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had as compared to the very few cooperatives that you have had that the comparison, if anything, would be in favor of the individual over the cooperative, although I must stipulate that your experiences with cooperatives have been very limited?

Mr. FOLEY. No; I do not think we have had an experience on which we could even answer your question; certainly not answer it as you have phrased it to me, but still that is not a question-the basic question involved in length of amortization period is not one of the credit worthiness of the individual, but the fact that the period you are proposing is beyond the expected earning life of almost all individuals. Mr. MCKINNON. That applies to cooperatives, too? Mr. FOLEY. No; but there you have a corporation.

Mr. MCKINNON. And the only reason you have that cooperative is for the benefit of the individual who never lives to see his paymentI will not say "who never lives" but "who will not likely live" to see his investment paid off in the cooperative and he will simply pass along an obligation to the other member coming along.

Mr. FOLEY. That is right, which you control through the separate corporate set-up and which you do not control when you are dealing with individuals without corporate set-up.

Mr. MCKINNON. Do you not think that on the matter of reducing the cost of the building, that primarily the main source of reduction comes from the matter of specification and from the matter of control of building requirements and materials and the way the thing is put together by the builder rather than through interest rates alone? Mr. FOLEY. Interest rate is only one factor in cost, of course. There is labor, materials, cost and management, and land; those are the other major factors. Actually the building contractor as we know him, the residential builder, just a general contractor, controls only a very small part of the cost of the house. He has to get his materials, his labor, usually his land, and he goes through channels that are pretty complicated and very well established. There are many trades, professions and skills, the cost of which he does not control. He can exert a certain degree of control through efficiency in the use he makes of those factors and a certain degree of control in the efficiency of his supervision, a certain degree of control in the amount of his own profit, but it boils down, finally, to a relatively small control over the total cost of a building under our present general system.

Mr. MCKINNON. Would it be fair to say that if we are really interested in getting the cost of building down for the average middleincome family, that there are certain places where we can introduce new materials and there are certain places where we can, shall I say, rationalize on the specifications that are now in effect by FHA without endangering the usefulness of the property. In other words, we have the uniform building code or other building codes in effect throughout the country that are considered good building codes. Many houses are put up under them that are not financed by FHA, that last many, many years and will out-last the length of the mortgage. Some of our FHA requirements on some of these houses we are trying to get down on costs are unnecessarily high. These FHA requirements are often so stiff that we are forcing the middle-income family to buy a Cadillac-type home whereas what he wants to buy and can really afford to buy is a Chevrolet-type home. The Chevrolet-type

home will fit under the uniform building code, but we force him to buy a much more expensive home due to certain gadgets that FHA feels is necessary to put in today.

Mr. FOLEY. Congressman, may I touch on that in two or three different steps?

First, what you have said originally is a reminder, really or at least serves as such, to the Administrator of an obligation placed on him by the Congress last year in connection with the research program. It is a very important and significant provision.

Mr. MCKINNON. I hope one of these days we will get a report on that, too.

Mr. FOLEY. Of course, it is a little bit early for me to report on the expenditure of moneys made available only at the latter part of last October, but we are under way. It is a very broad mandate and a command. I was interested in reading the other day how many times in that title Congress says, "The Agency shall do certain things, but getting to your other subject, it is a little bit refreshing to me, Congressman, to have you suggest here that the FHA is requiring people in the middle-income bracket to buy houses more expensive, finer, and better than they really need to have, in view of the fact that criticism lately has been in the other direction, that we have been allowing builders to provide them too little in their house. It is, of course, a nice balancing of the problem of what you are going to do as against high costs and getting some kind of decent shelter. Actually, the minimum standards of the FHA, which are those that they insist upon being applied generally, are low, generally speaking.

I think I am justified in saying this, Mr. Richards—we have frequently said it ourselves-if a builder brought to the FHA a house in a location which complied in every respect only with the minimum standards, the FHA would probably reject it. You have to have combinations of standards to meet certain situations. It is true that, generally speaking, the building industry tends to build higher than the standards where a market will support it, but, generally speaking, I would say that the FHA standards are not too high.

