I don't know what there is against it. I don't know why we can't do it.

Senator ROBERTSON. What is going to happen to these houses now? Families during an acute shortage, let us say, of housing, high prices, and everything, would live in a house because they had to, and not because they wanted to or not because they liked it.

What is going to happen when conditions get more normal and he can build a house that is a house and not just a shell of a house! Where he has ceilings and not just 2 by 4's that he looks at when he gets in bed at night, and has regular builtup rooms instead of an 8foot partition, like the barracks we had in World War I, where you would put a piece of wire and a little sheet in between them.

The CHAIRMAN. If you had 10,000 such units in Washington, D. C., at the moment, in these sections that they are talking about in the newspaper, you would certainly have a very, very desirable situation.

Senator ROBERTSON. In 10 years we might have a very undesirable situation. I have always admired our British friends, who follow the law of primogeniture where the property goes to the oldest son each time. When they built a house, they built it for as many generations as they could contemplate. During the last 10 years we have encouraged people to build houses, with Government aid, over the countryside which are really an eyesore. I know a man who is in there, whenever he feels he can do better for himself, he is going to do it. We have plenty of them on the outskirts of Washington that are no better than a dog kennel.

The CHAIRMAN. Well, go ahead.

To me, it has a lot of merit. I don't know just what the laws are. I certainly want to take it up with the housing people. But to me, it seems it has a lot of merit.

Let's not get confused, here, on showing blueprints of a house, or the fact that it has rafters, because that hasn't anything to do with what we are talking about at all. This plan would likewise work if the house were 100-percent completed, the idea being to permit a manufacturer or an employer or an association of employers to go together and guarantee FHA that they are going to receive 100-percent payments, in order to get low downpayments and low monthly payments.

Senator ROBERTSON. Mr. Chairman, I may remark it is unfortunate we can't print pictures. This picture looks pretty good.

The CHAIRMAN. That is my point. The house doesn't enter into this picture at all, because it could be a completed house. The fact is it could be a $15,000 house or a $5,700 house.

You say the law now prohibits anyone, except the occupant of the house, to have an FHA mortgage?

Mr. WALLACE. That is what I understand.

The CHAIRMAN. On that type. That is an unfinished house?
Mr. WALLACE. That is right.

The CHAIRMAN. Where it isn't completely finished?

Mr. WALLACE. Gentlemen, the real problem, as I see it, is that these working folks, when they go to a bank or a lending agency, they are turned down, because they haven't established a pattern of paying. They can't get credit. There are literally, in my opinion, just millions of people that can't get credit and want homes and are entitled to homes. Because they have 3 or 4 children, the lending agency says

you have so many children and you need so many clothes and this and that, and by golly, they are deprived.

Whereas, their employer and friends and father-in-law, and so on, could help them. He can't make a payment of $400 or $500, but they could help him with the downpayment and guarantee that payment over a period of years.

The CHAIRMAN. The reason you have this blueprint is because you are putting up some of those houses, now, in Peru?

Mr. WALLACE. That is correct, processed through the FHA.

The CHAIRMAN. Your plan or idea doesn't encompass a specific type house?

Mr. WALLACE. Only this title I, section 8, house.

Our plan is just to give homes to people that now just cannot have them, cannot qualify.

The CHAIRMAN. In other words, you are thinking in terms of myself, as a manufacturer, that I might help 20 or 30 employees that could not afford any downpayment, and could not afford any high monthly payments. I could put up 20 units and guarantee FHA.

Mr. WALLACE. Or even one. If we have a million businessmen in this country, and each one did just one house, we would give our working people a lot of help.

The CHAIRMAN. Of course, if the law was changed to permit FHA to finance multiple ownership of houses, that is all we would need to do.

Mr. WALLACE. Inasmuch as these houses are not painted and all, and they don't have closet doors, the man living in the home is going to make the house more valuable by putting in tile and doors, and he is going to be spending that money right in his hometown.

The CHAIRMAN. There is nothing unusual about a man building a house, and only partially finishing it and living in it while he is finishing it.

I know a particular individual who, over a period of 3 years, built his house. I remember first he didn't have a back porch, and he later put on a back porch. In fact, he didn't even paint the house much inside. There is nothing unusual about that at all; it has been going on for 200 or 300 years. But FHA will not permit it in their operation. That is your point?

