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However, not withstanding our present and our proposed additional FHA measures designed to expand the effective area of operations for private housing, it is clear that there will remain a considerable segment of the middle-income-housing market which will not everywhere be served. The program which we are now recommending is a supplementary program to help private enterprise meet those further needs. Thus, the President, in his recent budget message, stated :

As a necessary supplement to our other housing programs, I am recommending new legislation to authorize Federal assistance to cooperatives and nonprofit corporations in building and managing housing projects.

It is important that no single proposal should be regarded as a fully effective total program for housing middle-income families. On the contrary, each should be properly viewed in the context of the totalalong with present activities and other pending administration proposals aimed at increasing the existing supply of housing for middleincome families. The basic importance of H. R. 6618 is that it would provide a new avenue through which a number of the families in the middle-income group, who could not get satisfactory housing through other available means, can obtain housing adequate to their needs. Thus, it takes an important and appropriate place as one of the several measures aimed at the special problems confronting middle-income families.

Before I discuss the principal features of the new middle-income proposal contained in H. R. 6618, I should like to explain the income range of these families and their position in the housing market in terms of the rent or equivalent charges which they can afford to pay.

On the basis of recently available data collected by the Bureau of the Census for the year 1948, we are able to present a much more upto-date picture of what is meant by the phrase "middle-income" than was possible when I last appeared before you. We have supplied to your committee a compilation based on this census study which gives a good picture of 1948 income distribution.

For the purposes of this discussion, the middle-income-housing market for urban families in the country as a whole can be taken as comprising those urban families of two or more persons whose cash incomes were between $2,800 and $4,400 a year. One-third of the urban families in this country had annual incomes within that range during 1948, according to the latest census study. Of course, the actual income range which defines middle-income families in any given community will vary considerably from the national average range. Thus I should like particularly to call attention to the last five columns of the table which relate incomes to the size of the communities where these families live. It will be noted that in cities with a population of 1,000,000 or more, one-third of the families in such cities had incomes within the range of $3,135 to $4,841. In smaller communities the income range for the middle third of the population dropped somewhat, until in communities of 2,500 to 10,000 population, the range is $2,451 to $3,929.

Returning now to the middle-income-housing market for the country as a whole in terms of the national average range, let us examine what rent or equivalent charges families within this income range can afford to pay. On the basis of the usually accepted rule of thumb that monthly expenditures for shelter should not exceed 20 percent of income, housing for these middle-income families should be available at shelter rents ranging from about $47 per month to $73 per month, or at a median shelter rent of approximately $60 per month.

I should like to make perfectly clear to your committee what is meant by this term, “shelter rent. It includes the total amount which must be paid by the tenant, exclusive of utilities. In the estimated rent and cost schedules which I will summarize later for you, we have estimated the cost of utilities at $8.50 per month. In effect, then, gross rent, which can be defined as the total amount a tenant occupant must pay on the median basis we are discussing, would be $60 plus $8.50, or about $69.

Under the terms of this bill, we believe that it will be possible to ohtain rentals closely approximateing the range which the 1948 census analysis of current incomes shows to be necessary. It is our expectation, in fact, that rents can be reduced about 25 percent, below rents currently being obtained in FHA section 608 rental projects. There is one

further matter which I would like to emphasize at this point before I discuss the detailed provisions of H. R. 6618. Various attempts have been made recently to prove that the middle-incomehousing market is being served adequately and that therefore the additional aids which would be provided by this bill are not necessary. In each instance the attempted proof involved a fallacy resulting from the misuse of national averages. This attempted proof was based on the fact that a given percentage of all the housing produced in the country during 1948 or 1949 was sold or rented at prices or rentals which were within the means of a given percentage and it is always stated as a substantial percentage-of all American families. The fallacy inherent in this argument is that it balances off the low-cost homes, most of which are produced in the South and in parts of other sections where prevailing construction costs and income levels are lower or where savings in home-construction costs are possible because the climate is milder, against the housing needs of middle-income families in higher-cost areas, such as New York, Chicago, or Detroit.

