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When that happens, I think you will find that whole situation will iron itself out very quickly.

Mr. MULTER. You said that private enterprise should undertake the risk.

Mr. FULLER. Yes.

Mr. MULTER. Including doing without Government financing, and Government guarantees of mortgage, and so on.

Mr. FULLER. May I give you my position as well as the position of the National Lumber Manufacturers Association?

Mr. MULTER. Yes.

Mr. FULLER. That is, that I think the Federal Housing Administration, which is what I presume you are referring to, was conceived in 1933 or 1934, to help a very critical situation. Since that time we have increasingly bettered our financial position. That being the case, it seems to me that every effort should be made to curtail the activities of the Federal Housing Administration. We cannot, of course, take a baseball pitcher and put his pitching arm in a cast and leave it there for 12 or 14 years, then remove the cast and expect him to pitch a ball game the following afternoon. But we can take that arm out of that cast, and let it go along for 4 or 5 months, and let him use that arm again, and finally he can recover the full use of that arm.

Mr. MULTER. Do you think Government guarantees of financing in the real estate field should be withdrawn today?

Mr. FULLER. I tried to make myself clear on that point, Mr. Multer. I do not think it should be withdrawn immediately; no. I believe that every effort should be made to gradually curtail its activities. I think there is ample financing available to do this job, but you must realize that bankers throughout the country, loaning institutions throughout the country, for a number of years, have relied upon this cast. Mr. MULTER. They ought to go back to free enterprise?

Mr. FULLER. That is right. But you cannot put the shackles on the construction industry for 16 years and draw them off overnight and expect it to function immediately.

Mr. MULTER. You also said that private enterprise can be relied upon to achieve as much as it is economically feasible in the realm of housing. Does that include low-income housing?

Mr. FULLER. Yes.

Mr. MULTER. Can private enterprise achieve that goal economically? Mr. FULLER. I know that they can.

Mr. MULTER. Will they do it?

Mr. FULLER. You have seen evidence of it all your life.

Mr. MULTER. That, of course, includes a profit to private enterprise? Mr. FULLER. Yes, certainly.

Mr. MULTER. Will they do it?

Mr. FULLER. Why, certainly they will.

Mr. MULTER. Do you know where they are doing it today-private enterprise? Is it putting up any low-income housing without Government financing?

Mr. FULLER. Mr. Snyder testified this morning that 13 percent of the housing being built today was in the low-income bracket.

Mr. MULTER. Low-priced bracket?

Mr. FULLER. Yes.

Mr. MULTER. How much of it is going to low-income families?

Mr. FULLER. That is the same thing. It should be going to lowincome families, of course.

Mr. MULTER. No low-income families can afford to buy it?

Mr. FULLER. There again, Mr. Multer, I do not think that the thought of buying should be uppermost in our minds.

Mr. MULTER. When I say "buy" I mean buy or rent.

Mr. FULLER. That is a different story. The availability of low rent, clean and safe and sanitary housing can and is being achieved, and certainly that whole process will be speeded up when and if rent control is removed.

Mr. MUTER. In what communities is it being made available?
Mr. FULLER. I think in every community in the country.

Mr. MULTER. I would like to have you show us where it is in New York.

Mr. FULLER. Do you have any new dwellings being built in New York?

Mr. MULTER. Some.

Mr. FULLER. Just some?

Mr. MULTER. Are you talking about multiple dwellings now?

Mr. FULLER. I am speaking of all types of homes.

Mr. MULTER. They are building high-cost types of homes.

Mr. FULLER. And a lot of them out in the suburban areas?

Mr. MULTER. Yes; but none that can be bought or rented by the lowest-income groups.

Mr. FULLER. Of course not; not in the quantity that you would want. Mr. MULTER. In any quantity.

Mr. FULLER. But the people that should be moving into the higherpriced units are not moving.

Mr. MULTER. In New York private enterprise is not erecting a single house which the lowest-income group can touch either by purchase or rental.

Mr. FULLER. I cannot answer that on the statistics, because it is not in my field, as you know, but I will say that certainly a better distribution of the houses available could be had without this distinction that Iam speaking about. Another thing, your State of New York, I understand, has quite a housing program.

