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Mr. FERRY. Under Wherry housing there has been no defaults of
Senator BENNETT. Before Wherry housing is recommended for a particular base, how carefully do you check up the availability of adequate housing adjacent to the base, so that wherry housing doesn't in effect result in emptying privately owned residences just off the edge of the base ?
Mr. FERRY. That is one of the most essential requirements that we place upon the military commanders, in certifying the need for housing, that they shall not infringe upon the local housing availability within an area of reasonable commuting distance of the base, and we call 15 miles a reasonable commuting distance.
Senator BENNETT. I know that in my own State there was very bitter complaint when Wherry housing was erected on a certain base because it had the effect of emptying a lot of housing that had actually been built to serve the base and without which the base would probably not have operated successfully for the years before Wherry housing came along.
Mr. FERRY. Would it have been possible, sir, that rentals in these houses off base had perhaps inflated themselves to the point where we were unable to continue?
Senator BENNETT. I recognize that is a very valid question but it raises the next one, Is it one of the objectives of Wherry housing to attempt to regulate rents adjacent to the base, even if it results in substantial increase in private vacancies?
Mr. FERRY. It is not the intent. Now, I would like to ask Colonel McCord to answer that.
Colonel McCord. Our one requisite for the development of the Wherry project is the assurance by an FHA market analyst that the construction of the proposed project will not jeopardize the economic security of the units which FHA has available in that community.
Senator BENNETT. Of course, FHA only insures 37 percent of the total number of houses built, so it is interesting that you would protect FHA but not be so concerned about the fellow who put his own money into the project without Government guaranty.
Colonel McCORD. That survey by the Government analyst includes all rental properties or all properties available within that particular community. We have not attempted to set up Wherry to control rents in the area. We have attempted to set up the Wherry at rentals which would be within the rental allowances of the service personnel for the unit which they would occupy.
Our statistics are interesting, as far as Air Force is concerned. Our average rental allowance is approximately $86 and our average rents including utilities will approach $82 to $82.50, on the total number of Wherry units we have in the United States.
Senator BENNETT. Has there been objection to the Department that, as a matter of fact, when Wherry housing has been erected in areas where there was private housing adjacent to the base, that it has tended to force down the receipts on the property near the base?
Colonel McCORD. In certain instances, yes, sir; it has done that.
Senator Bush. I wondered if it was because the rents were more attractive on the base than they were outside, for comparable size.
Mr. FERRY. Well, in effect, the very fact that a man is able to live close to the station and eliminate the need for travel, is an advantage.
Senator Bush. Is there any question of difference in taxes involved, for instance? These being on Government property, I presume they don't pay municipal taxes, do they?
Mr. FERRY. In most cases they do not.
Mr. FERRY. There have been some cases, sir, in a few States, where, through quirks in the law, it is possible to tax the leasehold rights of the sponsor. He must pay a tax upon that. It is not a municipal tax, it is a State tax.
Senator BENNETT. Are there any other questions?
Senator Bush. I was just wondering about that question of taxation. Do you run into any difficulty with the communities in your environment around these bases, on account of the tax question?
Mr. FERRY. There have been State actions which have been brought in an attempt to collect taxes from these Wherry housing projects, on military installations.
Senator Bush. On the basis that they are using services being paid for by others and that they should participate ?
Mr. FERRY. No, sir, because when the Wherry housing units are located on the military reservations, services are supplied by the military reservation itself, and they do not become a burden upon the facilities and utilities of the local community.
Senator Bush. Or the schools?
Mr. FERRY. Or the schools, no, sir. We provide military schools, also, for the children.
Senator SPARKMAN. Mr. Chairman, may I ask one other question: What kind of housing program do you have for personnel in these bases that are not necessarily permanent, but probably will be with us for a good long time. I don't know whether I make myself clear or not but I notice in the press recently that there will probably be some new bases built
that I do not think we could predict would be permanent, such as Randolph Field, for instance, but nevertheless would be used for a long, long time.
Mr. Ferry. I regret to say, sir, we do not have a very optimistic view as to the ability to provide housing for the nonpermanent bases. Under the law, we may only use Wherry housing on permanent bases.
