III. DEVELOPMENT OF WAR HOUSING PROGRAMS BY DIFFERENT AGENCIES OF THE FEDERAL GOVERNMENT In the early days of the national defense period the Congress appropriated $100,000,000 to the President for allocation to the War and Navy Departments for the construction of housing units, including necessary utilities roads, walks, and accessories, at locations on or near military or naval establishments, or near privately owned industrial plants engaged in military, naval, or Maritime Commission activities. The Secretaries of the Army and Navy were authorized to utilize other Government agencies in the construction of this housing. As the need for defense housing began to grow, the President in July 1940 appointed a Housing Coordinator to coordinate the housing program and to make determination of the need, the number, and the type of defense housing required in different localities. When the Lanham Act became law on October 14, 1940, the task of supplying needed emergency housing accommodations was delegated to Federal Works Agency. The FWA designated various other Government bureaus and agencies to act as its agent in constructing specially designated and approved projects in all parts of the country in accordance with the determination of need made by the Housing Coordinator. On February 24, 1942, the President issued Executive Order 9070 which created the National Housing Agency with the Federal Public Housing Authority as one of its constituent agencies. All functions relating to the war housing program were transferred to the Administrator of NHA with the Federal Public Housing Authority being given the responsibility for the operation of the program. On July 27, 1947, through Reorganization Plan No. 3 of 1947, the President created the Housing and Home Finance Agency and changed the name of the Federal Public Housing Authority to the Public Housing Administration. Under Reorganization Plan No. 3 of 1947, the Administrator of the HHFA was given full responsibility for the war housing program and the Public Housing Administration was made responsible for the operation of the program subject to rules and regulations established by the Administrator. HISTORY OF DISPOSAL POLICIES WITHIN THE PUBLIC HOUSING ADMINISTRATION The preceding sections show that the Public Housing Administration has not been able to dispose of the public war housing in the expeditious manner that Congress expected would be possible when it passed the Lanham Act and its several amendments; nor has the agency been able to meet the disposition goals which it forecast with the submission of its budget requirements in the several annual budgets. In order to analyze the efficiency of its operation of this program, it is important to understand the history of the disposal policies within the agency itself. The following is a short summary of the disposal policies and procedures which have been in effect in the agency at different times during the past several years. H. Repts., 81-1, vol. 6- -50 PROCEDURES FOLLOWED IN DISPOSITION OF PERMANENT WAR HOUSING ACCOMMODATIONS The disposition of permanent and demountable war housing units for continued on-site use presents quite different problems from those involved in the disposition of temporary war housing units. Section 301 of the Lanham Act, as amended, provides that * * When the President shall have declared that the emergency declared by him on September 8, 1939, has ceased to exist * property acquired or constructed under this Act * * * shall be disposed of as promptly as may be advantageous and in the public interest. In dealing with this same question of the timing of disposition actions, section 4 of the Lanham Act provides simply that— Such housing may be sold and disposed of as expeditiously as possible. Preferences ORIGINAL PHA DISPOSAL POLICY In connection with the disposition of permanent war housing units acquired or constructed under the Lanham Act, the Administrator of the then National Housing Agency, acting pursuant to the authority granted by Congress in the Lanham Act, issued a general order in January 1945, which set forth the general policy of the agency governing disposition of permanent war housing units. This order established the following priorities or preferences for the purchase of permanent war housing accommodations: 1. Occupants 2. Prospective occupants who are veterans 3. Prospective occupants who are not veterans 4. Investors 8 According to a statement made by the then Commissioner, the preferences accorded to occupants over prospective occupants were prescribed for a number of reasons: (1) Because it is almost always simpler and cheaper to sell a house to a current occupant rather than to an outsider; (2) because many of the occupants had lived in the houses for a number of years and had come to regard them as home; and (3) because any other policy would have involved wholesale eviction of people who would generally enjoy no preferential treatment whatsoever in seeking other accommodations on an extremely tight housing market. SINGLE-FAMILY DWELLINGS Where permanent war-housing units had been constructed as single dwellings and followed the normal pattern of the surrounding community, there was little or no difficulty involved in the sale of these units to individual purchasers, either to the occupants or to other priority