The cooperative provision, the nonprofit feature, of this bill will mean, if it is adopted, that there will be pressure on all parts of the industry to reduce costs and to give the consumer a better value for his housing dollar, and I think, therefore, it is clearly anti-inflationary.

Mr. MULTER. It is the considered opinion of the responsible authorities in your organization that this will not create any undue competition, either in the labor or material field, so as to boost costs.

Mr. HENLE. We think that there is plenty of room in the building construction industry, both on the labor and material side to go ahead with this program.

Mr. MULTER. And even if under this cooperative building, contemplated by this bill, there should be no decrease in the actual cost, taking a comparative unit of the same kind. one in private industry and one in cooperative building, at a cost of $7,000, $8,000, and $9,000, as the case may be, you can still have a lower monthly gross maintenance charge because of your 3-percent rate and your 50-year amortization in the cooperative building as against the other building; isn't that so? Mr. HENLE. That is quite true.

Mr. MULTER. Then, if because of your cooperative building, you can cut your cost under that $7,000, $8,000, or $9,000 per unit, there will be a still further saving?

Mr. HENLE. That is right. Then in addition, a very important feature of the program will be the type of self-help and tenant maintenance under the cooperative project that will save additional dollars to the owner.

Mr. MULTER. Thank you.

The CHAIRMAN. Are there any further questions?

(No response.)

The CHAIRMAN. If there are no further questions, you may stand aside.

Mr. HENLE. Thank you.

The CHAIRMAN. We will call on the Right Reverend Monsignor John O'Grady.

Mr. O'HARA. Mr. Chairman, I have a letter from the Chicago Mortgage Bankers Association, which was sent to me as the only Chicago member of the committee. I request that it be put in the record, to afford the members of the committee an opportunity to consider the suggestions made.

The CHAIRMAN. Without objection, it may be put in the record. (The letter referred to is as follows:)

Representative BARRATT O'HARA,

CHICAGO MORTGAGE BANKERS ASSOCIATION,
Chicago, Ill., January 30, 1950.

Banking and Currency Committee,

House Office Building, Washington, D. C.

DEAR REPRESENTATIVE O'HARA: We are advised that the new housing act will not provide for an extension of FHA section 608 which expires on March 1, 1950, but that a revised section 207 act will be passed to aid in securing the building of rental housing in those sections of the country where rental housing is still needed. Chicago is one of those areas still in need of rental housing but the present section 207 would have to be drastically changed if we are to continue any apartment buildings here.

Under section 608, where there are high building costs, most recent building has been multistory and has contained small units, while our greatest need is three-story, walk-up buildings, containing two- and three-bedroom apartments. A recent multistory building built under 608 with a loan of $933,000 would have had a loan of only $617,000 had it been built under the present 207 act.

In order to encourage apartment building, especially of the three-story, walk-up type needed in this area, we suggest the following changes in section 207:

1. A continuation of the limit of loan of $8,100 per unit in multistory buildings where the average apartment size is not under three and one-half rooms, with a limit of $10,000 in three-story, walk-up buildings where the average apartment is not less than four and one-half rooms.

2. The upper list of principal, interest, and FHA mutual mortgage insurance payments should be set at 91 percent of the cash available for debt service. At the present time, section 207 requires that 85 percent of the effective gross income be used in arriving at the net income of a property.

3. The net income permitted before depreciation should be 72 percent of the replacement cost instead of 62 percent as at present provided. A 61⁄2 percent is satisfactory in low-cost areas but not in high-cost areas.

4. The present 207 loan provides for 40-year amortization at 4 percent interest, 22 percent amortization. In some respects, this type of amortization is better because the interest reduces and payments are, therefore, less as the building becomes older. However, we suggest 2 percent amortization so that the total mortgage requirement would only be 62 percent.

5. We suggest that a loan be based on a minimum of 85 percent and a maximum of 90 percent of current costs instead of December 1947 costs.

We believe that section 207 revised along these lines will be of immediate benefit to the building industry and to the public at large in providing needed housing for them.

Very truly yours,

HARRY H. SALK, President.

The CHAIRMAN. We will next hear from Rt. Rev. Msgr. John O'Grady.

STATEMENT OF RT. REV. MSGR. JOHN O'GRADY, SECRETARY, NATIONAL CONFERENCE OF CATHOLIC CHARITIES

Monsignor O'GRADY. Before presenting my own statement, I would like to present a statement on behalf of Monsignor Ligutti, director of the National Catholic Life Conference, endorsing in broad outline the principles of this bill, and I would like to submit that as a part of my testimony.

I am greatly interested in this bill and I have been interested in many of the things that have been said around here about it. I have been interested in it as a means of providing for the middle-income groups. I have supported this low-cost public housing with the idea that it would be confined to very low-income families, the low wage earners and that it would not get into this middle-income group, because I didn't want to see the element of subsidy entering into the support of the middle-income groups in our country, because I do not see how the economy can subsidize middle-income groups.

Now, I have been greatly confused in recent months about this whole question of what FHA is doing under 608 and 203. I have seen the large clearings in many cities in the United States-Los Angeles, Detroit, Chicago, Milwaukee, and many other cities. I have noticed, for instance, and one of the things that has impressed me about the shortage of housing for the middle-income groups was what I saw recently in the city of Los Angeles.

They have been clearing about 12,000 people out of the Bunker Hill area in Los Angeles and I was amazed to find that very, very few of them qualified to be admitted to the public low-cost homes.

Part of that clearance is due to the new speedways, and we have the same situation in many other cities. I have been interested in these new improvements, for instance, in the city of Chicago, and

in the new speedways and in the new highways that are being built, high-speed highways that are being built through our cities, and it is clearing out large numbers of families and we find that a surprisingly small number of them qualify for admission on these low-cost houses, public low-cost houses.

Another thing I find is this: As I move around, for instance, in these areas, and I visited many of the projects being built under 203 and under 608, and I do find a considerable number of units valued at possibly $7,700 or $7,800, but they are all two-bedroom units and they are very small rooms at that, and I don't think they are designed for family living, but practically, when I come to look over the threebedroom units, I find they usually range about $10,000 as a minimum.

That is what I have actually seen on the spot. The more I have seen of these locally in the various cities, including Mr. Lockwood's home city of Detroit, I have visited a great many units, I have traveled around with the FHA people in the city of Detroit, and I have seen many of the units that have been built under 203 for home ownership, that is, with a mortgage life of 32 years.

The more I have seen of them, and the more I have studied FHA figures about building costs and production of housing for middleincome groups, the more I have come to the conclusion that we do not have any over-all figures on this thing that give us a real picture of the situation.

I agree with Mr. Foley's statement that probably the best thing you can claim for FHA is that it is providing, supplying a part of the middle-income need, but as to its supplying the entire need, from my contacts in the various cities, I haven't been able to see how it is supplying the middle-income need, because I see these families that are being moved out, that are being cleared out of their homes by the improvements in our cities, and there is no place to go.

I am sorry to say that not many plans are being made for them because the highway departments that are so frequently concerned about these freeways that we are developing in our cities, they just hand them a few dollars, maybe $100, and say "You go and find a house," and for a large family it is still impossible in the cities that I have visited recently to find any housing accommodations.

It is impossible for even families with children. I do not see in the housing units that I have built, those with the very low income, that they consider very low-cost houses, the lowest I have seen is about $7,700. Now, I do not see how you could house a family, even of three children, father and mother and three children, in a house of that kind. It is not made for family living.

I think there are some other things that we need to study. We need to get that picture, and it is very curious to me that FHA has never made real studies of its own program. I can't find any available figures that gives me an honest-to-goodness picture of the FHA program, what it is doing for this middle-income group, its relationship to the market at this time.

It is clear now that we have had a drop not only in building materials, not only in building, but in building materials, and yet, for instance, take that vast industry, if we call it an industry, that is being supported by the mortgage market by guaranteed mortgages. After

all, here you have a guaranteed mortgage market under 203 and 608. What is 608 reaching? Very high-income families.

Now, with 203 there is an an effort undoubtedly made to reach some of the lower-income groups, but I am not satisfied, and I don't think anybody who has done any observing in the local level could be satisfied that we are reaching the middle-income groups.

I think we ought to make a study also of what the relationship of FHA means to our economy as a whole, that is the extent to which the support of all of these mortgages, the extent of it, what it means as a contingent liability on the part of the Federal Government.

I think that is all-important today, and yet most of what we can say about it is purely speculative. Even what the Federal Reserve Board would say about it, what anybody says about it, is largely speculative because we do not have a real picture.

