shall be repaid the membership fee of $100 less a reasonable sum to reimburse the cooperative for the costs incurred in processing his application.

Subscription of share capital.-Upon acceptance of his application, an applicant selects a specific dwelling unit and subscribes to the amount of share capital required to finance that unit. The amount of share capital varies with the size and location of the dwelling, and amounts to approximately $300 a room. Share capital is payable in advance of the beginning of construction, and, when paid in, is not ordinarily refundable during the period of construction. Transfer of a family's interest can, however, be made to another family acceptable to the board of directors.

Rights and obligations of residents.-Although the title to the land and buildings is held by the corporation, the individual members through ownership and control of the corporation enjoy the same rights and duties as those enjoyed by any other home owner,

Residents receive a lease giving them exclusive possession of their dwellings for a specified number of years, subject to automatic renewal except upon failure to conform to the rules of the cooperative. Residents are responsible for the proper care and maintenance of their dwellings. The corporation is responsible for exterior maintenance of the structure, including exterior painting, the repair and replacement of roofs, gutters, downspouts, and other sheet metal, and for the common walks, open spaces, and play areas.

Monthly payments.-Monthly payments will be specified in the lease and will cover payments on the principal, interest, taxes, insurance, management, and exterior maintenance. Amortization is set up on the basis of equal annual payments on principal and declining interest as the unpaid balance decreases. This means that the monthly payments decline year by year, although if the membership so decides, it is possible to keep them at their original level and pay off the mortgage in a shorter period instead of the maximum of 40 years for which it is written. Reserves. Subscription of stock, and monthly payments, have been so set up as to build up for each family a reserve which can be drawn upon in case of unfavorable economic conditions or personal misfortune. The reserve is credited to each family individually and is payable to that family if it moves from the development. Financing. Financing is being arranged through FHA-insured mortgage bearing 4 percent interest and running for a maximum of 40 years. The mortgage, as being written, is flexible enough to allow for considerable leeway in prepayments so as to build up reserves and pay off the indebtedness in a shorter time.

How you save in Schoolcraft Gardens

Residents of Schoolcraft Gardens Cooperative will save money in many ways. Here are some of them:

No extra moving-in costs.-Your down payment covers mortgage and closing costs, landscaping, and screens. In ordinary financing, you would have to spend approximately $515 for these items in addition to your down payment.

Lower interest rate. Our mortgage is written at 4 percent instead of the 4% percent at which individual mortgages are set up. In the case of a 40-year $9,000 mortgage, this means a saving of $900, or 10 percent of the cost of the house.

More space. You get, dollar for dollar, about 10 percent more floor space in Schoolcraft Gardens than in a typical home available on the open market. Thus, a two-bedroom terrace or apartment in the development is priced at $9,900 and contains 1,000 square feet of floor space, while a typical brick veneer two-bedroom bungalow offered by a well-known Detroit builder at $9,900 contains only 900 square feet.

Extra equipment.-In Schoolcraft Gardens you get an automatic gas-fired furnace, double-pane insulating glass in south living-room windows, a garbagedisposal unit in your sink, and an incinerator. If you installed these yourself, you would have to pay approximately $435 for them.

No commissions or brokers' fees. If you move from Schoolcraft Gardens, you merely sell your share certificate in the corporation, not your home. You need pay no commission, which amounts to at least 5 percent, or $500, on a $10,000 house.

Lower depreciation. Because Schoolcraft Gardens is a completely planned neighborhood and is permanently protected from traffic, smoke, and other blighting factors, the depreciation in the value of your home will be less than in ordinary subdivisions. This means that you will stand to realize a larger proportion of your equity, should you have to leave, than if you owned a home in an ordinary development. Your home and your neighborhood-will remain desirable for many years to come.

Reduction of income tax.-Families in Schoolcraft Gardens enjoy the same allowances on their Federal income tax as do owners of individual homes. The amount paid for interest and taxes on a home is deductible from gross income (unless the short-form, automatic deduction is used). During the first few years, interest and taxes amount to approximately $450 per year for a one-bedroom unit, $525 for a two-bedroom home, and $600 for a three-bedroom unit, and result in actual reduction in annual income tax of 20 percent, 25 percent, or more of these amounts, depending on the surtax bracket in which the family's income falls.

Comparison between Schoolcraft Gardens and house offered for sale in typical real-estate development

Items included in Schoolcraft Terrace but not included in typical builder's house:

NOTE.- No allowance is made in the above comparison for Schoolcraft Gardens' neighborhood amenities, better planning and design, and superior workmanship and equipment.

Estimated cost of dwelling units and suggested schedule of monthly charges (as of

June 1, 1949)

The above schedule, if used for the first 2 years' occupancy, plus other contemplated savings and added to provisions set up in the mortgage terms, will provide for cash reserves that will average about $500 per family at the end of that time. By using these reserves to prepay the mortgage, a cushion will be provided to help the group meet economic reverses, and the monthly costs can be reduced approximately as follows:

These payments can be further reduced each year as the unpaid principal declines, or they can be held at this level to accelerate paying off the mortgage, depending on the wishes of the membership.

The above charges do not include heat, light, or other utilities. Where such added services are required, as in centrally heated apartments, they will be charged for on a pro rata basis.

