abandonment is primarily a local concern and local input at every step of the program is essential if the problem is to be adequately addressed. Thank you very much. Senator CRANSTON. Thank you very very much, Mayor Reading. That was a very helpful statement and I appreciate it a great deal. Pete, do you have any remarks to make? Congressman STARK. Not at this time, Senator. Thank you. Senator CRANSTON. If each of the others of you have preliminary statements before we go to some questions and give and take, we'd be delighted to hear them at this time. Mr. Chastain. Mr. CHASTAIN. Thank you. I would like to read from John Williams' statement. He sends his regrets that he was unable to join you here today. He asked that I bring the statement to you. STATEMENT OF JOHN B. WILLIAMS, EXECUTIVE DIRECTOR, OAKLAND REDEVELOPMENT AGENCY Mr. WILLIAMS. A survey by a consultant to HUD, Linton, Mields and Coston, Inc., entitled "A Study of the Problems of Abandoned Housing," dated November, 1971, found no significant abandoned housing problems in Oakland. The situation has changed dramatically since that time. A major housing abandonment problem is visible to anyone who drives through East Oakland. Community organizations have banded together to help themselves and to urge private and public entities involved to take more decisive and effective actions in dealing with the problem. With our 20/20 hindsight, we can surmise that the 1971 survey did not probe to a depth that would have revealed the early symptoms of housing abandonment. Housing abandonment, rather obviously, is an eye-catching symptom of older and deeper inner-city social ills, including: 1. A stable or declining inner-city population growth contrasted with rapid surburban growth. 2. An exchange of population that finds the affluent ex-city dwellers in the suburbs being replaced with low income residents in the inner city. 3. A flight of industry and commerce to the suburbs with a resultant declining tax base in the city. 4. Declining property values relative to inflation in the less affluent residential neighborhoods of the city accompanied by housing deterioration and red-lining practices by lenders. The dimensions of the problems as they relate to housing are outlined in the attached ORA staff reports, entitled "East Oakland Housing." dated November 6, 1974, and "HUD As-Is Sales Program." dated February 7, 1975. Oakland's response to the problem is evidenced by the following actions that have taken place over the past year. 1. The city has adopted a transition plan for reorganizing city functions to make maximum use of the community development block grant program, utilizing the experience that exists in city departments and city agencies. The Oakland Redevelopment Agency has been assigned by contract the major responsibility for implementing CD programs during the first year and planning for second year actions. 2. The city has allocated more than 40 percent of its community development funds to housing conservation programs. A major component will be a rehabilitation loan fund using CD funds and funds to be obtained from the recently created State Housing Finance Agency, funds raised through the technique made possible by the State Marks-Foran legislation and, hopefully, funds from private lenders. 3. The city has authorized the use of CETA funds, as well as city general funds and community development funds for an East Oakland revitalization program aimed at neighborhood clean-up and short-term improvements. 4. The city has appointed an East Oakland housing taks force composed of concerned citizens to provide citizen's input for the programs dealing with housing abandonment and seven community development district boards have been formed to provide citizen's input for ongoing CD activities. 5. The city has been certified as the HUD Housing Counseling Agency and has delegated responsibility for operating the programs to the Oakland Redevelopment Agency. The counseling program is now in full operation and has already dealt with 238 families who have delinquent loans. 6. The Oakland City Council, at its meeting of August 26, authorized the filing of an application for the recently announced urban homesteading program. That application will be delivered to HUD by August 29. We are hopeful that Oakland will be selected as one of the homesteading cities. The neighborhood protection corporation proposed by Senate bill 1988 could become a most useful tool in the arsenal we are building to attack the problems of housing conservation in Oakland. We are particularly interested in provisions that would enable us to reduce the time that a property caught up in the default process remains vacant. The attachment entitled "HUD As-Is Sales Program" includes a graph prepared by James Price, Director of the San Francisco HUD area office, showing a typical time cycle of 16 months from abandonment to reoccupancy. Eight months of that cycle takes place prior to acquisition by HUD. It