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Legion Village, when finished, represented an area of several hundred homes that had all of the complete city services that are not enjoyed by 70,000 other inhabitants of the Baton Rouge metropolitan area, out of a total population of 125,000. Legion Village was, when completed, comparable to the finest residen. tial area in Baton Rouge metropolitan development, and it was the only residential subdivision in the entire Baton Rouge metropolitan area where a house and lot could be purchased for $6,300, all of which made it extremely attractive to persons looking for homes. I don't know whether this gives you all of the information that you want, or which the members of the House Committee on Banking and Currency would like to have. I would suggest that you get a copy of the Insured Mortgage Portfolio Folder 13, No. 2, Fourth Quarter, 1948, published by the Federal Housing Administration at Washington, D. C., and turn to page 14, where an article begins on Legion Village that I wrote, and I think that it might help to fill in considerable information.

The American Legion Housing Corp., while still in existence, is almost dormant. Mr. Carter, the certified public accountant who made the audit, could probably prepare any cost analysis or break-downs that you might desire. However, he would expect to be paid for them, and since the American Legion Housing Corp. doesn't have any funds for this purpose, if you want such a study prepared, I would suggest that you write to Mr. Arthur L. Carter direct, at Post Office Box 1747, Baton Rouge 2, La., and ask him to quote you a price on whatever material you may need.

Hoping that this will satisfy your need, and assuring you that I will be happy to assist you in any way possible to obtain further information, I am Cordially yours,

(S) Dick Cadwallader

RICHARD C. CADWALLADER. Mr. PATMAN. I understand the next witness is Mr. Drayton S. Bryant.

STATEMENT OF DRAYTON S. BRYANT, HOUSING CONSULTANT

Mr. BRYANT. My name is Drayton S. Bryant. I am a housing consultant.

Mr. COLE. Housing consultant for whom?

Mr. BRYANT. Agencies such as housing authorities and private developers. I am a housing economist.

Mr. COLE. Where have you been located ?
Mr. BRYANT. I have been in Los Angeles for the past few years.
Mr. COLE. Is that your residence now?
Mr. BRYANT. Yes.

I am testifying here today because of my work during the last year in studying redevelopment and during the last decade in housing economics, management, and administration. I have also been the treasurer of a housing cooperative during the last 4 years.

The first point which should be made is that this middle-income housing legislation is an essential tool in the redevelopment process in most of the cities which are presently interested in redevelopment. I have collaborated in a book which will be published shortly by a foundation in Los Angeles, entitled "Rebuilding the City." "There is an advance draft of it. It should be out in a month or so. I had occasion to meet with and talk with many people living in potential and proper areas for redevelopment. There is a large group, often about half of the people in these slum or blighted areas, whose incomes are just above the maximum for admission to public housing and yet is too low to obtain for them any decent shelter for rent or sale from private enterprise as it now is or is likely to cost.

I have sat down with groups of such people who have asked “what are the real facts about redevelopment? Is it in the general interest or is it just to bail out the owners of some land in deteriorating areas? Will we lose our homes? How can we get a decent home elsewhere? If we can't, we'll have to fight against redevelopment.” The feeling I got from such direct discussions is that many of these families will work with all their might against redevelopment programs, even though they may clearly be in the public interest. You and I would probably do the same thing. Taking the home of an average wage earner away from him—a man who earns from $40 to $60 per weekis like pulling a raft away from a man who can't swim, in today's housing market. In fact, if a redevelopment program does not make sense to the people in an area they will be against it. It is my opinion that it will then be impossible to put through the program in a whole city, that is, the electorate will not vote for it. I think that experience has been the case in several cities where bond issues for redevelopment have been defeated.

Some of the families in redevelopment areas asked “How could we get together and redevelop part of this area for our own homes? Where could we get financing so we could rebuild simple homes or apartments which we could pay for?” And the only answer that can be honestly given is that 3-percent financing through a mechanism such as is contained in this middle-income housing program is essential. Most of these families must have monthly payments between $40 and $70 per month for five- or six-room homes. The results of the approximate 3-percent interest rate, absence of large profits, low vacancy and collection loss, and savings from cooperative maintenance, are all required to remove from $30 to $10 from the rents or payments which speculative private enterprise would charge. As part of this study that I referred to, the president of the planning commission in Los Angeles, Robert E. Alexander, an architect, and I planned an actual occupant-owned, nonprofit project to carry through this thing and see exactly what it would cost and how it would work. In this redevelopment program we came to the conclusion that there was a large place for normal, private enterprise, there was a need for some low-rent public housing, but in between these two there was a big gap and that there had to be something in this rent range in between because these families were just above the income limits for public housing and yet actually could not find housing in the market as it then existed.

