means the maximum of debt retirement. Now, the question you are raising is whether against all of that background the bill should specify a larger initial investment?

Senator CAIN. Yes.

Mr. FOLEY. That I think is a matter that I have given my views on. Senator CAIN. And from your point of view, considering all the factors, you conclude that the 72-percent and the 21⁄2-percent down payment should be adequate?

Mr. FOLEY. If the bill were enacted that way?

Senator CAIN. Yes.

Mr. FOLEY. Well, I would not consider that the agency or administration would not, where the situation permitted and justified, encourage or possibly even require larger investment.

Senator CAIN. Would you require-perhaps I have read the words wrong:

* * * such stock subscriptions shall be paid for in cash at the time of application for the loan, or, at the election of the borrower, one-sixth of the total amount payable shall be paid at the time of application, one-sixth shall be paid prior to receipt of any proceeds of the loan from the Corporation, and the balance shall be paid in installments within twenty years thereafter.

Mr. FOLEY. When I made that statement, Senator, I was not confining myself to the equity in relation to the purchase of stock but was considering the other factors as well. There is nothing to prevent the enlarging of the equity, as much as he is able and willing to pay. Senator CAIN. One other question. You have, under the definition as you construe it to be in the proposed bill, 8,000,000 American families in the so-called middle-income group. Would you also interpret the bill to contemplate 8,000,000 families in the upper third in this country?

Mr. FOLEY. One-third above and about one-third below.

Senator CAIN. Meaning that when you get this housing legislation in full force and effect

Mr. FOLEY. Excuse me. We are speaking of urban.

Senator CAIN. Yes. When you get this legislation, it will mean that we have come to the day when 16 out of 24 million Americans, in order to have adequate housing, will get it through the assistance of the Federal Government.

Mr. FOLEY. No; that does not follow at all.

Senator CAIN. I wondered. I am raising the question.

Mr. FOLEY. No; I do not think that follows at all. A very great many families are presently acquiring homes without the aid of either the FHA or the VA.

Senator CAIN. Of the middle-income groups?

Mr. FOLEY. Yes. I think it is safe to say that, although I cannot give you figures at the moment. Actually if you include mortgage operations in new construction, I think it has reached a peak of about 35 percent, perhaps, in participation.

Mr. GREENE. That is right.

Mr. FOLEY. And they have reached 10 percent in VA, it is not larger than that in participation.

Actually, Senator, what these things do is to furnish incentive in other directions also; long-term amortized types of loans have come into being since they became an established success, and so on.

No; I think it would be totally wrong to say that because we provide vehicles and make them available to those who need them in certain elements of the population, that it follows that all or substantially all or even a majority will have to use them.

Senator CAIN. Senator Sparkman, I do want to repeat my appreciation for your indulgence extended me. I would like to conclude with one observation, if I might.

Senator SPARKMAN. Go ahead, Senator.

Senator CAIN. I am among those who are seriously concerned with what we are doing in the field of American housing, and concerned with where we are going.

Now, a year ago I had the opportunity to spend some 3 weeks in Dade County, Fla. How the facts are with reference to the rest of the country, of course, I do not know, but the facts were about as follows with reference to Dade County, Fla.

That county, which includes Miami and Miami Beach, was under rent control, and there was the insistence by everybody that there was a housing shortage. One or two of us as individuals took exception to that, but that is neither here nor there.

During the course of the year and because of the rent law that was written under the jurisdiction of Senator Sparkman, Dade County through its legislature was able to decontrol those rentals.

This Christmas I had an opportunity to go back for another look, to see whether all the horrible things that had been predicted by the Office of the Housing Expediter had come to pass. Well, I do not know what the reasons are in their entirety, but significantly there is no longer, in one short year, any housing shortage in Dade County. There is a housing surplus.

The result of that is that the business people and the propertied people of Dade County are collecting money so they can advertise more extensively in northern newspapers in the hopes of getting more people to come down there.