is our experience that non-HUD insured properties have a similar time cycle, or, in some instances, a longer cycle. Nothing is more damaging to a residential neighborhood than vacant, boarded-up housing. It is an invitation to vandalism. It impairs marketability. It inevitably leads, in too many instances, to the demolition of a rapidly vanishing resource-a single-family sales house available to low and moderate income people. The features of the bill that we see as particularly useful are those that would: 1. Create an agency, the primary concern of which is abandoned housing and its effects on neighborhoods. In our experience, existing lenders and insurers have been primarily concerned with protecting their own financial interests and have shown little concern for the effects of their practices on neighborhoods. 2. The ability to speed up the process of getting abandoned housing occupied once more and reducing the number of cases in which the final remedy is demolition. The low level of housing production we have experienced over the past 2 years is a very dangerous situation. With the moratorium on the old subsidized programs and the lack of production from new programs, we are telling moderate and low income citizens that, although we have been able to house a substantial segment of our population comfortable since World War II, they are now going to have to wait indefinitely for fulfillment of the promises of the Housing Act of 1949 and subsequent legislation. I think the situation holds dangers of social decay and disruption that could make the turmoil of the sixties seem mild. In Oakland, demolition of housing units has exceeded new construction in 5 out of the first 6 months of this year. The impact falls almost entirely on the low and moderate income community. We would like to see: (1) Stronger provisions for utilizing the services of local entities in communities that have strong programs to deal with their situations. (2) A program that is not time limited and experimental in nature. We recognize the need for a startup process and a careful monitoring of ability to deliver meaningful services. However, we believe that a commitment on the part of the Federal Government to deal with problems that result to some degree from Federal policy is essential to success. We are frankly concerned that Oakland might be left out of an experimental program. We certainly don't object to other communities being included, but want some assurance that our problems will receive the attention they need at the Federal level. The spirit of the bill is encouraging. We stand ready to offer any assistance we can in seeing it move forward. [The following material was submitted for the record:] EAST OAKLAND HOUSING, Nov. 6, 1974 FACTS Total population-5th Avenue to San Leandro, MacArthur to Estuary-166,000 persons (1970 Census). Total housing units-52,500 (1970 Census). Total HUD repossessions, area-wide-1,466 units (J. Price letter dated 7/31/74). Total HUD repossessions in Oakland-334 units (J. Price letter dated 7/31/74). Total HUD repossessions in Oakland-349 units (HUD files, 10/31/74). (The Alameda County Assessor's records show an additional 85 properties owned by the Secretary of Housing and Urban Development. This would make a total of 434 properties.) Total abandoned homes-not known (student count 1,100 to 1,700 units, report not available). Total VA repossessed homes-62 units. Sales listings (private market)-514 units; 126 vacant, 388 occupied. Repossessed homes (private market)-not known. (According to Vice-President, Federal Home Loan Bank Board these figures would be impossible to obtain because loans are in the computers by loan number not by geographical area.) FHA has an unusually high rate of foreclosures. FHA underwriting practices were especially lenient a few years ago. Price range of vandalized, repossessed properties is between $15,000 and $21,500, the range of 235, VA and 221d2 properties. Price range in East Oakland generally is between $15,000 and $30,000. SAMCO, International Mortgage, VA and FHA are only lenders in the area now. Presence of turnkey units, repossessed properties or boarded up buildings causes a drop of $2,000 in market value of other units on the block or in the neighborhood. Realtors are not advertising any properties in "bad areas" so there is probably undercounting of vacant properties. Code requirements, termite inspections, seller's points, broker's commissions often exceed equity in house; result is abandonment. The situation is not unique in Oakland. Experience in other central cities has shown that code enforcement and acquisition of properties has the potential for increasing the problem unless it is conducted as part of a concerted effort to upgrade a neighborhood. Vacant properties become garbage dumps. Most houses on current listings are owner-occupied. Appreciation of real estate values in East Oakland varies. In some areas property is appreciating up to 5%; in others