There is, we believe, another consideration which we think is important in this matter of costs; that is the very definite likelihood that additional easy credit, which would result from this proposed legislation, would have additional inflationary effects on building costs. Widespread liberal credit facilities in the home-construction field have historically produced higher construction costs. The reason is obvious. The more liberal the credit, the greater the number of buyers who bid against each other for the available supply of labor and materials.

Let us take a look at the record of construction costs following World War I and likewise following World War II. Department of Commerce reports show that the peak of construction costs following World War I was 68.6 percent above building costs immediately preceding World War I. In contrast to that, building costs in 1948 rose to a point 86.6 percent above the same costs in 1939. The fact is that in the period following World War II we had a number of elements which produced easy credit in sharp contrast to the limited credit facilities following World War I. I need mention only the FHA and the guarantee of loans under the GI bill. It seems clear from this record that additional easy credit facilities such as are embodied in this proposed legislation would necessarily have the effect of increasing the competition among buyers for available labor, material, and supplies. The result of that kind of buyer competition in the past has always been higher prices and therefore higher cost to the ultimate consumer.

On the other hand, if the present high level of home-building volume is allowed to continue without any additional stimulae in the form of Government subsidies we should soon reach a point where supply and current demand are almost equal. In fact, there are already reports around the country of increasing vacancies in some types of properties, particularly section 608 projects. If such vacancies increase and it seems likely they will, the effect will be lower rents and finally lower construction costs.

Senator BRICKER. Do you have figures available on the amount of unoccupied units there are throughout the country?

Mr. KREUTZ. No; we do not. I simply have statements made by various people to us of increasing vacancies in this country.

Senator BRICKER. If we should continue to build a million units a year, approximately, as we did last year, how long do you think it would be before we catch up with the increased number of families to saturate the market to where you had a buyer's market?

Mr. KREUTZ. I think it may not take very long. The thing that makes a buyer's market is generally a very little thing. In the depression, as you recall, when real estate was a drug on the market, the percentage ratio of vacancies was not very great. It was just enough to create more housing than there was demand. As soon as you have that condition, you have a drop in rent and you have a drop in prices.

Senator BRICKER. How long do you think it will be before those economic conditions start to depress your rental costs?

Mr. KREUTZ. I think it wouldn't take more than a year or two, Senator, before we would approach a point of equalization of supply and demand.

The ultimate effects of the proposed legislation could be seriously damaging to our existing system of private home construction and financing. Once you start the wide-scale use of Government credit to assist one class or group of our population, how can you prevent the expansion of this type of subsidy to include the next higher income group level and the next and the next? If the $3,500-a-year family is able to get better living accommodations through a Government subsidy than he could otherwise afford, won't the $5,000-a-year family want similar help in the near future?

Too much help, whether it comes from doting parents or a paternalistic government, will soften the young couple starting out in life, and too often dull the ambition of the wage earner. I don't doubt that some of the great men of our own history, including many Members of Congress and heads of our Government, would never have risen above mediocrity if they had not had to work hard and put up with many inconveniences of their early life.

It has been axiomatic in our business that the home buyer should have some initial equity to insure a continuing interest in keeping his home. Our experience has also proved that home buyers should pay off their indebtedness during the middle years of their earning period.

Finally, it seems to us that our Government cannot afford to assume additional debt beyond the absolute necessities for the maintenance of peace abroad and stability at home. We cannot see any such necessity in this proposed legislation.

To summarize, we believe that (1) there is no need for the proposed legislation, (2) that there would be no substantial saving in construction costs of cooperative housing projects and, in fact, there might well be inflationary increases in building costs if this proposed legislation is passed, and (3) the ultimate effects of the proposed legislation could be seriously damaging to the existing system of private home building and financing. Therefore, we recommend that this legislation be not approved.

With regard to the amendments numbered 1 to 11 which have been submitted by Senator Maybank to replace previous sections in S. 2246, dealing with the FHA program, we would in general be in accord. However, we would have to submit to our membership the question whether FHA title I should be permanently retained. We, in the past, have endorsed continuance of title I on an interim basis, and a number of savings and loan associations have used title I insurance facilities for the making of improvement and repair loans particularly. They have reported their belief that this title has been of considerable value in enabling private business to increase the available supply of suitable older dwellings.

