To the Congress of the United States:
The cities that sprang up along the seaports, the river banks and the prairie crossroads of America were built and grew with pride and hope--until the early 20th century.
For several decades, now, the tide has run against the growth, strength and vitality of our cities.
Today, America's cities are in crisis. This clear and urgent warning rises from the decay of decades--and is amplified by the harsh realities of the present.
The crisis has been long in forming. At the turn of the century, Lincoln Steffens told of "the shame of the cities." Jane Addams spoke of "the vast numbers of the city's disinherited."
Powerful forces swept the city after World War II, hastening its erosion.
People who could afford to began moving by the hundreds of thousands to new suburbs to escape urban crush and congestion. Other hundreds of thousands were trapped inside by a wall of prejudice, denial, and lack of opportunity.
They were joined by still thousands more from America's rural heartland--the unskilled and the unprepared, displaced by advances in technology. Their thirst was for opportunity, for jobs, and for a better life. They found instead a mirage: for stripped of its bright lights, the city for them was poverty, unemployment and human misery.
We see the results dramatically in the great urban centers where millions live amid decaying buildings--with streets clogged with traffic; with air and water polluted by the soot and waste of industry which finds it much less expensive to move outside the city than to modernize within it; with crime rates rising so rapidly each year that more and more miles of city streets become unsafe after dark; with increasingly inadequate public services and a smaller and smaller tax base from which to raise the funds to improve them.
But these problems exist in hundreds of smaller towns and cities across America-towns and cities whose growth is in numbers of people, but not in homes, or jobs, or public services, or schools or health facilities to serve them. The result too often is that these cities grow with decay, human misery, lack of job opportunity and increasingly concentrated poverty.
If the promise of the American city is to be recaptured--if our cities are to be saved from the blight of obsolescence and despair-we must now firmly set the course that America will travel.
There is no time to lose.
THE PEOPLE OF THE CITY
The human problems of the city are staggering:
--Ghetto youth with little education, no skills and limited opportunity.
--Citizens afraid to walk their streets at night, and justifiably so.
--Negroes, Puerto Ricans and Mexican Americans barred by prejudice from full participation in the city's life.
Illiteracy and disease, a lack of jobs and even dignity itself--these are the problems of the city, just as its tenements, traffic jams and rats are problems.
The city will not be transformed until the lives of the least among its dwellers are changed as well. Until men whose days are empty and despairing can see better days ahead, until they can stand proud and know their children's lives will be better than their own--until that day comes, the city will not truly be rebuilt.
That is the momentous and inescapable truth we face in this hour of America's history.
No single statement or message can embrace the solutions to the city's problems. No single program can attack them.
No one can say how long it will take, or how much of our fortune will eventually be committed. For the problems we are dealing with are stubborn, entrenched and slow to yield.
But we are moving on them--now-through more than a hundred programs, long and short range, making financial commitments of more than $22 billion to the task.
THE WORK SO FAR
The last several years have witnessed a remarkable record of legislative achievement-and most of it has borne on the problems of the cities.
We struck down discrimination in job opportunities, public accommodations, and voting in the Civil Rights Acts of 1964 and 1965.
We provided job training for nearly two million disadvantaged men and women who now have the skills to support themselves and their families with dignity and self-respect.
We cut through a century of opposition and controversy to help the poor school child with the Elementary and Secondary Education Act of 1965.
We brought healing and health to the elderly and the poor through Medicare and Medicaid.
We moved to help combat the pollution that poisons a city's air and fouls its waters.
And, with the Economic Opportunity Act of 1964, we finally embarked on a concentrated effort to eliminate poverty in this nation. That landmark measure has helped to change the Eves of 6 million Americans.
These programs have brought hope to people in every city and town in America. Children from the slums find a new chance to succeed through Head Start. Poor teenagers earn their first paychecks through a Neighborhood Youth Corps program and stay in school. Needy young men and women, whose talents might once have been their life's frustration, go on to college through Upward Bound. Men find self-respect and good jobs through work training programs. Half a million volunteers are engaged in a mission of service to the destitute of their communities. More than 6 million Americans have been lifted out of poverty.
But almost 29 million citizens still remain in poverty.
If the problems of the city are to be solved, there can be no retreat in the War on Poverty. It must be pressed, with renewed emphasis on the most critical needs of the poor--job opportunities and education for the young, and the chance to join in cooperative self-help efforts to improve their own lives, as well as to participate in the broader community attack on poverty.
