and most effective comprehensive housing program in the country today.

Our research showed us that 1,200 abandoned houses were abandoned because of high interest rates, because of short term high risk payment schedules, because of the unavailability of mortgage loans, the unavailability of rehabilitation loans, the unavailability of conventional financing-in short, redlining. Sellers can't sell and buyers can't buy. The houses were abandoned because of faulty FHA construction and rehabilitation, because FHA sold houses "as is" indiscriminately to speculators, because HUD sold Government repossessed houses not to qualified 235 certificate holders but to "investors" and "speculators," abandoned because counseling and necessary forebearance advocacy in human situations in today's economy were not available, abandoned because of 100 percent insurance to the mortgage houses and we only have to look at Chicago's $412 billion scandal to understand the effect of 100 percent insurance, abandoned because of scare tactics and quick foreclosures. These houses were abandoned because of the paucity of city services, abandoned because some absentee landlords seek capital gain off capital loss, some were abandoned because of inheritance and probate, abandoned because rehabilitation costs, requiring second mortgages, forcing the payment schedule for housing above 25 percent of a family's adjusted income. Housing is still being abandoned. This morning, ladies and gentlemen, you say houses abandoned this year. And more will be abandoned.

The East Oakland Housing Committee has taken steps, with phenomenal results, to deal with present and future abandoned houses. Just last week, the city council voted $4,645,000 for housing. Just Tuesday evening, the city council unanimously passed a unique homestead proposal and forwarded it to HUD Secretary Hills. This program was developed in a combined community and governmental effort. The city of Oakland is presently preparing enabling legislation to sell Marks Foran bonds for housing and we have already received a tender offer from the Bank of America to purchase those bonds. The city is also preparing a program for participation in the newly created California Housing Finance Agency. The city has already established an excellent counseling agency, certified by HUD and headed by Mrs. Henrietta Scott, to do financial counseling and forebearance advocacy. The city has established an East Oakland Housing Task force made up of representatives of labor, realtors, lenders, contractors, city council, and residents.

The State of California has passed the Gregorio Act insuring the Marks Foran bonds and has also created the California Housing Finance Agency with $450 million Arnold Sternberg, director of State housing and community development told the community at the Mills College meeting that the State would look to Oakland's present housing stock rather than to new construction and also that the 160 houses the State must purchase from HUD for replacement of the Grove Shafter homes would be located in East Oakland. He also assured us that he was anxious to work with Oakland through the California Housing Finance Agency because Oakland is the only

California city applying for funds. The State is presently considering a 5-year tax exemption for rehabilitation work up to $12,000 for owner occupants.

HUD, too, is responding. And Mr. Price has taken positive steps. Monday, Mr. Price sent out a press release stating "James H. Price, director of HUD's San Francisco area office, in response to a request from the East Oakland Housing Committee, has announced the expansion of HUD's 518b home repair program to larger areas of Oakland. This program will not require that 50 percent of the houses in a census tract be built prior to 1940; and it also includes, for the first time, the 235 houses as well as the 203's and 221D's. HUD has, as of July 13, been listing their east bay houses in the Oakland Tribune. Prior to that time they were listed in the San Francisco Chronicle. Mr. Price was present at our public meeting at Mills College on June 14 and promised to be an advocate for Oakland homesteading proposal with Carla Hills. In December 1974, Mr. Price granted a 90-day moratorium on "as is" sales and now has developed a special program to place all HUD "as is" houses on Oakland's substandard listings, so they will be required to be rehabilitated prior to occupancy.

The Oakland Board of Realtors has set up and is staffing a counseling office at 98th Avenue and is waving all commissions on HUD "as is" sales in East Oakland. They are presently helping develop a citywide presale inspection program with the Associated Realtors which could see as many as 4,800 houses rehabilitated in 1 year and 48.000 in 10 years.

Labor is developing plans for reactivating the prep and up-grade projects as well as offering to provide free technical assistance for low-income and elderly homesteaders involved in sweat equity.

