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proposal for Government assistance to stimulate the supply of housing has had this unintended result.

Mr. PATMAN. How long do you consider the average house which is being constructed now will be usable?

Mr. PROPPER. Speaking now of multifamily rental housing, which usually means masonry construction, I think a 40-year life expectancy is a fair limit. That is what the Internal Revenue Bureau sets as the life of a project for income tax purposes.

Mr. COLE. That is not really the expectancy of the life of the house, though, is it? The Internal Revenue Department permits that for depreciation, but we all know that the depreciation schedule is accelerated over the actual depression.

Mr. PROPPER. Yes. There are many houses that are in use today which have been standing for 60, 70, and 80 years, of course.

Mr. COLE. That is right.
I would like to add one further comment, Mr. Chairman:

This is not an ivory-tower proposal. It has been field-tested. Last fall I made a 7,000-mile trip across the country, during the course of which I conferred with more than a hundred of the leading investors and builders in the larger cities. They were unanimously in favor of this proposal and said that it would, in those relatively few cities, result in the construction of at least 100,000 additional units.

Within the last few weeks I rechecked, by telegraph, in order to make certain that there had been no change on their part in the intervening period. I would like to read a few of the telegrams that I have gotten in response.

This one is from David Bohannon, head of the Bohannon organization, probably one of the outstanding builders on the west coast :

We are prepared to proceed immediately with 500 units of rental housing if accelerated amortization plan is passed by Congress. There are several large investor-builders in this area who will likewise proceed with rental housing construction which will result in an adequate total to meet the urgent veteran and rental need. We believe that this will be the most effective means of meeting the rental housing need and at the lowest cost to the Government.

I have one from the Welch Construction Co., in Baltimore:

We regard the proposed amortization plan as the most effective method of stimulating construction of new rental units under present conditions. For our part, we will build 2,000 rental units if this plan is approved by Congress. We urge you and all interested to press for prompt adoption.

This is from Mr. Nielson, head of the Title Guarantee Co., of Denver, Colo. :

I wish there was something we might do to further the possibility of getting the accelerated depreciation plan passed at this time. If such a plan could be enacted, I am sure many hundreds of rental units would be constructed in Denver.

From Mr. S. L. Billings, head of the Union Trust Co., Salt Lake City :

Adoption accelerated depreciation plan will be definite urge to construction of badly needed rental units in this territory. Several projects being held up awaiting income tax relief; eliminating portion of hazard on long-term investment. Urge prompt consideration by Congress.

From Mr. Robert W. Dowling, head of the City Investment Co., New York:

Strongly support your plan accelerated depreciation plan because if enacted into law it will create immediately rental housing badly needed by middle income group. If law is passed we will build at least a thousand new apartments in Washington, D. C., and New York.

From the head of the Tishman Realty & Construction Co., New York:

If accelerated depreciation plan sponsored by your committee becomes law our firm will build approximately 4,500 apartments. We have been identified with construction over 40 years, having built over $100,000,000 worth of structures in this city, and are awaiting favorable action on your plan. Our entire organization will proceed on afore-mentioned program.

And there are others. Mr. MONRONEY. May I ask you a question right there, Mr. Propper! We would not expect the accelerated depreciation and the advantages of title VI as well, would we, under your suggestion! ?

Mr. PROPPER. We could, but I think the benefits would be much greater outside of title VI, because

Mr. MONRONEY. I thought these builders were willing to take these additional risks in hopes of accelerated depreciation rather than expect us to write 100 percent of the risk and then also give them accelerated depreciation. I think there might be a choice between one or the other. I think we might be going a long way if we gave them both.

Mr. PROPPER. I think, Mr. Congressman, that the two plans are not mutually exclusive. The benefits under title VI are of an entirely different character. The man who has no investment in a project can walk away from it at any time that the return becomes unsatisfactory. That is really the position of the builder under title VI.

