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standby facility, which the economics of this country have proven is needed from time to time.
I am confident, however, that this committee, the Congress, and all segments of the real-estate industry, as well as Government-housing officials, are anxious to bring about the creation of a truly workable secondary mortgage market facility.
The differences are not fundamental, but reflect if anything the recognition by people in our industry of the need for a secondary market facility, and their concern lest the proposed facility prove to be unworkable. If that were to happen, the progress of the home-building industry would be retarded in its growth at a time when the continuance of such progress means so much to the economy of our country. We sincerely believe that the amendments which we are proposing will provide a workable secondary mortgage market facility and will give to our industry the stability, the confidence, and the means for continued accomplishment, thereby bringing closer to reality our common goal of decent, adequate housing for all Americans.
Mr. WALTEMADE. Mr. Chairman, Mr. Fritz Burns, of Los Angeles, president of our Build a Better America Council, will discuss the remainder of the bill.
Mr. BURNS. Mr. Chairman and gentlemen of the committee, my name is Fritz B. Burns, of Los Angeles. I am a builder, although in the last year or so I have regarded as an honor the opportunity to serve on the National Association of Real Estate Boards. In that capacity I have visited 2 or 3 dozen cities throughout the United States, have spoken at various meetings in at least half of the States of the Nation, and my personal purpose, I might say, was to find out whether people were really interested, at the grassroots, in doing something about eliminating the slums and the blighted areas, and I can say this: that I have found that there is a very definite ground swell, you might call it, throughout the Nation at the present time, aiming at really doing something about this matter of slums that we have talked so much about in past years.
The reasons why this becomes a very ripe idea at the present time are various. They range all the way from the concern which downtown businessmen have about the decentralization of the cities, to the concern that mayors and city councils have as to how they are going to preserve the tax structure of their cities, the concern that the people as a whole have today regarding the housing and welfare of their fellow man, so that I really feel that at this time the most important thing we needwe need the financing tools that Mr. Summer has so ably spoken about, but I believe that the important thing to the people about the housing legislation, are those portions of the act that will make it possible to rehabilitate and revitalize these old neighborhoods, and these slum neighborhoods about which there has been so much talk, and comparatively little action.
I find that people do want to protect their properties. Now, we as realtors have some very definite ideas about property ownership. We are jealous of property rights, but at the same time we believe that with the ownership of the property goes a responsibility. We believe that the man that owns the property is the man that is responsible for its condition. We believe that tenants must cooperate with the owners in maintaining properties to the best of their ability, and not taking that
wear-and-tear clause too literally, and the objectives which we have aimed at in our build-America-better program are stated here in the lower half of page 20. I am not going to stick exactly to this text, if it is all right with you, Mr. Chairman, because in the interests of saving time I think I can move along a little faster, but the six objectives which we have here
Mr. SUMMER. Mr. Chairman, may I request that the testimony prepared by Mr. Burns be inserted in the record, his prepared statement. Mr. WALTEMADE. He is a real free enterpriser and we can't regiment him into a prepared statement.
The CHAIRMAN. Without objection, it may be incorporated.
(The statement of Mr. Burns is as follows:)
Mr. Chairman and members of the committee, I am Fritz B. Burns of Los Angeles. I am here as chairman of the Build America Better Council of the National Association of Real Estate Boards. This council is the unit within our association that works with our member real-estate boards throughout the country in civic programs to attack the problem of slum, blight, and unfit housing conditions through local government action.
My comments will be directed to those portions of the bill under consideration dealing with neighborhood conservation, rehabilitation, urban renewal, and slum clearance.
We feel that the extension of the FHA program of mortgage insurance into urban renewal areas as provided for in section 123 of the bill, and expansion of the FHA loan-insurance program for home modernization and repair under the terms of section 101, will provide a major stimulant to improvement in the condition of the Nation's existing housing inventory.
Our members who have been working with municipal officials in developing vigorous programs for enforcement of city ordinances and housing standards have found that when this work is done on a block-by-block and neighborhood basis, it invariably generates a great deal of voluntary improvement over and above that which is required by law-provided owners of property in the area can get financing for thoroughgoing improvement and modernization. The lack of available financing for these people is the particular difficulty in local rehabilitation programs that is reported most frequently to us.
