general national prosperity. These areas lend themselves in unusual degree to vacation activities, summer, winter, or both. The most logical and effective assist to the economies of these areas would be through housing construction. The chairman knows this far better than any witness that will appear before him. If we are not to start making a beginning in bringing these areas into the mainstream when we are in a period of prosperity, when will we? Perhaps the committee would prefer to limit FHA insuring authority to redevelopment areas. Such a decision certainly would be understandable. The committee may disagree with respect to the downpayment requirement. If a 90 percent obligation is deemed too high, 85 or even 80 percent perhaps could be substituted. Your experience certainly would be a sounder guide to this than mine. Second, perhaps I could refer to remarks I made when I introduced this bill. I suggested then that if this provision became law the FHA should require as a condition of insuring that adequate provision be made for maintaining the natural setting and scenic values and for assuring adequate lot size and other subdivision and zoning standards. I also noted the fact-and for this all of us are grateful to Senator Muskie that we now have in the basic housing law a requirement with respect to pollution control. This, of course, would apply to this section if it is added. Last, it will undoubtedly be said that our first obligation is to provide housing for the needy. Certainly we are in agreement with this. But until such time as this is indeed the exclusive direction of our enormous housing program, I believe it is not out of line to request loan insurance to aid the economies of our needy areas. This proposal has met very broad approval and support not only in Michigan, where the possibilities are quickly appreciated because of the undeveloped rural but attractive areas we have, but from people in many other parts of the country and from national organizations such as the Home Manufacturers Association, the National Homes Corporation, the Mortgage Bankers Association of America, the American Plywood Association, the National Association of Home Builders, and the National Forest Products Association. The Bureau of the Budget evidently takes the position that a program of this character is not warranted now. Perhaps a more limited proposal, confined to the depressed areas, would meet a more favorable response over there. My understanding is that at least at FHA, and perhaps at the Department of Housing and Urban Development, there had earlier been agreement as to its desirability and that it had been incorporated in the administration draft bill. In any event, Mr. Chairman, I realize that ours is the ultimate responsibility for decision. I know that your committee will give it your thoughtful attention, and, even if on a limited basis, I do hope this additional tool can be added in order that areas where manpower is available, where opportunity is rich, but where the economy is lagging, can be aided. Mr. Chairman, thank you for the opportunity to present this to you. Again I am very grateful. Senator SPARKMAN. Thank you, Senator Hart. Senator HART. Thank you very much. Senator SPARKMAN. Thank you very much. I was just looking at the report of the Budget Bureau. You have received that? Senator HART. You are looking at the wrong material, Mr. Chair man. Senator SPARKMAN. Well, I can assure you that the subcommittee will give it careful consideration. We did, as you said, on a previous occasion and reported it favorably, I believe. Senator HART. Yes, sir. Senator SPARKMAN. No; it was not in the bill, but the committee considered it. Senator HART. Your subcommitte did regard it favorably. Senator SPARKMAN. It was the full committee that took it out. Senator HART. Yes. Senator SPARKMAN. Well, we will certainly give it consideration. We appreciate your fine presentation. Senator HART. Thank you. Senator SPARKMAN. The next witness is Mr. Larry Blackmon, president of the National Association of Home Builders. Mr. Blackmon, we are glad to have you with us again. You have been before us on many occasions. We are glad to have you. We have the printed copy of your presentation. You have some exhibits. You want those exhibits in the record too? STATEMENT OF LARRY BLACKMON, PRESIDENT, NATIONAL ASSOCIATION OF HOME BUILDERS; ACCOMPANIED BY LEON N. WEINER, FIRST VICE PRESIDENT; NATHANIEL H. ROGG, EXECUTIVE VICE PRESIDENT; HERBERT S. COLTON, GENERAL COUNSEL; AND JOHN A. STASTNY, MEMBER, EXECUTIVE COMMITTEE Mr. BLACKMON. I am going to cover some of the main points and ask that the exhibits and my whole text be filed for the record. Senator SPARKMAN. Very well. Without objection, the whole thing will be printed in the record. You proceed as you see fit. Mr. BLACKMON. Thank you. Senator SPARKMAN. For the benefit of the record you might present your colleagues. Mr. BLACKMON. Yes, sir; I will. As you said