Mr. IHLDER. We would have to assume the original capital cost. The subsidy amounts to interest and amortization on that assumed capital cost. We do not know what it was.

Mr. DIRKSEN. Does not the P. W. A. have those figures?

Mr. MANDELL. The only figure I have ever seen was original construction. I have never received any data on other items included in the total cost.

STATEMENTS SHOWING INCOME LEVELS OF FAMILIES, AMOUNT OF SUBSIDY, ETC., FORT DU PONT DWELLINGS

Mr. WIGGLESWORTH. In connection with the contributions, will you not insert the formula that you are using, in the record, showing the different income levels and the amounts of the subsidy?

Mr. MANDELL. Yes.

THE ALLEY DWELLING AUTHORITY ADOPTS GRADED RENTS

(The following statement is explanatory of the first management resolution submitted by the Alley Dwelling Authority for the District of Columbia to the United States Housing Authority:)

OCTOBER 17, 1940.

The Alley Dwelling Authority has adopted for its Fort Du Pont dwellings a system of graded rents that meet the requirements of the United States Housing Act, takes account of the cost of the property and then utilizes the subsidy (United States Housing Administration annual contribution and District of Columbia tax exemption) to grade rents down in accordance with tenants' incomes to the lowest level practicable under the law, in terms of cost of living in the District of Columbia.

The highest future rents under this system will be on an economic level; that is, they will cover all costs including interest, amortization, and city taxes as well as operation, but will not yield a profit. If all the rents were on this level the property would be fully self-supporting. Families with incomes which rise after admission to $1,441 or more will pay economic rents and therefore will not be receiving any assistance from the public treasury. These economic rents, which include heat, hot and cold water, electricity and gas for cooking, will be $39 for a six-room, two-story house; $37.50 per month for a five-room house; $36 for a four-room apartment; $34.50 for three-rooms; and $33 for two rooms. This averages $8.67 per room per month. Each unit has a fully equipped bathroom and a kitchen. The cost of the utilities is estimated at an average of $7.38 per dwelling unit per month. This cost should be subtracted to get the "shelter" rent, but, as tenants must pay for the utilities, the over-all figures are used.

Having established the economic rent, which reflects the cost of the property the Alley Dwelling Authority then bases all lower rents upon family income, the deficit in each case being made up by subsidy. By this method, the Alley Dwelling Authority is able to reduce some of its rents to the lowest level practicable under the United States Housing Act. This level in the District of Columbia it finds is a rent of $11 a month. Beginning at this lowest or $11 level, rents are gradually increased at the rate of $1 per month for each $5 increase of income, then at the rate of $1.50, then at the rate of $2, until the family income warrants an economic rent. The reason for the smaller rates of rent increase in the lowest income brackets and the higher rates of rent increase in the higher income brackets is that cost of food, clothes, and other necessities may remain fairly constant. So, as the family income increases there will be a larger proportion available for rent. Therefore the rent may be raised and the subsidy correspondingly decreased.

At the desire of the United States Housing Authority the Alley Dwelling Authority will limit initial occupancy to families with incomes at the time of admission of not to exceed $1,320, if they have fewer than three minor dependents, or $1,584 if they have three or more minor dependents. Top rents, therefore, will be $27, $28.50, $30, $31.50, and $33, depending upon the size of the dwelling. Later, however, a tenant now accepted may remain though his income increases, with corresponding increases of rent, until, with an income of $1,441, he will be

charged an economic rent. If he has three or more minor dependents he may not be charged an economic rent until after his income reaches $1,584.

Forty-five percent of the dwellings will be allocated to families whose incomes range from $1,201 to $1,320, and whose rents will range from $25 to $33,per month according to the size of the dwelling; 35 percent to families whose incomes range from $901 to $1,200, and whose rents will range from $17 to $29, and 20 percent to families whose incomes range from under $600 to $900, and whose rents will range from $11 or $12 to $19.1 A reason for the different percentages in the three groups is to avoid danger of creating a bottleneck that will prevent families rising from one economic grade to a higher one. Each of these groupings must produce a definite rent revenue. This revenue, supplemented by the subsidy, will equal an economic rent or revenue for the whole property.

