IV. HOUSING

Introduction

The passage of the National Housing Act in 1934 signaled a new Federal commitment to provide housing for the Nation's citizens. Congress made the commitment explicit 15 years later in the Housing Act of 1949, establishing as a national goal, the realization of "a decent home and suitable environment for every American family."

Today, after more than three decades of fragmented and grossly under-funded Federal housing programs, decent housing remains a chronic problem for the disadvantaged urban household. Fifty-six percent of the country's nonwhite families live in central cities today, and of these, nearly two-thirds live in neighborhoods marked by substandard 36 housing and general urban blight. For these citizens, condemned by segregation and poverty to live in the decaying slums of our central cities, the goal of a decent home and suitable environment is as far distant as ever.

During the decade of the 1950's, when vast numbers of Negroes were migrating to the cities, only 4 million of the 16.8 million new housing units constructed throughout the Nation were built in the central cities. These additions were counterbalanced by the loss of 1.5 million central-city units through demolition and other means. The result was that the number of nonwhites living in substandard housing increased from 1.4 to 1.8 million, even though the number of substandard units declined.

Statistics available for the period since 1960 indicate that the trend is continuing. There has been virtually no decline in the number of occupied dilapidated units in metropolitan areas, and surveys in New York City and Watts actually show an increase in the number of such units. These statistics have led the Department of Housing and Urban Development to conclude that while the trend in the country as a whole is toward less substandard housing, "There are individual neighborhoods and areas within many cities. where the housing situation continues to deteriorate.” 37 Inadequate housing is not limited to Negroes. Even in the central cities the problem affects two and a half times as many white as nonwhite households. Nationally, over 4 million of the nearly 6 million occupied substandard units in 1966 were occupied by whites. It is also true that Negro housing in large cities.

The Department of Housing and Urban Development classifies substandard housing as that housing reported by the U.S. Census Bureau as (1) sound but lacking full plumbing, (2) deteriorating and lacking full plumbing, or (3) dilapidated.

"Hearings before the Subcommittee on Executive Reorganization of the Committee on Government Operations, U.S. Senate, 89th Cong., 2d sess., Aug. 16, 1966, p. 148.

is significantly better than that in most rural areas— especially in the South. Good quality housing has become available to Negro city dwellers at an increasing rate since the mid-1950's when the postwar housing shortage ended in most metropolitan areas. Nevertheless, in the Negro ghetto, grossly inadequate housing continues to be a critical problem. Substandard, Old, and Overcrowded Structures

Nationwide, 25 percent of all nonwhites living in central cities occupied substandard units in 1960, compared to 8 percent of all whites. Preliminary Census Bureau data indicate that by 1966, the figures had dropped to 16 and 5 percent respectively. However, if "deteriorating" units and units with serious housing code violations are added, the percentage of nonwhites living in inadequate housing in 1966 becomes much greater.

In 14 of the largest U.S. cities, the proportions of all nonwhite housing units classified as deteriorating, dilapidated, or lacking full plumbing in 1960 (the latest date for which figures are available), were as follows:

291-729 O-68-18

Finally, Negro housing units are far more likely to be overcrowded than those occupied by whites. In U.S. metropolitan areas in 1960, 25 percent of all nonwhite units were overcrowded by the standard measure (that is, they contained 1.01 or more persons per room). Only 8 percent of all white-occupied units were in this category. Moreover, 11 percent of all non-white-occupied units were seriously overcrowded (1.51 or more persons per room), compared with 2 percent for white-occupied units. The figures were as follows in the ten metropolitan areas analyzed by the Commission:

Negroes in large cities are often forced to pay the same rents as whites and receive less for their money, or pay higher rents for the same accommodations.

The first type of discriminatory effect-paying the same amount but receiving less—is illustrated by data from the 1960 Census for Chicago and Detroit.

In certain Chicago census tracts, both whites and nonwhites paid median rents of $88, and the proportions paying various specific rents below that median were almost identical. But the units rented by nonwhites were typically:

■ Smaller (the median number of rooms was 3.35 for nonwhites versus 3.95 for whites).