is depreciating as much as 10%. A nationwide study shows that: With 1% rate of appreciation, default probability is 8.8%; with zero rate of appreciation, default probability is 13%; with 1% rate of depreciation, default probability is 25.6%. In East Oakland, in 1973, the ratio of foreclosures to reported sales ranged from 8 foreclosures/11 sales in flatlands to zero foreclosures/24 sales in hills. The foreclosure ratios appear to correlate with price range of housing. The majority of listings are for two-bedroom one-bath homes. There is less than a $3,000 spread between two- and three-bedroom houses, and the cost of an additional room would be about $6,000, making additions economically infeasible. Residents fear being victimized by fire and burglaries. Trends in real estate rates of appreciation are not reassuring to homeowners or to the City. The situation calls for extraordinary measures. STRATEGY Begin both short- and long-term measures immediately; distinguish between those measures in the following ways: Short-term Intervene with maximum legal measures to eradicate hazardous properties. Organize joint neighborhood and police patrols to stop "organized vandalism." Formulate housing policy as part of Housing Assistance Plan; apply to HUD for discretionary funds for emergency, demonstration housing measure. Launch rehab program which utilizes all existing rehab efforts in the City (see Gearing Oakland for Citywide Pride). Long-term Establish a housing policy which emphasizes private housing market incentives, i.e., appreciation of real estate values. Use regulatory actions (concentrated code enforcement, property acquisition) only in specified selected areas. ACTIONS Convene all interested parties: City/Redevelopment Agency/Housing Authority/FHA/VA/Financial Institutions-Savings and Loans/Banks/Homeowners/ Real Estate Board/Rehab organizations. Identify interests, responsibilities and capacities of all parties. Negotiate with HUD 1) to stop "as is" sales, 2) to grant 312 funding, "Gearing Oakland" money, discretionary funds, and Urban Homesteading Program. Negotiate with financial institutions 1) to stop "as is" sales, 2) to stop redlining, to join Gearing Oakland program. Announce intention of governmental agencies to attack problem in a systematic way by launching eight simultaneous programs as listed below in order to accomplish the outlined objectives. I. Rehab program PROGRAMS Gearing Oakland to Citywide Pride--which includes continuation of: Oakland Neighborhood Housing Services, Inc.; Oakland Rehab, Inc.; Oak Center Better Housing Corporation; Spanish Speaking Unity Council; West Oakland Housing, Inc.; and East Oakland Community Council, and others. Utilization of Marks-Foran State Legislation for rehab financing. II. Neighborhod interest and community organization program Citizen participation. III. Neighborhood and home maintenance employment program IV. Homeowners counseling program Financial counseling presale, delinquency and default. Public housing community integration. V. Crime and fire prevention patrol program Joint neighborhood/police. VI. Urban marketing program Urban homesteading. Immediate efforts to get families into vacant housing on a provisional basis— as house sitters. Replacement housing for Grove Shafter Freeway. VII. Local financial aid to housing authority Community development funds for public housing units. VIII. Research program Improving capacity to monitor trends in private market. Exploring ways to ensure funds for neighborhood improvements, recreation facilities, street and sidewalk improvements, lighting, etc. Exploring ways to improve competitive position of the City through public development corporation, sale of tax-exempt bonds, and other financing mechanisms. Interview homeowners who have moved to determine why they moved. OBJECTIVES Arrest present trend of increasing rate of foreclosures or abandonments. Rehabilitate homes that are now occupied and deteriorated or showing signs of deferred maintenance. Stabilize housing market by declared public policy and public investment and services. Improve neighborhood environment. Encourage a high level of home maintenance. Achieve rate of appreciation of real estate values up to the level enjoyed by other areas in the City. Stimulate private investment in new housing construction. HUD AS-IS SALES PROGRAM HUD's guidelines for the as-is sales program define the primary objectives of the program as "the reduction of the inventory of HUD-acquired properties. while insuring the maximum return to the insurance fund." The fact that HUD will not warranty or provide mortgage insurance for properties sold through the "as-is" program indicates very clearly that HUD is withdrawing from a situation that they played a primary role in creating and that they are quite willing to let the financial consequences of that act fall on the local community rather than on the insurance funds that were established by Congress to deal with such losses. |