Last year the Congress extended the life of the poverty program for two years--but it appropriated only $1.77 billion, some $290 million less than we sought.
For Fiscal 1969, I recommend appropriations to the full level of Congressional authorization--$2.18 billion--for the antipoverty program.
All of these measures help the people who live in our cities.
They are new programs, and only now are they beginning to take hold in improving lives of men, women and children.
With other proposals I have made to Congress this year--for open housing, for safe streets, for gun control, for 500,000 new, private sector job opportunities for the hard-core unemployed, for better education--we can further protect and improve the lot and the life of the city dweller.
Today, however, I want to speak of programs designed especially for our cities--of shelter for its citizens and plans for its revitalization. This message, too, is for men and their families. For our lives are profoundly affected by the environment in which we live, the city in which we work and reside, the home in which we relax and renew our strength.
AN EVOLUTIONARY RESPONSE
Five Presidents and fifteen Congresses have forged the Federal response to the problems of housing and urban development.
It began in 1937, when Franklin Roosevelt saw a third of the Nation ill-housed. He and the 75th Congress recognized that poor families could not, with their own resources, afford homes on the private market, and that some form of Government help was necessary if they were to have decent shelter. The result was the historic legislation that launched the Public Housing program.
Twelve years later, with the Housing Act of 1949, President Truman and the 81st Congress started urban renewal and pledged "as soon as feasible . . . a decent home and a suitable living environment for every American family."
In the 1954 Housing Act, President Eisenhower and the 83rd Congress expanded the program of urban renewal.
At the beginning of this decade, President Kennedy and the 87th Congress enlarged the Government's role to bring decent houses into the reach of families with moderate income.
In spite of these strides, when I became President: --We had a loose collection of Federal housing agencies, each operating programs in isolation, not only of each other but also of the Federal assistance programs of other departments.
--Urban renewal was demolishing slum housing and dislocating people, but not enough new housing was being built for those forced to relocate.
--There was little interest in the private sector--by builders, architects and engineers-in providing decent shelter for poor families, and the public housing program was stagnated in numbers and in quality.
--Our concern with housing, health care, education, welfare and other social services was fragmented in the local neighborhoods where it counts.
Over the past four years, you in the Congress have approved our proposals to: --Establish a Department of Housing and Urban Development to bring scattered housing and urban development programs together and give the American city the cabinet role it deserves.
--Begin a new program of Rent Supplements to increase the housing supply for needy families. Built and operated by private enterprise, the portion of rent paid by the Government declines as the tenant's income rises.
--Inaugurate the Model Cities Program, the first effort to attack blight on a massive scale and renovate entire neighborhoods, by providing special supplementary grants to those cities that concentrate the entire array of Federal, State and local programs, from health to housing, in the worst slum neighborhoods.
Even these achievements are not sufficient to deal with the crisis our cities face today. They do provide a base on which the proposals in this message build.
THE HOUSING AND URBAN DEVELOPMENT ACT OF 1968
I propose the Housing and Urban Development Act of 1968--a charter of renewed hope for the American city.
With this Act, the Nation will set a far-reaching goal to meet a massive national need: the construction of 26 million new homes and apartments over the next 10 years. Six million of these will finally replace the shameful substandard units of misery where more than 20 million Americans still live.
This Act will authorize the construction and rehabilitation of 2.35 million housing units with $2.34 billion of contracting authority for the first five years of the ten-year program.
Under this legislation, we will in the year ahead: --Start 300,000 housing units for more than one million citizens who need Federal assistance to obtain decent housing. This is triple the rate of this year, and more than hale the number built over the last decade.
--Continue to restore the core of our center cities--and with that, improve the lives of nearly 4 million Americans-through the Model Cities Program.
--Summon the talents and energies of private enterprise to the task of housing low-income families through the creation of a federally-chartered private, profit-making housing partnership.
--Make Urban Renewal a more effective instrument for reclaiming neighborhoods, through a new neighborhood development program.
--Add many thousands of construction job opportunities in the inner city.
--Stimulate the flow of private credit for home building in the city by providing flexible interest ceilings on FHA mortgages and transferring the secondary market operations of the Federal National Mortgage Association to private ownership.
--Help American cities develop modern and efficient mass transit systems and services.