In May, at the request of Senator Proxmire, I testified before the Senate Committee on Banking, Housing, and Urban Affairs, regarding S. 1281-Home Mortgage Disclosure Act of 1975. Though it is not the entire answer, Senator and Congressman, it will "give local citizens the right to know where their local neighborhood banks or saving and loan associations were making their loans, and I would expect an informed citizenry to do the rest." This bill has been severely changed, but we still favor its passage as Senator Proxmire introduced it. The pressure of this bill has produced results here already.

Lenders are beginning to respond. I pointed out above about the Bank of America's tender offer regarding purchase of the city's Marks Foran bonds. But also, we have had several meetings with savings and loan associations, including Security Savings, Imperial, SAMCO, Great Western, Golden West, and American and very positive negotiations are in progress. We are optimistic.

Senator, we have a severe problem, but we have a concerned community that has organized, researched, and taken creative initiative to deal with the issue on all fronts. Because of the action of the neighborhood groups and their East Oakland Housing Committee, results are being realized. Senator, what has happened and is going to happen in Oakland to correct and stop the abandoned housing

crisis is the result of the residents, the East Oakland Housing Committee, and the East Oakland Housing Task Force taking initiative. What has happened is a response to the residents by lenders, realtors, labor, contractors, and Government. The initiative has been with the residents, but your bill, Senator Cranston, signals the type of initiative that we as East Oakland residents have been asking for and that urban centers throughout our State and country need. We hope others follow your lead.

Senator CRANSTON. Thank you very much and I hope that others will follow your lead also.

STATEMENT OF RICHARD ILGIN, DIRECTOR,

OAK CENTER BETTER HOUSING

Mr. ILGIN. Senator Cranston, Congressman Stark and fellow people, I was very intrigued when I first saw this bill because the Neighborhood Protection Corp. that is to be set up under this bill is in many ways very similar to the organization that I have been working for for the past few years.

I work for Oak Center Greater Housing Corp. and we started out as a neighborhood organization operating in the Oakland center neighborhood which is West Oakland. That is a redevelopment agency project there and we were set up to rehabilitate properties and provide home ownership opportunity for low and moderate income families.

Since that time when we first started out we have expanded and most of the houses we have done are in East Oakland and throughout our entire history we have done virtually all aspects of this operation, everything from acquiring properties to packaging loans, the architectural work, the selling of the properties and the rehabilitation of the properties using our own crews.

So this involves virtually all aspects of the abandonment and reoccupancy problems.

Now, our observations in the abandonment problem would be as follows: The abandonment itself is a very complex situation, as you well know, and there is no single factor that you can point to as really the cause of housing abandonment but I would like to list some factors which I think contribute greatly to the abandonment.

First of all the inability of people who live in this area of high abandonment or people who potentially would like to live in this area to be able to afford the housing cost.

People referred to the studies that have been done by the East Oakland Housing Committee and so on in terms of the income people have in these areas, and it is fairly obvious that few of the people can even afford the housing costs they are paying now, let alone to try to buy houses at current interest rates and the way current construction costs are going.

The second part would be the lack of a positive well-coordinated program by Government for assisting in the revitalization of these areas of high abandonment.

We are seeing the format of this program through community effort in Oakland now, but to date there has been in East Oakland

zero effort on anybody's part to really put together some kind of a program which is really going to solve this abandonment problem. It not only involves Government but involves bringing private enterprise back in to provide additional funding because Government simply cannot do the job alone.

This $4.6 million that is coming from community developing for housing rehabilitation, that is merely going to scratch the surface if that.

The third item is redlining not only by lending institutions but by insurers, meaning mainly the private mortgage insurance people who the conventional leaders depend on for insuring a large portion of the loans and when the private mortgage insurance people back out, the lenders will only go up to let's say 80 percent on loans and a great majority of the people who want to live in these areas and want to buy homes, it is almost impossible to meet a 20 percent down payment plus closing costs, and also I have found the Government has been doing redlining and hasn't just been FHA either. I notice some redlining from the cal vet program too and also from VA.

