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MIDDLE-INCOME HOUSING

WEDNESDAY, JANUARY 18, 1950

UNITED STATES SENATE,
SUBCOMMITTEE ON HOUSING AND RENTS OF
THE COMMITTEE ON BANKING AND CURRENCY,

Washington, D.C. The subcommittee met, pursuant to recess, at 10 a. m., in room 301, Senate Office Building, Senator John J. Sparkman presiding.

Present: Senators Sparkman, Maybank, Douglas, and Long.
Senator SPARKMAN. The committee will come to order, please.

We have quite a number of witnesses to hear; so, we will have to move right along to finish with all of them.

Mr. Drayton S. Bryant is our first witness. Will you come around, Mr. Bryant, please? Identify yourself for the record, if you will, and then proceed as you wish, sir. STATEMENT OF DRAYTON S. BRYANT, HOUSING CONSULTANT, ON

BEHALF OF THE LOS ANGELES HOUSING CORPORATION Mr. BRYANT. My name is Drayton S. Bryant. It is worth mentioning by way of reference that I have spent the last decade doing work in public, private, and coperative housing, including planning, management, administrtaion, and research. Degrees from Stanford and Columbia Universities indicate that I am an economist by training. During the last year I have been largely engaged on a study of redevelopment problems in the city of Los Angeles. This study, to be entitled “Rebuilding the City," was sponsored by the Haynes Foundation, a nonprofit, nonpartisan foundation developed and devoted chiefly to research, especially on city planning. Since it is 300 pages, I don't feel it should be inserted in the record.

A major point which I wish to make as a result of this consideration of redevelopment in Los Angeles and a dozen other major cities of the United States is that a middle-income housing program is an essential tool to accomplishing redevelopment by private enterprise in a majority of redevelopment areas with which I am familiar. The data contained in this study and others which I have seen are similar in that there is a substantial proportion of families whose incomes and assets—often the ownership of a small shanty-place them just above the eligibility limits for public housing, and yet are considerably below any possibility of buying or renting a decent home from normal private enterprises.

In one area studied in great detail, less than a third of the families would be eligible for public low-rent housing. About half had incomes slightly above the limits for public housing, many of whom owned their little shelters. Yet in the visible future these families could not obtain decent housing in any form from the existing supply of usual privately owned properties.

I have sat down with families in the area intensively studied and in other areas and know that, unless they can see some way to reestablish themselves in a home at a price they can afford, they will fight to the last ditch against redevelopment. A program which does not make sense to them will also probably not make sense to the rest of the electorate, even though the redevelopment project is financially sound and clearly in the long-run interests of the community. You and I would probably put up the same fight for our homes. Redevelopment appears politically impossible unless there are housing tools available for these regularly employed wageearners and owners of tiny homes.

As I have discussed the problem with people in redevelopment areas, many of them have asked about or proposed something just like this cooperative housing program. Direct questions have been asked me: "Can't we get together and get financing within our means to rebuild a decent neighborhood of small homes in the redeveloped area or nearby?” The initiative expressed was heartening and plans proposed made much sense. The incomes of most of these families was between $160 and $260 a month. Since they now live in a blighted area, and many were of Negro or Mexican origin, FHA or conventional financing was almost entirely denied them.

In examining the redevelopment problem, the architects associated in the afore-mentioned study and I felt that the area should not and probably could not be rebuilt with 3,000 units of private high-rent housing, or 3,000 units of low-rent public housing. The recommendations of the study and the designs were for a balanced neighborhood of two elementary-school districts which contained some private, unlimited rent housing, some single homes, some low-rent public housing, and an occupant-owned middle-income development. Various physical types were appropriate to the topography and the types of families in the area, including single homes, two-story row houses, and elevator apartments, largely for childless families.

In examining various costs and forms of financing, there is the unmistakable conclusion that the needs of the middle group can be served only by a 3-percent rate of interest. A nonprofit housing corporation of 548 units was proposed for the area studied for development, not as an entire solution but as a part to fit in between some public housing and a lot of private housing. Financing under title VI, section 608, with the higher vacancy losses, collection losses, and maintenance costs, as well as higher payment on principal and interest, would have resulted in a monthly cost of about $19 per room per month, or $95 per month for a five-room dwelling. No profits are included in this figure.