Mr. MULTER. That is right, and both the Governor of the State, who is a Republican, and the mayor of our city, who is a Democrat, have asked this Congress to give them help. because they have stretched to the limit what they can do in either the municipality or the State in the way of financing.

Mr. FULLER. Do you mean that their State indebtedness compares with that of the Federal Government?

Mr. MULTER. With their income-taking income and expenditure and liability, of course, it is far in excess, in comparative figures, than that of the Federal Government.

Mr. FULLER. You feel that way about it?

Mr. MULTER. Yes, sir.

Mr. FULLER. I see.

Mr. NICHOLSON. Do you want me to build a house for you, Mr. Fuller?

Mr. FULLER. No; I want to build my own.

Mr. NICHOLSON. All right. Let us build our own house, then.

The CHAIRMAN. Thank you, Mr. Fuller.

Mr. Rouse.

Mr. James W. Rouse represents the Mortgage Bankers Association. Mr. Rouse, we are very happy to have you proceed.

Mr. ROUSE. Thank you, sir.

My company is the Moss-Rouse Co., in Baltimore, and I appear on behalf of the Mortgage Bankers Association, as chairman of their Federal legislative committee.

Mortgage Bankers Association is an organization of life insurance companies and mortgage companies throughout the country.

STATEMENT OF JAMES W. ROUSE, CHAIRMAN, FEDERAL LEGISLATIVE COMMITTEE, THE MORTGAGE BANKERS ASSOCIATION OF AMERICA

Mr. ROUSE. Mr. Chairman, my name is James W. Rouse, and my home is in Baltimore, Md. This statement is submitted on behalf of the Mortgage Bankers Association of America. The proposals contained in S. 866 for financing aids are based on the premise that through the extension of liberal credit the construction of more housing units can be encouraged and that action to meet special needs can be induced by specially liberal aids for projects designed to meet those needs.

It has been amply demonstrated over the past few years that the extension of more liberal mortgage credit does, in fact, encourage construction both by reducing the builder's initial risk and by broadening his consumer market.

The case against liberal credit aids does not deny its effectiveness but is made because of it. The demand for labor and materials to construct new housing units has continually, since the end of the war, exceeded the available supply. The intense competition created by this excess of demand over supply has forced a steady increase in prices and has precipitated a succession of shortages which have delayed the delivery of completed housing units to the market. There can be no doubt that the effective demand for new housing is increased directly as credit is liberalized and the ability of the builder to build is thus expanded. But, as liberal credit does not in any way improve the supply of materials and labor with which to meet the increased demand, the only result can be an increase in competition for the available supply and an inevitable increase in the cost of housing.

When liberal credit adds new demand to an already high level of effective demand, thus increasing prices, it tends to nullify the intended benefits, for the easy terms provided by the more liberal credit are more or less canceled by the larger loans which are required to meet the higher building costs resulting therefrom. Furthermore, a serious excess of demand over supply spreads thin the available supply, thus creating shortages and delays which postpone completion. It is entirely possible that more new housing units might be occupied today if fewer had been started and completion dates had been thus accelerated.

On the other hand, the argument against liberal credit carried to its extreme could curtail mortgage credit so severely and reduce demand so abruptly that actual construction would fall behind the avail

able supply of materials and labor with resultant cut-backs in the production of materials and with loss of labor to other industry. The housing program would lose its momentum and housing construction would be seriously jeopardized. This alternative might be as undesirable as the results of too liberal credit.

Congress is faced with the exacting task of threading a course between these two extremes. It is with full awareness of the implications of a bad choice in either direction that the following recommendations are made with respect to the provisions of titles I, II, and IV of S. 866:

1. Do not renew title VI of the National Housing Act.

2. Revise title II as proposed in section 101 except that the provision for 95-percent mortgages for 30-year terms should be deleted. 3. Revise title I as proposed in section 101.

4. Approve section 103 which established the incontestability of VA loans.

5. Approve section 104 authorizing an increase in interest rates on VA loans only if Congress is satisfied that the Veterans' Administration is prepared and equipped to provide sufficient underwriting controls to avoid the dangers of excessively liberal credit.