Really the difficulties we confront are those that I think are going to be met best through research on codes, particularly, local codes, the restrictive practices of all sorts that find themselves imbedded in those codes for good and sufficient reasons originally but probably outgrown now; new materials, new techniques, the possibilities of adaptation of prefabrication; a whole host of things.

Mr. MCKINNON. I do not want to be impertinent and certainly I do not want to argue with an expert.

Mr. FOLEY. If you do, you will have to argue with someone else. Mr. MCKINNON. In that regard, I do not think the city of Long Beach, Calif., codes are low at all. There is an earthquake situation there that forces them to write a very tight code and yet we were able to put up buildings at Long Beach on the rental market between $40 and $50 a month, providing a nice-size unit to a family and still return the investor about 6 percent on his money. I know in my own community of San Diego, we have builders who find if they do not bring in plans beyond FHA, they will not get approval. Your prophecy is correct, if they brought in the minimum home it would not be approved.

Mr. FOLEY. It was a combination of all the minima, that is what I meant. It is rather difficult for me to discuss that and I am sure it is for Mr. Richards, but we would both be happy if you would give us specific cases in which you feel our standards are too high for your area and certainly we would be glad to examine them because what we want is to get good, sound housing at the rental range as we see it and put some housing in proper family size. It may be that there are situations and we would be glad to know specific cases.

Mr. MCKINNON. There are many things I have in mind that I have gone over with the contractors. I cannot understand compelling specifications requiring a garage in San Diego when in Washington it is not required. Those things all add to a man's cost of a home and makes it difficult for him to pay for it.

Mr. FOLEY. Every time I tried to park my car where I once lived I wished the FHA had insisted on a garage-but it was not an FHA case, I am afraid.

Mr. MCKINNON. You can afford to pay for a garage.

Mr. FOLEY. We would be glad to have specifics of that kind because I am afraid I could not discuss them very helpfully with you.

Mr. TALLE. Mr. Foley, it is true, is it not, that under existing law you have authority to write certain rules and regulations pertaining to administration of law in the housing field?

Mr. FOLEY. Oh, you mean the authorities given in specific acts to write regulations for them; yes.

(Chairman Spence was called from the committee room and Mr. Buchanan took the chair.)

Mr. TALLE. My question is, Have any of the people in the field, let us say, like managers and other officials of local public-housing authorities, ever objected to any of the rules and regulations you have written?

Mr. FOLEY. You are speaking across the whole range of the agency. I would say that there probably have been times, sir, when local directors, district or State directors or otherwise have expressed opinions that our rules and regulations were mistaken in one direction or another. I would feel that we perhaps did not have as active and as interested an organization as we should have if that were not the case. However, rules and regulations having been established, I know of no cases in which the field organization has refused to carry them out.

Mr. TALLE. As a second step, have any of these people in the field written to say that too much of their time is taken up by difficulties involved in the rules and regulations?

Mr. FOLEY. I do not at this point recall an instance, but I would not be surprised if that had been true on occasion in the past. I think I may have done so, myself, when I was a State director of the FHA. Mr. BUCHANAN (acting chairman). Any questions, Mr. Mitchell? Mr. MITCHELL. No.

Mr. BUCHANAN. Thank you very much. The committee will now adjourn to meet tomorrow at 10 a. m.

(Whereupon, at 12: 40 p. m., the committee was adjourned until 10 a. m., Wednesday, February 1, 1950.)





Washington, D. C.

The committee met, pursuant to adjournment, at 10 a. m., Hon. Brent Spence (chairman) presiding.

Present: Messrs. Spence, Patman, Hays, Rains, Buchanan, Multer, Deane, O'Brien, McKinnon, Addonizio, Dollinger, Mitchell, O'Hara, Gamble, Kunkel, Talle, McMillen, Kilburn, Cole, Hull, and Nicholson, and Mrs. Woodhouse.