With 3-percent financing for 50 years, the costs would be about $12 per room per month, or $60 per month for the five-room dwelling. It should be explained that, since this was intended to be a cooperative project, the dwellings and site were better designed for family living than most section 608 housing, with three- and four-bedroom apartments, with more storage space, adequate room sizes, play areas for children, and over-all an adequate but simple plan and construction of durable materials. The one-bedroom units in the tower apartments have 791 square feet; the two-bedroom, 1,037 square feet; the threebedrooms, 1,238 square feet; and the four-bedroom, 1,384 square feet.

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At this point I would like to insert in the record the very decisive saving in monthly costs. This has been mentioned before. Since I have studied the problem, I think it is worth stressing. I have managed half a dozen large-scale public housing projects. I have worked on the budgets of many others, including private and cooperative. In the management and administration, I have gone into detail on costs. I am quite familiar with them.

In the Los Angeles area, new multiple-rental construction is costing private enterprise about $18 per room to finance and operate. This, I think, is generous. It is mostly renting for $25 per month per room up, and sometimes way up.

This is a differential of at least $7 per room between the cost to private enterprise and what they are renting it for. Actually, the differential is often $10 or $15 per room per month. The project designed can operate for a total management and maintenance cost of $2.50 per room per month, or $12 for a five-room unit.

From long experience in management and working with people and preparing budgets, I am convinced and could demonstrate in detail that this cooperative procedure under competing management can have substantially reduced monthly costs, at least one-third of management costs, and between one-third and one-half of the maintenance costs, especially when interior painting is required by the tenant.

Section 608 allows 7-percent vacancy reserve. Many private rental developments set up 3- to 5-percent vacancy reserve. I am confident that half of 1 percent would be more than ample in well-managed cooperative housing and could be lower. Also, the collection loss would be lower.

As to savings in monthly costs, they are decisive, not less than onethird off. In the particular area studied and in many others, it is felt that there can be no redevelopment unless S. 2246 is passed to provide a means of middle-income families rehousing themselves.

It is felt to be essential that this cooperative program to serve middleincome families be guided by a responsible constituent agency, with the desire, understanding of the human relations involved, and the administrative competence for the program, capable of making a sound beginning and substantial progress as intended in the legisla. tion. Direct responsibility of a Commissioner to the President appears to be the clearest way to achieve what is desired by the publicinterest groups recently concerned with this legislation, although no law can completely insure adequate administration. This cooperative-housing program will require leadership above average to handle the complex factors of human relations, economics, and administration.

I have been in continual personal contact with nine cooperatives in California during the last 5 years; so, I feel that I can properly speak for them and for their point

of view and existence. The FHA, as the chief Government agency which has had recent contacts with housing cooperatives through its local offices, has almost without exception shown itself hostile to the idea and the groups organized, or has expressed an indifference which amounts to the same thing in delay, obstacles, and refusals. From all over the country has come the same story of contempt, evasion, and denials. There has been opposition by FHA local employees to the idea of cooperatives, to the designs of the houses, the site plans, and any other problems which could be raised. The cooperatives have in most cases been

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frustrated by the refusal or inability of FHA to consider anything beside the most mediocre and stock ways of doing building as evidenced by the apparent favored treatment to large speculative builders. The cooperatives have not asked for special treatment, but only equal and fair consideration. The evidence shows they have not gotten it.

One cooperative in northern California has been attempting to obtain FHA insurance for nearly 5 years without success, and is about to liquidate after building a few houses with conventional financing in what is considered an outstanding subdivision. Another in southern California, which raised $350,000 and paid full cash for 106 acres, has been attempting to obtain FHA insurance for over 3 years. Over 60 large lending institutions were contacted, almost all of which stated they would not finance a cooperative with or without FHA insurance. All correspondence is in the files of this cooperative. Several were finally found that would lend, with an FHA guaranty. After continued delay on the part of FHA and one pretext after another, although with verbal assurance from time to time that the tract and plans would be assured, the plan of the cooperative to build 268 homes was completely rejected. No grounds were given, only that the development appeared "unstable." Two days before the cooperative received such notice, five speculators telephoned to say that they knew of the FHA decision and wanted to buy in at the fire sale. Since the organization could raise no more money, it was forced to put the land on sale after 4 years of development of sound site planning, complete plans, contractual bids—$6.50 per square foot for most of the houses costing between $8,800 and $13,000—and administrative costs. The members will lose over $150,000 of their life savings. Americans don't like a dirty deal, especially from the bottom of the deck.

