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Mr. LEVITT. If you would permit me to sell you a house I could give you the argument on that quite easily. That is the difference between his paying rent and buying the house and saving carrying charges that he makes back, first of all what he makes on an income-tax deduction, he also increases his equity, call it compulsory savings and between the two he certainly has more than enough to take care of any maintenance.

Mr. MUMMA. That is theoretically true. You have this chase for the consumer's dollar. I have seen things that are very, very bad, and I know your type isn't rows or double houses.

Mr. LEVITT. No, single.

Mr. MUMMA. You run into that situation where Smith has the money to pay for painting and the fellow next door may not have.

Mr. LEVITT. I think you will find in the so-called low-cost house the average individual does it himself. He buys the paint, but he supplies his own labor. I know we have found that to be the truth, not only on painting, but a great many other items.

Mr. MUMMA. Smith may want green and the other fellow red. You can see, not in your development, because you have it pretty well, but over a period of years these row houses or multiple one-story do get to look a lot different. It sort of starts the degrading of the whole proposition.

Mr. LEVITT. That is right. You use the word "theoretical." I say it is actual. I say a man on a $10,000 house, we have estimated the average purchaser gets approximately a $100 income-tax deduction. That is actual cash in his pocket.

Mr. MUMMA. It is a question when he gets a pay check every month or weekly or whenever it is who gets the first and most definite cut out of it. He may save that hundred, but it doesn't necessarily mean he has to put it in the house. One fellow said we lived in automobiles.

Mr. LEVITT. The interesting part is it doesn't come every week. He gets that check at the end of the year as a refund from the Government.

Mr. MUMMA. His income tax?

Mr. LEVITT. Yes. He files deductions, and so forth, but he gets a lump sum at the end of the year.

Mr. MUMMA. It doesn't necessarily mean that something isn't pushing him more than paying the house.

Mr. LEVITT. That is up to him and mamma. I can't do anything

about that.

Mr. MUMMA. That is my point. I don't know where the decision will be made. From what I see of some houses, especially multiplerow houses.

Mr. LEVITT. The distinction I am drawing is between a 30-year mortgage which this bill proposes and a 35-year mortgage. If you are right in your contention it will apply equally to 30 years.

Mr. MUMMA. It might be a little worse in 35 years, is that right? Mr. LEVITT. That is right. It is a question of degree and I don't think that is too much, between 30 and 35, but the difference in buying, the difference in stimulating the market is tremendous. It means that you can practically cut the proposed figures you had on a $10,000 house almost in half, and actually the carrying charges will be slightly

less on a 35-year mortgage with a one-half downpayment. That is important.

Mr. MCDONOUGH. You also mentioned the fact that a large majority of the people pay out in 10 to 12 years.

Mr. LEVITT. That is not only FHA statistics, that is all banking figures. Practically all mortgages have been paid off or refinanced in 10 to 12 years. Let's presume we are going to have refinancing in 12 years. It is up to the then lender to determine what he wants to do. These mortgages we are talking about now you can bet your bottom dollar will be paid off or refinanced. I am saying 10 to 12 years and being conservative. I think FHA are 7 or 812 years. That is on a 20year experience.

Mr. MCDONOUGH. How many new prospective buyers would be in the market if you did have satisfying financing?

Mr. LEVITT. I think it is unlimited. You have a population upcurve coming all the time. You are pretty close to the family formations, war babies, etc. You are only a few years away now. I think it is practically unlimited if you can remember that credit is the lifeblood of everything. You can't sell automobiles, washing machines, or anything else without credit. We know it because when we take a credit memorandum on every purchaser he has to give us everything that he owes on credit, and you get the television machine, the washer, and this and that, and so on. Luckily we supply washers so we can get rid of that obligation.

Mr. MUMMA. Is that all in the cost of the house?

Mr. LEVITT. Yes, we include everything in the cost of the house, including settlement fees.

Mr. BETTS. Do you believe in the open-end mortgage?

Mr. LEVITT. Yes. That is the only mortgage that makes any sense. Consider the work you are going to do after you would close title or had done before, you would have had a different house, and you could have financed it and just the very fact you closed it you say "Now, I am going to add a garage or two or something," and somebody says "You can't finance that for 25 or 35 years. That has got to be done for 7 years." It doesn't make sense. I very much believe in the openend mortgage.