With mortgage insurance made available for the older areas that are undergoing urban renewal treatment rehabilitation and modernization will accompany its use in the areas that need it most. The changes in terms of home repair loans that are eligible for FHA insurance will put rehabilitation and modernization within reach of more people who need, and will use, the financing so made available.
We believe that the proposed new section 220 of the National Housing Act should include language that will limit its application to urban renewal areas in cities in which firm enforcement of adequate city ordinances on housing standards will be in force-and not merely planned-at the time mortgages on property in such areas are insured by the Federal Housing Administration.
We have come to the point at which modernization and rehabilitation of family dwellings should account for a bigger volume of work than does our total new home production at its present high level. Full use of the FHA loan insurance program in connection with urban renewal programs, as proposed in the bill, will help realize this important goal. It will bring widespread improvement in housing standards through the incentive it will provide for self-help. It will be good for the cities through its power to accelerate the growing trend to overcome neglect of housing right where it occurs. It will be healthy for the Nation in the part it will play to sustain our high level of employment and general economic activity.
Our work in this general field has convinced us that the solution to the problem of deteriorated urban areas can be found in no single remedy, but requires a coordination of six specific kinds of action within a specifically defined neighborhood and on the basis of a specific neighborhood plan:
1. Rehabilitation of housing that is below local standards, at the expense of property owners, in voluntary repair and modernization and through firm enforcement of city ordinances specifying health, safety, and sanitary standards for housing.
2. Demolition of slum structures which are unfit for sound rehabilitation and which are a direct danger to the public health and safety, at the expense of the property owners, through enforcement of city codes.
3. Systematic public improvement to schools, streets, parks, sewers, street lighting, and to municipal refuse collection, traffic, and other facilities.
In other words, we believe that the municipality has a definite responsibility, and too often these second hand neighborhoods get second hand treatment. 4. Replanning, rezoning and replatting of cleared and long-vacant sites in connection with closing of some streets and widening of others for a better protected, healthier, more livable, more attractive, and more convenient neighborhood environment.
5. Acquisition by the municipality of structures and uses of land which obstruct and prevent carrying out a neighborhood conservation program for the sole purpose of removing such adverse structures or land uses. We do not believe this necessitates public acquisition of the land underlying such structures
6. Attracting investment in new construction, as well as in rehabilitation and modernization, within the area.
Very much the same view is taken in title IV of the bill under consideration. The new term it introduces, "urban renewal," means substantially the process of applying these various activities in coordination. The bill revises and broadens the functions of title I of the Housing Act of 1949, in the light of practical experience, recognizing that typical problem areas in our cities do not have to become targets of peacetime blockbusters to be made into safe, healthy, pleasant, and attractive neighborhoods. Destruction of buildings and reuse of the land is proposed as one of the coordinated processes for selective use where it is genuinely needed, and not as an indiscriminate treatment for the whole neighborhood.
We believe that this broadening and redirecting of the title I program will bring vastly greater dividends in tangible improvement to city areas per dollar of Federal funds lent or granted to cities than would be possible with a continuation of title I of the Housing Act of 1949 as it now stands.
The President's Advisory Committee on Housing pointed out on page 111 of its report:
"If we continue only at the present rate of clearance and rely on demolition alone to eliminate slums, it will take us something over 200 years to do the job." We need the kind of program that can get the job done in something more like 10 years than 200. The very vastness of the job indicates that however helpful Federal loans and grants to cities may be as an aid in planning, and to provide worthwhile demonstrations, they cannot be spread widely enough to become our needed solution to the typical usual slum and blight problem.
Our clear need is for a method of financing the city's urban renewal costs in planning, in public works, and in acquiring and removing adverse land uses, that does not depend on Federal grants.
