but also as representatives of wage earners as consumers—that is representatives of people who live in housing. I want to emphasize that anything that we present here is meant to be submitted in the most constructive and helpful spirit to this committee, which is confronted with a very complex and difficult problem.

The adequacy of proposals for housing legislation must be measured against housing needs. There is no basis for appraising such proposals unless we have the answers to certain basic questions. How many houses do we need? What groups in the population have the most urgent need for housing? To what extent can we rely on the existing supply to meet housing needs? How many new houses must be constructed? How soon must we have them?

Perhaps the first and foremost reason why we need a high level of residential building activity in this country is that our population is rapidly increasing. The actual growth of population has outstripped all past estimates of the Census Bureau and other population experts. Now we can look for an even more rapid increase in population in the years ahead.

By 1960 our present population of about 161 million will-actually, we have already reached that level of 161 million now-will increase to approximately 175 million. Thereafter, the population will increase even more rapidly as the huge crop of World War II babies reach the age when they marry and begin to have children. It is altogether possible that by 1970 we may have a population of more than 200 million.

In addition to the housing needed to keep up with this population growth, we must also replace the large existing supply of substandard housing. In 1950 there were at least 8 million substandard nonfarm units in the United States, and by now this number has increased considerably. The fact is that the current level of housing construction has not even kept up with the rate of population increase. As the result, none of this new construction has been left over to replace the rundown dwellings in which millions of American families are forced to live.

In the past few years, housing construction has been at a high level. But relative to the growth of population it has lagged behind. The fact is that even on an absolute basis housing activity has barely topped that of the 1920's. Thus for the years 1923-27 construction averaged 872,000 new housing starts each year. That is nonfarm. During the past 3 years new housing construction averaged 1.1 million. For 1954 the forcast and the goal of the proposed program is only 1 million. This means that our sights are set on housing construction volume only 14.6 percent above 1923-27. Yet since 1923 our population has grown by nearly 50 million, an increase of 45 percent, and total national production has almost quadrupled.

It is indeed difficult to accept the target of 1 million nonfarm units for 1954 which barely exceeds the volume of such construction maintained some 30 years ago. It is even more difficult to square this with the housing picture that confronts us in the years that lie just ahead. It is a picture of a steadily increasing population and a large accumulation of substandard and rapidly deteriorating houses. This picture reflects the need for annual housing construction of at least 2 million units a year until 1960. After 1960, with the even greater increase

in population, it calls for even greater expansion of housing construction activity.

The need is for 2 million units. Yet in our judgement the legislation your committee is now considering will produce at the most, 1 million units. This would be our estimate of the production potential that could be expected under this legislation even if the administration had not already acknowledged that only 1 million units could be produced under it.

One of the encouraging signs of the times is that the extent of unmet needs for housing in the United States (particularly among low- and middle-income families, has at last been acknowledged, even by those who in the past have refused to concede them. Even the homebuilders' association is coming close to our estimate of the housing need.

Here are some recent estimates of annual average housing construction needed in the period 1955-60:

American Federation of Labor, 2 million.

National Housing Conference, 2 million.

National Association of Homebuilders, 2 million, including rehabilitation.

Twentieth Century Fund, 1,800,000.

Fortune Magazine, 1,400,000.

We are greatly encouraged by the evidence of increasing agreement with us regarding the immediate and urgent need for a substantial expansion in housing construction activity throughout the Nation. We believe it is important to recognize that this need must be met mainly through new housing construction rather than by patching up of that portion of our housing stock which is old, rundown, and subject to further rapid obsolescence.

We

I want to make sure that our position is not misconstrued. believe that where it is feasible and economical to rehabilitate existing dwellings, where such rehabilitation will produce livable homes, and where it can be accomplished without subjecting the present occupants to distress, rehabilitation is both appropriate and justified. But such rehabilitation must, above all, produce homes that are adequate for family life in decent neighborhoods. These essential conditions of rehabilitation should not be underestimated. If these conditions are to be met it would be folly to assume that there exist in this country any large number of dwellings now occupied which can be patched up for many future years of livability. We estimate that, at the very most, not more than 200,000 units a year can be properly and effectively rehabilitated-and even this estimate is likely to be quite high. Let me emphasize that this number of units suitable for rehabilitation is over and above the need for 2 million new units which should be constructed each year.

