Mr. SLUSSER. Eleven hundred?

Mr. BOLLING. Excuse me, 1,100 communities which have indicated a sufficient interest to request a reservation?

Mr. SLUSSER. That is not in addition, but total, including the 124,000 units.

Mr. BOLLING. But in any event, going back to the figures, and with the assumption that there will be certainly an increase in the figure of firm contracts plus preliminary loans, when we contemplate the reservations, there will certainly be additional units involved in that 1,100 figure, although it is inclusive of the others; isn't that true?

Mr. SLUSSER. Yes, sir.

Mr. BOLLING. We find, then, that you have a total, if my mathematics are correct, of approximately 160,000 units, where communities have either gone so far that they are under firm or binding contract, as I understand it, or that have gone so far as to be under a preliminary loan which is now in liquidation. Now, I presume that all of this was taken into account when the program was devised, which provided for a total of 140,000 units.

Mr. SLUSSER. Yes, sir.

Mr. BOLLING. So you are prepared to present a program which actually provides for less than the communities have indicated a very substantial interest in.

Mr. KILBURN. Are you talking about public housing?

Mr. BOLLING. Yes, sir.

Am I correct in that understanding?

Mr. COLE. Yes, sir; you are correct in the understanding that the program represented here is less than that represented by the evidences which you mentioned.

Mr. BOLLING. So that we cannot say, in effect, that the communities are inadequately interested in this program?

Mr. COLE. I do not know. I do not know that I understand your question.

Mr. BOLLING. Well, just on the figures, it seems evident that the communities are more interested in the program than the administration is willing to recommend that the program be.

Mr. COLE. Of course I would not agree with that, Mr. Bolling. You understand the preliminary problems of communities involved. Mr. BOLLING. Somewhat.

Mr. COLE. You must remember that Mr. Slusser, in his statement about the firm contracts, stated that even with those that are in existence now there is some attrition. Out of 36,000 they believe there may be an attrition of three to four thousand.

Mr. BOLLING. If I may interrupt, there, that is hardly startling in view of the way Congress has acted on this program.

Mr. COLE. Well, "yes" and "no." You are partially right about it. It may be partially Congress' fault, it may be partially my fault, or partially someone else's fault. All I am saying is that the mere evidence on the part of the community that they are interested in a program does not mean that they are going to complete it, nor does it mean that they should. They may change their mind, and they do change their mind, some of them.

Mr. BOLLING. You do not think that these figures indicate anything?

Mr. COLE. I think they do indicate something. I do not say that they indicate a firm, positive, absolute, unequivocable commitment that this number of units, first, will be desired by the community, and, secondly, that they are needed.

Mr. BOLLING. The indications would be to me, at least, that there were as of the time of the last appropriations rider's passing, a strong possibility that there was a desire on the part of enough communities to build a great many more units in a year than Congress was willing to appropriate money for.

Now, I would like to turn to another subject which has to do still with this business of slum clearance and urban renewal.

I am not sure that I understand entirely the significance of these $7,000 single-family 40-year mortgage units. I gather from what you said, and from other things that I have read in your statement, that it is in effect hoped that this would ultimately be a substitute for public housing?

Mr. COLE. No, I have not said that. I have said this: First, it is an experiment. Secondly, that we refuse to recognize that the only means of housing people with low incomes is public housing.

This, I think, is the first time that a program has been presented to achieve that objective. By that I mean, the recognition of other means of housing low-income people than through public housing. We are quite enthusiastic about the possibilities to be developed through section 221, in addition to section 220. We think that a test, a trial, will show that a successful operation of such a program will relieve the pressure for the need to assist people with low incomes to obtain decent housing.

Now, Mr. Bolling, you and I both know that there are people in this country-and God forbid there probably will be for many, many years, maybe always-people in this country who could never pay an economic rent or ever buy a house. We know that, and we must face that problem.

After facing it, then we decide what to do with it. This is merely another step to test, to see what can be done.

Mr. BOLLING. If I understand this correctly, it is designed to see, on an experimental basis, if we cannot house a number of people who are displaced by slum clearance in houses provided by the private enterprise without subsidy?