I hate to cite these over-all national figures, national averages, because they average up so many things that don't average. They average up the little town and the big city, and I don't think you can get an honest-to-goodness picture. I would like to see Mr. Foley invest some of this money that he has secured for research under the Housing Act of 1949 in making a thorough-going study, so we do not have all of this histeria such as we get right now in the city of Detroit, for instance, about the FHA covering the entire middle-income group.

The fact of the matter is that no real study has been made even in the city of Detroit, except what we get from casual observation. That is about all in its relationship to the housing need in the city of Detroit and even of the middle-income group, for instance, what is happening with the vast improvements that are taking place in the city. of Detroit, what is being done with these families? We do not have up-to-date information on them except what we pick up locally, what those of us who are interested can pick up through their own observations.

It is a very strange thing that we haven't been able to make that study nor have we been able to make a study of the relationship of these supported mortgage markets to our economy. Is it inflationary? Is it deflationary? I don't know. Who knows? We haven't studied it and I think it is all-important that it should be studied. I have raised many questions in this past winter when we were dealing with the falling market, and a considerable amount of unemployment in various cities, about the relationship of housing to the employment of labor, how far it is possible to stimulate the housing, to use housing as a means of stimulating employment in areas, for instance, I know quite well, in the New England areas, for intance, and in many areas in the United States.

I had hoped, for instance, that the Housing Act of 1949, that public housing might be made a means of picking up the slack in the labor market, but apparently not much has been done about that. We have not given as much thought to it as we should.

Maybe, again, Mr. Foley could use some of his efforts in the research field in studying the relationship of housing to unemployment.

Of course, I don't want to underestimate the contribution that has been made by private effort in this field, but I think we need to have more searching inquiries into the situation as to what is being done by private effort. Of course, I have the same point of view in regard

to public housing. I think we have to keep on studying that, too, and keep on facing the facts as to what is being done, and what we are going to produce, how many houses we are going to build this year. I think we ought to keep on studying and doing more research in this field as a whole.

I approach this cooperative housing in a somewhat different way. I am interested in cooperatives as a way of life. I am interested in getting people to do things for themselves. I am interested in a lot of the things I have seen, for instance, in the city of Los Angeles. The Mexican people in the past year or so have organized themselves and even elected a member of the city council, you know, which shows that they are going up and able to take care of themselves, and I noticed what they have done in clearing up their own homes in the repair program in their own district in Los Angeles, in Boyd Heights District in Los Angeles.

Therefore, I am interested in stimulating all sorts of neighborhood self-help. I think that is a part of the democratic way of life. I don't like to see Government, by direct effort, enter into too many areas of American life. I would like to see more and more of the spirit of self-help. I have always pointed out that that is one of the things, possibly, that Government could do; instead of taking over areas directly, it might do a good deal to stimulate voluntary effort in those fields. Maybe that is, as one prominent Senator, Senator Flanders of Vermont, has been pointing out, maybe that is going to be the Ameri

can way.

I hope that we are going to get more of that. For a long time I have been advocating that in the welfare field, that we ought to have more use of voluntary effort in that field, more stimulating of voluntary effort and that is frankly the point of view from which I face the analysis of this new proposed cooperative housing program.

I feel from my observations in the field and from my own personal observation of a project that my own group is developing near the city of Bloomington, Ill., and we are in the process of developing another project not far off, and I hope that our rural-life groups, which are very active on the countryside, may be able to develop. I have no doubt that with a little stimulus, with a little technical guidance, that they could do a lot more.

That project of ours near Bloomington has been drifting around and they have been trying to find various commercial firms to aid them in the technical approach to this matter. Of course, it is a new field for them, but we have been hoping that this kind of cooperative housing program might provide technical guidance for groups of that type, and we have, I think, a number of others throughout the United States now that need that same type of technical guidance, but there is nowhere that we can find it and we have been impressed, of course, at times, by what is being done in the rural-community front, because even your extension service, your country agents, your Farmers Home Administration has been giving that type of technical guidance to farmers in building their homes.

We have been hoping that that same kind of guidance might be available from Government in order to stimulate voluntary effort because, frankly, we regard this as genuine voluntary effort, and we hope, too, that it may be helpful in inducing people to save their own