The limitations of the rehabilitation approach were emphasized in a report made to the President's Advisory Committee on Government Housing Policies and Programs by two consultants to the committee, Jack M. Siegel and C. William Brooks. Messrs. Siegel and Brooks examined very closely actual experience with rehabilitation projects in a number of cities, including Philadelphia, a city which has had the most experience with areawide rehabilitation. They presented their findings and recommendations to the committee in a 143-page

report. In the section of this report dealing with rehabilitation they offer this conclusion: "Minimum rehabilitation in blighted areas may tend to perpetuate rather than eliminate slums."

The wise advice of these expert consultants seems to have been lost on the President's Advisory Committee on Housing, which in its report placed an undue emphasis on the potential value of the rehabilitation approach to the housing problem. It is unfortunate that this unrealistic emphasis on continued use of existing housing is also to be found in the bill which your committee is now considering.

The bill, H. R. 7839, contains three important provisions which, if enacted, would encourage the overuse of existing housing. The bill would convert the slum clearance and urban redevelopment program authorized in the Housing Act of 1949 into the so-called urban renewal program. Instead of the comprehensive city rebuilding which the 1949 legislation promised, cities would be encouraged to make do with the old instead of building anew. Communities would be called on to patch up and mask their rundown slum areas instead of clearing them out and building for future needs.

It must be recognized that the rehabilitation and conservation programs called for by the proposed legislation would entail serious problems of relocation of slum families. Our real need is not for "renewal" but for redevelopment of our cities to make them good places to live in in the years ahead. Redevelopment must provide for growth. It must be equal to the economic, industrial, and social demands of modern American life.

We must begin by acknowledging the hard, but unchallengeable fact, that genuine and lasting urban redevelopment requires a substantial amount of slum clearance and rebuilding in rundown areas. Ineffective and uneconomical rehabilitation of housing which has long sinceoutlived its usefulness will not do the job in areas which should be thoroughly rebuilt and replanned for decent family life.

Whatever legislation is enacted to deal with this problem Congress should make it unmistakably clear that financial assistance must not be withheld from communities undertaking thoroughgoing slum clearance and urban redevelopment programs. Congress should also direct the Administrator to authorize financial assistance for rehabilitation and conservation only when from the long-term viewpoint such activities in the community are feasible, economical, and will produce livable homes in sound neighborhoods.

Both in the special provisions for FHA insurance of existing dwellings in designated urban renewal areas (proposed new sec. 220 of the National Housing Act) and in the provision for equalization of mortgage terms for existing and newly constructed units under all FHA programs, the proposed bill would further encourage overuse of existing housing. The liberalized financial terms for existing housing would not only encourage the continued use of dwellings which should be retired from the housing stock, but would also inflate the prices of such dwellings. New residential construction would be put at a disadvantage while the sale and rental of existing houses would become more profitable. In the meantime, buyers and tenants of existing houses would have to pay higher charges. The net result would be fewer houses and increased costs for families needing housing while

real estate brokers and mortgage lending institutions would reap windfall profits in financial transactions involving old houses.

And I might say that such windfall profits would be of passing character, since they would not last very long because of the effect of this policy on the housing market as a whole.

We strongly feel that the reliance the bill would place on continued utilization of housing which has passed its period of useful life is misguided. We believe also that the provisions of the bill for financial assistance for construction of new housing are at best inadequate and in some respects seriously harmful.

Perhaps the most widely publicized of these provisions is the proposed section 221 of the National Housing Act which would authorize a special program of FHA mortgage insurance for construction of so-called low-cost private housing. Under the proposed bill the FHA could insure 100 percent loans for the maximum amortization period of 40 years for houses costing no more than $7,000 a unit. Priority for occupancy of these houses would be given to families displaced by slum clearance and other Government projects.