Senator SPARKMAN. I realize that is true. I was wondering if you had in mind the preparation of a program to take care of those situations.
Mr. FERRY. We have the possibility of title VIII housing, and in general I would say we have to depend upon the local economy to provide the housing.
Senator SPARKMAN. These bases are usually rather remote from cities of substantial size. That is where we run into our headaches.
Mr. FERRY. I regret to say, too, that we have no sensible program yet developed to handle that situation for the family house." I must confess that. It is a very difficult problem involving the economics, the possible tenure of use of the base, the commitments of Government funds—I frankly have no good answer for you, sir.
Senator BENNETT. Then, your program will continue to call for the erection of temporary housing at those bases. You have to have some housing.
Mr. FERRY. It is desirable to have some housing, sir, but we have many installations where we have no family housing, due to the remoteness from nearby towns. There is no available housing, even in the local economy, and the family just simply can't live with the personnel.
Senator BENNETT. Then, you have to supply barracks-type accommodations for the personnel ?
Mr. FERRY. That is right. We have to have barracks for the enlisted and officer personnel but not the family.
Senator SPARKMAN. I am just thinking out loud, but doesn't it seem a little strange that we would provide housing for families, to some extent, at least, in Germany and other countries, foreign countries, where we know they are not going to be permanent? Yet we fail to do that at posts in this country which may very well become permanent ?
Mr. FERRY. There is an answer to that, sir. The German housing has been provided out of deutschemarks, out of the German economy.
Senator SPARKMAN. Do you mean we did not underwrite them? Mr. FERRY. We did not underwrite them.
Senator BENNETT. That has been provided under the terms of the armistice.
Mr. FERRY. That is right, funds to be invested in Germany itself.
Senator Bush. Mr. Chairman, how is this expense of the Wherry housing program allocated as between the military and the HHFA? Where is all this money charged to and what budget is it?
Senator BENNETT. The money is provided by private sources. The Wherry Housing Act in effect sets up a monopoly on the base so that the person who undertakes to sponsor this housing and provide the money to build it is more or less guaranteed a satisfactory return on his investment, and a repayment of his mortgage.
Senator Bush. And then the ownership of these properties remains with the promoters?
Senator BENNETT. It remains inevitably in the hands of the United States Government, doesn't it?
Mr. FERRY. No, sir.
Senator Bush. Who has the capital investment? Whose money is invested ?
Senator BENNETT. The private investor.
Senator SPARKMAN. It is a part of the insurance program. In other words, it is insured up to 95 percent, isn't it?
Mr. McMURRAY. Ninety percent.
Senator BENNETT. That is right. It is a device to provide private financing to erect housing on Government property for Government personnel. The services determine the location and recommend the number of units that will be built.
Senator Bush. There is no burden on the military budget in connection with this?
Mr. FERRY. No, sir. There is an indirect subsidy in the fact that the utilities—water and sewerage and such-connect onto the military facilities on the base. It is an indirect affair.
Senator BENNETT. There is some little subsidization in the way of engineering cost and so forth, is there not?
Mr. FERRY. It is very, very minor, sir.
Senator BENNETT. Practically, it is free enterprise and private investment in what amounts to a monopoly, on the base.
Mr. Ferry. May I expand a little on Senator Sparkman's query here, on what sort of housing program we have on the nonpermanent installations?
Senator SPARKMAN. Or your plans.
Mr. FERRY. We are planning, sir. We are trying to develop a sensible program which we can present to the Congress which will not become too great a burden financially upon the economy of the United States. We are not ready to present it.
Senator BENNETT. Are there any other questions?
Well, thank you very much, Mr. Ferry. "We appreciate your coming and being with us.
Mr. Ferry. I am most appreciative of this opportunity to present the service viewpoint.
Senator BENNETT. Thank you.
STATEMENT OF T. BERTRAM KING, ACTING ASSISTANT DEPUTY
ADMINISTRATOR, LOAN GUARANTY SERVICE, VETERANS' ADMINISTRATION
Senator BENNETT. Our next witness will be Mr. T. Bertram King, Acting Assistant Deputy Administrator, Loan Guaranty Service, Veterans' Administration.
Mr. King, you have been here a good many times before. Do you have a prepared statement?
