be deemed inapplicable” in section 12, provides an unjustifiable latitude to spend when such a large sum of money is involved. And particularly is this so when, as in section 4, the chief assistants to the administrators are exempt from the Civil Service law and the Classification Act of 1923, etc.

You will see from the foregoing that while we find much to approve in the set-up of the Wagner bill, yet we strongly recommend :

1. That more provisions be made for construction loans to builders and pur. chase loans to buyers, whether individuals or corporations, and that interest rates and amortization periods be adjusted so as to favor those who obligate themselves to build for low-rent-paying, low-income families.

2. That a rent subsidy be allowed such persons when they will reduce rents still further to meet the rental needs of the low-income groups.

3. That the dwellings thus provided be limited in equipment to the safety and sanitary needs of families, with the luxury equipment omitted, at least until the lowest income group has been provided for.

4. That safeguards be thrown around the expenditures of the authority so that a check up may be maintained against wasteful construction and management; that all employees, technical and clerical, be selected under Civil Service rules; and that definitions be so clarified that the intent of the act shall not be juggled with. Very truly yours,

BERNARD J. NEWMAN,

Managing Director.

STATEMENT OF WALTER KRUESI, OF NEW YORK CITY The CHAIRMAN. Will you state your full name for the record ?

. Mr. KRUESI. Walter Kruesi. The CHAIRMAN. Where do you reside?

Mr. KRUESI. 44 West Tenth Street, New York City.
The CHAIRMAN. What is your occupation or business?
Mr. Kruesi. I am a consulting economist, especially on housing.

The CHAIRMAN. You are appearing here in your individual capacity ?

Mr. KRUESI. Yes. The CHAIRMAN. You may present to the committee the views which you hold in regard to this legislation.

Mr. 'KRUESI. I wish to go on record as opposed to the Wagner bill, S. 4424, proposing to set up a permanent separate U. S. Housing Authority. Our Nation is happily a union of sovereign States. The Federal Government has only the specifically delegated powers. Housing of the civilian population is not delegated.

Housing is no new need and no sudden exigency exists with respect to it. The nature of suitable shelter, and the unit cost of providing it vary as much as our continent-wide climate and manners of life. American homes are characteristically more comfortable and more generally equipped with sanitary conveniences than those of other nations.

The Congress is asked to subscribe, for the sake of saving this proposed legislation under the welfare clause in case its constitutionality be tested before the Supreme Court, to a statement of findings which is not largely or generally true as to the conditions described. The real property inventory classified 2 percent of dwellings as unfit, and many of these were thereupon repaired and made fit. The findings in this bill's preamble are far from established as to effect. Dr. Haven Emerson, eminent as a public health administrator and professor at Columbia, says (reading:]

Lay opinion is firm in the belief that poor housing is a cause of ill health. Architects, settlement workers, and other social agencies take it for granted that the reasons for high sick and death rates among the badly housed are the buildings inhabited.

There is no such strong conviction among physicians, sanitarians, or statisticians. A close analysis of causes and results tends to confirm those professionally concerned with health in a belief that the construction is of less concern to health than the occupancy.

There is hardly a factor offered for proof of relation between housing and health which cannot be explained on the basis of earnings, intelligence, education, or that quality so wisely termed maternal efficiency.

There are some neglected and depressing houses in many places as well as some of bad plan and construction and of slovenly and destructive occupancy. Their existence is generally due to local regulations or their circumvention and the remedy as well as benefit from its application is strictly local. That such conditions exist in small measure does not justify sober resolution of calumny upon the whole United States. Nor is it true that the private industry and enterprise of our people have been unable to cope with provision of proper housing. 'Over half our people own their homes. Think well before declaring it to be the United States policy to use its funds and credit directly or by temptation and control to house our people. Think whether a subsidized tenantry is for the general welfare, or the provision of a wasteful, extravagant housing of a selected few. Think whether that will sustain the national credit or undermine the whole institution of private property.

You may

I believe the preamble of this bill is specious though cunningly devised to embarrass the court and to agitate those whose cupidity for getting something for nothing is frustrated.

Section 2 defines most indefinitely various terms used. hastily enact that “low-rent housing means decent, safe and sanitary dwellings", but you still do not know how decent will be defined, what degree of safety is safe. I wonder whether the Purity League, the fire chief or health officer of the several cities would agree that even the 2 percent of houses called unfit for use by the real property inventory, actually violate any definite standard of decency, safety or sanitariness, though I have no doubt all would agree that as they are they need paint, plaster, glass, soap, and elbow grease, and that an enamelled iron tub having claw and ball legs is not modish.

