URBAN RENEWAL:

Future of renewal hit by court decision that may back overpricing of slums

The future of urban renewal is threatened by a federal appeals court ruling that upset a condemnation award for a mortgage-loaded house in a Washington, D. C. slum.

Urban Renewal Commissioner James W. Follin says the decision "raises a very serious question whether the country can go ahead with full-fledged urban renewal"� because it may add millions of dollars to the cost of acquiring blighted property.

The appeals court partially overturned the long-established principle that the only fair payment in a property condemnation case is fair market value whether or not the owner paid too much for it. The Justice Dept, expects to appeal, if necessary, to re-establish the old rule firmly. Otherwise, warn renewal officials, slum speculators may reap a multimillion dollar windfall as redevelopment authorities are forced to pay inflated prices for over-mortgaged property.

What slum dwellers pay

At issue is the case of Mayme J. Riley. Seeking a home for her mother, 3-year-old daughter and herself, she searched the homes-for-colored want ads in housing-short Washington in 1951 and found what she figured was "a good deal."� It was a two-story, six-room-and-bath brick semidetached house at 823 Delaware Ave., SW, built in 1901. It cost her $9,950 $300 down and $72.50 a month spread among three trust-holders. She spent $887 on improvements making the total cost $10,837.

When the property was seized in June 1954 by the Redevelopment Land Agency as part of Southwest Area B redevelopment, Mrs. Riley refused a $6,250 offer for the house and went to court. On March 11, 1955, a jury awarded her $7,000. This still left her liable for payment of $1,900 after her property was gone. And for 30 months occupancy, she had laid out nearly $3,500 in payments and repairs. Moreover, she had quit her job as a clerk with the Civil Service Commission had to, she says, to pay off $421 from a balance she still owed on an $887 FHA Title I loan to put in a new furnace. FHA took the money out of the retirement fund she built up in 11 years with the government. Now she lives in public housing.

Mrs. Riley litigating under a pauper's oath with help from the Legal Aid Society appealed. On June 17, the US Appeals Court, in a split 2-1 decision, sent the case back to district court for retrial with a stern warning. The appeallate majority held that the lower court "was obligated to subject to searching scrutiny an award so much les-� than Mrs. Riley's purchase price. The court did not unequivocally proclaim that the government must pay the most recent sales price for a piece of condemned property. But it questioned whether Mrs. Riley had received the "just compensation"� the Constitution requires when property is seized by the government. Wrote Judge E. Barrett Prettyman: "If proceedings like this are to become mere con

tests, a homeowner so situated [as the impoverished Mrs. Riley] is indeed at the mercy of the government. These proceedings must not be permitted to become mere contests."�

Relegated to the minority opinion was the old principle: "Just compensation may be more or less than the owner's investment. He may have acquired the property for less than its worth or he may have paid a speculative and exhorbitant price."�

NCHA Counsel William R. Simpson Jr. says the decision would "encourage speculation and conspiracy"� by shady operators in second and third mortgages in slums. He predicted the result would be "a virtual guarantee to speculators dealing in slum properties of recovering 100 cents on the dollar for the second and third trust paper."�

Case of inflated garbage

Was Mrs. Riley's house worth more than $7,000? "It was garbage but good garbage,"� say the "wholesale"� realty brokers who bought it six months before Mrs. Riley did for less than half what she paid.

Morton Himmelfarb and Leo Schloss figure they turned a $1,200 profit in the eight days they held Mayme's house, too. They bought her house, the attached house next door and one at 1008 Eighth St. NW for $13,500 in June 1951. They put up $3,500 cash and borrowed the rest on first trust note-�$3,000 each from Perpetual Building Assn, on the Riley house and its neighbor and $4,000 on the Eighth St. house from Eastern Building Assn.

Himmelfarb and Schloss sold the house to a second broker, Charles T. Martin, who gave them $1,800 cash for the three properties and a second mortgage for $4,000 each on the Delaware Ave. homes. Himmelfarb and Schloss sold these second trusts for $3,800 about the usual discount. Martin eventually sold to Mayme Riley, after adding in a third mortgage for $2,727.

The price and terms, a government appraiser testified in court, were "almost criminal."� The house next to Mayme's was bought at auction in 1954 for $3,189 and its owner later took $5,300 for it from the government.

As the Washington Post observed, the case exposes "an ugly dilemma"�: how to avoid hurting the hapless victims of "slum profiteering"� without paying bootleg prices for blighted property. Within a fortnight after the ruling, says the National Capital Housing Authority, it lost three pending agreements to acquire property for less than face value of its mortgage debt. Up to then, unsatisfied mortgage holders had taken their paper losses as part of the game.

Only the symptoms

Such abuses, of course, are only the surface sores of the slum infection. Still to be treated are the causes: 1) failure to plan and build enough good housing and, 2) almost direct subsidization of slum owners by undertaxing their property.

Tax "subsidization"� was pinpointed recently as a block to effective urban renewal by Builder William M. Freeborn, of the Oakland (Calif.) Citizens Committee for Urban Renewal.

"A large percentage of the people now occupying blighted housing in Oakland are on relief,"� he says. "Their rents are paid with money received from the welfare program  money which came originally from- taxpayers."�

Not only are tax-provided relief checks going to slum owners but assessments sn the property are "practically nothing,"� says Freeborn, because of their rundown, often substandard conditions.

His remedy: "A program in which slum landlords will be forced to maintain their properties at minimum health and safety standard-�or to get rid of their properties so that someone else can do the job."�

OPERATION HOME IMPROVEMENT:

Campaign to continue for another year

Operation Home Improvement will continue for another year with its budget increased 50%.

Since the big remodeling promotion campaign got under way last July it has spent some $100,000 boosting fix-up drives in some 1,000 cities and towns (mostly the latter.) For its second and final year OHI will operate with a $150,000 budget.

The OHI seal the common identifying symbol for manufacturers, lumbermen and others to tie their own promotion to the over-

1956    1957

all effort will continue as the campaign trademark. The slogan on it will change from "56 the year to FIX"� to "Better Your Living" (see cuts).

OHI Executive Director Jack Doscher and Assistant Director Don Moore plan to start next year's drive with a three-day national conference of local OHI chairmen in late September or early October, probably in Denver or Washington. The meetings will be aimed at collecting and exchanging ideas that work to help more cities conduct home improvement promotions and lay plans for a permanent home improvement month once a year.

Doscher said use of the '57 seal in national advertising (scheduled to begin in November) will be limited to firms which contribute to OHI's support. Minimum tab for national firms will be $1,000 this fiscal year, says Doscher. The maximum is $10,000.

A new OHI promotional kit will go on sale for $10 Sept. 1. This year, OHI sold some 13,000 kits, Doscher says.

Four new members have been added to OHI's board of directors: Chester Stackpole, managing director, American Gas Assn.; Donald Z. Albright, vice president, Security First National Bank, Los Angeles; George

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