--Offer the American family an alternative to crowded cities and sprawling suburbs, through a program to build new communities.
--Improve planning for the orderly development of public facilities for urban areas.
--Establish a base of research, analysis and knowledge of urban areas so we can make better informed decisions about the cities.
WHAT IS REQUIRED
To achieve our housing goal, we must move from low to high production.
We can make that shift only if the challenge summons the commitment of
--The capital and mortgage finance markets, to supply the private funds which are the lifeblood of the construction industry. These funds must flow steadily and in increasing scale.
--The home building industry, to tap an expanded federally-assisted market for private low and moderate income sales and rental housing.
--The genius of American business to bring to home building its skill and resources and the methods of modern technology so that houses can be built faster, less expensively and more efficiently than ever before.
--American labor, which has pledged to provide the necessary skilled manpower without discrimination.
--Government at all levels, to improve the working relationships with each other, and with the builders, lenders, and lowincome families who will be served by this program.
--Most importantly, the Congress.
First, the Congress must take steps now to insure strong, stable economic growth for the Nation as a whole and the home building industry in particular.
Once again I call upon the Congress to pass the anti-inflation tax which I recommended more than a year ago. Soaring interest rates will cripple the home building industry. The temporary surcharge tax legislation can help to keep that from happening.
Second, I urge the Congress to enact the fair housing legislation recommended repeatedly by this Administration.
Third, I urge the Congress to renew, fully fund and strengthen the basic housing and urban development legislation already on the books.
HOMES FOR AMERICANS
I urge the Congress to enact a program to provide 300,000 housing starts in fiscal 1969 for the poor, the elderly, the handicapped, the displaced, and families with moderate incomes.
This program would:
1. Enable 100,000 low-income families to buy or repair their own homes.
Home ownership is a cherished dream and achievement of most Americans.
But it has always been out of reach of the nation's low-income families.
Owning a home can increase responsibility and stake out a man's place in his community. The man who owns a home has something to be proud of and good reason to protect and preserve it.
With the exception of the pilot program I began last year, low-income families have been able to get Federal help in securing shelter only as tenants who pay rent.
Today I propose a program to extend the benefits of home ownership to the Nation's needy families.
Under this program, the broad outline of which has already been set forth in S. 2700, low-income families will be able to buy modest homes financed and built by the private sector. These families will devote what they can reasonably afford--a specified percentage of their income--to mortgage payments, with the Government paying the difference in the form of an interest subsidy. Under this interest subsidy, the Federal Government would pay all but 1 percent of the interest on the mortgage, depending on the income of the homebuyer.
2. Start 75,000 public housing units, to provide homes for 300,000 Americans.
The job is to turn authorization to action-by accelerating the processing of applications, by moving quickly from commitment to construction, and by involving private industry fully under the new Turnkey concept.
Under Turnkey, a low-income project can be put up in less than half the time traditionally required for public housing.
Turnkey frees the builder from complicated and cumbersome procedures and stimulates his initiative to develop imaginative and well-designed buildings at lower cost.
We have already extended the Turnkey concept to enable private industry not only to build low-income housing developments, but also to manage them.
Some Public Housing projects built in the past--when the challenge was simply to get units in place--reflect a tasteless conformity, and an indifference to community amenities.
At my direction, the Secretary of the Department of Housing and Urban Development has been working with leading architects and planners to achieve higher design standards for public housing developments. We know new projects can be pleasant places to live, reflecting the needs of human beings, with attention to comfort and convenience.
Our concern must be not only with the quantity of new public housing, but with its quality as well.
I propose a $20 million program to promote improved tenant services in public housing developments.
With these funds, we can enable those who live in public housing to take better advantage of job, health and education opportunities.
We can help and encourage them to become involved, personally and responsibly, in the day-to-day problems of the projects where they live.
3. Authorize 72,500 units under the Rent Supplement Program to provide shelter for almost 250,000 poor Americans. In fiscal 1969, 35,000 dwelling units will be started under this program.
This program, which holds so much promise for the poor families of America, has been underfunded by the Congress. Last year, we sought $40 million in annual payment authority. The Congress granted only $10 million.
Rent Supplements is a free-enterprise program, strongly endorsed by the home building, real estate, and insurance industries which have responded enthusiastically to this new approach to low-income housing. It contains incentives for escape from poverty, while creating modest, but decent shelter for those in poverty.
