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Mr. HIESTAND. And if they decline you are licked?
Mr. WALTEMADE. I think means should be provided whereby these public-housing units could be offered for sale to private enterprise, and get the Government out of this business. And I think some means should be provided whereby the communities, if they so desired to get rid of the existing public housing, should be able to dispose of it to private enterprise, or dispose of it to tenants, if it is small housing, to get it back into private ownership, and to be taxpaying to the municipalities.
Mr. DOLLINGER. What about the rents to be paid when it becomes private ownership? Would the rents go up?
Mr. WALTEMADE. There might be a slight increase in rentals. Because we know for a fact, Congressman Dollinger, that in publichousing projects right in our own county of the Bronx, where they are renting generally from $9 to $12 a room; we know that in the low-rental projects they are charging as high as $15 or $16 a room, and even charging for utilities, where the income of tenants has increased. The public-housing authority has taken upon itself to increase these rentals. We don't have that power in private enterprise. Mr. DOLLINGER. Is that Federal, that you are speaking of, or State? Mr. WALTEMADE. It is Federal. Patterson houses, Melrose houses, in the lower Bronx.
Mr. MCDONOUGH. If a plan were devised where the Federal publichousing units now located in the various cities of the United States could be offered for purchase by the cities, counties, or private enterprise, if they were sold to the cities and counties, they could probably continue to subsidize them, but if sold to private enterprise, under the present scale they would certainly have to increase the rent because private enterprise could not maintain the difference between the amount of subsidy now supplied and the low rent that they are permitted to charge.
Mr. WALTEMADE. That is correct, sir.
Mr. MCDONOUGH. However, the question of whether the cities or counties of the various States of the Union want to assume that obligation, and get the Federal Government out, is another thing.
We did correct our situation in Los Angeles after a long fight, by reducing the total number of units to be built, and also by amending the State Housing Act by putting the public-housing authority under the control of the local elected body. They are now subject to direction by the city council and are removable by the city council. Before that they were very autocratic in their administration of public housing affairs, and defied the city and the State and the county authorities.
Mr. SUMMER. Mr. Chairman, I would like to give Mr. Hiestand another suggestion in answer to his question, namely, that if the local public-housing units were to pay normal taxes, if they were required to pay normal real-estate taxes, and the city's contribution to the Federal Government, or to meet the Federal Government's subsidy, namely, 20 percent, be in the budget each year, then I believe it would become of public interest, and the people in the community would want to know that those who live in there really need that sort of
I think your very practical, honest American way of doing it is to put it in your budget every year. As it is now it is hidden, and the taxpayers of the community have no idea what they are paying locally for public housing. And I think paying normal taxes is the solution to at least making the public aware, and I think you will find that they will have closely scrutinized those living there, to make sure they are eligible.
Mr. WALTEMADE. Mr. Hiestand, you know that referendum is nothing new. In the 1949 Act it was 132 to 132, and the Chairman broke the tie or we would have had it at that time.
The CHAIRMAN. Are there further questions of these gentlemen? Mr. DOLLINGER. Mr. Chairman.
The CHAIRMAN. Mr. Dollinger.
Mr. DOLLINGER. Mr. Burns, you were speaking of the $7,000 house before. I would like to know how many rooms that would contemplate.
Mr. BURNS. Speaking of the Los Angeles area, the $7,000 house usually contemplates 2 bedrooms and a carport. Just remembering what I can from last Sunday's ads, at $8,650 there are houses being offered in quantity with 3 bedrooms. In the San Francisco Bay area a house that is known nationally, being built by a chap we refer to as Flattop Smith, merely because of his haircut, he is producing a 4-bedroom house at, I think, $8,350. That is within a hundred dollars or two.
Mr. DOLLINGER. Now, on your $7,000 house, would you say that the average rent per month is about $67 or $70 a month?
Mr. BURNS. The average payments, including utilities.
Mr. DOLLINGER. That is right.
Mr. BURNS. Yes.
Mr. SUMMER. The advisory committee came up with a total of $62. Ninety-two dollars, including utilities, heat, hazard insurance, and other extraneous items, and amortization of the mortgage.
But that isn't the requirement in connection with the actual mortgage payments.
