Mr. MULTER. What is the tax rate in the city of New York? Mr. WALTEMADE. About 3.60 now. Mr. MULTER. So in the city of New York, at 3.60, $120 is less than half of what the actual tax rate would be, and that is just real estate, without water charge and sewer charge. Mr. SUMMER. That is right. Mr. MULTER. And every other large city approaching that size, Chicago, Boston, Philadelphia, Los Angeles, your tax rate is over that, isn't it? Mr. WALTEMADE. There are two factors that need recognition. In many cities you are not assessed, whether it is right or wrong, at a hundred percent. Also, it is true that we are talking national averages and that is your major cities where your taxes are higher your income average is also higher. Mr. MULTER. You see, that is the trouble when we talk average about a house like this. Mr. WALTEMADE. That is right. Mr. MULTER. Where could you build that house? Where will a builder build that house for $7,000? In what areas? Mr. McDONOUGH. California. Mr. WALTEMADE. Mr. Multer, we are recommending in your testimony that $7,000 be raised to $7,600 with an additional thousand dollars in those high-cost areas. Mr. MULTER. Which would be $8,600? Mr. WALTEMADE. Yes, sir. Answering your question directly as to whether the institution would take these 40-year guaranteed loans Mr. MULTER. Let's take one thing at a time. You raise it to $8,600, and $8,600 in the high-cost areas, and it is no longer $62 a month but closer to $70 a month. Mr. SUMMER. On the $8,600 house, increasing the taxes another couple of dollars a month, the total payments, interest, and principal, $44.38, taxes, $12; hazard insurance, $1.50, $57.88, average saving, $17.90, or a net of $39.98, but the obligation is $57.88 plus heat and utilities. Mr. DEANE. Will you yield? Mr. MULTER. Yes. Mr. DEANE. Some of you are members of the President's Advisory Committee and if you have this publication I refer you to page 94, where it estimated monthly mortgage payments, on a $6,000, 40-year mortgage. On the $7,000, the estimated total monthly housing expenses total $72.92. On the $8,000 house, it is $70.70? Mr. WALTEMADE. As I have said before, I did not include heat or utilities. Mr. MULTER. Let's include the utilities, because you can't live in a house without the utilities. Mr. WALTEMADE. That is right. Mr. DOLLINGER. Can we find out something else? Will these houses last 40 years? Mr. MULTER. You see they don't have to last 40 years because the Government is going to return the capital at the end of 20 years. Mr. DOLLINGER. Or the owner might rebuild the house. Mr. MULTER. Yes, sir. Mr. GAMBLE. You might have another slum at the end of 40 years. Mr. MULTER. That is right. Mr. GAMBLE. On a $7,000 basis. Mr. MULTER. Mr. Deane suggests that I call your attention to what John A. Reilly of the American Bankers Association said speaking for his association. He opposed the 40-year loans on the ground they would not be justified by sound business or economics. I am willing to assume you can get a 40-year mortgage, and I am willing to assume you can get the mortgage for the $7,000 house or $8,000 house. I think you gentlemen agree that you are not going to get any builders who will build the $7,000 house. You might get a $7,600 house, or you might get an $8,600 house. Am I right? Mr. WALTEMADE. That is correct. Mr. SUMMER. After I am through, I will ask Mr. Burns to answer that, but this might be of interest to you. The difference on the monthly payments for interest and principal, which is the only difference, between a 40-year mortgage and a 30-year mortgage, the increases from $36 and $12 a month, on a $7,000 house, to $39.20 a month. It is approximately 50 cents a thousand dollars difference, and however the life of the mortgage, and the average monthly saving is also greater, and because the owner pays less interest. But I have mixed feelings about that. I find that 50 cents a thousand dollars a month, or $32, to some people, makes a big difference. On the other hand, from an underwriting viewpoint, the difference between 30 and 40 years is not very great, in dollars. Mr. MULTER. But the point Mr. Deane and I were trying to make was whether it was the $8,000 house, not the $8,600 house, at monthly payments for utilities and everything that goes into it, is $70.70 a month, and for $7,000, it is $62.92 a month. You are not going to get the housing for the people whom you want to house. They are not going to be able to afford it. Mr. SUMMER. I will answer you this way: As I said earlier, there are 3 million people, according to the 1950 census, earning less than $2,000 a year, who are renting, who live in metropolitan areas. With the present total subsidy, currently under obligation, that would be sufficient to pay all of those people-not that I am advocating this as the way to do it-at the local level, all 3 million of them, $20 a month for 10 years, which would reduce the figure shown here, which I think in some cases may be high, to $50, or you could