before, I have been before your committee many times, and I am grateful to have the opportunity to appear today. It is the first time that I appear as president of the National Association of Home Builders. For the record, I am Larry Blackmon from Forth Worth, Tex. I have with me Mr. John Stastny from Chicago, a member of our executive committee, and I hope a little later Mr. Leon N. Weiner, our first vice president and legislative chairman, will join us. I also have Dr. Nat Rogg, our executive vice president, and Mr. Herbert S. Colton, our chief counsel. As you know, the National Association of Home Builders represents over 45,000 members and some 390 local and State associations, associations in every State of the Union and Puerto Rico and the Virgin Islands. In general we support S. 2842-the Demonstration Cities Act-and S. 2977-the Urban Development Act of 1966-with some suggestions for amendment, but with the notable exception that-as last year on almost identical legislation and for the same reasons-we oppose the so-called new towns and State land agencies provisions contained in title II of S. 2977. As I said earlier, we are going to summarize several of the bills before the subcommittee and ask that this information that is attached to my testimony be filed for the record. Senator SPARKMAN. That will be done. Before we discuss these bills in detail, we call the committee's attention to other important problems which we believe should have your attention and that of all governmental officials and industry representatives charged with the responsibilities in these areas of homebuilding and urban development. They should receive serious consideration. I refer, of course, to the tightness and increasing cost of money, rapidly rising prices and wages and interest, and the scarcity of certain commodities in the construction industry. About 6 weeks ago, before the House subcommittee on companion bills to those before you, I referred to the increasingly difficult conditions facing the homebuilding industry and warned that "without its fair share of available credit to the homebuilding industry cannot rebuild American cities, cannot adequately provide for proper community growth, and, most important of all, it cannot continue to provide good homes for American families at reasonable prices." In the last several weeks, these conditions have further deteriorated. Then difficult; they are now intolerable. I now must warn that unless corrected-and corrected soon-monetary pressures now being exerted on our industry could cripple our capacity to produce the kind and volume of homes American families require. The net result will be not only a drastic drop in homebuilding, but, even more unfortunately, higher monthly costs to the home buyer for such housing as we do manage to produce. Once the industry is permitted to fall into the kind of condition it is now approaching, recovery will not be quick or easy. I attach, and ask that the record include, a copy of our association's weekly publication dated Friday, April 8, 1966. (Exhibit I, NAHB "Scope" rated Friday, Apr. 8, 1966.) Senator SPARKMAN. All of your exhibits will be included. The entire issue that I ask be included is devoted to a full statement concerning these problems and our efforts to obtain help in solving them. Since that issue appeared, the FHA and VA maximum interest rate has been raised to 534 percent, as you know. It is too early to tell if this will provide any substantial relief, although the extra onefourth of a point, of course, strengthens the attractiveness of FHA mortgages and VA loans. They are now in an even more competitive area where competition for savings is continuing to go on and on. The homebuilding industry depends on the savings institutions to finance our customers. Commercial banks are now being encouraged to pull savings out of mortgage-lending institutions by certificates of deposit at interest rates which long-term lenders cannot possibly match. It is difficult to see how this can fail to result in permanent serious consequences to the homebuilding industry and to the homebuying public. As a result of our industry's problems in the recurrent "tight money" crises of the 1950's, we concluded that housing should be given a voice in the councils of those who set national policies in allocating credit resources. We were among the first to advocate Cabinet status for housing to provide that voice. Nothing in these recent actions which have so seriously affected mortgage credit affords any basis for confidence that the bitter lessons of the first two postwar decades have been heeded or, for that matter, even thoroughly understood. Therefore, I would be less than frank if I did not tell you that, concerned as we are about the importance of the legislation now before you, we are also deeply concerned about the immediate problem. However justified their objectives, it will be several years before their full force is evident. Long