A study of cooperative housing in the United States sponsored by the Bemis Foundation in Cambridge, Mass., and prepared by Carl Eric Carlson, associate editor of the American City, reports the same story from many parts of the country.

I don't want to read a great many quotes, but I think there is one which will give a good idea. Mr. Carlson corresponded with over 150 cooperatives in the United States. He is associate editor for the American City magazine in New York, and was engaged by the Bemis Foundation to make this study. In this study, which will be published in mimeographed form very soon, there are quotas from Ohio; Minnesota ; Washington, D. C.; Califorņia ; Detroit. They all sing the same tune: “The FHA does not approve of cooperatives; the local office makes no bones about the expectations as to the projects; the FHA writes down the amount of the mortgage; criticisms of the neighborhood ; quibbles about your plans; the local FHA office is careless about co-ops; FHA is staffed by real-estate inspectors who cannot adjust to a nonprofit way of doing business.”

With this picture over the last 4 years, it is understandable why the supporters of this legislation urge a separate constituent agency rather than a subordinate office in the HHFA.

The statement has been made that co-ops can't build any cheaper. The yardstick function of the nonprofit building organization with open and audited books will be valuable to our entire economy and to the problem of decent housing to American families, in view of what is considered by housing economists as the unusually large amount of "water" in the housing construction since the war. Reportedly,

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this is aided and abetted by FHA appraisal practices in many instances. Investigation might establish the truth or falsity of the claims that FHA appraisals and insurance commitments have in some cases exceeded the actual cost to the builder. A previous witness was afraid of Government taking over, but did not seem concerned over private enterprise taking over a branch of the Government.

But especially nonprofit building such as that done by the People's Development Corp. at Bellevue, Ohio, which appears well below comparable contracting costs or sales prices in the area, would do much to make housing available to middle-income families at a price which they could afford, beyond only the impact of the quantity of housing produced by the cooperatives themselves.

It is clear beyond a shadow of a doubt to those with experience in sound and successful cooperative enterprise that the forces of good citizenship are vastly strengthened in such groups, along with family life and stability. Such organization is a strong combination of individual responsibility and teamwork, both essential ingredients in a healthy democracy. While the opponents of this program, in short-sighted self-interest, predict a weakening of initiative and desire for home ownership, in actuality housing cooperatives for middleincome families will be an important strengthening of a group which will largely never become home-owners, even of the “psychic equity” of a shoddy "economy" house. New prices have been claimed for these “economy houses”, 600 to 800 square feet, two bedrooms, one or two children, 5 to 20 miles from employment, high maintenance, and unencumbered income of $275 per month of steady work.

While we are on the economy house I think it is worth mentioning that the low prices which have been claimed in previous testimony for these economy houses are extremely deceptive. They are almost all one or two bedrooms. They have 600 to 800 square feet, which presumes that all American families should have only one or two children. They are often located from 5 to 10 miles from employment, which adds $10 or $20 of transportation cost. The construction is shoddy.

From personal experience I know they are available only to steadily employed white famlies with an unencumbered income of $275 per month and up.

I suspect some of those FHA quoted income figures with net income, that actually they were serving what we consider a good deal higher income groups.

I think those statistics would have to be verified. On one hand this cooperative program is attacked for being too little, described in previous testimony as an attempt "to deceive 8,000,000 people.” On the other hand it is attacked as being too large; so large that it will hasten the bankruptcy of the Government. In fact, of course, it is neither, but rather a necesary and useful tool with which to work at a sector of the housing problem, and one that in its character holds a maximum of good for the democratic way--with initiative, foresight, responsibility, and no cost to the taxpayers. It detracts nothing, but adds to the arsenal of democracy at its basic level—the home.

Senator SPARKMAN. Thank you, Mr. Bryant. You referred in the course of your remarks to some of the difficulties that have been incurred by various cooperative organizations in the State of California in financing these projects.

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