pay them $30 a month for 1,200,000 families, which is a whole lot more than 390,000 families, at local level, and reduce it down to $40 a month and let the city assume the obligation, because the city pays it in the long run anyway. In the State of New Jersey, for instance, the Congressional Record shows that in 1948 we paid into the Federal Government, or rather received from the Federal Government, in the form of aid, whether public housing or farm assistance, a total of $114,500,000. That was paid into the State of New Jersey in 1948, and some of that was public-housing assistance. That same year the citizens of the State paid into the Federal Treasury $1,272,000, or about 11 to 1. Well, obviously, our defense needs, our post office-at that time not being self-supporting, and still not-and many other functions of the Federal Government, require much of that money, but at the same time, where does the money come from, if subsidy is needed? It comes right back to the city. That is where the money is paid. And the city could Mr. MULTER. You are not suggesting that we use the subsidy to pay for these $7,000 houses, are you? Mr. SUMMER. I am not suggesting anything except that I am trying to avoid the most expensive means of doing it Mr. MULTER. I don't think you ought to try to convince us we ought to give subsidies when we are trying to work out a program without subsidies. Let's stick to the program we are trying to work out to get housing for the people who don't want to be subsidized and which you and I think ought not to be subsidized. Mr. Shanks, of the Prudential Insurance Co., points out to us that on a $7,000 40-year mortgage at 42 percent, assuming you would get it at that rate, the 40-year loan will cost the homeowner $2,344 more in the form of interest than a 30-year mortgage. Mr. SUMMER. I am not fighting you on the differential, sir. Mr. MULTER. Well, now then, let's get back for a moment to whether or not we can produce these $7,000 houses. What do you think would be a fair profit to a builder who is building the $7,600 house? Mr. SUMMER. Mr. Burns is a builder, but before he answers you I want to say this: That the building industry tries and has a moral obligation, to help meet a general need, and whatever its normal profits might be, it should certainly be whittled down on a program like this. Mr. MULTER. No Member of this Congress expects any builder to cut his profit or do his work without profit because he is a publicspirited citizen, and I don't think any builder is going to do it. He is going to stay in this business because he can make a fair profit, and nobody is going to try to deny that to him. And nobody in this committee or in this country is going to say he shouldn't have a fair profit. Mr. SUMMER. I am not a builder, so that I am not speaking for myself, but I do know there are some builders, and I agree with you, for the great majority that is not true, will definitely feel it is a part of their responsibility in connection with their overall operations. Mr. Burns is a builder who has established records for building lowpriced houses in great numbers, and I think Mr. Burns is better qualified on the building end than I am. Mr. MULTER. Mr. Burns, would you mind telling us what a fair profit would be to a builder putting up a $7,600 house? Mr. BURNS. I am assuming that a dozen or so builders who advertised in the Los Angeles Times last Sunday, of houses selling, with the lot, for less than $8,000, at least started out to make a fair profit. Maybe sometimes the discounts that they unexpectedly paid to get their money interfered with that. Mr. MULTER. At the best break he could get, what would be a fair profit per house? Mr. BURNS. I don't believe I can answer that question for you. Sometimes a builder makes more than he does at other times. If you would like to have me state as to whether or not I think houses will be built under this section 221, I think the answer is yes and no. I think they will be built Mr. MULTER. You can say "Yes," and I can say "No." Unless we explore everything that goes into it, we can't come to a fair conclusion. Mr. BURNS. All right. Geographically, I think in some areas these houses would be built. In other areas, I question it. Some places you probably would be able to get the money, in other areas, probably not. This is not a new argument. This is an argument you always get into when you try to figure out how to build new housing for the lowest-income people. It is an upside down approach, in my opinion, and I don't know as you will ever get a completely satisfactory answer. I think that this section 221 will make some contribution to the overall picture, but I think that we must realize that as of today, one-fourth of our rents, in this Nation, are less than $35 a month. There is nothing particularly wrong with our rent schedule. It is the condition that those houses are in, and I think we have to make an all-out attack on improving the conditions of those houses. Mr. MULTER. I