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Mr. KREUTZ. I'm sorry. I can't show that from the reports sent in by them. They were not broken down as between FHA and GI loans, but we can give you an estimate, based upon the facts we can get, as to the percentage of loans made by the savings and loan associations which were made to finance GI homes.

Mr. DEANE. Very well. Mr. KREUTZ. Here is an example of lending on the East coast. One of our institutions located in the Philadelphia area made 496 loans last year to finance home construction and home purchase for families with an average annual income of $3,585.92. The average amount of these loans was $8,272. The average monthly payment, including interest, principal, taxes, and insurance, was $58.96.

In addition to these loans made to individual families, this association also made 46 loans to operative builders to finance the construction of 781 dwelling units, the average cost of which was $6,246.

The president of this association wrote me that in 1950 their efforts will be confined to the financing of homes selling for prices ranging from $6,000 to $8,000, with monthly carrying charges ranging from $42 to $50. This association has a definite program under way to finance a total of approximately 2,000 such homes in 1950. These houses will be 60 percent of brick construction and the balance frame, some with two bedrooms and some with three, in addition to a kitchen, a breakfast room, a living room and a tiled bath.

Mr. DEANE. Mr. Kreutz, on that point, were these homes guaranteed by FHA or the Veterans' Administration?

Mr. KREUTZ. I think I have the letter from the president of that association here. I will see if he tells us.

He said, "chiefly to GI's," so I assume most of these were guaranteed by the Veterans Administration. Mr. DEANE. Thank you.

Mr. KREUTZ. The foregoing facts in regard to the large volume of lending being done by our institutions to the lower income families, and the fact which I am sure can be obtained in regard to lending by other types of institutions, is good evidence that there is no need for the Government sponsorship of cooperative housing as is proposed in this bill.

Furthermore, a comparison of the production of dwelling units in the United States with that of European countries shows that we are well ahead of the rest of the world and have no need for the additional facilities such as are proposed in this bill.

Let's have a look at the figures for the period from 1940 to 1947. Sweden, which is sometimes referred to as a model for home building, produced 7.3 dwelling units, or 16 rooms, for every income in population of 10 persons as compared with a production in this country during the same period of 3.85 dwelling units, but 17.8 rooms, a greater increase in living space than in Sweden; England's production was 1.6 units, or 7.8

rooms, or less than one-half the increase in living space in the United States; Switzerland's production was 2.4 dwelling units, or 8.9 rooms, exactly one-half the increase in living space in the United States. The production of dwelling space in every country of Europe was substantially smaller on a relative as well as actual basis than that of the United States.

Mrs. WOODHOUSE. Mr. Kreutz, I think it would be well to point out that a lot of those figures were from 1940 to 1947.

Mr. KREUTZ. Yes, ma'am.

Mrs. WOODHOUSE. And we were in a rather more favorable condition as our figures are for the postwar years.

Mr. KREUTZ. Yes.

Mrs. WOODHOUSE. I would suggest some comparisons with other years.

Mr. KREUTZ. I have some comparisons for 1948 which I think may go to the point.

The table on page 112 of “A report of the Senate Banking and Currency Subcommittee investigating and studying European housing programs” is additional evidence of the greater progress in this country in the production of new housing than in Sweden, Denmark, Netherlands, Norway, France, and the United Kingdom. It shows that we led the world in 1948 with 755 houses built per 100,000 of population. This was almost twice the rate of production of housing in the United Kingdom. It was almost 30 percent more than that of Switzerland, more than twice that of the Netherlands, and exceeded the rate of housing production in Sweden. Moreover, we knew from other studies that the amount of new living space created in new construction in the United States is substantially greater per dwelling unit than in European countries.

Mr. RAINS. Mr. Kreutz, those are good figures, but, at the same time, you will agree that if the Government had not put into operation certain housing programs, to which there was a great deal of opposition in this country, we would not have the fine record that we now have, since the majority of the homes built, about which you were talking, were built under a Government-operated program of financing.

I do not think it is exactly fair to compare the United States, in any instance, with Sweden because whatever they do we do better; and I do not think your figures would bear any special emphasis at all in this particular field.