If we are to match our concern for the cities with our commitments, this program must be adequately funded.
I recommend $65 million in authority for the Rent Supplement Program for Fiscal 1969.
4. Begin to build 90,000 rental housing units for 360,000 members of moderate income families.
A program to provide housing for families with incomes too high to qualify for public housing, but too low to afford standard housing began in 1961.
This is a below market interest rate program known as "221(d)(3)." It serves families earning between $4,000 and $8,000 a year.
After 5 years of testing, we are ready now to move this program into full production. But first we must improve it.
I recommend legislation to strengthen the financial tools under which the moderate income rental housing program operates.
Under this legislation, capital financing would be shifted to the private sector, and the Government would increase its support by providing assistance to reduce rents to levels moderate income families can afford.
Now the Government provides financial support for loans at 3 percent interest. Under this new arrangement, the private sector would make loans at market rates. The Government would make up the difference between the market rate of interest and 1 percent. The loans would remain in 'private hands.
TO HELP THE NON-PROFIT SPONSOR
Many housing projects are sponsored by non-profit organizations--including church groups, and fraternal orders. In many instances these groups lack the technical and financial know-bow which modern construction demands.
Their efforts are in the best interests of this Nation, and the Nation should help them.
I propose legislation to provide needed technical assistance and skills to the nonprofit sponsors of our housing programs.
Through grants, loans, and technical assistance, this program will help small private non-profit organizations in our cities. These organizations will then be able to draw quickly upon architects, engineers and financial experts to speed the construction of low income housing.
THE BLIGHTED NEIGHBORHOOD
The slum is not solely a wasteland of brick and mortar. It is also a place where hope dies quickly, and human failure starts early and lingers long.
Just as the problem of the slum is many-faced, so must the effort to remove it be many-sided.
The Model Cities program gave us the tools to carry forward the Nation's first comprehensive concentrated attack on neighborhood decay.
It was developed by some of the country's foremost planners, industrialists and urban experts.
The program is simple in outline--to encourage the city to develop and carry out a total strategy to meet the human and physical problems left in the rubble of a neighborhood's decay.
That strategy, which Model Cities spurs through special grants, is to bring to a dying area health care services, as well as houses; better schools and education, as well as repaved streets and improved mass transit; opportunities for work, as well as open space for recreation.
This program is now in its early stages. Sixty-three cities are drawing their plans to reclaim the blighted neighborhoods where 4 million Americans live. By this summer, a second group of cities will begin their planning.
Last year, I requested full funding of the amount authorized for Model Cities--$662 million. But the Congress approved less than half that amount.
To the cities of this land, that cut came as a bitter disappointment.
In the cities' struggle for survival, we dare not disappoint them again. We must demonstrate that they can rely on continued Federal support.
I recommend $2.5 billion for the Model Cities special grants over the next three years:
--$500 million for fiscal 1969.
--$1 billion each for fiscal 1970 and 1971. In addition, for fiscal 1969 I recommend $500 million in appropriations for urban renewal solely related to the Model Cities program. This includes full funding for a $350 million increase in the authorization.
The total funds needed to move the Model Cities program forward in fiscal 1969 are $1 billion.
I urge the Congress to fund fully this vital request for the people who live in America's worst urban neighborhoods.
Urban Renewal is the weapon that deals primarily with the physical side of removing blight. An essential component of the Model Cities Program, it is a major instrument of reform in its own right.
Last year, nearly 900 American communities were reclaiming inner city land under urban renewal.
Last year, the Congress appropriated $750 million for Urban Renewal in Fiscal 1969.
To give communities sufficient lead time for planning, I recommend that the Congress appropriate now $1.4 billion for fiscal 1970.
Even at these higher appropriation levels, under existing law Urban Renewal will not operate at sufficient speed to overtake the decay of our cities.
The lag between a community's decision to rebuild a neighborhood and the breaking of ground is far too long. Urgent neighborhood needs go unmet, awaiting the development and approval of a total plan for an entire area.
We must begin now to make urban renewal more immediately responsive to urban needs.
To apply our resources more quickly, I recommend that Congress authorize a new Neighborhood Development Program under Urban Renewal.
This legislation would permit detailed planning and execution to proceed segment by segment in an urban renewal area. Under existing law, neither demolition nor rehabilitation can begin on any portion of the area to be renewed until it is ready to begin throughout the entire area.
