(6) That urban redevelopment and public housing be so planned as to prevent the re-creation of ghettoes either on basis of race, creed, national origin, or ability to pay.

(7) That adequate provision be made for necessary community facilities in public housing and urban redevelopment projects, such as schools, transportation, shopping, health resources, and community

centers.

(8) That new and rehabilitated housing should be an integral part of sound community growth and development.

(9) That aids and assistance be given to permit home ownership where possible for the low- and middle-income families.

(10) That adequate moneys be appropriated by the Federal Government for assistance grants to localities for subsidies for low-rent housing at yearly rate commensurate with the need.

The National Federation of Settlements and Neighborhood Centers is greatly disappointed in the small number of public housing units recommended by the President, particularly on top of the drastic cuts made in the program over the past 3 years.

It is our conviction and faith that this, the greatest, richest, and most productive Nation in the world, can find the techniques and methods necessary to eliminate bad housing and slums with all their concomitant evils and ugliness, and in so doing will produce a healthier and stronger Nation, both morally and economically.

In our visits to cities and towns all over the United States we have been impressed with the magnitude of the general needs for housing of all kinds. Anyone visiting the neighborhoods our centers serve, particularly in large cities, can see clearly what is documented in the 1950 census the fact that there are 15 million substandard homes in existence. We can testify, too, to the tremendous surge in demand, coming from the undoubling of families, and from the surprising population "bulge" which has upset all previous demographers' calculations-with the earlier marriages and larger families creating an absolute necessity for more and bigger homes.

The National Federation of Settlements and Neighborhood Centers is one of the agencies working in communities where defense industry has made an impact, and we have been in a firsthand position to know the effects of internal migration. Ten million persons moved across county lines in 1950 and it is reasonably estimated that 9 million would be members of families, thus creating a need for about 3 million dwellings. Much of this movement has been to small communities under 2,500 and to the south and west, so that in many cases the total housing in a town must double and triple. In 1 town where we work, Warner Robins, Ga., a town of 12,000 to 15,000 has grown so fast it is not yet on the Georgia road map. In another, Moses Lake, Wash., the population jumped from 320 in 1940 to 5,064 in March of 1953. The provision of housing in these places is the first basic necessity and no other program can proceed until this is met.

In our older cities where our work is longer established we have felt the change. The progress in urban redevelopment, the building of superhighways and freeways has hit us with tremendous impact. It would be fair to say that at least one-third of our affiliated centers are facing the imminent question of relocation, since the old areas they

have served are being torn apart, and huge population groups are having to be rehoused in other parts of the city.

This adds up to the fact that we see an expanding, growing population. Housing is the basic prerequisite for our families, and if we are to meet the accumulated needs plus taking care of the new ones, we need a total housing program which is more grandly conceived, and is big enough to have an effect. We know the tremendous resources of this country, and believe that a total housing program which provides for less than 2 million homes per year is inadequate and not commensurate with our ability to produce.

By the nature of our work we come in contact with the low-income families and are concerned with the part of the Housing Act which will affect them. Many of our members are among the half of United States families which had less than $3,420 income in 1952, and the 25 percent which had incomes of less than $2,000. Obviously it has not proved economic to provide private housing for this group, although it has great need. If we assume that no more than 20 percent of the family's income should go for housing, then 25 percent of all families could afford no more than $33 per month, and the next 16 percent, with incomes $2,000 to $3,000 could afford no more than $33 to $50.

How has it gone with families which in 1952 bought new FHAinsured homes? Obviously, none have been sold to families with less than $2,000, and only 2.9 percent to families receiving from $2,000 to $3,000. From FHA data many of these families will spend more than 25 percent of their income for housing and some were spending nearly 50 percent for this item. This means they are living on a slim margin and their purchase has been predicated on full employment.

Unfortunately, private housing does not seem to be able to offer a program to meet the needs of half of our families and therefore we are distressed about the low number of public-housing units recommended.

We believe that there should be at least 200,000 provided for. We have observed the distress and disorders resulting from slum clearance or urban redevelopment because for half the families, public housing is needed and is not available. As a result more and worse slums are created, as desperate families crowd in where they can. We know the long waiting lists for housing, and particularly for apartments of large enough size. To restrict our planning to only 35,000 units seems to us to be uncalled for neglect of a large section of our population and a very meager program when compared with the demand.

