I thank you for your attention. I again commend both Senators Mondale and Hart for introducing this desperately needed legislation; and you, Senator Cranston, for being concerned enough to come help us to evaluate and to proceed, we hope, to support and implement this needed legislation.

Thank you all.

Senator CRANSTON. Thank you, Doris, very, very much.

In regard to those figures that you gave on the amount of private money invested in homes in Compton as against Beverly Hills, has the city made any great efforts with private financial institutions, either on an individual or a pool basis, to get them into the city?

Mayor DAVIS. Yes; we have during the last year worked consistently with each of the lending institutions in our community, and also with the larger big three of the State in terms of proven discriminatory practices, especially to our small businessmen. We have cited these statistics. We have tried to get the commitment. We are told that the policies of the head office of these banks are not consistent with this and these obviously must be some loan committeemen's inequities.

We have instances such as a business person who is financing an appliance, a community person, who is deprived of approval of a loan application for a television appliance, for example, through any one of the big three and will go to an adjoining community, such as Huntington Park, with the same application and the same appliance and be approved, and we have documented many sources of these discriminatory lending practices.

We have testified with the Governor's State "Red-Lining" on these types of practices that also are helping to stifle the community's growth.

Senator CRANSTON. Do you have any kind of a preventative or early warning system going so that you know when a house or a street is beginning to reach the point of decay and abandonment?

Mayor DAVIS. No; we have really not been able to develop that because the problems with medium, small-sized cities is with staffing. Now that we are reorganizing under the Community Redevelopment Act, we are able to give more emphasis to this type of analysis, but prior to this we have not had the resources nor the staffing to try to do this kind of preventative work.

How does a person let anyone give a signal that they are in distress in terms of mortgage payments? By the time we look into it, they are gone.

These are the kinds of things we encounter. I wish there were some system, some way that perhaps we could get indications of other things that have been tried throughout the country in other communities, such as ours, that we might try to do that.

Senator CRANSTON. Yesterday in Oakland, Councilman John Sutter suggested that a system be set up, on a voluntary basis, where neighbors in a block would let some central place know when a home had been abandoned, and then there would be some organized group of people who would serve as caretakers and actually move in and live there until the home was transferred to some other family. He suggested this as a way to prevent the empties and the vandalism.

It developed also in the course of the hearing that in London they have a system called "Licensed Squatters," and these people move in to take care of the home until some other family takes over, and then they move to another one. It provides employment and shelter for those people.

Do you think such a system could be worked out?

Mayor DAVIS. Well, we proposed 2 or 3 years ago to the area HUD office, that the city would step in, especially on maintenance, and that we could take over and assume the responsibility for renting or leasing these homes or at least doing the maintenance. Our city attorney and HUD cannot-there is some very hard line between the federal regulations that will not enable a small local municipality to step in. We have thoroughly explored this. We offered this several years ago, and we were told that we cannot do this unless we set up some legal mechanism.

HUD has told us that they would be in conflict of making the gift of public funds, and it would be interpreted that way, if they were to even engage in any program, such as this, and that has been a deterrent.

We would willingly step in and do the management because as we have cited, it has been such a critical problem.

If there could be worked out some means where we could have temporary management or even if we could have, within their own guidelines, the type of managers that are paid by HUD to do this work, who have been derelict in their duties, things could be worked out.

Now, we have had some input into the area offices so that we could make them aware that these kinds of things are consistently and repeatedly happening. We have brought this problem up to our area office, and they have worked with us cooperatively; and, yet, it has not been as successful as it should be.

Senator CRANSTON. Regarding your abandoned homesteading program that you're seeking to develop, is the city going to be in the position to provide subsidies for that at all, and are you going to be able to use the section 8 leased housing programs in connection with that?

Mayor DAVIS. Yes. Under the urban homesteading, which we are applying, we hope that with a combination use of 312 money-and that is the problem with the urban homesteading: It is not federally financed with additional money, and we'd be "robbing Peter to pay Paul" to have to subsidize and to make moneys available out of, for example, our housing and community development money.