There may be a few special units-two-bedroom end apartments, for examplefor which costs have not yet been determined. Garages will cost approximately

$400 each and will require $100 cash and $2.50 per month.

All savings below these figures which may result from declining construction costs or lower operating costs than anticipated, can be added to the reserves, used to repay the mortgage, or otherwise disposed of according to the desires of the membership.

Senator SPARKMAN. We had one other witness listed, Mr. Isadore Blumberg, who sent word from New York saying that he would not be able to be here.

The committee will therefore stand in recess until 10 o'clock, Monday, January 16, 1950.

(Whereupon, at 1:10 p. m., the hearing in the above-entitled matter was recessed until 10 a. m., Monday, January 16, 1950.)

MIDDLE-INCOME HOUSING

MONDAY, JANUARY 16, 1950

UNITED STATES SENATE,

SUBCOMMITTEE ON HOUSING AND RENTS OF

THE COMMITTEE ON BANKING AND CURRENCY,

Washington, D. C.

The subcommittee met, pursuant to recess, at 10 a. m., in room 301, Senate Office Building, Senator John J. Sparkman presiding.

Present: Senators Sparkman, Maybank, Douglas, Long, Flanders, and Bricker.

Senator SPARKMAN. The committee will come to order, please. Our first witness is Mr. Murray Lincoln. We are glad to have you with us, Mr. Lincoln. Do you have a prepared statement? Mr. LINCOLN. Yes, sir.

Senator SPARKMAN. Will you identify yourself for the record, and then proceed in your own way?

STATEMENT OF MURRAY D. LINCOLN, PRESIDENT OF COOPERATIVE LEAGUE OF THE UNITED STATES OF AMERICA

Mr. LINCOLN. My name is Murray D. Lincoln, of Columbus, Ohio. I am president of the Cooperative League of the United States of America and am appearing here today for the Cooperative League and for the National Cooperative Mutual Housing Association.

I am also president of three insurance companies, and because the problem of investment and security for the funds of insurance companies and other sources of private capital which are invited to participate in this program under the Maybank amendments are of concern to this committee, I would like to speak to that subject first. These companies are the Farm Bureau Mutual Automobile Insurance Co., the Farm Bureau Mutual Fire Insurance Co., and the Farm Bureau Life Insurance Co.

These companies serve over a million policyholders in the eastern United States. They are typified in the insurance industry by some of our competitors as being among the fastest growing insurance companies in America.

The Farm Bureau Mutual Automobile Insurance Co. had its beginning in 1926 with $10,000 capital which was invested by the farmers of Ohio in a project which they had no idea would succeed. Today our total insurance assets are $75,000,000 with surpluses of $15,000,000.

I only mention in detail these statistics because they point up our interest in the discussion before this committee.

As an insurance company executive I am vitally concerned in the possible use of our company funds for investment in cooperative hous

ing ventures. We must be certain, as near as an investment organization can be certain, that our investment funds are protected. If we invest any money in a cooperative business venture it must have as great a chance for success as any other type of business venture.

There are other reasons why we are interested in the cooperative housing bill and its amendments, gentlemen. Someone has pointed out in previous housing testimony that there are some 8,000,000 persons in the middle income group who are a potential market for homes. Some may already have homes but their needs are subject to change and new building devices and materials may create new demands in this group. This is a vast potential market for business.

Senator Bricker of this committee very graciously met recently with members of our staff to tell us of his observations as to what happens in the Scandinavian countries in terms of social progress when a potential housing demand is met. We profited by the Senator's observations and evaluations. I am certain too that the Senator realizes the interest of our Insurance companies in these amendments, to be one of using our insurance funds for the benefit of those people who entrust them to our business judgment. As Senator Bricker likely knows the roots of our existence are deep within the cooperative way of doing business. As I mentioned a little earlier, the farmers of Ohio joined together to provide the capital necessary to form our insurance companies. These farmers had also joined together in cooperatives to sell agricultural supplies to themselves in order to reduce their cost of doing business. They were merely applying the same principles of economics to the costs of their insurance. And today both farmers and city people are insured and benefited by these companies. Also, these policyholders represent a bloc of our middle income population who must have their housing needs cared for. What better way to help them is there than to use some of their funds for housing?

I may also add that our cooperative business approached a total of Ι insurance in the cooperative business of about $100,000,000 a year. We have successfully met competition on fertilizer, feed, insurance, and credit.

We have loaned money, I think, over the last 12 years at a better rate of return and interest than any of the banking systems have done, so when we say we can do certain things as we want to point out, I think it is backed up by ample experience.

Senator SPARKMAN. Are your operations restricted in the State of Ohio?

Mr. LINCOLN. Only in our Farm Bureau cooperatives in the rest of the 48 States, including Senator Flanders' State of Vermont.

These are our interests. Unfortunately, however, the funds which are available from our business institutions to help solve the housing problem cooperatively are a pittance compared to those for which there is a need. While we believe that this is an urgent need and that the potential demand for this legislation is great, we are asking the Government to provide nothing which we as a free-enterprise business institution would not ourselves do if we were sufficiently large to operate on a Nation-wide scale.

I am happy to be able to report to this committee on a very interesting and important conference held here in Washington, December 16. The meeting was called to work out a mutual agreement on policy on cooperative housing. Participating in the conference were repre