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Urban renewal, Federal-aid highways and low-rent housing programs will account for 96 percent of the 111,080 residential displacements. Urban renewal will cause 60 percent, Federal-aid highways 33 percent, and low-rent housing, 3 percent.
The Urban Renewal Administration has reported that as of September 30, 1963, 54 percent of the families displaced by the program since its inception were of an income level that would make them eligible for admission to low-rent housing projects. Only 19.7 percent of the total relocated, however, were in federally aided public housing:
A recent survey of 68 urban renewal project areas indicated that almost 29 percent of the families had annual incomes of less than $2,400. Another recent study of 789 families relocated to private housing from urban renewal areas showed a median annual family income of $3,264. The median monthly rental before relocation was $54 and after relocation, $65; 71 percent of the families paid higher rents.
Data was provided by the Bureau of Public Roads and the State highway departments concerning the sales or rental values of dwellings occupied by 44,757 of the 49,010 families or individuals displaced by Federal-aid highway projects in the 17-month period October 1962 through March 31, 1964. Of the displacements for which data was available, 36 percent had an estimated value below $6,000, or rented for less than $60 per month; 47 percent had a value between $6,000 and $15,000, or a monthly rental value between $60 and $110, and only 17 percent were valued in excess of $15,000, or rented for more than
month. No information was available with respect to rents or prices paid for replacement housing.
Some 8,117 of the dwellings were in rural areas, and beginning with the lowest category, these were divided, 47.6, 39.2, and 13.2 percent.
Displaced business concerns required to relocate at their own expense often incur substantial economic losses and sometimes suffer hardships. Displacement creates special problems for small businesses that cannot relocate without the loss of their established patronage. The problem is most severe for owners of small retail or service establishments that depend primarily on neighborhood trade.
Many of these businesses are operated by elderly persons. The majority occupy rented space. Some operate at minimal levels, but they provide a livelihood for the owner. Generally, displaced proprietors have been in business for many years. Expert testimony during the subcommittee hearings at Boston and Providence emphasized that, if left alone, most could continue indefinitely.
The elderly usually have little capital and have difficulty in obtaining financing, apparently including SBA loans. And many do not have the health or the training to assume the risks of a new business venture. Some proprietors use displacement as a convenient reason to retire. For others, displacement usually means a lost livelihood, temporary unemployment, or worse.
Many proprietors who lose their established patronage try to reestablish at new locations, and a few try to buy established businesses. In either case, substantial costs are involved. Few public agencies are authorized to pay for the goodwill or going concern value of the business lost.
In most programs, no consideration can be given to the
variety of costs necessarily incurred in establishing a business, apart from moving expenses, or the time required to develop new patronage. And many agencies do not pay moving expenses.
Testimony presented to the subcommittee at a public hearing in Providence, R.I., showed that the first 2 years is the crucial period for new businesses, and that a large number discontinue within the first 6 months. In many respects, a reestablished business is a new business.
Recent studies of the economic effects of displacement on small businesses indicate that a majority of all relocated concerns earn as much or more than at the project location, after an initial period of adjustment, but that some do not. It is indicated that at least one-third of the reestablished businesses earn less, and that some soon discontinue.? In addition, approximately 31 percent of the businesses displaced by Federal or federally assisted programs in the recent past discontinued at the time of displacement. Based on samplings by the Urban Renewal Administration and data provided by the Bureau of Public Roads, the discontinuance rates for these programs were 35 percent for urban renewal, and 23 percent for Federal-aid highways.
Most of the businesses that have serious difficulty are the very small proprietorships that have fewer than four employees. Frequently the employees are elderly, or have little training to qualify them for other employment. The majority are ineligible for unemployment compensation.
In contrast to the above displaced business discontinuance rate, the June 1963 Survey of Current Business, a publication of the U.S. Department of Commerce, shows that the discontinuance rate for all businesses in the United States in 1962 was 8.1 percent.
Of the expected annual displacement of 17,860 businesses by Federal and federally assisted programs, approximately 52 percent will be tenants and 48 percent will occupy their own property._Urban renewal will account for 73 percent of all dispacements, and Federalaid highways will displace 22 percent.
The subcommitee heard testimony at Providence, R.I., concerning a study of some 300 businesses displaced by public projects in the central business district of Providence during the 5-year period 1954 through 1959. Approximately one-third of the businesses were displaced by urban renewal and the remaining two-thirds by Federal-aid highway construction. The author found that more of the businesses in urban renewal areas were small marginal neighborhood establishments, whereas those displaced by highways were larger and more firmly established. The study concluded that many highway displacees are in a more favorable financial position to absorb the disruptive costs of relocation but that displacement caused serious difficulties and hardships in both programs.
1 See testimony of Sidney Goldstein, hearings before the Select Subcommittee on Real Property Acquisition, Providence, R.I., Feb. 28, 1964, p. 285.
See testimony of Basil G. Zimmer and William N. Kinnard, Jr., hearings before the Select Subcommittee on Real Property Acquisition, Providence, R.I., Feb. 28, 1964, p. 274,
See testimony of Basil G. Zimmer, hearings before the Select Subcommittee on Real Property Acquisition, Providence, R.I., Feb. 28, 1964, p. 263.
