set, of which HAC estimates 307,000 to be the nonmetro deficit. (1,013,000 of the deficit was from 1974 and 1975 alone.)

The background is that the Congress in the Housing and Urban Development Act of 1968 established the goal of 26 million dwelling units to be produced in the ensuing decade, of which 6 million units were to be constructed or rehabilitated for low and low-moderate income families. These goals, you will recall, were adopted after widespread outcry of persons forced to live in intolerable conditions and after serious investigations of housing needs by several Presidential commissions. The Report of the President's Committee on Urban Housing, a major source for the 1968 Act's production goals, revealed that, in 1966, 68% of all occupied substandard housing units were in nonmetropolitan areas, as were 56% of those households whose incomes were too low to pay the cost of decent housing. (The Economic Research Service in 1972 put the figure at 3.9 million substandard units.)

At the outset, no division was made in production targets between rural and urban areas. However, in 1970, in the Second Annual Report on National Housing Goals, the responsibility for the established yearly targets was divided between HUD and FmHA so that FmHA was assigned 25% of the overall 6 million unit goal for subsidized units, primarily through its sales housing program.

Since yearly rural or nonmetro targets were not and have not since been set for HUD, we have attempted to construct them in our study. Our allocation relies upon the HUD-commissioned study by the Harvard-MIT Joint Center for Urban for Urban Studies which, in 1970, found that 31% of all American households suffering housing deprivation, that is, living in substandard or overcrowded housing or paying an excessive share of their income for rent, were in nonmetropolitan areas. Thus, on the basis of this defined need, it seemed reasonable to us to assign 31% of the subsidized housing target of 6 million units, or 1,860,000 units as nonmetropolitan. Since HUD, in the aforementioned allocations, assigned 1,486,000 units to FmHA, it would thus be necessary for HUD to assume responsibility for the remaining 374,000 nonmetro units. What has happened since the 1968 goal setting?

(1) Overall subsidized housing production began to rise until reversed by the 1973 Nixon moratorium; since then it has descended to unprecedented lows;

(2) Only 58% of the overall assisted units targeted for the ten-year period were completed by 1975, even though the production levels assigned to the earlier years were lower than those allotted to later years;

(3) Two-thirds of the overall subsidized housing productions remains to be met, even though less than % of the target period remains-in short, we need 3.8 million units or 1.25 million subsidized units per year to reach subsidized housing production target.

(4) While rural subsidized housing production fared slightly better, only 76% of the targeted goals was reached, leaving a deficit of over 307,000 units as of the end of 1975 and 665,000 additional units to be assisted by 1978.

If this committee is to recommend future production levels and wishes to deal with the relationships among federal agencies which should be involved, there are several salient facts that emerge from the seven-year review:

(a) A major share of rural subsidized housing production was assigned to the Farmers Home Administration, even though it is not the nation's major housing agency;

(b) Neither agency, HUD nor FmHA, met its seven-year target;

(c) HUD, however, did produce a 100% or more of its assigned goal for five of the seven years, where FmHA has never reached its target, except for the first year;

(d) HUD accounted for 40% of the production, whereas its allotment was only 20%;

(e) Farmers Home accounted for only 60% while its assigned share was 80%; (f) The trends for both HUD and Farmers Home are moving away from approaching their goals;

(g) Both agencies need to more tuan double their rural subsidized housing production if the original goals are to be met in the balance of the production decade.

Obviously, anyone concerned about subsidized housing production in rural areas cannot ignore the role of the Department of Housing and Urban Development, nor ignore the need to boost significantly the output of the Farmers Home Administration.

A particularly important part of the HUD production is in the public housing program. It has been the only program with subsidies deep enough to serve the poor and has been the only program without a counterpart in the Farmers Home Administration. It should have been the major element in HUD's nonmetropolitan activity, yet production in the public housing program fell shorter of the mark than did other HUD efforts. Despite its increasing usage in nonmetropolitan areas in the early 70's, the program has been at a standstill since the 1973 moratorium and HUD has no plans to revive it, despite its conceded success and usefulness in rural areas.

These statistics present a grim picture and mean indefinite postponement of a decent home for the more than 3 million rural households, that the Economic Research Service found in 1974 to be enduring substandard housing. The deficit in production alone is equivalent to a shack city bigger than the District of Columbia.