Mr. COLE. Well, when you add the latter, I do not know what you mean by subsidy. You know I am a little cautious about what a subsidy really is.

Yes, sir; I would say the answer is "Yes." If you press me a little bit about subsidy, then I might say

Mr. BOLLING. Well, that is what I intend to do.

M. COLE. All right, let us be frank about it. If you mean Government support is subsidy, I won't argue with you.

Mr. BOLLING. Let us define that. Do you mean the insurance feature?

Mr. COLE. Yes, sir.

Mr. BOLLING. No, that isn't the point

Mr. COLE. The FNMA feature, the FNMA support.

Mr. BOLLING. Well, actually, the point that I had in mind was perhaps even more simple than that, and it is contained on page 29

of your statement, where you describe what this program is, this 221 program, and the key sentence is that "It provides a means under which the income hazards of long investment at fixed rate of return are minimized by permitting any such loan in good standing to be assigned to FHA at any time after 20 years, exchanged for 10-year fully guaranteed debentures."

Mr. COLE. Yes, sir.

Mr. BOLLING. Now, check me if I am wrong in this: The effect of this is that if a substantial amount of this housing is built, and if there should be, let us say, a significant shift in interest rates over a 20-year period, then the person or the institution which held that paper-maybe it held it at an interest rate of 5 or 6 percent, and conceivably I think in that period interest rates went up substantiallyit would be able to turn in this particular paper, drawing a certain percent, for a debenture which drew a very substantially larger percent.

Mr. BROWN. Mr. Bolling, will you yield to me?

Mr. BOLLING. Certainly.

Mr. BROWN. These $7,000 houses over a period of 40 years, how much per month will these people have to pay?

Mr. COLE. In a $7,000 house our estimate is around $62 per month, which would include interest, amortization, utilities, fuel-all of the other necessary living costs to live in the house as though you were living in a completely provided for apartment, you understand. Mr. BROWN. Thank you.

Mr. BOLLING. Am I incorrect in my understanding?

Mr. COLE. I want to check with counsel if you will allow me.
Mr. BOLLING. Certainly.

Mr. COLE. I think basically you are correct, but remembering this point, that an investor may shift his investment for a number of reasons. He may want to rearrange his portfolio. There may be a number of reasons why he would do so.

Now, may I add one more thing: The point we are making is that this does provide a test of this type of an investment. Therefore, we think it is proper to do so.

Mr. BOLLING. Well, I have no objection to that point of view. The only thing that I am interested in doing at this point is revealing the implications, and it seems to me pretty clear that there is very evident an implication here that there may very well be, in this program, a quite significant subsidy, but it is a subsidy which is very ingeniously handled and which comes about later in the game, in addition to what other subsidies there may be in the Government program as a whole, and it is a subsidy to the investor. It may be perfectly proper, but I think it should be recognized as such, at least that the potential exists.

Mr. COLE. If you define a subsidy as any program which the Government undertakes to support, and which may require, in the final analysis, some money to be paid by the Government for that support, then this could in my judgment be a subsidy.

I do not agree, however, that it is a subsidy solely for the investor. It is a subsidy for the people who obtain the homes.

Mr. BOLLING. It would be a subsidy that went to many different people.

Mr. COLE. Right.

Mr. BOLLING. Including the people who had quite a bit of this particular type of mortgage. Now, presumably, although this is an expermiental program-admittedly and recognizedly-there has been some estimate made, both as to number and quality of houses that might be expected under this particular program, and I would like to have some information, quite specifically, as to what kind of a house you get for $7,000 and whether or not competent judges feel that this is the kind of house that will be in good shape in 40 years. Mr. COLE. I don't know what you mean by specifically. I can give it to you generally, but not specifically.

I know some builders who are building $7,000 houses, and I know some prefabricated manufacturers who are manufacturing $7,000 houses, I know some houses that are now, having been built some years, in substantial condition, I know that a $7,000 house can be built, in practically every area of this country, and I rather think in every area of this country.