We have suggested such a method. It proposes using the benefit assessment principle in urban renewal areas under specific State enabling legislation that will also include additional law-enforcement powers to put cities in position to do this job under their own power. While this approach to a solution of the city's financing problem would not require Federal grants or loans of money, it would require Federal cooperation to the extent of insuring benefit assessment bonds issued by the cities, on the basis of an insurance premium, in order to provide good marketability for the bonds at favorable interest rates.
We intend to present the suggested enabling legislation to the State legislatures when most of them meet in 1955. The proposal will necessarily undergo varied adaptation to existing constitutional and statutory requirements in the various States. At that time we believe we will be in a position to recommend specific measure looking to Federal insurance of neighborhood conservation benefit assessment bond issues, and trust that we may then have the opportunity of presenting them to the Congress.
Introduction of new construction in urban renewal areas on cleared or longvacant sites brings vigor into the urban renewal process as nothing else can. Any impressive success in bringing new capital investment into these renewal areas that are dependent on it will, we are convinced, require revision of Federal revenue laws in two respects.
We are proposing that when an owner demolishes a structure in an urban renewal area, the residual appraised value of the structure be regarded as the
loss it actually is, and that the owner be permitted to deduct such residual value as a loss, in 1 year or over a period of up to 5 years, in calculating his Federal income tax.
With respect to new construction or capital improvement of existing structures in urban renewal areas, we are proposing amendments to Federal revenue laws that will permit such investments in such areas to be depreciated for income tax purposes at a rate of not to exceed 20 percent in any 1 year.
These measures, coupled with the proposed extension of the mortgage insurance program can, we believe, bring new investment and new construction into urban renewal areas on a scale that we cannot even hope for on the basis of federally aided write-down in land values over large urban areas.
It being clear that Federal loans and grants can deal effectively with only a fraction of the Nation's total slum and blight problem, it is our recommendation that in the administration of the improved and broadened program provided for in title IV of the bill, the emphasis be placed on aiding communities in planning urban renewal programs, in demonstration of the urban renewal concept, and in dealing with unusually difficult problems.
In its admirable policy of providing incentive for locally initiated effort, we believe that title IV can be improved with regard to its eligibility requirements for advances, capital grants, and the proposed section 220 FHA program. In making advances to cities for surveys and plans, section 101 of the Housing Act of 1949, as the pending bill would amend it, requires the Administrator simply to "give consideration" to correction action that the city is taking through its existing powers and resources.
After the city has made its plans and comes back for a capital grant, which may be a year or so following receipt of the advance for planning, the city can apparently be considered eligible for the grant by presenting to the Administrator a "workable program," including an "official plan of action," for using local resources to eliminate slums and blight and prevent their spread. The definition of "Urban renewal area" in section 411 of the bill contains nothing that would require active local housing law enforcement as a requisite for eligibility for the FHA section 220 program.
The language of the bill (p. 73, lines 4-18) seems to require not so much performance as the prospect of action.
In a recent address to the St. Louis Chamber of Commerce, HHFA Administrator Albert M. Cole, said that in his judgment a city cannot have a "workable plan" until it is "prepared to set forth on an aggressive program of code improvement-and enforcement-and to see that its housing is brought within at least minimum decent standards ***"
We heartily concur in Mr. Cole's judgment and believe that such a local code enforcement program should be in active and vigorous operation-not merely planned-before a city can be considered eligible for an advance or a capital grant under title IV, or for the FHA section 220 program proposed in title I. While ordinance enforcement is no cure-all for the problems we are discussing, it is clearly recognized by the authors of the bill and by our industry as the most important single tool we have in eliminating blight and slum and preventing their spread.
Since there is no good reason why any city should delay enforcement of ordinances containing modern, adequate, and reasonable standards of health, safety, and sanitation for dwellings, we believe the language of the bill should not admit the possibility of Federal loans or grants to a city that has not actively begun firm enforcement of this important body of local law.
We feel that this is particularly important with regard to local ordinances governing density of occupancy. Illegal overcrowding not only exploits people, and in itself produces slum conditions, but through its bootleg profits builds up unlawful earnings that can tremendously increase the capitalized value of such structures for which the public may be expected to pay an outrageous and unwarranted price when they are acquired in eminent domain procedures.
