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report to your attention in your attempt to deal with the problem of declining cities.

I. A SERIOUS PROBLEM EXISTS I agree with S. 1988 and the remarks of Mr. Hart inserted in the Congressional Record of March 6, 1974 to the effect that the problem of abandoned houses which have been repossessed by the federal Department of Housing and Urban Development (HUD) and the Veterans' Administration (VA) is an extremely serious one. I agree that federal agencies bear heavy responsibility as creators of the problem. And I agree on the necessity for the renovation of these build. ings and their restoration to our housing stock, because they contribute heavily to the deterioration of the communities they stand in, because they represent a shocking waste of material resources, and because they are needed to house people.

II. I OPPOSE S. 1988

Despite my agreement as outlined above, and my appreciation both of the good will and desire to help of the authors, and of the great benefit of holding these hearings, I oppose S. 1988 for the following reasons: A. The creation of a new Federal agency is inadvisable

1. The Federal Government Should Not Be a Residence Landlord or Owner. S. 1988 puts the federal government into the housing business as a landlord and owner, a constitutionally inappropriate role. Under the U.S. Constitution health and welfare are part of the Police Power which is reserved to the states. This separation of roles has been broken down from time to time, but such breaking down should always be suspect and inspected with a very critical eye before it is indulged in. The situation under scrutiny at this hearing is not one in which it is necessary or wise to permit federal intervention in the Police Power area,

The statement in $2(a) (1) that the abandonment brings the situation under the shelter of the Interstate Commerce Clause artificially inilates that venerable clause, a practice which is rampant and which I deplore. If this keeps up, the Interstate Commerce Clause will swallow the Constitution whole.

2. Local Control and Decision Making are Necessary.- Local control and decision making is much to be preferred over paternalistic direction and control from Washington. Federally financed urban restoration and renewal programs have not been unqualified successes. See, for example, p. 33 et seq. Cities, of The California Land referenced above. The imposition of inappropriate and unwanted plans upon the people of a city has the effect of alienating them from their communities. It drains them of energy to act upon their own. It weakens the sense of responsibility, for one's own destiny and for other's welfare, of citizens, city officials, and state officials. Therein lies much of our trouble.

3. There Is Now a Superfluity of Federal Agencies.-S. 1988 would create one more federal agency in a dense rank mat of federal agencies which overlays and smothers the country. Each new agency seems to be created to cure the failures of a predecessor. Each becomes a permanent barnacle which Congress cannot bring itself to destroy long after its usefulness has been outlived. Each adds to the strain and confusion of citizens and officials who try to deal with the federal government. Each interferes through pointless and obstructive regulations with the ability of localities and citizens to solve their own problems. This bill leaves intact, unchanged, and unchastened departments and agencies (and people) which (as set forth in the Congressional Record) have not been doing their job right. If, as is there asserted, the agencies do not have the confidence of the people they serve, it is the worst kind of answer to create yet another agency. The answer is for HUD and VA to conduct themselves henceforth in such a way as to rebuild that confidence.

4. The Bill Unwisely Ectends the Condemnation Power.-S. 1988 seriously extends the condemnation power, a power which should be used with great caution, beyond the boundaries which we have become accustomed to under earlier redevelopment legislation, and which frequently had disastrous results. In effect, it authorizes checkerboard condemnation.

5. The States' Authority in Debtor-Creditor Arrangements Should Not Be Undermined.-This bill circumvents and undermines the states historical and constitutional authority to control the rights of debtor and creditor, and to erect safeguards for the protection of both.

B. A better solution is for Congress and existing local, State and Federal agen

cies to do their jobs properly 1. HUD and VA Should Promptly Dispose of the Homes to Responsible Private and Public Group8.-Congress should direct the people in the agencies already created by it and being supported by taxes paid by people living in these cities, specifically HUD and VA, to promptly get these repossessed abandoned homes into the hands of private or public local groups who can in a financially sound way rehabilitate, sell, and rent the dwellings. HUD and VA should do that under their existing authority and within existing state laws. If the houses were originally or have become overpriced such that HUD and VA will take a loss, such loss should be accepted. I see no disadvantage and possible advantage to disposing at a nominal price if sales are to responsible groups and if HUD and VA monitor the results.

2. HUD and VA Should Help Finance on a Temporary Basis Neighborhood Protection and Maintenance Services.-Congress should direct HUD and VA to start working immediately with existing agencies, cities, and communities to help solve the problem of inadequate policing which exposes empty houses to vandalism, and of poorly maintained city services. Direct contribution of HUD and VA funds to cities for these purposes is appropriate on a temporary basis by way of redress. It should not become a permanent arrangement, such that cities become dependent upon federal funds for police and other city services.

3. HUD and VA Should Insure Home Loans on Renovated Houses but Under Rules of Sound Credit Practice.-Congress should direct HUD and VA henceforth to insure mortgages on the rehabilitated homes but to insure only soundly financed properties. The possibility should be squarely faced that such sound financing will make it impossible under present economic conditions for many persons of low and moderate income to become owners of these homes. Nothing but harm is done by refusing to face this problem directly and by indulging in unsound financing to gloss over the problem. Other sensible ways of assuring that these people are well-housed must be found. It is not appropriate for the federal government to be landlord, but it may very well be appropriate for state or local agencies to be landlord, i.e. to own housing and to rent and maintain the properties. Such an arrangement would doubtless necessitate subsidies, and it is time to give thought as to whether these subsidies should come from federal or state tax revenues.

People who have the means to finance the home purchases should be welcomed and encouraged to become home owners in the affected areas. Their re-entry will improve the neighborhoods' stability and forestall a repetition of the foreclosure/abandonment cycle.

4. Congress Must Reduce the Federal Tax Bite so that Cities Can Tax to Maintain Themselves.-Congress should begin drastically paring down federal government activities which drain tax dollars to Washington. This must be done for citizens to be able to pay the local taxes needed to maintain the state and city services which give vitality to cities and make them pleasant to live in.

This hearing is not the arena for setting up a list of wasteful, duplicative, unnecessary, and just plain harmful activities being carried out by legislative and executive branches of the federal government. It extends far beyond the agencies of concern to us today. Nevertheless, bloated federal spending is a major cause of the weakened condition of cities, and it is time Washington faced the fact.

5. Cities Must Once Again Assume Responsibility For Their Own Vitality.Cities must recognize that they must take old-fashioned responsibility for the health and welfare of their citizens, and must not remain in a demeaning dependency on the federal government. Police services, maintenance, improvement, addition of trees, parks, and pleasant public places need attention nowby the cities. If the cities feel they are understaffed they must (a) re-order priorities, (b) find good ways to use volunteer help, (c) pressure the federal government into reducing its spending so that the cities can realistically hope to tax their own citizens more. Finally they must work with other public agencies and with interested private industry in such a willing and active way that they contribute their share to the work to turn around these blighted neighborhoods.

III. SUMMARY

There are five steps to returning these abandoned houses to the housing stock and to beginning restoration of the neighborhoods blighted by them. They are: (a) Protect the houses from vandalism; (b) place possession and ownership in

appropriate hands; (c) renovate; (d) rent or sell wisely to home occupiers; (e) continue to maintain, protect, and nourish the neighborhoods, houses, and people after occupation.

The proposed bill S. 1988 takes into consideration only steps B and C. Each is vital. Each is best done by the city with help from the state as the state finds appropriate, and with willing and helpful cooperation of HUD and VA. The role of the federal government should be to cooperate with existing agencies and groups, to provide temporary grant funds for purposes of housing and neighborhood protection and services, and to guarantee soundly based loans.

Thank you for this opportunity to appear before you.
Senator CRANSTON. Thank you very much, Marjorie.

While you have your concerns about the Federal Government getting mixed up further in this, do you feel there is a need for some Federal financial backing in one way or another, either by coinsurance or underwriting?

Dr. Evans. I think the insurance-I think that's a good place for the Federal Government to be. I think the FHA and VA insurance program and others of this nature are fine. I think also that when I spoke of people who have less than a certain income having to live in city- or State-owned housing, someone is going to have to subsidize that, of course, and I think a national debate should begin on whether it should be the Federal Government or State and cities.

I don't have any terrible objection to the Federal Government subsidizing it. I think that might be an appropriate place.

Senator CRANSTON. HUD already has launched a coinsurance program.

Dr. Evans. I had that in mind when I spoke of that.

Senator CRANSTON. Can you tell us a wee bit more about this squatter's license procedure in London?

Dr. Evans. Yes. It is said—I was there about 3 weeks ago and it was told me by people in the housing bureaus in some of the bureaus of London that there is a 10-to-1 ratio of vacant housing to people who need housing in Great Britain. That sounds extraordinarily high to me but it was said to me.

There is also a crying need for housing. People are screaming over there. They are breaking into houses that are locked up for a month. They can't be dispossessed by the sheriff because they wire the bedsteads with electricity. It is a problem. London has an innovative and good way to handle this. The people who come in and say they haven't got housing, all right, we will give you a license to stay in house X on Y Street until we are ready to take it over to renovate it and put it into our council stock or until we are ready to level it for redevelopment.

It seems to work all right. There have also been licensed squatters who just move in.

Senator CRANSTON. Pete, do you have any questions at this time?

