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The CHAIRMAN. Because I thought the one idea in this bill was to give over-all benefit to the services whether the base be located in Nebraska or Virginia or whether it be in Maryland. But the District Committee, of course, has jurisdiction over the District.
Senator WHERRY. They have their own.
The CHAIRMAN. But the purpose of this bill is to build houses on or near military reservations, none of which are within the District limits?
Senator WHERRY. If there is any doubt about it we can modify the substitute. This bill covers a complete program not only of the United States but-well, it is defined in here if you want to turn to page 2.
The CHAIRMAN. I thought for the record that should be clear, because there is such difference in cost. For instance, you know, as a member of the Appropriations Committee, the difference in costs are so great between such plans as the Canal Zone, for example, and Alaska. It all has to be under the Housing Authority, and we cannot have any special bill.
Senator WHERRY. You can ask somebody from the military, Senator, but I do not believe there would be a project in the District that would qualify under the provisions. I doubt if there is a military installation within the District which would qualify. But if there is and they want it, I think it should go in the District housing legislation, and we will so modify the bill if the Senator wants it, because this goes to military installations in the States, and it defines what the States are. It extends to the regular provision that is made in all housing legislation.
The CHAIRMAN. I would not want it modified.
Senator WHERRY. All right.
Senator CAIN. All houses constructed on military reservations would be on leased land?
Senator WHERRY. They would have to be.
Senator CAIN. What sort of leases would they be?
Senator WHERRY. I will tell you in just a moment.
If a developer builds a project on his own account, he definitely must have substantial equity capital for investment, and risk. This means about one project is all he can build or will finance because his capital is wrapped up in that 5 percent.
Let me point out that the primary purpose of this legislation is not to help the builder or the mortgage bank or to give employment to the unemployed or to beautify a city or to eliminate a slum, although in many cases it does all of those things. Its principal purpose is to provide housing for the enlisted, the officer, and the civilian personnel assigned to military bases who have no choice in which town or near which town they may live. That is the complete purpose of the bill.
There are three requisites that must be provided in this legislation if it is to be successful:
1. The program must be attractive to the builder, else you will get no construction.
2. It must be attractive to the mortgage banker who supplies the
3. The project must be made attractive to the Federal Housing Authority to enable it to set rental prices within the reach of families
in the lower income brackets as well as in the higher brackets. You have to meet those three requisites.
In providing the legislation to encourage this necessary building program, we must not-in fact, we cannot-be as conservative as though we were attempting to get houses built in a metropolitan area where there is a continuous and diversified demand and where the national defense is not a problem. You have to draw that distinction. If we can agree on this premise that Government housing should be provided for the military base personnel, then such housing would have to be built at a great cost to the taxpayer, as the only other alternative to the plan which is now here before you for your consideration. The CHAIRMAN. Well, it is now being built at considerable cost. The money comes from amendments to appropriation bills and I am hopeful that this might, by having some uniform plan, not only reduce the costs now but also provide better housing. The record ought to show, as the Senator well knows, being a member of the Appropriations Committee, that all the bills have contained appropriations for housing on military reservations.
Senator WHERRY. That is true, and this will take a lot of the burden away from the taxpayer and place it on the shoulders of private industry where it belongs.
The CHAIRMAN. Yes.
Senator WHERRY. That is what we are attempting to do.
Abundant assurance has been given that private industry is willing to assume responsibility for providing these housing units; I have received letters and telegrams setting forth what private industry thinks of this bill and how they will take hold of it and try to do their level best to see that these units will be constructed. There are probably
a dozen of them.
Senator CAIN. Have you any indication in those telegrams that private builders might be interested in the Territories?
Senator WHERRY. Very much so. In Alaska and Hawaii, and so on. That is included in these provisions.
Senator CAIN. I see.
Senator WHERRY. That is right.
Abundant assurance has been given that private industry is willing to assume this responsibility for providing these housing units if the restrictions are reasonable and if the encouragement is phrased in liberal terms. Dire need for such liberal terms exists because of the very nature of the problem that confronts us, and that is that military bases are not considered permanent in most cases.
