Evening star., 1938-04-17
Camouflaged Subsidy Seen
In New Housing Program
Taxpayer, Wandering Through Maze of Bill, Will
Have Many Headaches Before
He Understands It,


This does not seem very large expendi-
ture, as Federal outlays go these times.
In fact, it might be considered fairly
good investment-being about third of
the cost of a single battleship and hardly
more than a twentieth of next years War
Department appropriations it helped to
clear out the worst slunls in most of the
Nations cities and helped insure return
to the Government of the capital cost Of
substituting decent homes in the bargain.
Free Rent Seen.
Nevertheless, a closer study of the figures
involved in the program shows that while
the Government should get back its $780,.
100000 investment in the 60 years al
lotted barring bad luck, practically the
entire amortization will come out of the
s26000,000 a year and hardly a penny
from the low-rent housing occupants. In
other words, the subsidy contemplated to
rescue these folks from the slums in which
they now live amounts to nothing less
than free rent in perpetuity At least
that is what the critics are bound to say
when they get through delving into the
statistics.
Furthermore, it can be expected that
the critical-minded will probably soon be
proving that practically the same thing
is occurring with the Sl34,0000OO worth
of completed and partly completed low
rent projects which the u. S. H. A. has
taken over from the P. W. A.
Does this mean. the startled taxpayer
NAV ask thof tho onoupoptc If ithaca 1ou-
rent projects are not going to pay
cent for the privilege?
The answer is in the negative" as
British parliamentarians say, for the act
provides that they must pay something.
But this amount, according to an analysis
OF the law by the U. S. H A., is only the
amount necessary to pay all management,
operation and maintenance costs, plus such
additional amounts as the Authority shall
determine are consistent with maintaining
the low-rent character Of such projects"
In other words, the low-rent project
tenant will pay. comparably, just about
what it costs the fortunate owner of a
home of his own to maintain and run
his place, over and above what he actually
paid for the property.
How It Is Accomplished.
Here is how the financial legerdemain is
accomplished The explanation is taken
from the analysis of the act just men,
toned, and for simplif1cation it will be
assumed that the entire S5000O0.OOO of
Federal funds all goes into one big project
instead of lot of different ones all run
on the same principle
The first point is that the half billion
OF Federal money goes to the construction
and operating agency in the form of a
loan which must be repaid in not to ex-
ceed so years.
Second this loan must bear interest Of
not less than the going Federal bond in
terest rate, plus half of per cent.
which means a total of per cent as of
the present.
Third, the U. S. H. A. is authorized to
make annual subsidy contributions to the
project out of its s26,oooOoo yearly ap-
preparation for as long as so years, but
these contributions cannot exceed the
going Federal interest rate plus per
cent, or otherwise 3l2 per cent Of the prof.
ects cost.
Fourth, inasmuch as the local agencies
must put up 10 per cent of the project
costs, this means that total of s555, ,O00.-
600 is available for building the projects
and 3ia per cent of that means that
s19,425,O00 can be given the local agencies
each year for go years to maintain the
low-rent character of the projects"
Once these four fundamentals are firmly
IN mind 1t is not so very difficult to see
who is going to pay off the interest and
principal on that s50O,0oo,0o0 Federal
loan.
Federal Grants Seen.
Certainly it need not be the tenants who
will pay. and probably it will not be. For
if it takes only sl5oooooo a year to pay
the per cent interest on that $500, 900 900
loan, one hardly needs consult complex
interest table to see that the availability
Of s4425,000 more each year in Federal
grants will also permit paying off the
principal likewise by the time so years is
up. This writer has not made the COM
putation himself to see how close this is
to the exact truth, but the assertion was
made in Congress when the bill was under
consideration that the annual contribu-
ton was determined with specifically this
outcome in view.
But what. the dizzied taxpayer may say
at this point-what is to become Of the
balance Of the $26 600, 900 yearly appropria-
ton be granted the Housing Authority?
Will it take $6575, 900 year simply to run
this lending agency?
The answer again seems to be "in the
negative" And the perceptive may already
have gathered the reason for the excess
funds. For, after all, there are still those
81 projects taken over from the p w. A.
which were built at cost Of $4,000, 900.
Uncle Sam obviously could not apply
different rent-fixing principal to these
projects from the one he promises for
the new ones. And 1t requires no figuring
at all to perceive that after the Govern
ment proceeds to pay itself back over 60
years the sum 1t invested In these earlier
projects 1t will still have enough left out
OF that s2s,ooo,ooo each year to run Q
pretty lively housing agency.