6. Reject the establishment of the secondary market as proposed in title II of the bill. Continue the secondary market as now constituted through the Federal National Mortgage Association. Although an expansion of the secondary market is not recommended, if Congress concludes that it is necessary it should be accomplished by increasing the powers of FNMA and not by dissolving FNMA and creating a new corporation to carry out its functions.

7. Reject the proposal contained in section 401 for 90 and 95 percent 40-year loans under section 207.

8. Reject, at this time, section 402 which sets up a yield insurance program.

This recommendation is made with personal reluctance as it is my hope that at sometime and in some such manner a vehicle can be developed to encourage an increase in equity investment as intended by this section.

It is the overwhelming sentiment, however, of the companies for whom this section is particularly intended that because of prevailing costs such insurance would not be used now if offered.

Titles V and VI of the bill which deal with urban redevelopment and public housing respectively are directed at this country's major housing problem. The problem stated briefly is that far too many people in the United States live in slums. The issue is how to correct this condition. Any solution to be effective must strike at the problem from two angles, prevention of the further growth of slums and cure of those which now exist.

What are slums? They are areas in which people live in which the housing generally is below an acceptable standard of structural soundness, health, sanitation or congestion, and in which the neighborhoods are inadequately served with parks, playgrounds and recreation areas, which have too many or too narrow streets and alleys, incongruous mixtures of land uses or other examples of bad "city housekeeping." To prevent slums every urban area in the United States must establish its minimum acceptable standard of housing and rigidly enforce it.

It must adopt and evecute intelligent planning programs with respect to parks and playgrounds, traffic direction and control, land use, and so forth, in order to assure that neighborhoods as well as houses will exceed an acceptable minimum in the future.

To eliminate existing slums, cities must enforce their housing codes against existing violations as well as future ones. They must force all housing to attain a satisfactory minimum or be abandoned. They must add to such an enforcement program, a redevelopment program by which areas which are beyond recall will be condemned, cleared and redeveloped in accordance with the cities needs.

Together with the programs of enforcement and redevelopment, the city must add to its total housing supply, both to alleviate the existing housing shortage and to provide a housing surplus into which people can move as slums are cleared and redeveloped.

Under this program of enforcement, redevelopment, and increase of housing supply, slums can be eliminated and our people adequately housed. For if we do not allow substandard housing or substandard neighborhoods to exist, and if we add to the total supply of housing sufficiently to meet the present shortage, plus the new demand created by redevelopment, there will be an adequate supply of housing and there will be no slums.

Mr. NICHOLSON. Mr. Chairman, may I interrupt?

How are you going to eradicate housing propositions for low-income groups when they cannot afford to do it?

Mr. ROUSE. That is my next question to myself.

Mr. NICHOLSON. Well, you can answer questions for us, if you want to. I am talking to myself now, while you are speaking.

Mr. ROUSE. If you will bear with me, I think I will answer it. I make the effort to answer that question in my statement.

Mr. NICHOLSON. I am sorry.

Mr. ROUSE. Many questions may be raised as to the practicability of this program. I will try to anticipate some of them.

A. How will this program assure adequate housing for the lowerincome families?

The distribution of rental housing among the various family income groups of the country can be determined by combining the 1947 Bureau of the Census report on housing with the Economic Report of the President of January 14, 1948. This shows that there is an excess of housing at rents which they can afford to pay for every family income level up to those earning $3,000 per year. For example, only 13 percent of the family incomes are $1,000 per year or less, but 20 percent of all rental housing in urban areas rent for $19 per month or less.

Similarly 15 percent of the family incomes are between $1,000 and $2,000, whereas 24 percent of the urban rentals are between $20 and $29 per month.

Adding up all family income groups of $3.000 per year or less, accounts for 48 percent of the population, but 69 percent of the housing rents for $39 per month or less.

On the other hand, 52 percent of the families earn more than $3,000 per year, but only 31 percent of the housing rents at more than $50 per month.

This would indicate that in terms of straight numerical supply of housing, the shortage exists at rentals above $50 per month. that there

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