Senator SPARKMAN. You realize that under this cooperative plan one of the present requisites is that it be nonprofit?

Mr. LOCKWOOD. Yes. Do you mean that the people who build the houses and maintain these houses are going to be working for nothing? Senator SPARKMAN. They will be the owners.

Mr. LOCKWOOD. You think these people that are going to live in there will lay the bricks?

Senator SPARKMAN. No. They will contract with the builder.
Mr. LOCKWOOD. Yes.

Senator SPARKMAN. And the debentures that will be issued will be to pay the builder. The builder takes the same chances he takes on building any house.

Mr. LOCKWOOD. He is not permitted to make a fee?

Senator SPARKMAN. I didn't say that for the builder.

Mr. LOCKWOOD. The only way there could be any difference would be if you were able to produce the project for less. That is the only way you could get an advantage. Obviously, you won't be able to do it. The house will cost just as much to build whether you build it under a cooperative plan or under an ordinary plan of financing. The method of financing will not affect the construction cost of the housing. Senator SPARKMAN. We don't contend that the cost of construction will be changed by it; that is, the initial construction of the project. The cooperative has got to do like any individual would have to do. He has to make a contract with the builder. Naturally, we assume that that builder in bidding for that particular job will do it at a price that will enable him to earn a profit.

Mr. LOCKWOOD. Where will there be advantage to the cooperative except for the indirect subsidy savings here as compared to the man who builds his own home by that method?

Senator SPARKMAN. Not at all. Much of the housing is not built that way. There is a third party in there. There is a promoter or broker, or whatever; developer. It is not the one who does the actual construction, ordinarily, who sells the house.

Mr. LOCKWOOD. I wouldn't say that is true. I think that ordinarily it is the person who does the actual construction who sells the house. Senator SPARKMAN. In many instances it isn't.

Mr. LOCKWOOD. In very few instances it isn't.

Senator SPARKMAN. I know of a great many in my own experience where it was not.

Mr. LOCKWOOD. I think by and large that is not a general method of operation; that by and large the largest proportion-I hesitate to guess; 80 to 90 percent of the housing-is delivered to the consumer by the party who builds it, and there is no third party involved.

Senator SPARKMAN. There are many instances in which the other is true. You may be right as to the majority of the housing.

You give us some very interesting figures. I think it is a very helpful statement. There is one thing that I would like to mention. That is this: Of course, when you take the figures up and study them from a national standpoint, there is a-I started to say tendency; it is not a tendency, it is a natural result, more or less, the picture as it applies to the local situation.

Mr. LOCKWOOD. I think that was particularly true in the testimony that I read of Mr. Foley, because it tended to indicate that—I mean,

he used the national figures to try to prove that presently housing is not being made available for the middle-income families. If you study the chart prepared in FHA's Fifteenth Annual Report and analyze it, you will find that the contention he made that there wasn't any housing available for much less than $92 a month for the upper brackets of the middle-income group just doesn't stand up.

That is what happens when you use national averages to try to prove a point. He made reference to section 608 projects which are built mainly in metropolitan areas where your largest income levels are prevelant.

Senator SPARKMAN. Don't you believe that the major portion of cooperative housing, if this proposal is enacted, will be in the metropolitan areas?

Mr. LOCKWOOD. Of the cooperative housing?

Senator SPARKMAN. Yes.

Mr. LOCKWOOD. Yes; I think it will.

Senator SPARKMAN. In other words, it is more usable there-Mr. LockwOOD. That is true.

Senator SPARKMAN. Than in other places.

Mr. LOCKWOOD. We are trying to show what it will accomplish, and you should not quote the national averages, but the national averages of metropolitan areas.

Senator SPARKMAN. Your economy house will have more adaptability to the smaller town.

Mr. LOCKWOOD. Surprisingly, its greatest production has been in the large cities.

Senator SPARKMAN. I thought you said——

Mr. LOCKWOOD. I said non-FHA and non-VA type of construction.. Senator SPARKMAN. That is right; I recall.

