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The distinguishing characteristics of public housing and private housing are that the first is to meet a need, the second is to make a profit-for without a profit private housing would cease. Public housing necessarily costs more than does private housing-it is subject to legal and other requirements from which private housing is free. So if public housing were rented at rates which just cover all costs (economic rents), private housing at the same rates should be able to make a small profit. How much profit private enterprise may demand will vary with time and place. The Alley Dwelling Authority, therefore, states that its tenants may remain until private enterprise has provided proper dwellings at one-fourth of family income.

Alley Dwelling Authority's rents.-The Alley Dwelling Authority's rents, then, begin or end, with economic rents and from that level are graded down, in accordance with tenant ability to pay, to and including relief incomes. No rent exceeds the economic level, because that would mean a profit. If all tenants paid economic rents the property would be self-supporting. But because of United States Housing Administration's annual contributions, plus tax exemption, it is possible to reduce the rents of individual families according to their means. By this method it has proved practicable to reduce some rents to $11 a month for a sixroom house-heat, hot and cold water, gas, and electricity included. Under a flat-rent system, utilizing the full subsidy, the lowest rent attainable would have been $16.50 for a one-bedroom unit and $22.50 for a six-room house.

In each case the rent paid by the tenant plus the subsidy equals the economic rent. As the tenant prospers, and a considerable proportion do, his rent is increased, his subsidy decreased, until he is paying the economic rent and the subsidy disappears. Then he becomes a candidate for "graduation." In case a tenant's income decreases, his rent is decreased. A reserve fund provides for the contingency of decreases exceeding increases.

Administrative problems and their solutions.-During the years immediately preceding application of this system there were dire prophesies of trouble. Most of them are still prophesies. Admittedly, there is administrative work in adjusting rents but that is more than compensated for by avoidance of other diffiiculties such as evicting tenants whose incomes exceed five times a half rent. But the prophesied jealousy among tenants because one is charged more than another has not developed. The system is explained during the application interview. Each tenant is given a copy of the rent schedule, shown his rent and his income on that schedule, and told that: (1) if his income increases or decreases, again shown on the schedule, his rent will follow suit; (2) that if his nextdoor neighbor is paying more or less it is because of that neighbor's income. So far this has been accepted as a very fair proposition.

Of course, there are cases of cheating or attempted cheating. They are dealt with decisively. The Authority's intent is to be a generous and helpful landlord. But it cannot be helpful to cheaters. So it is a cardinal sin for a tenant to lie to the Authority. Consequently, the number of cases has been small. Of course, there have been cases where tenants have been reluctant to pay increased rents. But the choice is theirs, pay or move. So far all have paid.

There have been objections by housing officials to the system of graded rents because it seemed to require too close watch of a tenant's affairs, because it seemed complicated—there must be many grades in order to prevent big jumps in rent.

As to watch on a tenant's affairs, that is essential in any subsidy system if there is not to be cheating and abuse. The only way to avoid it is to charge each tenant full economic rent and then have some other agency, such as the Board of Public Welfare, make up deficiency in income. As to complication, that is a matter of knowing one's job. A small child does not pay attention to the inch, half-inch, and quarter-inch markings on a foot ruler. But as he grows older he learns that these formerly bewildering divisions are quite necessary to careful work. We have had too much procedure designed for the convenience of the staff rather than the benefit of the tenants.

So * * *.-So the Alley Dwelling Authority's system of graded rents is designed to serve the needs of all ranges of low-income families; to make it possible for tenants to remain tenants until they can afford proper privately owned dwellings; to encourage them to progress economically instead of threatening them with return to the slum if their incomes increase; to supplement the work of private enterprise in assuring that all families shall be properly housed.

HEATING UNITS

Mr. HOUSTON. What kind of heating units do you use in these houses?

Mr. IHLDER. All kinds.

Mr. HOUSTON. Do you use any of the floor furnace type?

Mr. IHLDER. You mean those sunk under the first floor?
Mr. HOUSTON. Yes.

