That doesn't mean that the program falls. What you do about that situation is a complex problem, but one ought not to have any illusion that this program is going to make unnecessary or less necessary public housing, or any of these other things.

The CHAIRMAN. I think we understand each other on what we mean by the three groups here, and I think we understand what we mean by the so-called public housing group.

Your recommendation is 200,000 public housing units a year. How do you propose to handle this next group? Decrease the yearly payments?

Mr. FISCHER. Well, essentially you have to figure out who they are, where they are, what the building costs are realistically for good structures. We have set forth our ideas as to what they are.

The CHAIRMAN. You were specific on that one group which needs public housing, as you say, and you recommend 200,000, but you haven't told us what to do with this next group.

Mr. FISCHER. We think we have to, as a minimum, get hold of enough money and enough planning and enough legislative aids to get another four or five hundred thousand homes built for this other group.

The CHAIRMAN. But you haven't told us how to do it yet.

Mr. FISCHER. We are suggesting that that involves essentially the Government making available that amount of money. Now, the extent to which private investors are willing to do it on terms favorable enough to meet the need, that is splendid.

The CHAIRMAN. Wait a minute, now. I think we both agree that people can only pay so much of their income for either rent or payments on a house. You have made the point here that there are hundreds of thousands of people who cannot meet these 60-, 70-, and 80-dollar-a-month payments. What is your answer, then, longer

terms?

Mr. FISCHER. Longer terms and lower rates of interest which we think realistically at this time, at least, requires direct Government aid. We don't think it costs the Government any money, because we think these things are solvent and that the Government will be repaid for everything it puts out.

The CHAIRMAN. In other words, the recommendation, then, is longer terms?

Senator DOUGLAS. Longer than 40 years?

Mr. FISCHER. If longer than 40 years is necessary, longer than 40 years. If you have good homes, that is not very alarming. I want to point out, Senator, that the administration is asking you to make available FHA insurance on a 40-year term basis existing housingold housing. That is section 221. It applies to existing houses and not only new houses.

Senator DOUGLAS. That was an ambiguity that I had in my mind but never saw cleared up. You say section 221 is not merely for new construction but would be for rehabilitation of existing structures?

Mr. FISCHER. I don't want to question anybody's motives but I will say many of the people advocating section 221 have in mind that they will use it for existing housing and have no interest in new housing. I think its primary purpose is to take care of rehabilitation. Because most people in this business are pretty realistic and they know you are

not going to build $7.000 houses that any bank or anybody else is going to put a 40-year mortgage on.

The CHAIRMAN. Gentlemen, we haven't yet gotten the solution as to whether the Government finances them or whether private industry does. You recommend here the Government put in $3 billion or $5 billion for buying mortgages.

Mr. FISCHER. That is right.

The CHAIRMAN. Whether the Government buys them or whether private industry buys them, doesn't change the ability of a man to pay $50 or $60 or $40 a month. So whether one or the other buys them, what are you recommending? Do you recommend longer terms, like, say, 50 years?

Mr. FISCHER. A 50-year mortgage at 212 or 234 percent, it is just a matter of mathematics. It requires certain monthly housing costs. When you put that on paper you know what you are talking about. Senator DOUGLAS. That would mean direct loans.

Mr. FISCHER. It would mean direct loans probably for a time. It might not mean forever. Of course, we have made $3 billion worth of loans through FNMA but we have made those on short terms with 4.5 percent interest and with some few ways for a guy to make a buck out of it so that is all right. We are just suggesting that $3 billion or $4 billion worth of direct loans be made if necessary, but they should be made in a manner consistent with the needs of the con

sumer.

Mr. EDELMAN. It has been found that where direct loans are made available to veterans, the experience has been that where there is a complete paucity to direct veterans' loans and some money has been released that the private industry in that area therefore comes forth quickly and provides money on substantially equivalent terms.

Might I also add, to round out this point, that Mr. Fischer has made, that if the industry, the home-building industry were faced once and for all with the fact that the Government would put very definite top limits on the amount that they would make available for lending for home building, that they would develop the technique of mass production and the reduction of the unit cost. They would then learnwhich the building industry has never yet learned-the way of making satisfactory profits on volume output. I believe that it is quite feasible and that the industry has the capacity to do it, if faced with the necessity of adjusting to that problem by requirements the Government would make by the provision of funds.