This bill says decent, safe, and sanitary housing is to be made available solely for and within the financial reach of families of low income.

For illustration of how this works out look at the official announcement of the New York Housing Authority that it admitted no one to the first houses built by Uncle Sam and which have cost to date over $3,700 a room, who was not debt free, heavily insured, with a good bank account and a steady job for over a year past yielding five times the rent. Every one of these families is now made a dependent for they live in a house every room of which cost their fellow citizens one and one-half times the average value of every house in the United States. Their rent not only yields no interest or sinking fund whatever on its construction cost, but it also yields no taxes whatever to city, State, or Nation. Every other resident's cost of living and taxes will be higher so that those selected may live on these subsidies.

The CHAIRMAN. You may have in mind those housing projects that were instituted by the nonprofit corporations?

Mr. Kruesi. No, sir; these houses were built for the housing authority of the city of New York, by the W. P. A. and through relief labor with special allocations out of the relief fund.

Mr. Astor owned most of the property and he has been given a first mortgage which is tax-free on the income as well as the principal for 64 years. Mr. Bernard Baruch put up some money and has been given a similar first mortgage on other part of the same property, and the housing authority has no money invested in the property.

The CHAIRMAN. In whom is the title to the property.

Mr. KRUESI. The title to the property is in the housing authority, since Mr. Astor gave them the old property for renovation in return for a 101 and a fraction percent purchase money mortgage based on about half of its former assessed value.

The CHAIRMAN. Where are these properties located?
Mr. KRUESI. Avenue A and Third Street in New York City.
The CHAIRMAN. Are there two such projects?

Mr. KRUESI. No, sir; there is just one project, but the entire properties were in two hands, Mr. Astor's and a man named Muller. The Muller property.was seized against his protest under the power of eminent domain, and was paid for with money advanced by Mr. Baruch as a friendly assistance to this housing authority.

The CHAIRMAN. In whom is the title to the properties? Mr. Kruesi. The housing authority of the city of New York, which is not a part of the city government, but a corporation owned by the city though only very remotely controlled by it.

The CHAIRMAN. And the city government administers the management and regulation and rental of the property? Mr. KRUESI. No, sir. The CHAIRMAN. Who does?

Mr. KRUESI. It has been turned over to this uncontrolled corporation.

The CHAIRMAN. That has been completed by act of the city and probably the State legislature?

Mr. KRUESI. Yes; the legislature enabled the city to establish an authority, and the mayor appointed its members, but he has no authority over them except on their ultimate reappointment. He may remove them after trial for malfeasance.

The CHAIRMAN. Did the city put any money into this undertaking?

Mr. Kruesi. No, sir; it made an advance of approximately $12,000 for office supplies, salaries, and so forth, 2 years ago.

2 The CHAIRMAN. Has any investigation or study been made of these two projects you speak of, for the purpose of determining their economic and social advantages or disadvantage?

Mr. KRUESI. No public investigation that I know of, sir. There has been an audit made by the W. P. A. and the T. E. R. A.

The CHAIRMAN. What is rent charged per room?
Mr. KRTESI. $6.05 average per month.

The CHAIRMAN. And the property is occupied by the class of people you have described, as being among the comfortable working classes

Mr. KRUESI. I only know what the official announcement is, and the official announcement stated that no one had been admitted who had not had a job for a year before which would yield an income from four to five times the rent charged, and who had a bank account of $100 to $1,000, and life insurance from $1,000 to $3,000, and who was free from debt.

The CHAIRMAN. You may proceed.

Mr. KRUESI. The families of low income are defined as those unable to afford to pay enough to induce private enterprise in their locality to build an adequate supply of decent homes or dwellings for their use. Now, “to pay enough”, “to induce” the building of dwellings "in the locality are indefinite terms, but to build means new, and what such families thing they can afford to pay for a new house may depend on the degree to which they are accustomed to dribbling their income for movies, drinks, gambling, or plain wasting,

Furthermore, the bill defines such low-rent housing as "embracing all necessary or desirable appurtenances including administrative, educational, recreational, and other." What is desirable? A dragnet ?

If you decide that you will subscribe on behalf of the sovereign States you represent to that morass preamble in which their sovereignty may be lost; if you commit the above and other clumsy and fuddled definitions; then, I ask you to decide whether you wish the United States meddling with so local a concern, to be by a part of a regular department or by a new independent office.

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