Here you have the possibility of setting up a long-term incomeproducing investment. He is very much concerned about return. Under this plan he would be assured of a good competitive position as long as the project were in existence.

Mr. MONRONEY. What I was trying to bring out for your study and concern is this: Would the builders which you have mentioned be willing to do the job with accelerated depreciation and not expect us to wrap the Government's arm around them under a 100-percent guaranty in addition?

Nr. PROPPER. I should like to answer that question in this way, if I may, sir: I think you are talking of two different kinds of builders. These builders have not operated under title VI. They will not operate under title VI.

Mr. MONRONEY. That is the point I was trying to get at. If they will do this job for accelerated depreciation and forget about title VI, then perhaps we will have two programs—one to bring in this more substantial type of builder who is willing to build a project and stay with it for 40 years, and the other as well, but not to expect the Government to have both arms around them, under the accelerated emergency clause and under title VI. I think the Government's loss might be less under the accelerated depreciation plan than under title VI.

Mr. PROPPER. I agree with you.

Mr. MONRONEY. You would not expect title VI to go along with accelerated depreciation, necessarily!

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Mr. PROPPER. Not necessarily, not at all.

Mr. BUFFETT. Mr. Propper, are not the people who solicit this kind of encouragement people who are disinclined to use title VI?

Mr. PROPPER. Those that I have mentioned here—and, in fact, almost all those with whom I conferred in my trip across the country, have not operated under title VI for rental housing.

Mr. BUFFETT. I have spoken to people who are in favor of it. They want to put their own funds into it

. They want entirely private financing, away from the Government, and only want some help in having a chance to get some part of their high-cost investment back before very many years pass.

Mr. PROPPER. Exactly so, sir. Not only that, but the benefits of the plan operate to a greater advantage, the larger the equity investment.

Mr. BUFFETT. That is right. Thank you.

The CHAIRMAN. Would you say there would be a benefit to the borrower or owner of one of these projects if he did not have other substantial income?

Mr. PROPPER. I am sorry, sir. I do not think I got your question entirely, Mr. Chairman. Did you say: If he does not have substantial outside income, would there be a benefit?

The CHAIRMAN. Yes.

Mr. PROPPER. That is quite right. This would not operate to the benefit of a promoter or investor who did not have other income against which some of this additional amortization could be charged.

The CHAIRMAN. Do not the builders of these large projects, of four or five hundred units, incorporate those projects?

Mr. PROPPER. They are separately incorporated, as a general rule, but I believe that by filing a consolidated return those benefits could be applied to the other income without any difficulty. It is done regularly with cooperations of that character, I am told.

The CHAIRMAN. But you do have assurance that if we should adopt the accelerated depreciation principle there would be a substantial increase in rental dwelling construction?

Mr. PROPPER. I do not think there is any question about it, sir.

The CHAIRMAN. From the telegram survey which you have made, could you give us an estimate as to the number of units we might expect?

Mr. PROPPER. Well, I am a rather conservative person, but I feel justified in saying that this plan would produce 200,000 rental units, at least.

The CHAIRMAN. Over what period ?
Mr. PROPPER. Over the period of the 2 years contemplated.

I say that that is a very conservative estimate and is based purely on my own observation and on my conferences with these builders in only nine of our major urban centers. I did not intend to cover more than that.

The CHAIRMAN. Under FHA financing there is some restraint upon the amount of rent which can be charged for these units; but if they do not take advantage of title VI guarantees, then there is no restraint.

We have a situation up here on the Hill where there is a project now which has been built, and from the information which comes to

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me I do not see how anybody in his right senses can afford to live there.

If we have this accelerated depreciation, can it equitably be put into effect without some limitation on the rent charged in the projects?

Mr. PROPPER. We felt that there should be some degree of supervision and we have therefore recommended the certificate of necessity device.

The CHAIRMAN. And the certificate of necessity would perhaps operate as a check on rents such as the Federal Housing Administration limitation now operates?

Mr. PROPPER. That was our intention, sir.

