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comparable builders' house is only 900. Both are brick veneer. Our price

Senator SPARKMAN. Where are you reading from in your memo? Mr. Monson. It follows page 8. It would normally be page

9. Senator BRICKER. May I ask--the individual puts in 12.5 percent? Then he pays rent, which pays so much into his equity?

Mr. MONSON. Yes.

Senator BRICKER. If he wants to move or should die and the family would not desire to keep the unit, he has to offer that unit back to the cooperative, but he has to offer it under the rules back to the cooperative, at just what he has in it, 12.5 percent plus the rental he has paid in, less the operating costs? Mr. MONSON. That is right. There is a formula which goes this way:

He offers back to the cooperative his total equity, which includes, as you mentioned, the share capital, or equivalent down payment plus equity built up, less depreciation. In our particular group we are figuring that on an outside appraiser. He says whatever the value of the property is worth, and the seller would pay that depreciation. The total resulting figure from that will be multiplied by a figure based upon what the cost of building at that time is as compared to when the buildings are built.

Senator BRICKER. Do you pay interest on the amount of original shares?

Mr. Monson. No, sir. It is set up in a way that the share capital does not bear interest. That is voting stock in our corporation. One family gets one vote. In effect, each unit has one vote. To vote, you must occupy and be a shareholder in the corporation.

Senator BRICKER. The only profit he would be allowed if he wanted to sell his share would be the increment in the value of the property according to building costs as of the time?

Mr. MONSON. Yes.

That isn't, strictly speaking, a profit, because he would then perhaps have to go to another city and buy a house.

Senator BRICKER. But he is allowed the increment?
Mr. MONSON. Yes, but it may go down.
Senator BRICKER. Yes.

Mr. Monson. That is part of the agreement that he signs with us. We e are careful to make certain everyone understands that.

We have our price, including $100 membership fee, which takes care of the cost of organization, at $9,800, and the builder's price was quoted as $9,900. Our equivalent down payment was $1,200. The builder asked in the paper for $1,700. However, we have the following items included in our cost which are not included in the cost to the builder; so that is it.

There are mortgage costs of $275. For landscaping we have allotted $165. We have a gas-fired, automatic furnace, $250; screens all around, $75; insulated glass, or Thermopane; we have a garbage disposal in every kitchen sink. We have an incinerator in the basement to burn up the rest of the trash. If you add these factors together, the disposal unit is $85, Thermopane $75, it comes to about $950, which is missing from the best of the builders' houses there. Our down payment remains at $9,800. His comes to $10,850. The floor area, which is the measurement of the actual cost of a house, is repre

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sented in ours at $9.90 per square foot. The typical builders' house comes to $12.05. Our down payment is still $1,200. His actual comes to $2,650 if you put in these things he forgot to add. That is the best of the FHA houses that were offered at that time, and since that time there has been quite a bit of shuffling of figures. But the differential remains in our favor.

Senator BRICKER. What was your difficulty? I don't question the figures. What was the difficulty in selling the proposition to the FHA?

Mr. MONSON. The FHA obviously has been set up to process speculative building in the typical single-house manner, or 608's. When this cooperative came in they looked at us and said “We never saw this before.” Principally, it was the FHA's difficulty, as set up in the field, of understanding just what this was. They tried to use their administrative procedures under the old systems. Obviously, they didn't work.

Senator BRICKER. Tried to adjust and couldn't.

Mr. Monson. As a result, a long argument took place, and we found then that the laws of setting up a cooperative had to be worked out, and the FHA hadn't seen those laws before. There was considerable reading of law books.

Senator BRICKER. You would not have that trouble again?

Mr. Monson. Under the present bill, with this, a separate agency set up as part of the

Senator BRICKER. I mean, without this bill. You wouldn't have the difficulty you had in the first place in a second proposition?

Mr. MONSON. We wouldn't have the difficulty in time lag.
Senator BRICKER. That is what I meant.

Mr. MONSON. We would still have to pay the 12.5 percent. That is the best the FHA is legally empowered to give us.

