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which 130 are housed on the post. It is estimated there are around 2,000 army families with dependents who are not residing at the Army installation. This figure consists of approximately 600 officers' families and about 1,400 enlisted men's families. It is rather difficult to estimate the unsatisfied demand as it is reasonable to assume that a good number of the 2,000 families are properly housed in the area outside of the post. The military administration of the post estimates that approximately 2,000 could be absorbed on the post immediately. A survey of the Fayetteville area indicates that the needs of Fayetteville have been met in the way of housing. The Federal Housing Administration and private lenders hesitate to produce in the way of financing a considerable number of additional housing units in Fayetteville strictly and solely dependent upon military needs. I think that everyone agrees that soundly to solve Fort Bragg's problem is by legislative enactment of your proposed bill.
The Marine Air installation located at Cherry Point, N. C., has equally as serious housing problems which can only be solved by the passage of your housing bill. Cherry Point is half way between New Bern and Morehead City, N. C., or 19 miles from each city. There are approximately 3,500 civilian employees and they commute not only from New Berne and Morehead City, but from other spots further distant in adjoining countries. It is estimated that Cherry Point can adequately absorb 1,000 or so units.
I am quite satisfied that other military installations throughout the country are confronted with equally as serious housing problems.
Again may I thank you for asking me to appear before your committee and it is with sincere regret I am unable to do so. Yours very truly,
JACK H. BROWN. Mr. COLE. Mr. Richards, the provision for the mortgage provides that it is not to exceed 90 percent of the amount which the commissioner estimates will be the replacement cost of the project. Is that the same language that is found in title 608?
Mr. RICHARDS. No; 608 says "necessary current cost," and section 608 was amended about a year ago to also provide that it shall not be in excess of 90 percent, the maximum mortgage, that is, of the costs as of December 31, 1947.
Now, replacement cost and necessary current cost are in effect, at the present time, the same. In other words, replacement cost is the term that has been used in the past as the cost of the property. The reason necessary current cost was put in section 608 during the war and subsequent to the war was that it was recognized, in the trade, and in Federal Housing Administration, that there was a distinction possibly because of the shortages of material and labor between what might be commonly known as replacement cost and necessary current cost.
During those periods of time, there were gray markets, labor was very scarce, and the necessary current cost was placed in there to make it possible for a mortgage to be written at 90 percent of what it was actually going to cost at that time under those conditions.
Since that time, however, the materials situation has eased, and there is generally available material in all areas of the country at a competitive price, and also the labor market has opened up. In other words, there is an adequacy of labor and material. Therefore, we felt it was advisable and sounder and better legislation to have replacement cost rather than the necessary current cost as used in section 608.
Mr. Cole. Do you envision that all this building will be on military installations or will some be adjacent?
Mr. RICHARDS. Some will be adjacent and some will be on the reservations.
Mr. COLE. Is there much reason ïor the bill if the construction is to be just adjacent to the military establishments?
Mr. RICHARDS. I think so, Congressman, because of the fact that there are many areas—I am thinking of some at the present time in and near substantial communities—where there is a definite need as far as the military personnel is concerned, and they are not able to get housing built in substantial quantities under section 608 because of the probability, or as far as we might be able to see, lack of continued marketability, excluding the military in that area.
Mr. COLE. Thank you, that is all.
The CHAIRMAN. Are there further questions? If not, you may stand aside, Mr. Richards.
Mr. Knowles, you may proceed.
STATEMENT OF BURT L. KNOWLES, ASSOCIATED GENERAL
CONTRACTORS OF AMERICA, INC.
Mr. KNOWLES. Mr. Chairman, having had but very short notice of this hearing, I have been unable to prepare a statement for presentation, but I think I can express the sentiments of the Associated General Contractors of America, which I have the honor to represent as its engineer, because we have discussed this problem with our membership quite extensively.
Some months ago, Mr. Symington sent two Air Force officers to our office to discuss this very admittedly serious need for housing at military installations. We talked the matter over with the officers and agreed to publicize the need in great detail to our members, which we did, with the idea of encouraging them to build housing at these installations. But this request did not meet with a great deal of acceptance on account of the risks involved, and the history of military installations particularly in outlying districts, removed from substantial centers of population.