Still another fallacy, which characterizes this attempted proof that all middle-income families are being served adequately, is the fact that so many of the houses and apartments coming onto the market, especially those which sell or rent at charges low enough to be within the means of middle-income families, are not large enough for families with children.

Let us examine the extent to which these two fallacies may mislead us if uncritical use is made of available statistics. On the basis of national averages, FHA statistics show that roughly two-thirds of the families who obtained section 203 homes for which mortgage insurance ras issued during the first half of 1949 had net incomes of less than $4,800. However, it is found that, proportionately, more of these families were located in southern and western communities. In the New York and Chicago areas less than half the families who purchased section 203 homes earned under $4,800.

In the case of rental housing, in spite of the good record of the past few years as measured in volume, inability to serve fully the middle-income market has been much more pronounced than in the case of sales housing, so that families who for one reason or another are not in a position to buy a home are particularly hard hit. As costs have risen, this has been emphasized. Even for the country as a whole, FHA figures for section 608 projects covered by insurance commitments issued during the first 6 months of 1949 show that over 55 percent of the apartments were to rent for $80 or more. Only in the South was there a significant portion of the units which were to rent at under $60. In the New York and Chicago areas over 60 percent of the units were offered at rents in excess of $100 per month, and only about 5 percent were offered to rent at under $80 per month. As we shall see later, these are mostly efficiency or 1-bedroom apartments. During the same period in Denver, not a single proposed new 608 apartment was reported as being scheduled to rent at under $80 per month, and in Detroit, not a single unit was reported as being scheduled to rent at under $70.

There has been a growing tendency for an increasing proportion of new rentals.to be smaller units not suited to the needs of families with children. Hence, the plight of middle-income families who have children is even more pronounced than the rental figures by themselves would indicate.

For the same period last year in the United States as a whole, 49 percent of the units in 608 projects had 31/2 rooms or less; 19 percent had 4 rooms. The remaining 32 percent had 41/2 or more rooms, and out of the total, only 7 percent had 5 or more rooms. In many cities an even larger proportion of small units predominated. For example, in New York, 64 percent of the apartments had 312 rooms or less, and in Chicago, this figure was 71 percent. Indeed, over onefourth of all the 608 apartments for which commitments were issued during this period in Chicago were apartments having less than three rooms.

Mr. BUCHANAN. Have you figures showing the average family size at the income levels which you are now

Mr. FOLEY. You mean of the tenancy in these apartments we are discussing?

Mr. BUCHANAN. Yes.

Mr. FOLEY. No, I do not have since the selection of tenants is done by the owners, the sponsors and I don't think we have that data. If you mean with respect to the whole national situation, that is the type of information which we have only spottily and is the type of information which the 1950 housing census we hope will give us pretty completely. We are handicapped by lack of sufficient statistics of that kind. I understand that a recent census study shows that, in 1949, 38 percent of the urban families were families of four or more persons.

The trend toward smaller rental units has been developing for more than a year and is the result of both high costs and an increase in the proportion of apartment projects built in central urban areas where elevator structures are usually required. It is one of the major reasons why we have strongly recommended allowing section 608 to expire, and propose substituting the amendments to section 207 which are contained in H. R. 6742. They have been designed to help correct this trend by providing special incentives for the construction of family sized rental units

. You will recall that we advised the Congress last year we did not plan to suggest further extension of section 608.

The cooperative housing bill represents a further necessary measure to encourage the construction of units adequate for family living and at monthly costs within the means of middle-income families. I should like to make perfectly clear why I believe that organizations of this type hold special promise for added progress toward attaining our total housing objective in the middle-income field, and thus warrant the encouragement and assistance which the bill would provide.

The cooperative principle has played an important role in the development of America. It has been employed successfully in many ways since early colonial times. The various agricultural cooperatives in the production and marketing field are, I suppose, the finest example we have of the desirable results which can be obtained through cooperative organization.