holders. Under the original PHA disposal policy, the only major difficulties encountered in selling single dwelling units occurred in those instances (1) where the units had been very poorly constructed, (2) where the units had deteriorated badly through abuse or lack of proper maintenance, or (3) where the units did not meet local zoning and building code regulations and the PHA could not. or was un Hearings held on April 30, 1947, on appropriation bill for 1948 by the Government Corporations Sub committee of the Committee on Appropriations (p. 189). willing, to make exorbitant expenditures to bring the dwelling units up to local code standards. MULTIFAMILY DEVELOPMENTS Almost two-thirds of the permanent war-housing projects were so designed and so constructed with reference to community facilities and common utility systems that they cannot be subdivided for sale to individual families. In the interest of economy and efficiency of future operations, the Agency decided that such projects must be sold either in their entirety or at least in large blocks of dwelling units. Wherever this situation existed, the Agency policy provided that occupants and prospective occupants could exercise their purchase priority through the formation of mutual ownership corporations. In such purchases, mutual ownership corporations were required to make a down payment equal to 5 percent of the purchase price and to amortize the balance in 40 years at 31⁄2 percent interest. In December 1946 the required down payment was increased to 10 percent and the rate of interest was increased to 4 percent. SALES TO MUTUAL OWNERSHIP CORPORATIONS The policy of the Public Housing Administration permitting the sale of permanent war housing projects to mutual ownership corporations composed of residents and nonresidents was severely criticized by many people, including members of Congress and congressional committees. In some instances prior to December 1946 sales to mutual ownership corporations were permitted with down payments of as little as 5 percent of the purchase price and with as long as 40 years to amortize the principal. In these cases, the Public Housing Authority held the mortgages and in one instance continued to hold title to the property pending complete amortization of the balance of the purchase price over the 40-year period because the city threatened to condemn the property because of a zoning violation as soon as title passed from the Government. Some of the critics of this method of disposing of war housing projects by sales to mutual ownership corporations contended that this was merely a device by the PHA to keep the Government in housing since these mortgages or sales contracts would have to be serviced by the Government over the 40-year purchase period. JOINT RESOLUTION BY HOUSE COMMITTEE ON BANKING AND CURRENCY AND SUBCOMMITTEE ON GOVERNMENT CORPORATIONS, APPROPRIATIONS COMMITTEE 9 On February 25, 1947, the Commissioner of the then Federal Public Housing Authority was notified in a letter signed jointly by the chairman of the Committee on Banking and Currency and the chairman of the Subcommittee on Government Corporations of the Appropriations Committee of the House of Representatives that the following resolution had been adopted unanimously by the joint committee: Resolved, That it is the sense of this joint committee that sales of permanent war housing units by the Federal Public Housing Authority be limited to such Hearing held on April 30, 1947, on appropriation bill for 1948. by the Government Corporations Sub committee of the Committee on Appropriations (pp 245-246) transactions as will return all proceeds of the sales in cash to the general fund of the Treasury of the United States at the time of the consummation of the sales. The letter added that the Banking and Currency Committee would "take up the matter of the disposition of permanent war housing units within a reasonable time and establish standards governing the disposition of such properties." In a letter acknowledging receipt of the letter from the two chairmen, the Commissioner of the then Federal Public Housing Authority stated In my statement to your committees on February 24, I stated that I would follow the recommendation of your committees to refrain from consummating certain types of sales for a reasonable period of time, to enable the House Banking and Currency Committee to consider any legislative changes it may wish to recommend in the provisions governing such sales, except that I could not refrain from consummating sales in which the Federal Public Housing Authority and the proposed purchasers had come to a definite agreement that specific housing units would be sold to the proposed purchasers and had agreed on the price to be paid and on the terms of sale. The Government of the United States could justly be accused of bad faith if we were to refuse to consummate sales in these cases. In his reply, the Commissioner emphasized that, while he would comply with the request, he felt that the adoption of a permanent policy that would require all sales to be made for cash only would not be in the public interest and would cost the Treasury of the United States millions of dollars. Such a policy, in his opinion, would limit competition in the purchase of apartment-type housing units to those. who had