Hence, when this legislation was proposed, we became much more interested and our members became much more interested. But when the bill was first presented in the Senate and 95 percent was the amount approved for mortgage insurance, and $9,000 per family was considered for the maximum mortgage value of the family unit, we felt there was a great deal of hope for the program,
We are favorable to the objectives; exceedingly favorable. We know the need to be great, although I cannot vouch for the figures. We are familiar with construction at military installations, and we know that the need is very, very great.
Frankly, we feel, as an association, that this is the sort of situation that calls for public housing, if you wish to call it public housing. These homes are for the occupancy of Government employees--either civilian employees at these military posts or military personnel-and we feel that it is a logical place for the Government to build houses which it owns itself. But, if appropriations are not avaiiable for that purpose, some legislation of this kind is, of course, necessary. And we see possibilities for an extended market for our contractors.
But we think, as Mr. Foley and Mr. Richards testified, that this bill, as written, will be only a partial solution to the problem, and we think that while you are passing such legislation you might as well make the legislation much more effective, which I believe can easily be done, by increasing the amount of mortgage guaranty so that it would read “up to 95 percent.”
Undoubtedly, there are many of these military installations which need housing where a 90-percent-mortgage guaranty would be sufficient to satisfy any contractor. At an installation like Fort Myer, or any installation which we know will be permanent, and which it is generally considered will be permanent, housing would require no greater mortgage guaranty than 90 percent.
On the other hand, it seems apparent to us—although we cannot be certain of this—that where the greatest need for housing lies is at those military or defense posts which are outposts; that is, which are at a considerable distance from metropolitan areas or from substantially large communities.
We do not consider that the language of this guaranty-if you call it a guaranty—“because of uncertainty as to the permanency of such installations and to increase the supply of rental housing, forth; where it says “it is deemed to be a permanent installation" and that there is no present indication that the activity at that post will be curtailed-we do not consider that a sufficient guaranty for a contractor to risk his capital to the extent required by the bill as written, and we think that a mortgage guaranty should be allowed up to 95 percent.
We look with some skepticism upon the langauge to which the Congressman referred a minute ago, namely, “the amount which the Commissioner estimates will be the replacement cost of the property.” We believe that contractors are much more competent to estimate costs than people who do not have a financial interest in the business, and we think it would be much better if the language were retained as it now exists in Federal Housing Administration regulations under title 608.
Now, a word or two about the $8,100 limitation. Again, there are many installations which require housing-defense installationsand which require that housing very urgently, where the $8,100 limitation would be sufficient.
However, in some of these outlying posts, where the need for housing is equally urgent, transportation costs, labor costs, the transportation of labor by truck or bus, and the time consumed—and the men have to be paid, in most instances, for the time consumed in transportation-and the transportation costs of materials, and also the fact that often the Army or the Navy require special features in this housing, causes us to feel that the limitation should go up to $9,000 per family unit, rather than to $8,100 all the way through.
We believe that these modifications would make the legislation much more effective in meeting the very urgent needs for housing at these military establishments.
The CHAIRMAN. Are there any questions?
Vr. NICHOLSON. Do you think that is good business, to build a house on somebody else's land, who may vacate it at any time they feel like it? Do you think contrcators are willing to go in and build a $10,000 house on somebody else's property under those conditions, where they may get up and go next week?
Mr. KNOWLES. Well, Mr. Congressman, I do not think it would ordinarily be classed as good business; but, where the owner of the land is the United States Government, it might be a little different. I do not think it is idle, and that is why I said I think public housing, if you wish to call it such, or Government-owned housing, housing owned by the defense services, is the proper answer to this problem.
Mr. NICHOLSON. The Government has always, on a Regular Army post, built all the buildings it thought would be necessary, all through the years.
Mr. KNOWLES. That is correct.
Mr. KNOWLES. That, I suppose, is a question that can best be answered by the Appropriations Committee.
Mr. NichOLSON. Well, as I understand it, they want the private contractors and private builders to go in and build these units and get rent from them on their own hook.