I had an absolute experience of that. Right down here, I had private builders ready to build a large housing project, but they could not get FHA approval because it was not a good risk as the camp was not regarded as permanent.
Now, that is your difficulty. I am not picking something out of the air. I had that experience myself.
The CHAIRMAN. I was just going to say I had the same experience. Senator WHERRY. So you know what I am talking about. I expect all Senators have had similar experiences. That is not a condemnation of FHA or any other agency. I understand that. The very nature of the fact that military installations probably, to fit into the program of national defense, have to be shifted shows that this is an
additional hazard here in getting the houses built by private constructors that ought to be taken care of if possible.
My record for economy in Government spending I think has been clear and consistent, but we cannot escape the necessity of providing this housing program. Let me repeat and emphasize that we only have two choices in handling the job. We can continue as the Senator has said by hanging it on additional appropriation bills as they come through the Senate and the House and building it here and there. Senator CAIN. We cannot do that.
Senator WHERRY. Well, it is very difficult. Or we can take this alternative course. Let me repeat and emphasize that we have only two choices in handling the job. Either we increase Federal spending on military budgets by additional appropriations which such a program will require, or we adopt such legislation as is before you to provide the incentives and the means by which private builders and private funds will be utilized.
For the good of everyone concerned, I believe it is infinitely better that the program for private construction under reasonable Government incentives be carried out. It is my sincere hope that this committee will share with me this view and will report the bill favorably as promptly as possible.
I might say that a companion bill was introduced in the House, because there are others just as greatly interested in it as there are over here.
As I said before, there is no pride of authorship. This was brought to my attention by a situation that developed in Nebraska. It is coauthored by Senator Maybank, chairman of this committee, and Senator Tydings, chairman of the Armed Services Committee, who know of the need, and any other Senator who would like to share in the authorship is entitled to join.
Now, if there are any questions you would like to ask, I would be glad to answer them.
The CHAIRMAN. I just want to thank you for appearing and to commend you for the excellent statement.
Senator WHERRY. I might say, Senator Maybank, that Mr. Gruenther has examined these FHA recommendations, and their recommendations are for the bill providing you leave the insurance feature at 90 percent. As I told you, I thought that is what they would do. I do not know whether there is a Federal Housing Authority representative to testify this morning or not-
The CHAIRMAN. My thought would be
Senator WHERRY. But I do feel that if we could get together on the 95 percent insurance feature, providing we might reduce the maximum unit construction to $8,100, which is the provision in your housing bill now, 608, that they might accept it.
I would not be averse to that, except this: Here is what I thought about a $9,000 maximum mortgage insurance. You have here officers who could afford to go beyond the $9,000 units. You understand. Maybe to $10,000, maybe to $12,000. My feeling was that if you could get a sufficient number of those, then you could drop the others so you could get more low rental housing out of it, you see, than otherwise. That was my idea of making the $9,000 feature. Maybe I am wrong. Senator CAIN. That is an average cost of $9,000?
Senator WHERRY. That is an average cost. And I wish when the Federal Housing Authority representative is here you would ask him that question, because I am not averse to it. I do not want to establish a maximum ceiling that will defeat the purpose of this bill, but I say now that unless you can have an insurance feature of 95 percent it would be impossible to get private builders to take advantage of the situation. I am sure that this can be financed, and I doubt if there will be any loss in any appreciable amount at all to the Government. The CHAIRMAN. Well, I want to say this: Following your testimony we expect to hear from the distinguished Secretary of Air.
Senator WHERRY. I wonder if you would mind if I sat in with the committee for the purpose of asking him a question or two?
The CHAIRMAN. You would be welcome to do so.
Senator CAIN. You and your cosponsors have given a considerable amount of thought to the $9,000 average?
Senator WHERRY. Yes. The reason we made it $9,000 was this: I would like to go along with the $8,100 because that is the figure that is used. Senator Sparkman has brought that out so many times, and agree with you on that. But we felt as an added inducement there are those who could go on beyond the $10,000—or I mean the $9,000—— up to $10,000, $11,000, $12,000. I thought maybe if you would get a sufficient number of those units you could bring the average down so that you could get more units for low rental than otherwise. That was my feeling.