Unless there are ample provisions attached for allocations for the upkeep or the renovation rehab of these properties, then it will be a drain on already meager resources of the small municipality. Senator CRANSTON. How much in terms of Federal funding and in terms of dollars are you using now for rehabilitation efforts?

Mayor DAVIS. In terms of rehab, we have only just started institution of it. Just this last month we have worked with private developers, but the city itself has not had approval for a rehab program as such, none whatsoever.

Senator CRANSTON. Is inability of a family to pay property taxes a major cause of abandonment?

Mayor DAVIS. No, it is not. Actually, because under the laws of Los Angeles County, that inability can accrue to a period of, I'm not sure, about 3 to 5 years-is it?-before they are evicted on that basis, so the real problem seems to be on the maintenance of the property itself and on the actual payment ability of those persons who are buying to pay the notes. I think that is the crux of the matter.

Senator CRANSTON. Does the city of Compton acquire homes very often through condemnation?

Mayor DAVIS. No, the city itself does not.

Senator CRANSTON. You never do?

Mayor DAVIS. Well, we do, yes, but generally we have stepped this up a great deal because of deterioration.

Senator CRANSTON. If you do acquire a home, what do you do with it?

Mayor DAVIS. Well, that is why we hesitate in the acquisition, because many times by the time we have acquired it, it has become a safety hazard, and it goes to demolition; and then, naturally, it goes off the tax roll, and it gets to the point where it has gotten so far beyond our reach that we have to take another residence out of the city and that is regretable. That's another continuum of the problem that we have been faced with, but we have done quite a bit of condemnation recently.

Senator CRANSTON. Congress Hannaford, do you have any questions?

Congressman HANNAFORD. I would just like to commend Mayor Davis for this statement. I was previously a mayor of a city that is somewhat smaller than yours and, perhaps, slightly more affluent, but the problems you described are exactly the problems that brought this to my attention and interest as mayor.

I'm fascinated, Senator, with the "licensed squatters' " concept that you mentioned, but I wonder if that is not precluded by the problem that I think the mayor has experienced. This problem is the length of time between actual abandonment and repossession, during which time there has been no legal possibility of anyone moving in because it is still in the ownership of the person who is abandoning it.

Do you have any figures on how long that is, Mayor Davis? Mayor DAVIS. I did go over that entire schedule. I don't know if there is anyone from the area office here that could give us the exact figures on that, but as I recall, it can be something from 9 months to 1 year before the entire process has gone back to the Federal Government. At that time, even at 1 year's time-now, that means that this house is sitting there, perhaps, even for a period of 1 year or greater, and before the Federal Government rightly can legally step in and begin something, I don't know.

I think this is a very critical problem, because if you could in some way add some provision here that could streamline or enable an emergency provision, for example, that the local jurisdiction could step in prior to the completion of these, and then there is always legally the possibility of a person being able to go back and recoup their losses and take the title over or repossess their property, but I'm sure that the studies would show that this is very rarely done, as you've pointed up.

I don't know what we could do; but I think if we could do that, we could salvage our areas.

Senator CRANSTON. There must be a way to make it possible to do that.

Congressman HANNAFORD. I hope so, Senator, because I really think this is the crux of our problem.

Mayor DAVIS. I do, too.

Congressman HANNAFORD. It's not what the Federal Government is doing with the house after it gets it

Mayor DAVIS. No.

Congressman HANNAFORD [continuing]. But it's that long delay before it becomes a part of the federal inventory, which you as a mayor cannot do anything about, and I as a mayor could not do anything about; it sat there

Mayor DAVIS. That's right.

Congressman HANNAFORD [continuing]. And it's during that period of time that it has become unmarketable. At the time of abandonment you could market it very well.

Mayor DAVIS. That's right. I'm so glad, thank you, for this responsive note, because we've gone through this. We have looked at every single possible means; and, obviously, HUD's hands are tied on this.