The new provision for 40-year $7,000 loan for new or rehabilited structures is an attempt to meet this problem, and may be helpful to some degree in smaller cities. But it is obviously not useful in the large urban areas where multiple dwellings must be replaced. And in these large urban areas much of the pressing need for replacement is felt, particularly because multiple dwellings with inadequate light, air, and space become obsolete faster than single houses of the same construction date. Our cities will not be helped by this provision, yet it is there that the redevelopment is having most dramatic effect.

We urge this committee, and the Congress, to consider a housing program commensurate with our productive ability and our great need, so that all United States families can look forward to adequate shelter in the not too district future.

The CHAIRMAN. Any questions, Senator Sparkman?

Senator SPARKMAN. No questions.

The CHAIRMAN. That is a very fine statement, and we appreciate it very much.

Mr. CARPENTER. Thank you very much.

The CHAIRMAN. We will certainly take into consideration your suggestions.

The CHAIRMAN. We have one other witness this morning, and then we will be finished. Mr. Bialac of California.

You have a statement, I believe. You can read your statement or talk extemporaneously from it.

STATEMENT OF JERRY BIALAC, VICE PRESIDENT, RENTAL DEVELOPMENT CORPORATION OF AMERICA

Mr. BIALAC. I would rather read it, sir.

The CHAIRMAN. You proceed in your own way.

My

Mr. BIALAC. My name is Jerry Bialac, of Beverly Hills, Calif. specialty is rental housing. Together with my father, Samuel G. Bialac and our associates, we plan, build, and operate low, medium rent apartment projects. I have the honor and privilege of appearing before you for the second time to present, as a private citizen, the opinions of many of my colleagues and myself and we feel that through our practical experience and specialized study of the rentalhousing field and the mortgage market relative to rental housing, we may be able to contribute material that may help you in your endeavors to improve the housing bill before you and solve serious inadequacies in the universally important industry I serve.

I want to thank you for the courteous, helpful treatment I received on my first appearance before this important body. I return, confident and at ease, knowing that my suggestions will receive full consideration. This is doubly reassuring as I seem to be the only one testifying to any length on the vital rental problem.

Last year I predicted a great decline in FHA housing starts. This came to pass. This year, in spite of the slow start of the first 2 months, will be the biggest year in housing starts since the war. The reason being, there will be plenty of financing available. Unfortunately this is only a temporary condition and as the ever-changing financial cycle runs on and demands on money increase from other sources, less and less will be available to the builders and construction will again slow down. This need not happen. You have heard expert testimony before me on the huge number of living units needed in future years and a smooth flow fulfilling that need could be realized with the proper secondary or support market that would be brought into play when needed, not as a competition to private financing but rather as an aid to it. A fine start has been made on this under title III of this bill. However, while the basic idea behind this is sound and could solve the problem, it is obviously-by the many changes and criticism of the actual workings and fees, which you have heard in previous testimony by both the builders and the bankers, and which I shall not repeat now, that a more extensive study be made of the section. As the revision of FNMA now stands, for rental housing at any rate, it only offers to give the builder a push as he stands on the precipice overlooking the chasm of certain failure. I therefore respectively submit:

1. That FNMA should be continued in its present form for another year. With a renewal of a plan similar to the 1 to 1 program but changed to a ratio of 9 to 10. In other words, for every mortgage of $100 bought, a certificate would be issued for a $90 commitment. This would allow FNMA to diminish its portfolio by 10 percent. No further funds would be necessary if FNMA would be allowed to sell shortterm debentures secured by its portfolio.

2. A commission of experts be appointed to investigate further and recommend more realistic fees and make further recommendations to perfect this very complicated and controversial title III of the housing bill which, I am sure, can become very workable for everyone.

Even distribution of mortgage money: I am sure that you gentlemen who are from the South, Middle West and Far West have heard many times from your constituents that the farther away from New York, the more difficult it is to get financing for a mortgage and the greater discount you must pay. This is not because the mortgages are not just as desirable but the mortgagees are reluctant to expend any substantial sums in areas which are not thoroughly familiar to them and where they have to rely on others for servicing and general supervision of their investment. They naturally consider these greater risks.