Mr. OAKMAN. Where could he get it financed for 7 years?
Mr. LEVITT. FHA, title II.

Mr. OAKMAN. You are supposed-it is proposed to extend that 3 to 5 years.

Mr. LEVITT. There is 1 for 7 years. I am trying to remember what it is. Then it is 3 years. It makes the open-end mortgage still more attractive.

Mr. OAKMAN. Mr. Chairman, just a couple of questions.

I had a very enjoyable day last spring driving up to Levittown and looking over your development there. How many homes will you eventually have when it is all filled up? Mr. LEVITT. In Pennsylvania, 16,000.

Mr. OAKMAN. What is the average sales price of the average home? Mr. LEVITT. There is 1 house for $9,500, 1 house for $11,500, and we have a small group for $16,500. That will be less than 5 percent of the whole community.

Mr. OAKMAN. What is the monthly carrying charge of that $9,500 home?

Mr. LEVITT. Fifty-nine dollars a month.

Mr. OAKMAN. That includes taxes?

Mr. LEVITT. That includes everything.

Mr. OAKMAN. It was a lovely clear Sunday when we were there, and we just noticed hundreds of those young veterans out there doing all sorts of work, with their wives, too.

Mr. LEVITT. There is 36,000 people that live there now.

Mr. OAKMAN. They were painting and putting in everything around the place.

Mr. LEVITT. They were.

Mr. OAKMAN. They don't hire that work done. They do it themselves.

Mr. LEVITT. That is the interesting part I want to stress.
Mr. OAKMAN. They won't do it in a rented house.

Mr. LEVITT. That is exactly the point. When we first started Levittown, N. Y., that was shortly after the war, and there was the clamor for housing. We built under 603. We built 6,000 rental units which we sold part of them, part of them this chap bought and he is selling to homeowners. Right after the 6,000 we built 12,000 more for sale, and the difference between the maintenance of the rental house and the house that was homeowner occupied is just like chalk and cheese. One was maintained beautifully. The lawns were beautiful. What painting had to be done was done. The tenant paid no attention. He said it wasn't his, why should he. The minute he becomes a homeowner the whole house is different. Its real-estate value goes up because it looks better, and is in a better neighborhood.

Mr. OAKMAN. The other thing is, in referring or recommending a 35-year mortgage, open-end, would you discriminate between the age of your buyers?

Mr. LEVITT. That unfortunately you must do. You must do that because among other things it is practically an inflexible FHA rule. The mortgage, according to FHA, and again it is somewhat unrealistic, must mature at age 70, so that a 35-year mortgage means a 35-year-old individual, if he is 40 it has to be somewhat less, 5 years less. We do that all the time now even with the current 25-year mortgage. If a man comes to us to buy a house, he is 50 years old, he gets a 20-year mortgage instead of 25. In view of FHA's own experience on the maturity of mortgages when they actually get paid up or refinanced, it doesn't make sense. On the one hand they have a set of figures, and, on the other, they become theoretical.

Mr. OAKMAN. It is your firm conviction these people want to get these homes paid for as rapidly as possible?

Mr. LEVITT. I don't think there is a question about it. We get the request from 99 out of 100, because this is 25 or 30 years can't we pay it off earlier if we can? Every single purchaser asks that question. Mr. GEORGE. Mr. Chairman.

The CHAIRMAN. Mr. George.

Mr. GEORGE. Is it your contention that the home-buying field is practically unlimited if we lower the downpayment and extend the term of interest or the time of the mortgage?

Mr. LEVITT. From a practical standpoint, Mr. George, yes.
Mr. GEORGE. Up to 2 million homes every year?

Mr. LEVITT. I would guess so. There are so many collateral things that come in here. If, for instance, you could get the pension trusts of the United States to break down and flood the market with mortgage money, which they should do and which we all try to get them to do, and you had an abundance of mortgage money, where the mortgage money was cheap, where we didn't have to pay premiums for it, either, where you could give intrinsic value in a house rather than so many things that the customer doesn't see at all-he doesn't see that $300 that we have to pay on a $10,000 mortgage. That $300 ought to be translated into something tangible in the house and some day it will. If you could do that, plus the fact of competition; when you build a million and a half or two million houses everybody is competing for that market. The result is you get more and more value. Then you have a market, just as the automobile people this year are breaking their corporate heads to bring out looks and styling, and everything else, to keep this market.

