The proposed amendment permits the increase only if 65 percent of the members are veterans. By reason of the elimination of the pro rata increase based on the percentage of veterans, I beieve the requirement should be lowered from 65 percent to 50 percent. In the New York area, particularly Queens County, I have confirmed that it is becoming increasingly difficult to obtain the required percentage of veterans in order to obtain the maximum insurable loan.

To further strengthen cooperative housing I would recommend that section 213 be further amended so as to permit the sponsor-builder to file an application for a cooperative housing project and have same processed so that a commitment could be issued without the necessity of first obtaining applications and approval of the purchasers of 90 percent of the number of units contained in the project. This would eliminate the necessity of selling the stock in the cooperative corporation prior to the initial loan closing. It would greatly speed up the building processes if a builder-sponsor were able to receive a commitment prior to the sale of the apartments. The project could then be erected and the sale of the apartments could take place during construction. The payments received for the sale of the stock would be held in escrow until the project was completed, and, upon completion, said funds would be paid over to the builder-sponsor as reimbursement for equity capital advanced by him out of his own funds on behalf of the cooperative corporation. Upon completion of the project and reimbursement to the builder-sponsor the stock purchased by the cooperators would be issued. This would afford a greater protection to the cooperators for any moneys that may have been paid for their stock by reason of the fact that until the project was completed all funds paid by the cooperators would be held in

escrow.

I also wish to respectfully recommend that in connection with title III, Federal National Mortgage Association, some provision should be made so as to permit FNMA to issue prior commitments in connection with 213 cooperative housing projects where mortgage loans to be guaranteed by the FHA are not readily obtainable from private lending institutions.

STATEMENT OF WILLIAM L. RAFSKY, HOUSING CORDINATOR, CITY OF
PHILADELPHIA, PA.

The economic soundness and civic vitality of Philadelphia depend upon renewing the city's physical plant, particularly housing. The social and human cost, together with the sapping of economic strength brought about by substandard housing are, I am sure, well known to the members of this committee. The President's Advisory Committee on Government Housing Policies and Programs summarized the direct financial burden of slums to a number of cities throughout the country, including Philadelphia.1

The hidden costs, particularly to human beings, are far more devastating, even though they cannot be fully measured by the dollar sign. Indicative of the high price of inferior housing is the fact that in 1953, 65.3 percent of all police arrests were of individuals who resided in Philadelphia's officially certified blighted areas, which contain only 25.3 percent of the city's population. (See table 1 attached.) Similar statistics on juvenile arrests reveal that unless our slums are removed, significant numbers of our future juveniles from these areas are doomed to a life of crime. Despite the fact that the cause of crime is usually far more complex than physical environment, it would be ostrichlike to ignore the fact that in the third largest city in the country, arrests of juveniles residing in deteriorated neighborhoods were 46.4 percent of the total, as compared to the area's juvenile population of 25.2 percent of the entire city (table 1). Similarly, our losses of life and property by fire, our health, and our welfare problems are concentrated in districts where substandard housing predominates. From the longer range point of view, Philadelphia's survival depends upon the solution to this problem.

Recognizing the seriousness of the situation, we determined to do everything we could locally to eliminate our rundown residential areas and to provide decent shelter for all. The city already has an extensive program underway:

1 A Report to the President of the United States, the President's Advisory Committee on Government Housing Policies and Programs, December 1953. Appendix 2-Report of the Subcommittee on Urban Development, Rehabilitation and Conservation, exhibit 4, Notes on the Cost of Slums to Local Governments, pp. 151–154.

(1) The Philadelphia City Planning Commission maintains high standards which private builders must follow in developing unused land.. The Commission makes every possible effort to prevent future slums from arising in Philadelphia.

(2) Operating under the authority of the State statute, and with Federal funds provided under title I of the Housing Act of 1949, the Philadelphia Redevelopment Authority has demolished 761 substandard dwelling units. An additional 1,320 such units will be razed in 1954. By the end of this year, 1,003 new dwelling units will have been constructed as a result of the work of the authority. Plans which have already been approved will in the next few years greatly increase this total, including some 12,000 units for one redevelopment area alone, the Eastwick project in southwest Philadelphia.

(3) Although not as great in emphasis, the rehabilitation of existing houses has also been part of the redevelopment authority's program.2

(4) The Philadelphia Housing Authority has completed 4,648 number of lowrent dwelling units since the inception of the Federal program in 1937. By the end of 1954 the total of such units will be 9,157. It now manages 9,336 dwellings constructed under the various Federal programs. Project planning work is continuing with the aid of city funds in anticipation of the resumption of the Federal public-housing program.