The CHAIRMAN. I can only see one answer to this problem and that is longer terms.

Mr. FISCHER. And lower interest rates.

The CHAIRMAN. Lower interest rates, of course, brings down the cost. Naturally, if something is going to cost $6,000 and you want to pay at the rate of $40 a month, it is going to take more months than it would if it was $5,000. That, frankly, is the weakness of your recommendation. You don't come up with anything other than longer terms and I don't see any way to do it other than longer terms. Mr. FISCHER. Why is that a weakness?

The CHAIRMAN. I don't know whether Congress wants to do it or not and I don't know whether it is practical at this sitting. But that is our problem.

Mr. FISCHER. We haven't made the calculation. Somebody ought to make it. But when we begin to figure out what our Federal Government and what our Treasury is going to lose in the way of income in the year 1954 because of the present state of our economy, any proposal which can successfully bring employment to several million people who are not now working and the resultant income to the Federal Treasury, is not out of line in our opinion.

The CHAIRMAN. Mr. McMurray calls to my attention the 25-year mortgage on $10,000-is how much in monthly payments?

Mr. MCMURRAY. The amortization is $52.79. This is the interest and principal payments, probably.

The CHAIRMAN. It doesn't include any insurance, maintenance, or upkeep.

Mr. MCMURRAY. I don't think so.

The CHAIRMAN. What is it on 40 years?

Mr. FISCHER. On $10,000, 40 years.

Mr. MCMURRAY. It is 4 percent. I don't have it for the lower in

terest rates.

Mr. FISCHER. We would be glad ourselves, or in cooperation with the National Housing Conference which has been studying this problem, to work out and submit to you the actual figures on all of these alternatives.

What we started to say in the first place was that once you decide this is what you want to do, beyond that you get into the technical details of how you do it.

Now, there are many other devices I don't understand-I don't understand that much about the real estate business-there are many other devices which have been used in the past and used in other countries for trying to compose the desires for a maximum reliance on private investment and still accomplish the needed objectives which have been worked out and tried and tested. I believe in the past these things have been surveyed by this committee. I am sure you have much more information about this than almost anybody else, somewhere in the files, but this information can be gathered and we would be glad to do what we could to gather it together if there is, in the first instance, a desire to try to find some solution to this problem. The CHAIRMAN. The administration has recommended, of course, a continuation of public housing, up to 35,000 units.

Mr. FISCHER. It makes one good housing project.

The CHAIRMAN. You say it is too little but let me tell you what the administration recommended. Very briefly: A continuation of public housing up to 35,000 units annually for 4 years. They also have recommended the rehabilitation of old houses, as you well know. This comes under section 221, requiring no downpayment or merely closing costs, and up to 40 years to pay. They have recommended an increase in the amortization period for all FHA mortgages up to 30 years. They have also recommended a new schedule of lower downpayments all along the line.

The bill is in many respects a very liberal bill. That is, more liberal than anything that has been offered heretofore.

The big question mark in my mind is, will it get the job done, is it a practical thing, or is it just going to be something where, when we get all through, private industry will not build the houses under those conditions. The mortgage bankers will not buy the mortgages,

and are we going to end up here with no increase in home ownership in the United States? That is the thing that concerns and worries me. As I say, the more we study it, we always come right back to where we started, namely, that these people in certain income groups can only pay so much a month. When you take the cost of houses today, $10,000 or $12,000, and existing other costs, interest rates and so forth, it doesn't look like it can be done in much less than 40 years and maybe it is going to take more. That is if you are going to get within the monthly payments that seem to be sound.

Mr. THIMMES. Of course, we do not believe rehabilitation will add any units to housing. Probably less units when they finish with it.

The CHAIRMAN. The thing I like about the rehabilitation program is-if it will work; and it will only work if cities become interestedI think it will eliminate many sections from becoming slums in the future. I think it will add some new housing units because I think many of these old houses at the moment that were well constructed, as you know, will go into apartments and multiunits. I think it is a good thing. I don't see anything wrong with it. I don't think it answers the question entirely but I think it is a good thing.

I don't see anything wrong with anything in this bill if it will get the job done. That is, of course, the big problem.

