UNITED STATES HOUSING ACT OF 1937

AUGUST 13, 1937.-Committed to the Committee of the Whole House on the state of the Union and ordered to be printed

Mr. STEAGALL, from the Committee on Banking and Currency, submitted the following

REPORT

[To accompany S. 1685]

The Committee on Banking and Currency, to whom was referred the bill (S. 1685) to provide financial assistance to the States and political subdivisions thereof for the elimination of unsafe and insanitary housing conditions, for the eradication of slums, for the provision 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, having considered the same, report it back to the House with an amendment and recommend that the bill, as amended, do pass.

The amendment strikes out all after the enacting clause of the bill (S. 1685) and inserts in lieu thereof new matter as appears in italics in the reported bill. Hearings were held by the Senate Committee on Education and Labor on S. 1685 and by your committee on the companion bill (H. R. 5033). The Senate report (No. 933) sets forth the social and economic objectives of, and the need for, this legislation. There follows a summary of the important provisions of the bill as reported by your committee and the principal differences between it and the bill as passed the Senate.

GENERAL STATEMENT

The bill provides assistance to the States and their political subdivisions in the remedying of unsafe and insanitary housing conditions and the acute shortage of decent, safe, and sanitary dwellings for families whose income is so low that they cannot afford adequate privately owned dwellings. From the testimony adduced in the hearings, it is evident that private enterprise cannot construct safe and sanitary housing at low enough cost to enable it to rent or sell such housing to the families of low income who would be served by the

housing financed under this bill. The general welfare will be promoted by the program authorized by the bill in that slum and bad housing conditions which are injurious to the health and safety of the citizens of the Nation will be alleviated, and that present and recurring unemployment will be relieved.

ADMINISTRATIVE PROVISIONS

The bill would create within the Department of the Interior a corporate agency, known as the United States Housing Authority (sec. 3 (a)). In lieu of the board of three directors provided for in the bill passed by the Senate, this bill provides that the powers of the Authority shall be vested in an Administrator, appointed by the President, with the consent of the Senate. The Administrator would serve for a term of 5 years and would receive a salary at the rate of $10,000 per year (sec. 3 (b) and (c)).

The bill provides for an unpaid advisory board of nine members to make recommendations on questions of policy and to provide opportunities for the expression of different points of view (sec. 3 (d)). The members of this board are to be selected by the President with due regard to representation of public housing, labor, construction, and other interests, and to the various geographical areas of the country. The Administrator is authorized to appoint such employees as may necessary (sec. 4 (a)).

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As provided in the Senate bill, the Authority is made subject to the general supervision of the Secretary of the Interior (sec. 3 (a)). In order that the Authority may have the full benefit of the housing experience of the Public Works Administration, which is closely related to the Department of the Interior, it was deemed advisable to place the Authority within the Department of the Interior. The creation of the Authority within one of the permanent departments conforms to the recommendations of the President with respect to the organization of the executive branch.

PLAN OF FINANCIAL ASSISTANCE AND ITS COST UNDER BILL

DECENTRALIZATION

In contrast to present housing activities of the Federal Government, the bill contemplates a complete decentralization of the housing program, including the sale or leasing to public agencies of presently owned Federal housing projects. The bill does not authorize the direct Federal construction of any additional housing projects, but provides for a non-Federal program consisting of financial assistance to the States and their political subdivisions in the development and operation of local slum-clearance and low-rent housing projects.

SELF-LIQUIDATING LOANS

The bill provides (secs. 9 and 20 (a)) for $500,000,000 (as compared with $700,000,000 in the bill passed by the Senate) in Federal loans over the next 3 years, at the rate of $100,000,000 during the first year and $200,000,000 in each of the 2 succeeding years. These loans would be made only to public agencies to aid them in undertaking slum

clearance and housing projects. The money to be thus advanced would be raised by the sale of bonds of the United States Housing Authority, which are guaranteed as to principal and interest by the United States Government (sec. 20 (c)).

The bill provides (sec. 9) specifically that all loans shall be repayable in full with interest at not less than the going Federal rate of interest, plus one-half of 1 percent. The bill prohibits the Authority from participating in a loan which is in excess of 85 percent of the cost of a project. The loans will be secured not only by a first lien on the revenues of the projects of local public agencies, but also by a pledge of the annual contributions to be paid to such agencies by the United States Housing Authority. The provisions of the Senate bill have been modified by the committee amendment to require that the annual Federal contributions received by a local public housing agency must be used first to repay the principal and interest on the moneys borrowed from the United States Housing Authority (sec. 10 (b)). By bolstering the security for the bonds of the local public housing agencies in this way, the certainty of their payment and marketability should be enhanced.

ANNUAL CONTRIBUTIONS

The Federal annual contributions would be handled as a separate transaction, distinct from any loan that might be made to a public housing agency (sec. 10). This plan of separating the grants or contributions from the normal business function of financing by way of loan is the plan now used to finance the English housing program. The United States Housing Authority would enter into a contract with the municipal or State agency to make annual contributious in a fixed amount. The annual contributions would be strictly limited. to the sum necessary to assure the low-rent character of the project and in no case could they exceed a sum equal to the going Federal rate of interest on Government bonds, plus 1 percent (sec. 10 (b)). At the present interest rates on Government bonds, this would mean a maximum annual contribution of approximately 3% percent of the cost of the project. Contributions would be payable in uniform amounts over a fixed period, which in no event could exceed 60 years. Contracts for contributions would be subject to re-examination by the Authority at the end of 10 years and every 5 years thereafter (sec. 10 (c)).