Mr. LOCKWOOD. Only about one-third of the homes built in 1948 were financed by FHA-insured loans.

Senator SPARKMAN. I think that is an interesting figure that a lot of people overlook; about one-third.

Mr. LOCKWOOD. Yes; 32 percent.

Senator SPARKMAN. That was FHA alone?

Mr. LockwOOD. Yes.

Senator SPARKMAN. How much of FHA-VA?

Mr. LOCKWOOD. It comes to close to 50 percent.

Senator SPARKMAN. Is that 50 percent of the total?

Mr. LOCKWOOD. 50 percent of the total. We will attempt to obtain the figure and will submit that for the record.

Senator SPARKMAN. I think it would be interesting to have a breakdown.

Mr. LOCKWOOD. The difficulty with VA figures is that they include a tremendous amount of existing housing and in order to give you a clear picture we would have to sort the existing housing from the new construction.

With FHA, they do a good job of breaking that down. With VA we haven't been able to get very good statistics on the VA program. They overlap, too, on the combination loans.

Senator SPARKMAN. Yes. I understand the FHA figure you gave did not include any VA-

Mr. LOCKWOOD. That is right.

Senator SPARKMAN. Overlapping.

Mr. LOCKWOOD. That is right.

Senator SPARKMAN. They were straight FHA.

Mr. LOCKWOOD. Yes.

Senator SPARKMAN. Do you know what percentage of the housing in this country is built without any FHA or VA help?

Mr. LOCKWOOD. As I say, it is somewhere in the neighborhood of 50 percent. We will try to put figures together and submit them. Senator SPARKMAN. I thought you said 50 was FHA and VA.

Mr. LOCKWOOD. The remainder would be; the remainder of FHA-VA.

Senator SPARKMAN. My question was how much of the FHA have a combination loan.

You meant FHA and VA?

Mr. LOCKWOOD. Combined.

Senator SPARKMAN. FHA and VA combined?

Mr. LOCKWOOD. Yes; the FHA and VA total combined represents somewhere in the neighborhood of the 50 percent of the construction and is handled by those two organizations.

Senator SPARKMAN. One or the other or the combination.

Mr. LOCKWOOD. I think that is right.

Senator SPARKMAN. About 50 percent, then, would be built without any Government aid.

Mr. LOCKWOOD. That is right.

Senator SPARKMAN. That would be by private financing, building and loans, banks?

Mr. LOCKWOOD. Banks, and such as that; or by individual persons. Senator SPARKMAN. Now, back to this economy house: Of course, that is just a small house; isn't it? How many bedrooms?

Mr. LOCKWOOD. You mean our economy-house program?

Senator SPARKMAN. Yes.

Mr. LOCKWOOD. Two or three bedrooms. The house that ranges from $6,000 to $8,000. Three bedrooms. Some of them are below $6,000. The bulk are between $6,000 and $8,000.

Senator SPARKMAN. I have had prepared a table that I want to insert in the record at this point, because I think it is somewhat in line-I won't say in line-but in keeping with the table you inserted.

I think it brings out this other point, which we need to supplement your statement, and that is the houses that are big enough to take care of families with children:

Rooms by property valuation: based on FHA insured mortgages secured by new single-family homes under section 207 during 1948.

Mr. LOCKWOOD. May I suggest, sir, that in 1949 you will find a vastly changed picture with relation to two and three bedrooms.

Senator SPARKMAN. Of course, those figures are not available yet, as you pointed out.

Mr. LOCKWOOD. We put on a well-organized campaign to concentrate on two- and three-bedroom houses in 1949.

Senator SPARKMAN. Yes. It will be interesting to see that. I believe it will be really advantageous to put this in the record. (The information referred to follows:)

Rooms by property valuation, based on FHA-insured mortgages secured by new single-family homes, sec. 203, 1948

1 FHA property valuation includes valuation of the house, all other physical improvements, and land. 2 Excludes bathrooms, toilet compartments, closets, halls, and similar spaces.