With this Neighborhood Program, cities can start work quickly on the most pressing problems that are to be renewed, with the emphasis on the construction of new and rehabilitated housing.
MEETING THE INSURANCE CRISIS OF OUR CITIES
Insurance protection is a basic necessity for the property owner. But for the resident of the city's inner core and the local businessman who serves him, protection has long been difficult to obtain.
The problem has been heightened by civil disorder or its threat.
Last August I established a Special Panel to seek the solutions to this problem. The Panel, headed by Governor Richard Hughes of New Jersey, offered a clear example of how the States, industry and the Federal Government can join in a constructive effort.
The Panel looked deeply into the property owner's dilemma, and reported:
"Society cannot erase the suffering of the innocent victims of fire, windstorm, theft, or riot. But it can at least provide the opportunity to obtain insurance to safeguard their capital, and thereby prevent a disastrous occurrence from becoming a permanent tragedy."
The Panel recommended a comprehensive program of mutually supporting actions by the insurance industry, the States, and the Federal Government.
My advisers and I have reviewed the Panel's proposals carefully. We believe they are sound.
Accordingly, I call upon the insurance industry to take the lead in establishing plans in all States to assure all property owners fair access to insurance. These plans will end the practice of "red-lining" neighborhoods and eliminate other restrictive activities. They will encourage property improvement and loss prevention by responsible owners.
I call upon the States to cooperate with the industry and, where necessary, to organize insurance pools and take other steps to cover urban core properties. These measures will assure that all responsible property owners can obtain insurance, and provide a method of spreading equitably throughout the insurance industry risks that no single insurer would otherwise accept.
I recommend that the Congress establish a cooperative Federal-State-Industry program by chartering a National Insurance Development Corporation within the Department of Housing and Urban Development.
This Corporation will bring together all those vitally interested in the inner city insurance problem--members of the public, State insurance regulators and other State officials, insurance industry representatives, and interested Federal agencies.
The Corporation will perform a number of vital functions in support of the actions of private industry and the States to assure adequate property insurance in all areas of our Nation's cities.
Through the sale of reinsurance against the risk of civil disorders, the Corporation will marshal the resources of the insurance industry and add to this the backing of the States and the Federal Government. Without this reinsurance, many insurers and State insurance regulators do not believe the industry can move forward to provide adequate property insurance in urban areas.
This program will assist the insurance industry and the States to offer adequate property insurance for the inner cities. Through reinsurance, the program can help the States provide for the contingency of any large emergency losses.
For those companies who participate in this program, I recommend tax deferral measures, proposed by the Panel, to increase the industry's capacity to insure homes and businesses in the center city.
This program will encourage insurance companies to increase their reserves to cover unusual losses. Any deferred taxes will be invested in appropriate Government securities, so that no Federal revenues will be lost by the tax deferral unless unusual losses do occur.
Insurance is vital to rebuilding our cities. It is a cornerstone of credit. It can provide a powerful incentive for homeowners and businessmen to rehabilitate their own property and thereby improve the community.
THE PRIVATE SECTOR
The Federal role--a quarter of a century in the making--is designed to assure that every citizen will be decently housed.
The Government's concern is to stimulate private energy and local action--to provide capital where needed, to guarantee financing, to offer assistance that encourages planning and construction.
The real job belongs to local government and the private sector--the homebuilder, the mortgage banker, the contractor, the nonprofit sponsor, the industrialist who now sees in the challenge of the cities a new opportunity for American business.
All of the programs I have outlined in this message are directed toward the deeper involvement of the private sector. That involvement must match the massive dimension of the urban problem.
What is needed is a new partnership between business and Government. The first outlines of that partnership are already visible.
We see it in:
--The recent undertaking of the American Bar Association to improve the landlord-tenant laws--now more medieval than modern--and to attack other legal problems in our urban centers.
--The commitment of 318 of the Nation's life insurance companies to invest $1 billion of their capital in low-income housing.
Within the next several days, the Savings and Loan Associations and the Mutual Savings Banks of this Nation will announce their plans to intensify the investment of their capital for similar purposes.
NATIONAL HOUSING PARTNERSHIPS
How can the productive power of America-which has mastered space and created unmatched abundance in the marketplace-be harnessed to meet the most pressing unfilled need of our society: rebuilding the urban slum?
