that builders would be less diligent in their efforts to provide sound homes than in the past, we cannot help but think that FHA will be deluged with many applications for relief, and will be faced with the unpleasant task of screening these; a serious additional burden will be imposed on FHA's already overworked staff. In addition, appeals from valid FHA rejections of claims are certain to place an additional burden on Members of Congress and involve them in numerous contentious issues which will be difficult to adjudicate equitably. The headaches, which will be generated, can hardly help but result in the introduction of further legislation to increase the coverage under the warranty; this in turn will lead to greater and greater involvement of the FHA in the settlement of detailed complaints and less and less effort on the part of home buyers to exercise diligence and care in the selection and purchase of homes.

Sections 404 and 405: These sections provide for the continuation and extension of the public housing program. We are opposed to the authorizations for further new construction and for the purchase, or purchase and rehabilitation, of existing dwelling units.

We have considered carefully the proposals which would authorize local public housing authorities to lease units in existence or in existing structures. This provision comes close to offering the best opportunity for promptly providing safe, decent, and sanitary accommodations for needy low-income families. It would be desirable to provide safeguards in the legislation to assure that the units are leased from private owners on a basis of tenant selection, as opposed to assignment, and every effort should be made to convert this program to one where the rental subsidies are paid by local governmental units out of funds which are locally generated wherever this is possible.

TITLE V

Under the provision of section 502, there would be established an insured rural loan housing program, administered by the Farmers Home Administration in the Department of Agriculture. This is, in effect, a conversion of the present Farmers Home Administration program of direct home loans on what are described as "rural" properties. It has almost nothing to do with either farmers, or farms, but it uses those "magic" words to sell the program.

We certainly have no animus against farms or farmers and we would normally not even be concerned with agricultural assistance programs the Congress considers desirable. But, we are unalterably opposed either to the establishment of a new program within the Department of Agriculture to insure loans to people who are not farmers on properties that are not farms, or for a further extension of the present direct loan progam for such purposes.

The Farmers Home Administration makes a variety of loans for soil and water conservation purposes, the acquisition of farm homes and related buildings, the operations of farms, and nonfarm residential housing, and elderly housing loans for rural residents. It is also engaged in other types of lending, including loans for urban planning, recreational facilities, etc. At the time this agency was created, money was generally in short supply, transportation and communication facilities were far less adequate than they are today, and the percentage of our rural population living on, and engaged in, farming activities was considerably greater than it is today. Before establishing any new insured lending program within the Farmers Home Administration, we believe that is is appropriate to give some consideration to the changes that have taken place in rural economics, rural life, and in the lending habits of private lenders.

Additionally, we believe it is appropriate to consider whether or not it is sound from the Government's point of view to establish a new nonfarm mortgage loan insurance program in an agency which, although it uses the initials "FHA," has no connection with the Federal Housing Administration. Incidentally, we have found evidence that the use of these initials "FHA" is confusing and misleading. There is also a loan guarantee program in the Veterans' Administration. There have been many suggestions that both Government and industry would be benefited by the consolidation of the FHA and VA programs into one agency. We believe that many of these arguments have validity and we do not believe Congress should fly in the face of such arguments by the establishment of still a third mortgage insurance function in another agency.

One of the principal arguments for consolidation would be the avoidance of confusion and overlapping in responsibilities between the agencies. During recent years, when the nonfarm, nonfarmer direct lending program of the Farmers Home Administration has been in operation, there have been numerous instances in

which homes built under this program have been located in the very same areas as homes financed under FHA or VA. Even with the present programs of FHA, most of these homes can be built or financed under this or other FHA programs. An increase of the 203 (i) limits to $15,000 would be even more helpful. Homeowners would benefit from the FHA compliance inspection procedures and architectural reviews which are absent from the Farmers Home program. While the field offices of the Farmers Home administrators make some casual review of the plans and specifications, we find no evidence that there are any written standards, nor any stipulated requirements to which builders must adhere.

In the past, if there has been any justification for the Farmers Home Administration carrying out certain housing activities, it is only because the housing involved was related in some manner to the agricultural economy. However, the complexion of rural America is changing markedly and a continuously decreasing number of inhabitants of rural America are engaged in farm activity. The fact of the matter is, as we see it, that there is a decreasing need for the Farmers Home Administration and an increasing need for the Federal Housing Administration to devote a greater portion of its interests and efforts toward the rural areas.

**

NOTE.-The Yearbook of Agriculture for 1963 tells us that in 1940 nearly one-half of the rural employed people were farm operators, farm managers, or farm laborers. By 1960 "more than 5.5 million craftsmen, foremen, and operatives were resident in rural areas *" compared "to a little more than 3.5 million farmers and farm laborers. The white-collar occupations had about 4.8 million workers and thus were also more numerous than the number of rural persons in farm occupations.

