Central-City Housing Conservation: A Mortgage Insurance Approach

Fiscal Year 1976 Budget of the U.S. Government, Appendix, H.R. Doc. 94-22, 94th Cong., 1st. Sess. 488 (1975); and Fiscal Year 1976 Budget of the U.S. Government, Special Analyses 109 (1975).

1972 HUD Statistical Yearbook, Table 158, at 166 (1974).

Mumford L. , The Highway and the City 244 (1st ed. 1963).

National Commission on Urban Problems (the Douglas Commission), Building the American City, H.R. Doc. 91-34, 91st Cong., 1st Sess. 35 (1969) at 180, recommended the production of 2 to 2.5 million units annually. The report of the President's Commission on Urban Housing (the Kaiser Commission), A Decent Home 39–45 (1968) at 40, called for a total of 2.6 million new and rehabilitated units each year.

42 U.S.C. § 1441a (1971).

For example, Banfield asserted that urban problems are primarily cultural and not to be resolved except when the lower class adopts a working-, middle-, or upper-class ethic. Banfield E. , The Unheavenly City (1970).

A recent review of the data and available studies found no basis to conclude that low-income, low-skilled-blacks are better off in the suburbs than in central cities with regard to public services or employment opportunities. Harrison B. , Urban Economic Development: Suburbanization, Minority Opportunity and the Condition of the Central City (1974).

The Demonstration Cities and Metropolitan Development Act of 1966, 42 U.S.C. §§ 3301 et. seq.

Total housing production in 1971 surpassed the 2-million-unit mark and more than doubled 1961 production levels. HUD, Housing in the Seventies, Table 2, at 4-4.

See Bollens J. Schmandt H. , The Metropolis —Its People, Politics and Economic Life (1965); Wood R. , 1400 Governments (1961).

Numerous cost/revenue studies illustrate that the costs of providing services for new, moderate-income subdivisions exceed the revenues generated. This is attributed to the fact that educational expenses must be obtained, in part, from property taxes. Other costs are generally covered. See Associated Homebuilders of the Greater East Bay, Inc., Growth Cost-Revenue Studies (1972).

See Urban Land Institute, Fair Housing and Exclusionary Land Use: Historical Overview, Summary of Litigation and a Comment with Research Bibliography (1974).

Moynihan D. Glazer N. , Beyond The Melting Pot—The Negroes, Puerto Ricans, Jews, Italians, and Irish of New York City (1963).

Moynihan was the President's Assistant for Urban Affairs from 1969 to 1972. Who's Who in Government, 1972–73, 361 (1972).

“‘Benign Neglect’ on Race Is Proposed by Moynihan,” New York Times (1 March 1960).

“Housing filters down in quality, and, as it does, it filters down through the spectrum of household incomes moving from the richer to the poorer… . When a person buys a new house it usually means he moves out of an older one. One move leads to another. A species of musical chairs game ensues as people circulate or filter through housing. The rules of this game are the laws of housing market dynamics.” Mandelker D. Montgomery R. (eds.), Housing in America 226 (1973).

See Report of the National Commission on Civil Disorders, pp. 470–72.

See Tolchin M. , “The South Bronx, A Jungle Stalked by Fear, Seized by Rage,” New York Times, (15 January, 1973), the first of a four-part series. The series appeared January 15–18.

Courts have used housing codes as prima facie evidence in enforcement of warranties of habitability. See Javins v. First National Realty Corp., 428 F.2d 1071 (D.C. Cir. 1970), cert, denied, 400 U.S. 925 (1970); Green v. Superior Court, 10 C.3d 616; 111 Cal. Reporter 704, 517 P.2d 1168 (1974).

See Wolman H. , Politics of Federal Housing (1971); Berman D. , Urban Renewal—Bonanza of the Real Estate Business (1969); Lilley W. III , “Washington Pressures—Home Builder's Lobbying Skills Result in Successes, Good-Guy Image,” Nat'l. J. Rep. (27 February 1971) p. 431; Hartman C. , Yerba Buena, Land Grab and Community Resistance in San Francisco (1974).

See The Demonstration Cities and Development Act of 1966, 42 U.S.C. § §3301 et seq.

Local governments, in particular, have begun to pay unprecedented attention to housing conservation, allocating revenue sharing money in significant amounts for this purpose and establishing new organizational vehicles to undertake programs. See Community Development Block Grant Program, A Provisional Report, HUD, 1974; and Neighborhood Preservation: A Catalog of Local Programs, HUD, 1975.

Added by Section 311 of the Housing and Community Development Act of 1974.

HUD Handbook 4565.1, Mortgage Insurance for the Purchase or Refinancing of Existing Multi-Family Housing Projects—Section 223(f), September 1975, 1-1.

See statement by Taft Senator Robert Jr. , co-author of Section 223(f), February 19, 1975, Congressional Record.

The program may have considerable capacity to increase lender and sponsor liquidity, especially for real estate investment trusts (REIT's) that specialized in development and construction during the early 1970s. According to data submitted to HUD by the National Association of Real Estate Investment Trusts, REIT's, specializing in construction lending have $15 billion invested in short-term mortgages, of which almost $6 billion is in nonearning status, and this figure is growing. By 1974 the stability of many of the REIT's and the associated banks was being seriously questioned, and this concern has continued to grow.

GNMA participation will facilitate this objective.

The Senate Committee Report put the matter most plainly as follows: “The Committee is concerned that in the absence of a refinancing program for declining neighborhoods which is defined explicitly in the statute, HUD might not risk carrying out such a program. Section 401(h) and Section 501(k) should provide clear indication that while Congress is aware of the particular problems likely to be encountered in declining neighborhoods, it believes that FHA guarantees for refinancing can play an important role in preserving them. However, the Committee does expect the Secretary to take all precautions necessary to protect his interest in the transactions insured pursuant to these provisions.”

While not expressly prohibited, except in neighborhoods where the appraiser would normally recommend insurance under Section 223(e), use of the Section 223(f) authority in older, declining urban areas will be unlikely given the underwriting requirements established, particularly Handbook paragraphs 5-10 defining estimated remaining economic life, and 1-4.i limiting allowable repairs to 15 percent of the final estimate of the value of the property after repair.

See Phillips Bryson , “Refinancing: A First Step Towards a Realistic Housing Program for the Poor,” George Washington Law Review, Vol. 39 (1971), p. 835.

See Grigsby W. Rosenburg L. Stegman M. Taylor J. , Housing and Poverty (1971).

Section 201(a) of the 1974 Housing Act, 42 U.S.C. § 1437b.

For a more complete statement of the supportive actions by neighborhood organizations, unions, contractors, and all levels of government necessary for conservation approaches to function, see Phillips Agelasto , “Housing and Central Cities: The Conservation Approach,” Ecology Law Quarterly, Vol. 4 (1975), p. 797.