Last June, I asked a selected Commission of leading industrialists, bankers and labor leaders to study this question. That Commission, headed by Edgar F. Kaiser, has now given me an interim report with many valuable recommendations.
Acting on the Commission's recommendation, I propose that the Congress authorize the formation of privately-funded partnerships that will join private capital with business skills to help close the low-income housing gap.
The Kaiser Commission identified three principal reasons why American industry has not yet been attracted to the field of low and moderate-income housing. The problems and the steps proposed to meet them are:
1. Concentration of Risk
The profitability of individual housing projects varies widely and the risk of loss on any one project is high. The proposed national partnerships would permit industrial and financial firms to pool their investments and spread their risks over a large number of projects.
2. Rate of Return
Substantial operating losses are usually incurred in the first 10 years of a housing project's life to cover operating expenses, interest and depreciation.
By employing the partnership form of organization, which some building owners now use, under existing tax law these operating losses can be "passed through" to each investor, and offset against the investor's other taxable income. This reduces the investor's current income taxes otherwise payable, and makes possible an annual cash return on investment comparable to the average earnings of American business in other manufacturing enterprises.
The management personnel of major corporations are inexperienced in the field of low-income housing. They cannot afford to devote substantial time to occasional housing ventures.
The proposed national partnerships would be strongly financed organizations, fully committed to long term activity in the single field of housing for the poor. As such, the proposed partnerships should be able to attract top flight management and technical experts on a competitive career basis.
The objective of these partnerships will be to attract capital from American industry and put that capital to work. Their exclusive purpose will be to generate a substantial additional volume of low- and moderate-income housing. They will use the best private management talent, planning techniques and advanced methods of construction. They will probe for the savings inherent in the latest technology and in economies of scale.
--Participate in joint ventures throughout the country in partnership with local builders, developers and investors.
--Join with American labor to open new job opportunities for the very people their projects will house.
--Participate in our existing and proposed Federal programs for assisting low- and moderate-income housing projects on the same basis as other project sponsors.
This new undertaking will begin with one national partnership. We expect that others will follow as the approach proves itself.
A NEW ERA IN HOME FINANCING
The supply of credit is not unlimited. The Nation's banks, insurance companies, pension funds and other financial sources have an obligation to their depositors and shareholders to seek a fair and competitive return for their investments.
To insure that home financing remains competitive with alternative long-term investment opportunities, I recommend that the Congress:
--authorize the Secretary of Housing and Urban Development to adjust the FHA interest rate ceilings.
--authorize Federal insurance of bond obligations issued by private mortgage companies or trusts holding sizable pools of FHA-insured and VA-guaranteed home mortgages.
--transfer the secondary market operations of the Federal National Mortgage Association to completely private ownership. FHA Interest Rates
Mortgages insured by the Federal Housing Administration and the Veterans Administration can by law carry no more than a 6 percent interest rate. In today's market this is no longer competitive. In practical terms, the result is the sale of mortgages at substantial discounts.
Discounts require hard cash beyond the normal down payment. They erode the hard-earned equity of a home-owner and the profit margin of the builder of new housing. For when the rate of return on federally-insured mortgages is less than lending institutions can obtain from other investments, they require property-sellers to absorb discounts. To sell their homes, therefore, sellers realize less than they originally anticipated. And when builders of large projects--with 90% mortgages of $1 or $2 million, or more-must find additional hard cash to pay deep discounts, they will defer construction until the cash requirements are reduced.
As a result, many a house goes unsold and many apartment projects go unbuilt in a deep credit squeeze.
To assure a steady flow of funds into homebuilding, I recommend that the Congress authorize the Secretary of Housing and Urban Development to adjust the FHA interest rate ceilings to reflect the economic realities of the financial markets. l have already recommended a similar adjustment on the interest rates for home loans to veterans.
Federally-Insured Mortgage Bonds
Some private institutional and individual investors have shunned investments in home mortgages because they could realize nearly comparable rates of return in other investments, and avoid the bookkeeping and paper work associated with hundreds of individual mortgages.
These pools of savings--in large institutional pension funds, private trusts, and occasionally in individual estates---can be attracted to residential finance. It will take a new, marketable financial investment, with competitive yields and security. Such a bond-type obligation can be created to cover federally-insured mortgages held by private mortgage bankers or trusts.