We came to the conclusion, after designing this project and getting actual costs on it, that under an occupant-owned or cooperative basis the rooms could be rented for about $12 per room per month or about $60 per five-room apartment, but under FHA 5-percent financing, the minimum cost would be $90, not counting profit, which meant, of course, that it would probably be well over $100 or $110.

Mr. KILBURN. You mean the same rate of amortization?

Mr. BRYANT. No; that is using the four and a half plus a half percent interest with a 25-year amortization

Mr. KILBURN. Not 50 ?

Mr. BRYANT. Fifty years was needed at 3 percent to get the room cost from $17 down to $12, but probably half the people in this particular area could afford only $12 per month per room.

I have managed large housing projects and have worked closely with all kinds of tenants. I am positive that monthly costs can be reduced at least a third below those of public housing and much more than that, below whatever expenditures for management and maintenance are included in the $25 per room per month and up charged by private enterprise for new housing. As has been previously stated in last year's hearings before the committee on this subject, the existing mutual projects in different parts of the country have an outstanding record for reducing maintenance and management costs. Conservatively, I feel that both management and maintenance costs can be cut by one-third under competent cooperative management, with a high degree of responsibility on the part of the occupant-owners.

The public interest groups and especially the cooperatives feel that the proposed program will be best carried out by personnel genuinely desiring the success of the program, with the leadership of a separate constitutent agency. This program will require leadership of a special type, able to work with people as well as with the complex factors of economics and administration. I have been in fairly close touch with nine housing cooperatives during the last 5 years, all in California, and feel that I can fairly express their point of view.

That point of view can be summed up in the almost universal expérience that the local offices of the FHA are so entirely integrated with the large lending institutions and the most speculative large builders that the local offices completely express their point of view, meaning private industry, that of hostility toward cooperatives, as well as toward improved design, better site planning, and a nonprofit point of view. I could give you many details and the story is an extremely nasty one. I do not feel it is worth going into in detail at this point although it can and has been documented at length.

Washington administrators may disclaim the actions of local offices, but there is the appearance of being either unwilling or unable to give cooperatives fair treatment. The cooperatives have never asked for more or favored treatment—but have gotten much less than equal treatment than the speculative builders. The article in the January issue of the Architectural Forum I would recommend to all of you in your reading, if you can, because it is illustrative of some of the relations of FHA with the speculative builders.

Mr. Hays. Is this article identical in your manuscript?
Mr. BRYANT. It is in the January issue of the Architectural Forum.

A study of cooperative housing in the United States was recently sponsored by the Bemis Foundation in Cambridge, Mass., and prepared by Carl Eric Carlson, associate editor of the magazine, the American City. In his files is correspondence from over 100 cooperatives in many parts of the country. There are quotations in this report from many places including Ohio, Minnesota, Washington, D. C., California, and Detroit. He probably has more current information from housing cooperatives than any other person right at this time.

The universal story is expressed in this quotation:

The FHA does not approve of cooperatives; the local office makes no bones about their expectation that the project will fail; there is endless quibbling about your plans; the FHA is simply staffed with real-estate speculators who cannot adjust to a nonprofit way of doing business. With this record of action it is easy to understand why the cooperatives feel there should be a separate constituent agency.

The mechanics included in this legislation appear to be carefully and soundly conceived with the single exception as to the responsibility of the commissioner of the agency. Decentralization would

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be a major goal of this agency, that is, not building up a tremendous agency, but passing on a maximum of responsibility to the cooperative organizations as fast as they could handle it. It would own no property and would require a minimum staff as compared with other housing agencies.