If I may read on down: Payments required—the cash required is $1,000 for a one-bedroom unit up to $1,400 for a two-bedroom unit; $1,600 for a three-bedroom unit. That is more than the group we wish to serve will really find ready. Many of our people have had difficulty in financing that down payment. One of the things the bill will give us will be to permit us to lower these necessary down payments from 12.5 to—well, the bill, I gather, carries 100 percent

I financing—but the cooperative will ask as much as it can. In our area we would expect to operate at about 5 percent, that 5 percent would go into a reserve which is a prepayment for mortgages, so that in case of unemployment we could let at least the principal and interest on the mortgage ride for a few months, which will give additional security to these people, which security they sorely need.

Under the present system in FHA you stand in danger of foreclosure, of course, as soon as you miss a payment. We want to avoid that. We have one other additional factor here which we feel will give great security to our members; that is that we think included in the prices we are now quoting we are going to have a 3-year term insurance on the life of the breadwinner of each family. We are working it out so that the survivor will have an option, if the wife wishes to leave, she takes the equity, plus the term insurance, and the cooperative secures another member.

If she elects to stay, this term insurance will pay the equivalent of her monthly charges on the house for 3 years, giving her a chance to adjust to the changed family circumstances.

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That, of course, is not open to holders of free-standing houses. After all, the bank deals with each individual, and each individual has. to deal with the bank. We are a group, we can write such term insurance.

We feel that all of these factors give us a possibility of really lowering costs. Senator SPARKMAN. Before you leave those cost items, Mr. Monson, those additional values-before you leave them, let me suggest that the purchaser of one of the typical houses would not have to pay, except the mortgage cost. The others are optional?

Mr. MONSON. Yes, but

Senator SPARKMAN. They are advantages in your house, but not absolutely essential?

Mr. MONSON. That is true. You can live without taking the clay piles off the front of your yard, which is the usual way a working class family finds a house. To have a lawn they must get rid of the clay.

Senator SPARKMAN. I had in mind the gas-fired automatic furnace. I assume these other houses have some kind of furnace in them?

Mr. Monson. At the present time gas heat in Detroit is competitive with coal. There is a booming business in all classes of taking out of the coal furnace and putting in gas, simply because of the added convenience.

Senator SPARKMAN. The point I make is that that $950 or the items to the total of $950 represent attractive features on your house which are not essential in every instance or in every other house. If the person wanted to do without them, that could be done.

Mr. Monson. That is true.
Senator SPARKMAN. Except for the item of mortgage costs.

Mr. Monson. Strictly speaking, that is true. However, we feel these are not luxury items, but items which will make a livable place.

Senator SPARKMAN. It is like the hundred square feet of additional space. They are an advantage, and well worth the $950.

Mr. Monson. That is right.

Senator SPARKMAN. I did not want the record to stand as showing that that was an item that the purchaser of the other house would have to pay in addition.

Mr. MONSON. No.
Senator SPARKMAN. He would have to pay it if he got it.

Mr. Monson. Yes. However, these are the things which attract people who become members.

Senator SPARKMAN. That is right.

Mr. Monson. And I might say this is not something which is sold as an advantage of the cooperative living. Our members come in on a hard-headed business venture. They go to the open market and investigate. They come back to us. This is particularly true of the higher-income aspects. We had no intention of having fourbedroom units when they started. People came in and said "Can't, you put in a four-bedroom unit?”! It was on the insistence of our members that the architect designed and worked out the four-bedroom unit. We have now 10 in our 54 units which are a higher percentage, in terms of any other project. In fact, there are no four-bedroom units on the market that I know of generally in Detroit, particularly for rental. There is this factor: Why should we get things lower? Why not to everyone? We think this: that the cooperative form has certain advantages whereby it should be aided by the Government, such as this bill provides. We like the bill. We are in support of the bill. We feel that, first, a cooperative doesn't stop people from getting together, it enables them to get together and through getting together in a cooperative association get certain lower costs and better housing. They get the lower costs by eliminating speculative profit. A great deal of this will be built by builders. The builder will have to make enough to cover his overhead. But the speculative element is removed. There is no speculation after the house is built. This is built to move through the life of the dwelling, and at the cost it takes to make it.