Mr. IHLDER. No; we have not. But we have everything from central heating to individual oil and coal stoves in the houses. We are keeping account of them to see which one really works out best. Mr. STARNES. Are we getting any real developments or any new ideas in home building by virtue of these billions that we are spending on various types of construction?

Mr. IHLDER. Yes; I think we are.

Mr. STARNES. That is, improvements both in comfort and convenience, and permanence?

Mr. IHLDER. The trend at the moment is away from permanence because of limitations of cost and the needs of migrant defense workers. But I think we are going to get a residue of improvement out of it.

Mr. STARNES. I was very much interested in such questions as heating and air conditioning and the utilization of space, and so forth. We certainly ought to be able to get some ideas from these activities. Mr. IHLDER. Yes. I think one of the things we are coming to is to give up the basement; that there is less and less of a tendency to build underground. With new means of heating, a utility room on the surface may be better and less expensive than an underground cellar.

Mr. HENDRICKS. I think we are getting ideas from all of these different building and housing authorities.

Mr. IHLDER. Yes; I think we are, but I wish we could move faster. Mr. WOODRUM. If there is nothing further, thank you, gentlemen.

FRIDAY, DECEMBER 5, 1941.

FOREIGN-SERVICE PAY ADJUSTMENT

STATEMENTS OF G. HOWLAND SHAW, ASSISTANT SECRETARY OF STATE; MONNETT B. DAVIS, CHIEF, DIVISION OF FOREIGN SERVICE ADMINISTRATION; LAURENCE C. FRANK, EXECUTIVE ASSISTANT TO ASSISTANT SECRETARY SHAW; WILLIAM E. DeCOURCY, EXECUTIVE ASSISTANT TO ASSISTANT SECRETARY SHAW; LT. COL. T. P. WALSH, WAR DEPARTMENT; AND LT. S. S. BOWLING, NAVY DEPARTMENT

LOSSES OF PERSONNEL STATIONED ABROAD ON DEPRECIATION OF FOREIGN CURRENCIES

Mr. WOODRUM. We have before us an item for foreign-service pay adjustment, as follows:

Foreign-service pay adjustment of officers and employees of the United States in foreign countries due to appreciation of foreign currencies: For the purpose of

carrying into effect the provisions of the Act entitled "An Act to authorize annual appropriations to meet losses sustained by officers and employees of the United States in foreign countries due to appreciation of foreign currencies in their relation to the American dollar, and for other purposes", approved March 26, 1934 (U. S. C., Supp. IV, title 5, sec. 118c), and for each and every object and purpose specified therein, $1,350,000.

Mr. WOODRUM. The amount of the estimate is $1,350,000 as against a current appropriation of $975,000.

Mr. Shaw, will you make a statement on this item?

Mr. SHAW. I have a very short statement, Mr. Chairman. We have to present our request for an appropriation for the benefit of the United States officers and enlisted men, and employees abroad, who sustained losses on account of depreciation of foreign currencies in terms of the American dollar.

Mr. WOODRUM. Will you amplify that a little, as to what that is; that is, what the policy is with reference to that?

Mr. SHAW. The policy for some years, under legislation and Executive orders now in effect, has been to meet those requests and to protect those individuals against the very serious situation they would be in unless relief were afforded to them.

JUSTIFICATION OF ESTIMATE

I have a justification statement here which I would like to put in the record. The details of this matter are rather complex and with your persmission I should like to have these gentlemen from the State Department and from the Army and Navy present those details, and answer any questions the committee may have to put to them.

Mr. WOODRUM. The statement may go in the record and we should be glad to have a brief statement from any of these gentlemen who wish to say something on this matter.