With regard to the elimination of section 608 and the substitution of new provisions in section 207 providing for 90 percent FHA loans on the first $7,000 value per family unit plus other extensions in the title II program, these amendments would also meet with our general approval. We urge, however, that section 608 be retained through March 1, 1950, because many mortgage-financing institutions and builders have made construction commitments to this date. tainly it would be better to provide a mortgage-insurance program on this or similar basis instead of the cooperative housing proposal in title III of S. 2246.

Cer

Senator SPARKMAN. Senator Bricker?

Senator BRICKER. No questions.

Senator SPARKMAN. Mr. Kreutz, I think of a good number of questions I might ask, but I will limit myself to only one: Am I correct in understanding that last night you became a grandfather? Mr. KREUTZ. Yes; that is right. For the first time.

Senator BRICKER. That means another house will be necessary some day.

Senator SPARKMAN. Thank you very much.

Mr. Donald Monson.

Will you identify yourself for the benefit of the record, please.

STATEMENT OF DONALD MONSON, ON BEHALF OF SCHOOLCRAFT GARDENS, DETROIT, MICH.

Mr. MONSON. I am one of these middle-income people. I represent Schoolcraft Gardens Cooperative, a group that has been trying to build one of these cooperatives, and is now in the process of getting started on one in Detroit.

Senator SPARKMAN. Do you wish to be seated?

Mr. MONSON. Thank you.

Senator SPARKMAN. Proceed, please.

You do not have a prepared statement?

Mr. MONSON. I do not, sir.

Senator SPARKMAN. Proceed in your own way, please.

Mr. MONSON. Our group started in Detroit about 3 years ago, when a group of families interested in the development of a cooperative project, as an attempt to get better housing at lower cost, bought a piece of land and started to see what we could do in this particular line. Senator BRICKER. How many families?

Mr. MONSON. We have now about 100 people in our association who have gotten together into what we call Detroit Cooperative Housing Association. In the course of this period we got the aid of members of the labor organizations, of veterans' groups, and so forth, to form an advisory board, to which we presented all of our difficulties, and what we proposed to do. Among others on that board are Governor Williams, who represented the veterans organizations of Detroit before he was elected Governor of Michigan, and is still on the advisory board of ours, but in our brochure which we have passed aroundthis gray-covered book-Governor Williams makes the statement that

cooperative housing is a fine manifestation of the American way of doing things of the capacity of our people to get together and help themselves to meet their own needs.

Together with public housing projects and the private building industry cooperative housing has a definite role to play in providing adequate homes for all our people.

Among others on our board we have Mr. Finlay C. Allan, secretary of the Detroit Building Trades Council, AFL. He made the statement, also, that:

Inasmuch as the possibilities of private home ownership are usually limited to families in the higher income brackets, cooperative housing offers advantages to families of moderate income through large-scale planning and lower financing costs.

Organized labor has a stake in cooperative housing both as consumers and as producers. As consumers, we are the majority of the families of moderate income who need good housing and, so far, have found difficulty in securing it at a price we can pay. As producers, we are interested in providing decent homes for all income levels in order to insure a continuing market and a prosperous Nation.

I have worked with the sponsors of Schoolcraft Gardens Cooperative from the beginning and have been particularly impressed with the careful planning that has gone into it and by the fact that these plans are workable plans made by practical people.

Victor G. Reuther, educational director, UAW-CIO, also writes:

I have no hesitation in calling the homes in Schoolcraft Gardens the "best buy" in Detroit today. The member family will get bigger rooms and better design and equipment for his money than in any other housing now on the market.

Good homes in a good neighborhood, plus genuine cooperative ownership, mean lower prices as well as security for the family savings. I have participated in organizing this co-op, and I have great hopes that this is but the first of a growing number of cooperative housing developments in which our members, together with other American families, may get much-needed homes at prices they can afford.

Senator SPARKMAN. May I ask you, Mr. Monson, are you an architect, yourself?