The cooperative is holding ownership but giving tenure security to the family. Thus it achieves that purpose. By building in a group like this we can bring to home ownership and cooperatives really home ownership, and as such, we are private initiative from beginning to end, and we do not bow. to the mortgage bankers or anyone in being entirely private initiative in that. We resent the allegation that this is some sort of foreign importation, un-American, and all the rest of it. It will not destroy the Republic. Through this group we can do all the things which can normally be done only through rental projects, because the rental agency builds a single building or attached houses. I know row houses can be sold, but there is a difference in insuring that the entire building is properly maintained. Because this is held in one ownership we can use depth buildings and terraces and be sure repairs are made; one person doesn't paint his apartment a hideous color. Outside maintenance is included in the cost figures I gave. Because we are designing a large number at once, we can adopt all of the modern city planning practices and thus put all our garages into a compound. We save utility costs, we save sidewalks, and in a sense, we have the savings of rental housing with the savings and the responsibility that alone goes with home ownership.

These people are owners. They will take care of their homes better. In the highly successful cooperative in New York that has been the history of the project. Amalgamated does not house upper income people, but people who are members of the various garment trade unions for the most part. The Almagamated went through the depression and did not go through the wringer. It was the soundest thing in the housing field.

If you look into the record, you will find that to be so. Properly operated, cooperatives are able to survive, and have survived, even the 1933 depression, when practically all private housing, as has been admitted here, went through the wringer. That is the reason the various housing agencies were set up. Cooperatives have a record of surviving that financial storm intact. We feel, because we are a single mortgage and not a series of 54 individual mortgages, so that the bank in that case would keep 54 records, that no costs are involved in a cooperative of servicing the loan. They do that.

In Amalgamated they have a small staff doing the work at cost. In the Swedish cooperative, which my wife and I visited in 1948, in many of those small towns, members do all those things. There is a fee for such services, but if the member takes care of the apartment, does all this, he gets it back at the end of the year, as a rebate. We expect to do that too through the responsibility felt by each member, and through doing a lot of interior decorating and work themselves,

We are

as people do when they own their own homes, that we will actually be able to lower the costs. We will charge, on this general servicing, we had an advantage over the individual houses. Now, this is not class legislation. This is open to anyone,

We invite even the veterans who find that the houses they bought under their VA loans to be uneconomic, they are welcome to come in. We have veterans, nonveterans, people that work for the city, for the unions. a cross section of the city of Detroit. I think we have the best cross section of any such development in the city. We are getting a lot of work in the committee. We are well organized.

Particularly, the women in the group got together and formed themselves into a kitchen committee and advised the architect as to what they wanted there. The same goes for many of the other factors. We expect to have our community center, when we are finished with the development. We expect to have a nursery school. All of these things come out of the organization. We will have a park, playground; furthermore we expect that because this is planned as a group, because our people own it, and can take advantage of the best design, that our neighborhood will be sounder, more stable, be maintained as the years go by, our mortgage and our equity will depreciate much less rapidly than is usual in the city. The question of a long amortization, 50 years as the bill provides, is possible in the case of a well-organized cooperative, and not to individual families because, after all, in individual families it must be remembered they are geared to the life expectancy or the income expectancy of the individual family. In this group, because it is a group mortgage to

, a corporation, it can go as long as the mortgage can be written.

In Sweden we found it was common to build concrete structures, where warranted; that those could be amortized up to 100 years. This bill provides only up to 50 years. As such, we feel we are well within the limits of the building. Obviously, if the building form doesn't warrant it, the Administrator need not grant that long a term. So that the Government's interest, as far as giving aid to it, is fully protected.

I think that that general statement is actually the reason why we feel that a cooperative does warrant a consideration by the Government—I was going to say “special consideration,” but I don't think it is.

I think this bill simply plugs up our gap in our Government aids to housing. We began our Government aids with actual intervention in the building of housing for the upper-income groups, and the mortgage banks have switched and accepted with good grace such aids. We have insured the mortgage bankers, but we have as yet not insured the consumers. In the Housing Act of 1949 and previous publichousing developments, we aided the low-income groups and our group was in favor of that. We want to go on record here, we think hat would be necessary, and we are in favor of that. We are not opposed to the aid, FHA or what not, that came to the upper-income groups, but do ask that we get consideration for the forgotten middle third. We are not asking for 120-percent loans as was common in section 608's. The November issue of the Architectural Forum could not find excuse for 120 percent of cost mortgages which were given to holders of section 608 commitments.

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