In housing one of the very unusual things which have resultedand I wish I knew all of the reasons for it-is that the section 608 loans about which we have been talking so much today are beginning to run in the direction of serious trouble. With the rates of rent which the builders were permitted to charge under section 608—well, they could charge them but they could not get people to live in those accommodations, because that field of housing has been returned to the competitive situation.

Now, I have no antagonism against cooperatives, nor am I against a number of the Federal endeavors in the housing field. However, my first endeavor is that we be certain we are not going to some day face the fact that there may be a good many Dade Counties in this country; and I know the taxpayers are getting awfully worried about it down there. They would like to settle down for a while with the present obligations they have of the Federal Government, without having promptly to take on some more.

With that, gentlemen, I will conclude and I will leave the committee for the moment with great personal distress, although I am happy I will have the opportunity to come again.

Senator SPARKMAN. You are welcome at any time.

Senator LONG. There has been mention of the fact the section 608 projects brought a high rental and, of course, at the present time the

rent could be substantially higher. Is there anything to prevent a cooperative from buying one of these section 608's and financing at a longer term at a lower rate?

Mr. FOLEY. I think the language of the bill, as I recall it, contemplates new housing construction.

Senator LONG. It would be new.

Mr. FOLEY. Just as section 608 itself applied to new construction. Senator LONG. So that could not apply to construction already built.

Mr. FOLEY. It does not.

Senator LONG. Now, as I understand, the authorization the first year is $300,000,000, and there will be over 2 billion for this program; is that the present contemplation?

Mr. FOLEY. That is right.

Senator LONG. The original authorization on section 608 projects was about $500,000,000, I believe. How much was it?

Mr. FOLEY. It changed so frequently, Senator, that I cannot recall. Mr. GREENE. A very small amount in the beginning. $100,000,000.

It was

Mr. FOLEY. You will recall, Senator, it was passed in what were called the defense days prior to the war.

Senator LONG. Yes.

Mrs. HART. I might remind the Senator that it started with $100,000,000 but that was limited to the insurance of mortgages on one- to four-family structures under section 603, not to rental projects under section 608.

Senator LONG. And about how many housing units do you estimate could be built for $300,000,000, which I understand is the amount for the first year?

Mr. FOLEY. By our calculation, taking as the average $8,000 per unit, about 35,000 units.

Senator LONG. Those are all my questions.

Senator SPARKMAN. Mr. Foley, one of the last questions Senator Cain asked was about Government aids to this particular class of people.

As a matter of fact, the Government is simply saying to these people that if they want to act on their own, then it will help them through the guaranty of the loans which private industry will make to their organization, is that not right?

Mr. FOLEY. That is right.

Senator SPARKMAN. The Government is not giving them anything, is it, more than it has given the other classes of housing? Mr. FOLEY. No.

Senator SPARKMAN. It is just a different way.

Mr. FOLEY. As I attempted to point out this morning, the services rendered here are comparable to the services rendered in housing and in other operations by the Government in the past, as far as technical aid. And I think by analogy in the rest of the provisions what is being said in essence is that, "If you are a group of cooperatives that have been qualified and are willing to accept the conditions applying to this type of housing, which will differ from the conditions applying to other aids, then these special aids will be made available."

Senator SPARKMAN. And the type of housing they will get under this will be different from the other types of housing?

Mr. FOLEY. Yes.

Senator SPARKMAN. All right.

Senator CAIN. Different in what way, Senator Sparkman?

Senator SPARKMAN. Well, for one thing, perhaps they will not be as elaborate. There is a provision in the bill that provides they shall be of economic design.

Senator CAIN. I think that is in all of them.

Senator SPARKMAN. In the public housing; yes. And they are told that they will build this housing themselves or at least have it built on a nonprofit basis. And they are encouraged to set up some kind of a self-maintenance program. And they must show, is it not true, that they constitute a bona fide cooperative for the purpose of building residential units for moderate income families?

Mr. FOLEY. That is right. They forego, for instance, the right to any profit from the subsequent sale of that house.

Senator SPARKMAN. In other words, what we in effect are saying to these people is that if they want to do certain things, then we will help them get a certain type of housing.

