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Instant Slums? In several cities, said the committee study, the staff found supposedly renovated Section 235 houses with "faulty plumbing, leaky basements and roofs, cracked plaster, faulty wiring and heating, and rotting wood in floors, stairs or ceilings." As for new homes built under the program, the staff labeled two projects, in Elmwood, Mo., and Everett, Wash., as "instant slums" because of shoddy construction, flimsy materials or fire hazards. In Seattle, some Section 235 buyers—all on welfare—are suing FHA for damages because, soon after they moved in, the city declared their homes "substandard" and ordered them repaired or condemned.
Defending the FHA, George Romney, Secretary of Housing and Urban Development, last week angrily denounced the Banking Committee study as "inaccurate, misleading and very incomplete." The committee staff based its findings on a look at only 280 homes. "They've picked out a few horror examples," fumed Romney. Still, he conceded that "some shocking situations" do exist. The FHA has already tightened its appraisal rules, increased its inspections and raised its property standards in an effort to stop the speculative spree. Romney, a onetime president of American Motors, noted that a used-car buyer often finds that "it is tough to keep somebody from taking advantage of you. Well, it's child's play compared to the used-house business."
For all the furor, Congress seems unlikely to order any curtailment of Section 235. The program has broad bipartisan support, partly because it provides low-income families with housing at considerably less cost to taxpayers than public housing projects. The disclosures, however, may jar the FHA into taking a more protective attitude toward low-income families that buy houses. One complaint in the study involved a Washington, D.C., woman who made a deal to pay $14,000 for a house that had changed hands three weeks earlier for only $7,100. It was in such bad shape that embarrassed FHA officials last week agreed to transfer her mortgage to another house in better condition.