Mr. DOLLINGER. But your minimum would be $62.50, upward, for that kind of a house?
Mr. SUMMER. Your $7,000 mortgage would provide for payments on interest, principal, FHA insurance, and another item for reserves, of $36.12 a month. The difference is made up of taxes, hazard insurance, and so on.
Mr. DOLLINGER. Mr. Burns, I would like to find out, if you can tell me, what kind of a person would go into this $7,000 house? I mean in connection with his earning capacity. What is the rental per month of those people? Are they the $35-a-month rental people that you were speaking about a while ago?
Mr. BURNS. I wouldn't say that the person who is paying $35 a month rent, for the reason that he cannot afford to pay any more, is the man that could buy the $7,000 house, obviously.
Mr. DOLLINGER. The reason I ask
Mr. BURNS. I think for those low-income people, again, I think their answer is in the existing housing properly brought up to standard.
Mr. DOLLINGER. Well, you have sold $7,000 houses, or you know people who have?
Mr. BURNS. Correct.
Mr. DOLLINGER. When you sell a house of that kind don't you get some information from him as to what he earns, and what rent he pays now?
Mr. BURNS. Yes, indeed.
Mr. DOLLINGER. What is the rent scale of those people?
Mr. BURNS. I would say that those are people whose earnings must be-I know this is not the direct answer, but their earnings would have to be around $250 a month.
Now, just what rent they would be paying is a question. I have some actual figures on $10,000 houses. We sold them to people who previously had been paying an average rent of around $50. We worked out a little analysis showing that whenever we sold a new house, an apartment, some place was released at a rent of around $50. People usually will stretch themselves a bit more to buy a house than in the rent they are paying.
Mr. DOLLINGER. What is the average monthly rent for a person buying a $10,000 house?
Mr. BURNS. That was the illustration I gave.
Mr. DOLLINGER. You said they were paying $50 before they bought the house. But when they bought the $10,000 house what were their monthly carrying charges?
Mr. BURNS. Well, that would bring them up to probably, including taxes and everything, about $75 a month.
Mr. BROWN. Will the gentleman yield?
Mr. DOLLINGER. Surely.
Mr. BROWN. When you speak about building a house for $7,000 or $7,600, or $8,600, does that also include the lot?
Mr. BURNS. Yes.
Mr. BROWN. Some lots are much more costly than others.
Mr. BURNS. That is correct.
Mr. SUMMER. Under FHA standards at present, if the FHA had a legitimate buyer, they would require that, to live in this $7,000 house he must earn $59 a week.
Does that answer your question?
Mr. DOLLINGER. Partly it does.
Now, I think people in that wage scale usually have gone along with the theory that they will not pay more than 1 week's earnings for the rent for a house per month. Isn't that correct, Mr. Waltemade? Isn't that the theory people usually work on, that a week's salary will be the rent?
Mr. WALTEMADE. That used to be the scale.
Mr. DOLLINGER. It isn't any more?
Mr. WALTEMADE. No.
Mr. DOLLINGER. I am trying to find out what kind of a person will buy a $7,000 house. How many people in this country are able to make the purchase? Will they extend themselves to pay twice as much rent per month, when they buy their house, as what they are paying now?
Mr. SUMMER. I would like to say this, gentlemen: One of our greatest problems, as has been brought up today, is minority housing. Many of the people who will be relocated in code-enforcement program, and in a redevelopment program, are minority people who are
not necessarily of the lowest income, but who still have difficulty in finding a place to live, and I think that is a very substantial answer to the problem of housing minority groups, who are necessarily underincome families.
Mr. DOLLINGER. That is right. That may be one of the reasons that this bill is being pushed, but I disagree that this bill will assure minority housing. I think Mr. Multer pointed that out before, but I would like to stress it further-until I am satisfied that a minority person could go to a bank and/or a builder and say, "I want to build a house in the district of my choice, and I want financing," if that situation would occur and the bank would make such a loan then we would have minority housing.
Mr. SUMMER. Having been one of the persons who has financed minority housing, and did it many years ago, I will say to you that mortgage money will be available for minority housing so long as the area in which the loan is to be made is not an area on the downgrade.
Mr. DOLLINGER. Or if it doesn't conflict with another community of people who may disagree or refuse to live with minority people.