The CHAIRMAN. The committee will be in order.

We will hear from Mr. Kennedy, representing the American Legion.

Mr. KENNEDY. Mr. Chairman, Mrs. Woodhouse, gentlemen of the committee, I am director, national legislative commission, The American Legion.

I, myself, do not intend to offer any evidence, but I would like to present Mr. Dinger to testify before the committee.

The CHAIRMAN. Thank you very much. You may be seated, gentlemen.

Mr. Dinger.

STATEMENT OF ROBERT S. DINGER, ASSISTANT TO THE DIRECTOR, NATIONAL ECONOMIC COMMISSION, THE AMERICAN LEGION Mr. DINGER. Mr. Chairman and members of the committee, the American Legion appreciates this opportunity to express its views with respect to H. R. 6618, a bill to assist cooperatives and other nonprofit corporations in the production of housing for families of moderate income. This bill is a substitute for title III, H. R. 5631, which was favorably reported by this committee last year.

Members of this committee will recall that when hearings were being held last year on the middle-income housing bill the American Legion representatives testified that our organization was without specific mandate to speak either for or against the cooperative title. I would like to make it clear at this point that by action of our Thirtyfirst Annual National Convention, held in Philadelphia, Pa., August 29 through September 1, 1949, the national legislative commission has been directed to exert every possible effort to secure the speedy enactment of the middle-income housing bill as favorably reported by the Senate Banking and Currency Committee.

In view of this mandate we have made a very careful study of H. R. 6618 and it is our considered opinion that the benefits contained in the

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original title III are substantially implemented by providing a system whereby private capital can be utilized, thus eliminating the objections to direct Government loans. We believe that the encouragement of private capital to invest in this program along with the requirement that each borrowing cooperative subscribe to stock in the corporation will create a greater recognition of the cooperative principle designed to meet the housing needs of middle-income families which cannot be met by private capital alone.

The economic difficulties experienced by veterans upon their return to civilian status, following military service in World War II, and their resulting inability to acquire housing at prices they could afford to pay, has been a matter of serious concern to the American Legion for several years. Today, 42 years after the end of World War II, we find that the middle-income veteran is still priced out of the housing market. The failure of private industry to meet this need has encouraged the recognition of the cooperative principle, but this thinking is not new in the American Legion. Many of the more than 17,000 Legion posts throughout the country have formed housing cooperatives on a nonprofit basis with some success, demonstrating that considerable savings can be realized.

The Legion's experience in these instances gave such encouragement to the possibility of bringing monthly housing costs down, that during the Eightieth Congress we gave our major legislative effort to a veterans' cooperative housing bill, which was known as the Veterans' Homestead Act of 1948. This bill was favorably reported by the House Committee on Veterans' Affairs, but suffered the fate of other housing legislation in the House Rules Committee.

Congressman Wright Patman, who is a member of this committee, was very helpful to the American Legion and to the members of the Veterans' Affairs Committee in obtaining a favorable report on this cooperative housing bill and last year he introduced H. R. 2811, which was a slightly revised Homestead Act.

It was the feeling of our organization at that time, and is now, that considerable savings in monthly costs could be obtained in the construction of rental housing under the cooperative principle if financial assistance, not available through private sources, could be made available by the Federal Government.

The American Legion has consistently urged the formulation of a complete and well-balanced Government housing program, and has testified extensively before this committee on that subject. Many of the specific proposals which have been advanced by the American Legion have already been enacted into law. The unenacted portion of our program, designed to meet the needs of the middle-income third, is embodied in the legislation now being considered by this committee.

We believe that this bill, generally, is a considerable improvement over the former title III and take pleasure in joining with the other veteran organizations and public-interest groups in support thereof. We feel strongly, however, that the committee should give very careful consideration to the reasons presented for providing that the program be administered by a division director in the office of the Administrator, rather than by a constituent agency as proposed in the original title III. We do not believe that any substantial reasons have been

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