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set up by the cooperatives. This should be set up by agreement between the Administrator and the cooperative. There should be a vacancy loss reserve of half a percent, collection reserve of half percent, and advance payment by the members of the cooperative, so that after the first 3 years, perhaps, they would have as much as 3 months payments ahead as a cushion, so if individual members became ill or unemployed the corporation could meet its obligations. It would have more strength than individual members and therefore could have lower financing

Mr. DEANE. Do you conceive that this type of program will be attractive in the rural or small urban areas?

Mr. BRYANT. Yes; I know of one very nice little cooperative at Campbell in California that left a 2-acre park in a small section and a space for store in addition to the 80 lots for houses. Such an element of community planning is possible in large or small numbers. I would like to mention that in New Mexico there was a cooperative in the last few years which built houses for their members on scattered sites. They were a construction cooperative rather than a land-planning cooperative. The members bought their own lots; and, according to the report I was reading recently, there was some saving in the actual construction.

Mr. DEANE. From your experience, do you not think there will be more single-unit cooperatives?

Mr. BRYANT. Yes, I think that that should be made very clear to everyone considering this, that the type of unit should be appropriate to the size of the town and the area, that there is no preconceived notion that these all have to be 13-story apartments.

Mr. DEANE. Is the publication you mentioned available for study before it is printed?

Mr. BRYANT. This study on redevelopment?
Mr. DEANE. Yes.

Mr. Bryant. I think I can get another copy. This is the only copy I have, but it points out very sharply the relation between redevelopment and this cooperative procedure. It seems probable, I feel, that redevelopment will be blocked in most cities unless you can give an answer to these average wage earners who want to own their own homes or live in a fairly average apartment. Unless you

have some tool for working with them, you cannot move the whole thing.

Mr. DEANE. Mr. Chairman, not with the idea of inserting the publication in the record, but I wonder if the gentleman would be willing to leave it with the clerk for such reference that might assist in the report on this bill?

Mr. Hays. Can you supply that!

Mr. BRYANT. Yes; but since it is 300 pages in length it should not go in the record.

Mrs. WOODHOUSE. This cooperative project in New Mexico, how widely scattered were those ?

Mr. BRYANT. In the same town.

Mrs. WOODHOUSE. Yes, but I mean were they all within the same block or two blocks?

Mr. BRYANT. No; they were scattered about the town. Mrs. WOODHOUSE. The other question I wanted to ask you—one of the difficulties of home ownership is our mobility. We build a house,

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and selling it to the market we are likely to take a loss. On this cooperative arrangement it would be possible for a family to buy; if they had to leave, would the cooperative not guarantee to buy it?

Mr. BRYANT. No.
Mrs. WOODHOUSE. There is no guaranty there, is there?

Mr. BRYANT. In my book I propose the management and financial structure for such an occupant-owned project. In studying a lot of cooperatives, it seems to me that the corporation must have the option to repurchase at the price paid to prevent speculation but cannot guarantee to repay that full price because of the changes in our whole economy. If 10 or 20 percent of the members have to move for some reason and all wanted to sell at the same time, the corporation might go bankrupt. There should be a clause in there that it has the option to buy, but if the market has changed so that the value of that property is 10 or 20 percent less than the book value, then the member can only put his leasehold on the market for what it would bring. Otherwise there is a danger of wrecking the corporation.

Mrs. WOODHOUSE. I was not thinking at selling his actual investment. That would be putting him on a par with the steel companies as to their prices, but I was thinking of a sale. There has been some semicooperative arrangements between university faculties and colleges whereby, if the professor leaves, his house is bought back by the college at a current, assessed fair price, and I wonder if anything like that could be done.

Mr. Bryant. Some cooperatives have written into their bylaws such a provision—that in case the corporation does not choose to buy at book value then there can be an appraisal to arrive at a fair market value.

Mrs. WOODHOUSE. Thank you.
Mr. Hays. Mr. McKinnon.

