houses for people with incomes of over $4,800 or $5,000; they are not building homes for people in the $4,000-income bracket; they are not building homes for people in the $4,500-income bracket; they are not making an effective contribution to the building of homes for those in the $3,000-a-year bracket.

MIDDLE-INCOME HOUSING AND URBAN REDEVELOPMENTS

One of the most effective arguments for a cooperative housing program for middle-income families has been provided by the large number of families that have been displaced by the new freeways that are being built in American cities. Besides the freeways we have many other public improvements under way, such as the development of new medical centers and new schools, which are displacing a considerable number of families. As the new program for urban redevelopment gets under way, more and more families will be left without any housing facilities.

In the past, many of us were inclined to believe that the families displaced by public improvements or by ordinary clearance in our cities could be taken care of by public housing, but we now find that a considerable portion of these families do not qualify for public housing because they are over income.

COOPERATIVE HOUSING AS EFFECTIVE MEANS OF MEETING NEEDS OF MIDDLE-INCOME GROUPS

We have had a great deal of discussion in the past 2 or 3 years about ways and means of meeting the housing needs of middleincome families. When the Wagner-Ellender-Taft bill was first introduced in the Congress it was the hope of its promoters that a further extension of FHA financing would provide the answer for middle-income housing, but we have found that in spite of all the extensions of FHA, the middle-income groups still remain uncovered. From time to time there have been suggestions that the Government should provide subsidized housing for middle-income groups. I have always strongly opposed the entrance of Government into this field. I do not believe that we can afford to provide subsidies for such a large sector of the population.

When the Sparkman bill was introduced into Congress last year it was the thought of its promoters that straight Government lending might provide the solution for middle-income housing. This bill, including provisions for direct Government lending, was approved by this committee. However on the basis of more careful consideration, agreement was reached among the promoters of the legislation that ways and means should be devised of bringing private capital into the field. It was therefore proposed to set up a National Mortgage Corporation for housing cooperatives. This Corporation would be authorized to borrow $100,000,000 from the Government. This would be used to make advances to housing cooperatives to aid them in their preliminary planning. It would also loan them the necessary funds for the construction of the housing units. It was recognized that each member of a cooperative should make a contribution of 22 percent of the cost of the housing unit that he was to occupy, and 5 percent within 20 years. This, plus the rental payments or

service charges, would help to build up the capital of the National Mortgage Corporation; the Government investments in the Corporation would thus be replaced by the payments made by the various members of the cooperative. This would represent private savings in the true sense. It would mean savings on the part of our middleincome groups on whom to such a large extent depend the savings that are the very basis of our free economy.

COOPERATIVES AND HOME OWNERSHIP

In another important respect S. 2246 represents a very great improvement over the provisions of the bill approved by the Senate Committee on Banking and Currency last year. Last year's bill provided merely for mutual home ownership under the cooperative program. Under the bill as it now stands, families of moderate incomes may own their own homes where such homes are free standing. However, if an individual wants to sell his home he must give the cooperative the first opportunity of buying it. This is in line with the thinking of the people with long-established traditions of home ownership. In discussing last year's bill, the question was asked over and over again if it was possible for people of moderate means to own their own home. We found a great lack of enthusiasm when we announced that the program was confined. to rental housing.

We are sorry to point out, however, that the bill in its present form fails in one essential for which the various public-interest groups have been struggling. It provides for the setting up of a division within the office of the Housing and Home Finance Agency to be charged with the administration of the program. The various public-interest groups that have worked so hard in promoting this program believe that there ought to be a separate constituent agency to administer it. We believe that this agency should be on the same level as the Public Housing Administration, Federal Housing Administration, and the Home Loan Bank System. We are not impressed by the arguments advanced against a separate constituent agency. We know that conditions do arise in the Government in which the new agency is essential; this is the type of program with which we have had really no governmental experience. It is a new field of endeavor for the Government. It is a new type of service that cannot be easily administered by the established agencies of the Government. They are set in different patterns. In this new venture we need new leadership, new inspiration, and a new outlook. We need crusaders in contradistinction to the ordinary Government official.