In order to tighten the language of the bill to insure that local housing law enforcement is made a requisite for the Federal programs discussed here, we respectfully recommend that in the definition of "urban renewal area," the word "and" on line 12, page 80, be stricken, and that immediately following the words "under this title" on line 13, page 80, there be added
"and (3) in which the local government is actively and regularly engaged in enforcing local ordinances containing adequate standards of health, safety, sanitation, and density of occupancy for dwellings."
To carry out this recommendation, it is further proposed that the phrase on lines 23 and 24, pages 71 and 72, "give consideration to the extent to which" be stricken, and that there be substituted therefor the phrase: "first find that" and that the phrase "official plan of action" on lines 5 and 6, page 73, be amended to read: "official plan of action in active operation."
In the interests of good planning of urban renewal programs with insurance that such plans are coordinated with planning for the community as a whole, we believe that the "workable plan" required for any aid to a city under title IV of the bill under consideration, or under the proposed section 220 of the National Housing Act, should require that there be a city plan and an urban renewal plan consistent with it.
This program, of course, we believe that the property owners should assume their share of the responsibility, we believe that it is extremely essential that local cities and communities enforce their laws, because one of the most essential things in a law-enforcement program, or rather in a rehabilitation program, is the knowledge-this is comparatively simple, but it is very important—is the knowledge of one man, who owns a house in a blighted area, that he can feel free to do a voluntary rehabilitation of his own property, knowing that his neighbors are going to be compelled to maintain some sort of minimum standards themselves.
There already have been some very definite responses and some very encouraging progress made in many cities throughout the Nation. Through this BuildAmerica-Better program that I have mentioned, some sort of activity has already been generated in nearly 200 cities and towns throughout the Nation.
Now, in some of those cities, for instance, this report dated March 10, from Fort Worth, Tex., refers to the citizens committee appointed by the mayor to study housing rehabilitation. It states that the committee has completed its study. Attached to the letter is probably a 20-page report regarding this study and the recommendations which it is making to the mayor for the initiating of a law enforcement and rehabilitation program in Fort Worth.
In the city of Atlanta, there is a letter from the inspector of buildings dated February 19 in that city, during the year 1953, where they have such a program under way. It states there have been 4,248 dwelling units repaired, and 463 dwelling units demolished.
These programs have been accomplished against rather difficult odds, and without the assistance of the major part of any program, and the part that is directly of interest to this committee, namely, the part of financing. Therefore, we heartily recommend and support all of the phases of this housing bill, and most particularly, as far as my personal testimony is concerned, most particularly those portions of the bill that will add and facilitate and aid in the financing of rehabilitation of older buildings, in older neighborhoods, and the construction of new buildings in these older neighborhoods-either on the sites that are now vacant, or the sites that will be made vacant and by reason of some of the demolition work that will always occur in connection with a law-enforcement program.
We believe that new buildings, new dwelling units, and new apartments can be built in older neighborhoods. I think that in connection with urban redevelopment, so-called, in the past, and now to be known as urban renewal, there has been too great an emphasis on the necessity for creating an entire environment, by complete demolition, the complete leveling to the ground of an entire area of 40 acres or so, in order to create an environment.
We believe that the Federal funds for urban renewal should be concentrated, on picking out what we refer to as the slum pockets in these neighborhoods, the particularly spoiled apples, out of the barrel, or maybe even picking out some of the spotted portions of these apples, so that the balance of the neighborhood, the balance of the barrel, can be rehabilitated by the voluntary, or by the enforced regulations as called for by the housing laws.
I think that, obviously, when we realize that the single largest asset of our Nation is constituted by the value of the houses and buildings of this Nation, that anywhere from 15 to 25 percent of those areas are in various states of blight or slum conditions, if you start contemplating complete demoltion and rebuilding of those areas, building for building, it would not only take, as is set` out in the report of the President's Advisory Committee, a period of 100 or 200 years, but it would take sums of money that are so huge as to be almost incalculable.
Our objective is to try to do this job within the foreseeable future. We. take the position that we can hardly afford to let another generation grow up under slum condition.