Mr. WALLACE. Yes, sir.

The CHAIRMAN. They will permit it, but only on the basis if the man lived in it himself.

Mr. WALLACE. I believe the man himself has to have the money. The CHAIRMAN. You haven't prepared any amendment to this bill, to do what you are recommending?

Mr. WALLACE. No, sir. We could.

The CHAIRMAN. Will you spend some time with Mr. McMurray and other members of our staff, to get into the details of this, to see just what can be done, if anything, or if it should be done.

Mr. WALLACE. Yes, sir; I will be glad to.

The CHAIRMAN. Any questions, Senator Payne or Senator Bush? Is it clear what this gentleman is recommending? It seems to me that it has considerable merit.

Senator BUSH. If I understand it-I came in a little late-but his suggestion would contemplate substituting credit by the employer,

really, or some other credit, friends or employers, for the credit of the occupant?

Mr. WALLACE. That is right.

The CHAIRMAN. That is right. In order to encourage FHA to permit houses to be financed that are not completely finished so that the man that buys the house can finish it himself from week to week or month to month.

Senator BUSH. What is the incentive of the friend or employer to do that? Is there a financial incentive, or is it purely a social incentive?

Mr. WALLACE. Purely and simply, there would be no financial incentive at all. Just a means of helping his employees, and making them better satisfied and saying, I believe if a man is housed properly, he makes a better employee and a better citizens. Eventually, if he owns that home, he will take more of an interest in his city and in his

life.

The CHAIRMAN. I don't think it would work in a big city, but in smaller towns it might work even where the city would guarantee these payments in order to eliminate a certain slum district.

Senator BUSH. In some instances, we find an employer building houses, 25, 50, or 100 houses, which he will rent, or sell, to employees of his company. But he, heretofore, has been financing that on his own credit, and perhaps others would have done that if they had had available the financing offered by the FHA.

Mr. WALLACE. That is right.

Senator BUSH. What you are seeking to do is to encourage employers, therefore, to build such groups of houses, or individual houses, so as to get their employees to own their own homes and so forth. But instead of your doing it through the normal channels, you are using Government credit, so to speak, to establish the major basis of the financing for this enterprise. Under this plan, who puts up the equity money, where it is required? Does the company do that, the employer or friend?

Mr. WALLACE. The employer or friend. Or the homeowner, the eventual homeowner, may have $100, where he needs $400, so the employer or friend would loan him, on contract, the extra $300. Or maybe he has $200 and he only has to have an extra $200.

Senator BUSH. So, in effect, you step in and put up the extra equity that is required. It is just so you can do that, just the same as though he put it up?

Mr. WALLACE. That is right.

Senator BUSH. How do you get it back, under your plan?

Mr. WALLACE. We have a contract with that homeowner, and the homeowner can pay the friend or businessman back, over a period of months, or weeks.

Maybe his wife or his youngsters may get a job, and as soon as they are able to pay off the businessman, then the businessman can take the individual down to the bank and show that he has paid off, that he has paid over a period of months. His credit is well established, and from then on, it can be turned over to the owner, so that he can qualify with the bank and the owner can continue paying.

Senator BUSH. You anticipate that after a few years, he can refinance the whole deal, that an equity will have been established by that time?

Mr. WALLACE. And improvements in the home, too, because the individual will be putting in tile and painting it, and the home will be more valuable.

Senator BUSH. The only thing I don't see, Mr. Chairman, is when do you begin to get out of the equity which you put up?

The CHAIRMAN. The businessman never gets off the contingent liability.

Senator BUSH. He takes a deferred position, then?

Mr. WALLACE. That is right.

Senator BUSH. And he receives no current payment, no monthly payment, and looks forward to the refinancing to bail him out, so to speak. Is that right?

Mr. WALLACE. That is right.

The CHAIRMAN. FHA has everything to gain and nothing to lose, it seems to me. I thought it had a lot of merit. That is why I am encouraging questions, to see the weaknesses.

Senator BUSH. Is there any reason why this can't be done under the present law?

The CHAIRMAN. Yes, because it is against the law.