One of the greatest hazards to our housing economy is growing daily. While the center of population moves westward at an accelerated pace, the center of finance remains in the far east. Therefore we suggest:

3. That the term of the debentures that would be issued-only in case of failure of a project-would decrease and the interest rate increase proportionately with the distance from the point of origin of the loan to the city that the actual project would be built.

For example, the present debentures under 207 are for a term of 10 years, at 234 percent. Under the proposal loans made in New York to a project in New York or near proximity would be entitled to debentures at that rate. A loan made in New York to a project in Indiana would get 9 year debentures at 27% percent and a loan made in New York to a project in Portland, Oreg., would receive an 8-year debenture at 3 percent. These rates are only arbitrary, the actual rates would be set by the Housing Administrator and would compensate the lender for his additional risk and would divert the flow of moneys more realistically into their proper markets.

The CHAIRMAN. What is the advantage there?

Mr. BIALAC. Sir, as it stands now, the lenders are very, very reluctant to go beyond their front doorstep. By compensating them for an additional risk it would spread the money more evenly. They would be more inclined to give loans in California, or Oregon, or any other place, if they knew that if a project failed, they would have that much more compensation there, when they consider a project in California is more likely to fail because they haven't got that close a watch on it, or Indiana, or New Orleans, or anyplace away from the East.

The CHAIRMAN. They get their money back for their debentures one

year sooner.

Mr. BIALAC. That is right. In other words, they say it is a greater risk and the Government says, "If you consider it a greater risk, we will make much better compensation for you if it does go bad. But the

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statistics have proven that the loans in the West are just as good, if not a little better, and in the Middle West and the South, than the ones in the East. There has been just as big a record of failures in the East as there has been in the West.

Senator SPARKMAN. Do you believe that the debenture, the terms relating to the debentures serve as much of an incentive for lending money?

Mr. BIALAC. A lot depends upon it, Senator. The actual risk of the loan is in the debentures. In other words, if the loan goes bad all they have to show for it is debentures, which are very good, but which they can't turn in for that term of years. Their money is tied up for this lower rate. While they are close to Government bonds now, if they were given a litle more incentive, rather than an increase in the interest rates, which would be taken out of the pockets of the people that would have to rent them, it would have to be tacked right onto that.

I believe that a good study of it, to make the actual rates really workable, would induce the insurance company to make more funds available all over the United States.

Senator SPARKMAN. Thank you.

Mr. BIALAC. Title II, section 115: We support paragraphs 1 and 2 of title II, section 115, and the first part of paragraph 3, up to and including $2,400 per room for elevator-type structures.

As builders of large-scale apartments we have concentrated mostly on garden-type structures because of the more realistic financing-tocost ratio and the availability of land close in to the heavily populated areas. However, in an alarmingly short time, because of the larger tracts of buildings filling in these areas and the fantastic pyramiding of land costs, which make the per unit price economically unwise, we are forced farther and farther away from the center of the city. The dangers of this condition are multifold; first, it is forcing more and more people to rely on their cars for transportation to their jobs in already overly congested streets; secondly, it is forcing the population to spread out, adding to the great and ever-increasing load on the school system's shortages of schools and has made proper patroling by police departments impossible. I could go on and on, and I'm sure that isn't necessary.

The cure for this condition lies in more elevator-type structures which can stand the higher land cost by dividing the cost of the land into many more units.

A step in the right direction has been taken by increasing the allowable room mortgage amount to $2,400 in the elevator-type structures which is a 17 percent increase over room mortgage amount of walkup apartments-the actual difference in cost is over 20 percentbut then cancels this gain by limiting it to only $7,500 per family unit which amounts to only a 4 percent increase when the average room count is under 4. In order to make the provision workable the figures must be changed proportionately to 17 percent. Therefore, this section should be corrected to read:

4. That in elevator-type structures the mortgage amount limitation be $2,400 per room and $8,500 per family unit-less than 4 rooms. This increase would be in exact proportion to the walkup structures.

May I expand in my remarks on this, sir?