Our basic problem is after all one of further cost reductions, in construction, financing, or maintenance, or preferably by a combination of economies in all three. Cooperative housing and nonprofit housing offer great promise of achieving such cost reductions because of savings immediately obtainable in operation and maintenance, and potentially in construction costs. Further, the bill provides an economical financing system, since all economies obtained by cooperatives or nonprofit organizations are automatically translated directly into reduced charges to the consumer.

I cannot emphasize too strongly that the basic and fundamental objective of this bill is to provide a sound and practicable means whereby good housing of sound standards, livability, and sufficient size for adequate family life can be produced and made available at monthly charges which more middle-income families can afford. To achieve this objective, it is essential that every possible economy in financing, construction, and maintenance be translated directly into corresponding reductions in the monthly charges which the individual consumer must pay for that housing. The cooperative or nonprofit

: organization is the only form of private enterprise through which the savings achieved in financing, in construction, and in management are automatically translated into direct benefits to the consumer in the form of corresponding reductions in the monthly costs which he must pay for his housing.

There are many reasons which are frequently cited as to why the development of housing cooperatives has not been more widespread. Certainly one of the principal obstacles, on which almost all persons who have looked into this matter agree, is the extreme difficulty which groups of would-be housing cooperators have ordinarily found in obtaining the necessary financing of their operations. Another is the lack of accumulated experience, such as exists in other areas of housing, through which groups of prospective cooperators would be assisted and guided in proper organization. The organization of a cooperative for the purpose of producing or owning and managing residential property is admittedly not easy. However, the successful ventures which have been made and the success of the cooperative principle in other fields make me optimistic as to the possibilities for accomplishing very substantial reductions in the monthly costs of housing to the consumer through cooperative organization and have convinced me that the time is ripe for the initiation of a vigorous program to show that real progress can here be made through the application of the cooperative principle to housing. It is noteworthy, from a study of various cooperative housing undertakings in the country, that the difficulties I have mentioned have often resulted in enterprises which end by only partially using and benefiting from the cooperative principle.

The bill would make it possible for cooperatives to be properly formed and soundly organized, to be given a good start, and to be assured of reasonable financing supplied by private investment capital.

The bill provides, first of all, that the Housing and Home Finance Administrator shall undertake a program of technical advice and assistance in the organization of cooperative and nonprofit housing corporations. The carrying out of this responsibility would require the development of recommended plans and methods for the sound organization of cooperatives, including technical advice and assistance in their formation and in the planning, construction, and opera-tion of their projects.

We believe that this is a function which must be undertaken at the outset if a fair and practicable opportunity is to be given to fully test the usefulness of cooperatives in the housing field. It is a type of activity no different from that undertaken from time to time in many other areas by the Federal Government. It would be similar to the professional and technical guidance supplied through the Department of Agriculture that has accomplished such outstanding results in the farm field and in the case of rural electrification. It would parallel the technical service and assistance that was undertaken through the Home Loan Bank Board when authorization was first given for the Federal chartering of savings and loan institutions. It is comparable to the great variety of services rendered to the building industry, land developers, mortgage lenders, and individuals by the Federal Housing Administration program.

The bill provides that this function be performed as a public service and that it be handled from a division within the Housing and Home Finance Agency. I know there are some who believe that there should be created a separate constituent agency within the Housing and Home Finance Agency with a statutory responsibility for handling these activities. While I appreciate the sincerity of purpose which undoubtedly motivates such recommendations, I do not believe that it is consistent with sound principles of efficient Government organization. It is certainly inconsistent with the recommendations of the Hoover Commission. It would be directly contrary to the policy established last year by the Congress in providing that the newly established important program for the clearance of slums should be handled by a division within the Housing Agency. Moreover, as the program contemplated by the bill proceeds, the time will come when these advisory activities need not be continued on the scale which will be necessary at the outset. Therefore, by any practical test, the provisions of the bill to provide such services through a division within the Housing Agency seem obviously more sensible and economical.

Related to the task of giving technical advice and assistance in the formation and organization of cooperatives, is the task of providing adequate funds for the development of plans and specifications for a particular housing project. The bill authorizes the Housing Agency to make preliminary advances of funds to soundly or

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