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have placed it upon deposit. As in every other situation supply and demand has its effect and the larger sum of savings available commands a smaller wage per dollar than the limited amount of savings available in the past could command per dollar.

I am not an economist, but it seems to me that that is the answer.

Mr. NICHOLSON. So the man who had $50,000 in the bank in 1935, we will say, gets $1,500 from the bank. Now, what does he get? He gets $500 when he needs not $1,500 but $3,000, based on the economics of the country. In other words, he needs that much more. Instead of that, he is getting two-thirds less.

Mr. FOLEY. Those figures are probably correct. I don't think, Congressman, if you will pardon me for differing with you

Mr. NICHOLSON. So, it seems to me it is easier to take an old-age pension of $500 a year and not have to have about $80,000 deposited in a savings bank so you could get that much money.

Mr. FOLEY. You may be right; but, again, if you will pardon me for differing with you, I don't think that you can trace that general condition simply to the fact that the Government has been guaranteeing or insuring mortgages.

Mr. NICHOLSON. Where do you propose to get this $2,000,000,000 that is in this bill here?

Mr. FOLEY. You are speaking now, again, of 6618?
Mr. NICHOLSON. Yes.

Mr. FOLEY. The $2,000,000,000, which is a maximum authorization for lending under this bill, $1,700,000,000 of it remaining in the discretion of the President, and only $300,000,000 of it becoming immediately available, would be derived from the sale of securities issued by the mortgage corporation proposed in the bill, and sold to private investors.

Mr. NICHOLSON. That is all.
Mr. MULTER. Mr. Chairman.
The CHAIRMAN. Mr. Multer.

Mr. MULTER. At this time, Mr. Chairman, I would like to have unanimous consent to put in our record an article which appeared in Sunday's New York Herald Tribune by Joel W. Schenker, Housing Projects in New York, and which confirms much that Mr. Foley has already told us.

The CHAIRMAN. Without objection, it may be received. (The material referred to is as follows:)

[From the New York Herald Tribune, January 29, 1950] COOPERATIVE HOUSING PROJECTS CALLED PATTERN OF FUTURE (Mr. Schenker, whose article follows, is an expert in the cooperative-housing field. His building firm, the Roth-Schenker Corp., pioneered in the construction of the Bell Park Gardens mutual project for 800 families in Queens.-Editor.)

(By Joel W. Schenker) Broad lawns trees and shrubbery

spacious play areas. On the green expanse attractive garden apartment buildings. In these apartments happy families enjoying a degree of living few of them dreamed of having-at carrying charges of only $14 a room.

This is not to wax lyrical. At the Roth-Schenker Corp. we believe this backdrop is basic in any discussion of middle-income cooperative housing.

For when we discuss housing we discuss people. And when we discuss people in relation to housing there is this inescapable fact to be faced. That there are

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people earning from $3,000 to $5,000 a year for whom there is little or no housing. There are people who find themselves in the unhappy position of earning too much to be eligible for public-housing projects, and of earning too little to permit them to buy or rent adequate and decent houses or apartments at present prices.

These are the people who obviously need cooperative housing. Housing that is decent, and is the kind they can afford.

BELL PARK GARDENS CITED

Bell Park Gardens, which has been called the pilot project in the 1949–50 era of cooperative housing, was erected by the Roth-Schenker Corp. As the builders we were afforded the opportunity of studying mutual housing from the "inside out,” rather than from the "outside in.”

Without exploding any bombshell, we can say frankly that this observation at first hand has convinced up of the need for cooperative housing as the only means of easing the situation in which the lower middle-income group finds itself.

From an academic viewpoint this so-called finding as it relates to the need, was not new to us, nor will it be to others in the industry. It always has been known. Over the years there always has been a shortage. Not in terms of units perhaps, but in terms of adequate and decent housing. Shortages in terms of housing at the right price.

From another viewpoint, however, the findings were startling. Working with these people we were struck with the cold, hard reality of their situation. It is one thing to know in an academic fashion that a need exists. It is quite another thing to experience it as something real.

PARADISE REGAINED

Individually and collectively the Bell Park cooperators are a testimonial to mutual housing—to its need and at the same time to its benefits. For those people came out of what might be called a "housing hell” where they were doubled up and tripled up, or living in “substandard” dwellings, and into a “housing heaven" where they can breathe their own air, live the good life, and realize the dream of “Home, Sweet Home.”

But these Bell Park families are only 800 families. There are hundreds, thousands more here, and North, South and West. What about them?

The answer, of course, is mutual housing on a large scale, on a scale never before blueprinted. We know of no other way of solving, or even coming close to solving the problem which besets America's lower middle-income families.