New or Reinstated Goals are Sorely Needed

New goal-setting is plainly in order-for HUD, as well as for Farmers Home. Equally important is the development and commitment to budget levels adequate to accomplish these goals, a pairing that has been absent in the past. During the last seven years, Farmers Home could never have reached its targets because it was never funded to do so. Over that stretch, it used almost 95% of the funds allotted to it and the bulk of the unused authority is attributable to one year. First, what goals should be adopted for the balance of the decade?

The Senate Banking, Housing and Urban Affairs Committee recently addressed this question in hearings which provide two criteria, in addition to adhering to the targets of the 1968 Act.

In those hearings, HUD estimated that national housing production for 1975 to 1980 should be 2.26 million units annually, but it declined to estimate levels for subsidized housing, nor did HUD suggest any division between rural and urban areas. The AFL-CIO supplied a more detailed study to the Senate hearings which reflected a need for an annual level of 2.55 million units.

Using the allocation method of our study and recalling that 972,000 units of the original nonmetro subsidized production target remain unbuilt, the following are production levels to be considered for 1975-1980. An important variable depends on the shares to be assigned to HUD-the 20-80 split of the Second Annual Goals Report or the 40-60 split that actually resulted. The figures are shown by the following chart:

Source: HAC allocation of data found in "Estimates of Housing Needs, 1975-80," a report of the Committee on Banking, Housing and Urban Affairs. U.S. Senate, September 1975.

It should be noted that preliminary estimates for 1975 production-approximately 95,000 subsidized units-will be well below all of these goals and upward adjustments or a longer goal period-will be necessary.

Plainly, a different level of effort, and funding, are called for.

Any setting of production targets and budget levels should involve the thinking of the agencies responsible for carrying them out. Since, to our knowledge neither HUD nor FmHA is currently working toward any established estimates of rural housing need or production levels, they should be asked to develop and

present appropriate figures, accompanied by any recommended amendments to the goals provisions of the 1968 Act. Section 506(e) of the National Housing Act of 1949, as amended, requires the Secretary of Agriculture to "prepare and submit to the President and to the Congress estimates of national rural housing needs and reports with respect to the progress being made towards meeting such needs and correlate and recommend proposals for such executive action or legislation necessary or desirable for the furtherance of the national housing objective and policies established by the Act, together with such other reports or information as may be required of the Secretary by the President or the Congress." These provisions, we believe, should be used to assist Farmers Home Administration and the Congress in the development of more specific policies for the implementation of the housing assistance programs and the relating of those programs to those in substandard housing who are most in need of assistance. Goal-setting is not without difficulty, but that is no reason for avoiding the task. Any other course betrays progress and invites unaccountable administration and would seem out of place in the current Administration which has done so much to incorporate modern management tools in public administration. Budget Levels Must Cover Goals

The Farmers Home Administration can only assume responsibility for its share of rural housing production if it is provided commensurate budget levels. It has used the money Congress has given it. Since 1969, FmHA total authorized spending was $10.924 billion through FY 1975. Unused funds were only $700 million or 6.4%, and more than half of these unused funds are attributable to FY 1974. Yet, the agency has only produced 50% of the goals set for them in the Second Annual Report on National Housing Goals-and only 36% of the subsidized targets. The current goal ascribed by that report to FmHA is 180,000 subsidized units per year, yet in no year has FmHA exceeded 100,000 subsidized units. Thus, if the recommended targets are to be met, authorizations for the FmHA housing programs must reach at least $4 billion annually-or $5.5 billion, if the 1968-1975 shortfall is to be made up.

We would be glad to supply the committee suggested dollar levels for the various programs of the Farmers Home Administration if you would like us to. However, it seems to me, that the Administrator of FmHA should be asked to construct the appropriate budget once the desired level of production is established.