Mr. McKINNON. Mr. Bryant and I have already talked. I think he knows my basic question. I do not think there is much use repeating it here.

Mr. BRYANT. I tried to go into it in my statement.

Mr. McKINNON. I certainly appreciate your testimony. I think you made a very clear, concise case, Mr. Bryant. You feel pretty definitely that the cooperatives will not get a fair break or trial unless the agency is a separate part of the Housing Agency?

Mr. BRYANT. No law can guarantee good administration and that depends on the actual personnel selected, of course. They must want to make the program work and it appears to all the public interest organizations- I believe I can say all-at this point that there is a better chance for conscientious, devoted leadership in a separate agency, rather than having it integrated with all of the legal and fiscal and other staff of the present organization, which, in fact, has not shown any inclination to make this thing work.

Mr. MULTER. I cannot go along with you on that statement. That may be so in certain areas, but I know it is definitely not so in other

Mr. BRYANT. There may be areas, there are areas, I know, where several of these projects have gotten through FHA, but I could list several dozen for you and have seen the correspondence which would make extremely unpleasant reading in your minutes, which I think is fact.

areas.

Mr. MULTER. I for one would like to have that. Will you please submit to the committee instances where there has been no cooperation, or any other complaint levied against the agency in any region? I think this committee would like very much to know.

Mr. BRYANT. You are putting me on a difficult spot, Congressman. I have a particularly bitter letter from one cooperative here which says, “Please do not mention this to anybody for fear of reprisal from the FHA office."

Mr. MULTER. We get these statements repeatedly and we must disregard statements of generalities. We cannot go to the agencies and inquire on the basis of such generalities.

Mr. MITCHELL. Is there any reason why the committee could not have that for its own use and not put it in the record ? Certainly I can understand why the cooperative would not want its confidential complaint made available to the people who may be administering a program to which it will apply later.

Mr. BRYANT. That is right, or are now working with and trying to get something through. I will be glad to submit such a statement to the members privately.

Mr. MULTER. I will go along with that, that it be kept out of the public record but each member of the committee be supplied with the information.

Mr. BRYANT. These cooperatives are dependent on FHA financing. They cannot get private financing.

I would like to mention one particular cooperative in California that had raised $350,000 cash, bought 106 acres of land and for 4 years tried to work with FHA. For 2 years they were told verbally by FHA that they would put the mortgage through. However, the word around the lending institutions was that this cooperative was not to go through. Two days before a letter of rejection from FHA on the grounds the the cooperative appeared unstable, after 4 years and this much cash, and before this letter of rejection came through, several speculators called to ask to buy that land because they had been told by someone in FHA that the project was going to be rejected. The members of this group will lose over $150,000 of their life savings as a result of the refusal by FHA to put the cooperative through. It is a single-house cooperative.

Mr. MULTER. What was the cost of the operation?

Mr. BRYANT. Two hundred and sixty-eight houses at about $3,000,000. They had a builder, contract signed and bank financing approved, pending FHA insurance. They worked for 4 years to get that and were given a complete run-around all the way through. Friendly employees in that FHA office told us of the attitudes of FHA officials, that they never intended to put it through under any circumstances and were making deliberate obstructions. I would write that off as one case unless I had heard the same thing from a dozen other cooperatives around the country.

Mr. MULTER. What finally happened to the California one you are talking about?

Mr. BRYANT. They put the land on sale at considerable loss. They gave up. They had no more funds.

Mr. McKINNON. Will you answer for Mr. Rains' benefit and we will point it out in the record—since he is not here at the moment

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and for my benefit too, your explanation why you feel it is right to give one group of people a better interest rate than another

group

of people, all of those being citizens of the United States ?

Mr. BRYANT. Because an individual family applying for a mortgage loan is an entirely different kind of a risk from a corporate or group risk. This is not a strange thing in American life--we have many types of corporate activities-simply to solve this financing problem, including all kinds of private corporations which can raise money better than a group or a partnership and can go in and get money. This corporate structure is a different risk at 3 percent than the present 4 percent to a veteran or 5 percent to a home owner ander FHA.