Senator SPARKMAN. Thank you very much, Father O'Grady.
Are there any questions?

You must have been very satisfactory; there are no questions.

The next witness is Lawrence A. Epter, representing the Mortgage Bankers Association of New York. Is Mr. Epter present?

(No response.)

Senator SPARKMAN. Those are all of the witnesses scheduled for today, and therefore the committee will stand in recess until 10 o'clock tomorrow morning.

(Thereupon, at 11:40 a. m., the committee recessed until 10 a. m., Tuesday, January 17, 1950.)

MIDDLE-INCOME HOUSING

TUESDAY, JANUARY 17, 1950

UNITED STATES SENATE,

SUBCOMMITTEE ON HOUSING AND RENTS

OF THE COMMITTEE ON BANKING AND CURRENCY,

Washington, D. C. The subcommittee met, pursuant to recess, at 10 a. m., in Room 301, Senate Office Building, Senator John J. Sparkman presiding.

Present: Senator Sparkman.

Senator SPARKMAN. The committee will come to order, please.

Congressman Javits, we are glad to have you with us. I am sorry that the committee attendance is so small. There is a Democratic caucus going on which takes the Democratic members away. We have had assurance that some of our Republican members would be here a little later.

Senator Bricker's administrative assistant is present. Senator Ives will be here soon, and his administrative assistant is on his way now. We hope that Senator Flanders will be here also.

Congressman Jacob K. Javits, Congressman from the Twenty-first District of the State of New York. Congressman Javits, just proceed in your own way.

STATEMENT OF JACOB K. JAVITS, A REPRESENTATIVE IN

CONGRESS FROM THE STATE OF NEW YORK

Mr. JAVITS. Mr. Chairman, I might say that although the attendance of the subcommittee is small, it is distinguished. I have a great respect for the chairman and his leadership in the whole housing fight, which has been so difficult and so far partially successful.

I might say that I deeply appreciate the opportunity to come and testify before this subcommittee, which pleasure I have been accorded before, and I believe we have had fair success before in this somewhat close cooperation between the Senate and the House. The experience with the public housing bill demonstrated that bipartisan support is absolutely essential if we are to carry a housing measure of this character.

Apparently, anything but a straight extension of FHA calls for bipartisan backing. The only thing which enabled the public housing bill to pass in the House, as the Senator knows, was 23 Republican votes added to the Democratic votes, to give us a majority of five on the critical move to strike out the public housing article in the housing bill last year.

We are now considering in this committee—and I intended to confine my views to this-the amendments to title III of S. 2246, introduced by the chairman of this subcommittee, which amendments now deal with a fundamental proposition of making available to the

lower middle income groups direct Government aid in order to enable them to obtain housing parity with the lower income groups which benefit from the public housing bill we passed last year, and the higher income groups which benefit from FHA financed housing.

I might say, and I hope the Senator will forgive me for saying this, that the whole idea of a governmental responsibility to the lower-income groups was pioneered by the omnibus housing bill which 10 Republican Members introduced in the House on January 27, 1949. The Senator will recall that we had proposed $3,000,000,000 in direct Government loans for housing construction under a provision for limited rents, a proportion-a fixed proportion of earnings of families which occupied that housing, and that our ambit of beneficiary entities was a little wider than that contained in the amendment before the subcommittee, for it included not only cooperatives, but redeveloped corporations and limited dividend corporations as well, and is including also cooperatives and nonprofit corporations of a cooperative character.

Senator SPARKMAN. Congressman Javits, you referred to the bill that was introduced in the House by 23 Republicans.

Mr. JAVITS. No; 10 Republicans; 23 supported it.

Senator SPARKMAN. Was that bill somewhat similar to the bill introduced over here by Senators Tobey, Flanders, and Ives? Mr. JAVITS. Exactly.