You say, of course, that 40 years with no downpayment only applies to those who are dislocated as a result of slum clearance or something else. Well, that's true. That is the way the bill is written.

Maybe it ought to be expanded, I don't know.

Mr. FISCHER. Well, I don't think it will actually mean anything on that basis. In the city of Pittsburgh, that might mean 200 homes. The CHAIRMAN. You don't think they will buy the mortgages? Mr. FISCHER. No. You just don't have that much dislocation. The CHAIRMAN. No, I said it might well be that it ought to go beyond dislocation.

Mr. FISCHER. If it is to have any significant application, it will have to go beyond it. You just don't have in the near future that much of a relocation problem. The problem is there. We have a big project now getting underway in Pittsburgh. It is a tremendous project. In 5 years, it is going to involve 2,000 people. That is 2,000 families. What effect is that going to have on the overall housing picture? It is very important to those people and this program may be useful to them. "We can't build anything in Pittsburgh for $7,000, but it certainly isn't going to begin to answer the general housing problem.

The CHAIRMAN. A gentleman will be in here in a few days to testify. He has a plan for building houses and not completely finishing them, permitting the buyer to finish them. I wish you would send someone over here to listen to it. I don't know whether it is a good plan or not but he is very enthusiastic about it.

Mr. FISCHER. I haven't heard anybody suggest that we make unfinished automobiles or unfinished television sets.

The CHAIRMAN. I don't know. I say let's listen to his plan if it will help solve the problem. I think his idea is that the man himself can do a lot of the work and reduce the cost of the house probably $1,000 or $2,000.

Mr. EDELMAN. The Friends' Service Committee rehabilitation project in Philadelphia used that technique, Mr. Chairman.

The CHAIRMAN. This gentleman is going to testify on Monday. I don't know whether his plan has any merit or not.

Mr. EDELMAN. This self-help proposition has been one of the recurrent proposals made during all of my twenty-odd years in studying this problem. It was recently applied very successfully in this one rehabilitation project in Philadelphia but the fact remains, Mr. Chairman, the basic fact remains that the total cost of living in those units after rehabilitation is completed, even in that project, added up to practically double what it was in the beginning, and the people who were originally living in those units could not afford them when finished. There was a slight difference between the cost of the finished unit, depending on the amount of the work which the individual himself had performed, but it was not appreciable, Senator, it was not appreciable. It didn't really meet any particular area of need. And I think finally, Mr. Senator, I would say this, that as a generalization, to supplement what Mr. Thimmes and Mr. Fischer have said, the degree to which this program will be successful or the degree to which private industry will perform and meet the requirements, depends almost entirely on the drive and the extent of the intervention by the Government in its proposals for low-cost financing. If the Government says it will do it if private industry won't, private industry may. The Chairman. What is the total interest on a $10,000 mortgage in 25 years? What is the total interest on it, does anybody know? Mr. FISCHER. Do you mean over a period of time?

The CHAIRMAN. The total amount of interest one would pay on a $10,000 mortgage over 25 years. Does anybody have that?

Make it at 5 percent.

Mr. FISCHER. While Mr. McMurray is figuring that out, may I point out, Senator, that many of us used to be a little reluctant to talk too strongly about very long-term mortgages because we were so much condemned and criticized for it. This year we find bankers and everybody else, the most conservative elements coming into these committees as they did on the Advisory Committee and raising no horrors over 25-, 30-, and even 40-year mortgages on rehabilitated, existing houses.

Now, if that is a sound concept for existing housing, that is a technical question and I assume these people are conservative and doing their thinking straight, then certainly it does not become unsound, if you are talking about good, new housing, to talk about 40-, 50-, and even 60-year loans.

The CHAIRMAN. Many of these rehabilitated houses might last longer than some of the new houses I have been looking at. In fact, I am certain they will.

What did you say the interest was?

Mr. MCMURRAY. It would be about $6,000.

The CHAIRMAN. That is what the interest would be in 25 years? Mr. MCMURRAY. Yes.

The CHAIRMAN. Well, we certainly appreciate your testimony. As I say, it was very plain and understandable. We are all trying to accomplish the same thing but the committee and the people seem to be divided as to the best way to do it.

We might want to call you back later when we get into this thing. I wish you would have someone here to listen to this fellow on Mon