Mr. MONSON. I am working mostly as a. city planner; up until the last few months I have been employed by the Detroit City Planning Commission.

Senator SPARKMAN. I noticed the reproduction of the article you had written for the American City. It says senior architectural planner, Donald Monson. That is you, is it not?

Mr. MONSON. Yes.

Senator SPARKMAN. I notice you have a very good mimeographed statement here that I think could very well be incorporated in the record in toto, if you would like to have that done.

Mr. MONSON. If

you wish.

Senator SPARKMAN. You have some charts that I fear we will not be able to put in, although I wish we might, because you give a good illustration of how a cooperative project is detailed and developed and some of the things that you are hoping to accomplish by it.

I wonder if I might ask you to tell us in a few words how did you start, or how did this cooperative start? What prompted it?

Mr. MONSON. The situation in Detroit was that we in the middleincome groups, those of us who were in the white-collar classes, working in government and the unions, and so forth, found that our only choices, after the war, were that we could buy, or rent 608's which started for one bedroom-around $80, but two bedrooms you paid a minimum of $95, and then you had to pay your utilities; and you didn't get an adequate house for family life. You got a 600-squarefoot, cramped apartment, which is not meeting with very much favor in Detroit.

Senator SPARKMAN. At a price that was difficult to pay.

Mr. MONSON. That is right. Secondly, we could buy the economy house, two bedrooms, 24 by 24 feet, that is the usual size if you had more than one child, and many of our members have up to four children.

Presently we are on our first 54 groups, and our first Morgan unit, which we have just supplied the building plan to the building department on, are clearing the last details of an FHE mortgage insurance.

We have 10 four-bedroom units. When it came to those families with many children, two or more, it was impossible to get an adequate house in Detroit at a price they could afford. For that reason we felt that we should explore the question of cooperative housing and find out what we could do by eliminating the various speculative charges made, and secure to ourselves the benefit of these certain things which in rental housing are done, naturally, at a price, by the entrepreneur. We also felt that because we would have one mortgage over a number of groups, and we do our own bill collecting, posting, and so forth, one of our group would do that, we could reduce the costs, and we felt that we would be justified in asking a lower interest rate on that.

Senator SPARKMAN. You haven't built any yet?

Mr. MONSON. We have not.

Senator SPARKMAN. You are just getting ready to build your first project?

Mr. MONSON. Yes, sir.

Senator SPARKMAN. That is to be a 10-family unit?

Mr. MONSON. No; we have 54 in our first mortgage unit. We have land, which we own now, and which is available for extending, which will hold a total of 450 dwellings.

Senator SPARKMAN. Your plan is to put in 50?

Mr. MONSON. We are planning on starting 50 as soon as possible. We hope before the end of the month.

Senator SPARKMAN. Fifty units?

Mr. MONSON. Fifty-four.

Senator SPARKMAN. What type will that be?

Mr. MONSON. Twelve apartments in a single building of which two will have one bedroom, living room, and so forth, and the rest of them will be two-bedroom apartments. The rest of the units will be two, three, and four bedrooms, with terraces.

The larger units, as much as the four-bedrooms, are in two-unit dwellings, while the three's come in two and four units to a building. We have laid it out so as to have the most economical use of roads, and so forth.

Senator SPARKMAN. I believe that you present in the mimeo-. graphed paper a comparison of rents?

Mr. MONSON. That is right.

Senator SPARKMAN. That you will have to pay?

Mr. MUNSON. That is right.

Each member is a shareholder in the Schoolcraft, in the whole development. He then rents from the cooperative his own apartment. He is in that apartment for an unlimited tenure, so long as he abides by the rules of the cooperative. We have in our bylaws an elaborate procedure that you would have to go through to determine a termination of rent. If such lease were terminated, the member would have to be given his equity at the point of termination. If he wants to leave the co-op, he must offer his equity. That is, the share capital and the accumulated equity. That he must offer first to the cooperative. If the cooperative cannot buy it, when they have first option of purchase, then he is free to sell that equity to whomever he may.

There are other provisions, such as in case of stress, the cooperative can rent that, and so on.