Mr. FOLEY. That is right.

Senator SPARKMAN. Just as we have said that to other types of housing, other groups under title I or the title II program or the title VI program, to public housing; to every group, we have provided some kind of aid for a certain type of housing, have we not? And we are doing nothing different here. Is that not right?

Mr. FOLEY. It seems to me that we are doing nothing substantially different in principle.

Senator SPARKMAN. Now, one question of you, Mr. Foley, about the prepayment, the advance loans. I agree with Senator Cain that we certainly ought to be very careful about that part of it, in order to be certain that it is going to be used properly.

Is it your opinion that this legislation is so drawn as to safeguard those loans?

Mr. FOLEY. I think the legislation is so drawn as to give the necessary authority to set up regulations to so safeguard them.

Let me say this, however. I am sure you will agree that although we have made a very careful study of this, we cannot claim to be all-wise. Somebody may have a very good idea that would give further protection.

Senator SPARKMAN. But, of course, they must prove themselves to be a bona fide organization before there is an advance loan?

Mr. FOLEY. That is correct.

Senator SPARKMAN. And the advance loan is not given to any group that cannot prove that they constitute a bona fide organization. Mr. FOLEY. That is right.

Senator CAIN. I only hope that we can find some way to make that a practical fact. Every man and woman in this room knows the instances that can arise; the instances within the section 608 loans, for example, where there was entirely too much profit that has accrued because of carelessness in the matter of appraisals and carelessness on the part of the Federal Government, which has resulted in all of us, all of the people, paying that unwarranted and terrible bill, the sum total of which we probably never will have a proper accounting for.

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Mr. FOLEY. Well, at this time, of course, Senator, there are no losses under any title, section 603 or 608, that have resulted in claims upon the Treasury. Whether or not there may be some in future we cannot predict, although I think there are many safeguards in the set-up. But nobody, and I think I testified to that very frankly before this committee, nobody can estimate in advance as the bill requires as to what it will cost any builder to build any given project. As I have already pointed out, one builder in one community builds a project cheaper than the same project would be built by another builder in that community. So, you have that impossibility, and it should be recognized and it would be unwise for any of us in the housing agency to claim that it is not possible that claims will result on the Treasury.

Senator CAIN. No.

Mr. FOLEY. And as to whether or not there will eventually be losses so substantial that they would have to be claimed upon the Treasury and therefore upon the taxpayer-we cannot say it is not possible.

Senator CAIN. I have talked with people. There was one person from the Northwest that I spoke to months ago on this matter, and his opinion I respect very highly, and he contended that in one construction of 64 individual homes they have been so badly appraised that when they were sold they, in his considered opinion, sold for around 25 cents worth on the dollar.

Mr. FOLEY. That, of course, would not have been a section 608 project.

Senator CAIN. No.

Mr. FOLEY. Or VA.

Senator Cain. A lot of us dream that we will stay within the practicalities in this matter; and we have some hopes that our dreams will turn out to be facts.

Mr. FOLEY. That of course is the reason, one of the reasons, as I said last summer and again I will repeat today, that we do not want an extension of the section 608 type of operation. We think the necessity has passed. We will have to assume that Congress was wise in designing it and that we needed it at the time we had it.

Senator SPARKMAN. By the way, did we not have advance loans under section 608?

Mr. FOLEY. The advances are a different situation there, Senator. Senator SPARKMAN. Well, somewhat similar?

Mr. FOLEY. The insured advances made by the private loans for construction were somewhat different. I think it does not parallel. Senator SPARKMAN. But at any rate this idea of an advance loan is not something special or something entirely new in a housing program, is it?

Mr. FOLEY. We had a somewhat similar situation in the slumclearance program.

Senator SPARKMAN. Yes.

Senator CAIN. May I raise a question about this speculation angle. Now, suppose some people tell me they intend to be speculators and

Senator SPARKMAN. Well, they cannot be speculators in this housing, can they?

Mr. FOLEY. Well, conceivably, some people may dream up a scheme, but also conceivably some other people may head them off, too.