and restore the entire area to a sound and stable condition. We have no authority to designate an area that is not characterized by blight or deterioration as an urban renewal area, in order to facilitate the acquisition and disposition of air rights, nor does S. 2468 make any change in existing law that would affect this situation.

You will appreciate, I am sure, that similar problems concerning the eligibility of the area must be reckoned with under State and local law. We have not attempted to deal with the provisions of New York law in this reply, nor have we concerned ourselves with the extent to which commitments for mortgage insurance may be available under section 220 of the National Housing Act, as amended, or special assistance from the Federal National Mortgage Association under section 305 of the National Housing Act. Our regional office and the FHA Multifamily Insuring Office in New York City are prepared to give detailed consideration, however, to any specific proposal by the Housing and Redevelopment Board for an urban renewal project involving the disposition and development of air rights.

Sincerely yours,

ROBERT C. WEAVER, Administrator.

Senator JAVITS. The other question which I would like to ask you, again not necessarily off the top of anybody's head but to give us a written answer to as part of the record, is this: The success which has been attained in dealing with the problems of moderate-and middleincome families under the plans that are contained in the 1961 bill, with which, of course, you are extremely familiar, as contrasted with the attitude of the administration now toward some type of pooling of mortgages of that character and bond issues to deal with them somewhat along the lines of the analogy of what we are doing in New York-whether or not the administration is prepared to give any reaction to the idea of the middle-income housing program along the lines of the New York State Housing Finance Agency program.

Dr. WEAVER. Well, I can say that we can certainly give you some, I think, very revealing and very encouraging reports on the 221 programs which we will be happy to insert in the record.

As I said in my statement, however, these programs will expire in 1965, and I think that we probably would feel that we ought to look at it in 1965 with an additional year's experience before getting too far afield.

But this is something we would check out, and we will be happy to do it.

Senator JAVITS. In other words, if I may rephrase it-and please correct me, Mr. Weaver, and I know you will-preliminarily you feel that we would be better off looking to another type of program after you have had the full statutory experience with this one rather than looking to it now as you feel your experience is encouraging enough so that it rates that kind of treatment?

Dr. WEAVER. Yes, Senator. I think this bill, as I recall, this section, was specifically inserted as an experimental program.

Senator JAVITS. Right.

Dr. WEAVER. A 4-year program. And it was my feeling this is why this bill does not relate to this subject at all. At the end of the 4 years we would make a full report of a full-dress review, look at this, and decide the Congress would-whether or not to continue it, to modify it, or so forth. And we would give a full report at that time. But we will give an interim report.

Senator JAVITS. An interim report? Thank you. (The report requested follows:)

COMPARISON OF THE FHA SECTION 221(d) (3) AND NEW YORK STATE HOUSING FINANCE AGENCY PROGRAMS

DESCRIPTION OF PROGRAMS

New York State housing finance agency program

The agency was created in 1960 for the purpose of providing safe and sanitary dwelling accommodations at rentals which families and persons of low income can afford, and which the ordinary operations of private enterprise cannot provide. To accomplish this purpose, the agency is authorized to issue its bonds and notes to the investing public and make mortgage loans to companies which are subject to State regulations as to rents, profits, dividends, and disposition of their property.

The interest on the bonds issued by the agency is exempt from Federal and New York State income taxes. The bonds are direct and general obligations of the agency, but they are not a debt of the State of New York and the State is not liable on such bonds. The agency is authorized to issue bonds and notes which in the aggregate do not exceed $1 billion. The underlying security of the bondholders, aside from the mortgaged properties, is the capital reserve fund which maintains an amount equal to 1 year's debt service on all bonds outstanding. About 5 percent of each bond issue is placed into this reserve which is financed from part of the annual fee (payable monthly) of one-half percent on each mortgage loan and is charged to each housing company by the housing finance agency. About 60 percent of this fee goes for this reserve purpose. The balance pays for agency maintenance and operations, and supervising services of the division of housing and community renewal. The State has made a deposit of $2 million in the capital reserve fund, which sum is repayable. The act also provided that there shall be appropriated and paid annually into the fund such amounts as are necessary to restore the fund to an amount equal to 1 year's debt service on the bonds.

The agency may make mortgage loans up to 90 percent of the cost of a project to limited-profit housing companies (for rental-type projects) and up to 95 percent to mutual companies (for cooperative-type projects) and to nonprofit membership corporations (for housing for hospital staffs, college students and aged persons of low income). The interest rate to be paid on these mortgages would not be less than the rate or rates the agency is required to pay on the bonds issued to obtain the funds from which the mortgage loans are made. However, the housing companies must pay the aforementioned additional 0.5-percent fee. The law provides for a maximum term of 50 years for the repayment of loan, and the agency schedules mortgage repayments in such a manner as to provide sufficient funds to pay the principal and interest on the serial bonds issued by the agency to obtain the funds from which the mortgage loan was made.