Mr. KREUTZ. I certainly agree that without the aids which have been provided by the Congress, in the form of FHA insurance and VA guarantees for loans to veterans, we would not have the volume of home production we have had in this country.

Mr. Rains. You could not hope to, could you?
Mr. KREUTZ. No, sir.

The rate of progress in home construction in this country is shown by the comparison of 1948 with 1939. In 1939 our rate of production of new housing was exceeded by that of Sweden, the United Kingdom, Norway, and Denmark and was almost equaled by the Netherlands. In that year we built only 560,000 houses, or 430 per 100,000 of population, in contrast to 1,100,000 or 755 units per 100,000 of population in 1948. And

may I interpolate here to say that in most of these countries they have government aids of one sort or another which are comparable to the aids which have been provided by the Congress for home building in this country.

It is quite significant that despite a tremendous concentration of resources in new home building in Great Britain in 1948 with very extensive Government assistance they produced new housing at the rate of only 400 units per 100,000 of population as contrasted with 755 units produced in the United States.

It was my privilege, in late 1948, to visit Europe and to study housing conditions and progress in new construction of housing there. It seems to me that we are so much farther advanced in this country in the quality of housing which is produced and in the cost of such housing, as measured by wage levels, that we do not need to look to Europe for new ideas on housing.

There already exists in this country many Government aids for the encouragement of private home construction. You are familiar with them. There are various Government aids in the development of new and better materials for home construction, to say nothing of the research and other facilities which private industry is providing. Under the GI bill provision is made for the 100 percent financing of homes for veterans. Under the National Housing Act there are various types of liberal FHA plans which have encouraged home building in large volume. The Federal Home Loan Bank System, with total resources of three-quarters of a billion dollars, is functioning success

a fully and efficiently in providing a reservoir of credit for its member institutions which number nearly 4,000 and whose assets total over $14,000,000,000. These local institutions are located throughout the United States and in our Territories.

In addition, the Congress adopted the Housing Act of 1949 and the Public Housing Administration is now busily engaged with plans for increasing the housing supply for the lowest income groups.

And so I respectfully submit that there is no need at this time for the proposed legislation.

Would this bill reduce prices of new homes? It seems clear that building costs and not interest rates are the real problem faced by the potential home buyer these days, and yet building costs themselves, high as they are, are the effect of the postwar inflation. The largest single item in the cost of building a home is labor. As we all know, the wages paid for the labor that goes into a house both on the site and in the mills and factories which produce the materials are substantially higher than they were before the war. We are not recommending that these wages be reduced for they must be consistent with the costs of consumer goods. Possibly some of the profits of some contractors and subcontractors became higher than normal during the period of acute shortages of housing supply against abnormal demands for housing. If this were true, a fast increasing competition will soon squeeze out any excessive profits.

But again I wish to emphasize that it is the total cost of a finished house that is the greatest deterrent to home buying and lower rents. It is also a fact that many potential buyers have held off even if they had the money with which to buy or build new homes because of their expectation that costs would decline. Costs have declined somewhat, , but are leveling off.

While lower costs are apparently one of the purposes of the proposed legislation, we cannot see how any substantial saving in costs can result from cooperative housing. The cost of professional services would not be decreased and the contractors who would undertake to build the projects, after bidding in open competition, would, we assume, have to make a reasonable profit to stay in business.

It is true that in some instances the services of an entrepreneur would not be required. That, of course, is assuming that these cooperatives would spring up under their own initiative and that their


developers would require no compensation for their time and efforts. However, we suggest that the entrepreneur has been a very useful individual in our system. We can attribute much of our present high standard of living to the progressive, aggressive, and successful entrepreneur in every line of business. He has been willing to spend time, money, and energy, and take risks.

While we have no specific data to support the opinion, we do feel, as a result of many inquiries we have made around the country, that construction costs in cooperative housing projects will, in many cases, exceed those of the traditional and orthodox type of undertaking. A housing project that has to please a large number of people, namely, the members of the cooperative undertaking, may easily result in higher costs than exist in the case of this conventional development under the direction of, shall we say, the hard-boiled management of the individual or corporate developers.