In worse condition (30.7 percent of all nonwhite units were deteriorated or dilapidated units versus 11.6 percent for whites).

■ Occupied by more people (the median household size was 3.53 for nonwhites versus 2.88 for whites).

More likely to be overcrowded (27.4 percent of nonwhite units had 1.01 or more persons per room versus 7.9 percent for whites).

In Detroit, whites paid a median rental of $77 as compared to $76 among nonwhites. Yet 27.0 percent of nonwhite units were deteriorating or dilapidated, as compared to only 10.3 percent of all white units.

The second type of discriminatory effect-paying more for similar housing-is illustrated by data from a study of housing conditions in disadvantaged neighborhoods in Newark, N.J. In four areas of that city (including the three areas cited previously), nonwhites with housing essentially similar to that of whites paid rents that were from 8.1 percent to 16.8 percent higher. Though the typically larger size of nonwhite households, with consequent harder wear and tear, may partially justify the differences in rental, the study found that nonwhites were paying a definite "color tax" of apparently well over 10 percent on housing. This condition prevails in most racial ghettos.

The combination of high rents and low incomes forces many Negroes to pay an excessively high proportion of their income for housing. This is shown. by the following chart showing the percentage of renter households paying over 35 percent of their incomes for rent in 10 metropolitan areas:

The high proportion of income that must go for rent leaves less money in such households for other expenses. Undoubtedly, this hardship is a major reason many Negro households regard housing as one of their worst problems.

Discrimination in Housing Code Enforcement

Thousands of landlords in disadvantaged neighborhoods openly violate building codes with impunity, thereby providing a constant demonstration of flagrant discrimination by legal authorities. A high proportion of residential and other structures contain numerous violations of building and housing codes. Refusal to remedy these violations is a criminal offense, one which can have serious effects upon the victims living in these structures. Yet in most cities, few building code violations in these areas are ever corrected, even when tenants complain directly to municipal building departments.

There are economic reasons why these codes are not rigorously enforced. Bringing many old structures up to code standards and maintaining them at that level often would require owners to raise rents far above the ability of local residents to pay. In New York City, rigorous code enforcement has already caused owners to board up and abandon over 2,500 buildings rather than incur the expense of repairing them. Nevertheless, open violation of codes is a constant source of distress to low-income tenants and creates serious hazards to health and safety in disadvantaged neighborhoods.

Housing Conditions and Disorder

Housing conditions in the disorder cities surveyed by the Commission paralleled those for ghetto Negroes generally.

Many homes were physically inadequate. Fortyseven percent of the units occupied by nonwhites in the disturbance areas were substandard.

Overcrowding was common. In the metropolitan areas in which disorders occurred, 24 percent of all units occupied by nonwhites were overcrowded, against only 8.8 percent of the white-occupied units.

Negroes paid higher percentages of their income for rent than whites. In both the disturbance areas and the greater metropolitan area of which they were a part, the median rent as a proportion of median income was over 25 percent higher for nonwhites than for whites.

The result has been widespread discontent with housing conditions and costs. In nearly every disorder city surveyed, grievances related to housing were important factors in the structure of Negro discontent. Poverty and Housing Deterioration

The reasons many Negroes live in decaying slums are not difficult to discover. First and foremost is poverty. Most ghetto residents cannot pay the rent necessary to support decent housing. This prevents private builders from constructing new units in the ghettos or from rehabilitating old ones, for either action involves an investment that would require substantially higher rents than most ghetto dwellers can pay. It also deters landlords from maintaining units that are presently structurally sound. Maintenance too requires additional investment, and at the minimal rents that inner-city Negroes can pay, landlords have little incentive to provide it.

The implications of widespread poor maintenance are serious. Most of the gains in Negro housing have occurred through the turnover which occurs as part of the "filtering down" process-as the white middle class moves out, the units it leaves are occupied by Negroes. Many of these units are very old. Without proper maintenance, they soon become dilapidated, so that the improvement in housing resulting from the filtering-down process is only temporary. The 1965 New York City survey points up the danger. During the period that the number of substandard units was decreasing, the number of deteriorating units increased by 95,000.