Mr. LOCKWOOD. I have one other suggestion.

Senator SPARKMAN. Yes?

Mr. LOCKWOOD. It is all germane to the subject, although it isn't mentioned in the bill, or in the amendments to S. 2246.

That is this: The industry has been giving thought to the problem of improving the supply of private money for support of the secondary home-loan market.

Senator SPARKMAN. May I say that I commented on that earlier in these hearings, the first day of the hearings. I have seen that published in the papers recently, and I have said here several times before the committee that I think that is one of the most hopeful things that has been proposed. I am glad to see the industry undertaking some such move as that.

Mr. LOCKWOOD. I have a suggestion for the revival of title III of the National Housing Act which was abolished a few years ago: As you know, that title provided for the establishment of private mortgage associations under Federal charter, which I think could be counted on definitely with the formation of a few such associations to relieve some of the load upon the Federal National Mortgage Association, today, and I strongly urge that you give consideration to reviving title III of the National Housing Act. I am sure that we can get people in the industry to work under it, and to take much of this Federal Mortgage Association loan off of their shoulders.

Senator SPARKMAN. I have in my file the proposed legislation that has been suggested by the Mortgage Bankers Association in keeping with that suggestion of yours.

Mr. LOCKWOOD. May I suggest

Senator SPARKMAN. A witness from that association is to testify tomorrow.

Mr. LOCKWOOD. May I say in that connection, however, that in reviving title III of the National Housing Act, should the Congress decide to do so, that certainly I think they should not at the same time abolish the Federal National Mortgage Association. It is needed.

as a stand-by device until the private market can be developed, that would handle the entire job.

Senator SPARKMAN. I fully agree with you in that statement.

By the way, I may say this; the fact may have escaped your attention: Mr. Foley in testifying before us suggested that we needed to look again at FNMA, and I asked him if his agency would propose some kind of legislation during the the present session of Congress, and he indicated that most likely there would be a proposal to come up. We are going to have to do something, because by the end of June all of the available funds for the FNMA are going to be used up.

Mr. LOCKWOOD. May I suggest a way to stop that drain? That is by doing what we have been urging for more than a year, arranging for the standardization of home-loan interest rates of FHA and VA; one interest rate.

Senator SPARKMAN. I agree with you that it would be much better if they were brought together, and I think that if FHA would lower its interest rate to 4 percent they could very easily bring them together. I think the present money market, even under the figures advanced by the Mortgage Bankers Association itself, would justify such rate of

interest.

Mr. LOCKWOOD. I say the rate ought to be standardized between the two, and ought to be at a rate which will elicit the necessary flow of

money.

The lowest rate possible consistent with getting a flow of money would be desirable.

Senator SPARKMAN. I think everybody agrees that 4.5 percent is more than the market justifies at the present time.

There is one other thing that I wanted to suggest to you, and another table that I think would be pertinent to put in the record at this point; it fits in pretty well with your testimony, because in your statement you bring out the very commendable job that the private home builders have done in this country during 1949.

By the way, you spoke of it as being more than the combined total of all the other countries in the world; something like that. Mr. LockwOOD. Yes.

Senator SPARKMAN. Yet, I wonder if you saw in the paper a few days ago an item that surprised me, saying that the United States was not the foremost nation in the world in building houses, that it stood fourth; there were three nations during 1948, which again was the latest figures they had, three nations who stood ahead of us in the number of units per thousand of population. The highest was Sweden, the next

Mr. LOCKWOOD. Number of existing units, not construction.

Senator SPARKMAN. This was construction; new construction during 1948. I inserted the fact in the hearings; I don't have it now. Mr. LOCKWOOD. Well, we will look it up, and find out where it is in

error.

Senator SPARKMAN. I will be glad for you to do so, and comment on it. It was new building in 1948. They ran like this

Mr. LOCKWOOD. You are talking in terms of percentage; I said in total numbers of units.

Senator SPARK MAN. I know that. I am not questioning the accuracy of your figures. It made me think of this. I thought you would be interested: