DEPARTMENT OF AGRICULTURE, The VICE PRESIDENT, The United States Senate. DEAR MR. VICE PRESIDENT: The act approved March 26, 1934, 48 Stat. 467 (U. S. C., title 5, sec. 514a), created the position of Under Secretary of Agriculture, as follows: "There is hereby established in the Department of Agriculture the position of Under Secretary of Agriculture, to be appointed by the President, by and with the advice and consent of the Senate, and whose compensation shall be at the rate of $10,000 per annum." When this position was being considered by the House Committee on Appropriations (hearings on Agricultural appropriation bill for 1935, pp. 4-6) and the Senate Committee on Appropriations (hearings on H. R. 8134, Agricultural appropriation bill for 1935, pp. 1-3), the duties were described in general but, as indicated by the foregoing, the act as passed did not include any specific definition of functions. While it is obvious that Congress intended that the duties of the office should be commensurate with the position created, there is some doubt, technically, under existing legislation, whether the Secretary can delegate to the Under Secretary authority to perform duties involving discretion. Since it is highly desirable that the Under Secretary should have such authority it is recommended that legislation, in substance as follows, be enacted by the Congress: "The Under Secretary of Agriculture shall be the first assistant of the Secretary of Agriculture within the meaning of section 177 of the Revised Statutes of the United States (U. S. C., title 5, sec. 4) and shall perform such duties as may be required by law or prescribed by the Secretary of Agriculture." Upon reference of this matter to the Bureau of the Budget, as required by Budget Circular 344, the Acting Director thereof advised the Department of Agriculture, under date of January 28, 1939, that there would be no objection on the part of that office to the submission of this proposed legislation to Congress. Sincerely, H. A. WALLACE, Secretary. Your committee recommend the passage of the bill. О MAY 22 (legislative day, May 19), 1939.—Ordered to be printed Mr. ELLENDER, from the Committee on Education and Labor, submitted the following REPORT [To accompany S. 591] The Committee on Education and Labor, to whom was referred the bill (S. 591) to amend the United States Housing Act of 1937, after holding hearings and giving consideration to the bill, report the same with an amendment in the nature of a substitute and recommend the passage of the bill as amended. PURPOSE OF BILL The purpose of this bill is to continue the program of slum clearance and low-rent housing established under the United States Housing Act of 1937, as amended. This bill would authorize the United States Housing Authority to finance additional projects through loans and annual contributions. The bill would authorize the United States Housing Authority to enter into additional contracts for annual contributions in the amount of $45,000,000 per year, and would increase by $800,000,000 the authorization of the United States Housing Authority to issue its own bonds to raise funds for loans. WHAT THE ADDITIONAL PROGRAM WOULD COST Loans entirely repayable.—It is important to note that the authorization of these funds will impose only slight costs upon the public and the taxpayer. The $800,000,000 increased authorization is an authority merely to borrow that sum, which will be used for loans that will be fully repayable to the United States Housing Authority with interest and which will not affect the public debt. These loans, in fact, will yield a profit to the Government. The only cost to the Government of the additional program is the annual contributions, for which the maximum gross amount would be $45,000,000 and (as explained below) the net estimated annual cost would be about $30,000,000. There is every reason for assurance that the principal and interest on bonds issued by the United States Housing Authority will be repaid by it out of the moneys it will collect on the loans that it makes to local public housing agencies. The experience of the Public Works Administration and the Reconstruction Finance Corporation in connection with loans to municipalities and other public bodies indicates the prime character and the value and soundness of such securities. The bonds to be purchased by the United States Housing Authority will be even more attractive than most of these municipal securities, because principal and interest payments thereon will be secured by, and correlated with, the annual contributions. In accordance with the requirements of the act, the annual contributions must be applied first to the payment of interest and principal as it accrues on the bonds purchased by the United States Housing Authority. Such contributions will be payable under a contract (United States Housing Authority Form No. 700-701, dated April 6, 1939) which provides for the pledge of annual contributions for the payment of the principal and interest on bonds issued to finance a project and which will achieve the objective of maintaining the permanent low-rent character of projects and, at the same time, will facilitate the marketability of bonds of public housing agencies at interest rates low enough to assure low rentals. Many States have recognized that these bonds of local public housing agencies are sound and conservative investments because they have amended their State legislation to make these bonds legal investments for funds held by public off cers, banks, insurance companies, trustees, and fiduciaries. Actually, the housing loans represent a profit to the Government because, under the United States Housing Act of 1937, as amended, all loan contracts must be made at a higher rate of interest than the rate at which the Government, itself, can borrow moneys. The United States Housing Authority has made loans to local publichousing agencies (which these agencies will repay, principal and interest, over a fixed period) at an interest rate generally of 3 percent. At the same time, the United States Housing Authority is obtaining money from the public by selling its own bonds bearing an interest rate of about 1% percent. The difference between the rate at which the United States Housing Authority borrows money and the rate at which the United States Housing Authority lends money to local public-housing agencies represents a net profit to the Government. Net cost of annual contributions.