Mr. King. I have some notes here, Mr. Chairman, from which I would like the privilege of reading.
I have with me Mr. Philip Brownstein and Mr. Charles Hopkins of my office.
Mr. Chairman, and members of the committee I appreciate very much the opportunity of testifying before this committee. It is my understanding there are two bills now before the committee which concern the functions of the Veterans' Administration, for consideration at this morning's hearing, namely, S. 2889, a bill to extend and expand the direct loan authority of the Veterans Administration, and S. 2938, commonly referred to as the Housing Act of 1954, which in several its provisions, affects the present guaranty functions administered by VÅ, under the Servicemen's Readjustment Act of 1944, as amended.
My remarks regarding these proposed measures, in their tenor, have had the informal verbal approval of the Administrator of Veterans' Affairs. Formal clearance has not been had with the Bureau of the Budget.
First, in reference to S. 2889, the bill to expand the direct loan program, I believe, Mr. Chairman, that Mr. Higley sent to the committee a letter dated March 9, 1954, in which he advised as to the recommendations of the VA, with respect to the proposals in that bill.
Senator BENNETT. At this point we will put Mr. Higley's letter in the record. (The letter referred to follows:)
March 9, 1954. Hon. HOMER E. CAPEHART, Chairman, Committee on Banking and Currency,
United States Senate, Washington, D. C. DEAR SENATOR CAPEHART : Further reference is made to your request for a report by the Veterans' Administration on S. 2889, 83d Congress, "A bill to expand and extend to June 30, 1955, the direct home and farmhouse loan authority of the Administrator of Veterans Affairs under title III of the Servicemen's Readjustment Act of 1944, as amended, to make additional funds available therefor, and for other purposes.”
The purpose of this measure is to amend sections 512 and 513 of the Servicemen's Readjustment Act of 1944, as amended, to extend from June 30, 1954, to June 30, 1955, the authority of the Administrator of Veterans' Affairs to make direct home and farmhouse loans to veterans. The bill would also increase the funds available for direct loans by not to exceed $200 million to be advanced by the Secretary of the Treasury in quarter annual installments of $50 million, less such amounts as shall be received by the Administrator in the preceding quarter annual period from the sales of direct loans to private lenders. In addition, the Administrator would be authorized to sell direct loans to any person or entity approved for such purpose by him, thus broadening the existing provision which limits the sale of such loans to lending institutions evidencing ability to service loans.
Informaton relating to the legislative history and current status of the Veterans' Administration direct-loan program is contained in a separate statement which is attached hereto and made a pare of this report.
Since the last renewal of the program by the Congress (Public Law 101, 83d Cong., approved July 1, 1953), there has been some general improvement in the availability of GI loan funds on an overall basis, but such improvement seems to have been confined predominantly to urban areas, and it, therefore, has been possible to remove only a relatively few areas from the eligible direct-loan list as the result of an increased availability of private financing for GI loans. A further improvement in the supply of private funds for GI loans in 1954 appears likely, but the possibility is remote that such funds will become available to any considerable extent in the rural areas where private capital has never been generally available for financing loans to veterans. This, together with the fact that the waiting list of veterans applying for direct loans in eligible areas has remained relatively large during the past year, suggests that there is a continuing need for direct loans.
As the committee is aware, eligibility for direct home loans has been confined almost exclusively to the smaller towns and more rural counties. Presently there are no cities in eligible areas within the continental United States which exceeded 50,000 in population, according to the 1950 census, although a few such cities were eligible for a limited period prior to April 1952. Only a relatively small proportion of the cities with a 1950 population of 25,000 to 50,000 are eligible.
Thus, the operation of the direct-loan program is now restricted almost entirely to the nonmetropolitan parts of the country where veterans have had but little opportunity to obtain the advantages of a GI loan from private lenders in their communities. It should be emphasized that under the Veterans' Administration direct-loan procedures there is an additional safeguard against encroachment upon private economic activities by reason of the requirement that the veteran show expressly that he had been unable to obtain a VA-guaranteed loan from a private lender in his community before an application for a direct loan is considered by the Veterans' Administration.
In the event that it is determined that the direct-loan authority should be extended beyond the present expiration date of June 30, 1954, it is believed that