October 19, 1965
PAGE 27334
THE RENT SUPPLEMENT PROGRAM AS A PART OF THE 1965 HOUSING
ACT
Mr. MUSKIE. Mr. President, I should like to express my great disappointment in the action of the House of Representatives in undertaking to kill the rent supplement program by failing to fund it as part of the supplemental appropriations bill for the coming year.
The rent supplement program is an important part of the 1965 Housing Act.
For 30 years, the Congress has been struggling to develop a formula to rid our cities of slums and blight and to provide decent shelter for the poor. In l937, the public housing program was launched as a method of providing rent supplements to help the poor get decent shelter. It has done yeoman work but its impact has been watered down by so many restrictions and local conservative opposition that now, after 28 years, only 600,000 units have been built.
It was obvious that a new approach was needed to house the poor. Earlier this year, after extensive consideration and debate in committee and on the floor of both Houses of Congress, approval was given to a new rent supplement program but under private enterprise auspices.
Our homebuilders, our mortgage bankers, our financial institutions, our nonprofit church groups, labor unions, and elderly housing sponsors all agreed to help launch this new and imaginative endeavor to provide housing for the poor and the elderly.
Uppermost in the minds of these supporters was the private enterprise feature of the rent supplement program. With Government help, private enterprise was given the opportunity of doing a job that had long been neglected and which our great Nation could no longer ignore. The projects were to be privately sponsored, privately financed and privately managed. FHA was to insure the private lender against default and HHFA was to help meet the cost of decent housing for the poor by supplementing the rent.
Preliminary estimates on cost indicated that private enterprise could produce housing under the rent supplement program at less cost to the Government than could be provided under the public housing program. The Agency submitted estimates to the effect that the average cost per unit under the rent supplement program would be $40 whereas under public housing it would be $58 per month.
The principal reason for the savings is the expected lower land costs and construction costs of rent supplement housing as well as the higher monthly payments by rent supplement families over public housing families. To avoid it being a giveaway program, families benefitting under rent supplements are required to pay 25 percent of their income for rent. The Government subsidy would make up the difference needed to meet the full economic costs of the project. Public housing tenants pay 20 percent of their income for rent.
Mr. President, I want to reemphasize this 25-percent requirement in the law. A family head making $300 a month would be required to pay 25 percent or $75 rent. If the total rent were $100, the Government would pay $25. This requirement plus that which gives the sponsor full responsibility for selecting tenants removes the possibility of the program being taken over by irresponsible freeloaders who are unwilling to make some sacrifice to live in decent housing.
The basis for the House action in cutting our rent supplement funds can be boiled down to three items: First, premature issuance of regulations; second, net worth limitations too high; and third, family income limitation too high.
PREMATURE ISSUANCE OF REGULATIONS
The critics were most unfair in twisting the facts relative to the issuance of a proposed set of regulations by the Federal Housing Administration. A draft of regulations clearly labeled as "proposed" and subject to revision were sent to all field offices on September 28. At the same time, copies were sent to interested public officials and industry representatives as well as to congressional committees. There was nothing secret about these regulations -- anyone could have gotten a copy if it was requested. The agency was anxious to have the widest distribution, hoping to uncover any obvious faults or unworkable features before preparing a final set once the Congress appropriated the necessary funds.
NET WORTH LIMITATION
The critics of the program had a field day on the interpretation of a relatively minor item included in the draft regulations -- the net worth limitation for eligibility for rental assistance. The preliminary regulations established a ceiling not only for income, but also for assets or net worth. Because of the variation in cost of living by area, a net worth limitation was established in direct proportion to the income limitations for each area. For non elderly, net worth could not exceed two times the income limit, and for elderly, it could not exceed three times the income limit.
Dr. Weaver made it clear that he would welcome suggestions on the criteria to use and said he would not oppose using the public housing approach. Under this program, the average ceiling for proposed assets is around $2,000 with a higher allowance for the elderly, because of the special needs of old folks living in retirement off their savings. He said consideration should be given to retired persons whose only income is derived from investments and yet who cannot afford decent housing.
The asset issue should not be used to kill the program. It is a red herring to confuse the issue. The poor do not have stocks and bonds. They are lucky to have furniture and perhaps a refrigerator or a television. An applicant for rental assistance whose income is low but who may have extensive personal assets is a rare case. Such cases have been handled fairly over the years by public housing authorities and I have no doubt that they will be properly screened under this program.
FAMILY INCOME
The more important eligibility criterion is, of course, family income. The law is clear on this, requiring the application of the Federal public housing law to each area and individual case. This has been done but the opponents continue to criticize. Despite the amendment authored by me which limited eligibility to families under the public housing ceiling, they voted against the authorizing legislation and now 3 months later they are at it again.
Repetition is their weapon and it paid off on the House floor during consideration of the supplemental bill.
They wrap together allegations on high assets and high income requirements with misstatements on higher construction cost to give the impression that it is a rich man's program financed with the taxes of poor Mr. John Q. Public.
To prove otherwise is easily done by referring to income limits furnished by the Agency and placed in the RECORD of July 14 during Senate debate of the housing bill. Families with two children earning between $3,700 and $5,000 per year are not rich. Requiring such families to pay annual rent of between $925 and $1,250 for housing costing on the average of $12,500 is not a program for the rich.
In closing, let me show how foolish and irresponsible it is to urge delay in funding the program and, at the same time, to urge approval of administrative funds presumably to be used by the FHA in the preparation of regulations.