The lack of adequate financing, and the absence of advice and counseling for displaced small business concerns contribute to the high rate of business discontinuance. Expert witnesses testifying before the subcommittee, at Boston, Mass., and Providence, R.I., were agreed that lack of borrowing power was a serious problem, and that counseling was vital for some small business proprietorships. There was a general feeling that the Small Business Administration disaster loan program, authorizing long-term low-interest loans, and working capital loans for displaced small business concerns, had not lived up to expectations; and that many displaced business proprietors probably had no knowledge of the program. During the 3-year period from its inception, June 30, 1961, through June 30, 1964, only 278 loans were approved. An analysis of loan applications approved or rejected during the period from June 30, 1961, through December 31, 1963, by region and program causing the displacement, and indicating certain characteristics of businesses for which loans were approved, is included in appendix E. One witness testified:
Unfortunately, there are many administrators of federally assisted programs, and others who hold that most businesses being forced to relocate are marginal, and, as such, their ultimate demise is inevitable, particularly in view of the blighted conditions that exist in areas usually chosen for urban renewal, highways, et cetera. Consequently, many communities accept business loss rates of 25 to 40 percent, and some greater, as the indispensable price for the improvement of their cities.
There are very few evidences of the "take them by the hand” professional assistance and guidance by which the businessman in "displacement shock" may convert what appears to him to be an unfair and unfortunate situation into real opportunities for his own personal advancement and business development.
It is not that personnel or that project administrators are not willing to render such a service. It is rather the lack of time and the inadequate number of capable professional per
sons assigned to the relocation function. * *** 5 The witness concluded that where effective business advisory services were provided for small business concerns, the rate of discontinuance was sharply reduced.
Early in 1964, SBA was asked to complete a questionnaire concerning its management assistance activities. An extract from the completed questionnaire submitted to the subcommittee on April 13, 1964 follows:
• See testimony of Thomas Noonan and william N. Kinnard, Jr., hearings before the Select Subcommittee on Real Property Acquisition, Boston, Mass, and Providence, R.I., Feb. 27, and 28, 1964, pp. 104 and 310.
6 See testimony of John P. Alevisos, hearings before the Select Subcommittee on Real Property Acquisition, Boston, Mass., Feb. 27, 1984, p. 123.
Question. We note with much interest a press release, dated January 28, 1964, concerning a new SBA program in Philadelphia, and more particularly this statement by Administrator Foley.
“I want to stress that we are going to do much more than make loans to small firms that qualify. We are going to provide intensive management counseling to these small firms, we are going to keep close watch on these small concerns, and we are going to help them so that they may expand, create more jobs and prosper.
Would a similar program be feasible for the very small business concern being displaced by public programs?
Recent studies indicate that the incidence of business failures resulting from displacement is approaching, and in some instances, exceeding 30 percent. The situation is particularly acute, as you know, in the case of the "mom-pop” type business.
Answer. We thoroughly agree that, particularly in the case of “mom-pop" type businesses, intensive relocation assistance and management counseling is often needed for successful relocation. We are attempting to aid such small concerns through our program in this area. The President's proposed legislation for an attack on poverty, H.R. 10440, contains a new program specifically aimed at helping very small firms through loans and intensive management assistance.
Question. Would it be feasible, and is it desirable for SBA
a. To appoint one skilled and imaginative person in each region to a full-time position encompassing functions such as the following:
(1) Stimulate public agencies to give more consideration to the needs of small business concerns, in planning projects;
(2) Work with agency personnel to find more effective methods of helping small businesses relocate successfully;
(3) Enlist the help, in each affected community, of civic groups, trade associations, business and industry organizations, service organizations, universities, real estate boards, individual realtors, business chance brokers, and others in working to eliminate unnecessary hardship to displaced small businesses, and in reducing the incidence of businesses which fail to relocate or are unsuccessful at their new locations.
(An SBA field specialist recently suggested that service organizations might be persuaded to establish “business aid" committees, with members taking on individual cases to help, as do social service agencies and legal aid societies in their respective fields.)
(4) Encourage "retraining” for owners of displaced small businesses, who may have to change their type of business, or may have to seek employment after displacement.
b. To arrange periodic "working meetings" in which such SBA relocation specialists, and perhaps business relocation officers of various public agencies, and others, could share experiences, and exchange thoughts and ideas.
c. To establish a clearinghouse in the SBA Washington headquarters, to collect information on business relocation experience, and on new techniques and ideas in the field; and to stimulate thinking by making the data available to business relocation personnel in various agencies throughout the country, by means of informal newsletters or bulletins, issued at frequent and regular intervals. (This kind of information could be especially helpful to "working level" personnel.)
Please discuss the suggestions advanced in this question. Also give us the benefit of any thoughts you may have concerning assistance for displaced small business concerns.
Answer. a. With respect to the feasibility of full-time relocation specialists for each region, it should be noted that this is not provided for in SBX's proposed budget for fiscal 1965, now before Congress. It would not be possible to place current staff people on this assignment without hiring new people to take care of other SBA management assistance programs. Consequently, it does not appear feasible to include this proposal within our immediate plans. However, we are now working along the lines suggested in your proposal to the extent our staffing permits, and we will continue to give close attention to the need for additional personnel to carry out this and other important SBA programs to help small business.
b. “Working meetings," as suggested to exchange ideas, can be fruitful for specialists concentrating on finding more effective means of assisting small concerns affected by relocation problems.
C. A business relocation clearinghouse, such as proposed, might be maintained to advantage by the Urban Renewal
nistration. We believe the studies in this area would be more revealing when based on relocation information concerning all businesses displaced rather than on small concerns only. SBA could cooperate in the project to give full consideration to small business aspects of the problem. If the Urban Renewal Administration wished to delegate some of
the responsibility to SBA, this could probably be worked out. In contrast to the vast amount of displacement and disruption in present day programs, the market value standard, limiting compensation to the value of the property taken, was adopted by the courts in a comparatively uncomplicated time in our Nation's history, when land was plentiful, and Government acquisitions skirted cities and bypassed homes and businesses, causing few displacements and relatively little damage. Nevertheless the Federal courts have made it plain that they are bound by the established precedents, and that it is the responsibility of the Congress to determine whether other losses suffered by property owners or tenants should be absorbed by the public,