I believe, as Senator Cranston says, that there must be a way; and if you could in some way address this problem in here in terms of emergency acquisition, and I don't know-do you have any ideas? Has anyone brought anything out?

Senator CRANSTON. Since I'm not an attorney, I'm not going to venture any opinions at this point, but I intend to find one who will look into it.

Mayor DAVIS. Very good. Thank you.

Senator CRANSTON. One attorney at my left is going to have the responsibility for finding the way to do that.

Mayor DAVIS. May I say that the attorney at your left was at one time one of our city attorneys, so she is very much aware of the problems of Compton.

Senator CRANSTON. Doris, thank you very, very much.

Mayor DAVIS. Thank you again.

Senator CRANSTON. You've been very helpful. Before going with the panel that will be next, we are going to take a 3-minute break. [Short recess was held.]

Senator CRANSTON. The hearing will come to order.

We will next hear from the panel consisting of Ralph Fertig, Michael Salzman, David Lizarraga, Joseph Korpsak, and Henry Dotson. Would you please come forward and be seated over here, those of you that are present.

Ted Watkins is not here. I was with him earlier this morning, and he is well aware of what we are doing, and I was given his thoughts. Would you please identify yourselves for the record, starting at the left.

Mr. SALZMAN. I'm Michael H. Salzman, executive director, Los Angeles Housing Authority.

Mr. KORPSAK. I'm Joseph Korpsak, executive officer, Valley Association of Cities.

Mr. DOTSON. I'm Henry B. Dotson, of the Concerned Compton Citizens Organization.

Senator CRANSTON. If you have any prepared statements, I would like to ask that you submit them to us for the record. The committee would like to have each of you just briefly summarize whatever key points you feel you want to express to us, and then we have some questions for you.

STATEMENT OF MICHAEL H. SALZMAN, EXECUTIVE DIRECTOR OF THE HOUSING AUTHORITY OF THE CITY OF LOS ANGELES

Mr. SALZMAN. Senator Cranston and Congressman Hannaford, good morning. My statement is not too long, but basically what I propose is this: that for a Federal demonstration to make a mark of success, it should establish a system for process that becomes reproduceable by either local units of government or by the private industry; and, otherwise, the success could be very limited and would help very few people or help even fewer communities.

There have been a number of instances where there have been successful Federal demonstrations, but they never had caught on. We can go back to the New Towns or the Green Towns bill, way back in the early days of the New Deal administration. From many aspects those projects were highly successful, but they never generated the ability to be reproduced by private industry.

Similarly and one of the major points I make-is that there are large-scale abandonments and repetitive abandonments in many areas, particularly here in the south-central part of Los Angeles, and most things that could be done aren't going to help unless you can also increase the job opportunities for people in the area.

Not very far from here there was a very good demonstration of this. An aircraft assembly plant was built where the local indigenous people were trained to fill those jobs, and it has been so successful that about a year ago that firm wanted to recruit people for another firm in Palmdale. They advertised in a Los Angeles paper, and that kind of success cannot be rubbed out; but, on the other hand, to really do any good, maybe we need a thousand more plants like it.

Yet, that was done with some economic development administration assistance, but it is not a reproduceable system so that we can keep going with it; and as long as people are largely unemployed, we are going to find that we will continue to have abandonments.

Now, back a few years ago, the Housing Authority of the City of Los Angeles was able to cosponsor with the local area office of HUD so that we were able to put out a bid proposal for developers to purchase 25 homes from HUD on scattered sites, rehabilitate them in accordance with the Housing Authority specifications, and then lease them to the Housing Authority under section 23. But under section 8, it isn't possible. As far as substantial rehabilitation under section 8, there are no set of sites that the Housing Authority could get. We could only respond to advertisements that HUD might make.

So far they haven't made any to this area organization; and if you want to respond to the ad and you have only a short time, how do you work out the mechanics to take a lot of these houses out of HUD? You can't entice the private entrepreneur to purchase these from HUD and then rehabilitate them to lease it to us.