Mutual housing enables these families to enjoy better apartments priced at levels they can afford. Well planned mutual housing does not demand a disproportionate amount of their monthly income. Mutual housing takes these families out of the rut of old hand-me-down apartments. Mutual housing provides a healthier environment that aids not only the one family, but eventually accrues to the benefit of the community as a whole.

If there is any other way whereby the lower middle-income group can gain such advantages it has escaped us.

The builder and the industry as a whole have much to gain through cooperative housing. And again we can speak from experience. In agreeing to erect Beli Park we acceded to a contract limiting profits. This was an experiment for us. It has turned out to be eminently fair for all concerned. We received a fair return out of this arrangement, and the cooperators will share excess profits, adding theme to their reserves and thereby reducing their charges.

This is one economy in mutual housing, but perhaps the greatest economy comes about through a centralization of effort in that builder who combines, as we did with Bell Park, know-how, background, and experience with financial resources. Combined, these are the factors that take a mutual housing development over the humps in the many stages of putting one together.

Far from being socialized housing as some would tag it, cooperative housing symbolizes democracy in action. It gives a group of families what they so urgently require at their price level, and it permits the industry to enjoy a continual flow of fair-profit housing construction instead of a spasmodic risk pattern.

With tax exemption, where it is required, or without tax exemption, as it also can be achieved, cooperative housing is, we think, America's new housing economy.

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Mr. MULTER. Is your recommendation being made at this time to continue loans under 608?

Mr. FOLEY. Rather the contrary. We have indicated that we feel it should not be extended.

Mr. MULTER. Do you think that the benefits to be derived under section 608 have now reached their maximum, and that there is no further gain to be obtained by continuing that type of loan?

Mr. FOLEY. May I answer that a little bit at length, Congressman? Mr. MULTER. Please.

Mr. FOLEY. Section 608 was a part of the whole of title VI, which was created, as you will recall, as an emergency provision in the defense period, continued during the war, and originally for the purpose of providing the housing needed in connection with war and defense activities. It is definitely an emergecy set-up with certain risks contemplated in it that had not been previously contemplated in the regular insuring operation.

You will recall it expired for a brief period after the war, and was renewed again as an emergency measure because of the great shortage of housing for veterans, and was extended from time to time, and never contemplated as a permanent operation.

You will recall that Mr. Richards and I came before you, I think it is about 2 years ago, and recommended discontinuance of title VI as it related to housing for sale, because we felt that we had other vehicles in title II and were proposing new ones which would take care of the for-sale needs without this emergency type of operation, which chiefly revolved around using cost estimates rather than value as the basis of mortgage lending.

We have somewhat reluctantly recommended extension of 608 for rental housing purposes from time to time, because the production of rental housing was so small in proportion to the total, and we had no other vehicle which would seem to give it incentive.

However, we have been studying what would be a proper substitute during that entire 2 years. The conditions of high cost handicapped the development of a substitute.

In the meantime certain trends began to develop in the production of rental housing under 608, such as I outlined to you yesterday, a trend toward smaller family units, and so on, with the result that we feel that the time has now come in the point of probable stabilizing of costs so that we can proceed on a valuation basis rather than a cost basis, and can now introduce into the system types of incentives that will produce, we hope, a volume of rental housing comparable to what we have been getting, but more geared to the actual needs of the people. So we strongly recommend the amendments of 207 as a substitute for any further continuance of 608.

Mr. MULTER. I don't recall whether or not your figures have a break-down of the number of loans made to veterans for home financing and the number of loans made to veterans for farm-loan borrowings. Is that included in your summary? Mr. FOLEY. No; that was not.

You are referring, Congressman, I suppose, to the operation under the GI bill, particularly?

Mr. MULTER. Yes.

Mr. FOLEY. I do not have that with me. As you know, the veterans' operation is not under the supervision of the housing agency,

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but I am sure that we can get it for you, if you wish it for the record.

Mr. MULTER. Suppose I put the figures in the record, subject to correction, if my figures are not accurate:

The latest figures available show 1,660,464 loans to veterans for home financing, for a total borrowed by them of $9,283,238,836 for home financing.

Farm-home borrowings by veterans were 53,426 loans, for a total of $204,619,071.

Business loans for veterans aggregated 113,562 loans for a total of $354,711,450.

The default ratio to date is less than one-half of 1 percent.

I think the importance of that is that it indicates these veterans are good financial risks. That has been your experience, too; has it not, Mr. Foley?

Mr. FOLEY. That is true wherever a veteran has been given the proper advice on the amount of debt that he ought to assume; yes.