Nor is the city relying on previous accomplishments and existing levels of programs in its fight against blight. Within the past few months additional programs have been launched and plans made for an all-out comprehensive attack on the problem.

1. A new position, housing coordinator, has been created directly under the mayor to bring together the various agencies now working in the field in order to supply a unity of purpose and an effective pooling of resources. It was felt that the good work of the different agencies, both city and State, was piecemeal and uncoordinated.

2. A new housing code, bringing up to date the existing law adopted in 1915, is now pending in the city council and its adoption is expected shortly. It will substantially increase minimum housing standards, eliminating, for example, all outside toilets. In addition, revision of our health, fire, plumbing, and building codes are all underway.

3. Our zoning ordinance of 1933 is being overhauled. One of its primary objectives is to prevent the type of building activity which tends to downgrade residential areas.

4. Even prior to the introduction of the present legislation, the city started to draft experimental programs applying our entire enforcement machinery to achieve slum clearing, rehabilitation, and conservation. Within the next few weeks we plan to select pilot neighborhoods in which these procedures will be tested. The overall program will be developed with the aid of private groups, both civic and private, including the real estate board and the Home Builders' Association.

5. Our commission on human relations is developing a program aimed at providing decent shelter for all groups in the city regardless of race, creed, or color. It is particularly concerned in its preliminary operation in finding out what factors have produced a concentration of minority groups in blighted neighborhoods In short, we are marshaling the full force of local government to meet a critical situation.

As a city which is the center of a vast economic area, we believe that the Commonwealth of Pennsylvania also has an important responsibility in meeting our housing needs. For that reason, a legislative program calling for the State's participation and assistance in the housing field will be submitted to the next session of the legislature in January of 1955, as well as to the candidates who are seeking State office this year.

Yet in spite of all this concerted activity and these plans to cope realistically with the major problem, we know from both experience and careful review that the city of Philadelphia, like most large urban centers in the country, cannot do the job itself. We just do not have the financial capacity even to make a dent in correcting bad housing because of the heavy fiscal burden we must assume in carrying out the necessary municipal functions affecting safety, health, and welfare, and because our authority to levy taxes is hemmed in by

2 For details on Philadelphia's rehabilitation activity, see A Report to the President of the United States, op. cit., exhibit 2, Slum Prevention Through Conservation and Rehabilitation, Jack M. Siegel and C. William Brooks.

our State constitution. This position, recognized by Congress in 1949, is amply documented in the report of the President's Advisory Committee on Government Housing Policies and Programs. Ironically, the cities single largest source of income, real estate, is in danger because of our slum problem. It will take Federal aid to break this vicious cycle.

We welcome the approach used in the proposed Housing Act of 1954 because it recognizes the limitation of cities in providing remedies for inferior shelter. The bill has a number of constructive features, which we hope will be adopted. These provisions, however, do not go far enough in the approaches and methods endorsed.

I. URBAN RENEWAL

The increased emphasis on urban renewal, as including rehabilitation and conservation as well as redevelopment, gains our wholehearted support. Philadelphia took advantage of the language in title I of the Housing Act of 1949 and has already carried out a rehabilitation program in addition to its redevelopment work. Yet at the end of 5 years, only a little more than 2 percent of the 103,410 dwelling units in redevelopment areas have been removed at a cost of $3,939,775. Rehabilitation of existing homes is an important weapon in the arsenal needed to fight deterioration, but it does not add to the new housing supply which is so necessary to meet the condition of overcrowded slum neighborhoods. If the program is not handled with extreme care, there is the danger that the remedy will be patchwork in that it merely postpones the date of obsolescence, thereby making the money used an unsound investment. It is of the utmost importance, therefore, not to substitute rehabilitation for blocks and areas which require redevelopment. The key is the amount of money to be appropriated to carry out what should be an enlargement of an existing program, rather than a shifting of emphasis. The subsidy available is of specific concern in rehabilitation because the monthly housing cost or rent of the existing dwelling will tend to increase.

The President's recommendation to allot $97 million for urban development and redevelopment in 1955 does not in any way come near the necessary wherewithal to work on a problem of the magnitude of substandard shelter. Even without the new stress on rehabilitation and conservation, the Housing Act of 1949 calls for $250 million in loan funds per year, and $100 million annually for capital grants. Unless the appropriations are substantially increased, we can only resign ourselves to having blight continue to outstrip new or rehabilitated homes.