There is, we believe, another important consideration in this matter of costs; that is the definite likelihood that additional easy credit, which would result from this proposed legislation, would have additional inflationary effects on building costs. Widespread liberal credit facilities in the home construction field have historically produced higher construction costs. The reason is obvious. The more liberal the credit, the greater the number of buyers who bid against each other for the available supply of labor and materials.

Let us take a look at the record of construction costs following World War I and likewise World War II. Department of Commerce reports show that the peak of construction costs following World War I was 68.6 percent above building costs immediately preceding World War I. In contrast to that, building costs in 1948 rose to a point 86.6 percent above the same costs in 1939. In this latter period following World War II we had a number of elements which produced easy credit in sharp contrast to the limited credit facilities following World War I. I need mention only the FHA and the guaranties of loans under the GI bill.

It seems clear, from this record, that additional easy credit facilities such as are embodied in this proposed legislation would necessarily have the effect of increasing the competition among buyers for available labor, material and supplies. The result of that kind of buyer competition in the past has always been higher prices and, therefore, higher cost to the ultimate consumer.

On the other hand, if the present high level of home building volume is allowed to continue without any additional stimuli in the form of Government subsidies, we should soon reach a point where supply and current demand are almost equal. In fact, there are al

, ready reports around the country of increasing vacancies in some types of properties, particularly section 608 projects. If such vacancies increase, and it seems likely they will, the effect will be lower rents and finally lower construction costs.

The ultimate effects of the proposed legislation could be seriously damaging to our existing system of private home construction and financing. Once you start the wide-scale use of Government credit to assist one class or group of our population, how can you prevent the expansion of this type of subsidy to include the next higher income group level and the next and the next? If the $3,500-a-year family is able to get better living accommodations through a Ġovernment subsidy than it could otherwise afford, won't the $5,000or $7,500-a-year family demand similar help in the near future?

Too much help, whether it comes from doting parents or a paternalistic Government, will soften the young couple starting out in life and too often dull the ambition of the wage earner. I don't doubt that some of the great men of our own history, including many Members of Congress and heads of our Government, would never have arisen above mediocrity if they had not had to work hard and put up with inconveniences of many kinds in their early life.

It has been axiomatic in our business that the home buyer should have some initial equity to insure a continuing interest in keeping his home. Our experience has also proved that home buyers should pay off their indebtedness during the middle years of their earning period.

Finally it seems to us that our Government cannot afford to assume additional debt beyond the absolute necessities for the maintenance of peace abroad and stability at home. We cannot see any such necessity in this proposed legislation.

To summarize, we believe that (1) there is no need for the proposed legislation; (2) there would be no substantial saving in construction costs of cooperative housing projects and, in fact, there might well be inflationary increases in building costs if this proposed legislation is passed; and (3) the ultimate effects of the proposed legislation could be seriously damaging to the existing system of private home building and financing. Therefore, we recommend that this legisla

. tion be not approved. .

Now, Mr. Chairman, over the week end I read most of the testimony before the Senate Banking and Currency Committee hearings on the companion bill.

I would like to make two or three points clear here. One is that we are not opposed to cooperative housing as such. We do not believe it is socialistic, either. As a matter of fact, we believe in cooperative principles. Most savings and loan associations are mutual institutions and therefore made up of cooperators. We

are, however, opposed to any unnecessary subsidies such as we think are incorporated in this bill." We do not see any essential difference between this proposal, which involves the raising of money to make loans to cooperatives, through the sale of bonds which are guaranteed fully as to principal and interest by the Federal Government, and direct lending.

We do not see any essential difference between a proposal of this kind—to set up what amounts to a mortgage bank to make loans to a class of our people—and the setting up of a huge Federal bank to make loans to all the people of the country, to finance their homes, with funds that are raised by the sale of bonds which are wholly guaranteed by the United States.

Now, I would like to make an alternative suggestion as to what could be done in the way of setting up a national mortgage corporation for housing cooperatives, if the committee and the Congress feel that that is necessary, although I want to repeat that we do not think it is necessary at this time.

It could be set up with Government-furnished capital, as is proposed, and with a plan for retiring that capital, as is proposed.

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