-The $45,000,000 figure represents the maximum gross annual contributions of the Government for the proposed additional United States Housing Authority program. order to ascertain what the net annual cost of the proposed additional $45,000,000 authorization for annual contributions would be, this gross annual contributions figure should be reduced by the estimated net profit on the loan transactions as computed above under present rates of interest at which United States Housing Authority is borrowing and lending. On this basis, the net cost of the additional program would be about $30,000,000 annually. The maximum gross annual contributions for the whole present and proposed United States Housing Authority programs will be $73,000,000, and the net cost of the whole present and proposed program will be only $53,240,000 per year. This may be compared with certain other annual costs to the Federal Government: For aviation, it is over $76,000,000; In for roads, it is more than $275,000,000; and for national defense, it is over a billion dollars. In terms of the benefits derived from the United States Housing Authority program, and in the light of the size of Federal expenditures being made for other purposes, the sum of $53,000,000 as the net annual cost to the Federal Government for all purposes of the whole program under the present act and the proposed bill is modest. Effect on current expenditures.-It should be noted that under the whole present and proposed United States Housing Authority programs, there will be a very small amount required to be appropriated in the fiscal years 1940 and 1941, so that the proposed legislation has virtually no effect on the National Budget for these years. The annual contributions are not payable under an annual contributions. contract until the date when the United States Housing Authority estimates that the project will be ready for initial occupancy. Thus, in the Department of the Interior appropriation bill for the fiscal year 1940 the actual amount appropriated for annual contributions payable in that fiscal year is only $5,000,000. Cost per family rehoused.-The annual net cost to the Federal Government for rehousing in the new projects averages about $115.50 per family rehoused and about $29 per person rehoused (the maximum gross annual contributions before deducting interest profit on loans is $158 per family and $39.50 per person). The figures representing the net annual cost to the Federal Government for rehousing per family and per person are remarkably low. These figures may be compared with the amounts which the taxpayers are contributing each year for every family with two children in the public schools, coming to about $180 per family or about $90 per pupil. The $115.50 per family is arrived at by assuming an average over-all cost of new housing of $4,507. Costs in United States Housing Authority aided projects are steadily coming down, so that it is not unreasonable to expect that the costs of many projects may be reduced to as low as $3,300. Lower costs for durable housing with low maintenance charges mean lower net annual costs to the Federal Government per family rehoused, as well as more families rehoused. Assuming a $3,300 over-all cost, the net annual cost to the Federal Government would be only $82 per family and $20 per person. PURPOSE AND CONTINUITY OF ANNUAL CONTRIBUTIONS The annual contributions are intended to bridge the gap between the economic rent which is the rent which would otherwise have to be charged for this decent new housing (in order to meet debt service, maintenance, and operating expenses) and the social rent, which is the rent that families now living in the slums can now afford to pay. Under the terms of the present act, the annual contributions contracts, whenever made for a period exceeding 20 years, will be reviewed at least at the end of 10 years and every fifth year thereafter, in accordance with the statutory provisions that they be modified as warranted by changed economic conditions. The contributions, through such modifications, can never be raised above the maximum rate at which annual contributions may be contracted under the act. Although debt-service requirements (because necessarily fixed at the very outset for the life of the project) present a condition that will not change, other conditions will change, such as price or wage levels. Every analysis of normal rent and income trends in the past, and every reasonable estimate of probable trends in the future, reinforce the conviction that the annual contributions necessary to achieve rents within reach of "low-income families," and to insure the financial stability of housing projects, will gradually decline. For this reason it must not be presumed that the annual contributions to be contracted for will last for 60 years. This system of annual contributions places the grants in aid for housing on an annual basis, relates the total cost of the public housing program in any one year to the real social benefits achieved in that year from bettering the housing of slum dwellers. In this sense, housing, like education, sanitation, and other public services, is budgeted on a year-to-year short-term basis. The significant feature of the United States Housing Authority program, however, lies in its low cost each year compared to the large benefits derived each yearespecially when contrasted with a number of other governmental programs likewise vitally concerned with the national welfare, employment, and purchasing power. PRESENT FUNDS EXHAUSTED All funds made available to the United States Housing Authority by the previous Congress have been earmarked and committed for slum clearance and low-rent housing projects. Some 209 low-rent housing projects in 108 localities distributed in 25 States, the District of Columbia, and the Territory of Hawaii are now under contract for United States Housing Authority loans totaling $409,698,000. These loans will aid in financing projects estimated to cost $455,305,000, including demolition expense. In addition to the funds covered by these contracts, there are earmarkings outstanding for 123 communities, amounting to about $246,900,000, making a grand total of a little over $656,000,000 committed by the United States Housing Authority to date. This is all that has been made available to the United States Housing Authority. In view of the fact that this figure of $656,000,000 does not, on its face, square with the $800,000,000 authorization now appearing in the act, a word of explanation should be added here. Under the act, the maximum amount available for annual contributions is $28,000,000, which as a practical matter results in limiting the amount available for housing loans to about $656,000,000. This is because loan contracts and annual contributions contracts must be entered into simul taneously and the annual contributions maximum of $28,000,000 fixed by the law is sufficient to cover projects involving approximately $656,000,000 in Federal loans, plus the 10 percent local capital par ticipation, plus the necessary allowance of 10 percent in estimates of costs to cover possible contingencies. REASONS WHY ADDITIONAL FUNDS NEEDED First, it is clear that the $800,000,000 authorization appearing in the present act is only a modest beginning in the solution of the problems of the slums and the ill-housed. To eliminate American slums, and to rehouse families in the lowest income groups, are objectives which, of course, cannot be realized at once. If the attack on these problems, however, is to proceed in an orderly and continuous manner without |