Reasonable questions have been raised about the interest rate and why a rate of approximately 3 percent is justified. The answer is clear and sufficient, and is worth summarizing:

1. The risk, if any, is far lower to the Government than on a single home loan or a loan on one project, for the debentures sold to private investors would have as security, beside the guaranty of the Government, the real property of many homes and developments in many sections of the country:

This is a different type of mortgage financing, logically flowing out of the association of a number of families and developments; a different type of investor would be attracted to purchase large blocks of the debentures, the same kind of large investor that would be attracted to municipal bonds. The 5-percent rate of FHA in comparison to the 3-percent rate on the cooperative mortgage corporation debentures would be like comparing a security based on the revenues of the city dog-catcher to one based on the entire income and faith of a city-with the added security as if many cities pooled their bonding capacity-since many cooperative projects would in various cities and sections of the country be included in the backing for the debentures; also, cooperatives would accumulate reserves which would enable them to meet all regular obligations in spite of temporary financial difficulties of a few members because of illness or unemployment.

2. The costs of servicing would be carried by the cooperatives themselves rather than by the lending institution—this is generally acknowledged to be at least half of 1 percent on the principal and often higher.

3. This lower interest rate is the only way to aid in rehousing many of the middle-income families likely to be displaced by redevelopment, and of bringing other middle-income families into a type of home similar to home ownership in all respects except the right to speculate in resale.

4. The cooperative technique is the only way to insure that the economies and benefits are passed on to the consumer, and that there can be substantial savings in monthly costs.

5. In comparing the interest rate of this cooperative program, that of the Veterans' Administration at 4 percent and of the FHA at 5 percent, a real case can be made at this time for reducing the FHA interest rate by at least one-half percent. The only argument against it is that the lending institutions do not want it. This same argument was advanced against the FHA 5 percent in 1935, but the mortgage market did not collapse—again, that is. If the argument is advanced that it would adversely affect the rate of savings, it would have to be pointed out that the rate of savings of the American people is affected by many other things than the rate of return, and often has little relation to the actual needs for new investment. America has plenty of capital and of savings—even though private investment in industry is declining.

Perhaps not enough is going into housing of all kinds.

The question has been asked if cooperatives can build more cheaply than private enterprise. Not only can cooperatives maintain the properties better at a lower cost per month than private enterprise, but it is felt by those experienced in the field that there can be a lowering of capital costs also. First, by removing the speculative profits, as distinguished from a reasonable fee to a builder; second, by efficient construction; third, by the close check of the consumers and their hired representatives over the operations of the contractors; and, fourth, a type of cost-minus contract with a maximum ceiling including a fixed fee, with any savings divided between the contractor and the consumer group. This would give maximum incentive to the contractor to lower his costs, for only in this way could he make more money. The experience of the Farm Bureau Insurance Co., in building more than 100 houses at Bellevue, Ohio, showed that efficient construction could cut costs way below the lowest contracting bid, as much as 20 percent in some cases. It is well known to economists and students of housing that there are fore "water," kick-backs, price understandings, and more elements taking profits out of the job than in most other major industries. The organization of strong cooperative associations will do much to serve as a yardstick and bring building costs into better relation with consumer incomes.

This bill is not inflationary, as has been claimed by some of the special-interest opposition. The addition of 250,000 cooperative units over probably not less than a 5-year period would mean probably a maximum of 40,000 units a year, as compared with a 1949 production of over 1,000,000 dwelling units of all kinds. Impartial housing economists have urged a production of 1,500,000 units a year for the next 10 years. In the real-estate section of the Washington Post, Sunday, January 29, a production of only 800,000 units was predicted for 1950. Six hundred thousand units per year are needed just to take care of new families and loss of existing housing. There has been a sharp decline in investment of private capital during the last year. Private, commercial, and industrial construction has been declining. Unemployment has appeared in building trades in many areas. It is clear that the chief problem over the next few years is more likely to be deflation. At the present time it is felt by housing economists that the housing industry could be expanded to produce 1,500,000 units per year. It should be recalled that 937,000 units were produced in the year 1925, but our population has grown by 35 percent since then, and our industrial capacity far more, so the proposed middleincome housing program cannot be called inflationary by any stretch of the imagination.

This middle-income housing program will not compete with FHAinsured loans or the private-mortgage market but is supplementary to existing programs. It was claimed in 1935 by the American Bankers Association that FHA would injure the private-mortgage market, meaning 6- to 8-percent first-mortgage loans; however, there are still plenty of 6-percent loans today, so that the total result of FHA has been to aid in the expansion of housing production. This middleincome program does not compete with home ownership but, by a procedure almost the same in the end product as home ownership, brings an additional group into the field which would otherwise have no chance. It will result in a strengthening of pride in a place to

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