In order to determine the annual contributions to be paid to a public housing agency for any particular project, the United States Housing Authority would have to consider two factors: First, the total amount which must be paid annually for the maintenance and operation of the project and for interest and amortization on the bonds. issued to finance its construction; second, the total amount of rentals which can be collected if the project is operated for families of low income. The difference between these two amounts represents the amount of subsidy needed for a low-rent housing project. It is evident that if all the annual payments on account of the original and operating costs of the projects had to be met entirely out of rentals, the rents would be too high for the low-income group. To provide housing for families of low income, it is necessary that a subsidy be made to meet the difference between the rentals which families of low income can afford and the economic rental which would have to

housing financed under this bill. The general welfare will be promoted by the program authorized by the bill in that slum and bad housing conditions which are injurious to the health and safety of the citizens of the Nation will be alleviated, and that present and recurring unemployment will be relieved.

ADMINISTRATIVE PROVISIONS

The bill would create within the Department of the Interior a corporate agency, known as the United States Housing Authority (sec. 3. (a)). In lieu of the board of three directors provided for in the bill passed by the Senate, this bill provides that the powers of the Authority shall be vested in an Administrator, appointed by the President, with the consent of the Senate. The Administrator would serve for

a term of 5 years and would receive a salary at the rate of $10,000 per year (sec. 3 (b) and (c)).

The bill provides for an unpaid advisory board of nine members to make recommendations on questions of policy and to provide oppor tunities for the expression of different points of view (sec. 3 (d)). The members of this board are to be selected by the President with due regard to representation of public housing, labor, construction, and other interests, and to the various geographical areas of the country. The Administrator is authorized to appoint such employees as may be necessary (sec. 4 (a)).

As provided in the Senate bill, the Authority is made subject to the general supervision of the Secretary of the Interior (sec. 3 (a)). In order that the Authority may have the full benefit of the housing experience of the Public Works Administration, which is closely related to the Department of the Interior, it was deemed advisable to place the Authority within the Department of the Interior. The creation of the Authority within one of the permanent departments conforms to the recommendations of the President with respect to the organization of the executive branch.

PLAN OF FINANCIAL ASSISTANCE AND ITS COST UNDER BILL

DECENTRALIZATION

In contrast to present housing activities of the Federal Government, the bill contemplates a complete decentralization of the housing program, including the sale or leasing to public agencies of presently owned Federal housing projects. The bill does not authorize the direct Federal construction of any additional housing projects, but provides for a non-Federal program consisting of financial assistance to the States and their political subdivisions in the development and operation of local slum-clearance and low-rent housing projects.

SELF-LIQUIDATING LOANS

The bill provides (secs. 9 and 20 (a)) for $500,000,000 (as compared with $700,000,000 in the bill passed by the Senate) in Federal loans over the next 3 years, at the rate of $100,000,000 during the first year and $200,000,000 in each of the 2 succeeding years. These loans would be made only to public agencies to aid them in undertaking slum

clearance and housing projects. The money to be thus advanced would be raised by the sale of bonds of the United States Housing Authority, which are guaranteed as to principal and interest by the United States Government (sec. 20 (c)).

The bill provides (sec. 9) specifically that all loans shall be repayable in full with interest at not less than the going Federal rate of interest, plus one-half of 1 percent. The bill prohibits the Authority from participating in a loan which is in excess of 85 percent of the cost of a project. The loans will be secured not only by a first lien on the revenues of the projects of local public agencies, but also by a pledge of the annual contributions to be paid to such agencies by the United States Housing Authority. The provisions of the Senate bill have been modified by the committee amendment to require that the annual Federal contributions received by a local public housing agency must be used first to repay the principal and interest on the moneys borrowed from the United States Housing Authority (sec. 10 (b)). By bolstering the security for the bonds of the local public housing agencies in this way, the certainty of their payment and marketability should be enhanced.

ANNUAL CONTRIBUTIONS

The Federal annual contributions would be handled as a separate transaction, distinct from any loan that might be made to a public housing agency (sec. 10). This plan of separating the grants or contributions from the normal business function of financing by way of loan is the plan now used to finance the English housing program. The United States Housing Authority would enter into a contract with the municipal or State agency to make annual contributious in a fixed amount. The annual contributions would be strictly limited to the sum necessary to assure the low-rent character of the project and in no case could they exceed a sum equal to the going Federal rate of interest on Government bonds, plus 1 percent (sec. 10 (b)). At the present interest rates on Government bonds, this would mean a maximum annual contribution of approximately 31⁄2 percent of the cost of the project. Contributions would be payable in uniform amounts over a fixed period, which in no event could exceed 60 years. Contracts for contributions would be subject to re-examination by the Authority at the end of 10 years and every 5 years thereafter (sec. 10 (c)).

In order to determine the annual contributions to be paid to a public housing agency for any particular project, the United States Housing Authority would have to consider two factors: First, the total amount which must be paid annually for the maintenance and operation of the project and for interest and amortization on the bonds. issued to finance its construction; second, the total amount of rentals which can be collected if the project is operated for families of low income. The difference between these two amounts represents the amount of subsidy needed for a low-rent housing project. It is evident that if all the annual payments on account of the original and operating costs of the projects had to be met entirely out of rentals, the rents would be too high for the low-income group. To provide housing for families of low income, it is necessary that a subsidy be made to meet the difference between the rentals which families of low income can afford and the economic rental which would have to