"Manufacturing, the single most important industry group, accounted for 4.2 million rural persons, or 24 percent of the total compared to 3.8 million or 22 percent in agriculture in 1960. A decade earlier, agriculture accounted for twice as large a proportion of the rural labor force as did manufacturing-36 and 18 percent respectively. * * * Thus we are developing an increasingly more urban like occupational structure among rural people. In view of the generally higher incomes obtained in nonagricultural occupations than in agriculture, the effect of these shifts has been to increase average incomes among rural families and to raise their standards of living." It is obvious that the farm population has dropped sharply while the rural nonfarm population has gone up.

We would also recommend to the committee's attention, statistics published by the Federal Reserve Board and the Economic Research Service of the Department of Agriculture, showing the sharp increase in rural and farm loans by private enterprise. The marked increases, which these figures reflect, certainly do not suggest the need for further Government stimulation.

We believe that Congress should increase the maximum loan limit under sec tion 203 (i) to give the FHA (that is the real FHA) a better tool to work with in this area. Such an increase should be accompanied by an expression of congressional intent that it is the desire of the Congress for the Federal Housing Administration to serve more aggressively the needs of rural America by gaging its underwriting requirements for the program to the determination of an economically sound risk based on the type of marketing criteria prevailing in rural areas. FHA, in its modification of 203 (i) standards last year, made a significant step toward making the 203 (i) programs far more acceptable in rural areas. The FHA's experience in mortgage loan underwriting is so far superior to that of the Farmers Home Administration, that there is absolutely no justification for a new insured lending program, or even for additiona lauthorization and appropriations for more Farmers Home Administration direct loans.

TITLE VIII

There are three sections of title VIII which we recommend against. Section 802 would provide the FHA Commissioner with authority to pay any claim in cash or debentures at his option and would grant him authority to borrow from the Treasury for this purpose.

We have heard rumors that this provision of the bill was favored by MBA. Let me state publically, officially, and emphatically that our association is firmly opposed to the conversion of FHA claims' settlement to any system which

1 The Yearbook of Agriculture for 1963, "A Place To Live," pp. 20 and 21.

unwisely jeopardizes the insurance reserve funds or which contravenes the principal of self-sufficiency of the FHA.

It is our belief that the debenture device is one of the most important principles of the whole FHA concept and it should not be abandoned. Cash payments could not help but increase the demands upon FHA to liquidate its investment in foreclosed properties, and thus further upset an unsteady real estate market. We oppose cash payments in any form. We are sure the past records of this committee are replete with studies demonstrating the soundness of the debenture concept.

We do not believe FHA mortgage money would be made significantly more plentiful or less expensive by granting the Commissioner this authority, and we recommend against passage of not only this section 802, but also section 807, and any others providing for cash payments.

Section 809 would provide authority to shift money out of the mutual mortgage insurance fund to other program funds. This is the fund which provides the underlying strength and confidence in FHA. It is a fund that has been created by home borrowers for the sole purpose of paying losses on a mutual insurance program. Any surplus not needed for this purpose both morally and legally should accrue to their benefit and to theirs alone.

By far, the largest portion of FHA business is done under the programs insured under this fund. While we realize that if the fund became insolvent, the Government probably would appropriate necessary moneys to honor the insurance obligations, nevertheless, such actions may be delayed and may be expensive to investors, as unfortunately was the case last year when the Veterans Administration was unable to honor its guarantees pending supplemental appropriations from the Congress. It must be recognized that mortgage loans represent the savings of ordinary Americans and that the managers ofmortgage portfolios must invest these savings in the most attractive fields if they are to continue to enjoy the confidence of their savers. Because FHA has been soundly operated over the years, we have gradually been able to attract a wider and wider range of investors into this market. Only a few years ago, the mutual savings banks became active in the FHA mortgages on a national basis, and in recent years, an increasing number of pension fund managers have begun to invest their funds in FHA insured mortgages. The result of this wider range of investors has been a more substantial flow of mortgage funds, which has kept interest rates in line despite a growing volume of construction activity. With the recognition that an increasing number of housing units must be built to house a continuously growing population, we consider it imperative to maintain the sanctity of the mutual mortgage fund if the confidence of investors is to be maintained.

Let me say again that in our view any withdrawal of funds from the mutual mortgage insurance fund to pay claims on loans insured under other programs, violates the mutual contract which the FHA has with its borrowers. We do not see how funds can be withdrawn and used for payment of other claims without jeopardizing the concept of mutuality. We hope that the Congress will not see fit to pass this section of the bill.

Mr. Chairman, in conclusion, may I repeat that our stated opposition to the enumerated provisions of this bill is based upon our conviction that they do not either stimulate local initiative or private enterprise.

Senator CLARK. We are going to call next, at the request of Senator Javits, Mr. Eugene H. Nickerson, county executive for Nassau County, N.Y.

Senator Javits wanted to be here to hear his testimony and could not stay if he were called in turn.

Mr. Nickerson, I see you have a prepared statement which will be printed in full in the record. It is relatively short. Would you rather read it or summarize it?