Senator SPARKMAN. It is merely a shifting of the borrowing power, from the individual owner to the group owner. Then let the group owner sell it to the individual. We do it in all other FHA programs. It can be done in every other FHA program.

The CHAIRMAN. For example, here is what it means. Take myself, or you-you are a manufacturer. Say four of us go together. If we wanted to build six homes, we would offer to use our own credit, or we would have to put up our own money. Under this plan, FHA would handle the whole thing. We would put up nothing, except we would guarantee it. If the six houses were built, and six people were sold to, if they pay those mortgages off 100 percent, we would never have to put up a nickel. All we are using is our credit and goodwill to enable the FHA to go ahead and do it. But we are loaning to the people that are buying the houses, maybe half of the down payment, or maybe all of it, and we are likewise permitting this house to be partially finished with the owner to finish it as time goes on. FHA can't do that at the moment under this title, because under existing law, if a house isn't finished, FHA can only handle the mortgage if it is going to be owner occupied.

Mr. WALLACE. In Peru, with a population of about 15,000, we believe

The CHAIRMAN. It says here, "The mortgagor shall be the owner and the occupant of the property at the time of the insurance and shall have paid on account of the property at least 5 percent of the commissioner's estimate of the cost of acquisition of cash or its equivalent, or shall be the builder constructing the dwelling, in which case it shall not exceed 85 percent."

Mr. WALLACE. We believe we could build about 50 homes in our community of about 15,000.

The CHAIRMAN. You mean your company

Mr. WALLACE. Our businessmen in Peru.

The CHAIRMAN. Your businessmen's syndicate there?

Mr. WALLACE. Individually, or otherwise. Each businessman can go to his own contractor, or lumberyard, and we will have it available

to everybody in Miami County or everybody in the country for that matter. Then these people could own a home like this.

The CHAIRMAN. Well, we will certainly talk to the housing people to see where the loophole is in this thing. I don't see it.

Senator SPARKMAN. If I understand correctly the recommendation of the housing people, when they were before us, they are proposing to consolidate section 8 of title I with section 203. I suppose if that is done, and I see no reason for its being done, but if it is done, it would be your suggestion that this be transferred right over with it. Mr. WALLACE. Yes, sir, Senator.

The CHAIRMAN. Any further questions?

Thank you very much, Mr. Wallace. I think you certainly have an idea with a lot of merit. Will you work a little bit with the staff! Mr. WALLACE. I will be glad to, Senator.

The CHAIRMAN. Our next witness will be Mr. Tuemmler, of the American Institute of Planners.

Mr. Tuemmler, you proceed in your own way.

STATEMENT OF FRED W. TUEMMLER, AMERICAN INSTITUTE OF

PLANNERS

Mr. TUEMMLER. Thank you, sir. Mr. Chairman and members of the committee, my name is Fred W. Tuemmler. I am a member of the American Institute of Planners and chairman of its special committee appointed a few weeks ago to study the proposed Housing Act of 1954 and to make recommendations for action to be taken by the institute at its 37th annual meeting which took place this year, March 11 to 14, at Dayton, Ohio.

A resolution was adopted at that meeting by the board of governors and I have been asked by Prof. John T. Howard, newly elected president of the American Institute of Planners, to submit it to you, and to comment briefly on a few of its salient points.

We appreciate, Mr. Chairman, the opportunity that has been afforded to us to appear before your committee this morning.

The American Institute of Planners, as provided for in its constitution, is devoted to the "planning of unified development of urban communities and their environs and of States, regions, and the Nation, as expressed through determination of the comprehensive arrangement of land uses and land occupancy and the regulation thereof."

The nearly 1,200 members of the institute are to be found in most of the official planning bodies and many of the redevelopment agencies, at Federal, regional, State, and local levels of government throughout the country. They are at work in all the major metropolitan areas and many of the cities and urbanized counties. A small percentage are in colleges and universities where their energies are devoted to training the men and women needed to carry on with direct purpose the important work of guiding the communities' design and development and devising the means and measures to prevent and protect these communities against their physical, economic, and social deterioration and decay.

The pending legislation, therefore, is of vital interest to the planning profession and to planners everywhere. The American Institute of Planners was among the supporters of the Housing Act of 1949, and since its enactment many members have played significant roles