The overall levels we have suggested are not out of line, considering the growth of the FmHA programs, the effects of inflation and the fact that total authorizations for the current fiscal year have reached $3.2 billion. Since the passage of the 1968 Housing Act, appropriations for Farmers Home housing programs have risen constantly. Between 1969 and 1971, the increases were dramatic-the program dollars tripled in just two years. Since that time, however, the increases have been more modest, paralleling rising construction costs. For example, although the 1975 appropriation was 52% larger than the 1971 appropriation, the cost of housing has increased even more. The average size of an initial loan in the Section 502 program, a good indicator of the cost of housing in rural areas, increased by 54.1% during the same period. In effect, the recent increased authorizations have been required to maintain program levels reached 5 years ago and have not resulted in the significant expansion of the programs.

The necessity of raising the level of Farmers Home housing production substantially, is clear if any noticeable progress is to be made in clearing rural areas of substandard housing. The total production of FmHA since 1969 is equivalent to only 18.5% of the households living in substandard housing, according to original estimates by the Economic Research Service of 3.9 million families occupying substandard dwellings in FmHA-served areas. If one makes the tenuous assumption that each of these new or rehabilitated units caused the removal of a substandard unit from the rural housing stock, the result would have been a reduction at the rate of 2.7% per year. At that rate, it would take approximately 37 years to bring about the replacement of all rural substandard housing. (When HUD's nonmetropolitan public housing production rate is included, only 32 years would be needed!) Surely, when the Congress in 1949 legislated the promise of a decent home for every American, it did not intend completion of that goal to be celebrated in the 21st century!

67-064-76——2

FmHA's Lack of Policies for Allocating and Implementing Its Housing Assistance Programs Results in Major Disparities

It is plain, we believe, that substandard housing will not be eradicated from rural America without the joint efforts of HUD and Farmers Home. The HUD effort should consist mainly in the resumption of the public housing program and aggressive implementation of the Section 8 leasing program in rural areas as the only means of serving the approximately 1.8 million families, living in substandard housing in FmHA service areas, who are too poor, according to the Economic Research Service, to be aided by FmHA programs.

At this point, however, we would like to bring to your attention other findings of our Goals and Gaps study, which relate specifically to the operations of the Farmers Home Administration.

As you are probably aware, FmHA annually allocates among the states authorizations for its homeownership and rental programs. Adjustments are then made during the year. The basis on which these allocations are made cannot be discerned by those outside the agency. In FY 1976, as in preceding years, the levels by and large have been a reflection of the previous year's obligations. Our analysis shows that the distribution has little relationship to need and results in considerable inequities among the states.

Previously, we pointed out the total Farmers Home production since 1969 was equivalent to 18.5% of substandard housing in FmHA-served areas. Using the level of substandard housing as the measure of need, a look at state-by-state allotments of FmHA programs reveals a startling dispersion around that median of 18.5%. The states most-benefitted were Idaho and Utah in the west, and Maine and Vermont in the New England area. Though Idaho had only 19,860 households in the substandard housing, 14,886 units-equal to 75% of the need-were produced since 1969. The lowest performances were in Alaska and Louisiana. Though 9,924 units were produced in Louisiana, this represented only 7.5% of the need; at this pace it would require an excess of 90 years to replace the existing substandard rural housing stock in that state. Iowa, incidentally, ranked Sth among the states when production was matched against the amount of substandard housing, while Minnesota ranked 44th. Interestingly, the four states that had the highest production do not rank high when that production is viewed in proportion to the need. The production in all of the high producing states fell below the 18.5% national median.

The apparent eccentricity of FmHA allocations is further illustrated by the fact that Georgia, the lowest ranked state in Fiscal 1975, when need is related to the FmHA dollars allocated per substandard house, received the same level of allocation for 1976; Idaho, on the other hand, the top state in obligations per rural substandard housing in 1975, received an increase in allocations for Fiscal 1976, which, if utilized, would result in a Fiscal 1976 obligation of over $4,000 per rural substandard house, while Georgia is at a $168 per rural substandard house.

We recognize that many factors must be dealt with as part of the allocation process existence of county offices, the number of staff, the service load for outstanding loans, the levels of farmer and community projects programs and so forth. Nevertheless, the disparities which our review discloses (attached as exhibits of testimony are charts illustrating our findings for all 50 states) indicates the need for Farmers Home Administration to reveal the basis for its allocations and to develop policies and allocation formulae that are more equitable in enabling rural people in all parts of the country to escape substandard housing. The analysis, in the long run, should go even further to determine how closely, in fact, the housing assistance resources of the agency are coupled directly to enabling those in substandard housing to move into a decent home. We are not unmindful of that fact that local initiative and demand should be taken into account in distributing housing assistance. However, this should not override broader national purposes in removing substandard housing throughout the country on a basis that is fair to all rural people.