Senator SPARKMAN. The same bill.

Mr. JAVITS. It had been worked out with Senators Flanders, Tobey, and Ives, and there was a counterpart introduced in both Houses. Senator SPARKMAN. I want to bring that out because I have frequently said that this bill really grew out of the bill that was introduced by Senators Tobey, Flanders, and Ives, all of whom are now members of this committee.

Mr. JAVITS. That is very gracious.

Senator SPARKMAN. Senator Ives was not a member at that time, but he is now.

Mr. JAVITS. That is very gracious. There is enough credit in this housing fight for all that participated in it.

Senator SPARKMAN. May I ask: that bill provided for direct loans from the Government?

Mr. JAVITS. It did.

Senator SPARKMAN. Of $3,000,000,000?

Mr. JAVITS. Yes.

Senator SPARKMAN. At what rate of interest?

Mr. JAVITS. It was estimated that it would be three percent.

Senator SPARKMAN. You had the going rate of money plus one-half percent.

Mr. JAVITS. It was there the going rate plus 1 percent.

Senator SPARKMAN. Plus 1 percent.

Mr. JAVITS. We had taken in our fixed figure the amount which you. take in for reserves and overhead in an uncertain figure, but which we know will be about one-half of 1 percent.

Senator SPARKMAN. Yes.

Mr. JAVITS. So it came to much the same rate that you have in this bill.

Senator SPARKMAN. I am glad to have you make that comment about the origin of this legislation, because some people have felt

that this legislation was a move by the administration to impose it on the American people and that they just shipped it down to Congress and told us to take it.

As a matter of fact, you have made a statement which I know to be true; that the legislation did have its origin with the introduction of those two measures, and that growing out of that a great many people have contributed a great deal of thinking to this legislation, and that this represents the outgrowth of all that work and all of that thinking.

Mr. JAVITS. That is exactly right.

May I say that was logical, for this reason: that the public-housing idea, having come essentially from yourself and others in the Administration, it was naturally that those in the minority opposition, who had liberal views themselves on the housing issue, should call attention to the fact that in order not to make it class legislation, it was necessary to have a balanced program, and so many of us fought very hard for public housing, because we think and our hopes have been realizedthat we would have support when the time came, and it has now come, for an effort to erect a program for the lower middle-income groups, to balance out what had already been done in the public-housing field. We proceeded rather vigorously to support public housing in full confidence that justice would be done by this group.

I think it is significant, as the Senator knows, as has been pointed out here, that families we are now dealing with are the very backbone of what we call the American way, because there are 15,500,000 families that are in this $2,000 to $4,000 earning bracket, and they constitute there about 40 percent of all American families. They are the very people whom we are trying to help in this effort.

Senator SPARKMAN. When you say 15,000,000, you are including families on the farm as well as urban?

Mr. JAVITS. Yes.

Senator SPARKMAN. We are using the figure of 8,000,000 urban families, since this legislation is aimed primarily at urban communities. I believe it is better for us to think of the 8,000,000 rather than the 15,000,000.

Mr. JAVITS. Yes.

I say 15 for this reason: We know we will never pass a piece of legislation which will take care of as large a number in that class as in the public-housing group where we have 810,000 units, and you have a need variously estimated at 3,000,000; sometimes as high as 5,000,000. I say that because what we are really doing here is giving our pledge of cooperation to a whole class of people in our community, and going here, and perhaps even later a little further, as far as the Government can possibly go with that.

That is why I use the term defining the whole class. I agree with the Senator that from the point of view of direct applicability it relates to 8,000,000 families.

Senator SPARKMAN. I certainly join with you in the wish that you express that we may continue to have bipartisan support. At this point I think it may be well to say that the fact that we did not have bipartisan sponsors of the amendment is not to be taken at all as indicating lack of bipartisan support. The amendment was introduced by the chairman of the committee, as is so frequently done, and represents of course more or less complete committee action.