Mr. MONRONEY. About what price do you think these family dwelling units would rent for?

Mr. PROPPER. I should say they would come within the present 608 scale and somewhat higher, depending on the area. I hesitate to put a dollar figure on it because it varies so from region to region. But in the high-cost areas, such as Chicago, New York, and perhaps Los Angeles and San Francisco, I should say a $25 per room figure would be a reasonable figure to shoot at.

One of the things which has impressed us is the fact that, unlike the permanent housing emergency for low income families, in this present shortage, middle income families are just as badly off, or almost as badly off, as low income families, and the assistance that this would give to the middle income family would do a great deal to relieve the pressure at that point. It is not a substitute or alternative for a complete building program.

Mr. MONRONEY. Would this help to get a great many of the large insurance companies more actively into the housing field?

Mr. PROPPER. I think not, sir, because its benefits would not be of substantial assistance to the mutual companies. The mutual companies now enjoy a tax situation which, I believe, limits their tax liability to something under 5 percent because they come within the operations of the cooperative association provision of the income tax law. But the private stock company certainly could benefit very substantially.

The CHAIRMAN. Are there further questions of Mr. Propper?
Thank you very much, Mr. Propper, for your contribution.

Mr. MONRONEY. Mr. Chairman, could we answer the roll call and come back and continue until 1 o'clock or 1:30 ?

I think we just have an 'Interior appropriations general debate.
The CHAIRMAN. We will see what the situation is on the floor.
Mr. MONRONEY. Will we meet this afternoon?
The CHAIRMAN. I do not know yet.
Mr. MONRONEY. I respectfully suggest that we should meet.

The CHAIRMAN. We will stand in recess, to reconvene at the call of the chairman.

(Whereupon, the committee recessed, to reconvene at the call of the chairman.)

GENERAL HOUSING

TUESDAY, JUNE 1, 1948

HOUSE OF REPRESENTATIVES,
COMMITTEE ON BANKING AND CURRENCY,

Washington, D. C. The committee reconvened at 10 a. m., Hon. Jesse P. Wolcott (chairman) presiding.

Present: Messrs. Wolcott, Gamble, Kunkel, Talle, McMillen, Buffett, Cole, Hull, Stratton, Scott, Banta, Fletcher, Nicholson, Spence, Brown, Patman, Monroney, Hays, Rains, Buchanan, Boggs, and Multer.

The CHAIRMAN. The committee will come to order.

We will continue with the hearings on the various House bills which are before the committee.

Mr. Douglas Whitlock, chairman of the Building Products Institute, will be our first witness.

You may proceed, Mr. Whitlock.

STATEMENT OF DOUGLAS WHITLOCK, CHAIRMAN, THE BUILDING

PRODUCTS INSTITUTE

Mr. WHITLOCK. Mr. Chairman, my name is Douglas Whitlock. My offices are in the Shoreham Building, Washington, D. C.

I appear as chairman of the Building Products Institute, an organization of manufacturers of building materials and equipment.

I have filed with the committee a short statement which I would like to read to the committee. I also have a supplemental statement covering the bill, Senate 866, by title and section and line, which I would also like to file with the committee at the proper time.

I appear in opposition to S. 866, including the Declaration of National Housing Policy which starts on page 1.

First, however, I would like to voice my appreciation of the willingness of the chairman and the committee to hear the views of the opponents of this bill. As you may know, the Senate refused to hear on single witness from the building industry, with the result that members of the Senate were in the position of passing on this measure without having heard any analysis of its numerous shortcomings.

The reason for that arbitrary decision is not hard to find. Certain of the advocates of S. 866 knew full well that it never could pass if it were analyzed section by section. They had succeeded in persuading a large segment of the public that it was a bill to provide 15 million new homes in 10 years, although, as I shall show in due course, it is no such thing. Those advocates ballyhooed this bill as a means of aiding private enterprise to build most of the 15 million homes,

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