(The justification statement is as follows:)

FOREIGN-SERVICE PAY ADJUSTMENT, APPRECIATION OF FOREIGN CURRENCIES Regular appropriation 1942 act--

Total estimate or appropriation for 1943_

$975,000 1, 350, 000

As a consequence of the decline in the exchange value of the United States dollar in 1933 when the Treasury suspended temporarily domestic and foreign gold payments in exchange for United States currency, and the subsequent revaluation of the dollar by the President's proclamation of January 31, 1934, at 59.06 percent of its pre-1933 par, officers, enlisted men, and employees of this Government in service in certain foreign countries which had not depreciated their currencies or at least had not depreciated them in so drastic a degree as the United States dollar was devalued-were placed in a most difficult situation. The living expenses of such personnel had still to be met in the currencies of the countries of their assignments abroad, but because of the readjustment in the exchange value of United States currency they found the effective value of their dollar incomes to have been greatly reduced when converted into local currencies. In order to remedy this situation, legislation was enacted on March 26, 1934, authorizing the payment of losses sustained due to the appreciation of foreign currencies in relation to the United States dollar, subject to regulations to be prescribed by the President. This enabling legislation, as amended in a minor detail by a later enactment, appears in title 5, section 118c, of the United States Code, as follows:

"There are authorized to be appropriated annually such sums as may be necessary to enable the President, in his discretion and under such regulations as he may prescribe and notwithstanding the provisions of any other Act and upon recommendation of the Director of the Budget, to meet losses sustained on and after July 1, 1933, by officers, enlisted men, and employees of the United States while in service in foreign countries due to the appreciation of foreign currencies in their relation to the American dollar, and to cover any deficiency in the accounts of the Treasurer of the United States, including interest, arising out of the arrangement approved by the President on July 27, 1933, for the conversion into foreign currencies of checks and drafts of officers, enlisted men, and employees for salaries and expenses: Provided, That such action as the President may take shall be binding upon all executive officers of the Government: Provided further, That no payments authorized by this section shall be made to any officers, enlisted men, or employees for periods during which their checks or drafts converted into foreign currencies under the arrangement hereinbefore referred to: Provided further, That allowances and expenditures pursuant to this section shall not be subject to income taxes: And provided further, That the Director of the Budget shall report all expenditures made for this purpose to Congress annually with the Budget estimates.'

The reimbursement of currency appreciation losses at the basic rates established by the regulations prescribed by the President to govern the payment of currency appreciation losses and subject to the rules prescribed therein has been successful in practice and fair to the Government and to its personnel serving in foreign countries. The regulations as they now stand are the result of some years of experience with the problem and are so designed as to insure fulfilllment of the intent of the law and prevent abuse. The basic rates prescribed for the several currencies are derived from actual averages for the 5-year period from 1927 through 1931, a time when the international exchange markets were operating under normal and reasonably stable conditions.

Under the regulations there are losses requiring reimbursement by the Government with respect only to those currencies which command a premium in present-day United States dollars over what the same currencies were able in the past to command in pre-1933 United States dollars. During 1931, with the abandonment of the gold standard by Japan and Great Britain, there began a cycle of depreciation of world currencies of which the readjustment in 1933 and 1934 of the value of the United States dollar was only a part, and the end of which is not in sight. From the beginning there have been a number of countries, notably Japan and most of the American republics, in which there have been no currency appreciation losses for reimbursement, because the currencies of those countries preceded the United States dollar in the depreciation cycle. Following the American revaluation, one after another of the gold-supported or stringently managed foreign currencies has declined as much as or more than the United States dollar, and the termination of the payment of currency appreciation losses in those countries has been automatic under the regulations. The progressive reduction in annual requirements for appropriations for currency appreciation losses is clearly shown in the following statement:

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Actual 1941.-The following table (schedule A) shows estimated final requirements for the 1941 fiscal year as nearly as can be calculated at the present time upon the basis of information received from the departments and establishments

concerned, in comparison with the allocations which have been set up on the books of the Treasury:

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Estimate for 1943.-The basic rates prescribed by Executive order for all foreign currencies and the latest quotations available for those currencies as of August 1941 are shown in the following table (schedule B), as well as the percentage of reimbursable loss in the case of currencies quoted at a premium over the basic rate: SCHEDULE B.-Comparison of basic rate and latest available quotation for all foreign currencies, and percentage of reimbursable loss, if any

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