Once more, it is an experiment. I don't think it is an experiment with respect to the fact that a $7,000 house can be built, nor do I personally feel that it is an experiment that a $7,000 house will last 40 years, Mr. Cole.

Mr. BOLLING. You feel convinced of that?

Mr. COLE. Yes.

Mr. BOLLING. Have you got evidence of that?

Mr. COLE Yes, we have some evidence of that. It is a matter of statement on the part of builders who feel that that can be done.

Mr. BOLLING. This is a matter of statement than can be done and not an illustration that it has been done?

Mr. COLE. Oh, when you press me for that, many $7,000 homes have been built in the past longer than 40 years ago, that are good, decent, sound houses.

Mr. BOLLING. We know what we are talking about, Mr. Cole, we are talking about a $7,000 house at 1954 prices.

Mr. COLE. I know, we are talking about that

Mr. BOLLING. If you translate a $7,000 house at 1954 prices to a $7,000 house on an equivalent basis, with the change in value of the dollar, then we have something to talk about.

Mr. COLE. Then we are talking about a guess which anybody might have.

Mr. BOLLING. That is what I want to find out.

Mr. COLE. But let me say this: There have been many advances made in the construction of housing over the last few years, many advances, which provide for a low-cost construction with the type of construction that was never dreamed of a few years ago, which, by the mere examination of the house, looking at it, some uninformed people might think it is a shell, a flimsily built house, whereas that is not true.

Many of the finely constructed houses today are built with materials which we never dreamed were available in years past, and bring the

cost down. Mass production will also come into play to accomplish this objective.

Now, I am not saying to you that I know positively that the $7,000 house is an answer to this problem. I won't say that. None of us know that. We merely say we are going to make a test of it, and we are advancing with our ideas on it and we are going to go about it in such a way that we think will be slow enough to really test it, and not to test it.

Mr. BOLLING. If I understand you correctly, this is a very important experiment and I would presume that you would have fairly careful studies, not only on the subject that we have just been discussing, but also on the subject of what the repair ratio would be, if that is the right way to put it, to keep a $7,000 house in good shape so that it would be worth something in 20, 30, and 40 years.

Mr. COLE. If repair work is done properly.

Mr. BOLLING. What does it cost? It is a question of cost. That enters into the total cost of dwellings, certainly.

Mr. OAKMAN. Would the gentlemen yield?

Mr. BOLLING. Yes.

Mr. OAKMAN. We took a day off and drove up to Levittown, Pa., is it, Mr. Cole, where they are building thousands-a brand new community-of houses, with a depot, and everything, a beautiful modern community, with large lots.

Mr. BOLLING. I think we are going to have the privilege of having Mr. Levitt testify, if I understand correctly.

Mr. OAKMAN. I think that would be excellent.

Mr. BOLLING. I do, too.

Mr. OAKMAN. They are very attractive homes, with natural fireplaces, electric ranges, and so forth. I forget the exact price of those homes, but it seems to me they are in the $7,900 class. Mr. Cole, there isn't anything sacrosanct about the figure of $7,000, is there? Mr. COLE. No.

Mr. OAKMAN. That could be changed to $7,500 or $7,300 or $7,700. But I say, I saw thousands of those homes, in a matter of a few hours. It is located around 35 or 40 miles out of Philadelphia.

Mr. BOLLING. I understand that is a unique development.

Mr. COLE. It is a unique development but there are many builders in this country that are doing a tremendous job in that field, Mr. Bolling. You would be amazed at what they are doing in that field. Mr. BOLLING. I understand there are a number of people that want me to yield. Mr. Multer.

Mr. MULTER. It may be that some of these fellows can build a house for $7,000, but I am sure that none of those builders are willing to do it, in my district or Mr. Deane's district or Mr. Bolling's. We would like to know where they are. They are not in our districts.

Mr. COLE. When you are talking about your district Mr. Multer, you are talking about a different situation.

Mr. MULTER. I will take the entire metropolitan area of New York; Long Island, Nassau County, N. J.

Mr. COLE. Levittown is built in your area, and may I say, in response to that, and in response to a question on this side of the aisle