I think these problems need to be dealt with because if Government is going to redline, if Government is not going to go into these areas, how can you expect private enterprise to?

The fourth item which makes rehabilitation financially impossible is the declining market value of many of these areas which have been declining so rapidly because of the abandonment and because of many other factors. Their value would not even be up to the value of the cost of rehabilitation even if the properties were given away free.

What do you do with these properties? Do you tear them down? It is financially even more unfeasible to build a new house on that location and I think we have seen the experience of what large number of apartment houses and particularly those turnkey units have done in the areas of East Oakland. So it is not particularly feasible to build multiple units in a lot of these lots.

I think many of the East Oakland people simply do not want more multiple units because of the pressure it is going to put on the community and schools and everything else.

In fact, we have done some studies on rehabilitation of housing versus new construction and on one house, in particular, just recently torn down, we estimated it would take about $24,000 to rehabilitate that house. It had about 2,500 square feet in it. To build a new house on that lot with approximately half that square footage would cost about $28,000 and the older is much better quality house than can be built today.

Another item is structural deterioration or obsolescence which makes houses physically impossible to rehabilitate. Many have deteriorated through lack of maintenance, vandalism or simply wear and tear on the house to the point where it is almost impossible to rehabilitate them. In other situations code requirements of FHA, minimum. property standards or what have you have made these properties impossible to rehabilitate because they have made then obsolescent. That is. for example, in many areas houses were build with brick foundations which are perhaps perfectly good foundations, will last many, many years but because of new requirements they had to be

replaced. It is impossible to rehabilitate when you are talking about $6,000 or $7,000 in redoing the foundation.

The last item I have on here would be the lack of adequate programs or measures to abate foreclosures. This would include home ownership counseling, liberal forebearance programs and some kind of emergency loans to enable people to either make the mortgage payments during periods when their income has been cut off or to help them make emergency repairs, if that is what it takes to keep

them in those houses.

What essentially happens is that you have got a situation where once a house has been foreclosed on, because you haven't had really the programs to deal with the foreclosure process, it is extremely difficult to rehabilitate the house and even if it can be rehabilitated, there are little opportunity for home ownership for people to come in and purchase these homes and live in them because of the redlining and because of the lack of an adequate low-income housing program. So, on that basis, I would like to make the following recommendations: First, go to Roger Hills-tell Mr. Ford, his boss, that he not be Associate Justice of the Supreme Court unless there is a 235 program back on the books. This is necessary, not simply to get an additional market for these homes, because we used to work with the 235 program exclusively. We have seen the market for our homes drop off drastically because over half of that market has been cut out. We have been operating primarily in those areas where there is some fairly high abandonment, or it's been difficult to rehabilitate houses. I think you are aware of the benefits of homeownership not only to the family, but neighborhoods. It brings more stability to the neighborhoods and it would prevent some of these kinds of abandonment problems in the future. In addition low-income people very rarely have the opportunity to own anything and this whole tax structure is oriented toward ownership. Renters get absolutely nothing out of this tax structure and if you can create more homeowners out of low-income families, I think you are going to find a lot of your property problems are not going to be solved but at least you are going to find something to be done about those problems.

Second, would be enact the bill that you represented today but provide more local autonomy than is presently in the bill. I think local situations vary so much from community to community that you really need to have a great deal of local autonomy to deal with these problems. For example, Oakland's problem is primarily single family dwellings. A lot of people have abandonment problems. But they are in multiple structure which is a totally different animal to deal with. Also the whole context of working in East Oakland as opposed to working anywhere else where there are abandonment problems, you have a whole totally different set of parameters that you are working

for.

So what you should have basically is a monitoring agency but that's about it.

Let the local communities deal with the problems and make sure that those efforts are combined with whatever community develonment efforts, whatever other efforts are going on in the cities. It