Discrimination

The second major factor condemning vast numbers of Negroes to urban slums is racial discrimination in the housing market. Discrimination prevents access to many nonslum areas, particularly the suburbs, and has a detrimental effect on ghetto housing itself. By restricting the area open to a growing population, housing discrimination makes it profitable for landlords to break up ghetto apartments for denser occupancy, hastening housing deterioration. Further, by creating a "back pressure" in the racial ghettos, discrimination keeps prices and rents of older, more deteriorated housing in the ghetto higher than they would be in a truly free and open market.

Existing Programs

To date, Federal building programs have been able to do comparatively little to provide housing for the

disadvantaged. In the 31-year history of subsidized Federal housing, only about 800,000 units have been constructed, with recent production averaging about 50,000 units a year. By comparison, over a period only 3 years longer, FHA insurance guarantees have made possible the construction of over 10 million middle and upper-income units.

Federal programs also have done little to prevent the growth of racially segregated suburbs around our cities. Until 1949, FHA official policy was to refuse to insure any unsegregated housing. It was not until the issuance of Executive Order 11063 in 1962 that the Agency required nondiscrimination pledges from loan. applicants.

It is only within the last few years that a range of programs has been created that appears to have the potential for substantially relieving the urban housing problem. Direct federal expenditures for housing and community development have increased from $600 million in fiscal 1964 to nearly $3 billion in fiscal 1969. To produce significant results, however, these programs must be employed on a much larger scale than they have been so far. In some cases the constraints and limitations imposed upon the programs must be reduced. In a few instances supplementary programs should be created. In all cases, incentives must be provided to induce maximum participation by private enterprise in supplying energy, imagination, capital and production capabilities.

Federal housing programs must also be given a new thrust aimed at overcoming the prevailing patterns of racial segregation. If this is not done, those programs will continue to concentrate the most impoverished and dependent segments of the population into the central-city ghettos where there is already a critical gap between the needs of the population and the public resources to deal with them. This can only continue to compound the conditions of failure and hopelessness which lead to crime, civil disorder and social disorganization.

Basic Strategies

We believe the following basic strategies should be adopted:

The supply of housing suitable for low-income families should be expanded on a massive basis.

The basic reason many Negroes are compelled to live in inadequate housing is the failure of the private market to produce decent housing at rentals they can afford to pay. Programs we have recommended elsewhere are directed toward raising income levels. Yet it is obvious that in the foreseeable future there will continue to be a gap between the income of many Americans and the price of decent housing produced by normal market mechanisms. Thus, the implementation of the strategy depends on programs which not only

generate more lower cost housing but also raise the rentpaying capability of low-income households.

Areas outside of ghetto neighborhoods should be opened up to occupancy by racial minorities.

Provision of decent low-cost housing will solve only part of the problem. Equally fundamental is the elimination of the racial barrier in housing. Residential segregation prevents equal access to employment opportunities and obstructs efforts to achieve integrated education. A single society cannot be achieved as long as this cornerstone of segregation stands.

Suggested Programs

We are proposing programs in 10 areas to illustrate how we believe basic strategies we have outlined can be put into effect:

■ Provision of 600,000 low- and moderate-income housing units next year, and six million units over the next 5 years.

An expanded and modified below-market interest rate program.

■ An expanded and modified rent supplement program and an ownership supplement program.

Federal write-down of interest rates on loans to private builders.

■ An expanded and more diversified public housing program. ■ An expanded Model Cities program.

■ A reoriented and expanded urban renewal program. ■Reform of obsolete building codes.

■ Enactment of a national, comprehensive and enforceable open-occupancy law.

■Reorientation of Federal housing programs to place more low and moderate-income housing outside of ghetto areas. The supply of housing suitable for low-income families should be expanded

The Commission Recommends:

Provision of 600,000 low- and moderate-income housing units next year and six million units over the next 5 years.

Some 6 million substandard housing units are occupied in the United States today, and well over that number of families lack sufficient income to rent or buy standard housing, without spending over 25 percent of their income and thus sacrificing other essential needs. The problem promises to become more critical with the expanded rate of family formation on the immediate horizon and the increasing need to replace housing which has been destroyed or condemned.