To enhance the attractiveness of such an obligation to investors, and thus attract additional funds to the housing market, I recommend that the Congress authorize the Department of Housing and Urban Development to insure mortgage bonds that are secured by pools of FHA-insured and VA-guaranteed mortgages.
Federal National Mortgage Association
Through the Federal National Mortgage Association, the Federal Government has helped keep mortgage funds flowing by buying mortgages when credit was tight and selling them when money was plentiful.
Today, FNMA is a hybrid, owned in part by private shareholders, in part by the Government, but managed by Government officials.
This secondary market operation is largely a private function, which ought to be performed by the private sector--as the Congress has always intended.
I propose legislation to transfer the secondary market operation of the Federal National Mortgage Association on an orderly basis to completely private ownership.
This new FNMA, concerned exclusively with providing an increasing and continuous flow of funds into residential financing will close an important gap in the existing network of financial institutions.
This change will not affect the Government's special assistance to selected types of mortgages which are not yet readily accepted in the private market.
In the modern city the arteries of transportation are worn and blocked. The traffic jam has become the symbol of the curse of congestion.
It was only a few years ago, however, that we recognized this as a national problem. In signing the Urban Mass Transportation Act in 1964, I said:
"This is a many sided challenge. We cannot and we do not rely upon massive spending programs as cure-alls. We must instead look to closer cooperation among all levels of government and between both public and private sectors to achieve the prudent progress that Americans deserve and that they expect."
Under this Act, we are
--Aiding cities to draw the blueprints to modernize, expand and reorganize their transportation systems.
--Helping to train specialists in the urban transportation field.
--Advancing research to improve the system and the service.
--Assisting communities to buy the capital equipment and to build terminals for their transit systems.
We must step up this effort.
In the year ahead, we expect to increase our grants to cities from $140 million to $190 million.
I recommend that the Congress provide $230 million for fiscal 1970 so cities can begin now to plan the improvement of their mass transit systems and service to the people.
Urban transportation is the concern of our two newest Departments--Housing and Urban Development, and Transportation.
The Department of Housing and Urban Development is responsible for the development of the metropolitan community--and transportation is an essential part of that effort.
The Department of Transportation is responsible for the coordination of different-but closely related--modes of transportation. Moreover, research facilities bearing on transportation--out of which will come the transportation technology of tomorrow--are concentrated in this Department.
When the Department of Transportation was established in 1966, the Congress required both Secretaries of Housing and Urban Development and Transportation to study this problem and recommend the arrangement which would best assure the Government's ability to meet the transportation needs of America's urban citizens.
On the basis of their intensive study, and their recommendations, I will shorty submit a reorganization plan
--Transferring to the Department of Transportation the major urban transit grant, loan, and related research functions now in the Department of Housing and Urban Development.
--Maintaining in the Department of Housing and Urban Development the leadership in comprehensive planning at the local level, that includes transportation planning and relates it to broader urban development objectives.
RESEARCH AND TECHNOLOGY FOR THE CITIES
Federally-sponsored research has helped us guard the peace, cure disease, and send men into space.
Yet, we have neglected to target its power on the urban condition. Although 70 percent of our people live in urban areas, less than one-tenth of one percent of the Government's research budget has been devoted to housing and city problems.
--Learn how to apply modern technology to the construction of new low-income homes and the rehabilitation of old ones.
--Test these ideas in practice, and make them available to builders and sponsors.
--Look deep into the fiscal structure of the cities--their housing and building codes, zoning, and tax policies.
--Learn how best the Federal Government can work with State and local governments--and how States and local governments can improve their own operations.
--Evaluate our city programs, so we can assess our priorities.
Last year, I sought the first major appropriations for urban research: $20 million. Congress appropriated only half that amount.
I once again propose a $20 million appropriation for urban technology and research. This will assist the universities and private institutions of America to carry out the studies so crucially needed.
These funds, along with those from other Government agencies, will also help launch the new Urban Institute, which I recently recommended. This is a private non-profit research corporation formed to create a bank of talent to analyze the entire range of city problems.
PLANNING FOR THE FUTURE
A passenger on an airline flying from Miami to Boston is rarely out of sight of city lights below.
As our urban areas expand, the citizen's sense of community broadens. He may live in one locality, work in another and seek leisure in still another.
The face of the landscape is changing with our growth.
The question is: How shall our communities grow?
Unless we decide now for order and purpose, the result will be surrender to chaos, confusion, ugliness and unnecessary and exorbitant cost.