agree with you. Now, let's talk about the new houses we are going to build. We are going to try to rehabilitate the others, and modernize them and all of that, and side by side with that we want to build new houses. Do you agree that the maximum need for housing is in the field between $7,000 and $10,000? Per family unit? Mr. BURNS. I don't think that is the maximum need, sir. Mr. MULTER. Where is the maximum need? Mr. BURNS. I think that for people who want houses in that bracket-of course, you can't dictate what people want, if they want a new one and won't take an old one, that is something else again, but I believe the best soloution to the low-income family is the used house, properly placed in condition. Mr. MULTER. What are we going to do with the medium income family, the family in between, the middle-income group family. They need housing too, don't they? Mr. BURNS. Yes, sir. Mr. MULTER. What housing would they need? Is it the housing in the $7,000 to $10,000 per family unit? Mr. BURNS. Well, we are speaking in generalities as to middle incomes and so forth. I visualize the middle-income people as those who probably would buy a house from $10,000 to $18,000. Mr. MULTER. What is their average earnings? Mr. BURNS. I think the median income, for that group that I am talking about, is probably a range from $4,000 to $6,000 a year. Mr. SUMMER. The United States census clearly states that in 1949 there were 3,092,000, I think it is, families renting who earned $2,000 a year or less, in nonfarm areas. Another million and a half who owned their homes, who earned $2,000 or less in nonfarm areas. Mr. MULTER. We have those figures. That is the third time you are telling us that. That has nothing to do with the problem. Mr. BURNS. You said 70 percent of them needed help, though. Mr. MULTER. No, I said that almost 70 percent of the people in this country are earning less than $5,000 a year. Mr. BURNS. I didn't understand you correctly. Mr. MULTER. Is there a large demand or a great demand in the country for housing at $20,000 per family unit, one family unit? Mr. BURNS. No, I would not say that is a large demand. Mr. MULTER. Will you agree with me that there is a much larger profit in building a $20,000 house to house 1 family, than in an $8,600 house or a $7,600 house? Mr. BURNS. There should be. Mr. MULTER. Let's be fair. There is. Mr. BURNS. There is; yes, sir. Mr. SUMMER. Except this, at the end of the year, it depends on how many you build of each. Namely, you can build 500 houses at $7,000, or you may build 50 houses or 25 houses at $20,000. So that profit is not necessarily measured per house, but it is measured in the year's operations. Mr. MULTER. So you think this bill should have a provision per mitting mortgages on 1-family dwellings at $20,000, guaranteed mortgages, and at the same time, having that kind of a provision in there you are going to get the other houses built for $7,600 or $8,600. Mr. SUMMER. Yes, sir. Mr. MULTER. You think you will? Mr. SUMMER. There is a limit to the market. Mr. WALTEMADE. Mr. Multer, it has been my experience in serving on mortgage boards of institutions loaning money, that just as soon as you provide the financing there will be all the builders in the world to go ahead and build. We know that America has been built up by the speculative builder. He keeps on building just as long as he can get financing. With financing available on this section, there will be builders to go ahead and build on that plan. The answer to your question before of whether or not there would be loaning institutions that would loan on this at 40 years, I might say right now, they are making conventional loans from 20 to 30 years, so certainly there will be no difficulty in getting them to take 40-year loans that are guaranteed. Mr. MULTER. The bankers' representatives and the insurance companies' representatives said no. Shanks was here, president of Prudential, talking for his group, he said they would not do it, that it is bad business, and Reilly speaking for the bankers said it is bad business, where are you going to get that mortgage money? Mr. WALTEMADE. I am sitting on boards now where we are taking a hundred percent guaranteed loans. We are taking it by the millions. Mr. MULTER. But not in 40-year loans. Mr. MCDONOUGH. Let's correct the record. I don't think Mr. Multer wants to convey that Mr. Shanks said those mortgages would not be purchased. Mr. MULTER. He said his company won't take them. Mr. MCDONOUGH. I recall Mr. Levitt saying definitely that if a loan for 40 years, on a 7 or 8 thousand dollar house, is guaranteed by the Federal Government, even if that were 60 years, that bank's industry would pay itself. Mr. MULTER. That is what Mr. Levitt said. The lenders said differently. Mr. MCDONOUGH. Mr. Levitt has to seek that kind of financing and he is one of the big builders of the Nation, so I don't think it is fair for the record to show that these types of mortgages will not be mar ketable. |