In our view, the dimension of the need calls for an unprecedented national effort. We believe that the Nation's housing programs must be expanded to bring within the reach of low and moderate-income families 600,000 new and existing units next year, and 6 million units over the next 5 years.

This proposal can only be implemented if present subsidy programs are extended so that (a) a part of the existing housing inventory can be brought within the reach of lower income families, and (b) private enterprise can become a major factor in the low-cost. housing field, both in terms of the construction capabilities of private developers and the capital of private institutional lenders.

In the sections that follow, we discuss specific programs that must be part of this expanded national effort.

An expanded and modified below-market interest rate program.

The below-market interest rate program, which makes long-term, low-interest financing available to nonprofit and limited profit sponsors, is the best mechanism presently available for engaging private enterprise in the task of providing moderate and lower income housing.

Several limitations, however, prevent the program from providing the quantity of housing that is needed. Funding levels are inadequate to launch a national program, nonprofit sponsors are deterred by lack of seed money to finance preconstruction costs and limited. profit corporations are deterred by the statutory prohibition on transfer or refinancing projects for 20 years without FHA permission.

We recommend that funding levels of the program be substantially increased. We also recommend that legislation be enacted to permit interest-free loans to nonprofit sponsors to cover pre-constructions costs, and to allow limited profit corporations to sell projects to nonprofit corporations, cooperatives, or condominiums.

Though the potential of the program is great, it presently serves few truly low-income families. Current costs average $14,400 per unit, making the typical rental for a two-bedroom unit $110 per month, thereby in effect requiring a minimum annual income of $5,300. Only with rent supplements can poor families afford housing commanding rents of this amount, but the amount of rent supplement funds which can be used in such developments is limited by statute to 5 percent of the total appropriation for the rent supplement program.

In order to make below-market interest rate housing available to low as well as moderate-income families, we recommend that the 5 percent limitation be removed, and that the overall funding of rent supplements be greatly expanded. We also recommend that serious consideration be given to expanding the interest subsidy under the program in order to lower the rate for sponsors.

An expanded and modified rent supplement program and an ownership supplement program.

The rent supplement program offers a highly flexible tool for subsidizing housing costs, because it per

mits adjustment of the subsidy according to the income. of the tenant. The project financing is at market rates, so that tenants who do not qualify for supplements must pay market rentals. Potentially, therefore, these developments can provide an alternative to public housing for low-income families, while still attracting middle-income families.

We believe, however, that several changes are necessary if the full potential of this program is to be realized.

First, we recommend that existing regulations restricting architectural design, imposing rigid unit cost standards, and limiting tenant income to amounts lower than required by statute be removed. These regulations diminish the attractiveness of the program to private developers, and represent a major barrier to substantial expansion of the program.

Second, the statutory limitation of rent supplements to new or rehabilitated housing should be changed to permit use of rent supplements in existing housing. In many areas, removal of the restriction would make possible a major increase of the program without requiring investment in new construction. This option must be made available if the program is to be expanded to its fullest potential.

Third, the rent supplement concept should be extended to provide home ownership opportunities for low-income families. The ambition to own one's own home is shared by virtually all Americans, and we believe it is in the interest of the Nation to permit all who share such a goal to realize it. Home ownership would eliminate one of the most persistent problems facing low-income families in rental housing-poor maintenance by absentee landlords-and would provide many low-income families with a tangible stake in society for the first time.

The Senate Banking and Currency Committee recently approved a bill that would establish a program to pay a portion of the mortgage payments of lowincome families seeking to purchase homes. As with rent supplements, subsidy payments would decrease as the purchasers income rose. The income limits of the program-70 percent of the below-market interest rate eligibility limits would greatly impair its usefulness, in our opinion, and should be eliminated. With that reservation, we strongly endorse the concept, urge that such a program of ownership supplements be enacted, and recommend that it be funded on a basis that will permit its wide use in achieving the goal of 6 million. units for low- and moderate-income families over the next 5 years.

■ Federal write-down of interest rates on loans to private builders.

To make private loan capital available, we recommend direct Federal write-down of interest rates on