II. LIBERALIZATION OF MORTGAGE INSURANCE TERMS

The increase in the loan-value ratio and maximum amounts of mortgages which may be insured by FHA, as well as the extension of the maximum statutory term to 30 years of all mortgages will undoubtedly be of some help in preventing any significant decline in new housing starts. At this stage of the economy such bolstering of the home construction market will be helpful. Housing Administrator Albert M. Cole estimates that the proposed legislation would result in about 1 million new-home starts in the United States, a significant decline from the past few years. When the approximately 200,000 net gain from conversions is added, the total is scarcely sufficient to meet the need created by new households and by replacement of structures demolished or destroyed. Since the funds recommended for urban renewal will merely continue that program at a snail's pace, the families who live in the 10 million substandard nonfarm homes in the United States can neither turn to the Government nor to the private-building industry to provide what is universally agreed to be a necessity of life— housing with minimum standards of decency.

From the point of view of the urban community, the existence of large numbers of substandard housing is not merely another unmet need. Housing cannot be placed in a deep freeze; continued wear and tear means that neglect results. in a growing backlog. Unless checked now, blight will erode the economic base of our large cities.

These nationwide conditions, when translated to Philadelphia, pose a thorny question. In 1953 Philadelphia added 8,900 dwelling units, exclusive of publichousing, to its supply; 5,255 of these units were in new construction. (See table

3 A Report to the President of the United States, op. cit., exhibit 10, A Statement on Problems of Capacities in Local Financing of Slum Clearance.

2.) The supply of privately created dwelling units is hardly sufficient to keep up with the need as measured by the formation of new households and homes destroyed in Philadelphia. (It is estimated that the city's inmigration and outmigration cancel each other.) Except for public housing, therefore, we have not been able to reduce the unfilled needs of families having substandard shelter. The proposed Housing Act of 1954 offers us little encouragement in that regard. The present legislation fails completely to recognize that we must produce housing within the financial capability of our low and middle-income groups. According to the United States census, 75.7 percent of Philadelphia families had incomes below $5,000 per year as of 1949. Even if a generous 25 percent upward adjustment is made, at least 65 percent of these families still fall below the $5,000 level. The cheapest of the new homes selling in Philadelphia is $10,000. An estimate by realtors of the average price of existing homes sold in Philadelphia last year was $8,400. The rentals for newly constructed dwelling units tend to run $85 per month and upward. A survey conducted last September in Philadelphia revealed that the vacancy ratio in rental units based on a sample study was less than 2 percent. For all intents and purposes, therefore, existing units at low rentals are not available.

4

The President's Advisory Committee found that in most cities rent, heat, and utilities fell below 20 percent of the total budget cost. If one takes the inedian family income for Philadelphia, $2,069, as reported by the United States census for 1949, makes a 25 percent upward adjustment to bring it in line with the present, and then applies the 20 percent formula suggested by the President's Committee, the average family in Philadelphia would not be in a position to spend more than $60 a month for its housing costs. If a house, which costs as little as $7,000 requires a monthly housing expense of $62.92, half of Philadelphia's families have no real housing market to speak of and can only turn to the oldest existing homes when they are put up for sale.

The almost hopeless impossibility of this condition is more clearly seen when one looks at the incomes of families who live in Philadelphia's blighted areas. A special study made at our request reveals that even with the 25 percent upward adjustment of the 1949 census figures, the median family group is in the $2,000 to $2,500 category (table No. 3). To meet this difficult situation, the proposed legislation has come up with only a stopgap suggestion which will undoubtedly prove impractical for cities like Philadelphia. The proposed new section 221 to the National Housing Act, providing for FHA 100 percent insurance on a $7,000 home with a mortgage term of 40 years, will have little significance for us. It is difficult to forsee how any builder can construct a home in Philadelphia at this price. Furthermore, the monthly housing cost of $62.92, as listed in the report of the President's Advisory Committee, places it out of the price range of the families who are in greatest need of housing. It is questionable, in the first place, whether mortgage money would be made available to finance such construction.

Little reliance can be placed on the amendments to section 203 of the National Housing Act insuring up to 95 percent of the value of existing homes for mortgage periods up to 30 years. Aside from the prevailing high prices, even for other than new dwellings, there is no assurance that either FHA or private lending facilities will provide the maximum terms for such housing, particularly for older homes whose prices are lower.