The Alley Dwelling Authority's graded rent system could, of course, be carried down, with increase of subsidy, until rents were only $1- or even less-per month, were it not for two requirements in the United States Housing Act; 1, the revenue from rents must in effect be enough to pay operating costs; 2, family income may not exceed five times, or, where there are three or more minor dependents, six times, rent. Obviously a family income of $5 or $6 per month would not support the family even if there were no rent. In fact, at the $11 level, which permits incomes of not to exceed $55 and $66 per month, families will have to be very good managers to provide food, clothing and other necessities on the remaining $44 and $55. When there are three minor dependents (the condition on which the $66 income is permitted) a family will consist of at least five persons and is likely to consist of six or even seven. Fifty-five or even $60 per month will not go very far among that number. So it is not contemplated that rents for such families will be lower than $12, which permits an income of $72 or of $60 after payment of rent.

In setting this lowest graded rent level, the Alley Dwelling Authority has taken account of cost of living studies by other local agencies and would call attention to the publication on Intercity Differences in Costs of Living, 1935-37, Research Monograph XIII, Works Progress Administration Division of Social Research, which sets $1,415 as the maintenance level of cost of living for a family of four in the District of Columbia; to studies by Gordon Grant of the Washington Post, based upon data from the National Income Division of the Department of Commerce, which place the median family income in the District of Columbia at $2,983; and the conclusions of Sales Management, 1939, that $4,556 is the effective buying income for a District of Columbia family.

With these figures in mind the Alley Dwelling Authority's decision that for a family with fewer than three minor dependents, $1,440 should be the highest income requiring rent subsidy, is conservative. Some of the local figures indicate that the cost of adequate housing, food, clothes, and other necessities require an income of more than $1,600. But as these figures include commercial rent; that is, rent which includes profit, as distinguished from economic rent; that is, rent that pays costs but does not include profit, the Alley Dwelling Authority believes that its nonsubsidized income level will prove practicable.

Considerable leeway for experiment in rent and tenant-income policies is permitted under the United States Housing Act, and the United States Housing Authority has recently announced that the time is ripe for some careful experimenting by the more experienced local housing authorities.

The United States Housing Authority says that while it is generally agreed that there are distinct income grades represented among ill-housed families, for whom different grades of rent and subsidy would be appropriate, it finds there is much difference of opinion as to whether it is better to attach fixed rents to houses and allocate tenants accordingly, moving them when their incomes go up or down, or let them stay in the same house, increasing or decreasing the rent with changes in their income. The United States Housing Authority states that so far it has not recommended the second system, but has not forbidden it, and as the Alley Dwelling Authority is among its strongest advocates and as Mr. Ihlder has had many years of experience in American housing, it has been agreed that the first American experiment along this line should be made in Washington, where the results will easily be available to other local authorities.

Of course there are existing privately owned dwellings at all rentals down to the $11 level. The questions are as to the condition of these dwellings and the adequacy of the supply. But, there are wage earners, including domestic servants, who pay rents of $40 to $55, sometimes more than half of their incomes. So they are forced to take in lodgers. There are apartment houses where every apartment is occupied by from 2 to 4 or 5 families who share rents ranging as high as $65 a month.

The Alley Dwelling Authority's response to this is that it believes varying the rent is practicable while moving families is impracticable.

In drafting its rent schedule the Alley Dwelling Authority recognized the wisdom of dealing with two economic facts and making them plainly evident: 1, the total cost of the property including acquisition, development, and operation; 2, the cost of living in the District of Columbia. It also took account of the evidence that private enterprise is not erecting an adequate number of rental dwellings to meet the needs of families whose annual incomes are $2,000 or less. It, therefore, decided that when tenant's incomes exceed $1,440, and when, therefore, they pay an economic rent, they shall move from the property provided private enterprise has built an adequate number of proper dwellings for rent, excluding utilities, at one-fourth of family income. In this way private enterprise will constantly set the ceiling for public housing, and the graduates of public housing will be able to move directly into proper dwellings privately owned without having to return to the slum.