Congressman STARK. Senator, I would just like to commend these panelists who I have worked with in the past; Dr. Evans, for her work really on behalf of the Bank of America, whether or not she is representing them or not now in this area; and Oak Center Better Housing, who I rather suspect some time ago made one of the very first loans in this area. It is an excellent group of people who have struggled through a lot of learning processes. To my knowledge there are very few people who have tried to specialize in that unique enterprise of taking abandoned houses and rebuilding them in a way that they are suitable to the neighborhoods they are in for people who can afford to live there. That is a very delicate enterprise and I really don't know of many people who do it as well and they are to be commended along with the East Oakland Housing Committee which has been growing all these many years.

I want to thank you all for taking the time—all of you—to be here because with just a few more jobs and a little more money and a little more cooperation we could probably solve these problems in East Oakland. Thank you all.

Senator CRANSTON. Dr. Evans or Mr. Saladin, do you have further thoughts on how we induce private enterprise and financial institutions to get back into this field really effectively?

Mr. SALADIN. When we say "back into this field” I think we have been there but maybe not to the greatest extent possible.

One thing I would like to mention on insurance, and I am speaking for Great Western Savings now, we have not left private mortgage insurers alone. The loans we have been making in East Oakland, 90 percent we have been able to get profit mortgage insurers to go along with us on those loans. So I can't leave that sector out and I am sure they continue to go with us.

In ways to induce people, to repeat what I said earlier, I think inducement is knowing now that we have the support and we have a group that we can, as private lenders, people that we can really work with. The present inspection sale requirement is going to help us as lenders, if that is approved. There are things relative to the certificate of occupancy that we require now in certain areas that is going to be enhanced by developing, hopefully, a special department within the city and all of these things we feel now that we have some support and we can make loans with reasonable assurance.

We have the counseling center, Henrietta Scott, we are working with her. We have now a letter that the lenders can mail with their notices, their late notices, notices of default, referring that particular individual to the counseling agency. All these things help support us. Senator CRANSTON. Do you feel the assigned-risk

approach that was suggested by Councilman Sutter could be made to work!

Mr. SALADIN. Yes, I think it is the same type of thing that is coming up as part of the proposal. Richard Ilgin's group, their part of the funding will be for an insurance for the private lenders.

As I say I don't think that is going—as we get into it I think the private mortgage insurers are going to go along with us to the extent those funds aren't going to be used to the extent other people think will be used.

I don't know if I am clear on that but I think the private mortgagors,

they are going to go. Dr. Evans. Yes, I think those are good suggestions, particularly the absolute necessity of having the city cooperate so willingly in the things that are absolutely important that the city do and that banks can do, cooperation of building departments or whatever it is they may be called.

Senator CRANSTON. Do either of you have any figures on the amount of non-Federal-Government-owned property, not FHA, VA, that has been forclosured in Oakland ?

Dr. Evans. I am glad you brought that up. I was running over my time and I had a note. I suspect if we could figure some way to get data on that, we'd all be better off.

I know in my work I have on several occasions attempted to find out this datum without going to the trouble myself of checking it which is difficult to do and it isn't available as far as I know and I think we all need it.

Mr. SALADIN. I can only give you Great Western and we have on our list of foreclosed properties in a general confines, not exactly what you would call East Oakland, but basically East Oakland, 24 properties and we have approximately 1,200 loans in East Oakland, existing loans on our books.

So it is a very low percentage.

Senator CRANSTON. Dr. Evans, you have been involved with that Federal Home Loan Bank mortgage program run by Mary Wagner.

Dr. EvANs. I am familiar with it. I am not involved in it but I have heard of it.

Senator CRANSTON. How is that working ?

Dr. Evans. Let's see. How shall I answer that? I think Oakland is much the better because of that program and other cities, too, which were utilizing it.

I think one of my concerns goes back to what I said a minute ago. I fear that there is simply not enough money in the hands of a lot of people to finance the loans.

If you make loans to people who cannot repay, that is just another word for subsidy. I don't say I am against it, I just say we ought to be clear with what we are doing and I think that may

be one of the problems there. But they are excellent on counseling and they know their banking business.

Senator CRANSTON. Do either of you have comments on that?

Mr. ILGIN. I did have a comment on the inventory of abandoned houses.

The city of Oakland, since we have had the task force going, at least, and possibly some before then, has been keeping a running inventory of those houses. It comes out about once a month and they do research who are the parties in interest in the abandoned house as well as who the owner is who is defaulting. Also as far as Mary Wagner's program, we have talked to her recently also and, of course, she has an excellent program, works, generally speaking, with owner-occupant and not with abandoned houses and when we consulted with her recently, she was asking us about the abandoned housing in her area, which, of course, is also a very limited-size area because of her limited funds. And she is now going to try to contact private owners of abandoned houses in that area because she finds the same problem, that people who she is trying to help to keep their homes up are concerned because they will put so much money into their own home and they do not want to do that. Next door they may have one that's abandoned, boarded up, and something like we saw today.

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