This is utterly ridiculous. The FHA does not need 6 months or $170,000 to study and write regulations. Most of the work is already done. After receipt of comments now being solicited, the Agency could issue final regulations immediately provided the Congress has approved program funds.
We have delayed long enough in carrying out the national housing policy of a decent home and suitable living environment for every American family. We cannot keep postponing the job. The Congress has acted -- the President has signed the bill into law and there is no excuse for further dickering and obstructing the will of the majority. There are plenty of problems to be solved and the sooner we get started the better.
Mr. President, I urge Members of this body to pay heed to this call. Last summer the Congress arrived at a consensus and approved the rent supplement program as part of one of the greatest housing bills ever conceived. Now that it is fall, let us not back down and change our direction and cut the heart out of this great bill.
Mr. President, I have some material pertaining to the rent supplement program and, without objection, I would like it included in the RECORD as a part of my remarks.
There being no objection, the material was ordered to be printed in the RECORD, as follows:
RENT SUPPLEMENT PROGRAM
HOW THE RENT SUPPLEMENT PROGRAM WILL WORK
Scope of program
This is a program authorized by the Housing and Urban Development Act of 1965 under which private enterprise can design, construct, finance, and operate modest new dwelling units to house poor families. The rent supplement feature is, in effect, a type of subsidy paid by the Government directly to the builder-owner to make up the difference between the fair rental of the property and what the poor family can afford. A family living in a rent supplement unit will pay 25 percent of its income toward the fair market rental of the unit it occupies. The tenants will occupy these homes under lease.
Families eligible for rent supplements
Low-income families who are either -- (a) elderly; (b) handicapped; (c) displaced from their homes by government action; (d) occupants of substandard housing; or (e) victims of natural disasters.
The act establishes an income ceiling Identical with the ceiling for low rent public housing.
Housing eligible for rent supplements
1. Housing must be constructed according to FHA mortgage insurance standards.
2. Housing must be either (a) new, or (b) substantially rehabilitated.
3. The average unit cost is expected to be around $12,500.
4. Sponsors are limited to (a) private nonprofit, (b) limited dividend corporations, or (c) cooperatives.
Administration of programs
1. Supplements will be paid by the Federal Government to the nonprofit sponsor, not directly to the individual.
2. The contract between the Federal Government and the sponsor will call for periodic review and will insure against windfall to any tenant who might enjoy a sudden increase in income.
3. The maximum income permitted will not exceed public housing criteria.
Major issue
Regulations were issued prematurely.
Comment
1. No final or firm regulations have been issued. The draft regulations have been withdrawn.
2. Draft regulations were printed and distributed for review and comment but with the caveat that they would be revised and that until Congress appropriated funds, there would be no program. These were unsigned and not sent to the Federal Register -- so they had no legal effect.
3. The distribution of these draft regulations to the interested parties was made mainly to secure comments and suggestions for revisions. (A practice followed by other agencies like internal Revenue, Federal Home Loan Bank Board.)
4. Regulations will be revised and will reflect the sense of Congress.
Major Issue
Families with assets of $25,000 or more would be eligible.
Comment
1. This is not so.
2. The fuss was caused by a provision in the draft regulations which stated that eligibility could be established in the case of an elderly or handicapped family if they had net assets up to three times the "maximum annual income ceiling" set by the Administrator for the family and housing unit.
3. The point is that the "maximum annual income ceiling" set by the Administrator would be less than $5,000 for the elderly, and hence only assets of under $15,000 would be permissible. HHFA would not establish an income ceiling as high as $8,000 (and $24,000 net assets) as Congressman HARVEY suggests.
Major issue
Families with high incomes would be admitted.
Comment
1. There are many safeguards built in to prevent this.
2. The guidelines will be at least as stringent as those in the public housing program.
3. The only families eligible are those who:
(a) Have incomes below the maximum specified for occupancy in the Housing Act of 1937 (the act that has established eligibility for public, low income housing); and
(b) Are elderly, handicapped, living in slums, or displaced from their homes by Government action, or who are victims of a natural disaster.
INCOME LIMITS UNDER RENT SUPPLEMENT PROGRAM
The only families eligible for rent supplement payments will be those who meet both of these requirements:
(1) Have incomes below the maximum amount which can be established for occupancy in public housing under the Federal public housing law, the U.S. Housing Act of 1937, and
(2) Are elderly, handicapped, displaced from their homes by governmental action, living in slums, or victims of natural disasters which have destroyed or damaged their homes.
Determining the maximum income
The maximum income a family may have and still receive a rent supplement will be determined in each area as follows:
(1) A market analysis will be conducted to determine the rentals at which there are available a substantial supply of private decent, safe, and sanitary housing consisting of one-bedroom, two-bedroom, three-bedroom, and four-bedroom units for families of low income.
(2) The maximum income limit will be established, for the corresponding sized unit in the rent supplement program, at four times the rental determined by such market analysis.
For example, assume the market analysis for the area shows that $80 per month is the lowest rental at which a substantial supply of private, decent, safe, and sanitary twobedroom units is available in an area. The maximum annual income limit for a family of the size that requires a two-bedroom unit will be $3,840 (4 times $80 times 12 months).
In administering the rent supplement program, the Housing Agency will count all income of an individual or family, from every source, whether taxable or not, as against the income ceiling administratively established for an area.