This proposed program is open to very serious criticism on a number of counts. In the first place, it is extremely unlikely that private builders will construct any considerable number of houses in the urban centers where families are displaced by slum-clearance projects to sell for $7,000 or less. Housing costs in these areas simply do not permit construction of even the most inadequate type of houses at such an extremely low cost. Thus even if long-term mortgage financing could be obtained for houses built under this program, the realities of prevailing housing costs in such areas indicate that the program could never get off the ground.

Even if financing could be obtained and houses could be built at the maximum costs specified in the bill the houses would still not be suitable for low-income families who constitute the majority of slum residents. The FHA estimates that houses under the proposed section 221 program selling for $7,000 would involve a monthly housing cost of $62.90. This is twice as much as low-income families in most cities can afford to pay.

Yet this program has been described by some as a substitute for low-rent public housing. The bill before you, except for some minor provisions, ignores public housing. Although the President has requested a token 140,000-unit program to be built over a period of 4 years, even this token and clearly inadequate request is not included in the bill. Yet it has been proven again and again that the low-rent public housing program, which has made good homes available to hundreds of thousands of low-income families, is the only effective means for permitting families in the low-income brackets to obtain decent homes.

I appreciate the fact that under the previous authority the Appropriations Committee may consider a provision of funds for such housing. But it seemed to us that it would be desirable to spell out the related programs and here spell it out in terms of the real housing need.

The American Federation of Labor is thoroughly convinced that construction of low-rent public housing should be considerably ex

panded at this time and should certainly figure largely in any housing legislation that is enacted.

The bill before you also fails to make provision for the needs of middle-income families, even though it has become abundantly clear that private speculative builders are either unable or unwilling to construct homes that most families of moderate means can afford. Without going into detail, let me cite one fact to illustrate the failure of private speculative builders under current programs to meet housing needs. In 1952 the latest year for which figures are available, only families with incomes of more than $5,000 could afford to meet monthly housing expenses for the average FHA house or apartment. Yet in 1951, the latest year for which we have census data, only 31 percent of all nonfarm families had incomes of $5,000 or more.

The proposed bill would do nothing to right this imbalance between incomes and housing costs. Instead of developing a fundamental approach to the middle-income housing problem this bill would simply reduce the downpayment requirement and extend the maximum amortization period for some types of Government-insured housing, and at the same time would authorize an increase in the maximum interest rate to a possible effective rate of 6 to 62 percent.

The lower downpayment requirements for houses in the luxuryprice brackets will simply encourage builders to construct such houses and discourage them from building more moderate priced dwellings. As far as the moderately priced housing is concerned, the lowering of monthly charges resulting from the extension of the amortization period, but actual increase in total costs over the life of the mortgage, will be considerably offset by the increase in the interest rate. Under the bill the President is given authority to establish maximum interest rates on FHA and VA loans up to 22 percent above average market yields of Federal long-term obligations. Since all the pressure will be on the President to increase interest rates rather than to lower them, there is every reason to believe that the apparent flexibility in mortgage terms which the bill seeks to introduce would in fact result in a continued high level of mortgage interest rates under the FHA and VA programs.

The net result of the changes in these terms which the bill would bring would be increased concentration on construction of higherpriced houses and higher costs for prospective middle-income home purchasers. This is obviously not the way to assure an adequate supply of housing for middle-income families at costs within their budgets.

Just a word on the proposed changes in the Federal National Mortgage Association directed primarily toward the support authorized for special housing programs. The bill authorizes a total of $700 million for this purpose without specifying any priority of use. Since this could assist the construction of only about 70,000 dwelling units it is clearly not the proper way of providing necessary financing for housing for cooperative groups or for minorities and others who are especially disadvantaged in obtaining private financing in the existing market. While we endorse the proposal for an authorization of special assistance for such housing, we think that the types of housing which would be assisted should be spelled out in the bill. Moreover, such authorization should clearly assure more adequate source