Mr. McKinnon. That is true, but this is different because the United States Government is coming in with its credit to assist one group of people but the United States is not pledging its credit to assist another group of people.

Mr. BRYANT. I heard the Senate hearings where one of the opposition group said they were opposed to lending to special groups, which was a little bit comical, frankly. I think the conclusion is that it is in the public interest to aid in encouraging a form of home ownership to a group which would not otherwise come into the market. That, I think, is the clearest formulation.

Mr. McKINNON. Would you say we should attack the first problem first? I mean a lot of things enter into high cost of building besides financing

Mr. BRYANT. We have mentioned in the savings, which might be $35 a month on a five-room apartment, only a third of that may be the savings in financing. Maybe a half will be the savings in management and maintenance and the balance from lower collection and vacancy losses and by group activities. All of these together accomplish this end result.

Mr. MITCHELL. I wonder if I could ask one question. I am wondering whether, although you cannot be here tomorrow, it would be possible for you to return at a later time during the committee's hearings?

Mr. BRYANT. Yes; I would like to.

Mr. Hays. I wonder if Mr. Multer would mind modifying the request about this information. I do not believe we should ask him to furnish all members with this information.

Mr. MULTER. I asked for the information and if no other member wants it, I will keep it, or if it is submitted to me alone, and any member who wants to see it, I will submit it only to that member.

Mr. Hays. The committee will now adjourn to meet tomorrow at 10 a. m.

(Whereupon, at 12:05 p. m., the committee adjourned until 10 a. m., Thursday, February 2, 1950.)

COOPERATIVE HOUSING

THURSDAY, FEBRUARY 2, 1950

HOUSE OF REPRESENTATIVES,
COMMITTEE ON BANKING AND CURRENCY,

Washington, D. C. The committee met, pursuant to adjournment, at 10 a. m., the Honorable Brent Spence (chairman) presiding.

Present: Messrs. Hays, Buchanan, Multer, Deane, O'Brien, McKinnon, Dollinger, Mitchell, O'Hara, Wolcott, Gamble, Talle, Kilburn, Cole, Hull, and Nicholson, and Mrs. Woodhouse.

The CHAIRMAN. The committee will be in order. We will hear first from Mr. Williamson, representing the Veterans of Foreign Wars.

STATEMENT OF JOHN C. WILLIAMSON, ASSISTANT DIRECTOR, NA

TIONAL LEGISLATIVE SERVICE, VETERANS OF FOREIGN WARS

Mr. WILLIAMSON. Mr. Chairman and members of the committee, I am pleased to have this opportunity to express the views of the Veterans of Foreign Wars of the United States with respect to H. R. 6618, a bill designed to assist the middle-income group to acquire homes of their own through their participation in cooperatives, or through the efforts of nonprofit corporations.

The utilization of the cooperative principle to assist families of moderate means to a more beneficial participation in our national bounty is no innovation in our American system. Unfortunately, many opponents of this measure seek to attach something alien, something sinister to this legislation because it provides an inducement to families of moderate income to participate in cooperatives as a means of acquiring decent homes at monthly cost within their means to pay.

The million and a quarter members of the Veterans of Foreign Wars of the United States have one experience in common-an experience which taught them to live and work with their fellowmen. The comradeship born of war has survived to live in the more than 10,000 posts of our organization, the great majority of which are nonprofit corporations organized and chartered under State law. Several of these posts have already organized housing cooperatives and others await the guiding and helping hand provided in this legislation. Two years ago ihe James A. Manley Post, VFW, in Wilmington, N. C., acquired a war-housing project of 584 masonry-type units through the assistance of the Federal Public Housing Authority, the Office of the Housing Expediter, and Federal Housing Administration. The success of this cooperative project was such that the Wilmington plan became a byword in the VFW national housing effort. Unfortunately, many other

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