The same lopsidedness in distribution of resources among states shows up in usage of individual programs of FmHA. This type of disparity is particularly present with respect to the Section 504 repair and the Section 515 rural rental programs. For example, Texas and Kentucky during the 1969 to 1975 period received 6,624 and 3,806 loans respectively in the Section 504 repair program. In no other state, were more than 2.000 loans approved, and in 24 states, fewer than 100 loans per state were approved in the seven year period since 1969! There are particular ironies with regard to the 504 program since improve

ment of existing stock is a high priority at FmHA and last year only 24% of the appropriated monies were used-the poorest performance among all the housing programs of Farmers Home.

A similar observation can be made of the Section 515 program. Three statesIowa, Missouri and Ohio-each produced more than 4,000 units through Section 515 loans, while in 18 states fewer than 500 units per state were produced in the seven year period.

We invite you to review HAC's Goals and Gaps report for a more extensive review of the disparities in program usage throughout the country.

Any review of the Agency's activities should determine why there is such widespread under-use of the rural rental and the low-income home repair programs. The need for both programs is acute, in most, if not all, states. As you know, the rural rental program is the Farmers Home program for housing the elderly. And no group of Americans suffers greater and more pervasive housing deprivation than rural elderly citizens. It is also the main program for bringing Section 8 subsidies to rural areas for low-income families and the elderly. Similarly, 504 repair loans serve the poorest rural citizens in the poorest housing. At a minimum, Farmers Home should provide the various state offices with directions and targets for the increased uses of both of these programs in areas where they are now not being utilized. Such under-utilization also suggests that the Agency should take positive steps both to see that the FmHA personnel involved and the local housing sponsors are fully informed about the existence of the programs and how to use them. It has been our experience that local Farmers Home personnel sometimes are not knowledgeable about a given program with a result that it is not used in the locality. There is no justification for any rural area not having equal access to all the assistance programs of the Agency.

The point seems plain that Farmers Home should develop: (a) a clearer set of national and state goals for its programs; (b) methods for more equitable implementation of its programs among the states; and (c) staffing adjustments and greater public information about under-used programs in the appropriate areas. The Farmers Home Administration itself could best do the job of allocating its limited dollars based upon objective studies of need and of assigning staff according to documented workloads and staff productivity analyses.

Such studies by FmHA could build on the Agency's present efforts, and the studies conducted by Senator Clark's committee through the General Accounting Office.

To accomplish these purposes, however, the policy and program analysis and research capacities of FmHA should be augmented. In the Housing and Community Development Act of 1974, under Section 506(d) the Congress authorized a million dollars to be spent for research and study programs. Appropriations have never been sought, but we feel this authority should be implemented to strengthen FmHA's management and program planning efforts.

Some Brief Points on Staffing

As noted, FmHA cannot meet any set of national goals for rural subsidized housing production without adequate budget authorizations. Those authorizations cannot be prepared in a vacuum. The Congress and the Agency must collaborate in developing the needed dollar levels. This is particularly true relative to staff needs. All of us know, that the Agency is overburdened and has manfully sought to carry out its increased responsibilities with staffing levels that were out of date several years ago. However, it is dismaying to see the Agency's failure to implement fully the increased staff levels provided by Congress in the Agricultural Appropriations Act of 1975. While personnel are to be added, the additions do not represent, in our view, the full level provided by the Congress. There is no more important issue facing Farmers Home than obtaining sufficient and appropriately skilled people to carry out the jobs assigned to it. While the Agency continually insists that it will work with what it is given to it, it frequently refuses to take what is given to it.

It is essential that the Administrator of the Agency be asked to develop his staffing needs that are required to carry out the goals that you set. It seems to us that it is then up to the Congress to decide whether or not it will fund those goals.

A further word on staffing at the Agency. You have made your own studies and undoubtedly will act on what they suggest. We would make several brief points: