ment market, and in turn will loan the proceeds of these debentures to housing cooperatives. It is expected that the resulting interest rate to the cooperatives will be approximately 3 percent.

Does this 3 percent interest rate represent a subsidy? It definitely does not, because the 3 percent covers not only the cost of money to the mortgage corporation, but in addition it includes one-fourth of 1 percent for all administrative costs, and one-eighth of 1 percent for a financial reserve.

Moreover, it is important to notice this fact. Insurance companies, savings banks, or other investment sources which purchase the debentures issued by the mortgage corporation, will receive an extremely attractive investment. There will be no servicing or administrative cost normally connected with a mortgage loan. All that the investment company will have to do will be to clip the coupons bearing interest at approximately 212 percent. Moreover, the debenture will be supported by the security behind many different mortgages for many different projects in many different areas of the country, issued by the mortgage corporation.

The comparatively long amortization period does represent somewhat of a departure from traditional practices. We must be careful, however, not to let the heavy hand of tradition and habit obscure a realistic view of our housing problem. There is no special sanctity about the traditional 15-, 20-, or 25-year mortgage. In many European countries mortgages run up to 100 years.

It is quite true that wherever possible a young married couple wants to pay off its mortgage as soon as possible. However, with the present housing shortage, many young married couples cannot afford to own. any house with a mortgage because of the high monthly payments that are required. One way to reduce these monthly payments is to lengthen the amortization period. Certainly young couples today would prefer a decent home with a longer amortization period on the mortgage than no home at all.

Moreover, under this program it is quite likely that many cooperative groups will voluntarily be paying off their mortgage at a faster rate than the terms of the loan require.

Income limitations: This is a housing program for families whose incomes place them in the middle third of our population. With this fact in mind, a few individuals have suggested that not a single family which is not in this middle-income category should be eligible to occupy any units built under this program.

We emphatically disagree with this point of view. We strongly feel that there should be no specific income limitations written into this legislation since the proposed program involves no subsidy, is privately financed, and stands entirely on its own feet.

This point is particularly important for a realistic and effective program. We do not want a program which will deny cooperative housing to all members of a union local or veterans' post simply because a few members may have incomes slightly above or slightly below the so-called middle-income level.

We believe that the present wording of the bill makes it certain that these projects will in fact be built for middle-income families. Before any cooperative can obtain a loan, the Administrator, under section 204a, has to certify that "the proposed housing project will

meet a need for housing for families of moderate income in the locality." In addition, the Administrator has to certify that the rental schedule for the project will make it available for these middle-income families.

Deferred payment: We are pleased to note that the bill contains an arrangement, long advocated by the A. F. of L., under which monthly payments could be suspended for specified periods so that families whose incomes are temporarily reduced by unemployment, illness, injury, or other misfortune would not be forced to lose their homes after making their regular monthly payments for many years. Down payments: Under the terms of the bill before you, each cooperative borrowing from the Mortgage Corporation would be required to subscribe to the capital stock of the Corporation in an amount equal to 72 percent of the value of its loan. Of this amount, one-sixth would have to be paid at the time application is made for the loan and an additional one-sixth just prior to actual receipt of the loan. This means, in effect, that each member of the cooperative would have to make a down payment of approximately $100 very soon after the organization of the group and another $100 a few months later but prior to actual construction of the project. We feel that this might work a considerable hardship upon some members of such cooperatives, and we would, therefore, suggest that the second $100 be payable at the time of occupancy of the project rather than prior to the beginning of construction. This would mean that the member of the cooperative would have to make a down payment very soon after the group was organized, but that he would have a little more time to raise the necessary cash to pay the second installment of his down payment. I would like to comment on a couple of the questions that have been asked hereby the members of the committee.

Congressman O'Hara asked one question concerning the membership of the American Federation of Labor and their position as members of this so-called middle-income group. I think I might discuss that for just a moment by stating that, although there are no detailed income analyses available of trade-union membership, you can get some idea of where our membership stands in the income scale by referring to certain figures on hours and earnings published by the Department of Labor.

For example, for the month of December 1949, the average factory worker earned a total of $56.20 a week. That would amount to approximately, on a yearly basis, assuming the worker worked 52 weeks during the year, of something around $2,900. That is the type of person and his family that we hope will be reached by this bill.

Other weekly earnings figures are available for other industries and they indicate, in general, that production workers, union members, the vast majority of them fall into this middle bracket with weekly earnings between $50 and $60 and sometimes up to $70 a week.

Mr. O'HARA. How much is the average member of the American Federation of Labor able to pay for shelter, based upon the figures you have given us?

Mr. HENLE. Standards vary for that sort of thing, but in general, I think it might be fair to say that a person earning $60 a week should pay not more than $60 a month for housing, something like that. That is a very rough guide that can be used and it is for that reason that we

feel that our membership is particularly hard hit, since it cannot meet the rentals in the $85 and $95 category in the apartments now being built by FHA.

Congressman Buchanan raised a question about the effect of this. bill on the construction industry for 1950. He mentioned that the industry is presumed to be operating at a very high level, and he raised the question whether this bill might possibly mean that the industry would not be able to furnish by implication the labor and materials to do an extra housing job.

In that connection, I would like to call attention to the fact that the construction figures published by the Labor Department and the Department of Commerce show that, although it is quite true that 1949 was a record construction year, they show, also, that in the private housing field the 1949 total was below 1948.

Construction in industrial and commercial buildings has definitely slackened, and as a result there is labor and materials available to put additional time and effort in on the home construction part of the industry.

Mr. MITCHELL. Mr. Chairman.

The CHAIRMAN. Mr. Mitchell.

Mr. MITCHELL. Has the American Federation of Labor made any estimate as to the number of homes which will be constructed in 1950?

Mr. HENLE. Under this new program?

Mr. MITCHELL. Under the present program, assuming there are no legislative changes.

Mr. HENLE. We think that the production of housing units will fall below the 1949 level, and we recognize, of course, that a lot of the forecasting cannot be done with pin-point accuracy, and a lot, also, depends on the action the Congress takes on the various housing measures before it.

Mr. MITCHELL. Assuming that 608 is not continued, and certainly the FHA has indicated that it will not push that program even if Congress extended the authorization; how much will this reduce home construction? Do you know how many units were constructed in 1949 under the 608 program?

Mr. HENLE. I am sorry, I don't have those figures available, but I would certainly say that for 1950 it would certainly be that the number of units that would be constructed under the new 207 program instead of the old 608 program would fall substantially below the number constructed under the 608 program.

The CHAIRMAN. What is the membership of your organization engaged in the building industry?

Mr. HENLE. Approximately two million.

The CHAIRMAN. What is the total membership of your organization?

Mr. HENLE. Approximately eight million.

The CHAIRMAN. That will mean probably 30 million people dependent on members of the American Federation of Labor for their daily bread; isn't that true?

Mr. HENLE. I think that would be a very good estimate. The only other question that I wanted to make a couple of comments on was a question that Congressman Kilburn raised regarding the 50-year mortgage.

He pointed out that it might seem perhaps a little unwise and impractical for a young couple settling in a new house to accept a 50year mortgage, assuming that the couple was 30 years old at the time that they purchased the home. That would mean that the home would not be mortgage-free until the couple was 80 years old.

There are a couple of things that I think need to be brought out in this connection: First of all, it must be realized that the length of the period for amortization is a very important factor in determining the total cost or rent of any particular dwelling unit. It is one of the chief ways whereby the cost of the unit can be reduced to a couple or a family buying a new house or renting a new apartment.

For that reason, we vigorously favor the 50-year terms which are now in the bill. We favor it as a method for reducing the cost of the apartment.

In this connection, however, I want to point out this: There is no reason why individuals and families should not be able to accelerate their payments under this particular bill. I am sure a program whereby that can be done can be effectively worked out. Then, in addition, let me point this out: A family moving into a new home or a new unit feels that that home is theirs and acts as though it is their own personal property, even though there is a mortgage on it.

I think I can say from personal experience that young families moving into a house do not feel that the house belongs to someone else simply because there is a mortgage on it. They obtain the benefits of home ownership, even if they have to make monthly payments on their mortgage.

It is far better to obtain those benefits of home ownership under an extended amortization period of 50 years than not to obtain the benefits at all. In other words, without the 50-year mortgage, the costs rise substantially and the couple would not be able to afford the new home at all.

Mr. KILBURN. In that connection, according to that argument, why not make it a hundred years?

Mr. HENLE. In several European countries, amortization periods do run as long as 100 years.

Mr. MULTER. And without loss of any of the money invested?
Mr. HENLE. That is correct.

Mr. KILBURN. Do you favor 100 years?

Mr. HENLE. We consider our proposal a little more practical and we think that 50 years is a practical, effective program without heading for something that the people would throw up their hands at.

One other statement that I think you made, Congressman, that I would like to comment on. You mentioned that we built homes faster last year than any other country.

Mr. KILBURN. The last few years.

Mr. HENLE. I do not believe that is true. I have seen certain figures, although I don't have them before me, that indicate that in 1949 a number of countries, based on population, built more homes than the United States. I am fairly certain that both New Zealand and Sweden were included in that group.

Mr. O'BRIEN. During these hearings, sometimes occupants are referred to as renters and sometimes witnesses refer to them as purchasers. Does that depend on the cooperative itself whether its mem

bers, occupants of these units, rent or purchase a contract, or how does that work out?

Mr. HENLE. I think perhaps a certain confusion over language has developed in the discussion of the bill. As we see the program, under the cooperative-housing feature, everyone would become an owner; they own their own unit. It may be that their unit is an apartment unit, a type of unit which was normally rented on the private market rather than sold and so, therefore, there may be some carryover of that language, if you see what I mean, but actually as we visualize the program, there will be both apartment-type units and single free-standing homes built.

Mr. O'BRIEN. Under this bill, can cooperatives be organized and construct their buildings and then rent the apartments strictly on a rental basis to members of the cooperative?

Mr. HENLE. I do not believe that that could be done.

Mr. O'BRIEN. The occupants of the unit then have to be members of the cooperative; is that it?

Mr. HENLE. Yes. Normally, I believe there would be rules and regulations of the cooperative governing that particular point.

Mr. O'BRIEN. And each occupant then would be buying his unit on an installment basis?

Mr. HENLE. That is correct; yes.

Mr. O'BRIEN. There is no provision for a purely rental relationship? Mr. HENLE. I think that would depend on the administration. I don't know whether the bill itself would prohibit it.

Mr. O'BRIEN. Couldn't a cooperative be organized under this bill that would rent units?

Mr. HENLE. That certainly isn't the type of program that we have in mind. It may very well be that under the nonprofit

Mr. O'BRIEN. What is the type that you have in mind? Under the type that you have in mind, what is the status of the occupant of the apartment? Is the purchaser building up an equity which he will ultimately own, or is he a renter?

Mr. HENLE. He is a purchaser building up his equity. Then is this arrangement for nonprofit corporations to construct units, and it may be that under that provision such units will be built for rent, but that is not the primary type of emphasis that we feel would be coming out of this bill.

Mr. MULTER. This bill doesn't provide for rentals. It is for multiple and single or free-standing homes?

Mr. HENLE. That is right.

Mr. MULTER. We have heard a great deal in the last few years that the way to overcome inflation was to increase production without increasing costs. Now, the argument is being raised against this bill that this is going to increase production and, therefore, increase inflation.

Do

you care to make any comment about that?

Mr. HENLE. I am very glad that you brought that up. In our view, this bill is anti-inflationary and very clearly so. For the first time it seems to us that the country is offered a program whereby the speculative elements in the real-estate industry, those elements which have been helping to boost costs and boost prices, can be taken out of at least a certain part of the construction industry.