Exemption from local and municipal real estate taxes up to 50 percent of the value of the property is provided for, with the consent of the local legislative body of a municipality. Such tax exemption shall continue so long as capital loans or investments of the company are outstanding, but in no event for a period of more than 30 years.

Rents charged are subject to approval by the commissioner of housing and community renewal of the State of New York. Annual incomes of families of three or less persons cannot exceed six times the rental at time of admission and during the period of occupancy. For families of four or more persons, such ratio cannot exceed seven times rent. Rental includes heat, light, water, and cooking fuel. Under certain conditions families with income-to-rent ratios in excess of those prescribed by law may be permitted to remain in occupancy upon payment of a surcharge which is to be paid over to the municipality providing the tax exemption.

New York State program of direct loans to regulated housing companies

In addition to the program of the New York State Housing Finance Agency, the State is authorized to make mortgage loans to regulated housing companies under the limited-profit housing companies law (Mitchell-Lama law, 1955). Such mortgage loans are limited to 90 percent of project cost for limited-profit housing companies, and to 95 percent for mutual companies or membership corporations offering housing for hospital staffs, college students, and the aged. To obtain funds for making mortgage loans, the State is authorized to issue bonds in an amount not to exceed $150 million. The interest rate charged on the mortgages made would be the same as the interest rate the State pays on the bonds. In ad

dition, the participating housing companies are assessed charges computed at $1.20 per year per rental room. The maximum maturity of the mortgages is 50 years. Tax-abatement provisions and rent-to-income limitations are similar to those described above.

FHA SECTION 221 (d) (3) PROGRAM

The FHA program of mortgage insurance for rental and cooperative housing for families of low and moderate income, section 221(d) (3) of the National Housing Act as authorized by the Housing Act of 1961, was designed to provide good housing for such families as are in an income bracket too high for public housing, but too low to compete successfully in the normal rental or cooperative market.

Proposed new projects and existing projects involving rehabilitation having five or more units may be eligible for mortgage insurance, providing such projects are located in a community having a current workable program certification. Insured mortgages on acceptable existing properties located in an urban renewal area, and not involving rehabilitation, may be refinanced providing the Federal Housing Commissioner finds that insurance under the below-market interest rate program will facilitate the occupancy of dwelling units in the projects by families of low or moderate income or displaced families.

Projects may be developed by public agencies (except local housing authorities obtaining funds exclusively from the Federal Government) or by cooperatives (including investor sponsored), private nonprofit corporations or associations, or limited-dividend corporations. For all these eligible mortgagors, except limited-dividend sponsors, the amount of the mortgage on new construction may not exceed the replacement costs of the project; on rehabilitation projects, the amount of the mortgage may not exceed the estimated cost of rehabilitation plus the value of the project before rehabilitation; or if refinancing is involved, the amount of the mortgage may not exceed the estimated cost of rehabilitation plus the lesser of the amount required to refinance the outstanding indebtedness or FHA estimate of market value before rehabilitation. For limited-dividend sponsors, the mortgage may not exceed 90 percent of these amounts.

The maximum mortgage term is 39 years and 11 months or three-fourths of the FHA Commissioner's estimate of the remaining economic life of the property, whichever is less. If advances are to be insured during construction, 2 percent of the original principal amount of the mortgage will be required as working capital. This fund must be deposited with the mortgagee.

The interest rate during construction currently may be as high as the established FHA maximum interest rate at the time of construction (54 percent). Upon final endorsement of the loan, the interest rate will be based on the average current yield on all marketable obligations of the U.S. Treasury (presently 3% percent per annum). FHA has waived payment of the mortgage insurance premium of one-half percent for projects financed with this below-market interest rate mortgage.

To provide financing at this below-market interest rate for section 221(d) (3) projects, the Federal National Mortgage Association is authorized to purchase the insured mortgages under the FNMA special assistance program.

FHA supervision over rent, carrying charges, and occupancy requirements will be maintained until the insured mortgage is paid in full. To prevent early refinancing and release from FHA supervision, full or partial prepayment of the insured mortgage is prohibited without the approval of the FHA Commissioner, except that limited dividend corporations may pay off the mortgage in full after 20 years from the date of final endorsement for insurance without such approval. Occupancy is limited to families of low and moderate income and maximum income limits for admission are established for various size families in each locality. Occupancy preference is given to displaced families.

SIZE OF PROGRAMS

Table 1 below shows that the New York State limited-profit program had reserved or committed through December 1963 almost $491 million in mortgage funds for 61 projects. Thirty-two of these projects involving almost $108 million are being financed by State loan funds (SLF), while the other 29 projects involving almost $383 million are being financed by the State housing finance agency (HFA).