STATEMENT OF EUGENE H. NICKERSON, COUNTY EXECUTIVE,
NASSAU COUNTY, N.Y.

Mr. NICKERSON. Well, I will try to combine the two.
Senator CLARK. Good. Go right ahead.

30-944-6454

Mr. NICKERSON. I want to express my appreciation for the opportunity to appear before this distinguished committee to support Senator bill 2468.

First, may I indicate briefly I am the chief executive officer of Nassau County, which I believe today has the largest population of any suburban county in the Nation. We have just reached 1,400,000, which makes us a major metropolis larger than many entire States. As you know, we have witnessed since World War II a vast expansion in population with all of the attendant problems of suburbanization, especially those which involve raising enough funds to provide municipal services and to support, in particular, education.

I am unhappy to report that in some segments of our county we have the highest local tax burden per capita anywhere in the Nation. We have had to learn many things the hard way. In the absence of a comprehensive development program, many of our local units of government, particularly school districts, were permitted to grow without any balance in the economic base. Thus, we not only have high taxes in some areas, we also have a considerable variation in local tax rates.

The rate of our population increase has slowed down, and we do not anticipate more than about 20,000 to 25,000 net increase per year in the next decade, but what concerns us is the nature of our growth.

Our age profile in the county is rapidly changing, and we anticipate that by 1970 the number of our high school students will double from about 18,000 to 37,000. This increase in young people will make it necessary for us to provide appropriate housing, recreation, jobs, schools, and colleges.

At the same time, the parents of these children are getting older. In the age group above 60 we are expecting a rapid rise of persons who will also require facilities which, by and large, are not existent in the county today.

I am speaking in particular of senior citizen housing, of which there is a major lack, which we have to pay attention to.

And there is one vital element that I would like to stress which I think affects the well-being of my constituency. I am referring to the great need to place increasing emphasis on esthetic and conservation controls in order to vouchsafe, or perhaps salvage, what remains of the beauties which nature has bestowed on our country.

We have somewhat of a lack of sensitivity especially at the local level, which controls zoning, which in my judgment fails to take into consideration adequate esthetic controls.

Senator CLARK. It would be a good thing if you became the county executive officer 50 years ago, would it not?

Mr. NICKERSON. Well, I hope that we will be able to do some more planning, Senator, than we have done in the past.

This aspect of physical environment is of particular concern to our county, where we have only a limited amount of open space remaining which can be considered scenic and attractive, so that we are going to need all the help that we can get, and this is not, of course, merely a matter of financial aid but also one of moral support which gives public officials a mandate to make sure that our natural attributes are preserved as much as possible.

There is another purpose in this legislation which I think is not. explicit but I feel would play a major role in our society, and that

is what has been called economic conversion, conversion of a certain amount of our natural resources devoted to the Nation's defense into more peaceful purposes.

And while I am not competent to discuss the merits in terms of actual defense requirements, I do think that to the extent that excess economic output is available there can be no better objective than to rehabilitate our cities and our land which over the years have become uglified and offensive to our well-being.

Senator CLARK. And in the process make a rather substantial contribution toward relieving unemployment.

Mr. NICKERSON. Correct.

I therefore support this legislation on the grounds that it will encourage construction and rehabilitation to give us better places to live. and therefore a more wholesome community in which to raise our

young.

I support it because it will at the same time assist us in channeling our economic resources in such a way as to alleviate the economic strains which are inherent in any change in national policy.

In reviewing the legislation in Senate bill 2468, I note that it applies more extensively both to our neighbor to the east, Suffolk County, where large tracts of land are still undeveloped, and our neighbor to the west, New York City, where the existence of dilapidated and deteriorating or deteriorated housing exists.

Senator CLARK. How far east is the boundary of Nassau? Do you take in Patchogue?

Mr. NICHERSON. No. The farthest east, our most easterly boundary, on the north is at Syosset.

Senator CLARK. And on the south?

Mr. NICKERSON. Massapequa on the south.

But we feel, Senators, our future well-being depends in large part

Senator CLARK. You go all the way out to Montauk Point, do you not?

Mr. NICKERSON. Suffolk does. Suffolk is about four or five times our size, and we are neighbor to Queens on the west.

Senator CLARK. Thank you.

Mr. NICKERSON. As I said, we feel our future well-being depends in large part on the well-being of our neighbors. And for that reason alone we would support the legislation.

We are, I think, fortunate in Nassau County that only 4 percent of our housing is at present in a deteriorated condition, and that is I think the least percentage of any of the counties in the New York metropolitan area.

However, dilapidated housing does exist, and our housing stock is getting older. We must be prepared, therefore, to prevent erosion, such as has taken place in other parts of the country.

I believe Nassau County could benefit from much of the bill, much of the existing legislation.

Parenthetically, it does seem to me appropriate to elevate the Housing and Home Finance Agency to Cabinet level. That is in my statement. I will not pursue it.

Senator CLARK. I wish though you would write a letter to the Senate Committee on Government Operations endorsing the bill. I hap