Mr. GEORGE. Do you think FNMA's operation should be curtailed? Mr. LEVITT. I was hoping you wouldn't ask anything about FNMA because I have my own preconceived notions on that.

Mr. GEORGE. I would be interested in seeing.

Mr. LEVITT. I would take leaf out of the Canadian system. That is to set up a fund and if we can't get money the Government lends, but you will get the mortgage money. If the Government were to announce tomorrow morning we have $5 billion we are going to lend on mortgages if you can't get it individually we would have every banker and his brother on our neck begging us to take away money. Mr. GEORGE. I think you are right.

Mr. LEVITT. That is the simple approach. It is a little too simple. Canada does it, incidentally.

Mr. MUMMA. Do they guarantee private loans like we do?

Mr. LEVITT. Yes. The Canadian economy is in pretty good condition. They have an excellent housing commission there. It is the counterpart of our FHA.

The CHAIRMAN. Thank you, Mr. Levitt, for your contribution. Mr. LEVITT. Thank you, gentlemen.

The CHAIRMAN. The committee will stand in recess until 2:30, subject to my being able to get permission for the committee to sit this afternoon.

(Whereupon, at 12:35 p. m., a recess was taken in the committee hearing.)

H. R. 7839

The committee met at 2:30 p. m., the Honorable Jesse P. Wolcott (chairman) presiding.

Present: Chairman Wolcott, Messrs. Talle, Kilburn, McDonough, Betts, Mumma, McVey, Oakman, Hiestand, Stringfellow, Spence, Brown, O'Hara, and McCarthy.

The CHAIRMAN. The committee will come to order.

We will proceed with consideration of H. R. 7839.

I am very glad to have back with us Monsignor O'Grady who has been with us so often. We consider you an ex officio member of this committee, Monsignor O'Grady. We would like to have you proceed. I am glad to have you back with us.


Monsignor O'GRADY. I am glad to be back, Mr. Chairman. I appreciate your kindness, your interest, and I sort of feel at home in this discussion, I have been in it so many years-more than I would like

to say.

I am, of course, very much interested in this housing movement. As I pointed out I think my friends in the home business hardly believe me when I tell them I am a conservative. I am for the free economy, you see, and sometimes they insinuate that that isn't so, and that I am quite radical, but I have to keep on denying that, and for that reason I think I have been impressed by the many things in these newer developments, and these new programs around here, and I don't want to be just merely a critic of them.

I like to look at myself more as an analyst than just a mere critic. I am hoping that these movements will work, and that these implements-new implements-that are handed to the private enterprise people may attain the purposes for which they are designed. That is my hope.

I have been, since I have returned to the country a few weeks ago, trying to get around in a number of cities to see what the picture is, and my picture is not yet as complete as I want to try to make it. I am interested in getting around and studying the housing conditions firsthand in these different cities. I spent all of yesterday and part of Saturday in the old downtown area of Cincinnati, that I have known for so many years, and I spent some time last week in going over the city of Detroit, that I have also known for many years, and I have just been trying to get up to date.

Now, when we were discussing this matter first, beginning in 1932, of course, at that time we were interested in work and housing, and I shall ever remember when we got this provision for loans and grants to local communities on housing, and Mr. Sincovitch and I were rather surprised at the ease with which that can be made a part of the Recovery Act. I think it was clear, but nobody had ever given much attention to it, I don't think General Johnson had when he agreed to put it into the bill, but at that time we thought about housing as a work program, and because it was one of the measures of a dynamic economy-at least those were the expressions we used in those days.

I have always, of course, liked to regard housing as a part of an allover dynamic economy, and I, of course, was surprised when I got in the outskirts of Cincinnati yesterday. I find a considerable vacancy in this high-income, high-priced housing, and, of course, I find that the supply of houses in the downtown area is gradually contracting and population of the downtown area declined, and this is characteristic of many other American cities, I am quite sure contracted until about 1950, and it has been growing ever since, and the housing supply is being reduced downtown all the time.

Of course, I realize that there is some movement of Negro families from the downtown areas, some of those in the upper middle income brackets into the outlying areas. I saw several evidences of that yesterday. I visited several of those families and talked to them about the prices they paid for their homes. They have kept up pretty well.

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