The key to orderly growth is planning-planning on an area-wide basis.
Planning, both immediate and long-range, is the function and the responsibility of the State and community. But the Federal Government has long recognized the need for its support.
That need grows as the problem grows.
I urge the Congress to provide $55 million in Fiscal 1969 to assist planning for the orderly growth of our urban areas, a 22 percent increase over last year.
So essential is orderly development to the future of our urban centers that we must provide incentives to encourage it. In 1966 the Congress authorized--but did not fund--such a program of incentive grants.
I ask Congress to authorize $10 million for a program of area-wide Incentive Grants in Fiscal 1969.
The Federal share of a project will increase by up to 20 percent of the costs of projects of areawide significance--if they are part of a comprehensive area plan.
The far-sighted community which responds to this incentive program will find its burdens lighter in providing hospitals, roads, sewage systems, schools and libraries.
Over the next decade, 40 million more Americans will live in cities.
Where and how will they all live? By crowding further into our dense cities? In new layers of sprawling suburbia? In jerry-built strip cities along new highways?
Revitalizing our city cores and improving our expanding metropolitan areas will go far toward sheltering that new generation. But there is another way as well, which we should encourage and support. It is the new community, freshly planned and built.
These can truly be the communities of tomorrow--constructed either at the edge of the city or farther out. We have already seen their birth. Here in the Nation's capital, on surplus land once owned by the Government, a new community within the city is springing up.
In other areas, other communities are being built on farm and meadow land. The concept of the new community is that of a balanced and beautiful community--not only a place to live, but a place to work as well. It will be largely self-contained, with light industry, shops, schools, hospitals, homes, apartments and open spaces.
New communities should not be built in any set pattern. They should vary with the needs of the people they serve and the landscapes of which they are a part.
Challenge and hard work await the founders of America's new communities:
--Careful plans must be laid.
--Large parcels of land must be acquired.
--Large investments in site preparation, roads and services must be made before a single home can be built and sold.
--The development period is long, and return on investment is slow.
--But there is also a great opportunity for, as well as a challenge to, private enterprise.
The job is one for the private developer. But he will need the help of his Government at every level.
In America--where the question is not so much the standard of living, but the quality of life--these new communities are worth the help the Government can give.
I propose the New Communities Act of 1968.
For the lender and developer, this Act will provide a major new financing method.
A federally-guaranteed "cash flow" debenture will protect the investment of private backers of new communities at competitive rates of return. At the same time, it will free the developer from the necessity to make large payments on his debts, until cash returns flow from the sale of developed land for housing, shops and industrial sites.
For the local and State government, the Act will offer incentives to channel jointly-financed programs for public facilities into the creation of new communities. The incentives will take the form of an increased Federal share in these programs.
A SENSE OF PLACE AND PURPOSE
"A city," Vachel Lindsay wrote, "is not builded in a day."
Nor--we know well--will its problems be conquered in a day. For the city's tides have been ebbing for several decades. We are the inheritors of those tragic results of the city's decline.
But we are the ones who must act. For us that obligation is inescapable.
Our concern must be as broad as the problems of men--work and health, education for children and care for the sick. These are the problems of men who live in cities. And the very base of man's condition is his home: he must find promise and peace there.
The cry of the city, reduced to its essentials, is the cry of a man for his sense of place and purpose.
Violence will not bring this. But neither should fear forestall it.
The challenge of changing the face of the city and the men who live there summons us all--the President and the Congress, Governors and Mayors. The challenge reaches as well into every corporate board room, university, and union headquarters in America. It extends to church and community groups, and to the family itself. The problem is so vast that the answer can only be forged by responsible leadership from every sector, public and private.
We dare not fail to answer--loud and clear.
To us, in our day, falls the last clear chance to assure that America's cities will once again "gleam, undimmed by human tears."
No one can doubt that the hour is late.
No one can understate the magnitude of the work that should be done.
No one can doubt the costs of talk and little action.
As we respond to the cities' problems--to the problems caused by the accumulated debris of economic stagnation, physical decay and discrimination--let us recall and reaffirm the reasons for our national strength: unity, growth and individual opportunity.
And recalling these truths, let us go forward, as one nation in common purpose joined, to change the face of our cities and to end the fear of those--rich and poor alike--who call them home.
LYNDON B. JOHNSON
The White House
February 22, 1968