Table 1 also shows that through December 1963, commitments to insure mortgages under the section 221 (d) (3) below-market interest rate program had been

issued by the Federal Housing Administration (FHA) amounting to $210 million on 131 projects. Some $45 million in commitments have been issued for 26 projects in FHA's zone I of operations, which includes New York State. In addition, the FHA had in process, as of December 31, 1963, applications for section 221(d) (3) insurance for 103 projects containing 14,611 units involving a total mortgage amount of $185 million.

The figures presented in table 1 are cumulative figures for the various programs since their inception. It will be noted that the data for the section 221(d) (3) program reflects a shorter time period of operations. This program was authorized by the Housing Act of 1961 (effective date, June 30, 1961), whereas the State loan fund program (Mitchell-Lama) dates back to 1955 and the Housing Finance Agency program back to 1960.

TABLE 1.-New York State limited-profit program and sec. 221(d) (3) below market interest rate program cumulative volume through Dec. 31, 1963

122 of the 32 State loan funds projects are elevator projects, and all 29 of the housing finance agency are elevator projects.

Includes New York State. Also includes 1 project in the New York City area for 366 units and a $4,993,900 mortgage.

The 61 limited-profit projects contain 30,462 units-SLF projects with 5,758 and HFA projects with 24,704. The 61 projects are composed of 51 elevator, 8 walkups (2 and 3 story), and 2 one-story structures. All of the HFA projects are located in New York City and are composed of elevator structures.

The 131-section 221(d) (3) projects contain 19,112 units. The majority of units are in walkups, in contrast to the predominantly elevator-type projects under the limited-profit program.

The limited-profit program projects average about 500 units per project, while the section 221(d)(3) projects average slightly less than 150 units per project.

PER ROOM AND PER UNIT COSTS

The average cost per rental room of the 61 projects in the limited-profit program is $3,917, SLF projects, $3,830, and HFA projects, $3,936. The average replacement cost per room of the projects in the section 221(d) (3) program is $2,079 for walkups, $2,878 for elevator structures, and $2,208 for one-family structures. Walkups in the FHA zone I averaged $2,267 per room; elevator, $2,930; and one-family, $2,413. It should be noted that these are comparisons of predominately different types of construction in different locations, consequently the comparisons should be qualified accordingly. As indicated previously, most of the State limited-profit projects are elevator-type projects, which are a highcost type of construction, and many of them are located in New York City, which is a high-cost area. On the other hand, the FHA section 221(d) (3) projects are mostly nonelevator projects and located throughout the country.

The average project cost per unit was $18,177 for the 61 limited-profit projects (table 2), the SFL projects, $16,610, and the HFA projects, $18,542. The section 221(d) (3) projects had an average replacement cost per unit of $11,309 for the walkups, $15,192 for the elevator structures, and $12,854 for one-family projects. In zone I the walkups had an average cost of $12,390 per unit; the elevators, $15,719; and the one-family, $13,897.

TABLE 2.-Average costs1 per room and per unit for limited-profit and sec. 221(d) (3) program projects cumulative through Dec. 31, 1963

1 Based on project costs for New York State limited-profit projects and replacement cost for FHA projects.

PER ROOM AND PER UNIT RENTALS

In addition to having higher average per-room and per-unit costs, the limiteddividend projects also cost more to live in than the section 221 (d) (3) projects. The average monthly rental per room for limited-profit rental projects financed with State loan funds was $25.49 (generally excluding utilities), and housing finance agency rental projects, $26.29 (excluding utilities). In comparison, the average monthly rental for the section 221(d)(3) rental projects was $15.04 for walkups, $20.29 for elevator structures, and $17.74 for one-family structures, including utilities in part. (See footnote 5 to table 3 for an explanation of the utilities included in sec. 221(d) (3) rentals.) In FHA zone I, the average monthly rentals were slightly higher than those for the United States as described above.

As indicated in table 3 below, the average monthly rental per unit for rental projects in the limited-profit program was also higher than for section 221(d) (3) rental projects. Data are not available on carrying charges or the equivalent of rent for section 221(d) (3) cooperative projects, hence no comparison can be made with limited-project cooperative projects.

TABLE 3.-Average monthly rental per room and per unit for limited-profit and sec. 221(d) (3) program projects cumulative through Dec. 31, 1963

Not available. Data on carrying charges or the equivalent of rent are not available for the FHA Sec. 221 (d)(3) cooperative projects. The 5,010 units in such cooperative projects represented 26 percent of the total of 19,112 units.

Rentals shown generally cover ranges, refrigerators, heating, water, laundry facilities, janitor services, grounds maintenance, and to a lesser degree-air conditioning, gas, electric, and parking.