large amounts of cash and those who could readily raise large sums with which to pay in cash. This would drive down the amounts which the Government could hope to realize in the sales and at the same time would practically eliminate occupants and prospective occupants, both veterans and nonveterans, as prospective purchasers. There are quoted below the entire letter from the two chairmen and the Commissioner's reply: Mr. DILLON S. MYER, HOUSE OF REPRESENTATIVES, COMMITTEE ON BANKING AND CURRENCY, Washington, February 25, 1947. Commissioner, Federal Public Housing Authority, Washington, D. C. DEAR MR. MYER: Pursuant to the joint committee meeting of the Banking and Currency Committee and the Subcommittee on Government Corporations of the Appropriations Committee which you attended yesterday, the joint committee met in executive session this morning to determine its policy with regard to the disposition of permanent war housing units under the jurisdiction of the Federal Public Housing Authority. The joint committee adopted unanimously the following resolution, based upon the understanding which you gave to the joint committee at its meeting yesterday that you would follow the recommendation of the committee at this time so that the Banking and Currency Committee could, within a reasonable time, establish a definite program with regard to the disposition of permanent war housing units. The resolution adopted is as follows: "Resolved, That it is the sense of this joint committee that sales of permanent war housing units by the Federal Public Housing Authority be limited to such transactions as will return all proceeds of the sales in cash to the general funds of the Treasury of the United States at the time of the consummation of the sales." The Banking and Currency Committee will take up the matter of the disposition of permanent war housing units within a reasonable time and establish standards governing the disposition of such properties. Very truly yours, JESSE P. WOLCOTT, Chairman, Committee on Banking and Currency. Chairman, Subcommittee on Government Corporations, Hon. JESSE P. WOLCOTT, Appropriations Committee. NATIONAL HOUSING AGENCY, Chairman, Subcommittee on Government Corporations, House of Representatives, Washington, D. C. GENTLEMEN: I have received your joint letter dated February 25, 1947, advising me of the resolution concerning sales of permanent war housing units by the Federal Public Housing Authority adopted at a joint meeting of the House Banking and Currency Committee and the Subcommittee on Government Corporations of the House Appropriations Committee held on February 25. The resolution quoted in your letter differs from my understanding of the proposed action which you asked me to agree to during the joint meeting held on February 24, and is silent concerning some of the conditions which I understood were to be incorporated in any request made by your committees. I should like, therefore, to state explicitly what I understand to be the action which you have asked me to take, so that there may be no misunderstanding on my part as to the scope of your resolution. The resolution, as quoted in your letter, reads as follows: "Resolved. That it is the sense of this joint committee that sales of permanent war housing units by the Federal Public Housing Authority be limited to such transactions as will return all proceeds of the sales in cash to the general fund of the Treasury of the United States at the time of the consummation of the sales." 1. In my statement to your committees on February 24, I stated that I would follow the recommendation of your committees to refrain from consummating certain types of sales for a reasonable period o. time, to enable the House Banking and Currency Committee to consider any legislative changes it may wish to recommend in the provisions governing such sales, except that I could not refrain from consummating sales in which the Federal Public Housing Authority and the proposed purchasers had come to a definite agreement that specific housing units would be sold to the proposed purchasers and had agreed on the price to be paid and on the terms of sale. The Government of the United States could justly be accused of bad faith if we were to refuse to consummate sales in these cases in accordance with the existing commitments and, I assume that your committees do not intend that the Government should break faith in these cases. In this connection, may I call attention to the fact that I telephoned Mr. Jensen on the morning of February 25, before the joint meeting of your committees on that date, and stated to him that there was reason to believe that there may be several projects, not enumerated in my letter to you of February 24 on this subject, on which such binding commitments have been made by authorized personnel in our regional offices. 2. Section 301 of the Lanham Act provides that housing projects constructed under that act "shall be disposed of as promptly as may be advantageous under the circumstances and in the public interest," after the President has declared that the emergency declared by him on September 8. 1939. has ceased to exist. Section 4 of the act also expressed the intention of the Congress that such housing should be "sold and disposed of as expeditiously as possible:" Section 304 of the act |