Mr. MULTER. Referring for a few moments to 6618, the cooperative housing bill that we are concerned with, there is nothing in that bill, is there, Mr. Foley, which puts the Government into the building business, either erecting, owning, operating, or maintenance of homes, or multifamily dwellings?

Mr. FOLEY. There is not, Congressman.

Mr. MULTER. The principle underlying the bill is to help individuals to become home owners, whether it be single-family dwellings or units in mutlifamily dwellings and the ultimate result of this bill, if it becomes law, will be that these people will own their homes.

Mr. Foley. That is right, Congressman, in the cooperative group set-up that is contemplated in the bill.

Mr. MULTER. And it is contemplated that all of the building be done by private enterprise ?

Mr. FOLEY. That is correct.

Mr. MULTER. And all of the financing will, in effect, be by private enterprise, even though it be aided by Government guaranties?

Mr. FOLEY. That is true, with the exception that the first $100,000,000 of capital contemplated can come from the Federal Government.

Mr. MULTER. But that also will be paid back to the Government?

Mr. FOLEY. Through two devices, particularly the mixed-ownership character of the corporation and the retirement of the Government stock, and the further provision of accumulating dividends.

Mr. MULTER. So, although the Government will put in the initial capital, that capital stock will eventually be acquired by the owners of the cooperatives and the capital repaid to the Federal Government?

Mr. FOLEY. That is right.

Mr. MULTER. And, by virtue of the debentures that will be sold by this cooperative corporation set up under this bill, the public will buy the bonds and the money will eventually be repaid out of the charges collected from the occupants of these buildings?

Mr. FOLEY. That is right, through the collections of rents, or the equivalent of rents, the mortagage payments to the mortgage corporation will be paid, including items as indicated in my statement yesterday for reserves for a cushion against losses.

Mr. MULTER. That is all I have, Mr. Chairman.

The CHAIRMAN. Mr. Foley, aren't the private-lending institutions generally in favor of FHA-insured mortgages?

Mr. FOLEY. My experience has been that they are. There are those who do not participate in the system. There are others who participate heavily, and others to a less degree, depending upon their local attitudes; but, generally speaking, I have been appearing before Congress now for nearly 5 years, testifying in favor of extensions, modifications of the system; and, except on detail, usually detail that is not basic, I have not heard opposition expressed in those same hearings from those institutions.

The CHAIRMAN. They have shown a very great interest ? Mr. FOLEY. They have; yes, indeed. Mr. DEANE. Mr. Foley, in the closing part of your statement you indicated that your statement was submitted with the approval of the Bureau of the Budget.

Are the funds contemplated in this proposed bill included in the Federal budget for 1950-51?

Mr. FOLEY. I have here, I think, the figures, Congressman. The budget contemplates, and I will stand corrected by my own budget if I am wrong, an item of new obligation authority in the 1951 budget of $35,000,000 for appropriations, and $25,000,000 for preliminary advance loans to be in the nature of a revolving fund.

No—$35,000,000 is for capital-stock subscription, and $25,000,000 for the preliminary advances.

The expenditures contemplated for the budget out of those estimates for the year would be $50,000,000.

Mr. DEANE. I am beginning to receive correspondence which indicates that this is another indication of a Federal subsidy. Is any Federal subsidy contemplated in this program?

Mr. Foley. No; not in any sense in which I believe that argument is being advanced.

As I went to considerable length with the patience of the committee yesterday in pointing out the analogy between the proposed system and the insured-mortgage system, there is, of course, the possibility of contingent loss in the event of what might amount to a debacle in the real-estate field; and I pointed to the experience of the FHA for 15 years in connection with the fact that, in spite of a tremendous volume of loans insured under a system quite analogous to this, insofar as the protection of risk is concerned the Treasury has never been called on yet to make good on a guaranteed-debenture issue.

This is set up in such a way, and in our best judgment a way sufficient, to create the same kind of picture with respect to the loans herein made. There would be some governmental cost involved, particularly in the administrative expenses of the division contemplated by the bill. The administrative expenses, however, of the corporation which would make the loans are to be covered by the interest return on loans, so that I do not believe that in the sense the critics have in mind when they raise that question that this bill contemplates subsidy.

Mr. DEANE. I am glad to have that statement.

Carrying the thought a step further, I am sorry our distinguished friend and my colleague, Dr. Talle, is not present. Yesterday, if I recall correctly, he expressed some concern over our housing programs, and what might result in the event of a depression market. As I recall, you did not share perhaps his

I wouldn't say pessimistic views, but they were not too optimistic. Do you still have the same feeling this morning that you had yesterday?

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