The CHAIRMAN. The great argument we have always had among each other has been the 95 percent.
Senator WHERRY. I understand that.
The CHAIRMAN. Because we can go up or down on the $8,100.
Senator WHERRY. I would say now that these figures were gotten together 2 or 3 months ago, and at that time building costs were higher than they are today.
Senator TOBEY. Do you believe that low rental for enlisted men can be achieved under this bill?
Senator WHERRY. You get down to, I would say, about a $5,000 unit. That would not take care of these single enlisted men down on this low pay, but there are 250,000 needing these units——
The CHAIRMAN. It gets down to the low-paid ones who are married. Senator WHERRY. That is right.
Senator TOBEY. What do you think this bill, if it comes along, will achieve in low rentals? What figure?
Senator WHERRY. I think it depends on how many units you can build under that average, but it would get them down where they could be rented for $40 to $50 a month and up depending on the construction.
Senator TOBEY. A month?
Senator WHERRY. Yes.
Senator CAIN. Most of your single men are going to be taken care of by the establishments.
Senator WHERRY. They are going to be taken care of anyhow.
Senator TOBEY. It would not take care of them if they are married. Senator WHERRY. They get more pay if they are married. And you run into the noncommissioned officer class that raises your bracket, and then you run into your military civilian personnel. And that is why we set this at the $9,000 figure. If we could get some of those
above the bracket, it would make us a little lower average cost than otherwise. Maybe that is wrong. Maybe if the construction costs are reduced enough we can accomplish what we want here at the $8,100 limit. I am not familiar with the reduction of these prices. But you have to give some additional inducement here to get these contractors to go out 6 or 8 miles away from these areas where there is a demand and a diversified demand to build these housing units on a base or near a base. They do not get any additional advancement in their land or anything of the kind. You can see that point better than I. Senator TOBEY. Did you talk to FHA about this?
Senator WHERRY. Yes.
Senator TOBEY. Do they agree with you in your point of view on the rentals?
Senator WHERRY. I think they do on the rentals. I think so. There are two items here, Senator Tobey, in dispute. That is, I think FHA would still like to take these loans at 90 percent rather than 95. And then I think they would like to reduce the maximum of $9,000 average to $8,100. I am not going to quarrel too much with the $8,100 maximum, because that is a debatable issue. And if it can be done and accomplish the purpose of $8,100, that is all right with me, you see. But it is just absolutely mandatory that the insurance on the entire project be made at 95 percent, because you have an entirely different situation in building housing on a military establishment or near it than you have here in a diversified place like Washington where you have a continuous demand.
Most of these bases are 6 or 8 or 10 miles from a city. Most of these bases are out where the only demand for housing comes from the military personnel. You see what I mean? But we have plenty of assurances here from private builders that if they can get this 95 percent insurance feature they will be glad to build those units and will build them according to the specifications of FHA and will have their construction requirements so we can get the rentals that I just spoke of here to Senator Sparkman.
Senator SPARKMAN. Your $8,100 figure or your $9,000 figure does not represent the average cost? That would be the average insurance part? Mortgage part?
Senator WHERRY. Yes.
Senator SPARKMAN. In other words, if we took the 90 percent insurance at $8,100, that would really be a $9,000 unit.
Senator WHERRY. That is right.
Senator SPARK MAN. So you can build at an average cost of $9,000 even under the 90 percent and have your $8,100 figure.
Senator WHERRY. That is right, but the thing we have to have is 95 percent insurance on the entire project.
Senator SPARKMAN. Let me ask you about another feature. That is the amortization. I understand the housing
Senator WHERRY. I mentioned that before you came in.
Senator SPARKMAN. I'm sorry.
Senator WHERRY. No; I guess I did not. But I did give some of the things we changed. First we had it 10 years, and then we amended it to make it 25 years.
Senator SPARKMAN. I notice it is 25 years in your substitute, but I notice in the letter from Mr. Foley
Senator WHERRY. He does not even agree with that.