Mr. SUMMER. But under this proposal, to have the city face up to its responsibility before it is eligible for this type of lending, and I won't review the various basic prerequisites, it will stop the downgrade of the cities and start it upgrade, which is the only real barrier, sir, to more private money being made available for minority housing.
Mr. DOLLINGER. Mr. Summer, I don't raise that question.
Mr. DOLLINGER. What I am trying to find out, on the basis of economics, pure and simple, is this: Whether a man who is paying $35 a month rent, who earns $2,000 a year, would go into a district and buy a house for $7,000, and overextend himself to pay twice what he is paying now?
Mr. SUMMER. He shouldn't buy it.
Mr. DOLLINGER. What people will you get to buy the $7,000 house? Mr. SUMMER. I just finished telling you
Mr. DOLLINGER. Your answer doesn't give me the information. I think it gives me part of the information, but it does not give sufficient information for me to be satisfied that the average person who makes $50 a week will go into those houses.
Mr. BURNS. I would say that just by and large a person would have to be making at least $250 a month or, as we said a while ago, $60 a week, and anybody making less than that has got to look to the existing housing supply.
Mr. DOLLINGER. And the person who wants to double his present rent would want to buy a house better than the $7,000 house. He would want to move into something which is better than what he has now, and I don't think a $7,000 house would give him what he wants. Mr. SUMMER. The proposal is only for relocation purposes. This house that we are talking about, under the proposed bill, is limited to relocation. That means that people are forced to move, and I might say that it is dangerous to use a monthly figue, because in certain parts of the country $190 a month is adequate, and other parts of the country you may need $275 a month income, depending on your tax situation, and other factors, and cost of construction.
These are ceilings, sir. This doesn't mean they must be $7,000 or $8,600, as we recommend in high-cost areas. That is merely the ceiling, and your demand is what will dictate the price range, and, in turn, affects the monthly carrying charges.
And I insist that Mr. Burns has the answer when he says that the very lowest income group-I don't mean the indigent, but the very low income group, should live, until their economic means housing that is up to standard.
We don't advocate anyone living under conditions as they have been. But I can see no justification, when our entire housing supply, that is new every year, is somewhere around 2 percent or more, certainly under 3 percent, that everybody must live in new housing. It just does not add up.
Mr. DEANE. I am interested to know what the age would be of this person who would buy a $7,000 house?
Mr. SUMMER. I believe you will find that again the FHA, in underwriting mortgages, takes into consideration the age of the borrower.
Under the present system, where it provides for 20-year loans, and a man is 50 years old or 55 years old, they don't say you can't have this mortgage because we don't think you will be alive 20 years from now. They don't subtract the length of the mortgage from his age, or add to it, to determine whether or not he will be alive at the end of the term.
Mr. DEANE. You don't take into consideration the age of the borrower in the loans that you recommend?
Mr. SUMMER. It should be taken into consideration; yes, sir; but there are many factors that must be taken into consideration. No. 1, is he the sole producer in the family? No. 2, what type of work is he doing, and how old is he? Naturally if it is a man who is 65 years old, and he is the sole earner in the family, I don't think FHA is justified in its underwriting department to recommend guaranteeing that loan. I agree with you.
Mr. O'HARA. Will the gentleman yield for one question?
Mr. DOLLINGER. I yield.
Mr. O'HARA. What will you do with a man over 65? Take him out and shoot him?
Mr. SUMMER. No, sir.
Mr. O'HARA. Answer the question, please.
Mr. SUMMER. I will answer your question. I am one of those who have insisted that the economy of our Nation is such that no person should be compelled to live in the streets or under conditions which I have witnessed and found further information on in this Eisenhower committee, and that where he is attempting to pay his maximum, and there is no housing available, I think it is up to the community to make it possible for that person to live in decent shelter, and I believe the American way to do it is not to segregate them in large numbers, but to help him out, and make it possible for him to live in decent housing. That is why we have recommended the enforcement of codes, sir. Mr. O'HARA. Are you against public housing?
Mr. SUMMER. Because it allows 13 percent of the people to usurp all of the funds that could accommodate a hundred percent of the people who need help, and still would leave a surplus of $4 billion on top of that.