What is needed is a fresh approach, and perhaps the extension of existing approaches far beyond their present limits in order to find the answers for housing for low- and middle-income families. The entire field of incentives and subsidies has to be explored. Perhaps more can be done in reducing downpayments by encouraging direct loans to home purchasers. Builders might be given better terms on construction loans through Government guaranties. More aggressive mortgage market facilities might stimulate an increased flow of funds and bring the interest rate down. More might be done to provide greater incentives for mortgage loans, which result in carrying charges in line with the resources of the $3,000- to $5,000-per-year income group. Since large-scale build

Percentage Vacancy of Habitable Dwelling Units in Philadelphia, September 15, 1953. Government Consulting Service, Institute of Local and State Government, University of Pennsylvania, Philadelphia.

Op. cit., appendix 3, Subcommittee on Housing for Low-Income Families, exhibit 4: Estimated cost to maintain families at a level of adequate living.

Op. cit., appendix 1, Subcommittee on FHA-VA Programs, exhibit 8: Estimated monthly mortgage payment and housing expense on typical mortgages insured under proposed sec. 221.

ing has brought about some reduction in construction costs, encouragement might be given to home builders to pool their resources and to engage in extensive development projects. Building standards and building practices should be continually reviewed in order to eliminate unnecessarily expensive procedures. More encouragement could be given to cooperatives. A continuing research program might be able to uncover new building techniques, which would also result in lower costs.

III. PUBLIC HOUSING

With all this, however, the housing needs for families with annual incomes of $2,500 or less can only be met by large-scale low-rent public housing. I understand that this matter has been referred to another congressional committee. It is difficult, if not impossible, to consider housing legislation without taking into account the total picture. Much of the proposed legislation, particularly as it pertains to urban renewal, cannot be productive unless it is accompanied by an extensive public-housing program. As the Philadelphia income study of families of blighted areas shows (table 3), more than half the families in slum neighborhoods are eligible for public housing.

The cooperative agreement between the Philadelphia Housing Association and the Federal Government calls for 10,000 dwelling units under the Housing Act of 1949. Thus far, only 4,509 have been constructed or are under construction. Philadelphia could undoubtedly use 70,000 low-rent public-housing units, based on the income study to which reference was previously made. At the very least, therefore, it is hoped that Congress would return to authorizing 135,000 publichousing units a year, instead of the 35,000 recommended by the President.

IV. PROBLEM OF MINORITIES

No housing legislation like the proposed act before this committee can accomplish its objective without providing opportunity for shelter to all groups in our society, regardless of race, creed, or color. The inability of minority groups to obtain decent shelter is a condition which is not unique to Philadelphia. A recent study of Philadelphia's Negro population' points up the problem sharply for our city. Of the 72,113 dwelling units classed as substandard in 1950, 46 percent or 33,471, are occupied by nonwhites. Almost one-half of all nonwhite families in areas certified for redevelopment compared with less than one-eighth of the white families.

The only possible approach to meeting this confining situation that one can see in the proposed act is the authority to be given to the rechartered Federal National Mortgage Association. The special type of assistance which FMNA can provide is not specified, but one assumes that the President can determine that a program to make available housing for minority groups would be in the public interest and eligible for aid under the proposed amendment to section 301 of the National Housing Act. In that case, however, it will be competing for limited funds with special housing programs, such as veterans, co-ops, defense, housing for the aged, housing for displaced persons, and others.

We cannot lick the slum-housing problem in Philadelphia unless special attention is given to this situation. It would seem desirable, therefore, to have FHA give high priority to meeting this need. The Federal Government could use its influence through FHA in seeing to it that mortgage money is made available in much greater amounts, on a nondiscriminatory basis. To ignore this aspect of our slum problem could only produce an unrealistic shelter program.

From the point of view of the means of the city of Philadelphia, the Housing Act of 1954 is not a sufficient answer. We welcome a number of its constructive features. The test as to whether it will contribute to better housing depends upon:

(1) Appropriating sufficient moneys to carry out all aspects of the program, particularly urban renewal.

(2) New and fresh approaches to providing housing at prices within the means of low- and middle-income families.

(3) A substantial low-rent public-housing program.

(4) An apportunity for housing, with at least minimum standards, for all groups in our society.

7 Philadelphia's Negro Population, Facts on Housing, prepared by the Philadelphia Housing Association for the Commission on Human Relations, October 1953.