Mr. KNOWLES. That is correct, because they have not had money appropriated with which to build this housing.
Mr. NICHOLSON. But they have had money appropriated for the guaranty that these people are not going to lose up to 90 percent of the value.
Mr. KNOWLES. That is not money that was appropriated for the Military Establishment. That is money that is appropriated for the Federal Housing Administration.
Mr. NICHOLSON. Well, it is for defense purposes, though.
Mr. KNOWLES: That is correct, sir. I understand the force of your argument, but this is an expedient which is apparently being proposed, to make it possible to build these houses without the necessity of making a military appropriation for them.
Mr. NICHOLSON. That is all.
Mr. MONRONEY. Can you tell us, Mr. Knowles, how much higher the construction cost would run in residential housing for Army posts if the Army had the contract and built them according to military specifications?
Mr. KNOWLES. How much higher?
Mr. MONRONEY. Yes; the cost would be a good deal more if the Army built these residences. Would it not?
Mr. KNOWLES. It would all depend on the specifications, sir.
Mr. MONRONEY. Yes, but you have handled Army specifications and are very familiar with them.
Mr. KNOWLES. I think, under some conditions, construction costs would run higher because—well, I hesitate to say with any positive assurance just what the increased cost would be. I think it would be entirely possible for the Army or the Navy or the Air Force to write specifications for the same type of housing that is contemplated by this legislation, which would be perfectly satisfactory. And, if they would, the cost would not be any more.
Mr. MONRONEY. But have they ever written that kind of specification? Generally, the Army wants the very best of quality.
Mr. KNOWLES. Well, I do not want to say what the Army might do. I have faith that they might want to write a specification that would be all right and economical.
Mr. MONRONEY. But this way these would be built to regular commercial specifications; is that not right?
Mr. KNOWLES. That is correct, Federal Housing Administration specifications.
Mr. MONRONEY. Just as we are building hundreds of thousands of homes today under the same specifications?
Mr. KNOWLES. That is correct.
Mr. Talle. Mr. Knowles, will you repeat what you said at the outset as to what your position is and for whom you speak?
Mr. KNOWLES. I speak for the Associated General Contractors of America, the trade association of the construction industry.
Mr. TALLE. That is what I understood you to say.
Mr. KNOWLES. No; I am the engineer for the organization, resident here in Washington. The headquarters of the organization are here in Washington.
Mr. TALLE. In the event that this proposal is enacted into law, what is your estimate of the liability to the American taxpayer?
Mr. KNOWLES. I do not quite understand your question, sir.
Mr. Talle. In the event this proposal is enacted into law, what is your estimate of the liability under its terms to the American taxpayer?
Mr. KNOWLES. I think that, under the terms that I have outlined, the risks which would be assumed by the Federal Housing Administration are not extreme, and I think that there would be very little default. I think there would be very little burden on the American taxpayer, except the burden of Federal Housing Administration which we have anyway, and which has been doing a good job.
Mr. Talle. In other words, the contingent liability would be something you would not attempt to guess at at this moment?
Mr. KNOWLES. That is correct.
Mr. DEANE. Mr. Knowles, you indicated that you would like to see the legislation read “not to exceed 95 percent.” What are your basic economic reasons for that?
Mr. KNOWLES. My basic reasons are that where the housing is probably most needed the risk is the greatest, and that contractors should not be called upon to assume that risk, because they are in outlying areas, and subject, perhaps, to abandonment or curtailment more than in some other areas.
Mr. DEANE. If the legislation stands as written, do you think it will slow up the development of housing in these areas?
Mr. KNOWLES. I certainly do. I don't think there would be the response on the part of contractors, and I think Mr. Foley's testimony and that of Mr. Richards substantiate that claim. That is why I say I think it should be changed.
Mr. DEANE. Why was it changed in the Senate from 95 to 90 percent?
Mr. KNOWLES. I can't say, unless it was under the blandishments of Mr. Foley, when he appeared before the Senate committee.
Mr. DEANE. That is all.
Mr. Smith. It seems to me that this is a rather anomolous proposal; to build these houses on Government property with the title to the houses themselves remaining in the hands of private individuals. Do you know of any similar arrangement?