before then-unless present monetary conditions are corrected-the present productive capacity of our industry will be so sharply curtailed as to create a new series of problems. This is something that disturbs us a great deal. We are here today talking about new legislation, and we are faced with problems now of administering and having money available for legislation that you have so ably already provided for the country, and we need to look at the picture as well as some of the new legislation. DEMONSTRATION CITIES ACT, S. 2842 NAHB supports this bill because it seems to us entirely logical to try to rehabilitate people as well as structures. Certainly it is simple commonsense to demonstrate that focusing a vast variety of available Federal aids upon a blighted area in a coordinated fashion, rather than scattering them in a shotgun approach, will accomplish more for the slum areas and for the people who live in them if this proposal is enacted into legislation and properly administered. There is some reason to contend that success in this aspect of the program may very well substantially reduce the necessity for large public housing and urban renewal programs. If a higher level of education and consequent higher earning power and employment and other opportunities can be provided by the Federal programs coordinated under the bill, then the ability to obtain better living quarters and an increased pride in maintaining them in good condition should be increased. With respect to the criteria established in the act for the type of housing program required to qualify for assistance under the bill, we particularly applaud those provisions which would give priority to good design; the maintenance of natural historical and cultural characteristics; use of new and improved technology and design; and use of cost reduction techniques (sec. 4(c) (2) and (3)). A substantial part of the budget and energies of our association for some years has been directed toward cost reduction and the improvement of tech 62-551 0-66-pt. 1-21 nology, design, and environment. We believe it highly desirable that all Federal housing efforts be required to work toward those ends. We note also that S. 2978, the Housing and Urban Development Amendments of 1966, in section 106, covers this same subject. The section-by-section summary of the bill states that this section "would establish a program to encourage and assist the housing industry to reduce the cost and improve the quality of housing through the application to home construction and rehabilitation of advances in technology." The program suggested by this section, realistically conceived and effectively pursued, should, we submit, save the Federal Government and the American public many times its cost-but only if cast in the mold of Federal assistance to nongovernmental bodies or agencies, and that a start on such program be made by setting aside for research one-half of 1 percent of any funds appropriated pursuant to S. 2842. We also recommend that (a) Section 4 (c) of S. 2842 be amended by adding a new paragraph (6) to specifically recognize the importance of local real estate taxing policies in obtaining low and moderate rentals. We suggest the following: (6) local real estate tax policies (including tax exemption or abatement encourage production and operation of housing for families of low and moderate income. Section 4(c) gives the Secretary broad discretionary power to select for the demonstration cities program those cities which are modernizing their local laws to encourage sound planning and development. In this connection real estate taxation has a powerful effect. Heavy taxes can discourage construction and prevent survival of low- and moderate-rental housing. The criteria which the Secretary is to consider under this section should, therefore, logically include the effect on rents of local tax policy. (b) The Congress should clarify section 7 of S. 2842 to make more effective the Office of Federal Coordinator established thereby. We believe an office of this kind is necessary if the manifold Federal programs available to localities are to be kept from complete confusion in action and lack of action. We see nothing in the bill which would give the Coordinator any duties or powers other than to advise local governments how most effectively to work with Federal grants-in-aid programs. We suggest that this be elaborated and clarified by comment in your committee report on the bill. In this connection, the title "Federal Coordinator" may be unfortunate. Perhaps the true function of this office could be better expressed by use of a name such as Demonstration Coordinator or Urban Program Coordinator, rather than Federal Coordinator. URBAN DEVELOPMENT BILL (S. 2977) As I indicated at the outset of my remarks, while we support titles I and III of this bill, we vigorously oppose title II. This title again brings before the Congress two proposals which it has already re |