7. Under sections 502 and 517 only the new farm home and the immediate lot (not exceeding 1 acre) should be encumbered in a mortgage to the Farmers Home Administration.

This would avoid the need to encumber the total acreage, thereby leaving security available for crop and other much-needed loans. B. Other general recommendations concerning the Federal Department of Housing and Urban Development

1. We are in full accord with the principle that all communities adopt workable programs and thereby energetically prevent the spread of blight; however, to require such a workable program in order for rent supplements and section 221 (d) (3) housing to be permitted in a community in effect denies thousands of low-income residents of California housing units they can afford because, through no fault of their own, their community does not have a workable program.

2. Projects covered by rent supplement payments should not be subject to approval by the local community as recently required by a rider in the proposed House appropriation measure, since this would permit local governing bodies to capriciously exclude a much-needed housing resource for their low-income families.

3. The extremely successful section 221(d) (3) program presently does not permit projects designed exclusively for the elderly. This program should be expanded in order to provide an additional effective tool toward housing our low-income elderly.

4. A program should be developed to provide a Federal supplement to low- and moderate-income home purchasers to help them make interest payments. Such supplement should be geared to the net income of the home purchaser with the supplement decreasing as net income increases. The interest rate allowable for mortgages involved in this program should be related to prevailing FHA and conventional rates, with the FHA Commissioner determining what the discounts on the loans would be and setting an appropriate interest rate.

We have one further amendment not included in our written testimony, Mr. Chairman, and that is that under the rent supplement program, in order for a tenant to be eligible, he must either be now living in a substandard housing unit or be a displacee, or be handicapped, or elderly.

We have noted that in analyzing housing conditions in the Watts area of Los Angeles, where the riots of last summer took place, very few of those occupants of those housing units would be eligible for the rent supplement program simply because their housing units would not meet the test of substandard housing.

They do, however, meet a test of overcrowded conditions, which is not an eligibility requirement under the law.

So we recommend that the eligibility requirements for rent supplement be extended to include overcrowded living conditions.

This concludes our testimony, and we would just like to add one thing, Mr. Chairman. That is, we have been very much concerned about an April 1, 1966, regulation change of FNMA which limits the maximum mortgage to $15,000 under their secondary market operations program.

At the urging of various segments of the building industry in California, and with the full support of our department, Governor Brown sent off a letter just last Friday to President Johnson asking for relief under this order and to either eliminate this change and restore the $30,000 limit or otherwise to consider a new limitation of a maximum of $20,000, to more clearly reflect conditions in California. Between high construction cost and high land cost, it is just about impossible to produce a house with a mortgage of under $15,000 in our State, whereas in other States of the Union this may be entirely possible.

I would like to introduce for the record the press release on this letter from the Governor to the President, if I may. It is just a twopage document.

Senator SPARKMAN. That will be received and made a part of the record.

(The press release referred to follows:)

PRESS RELEASE: Gov. EDMUND G. BROWN, APRIL 22, 1966

Gov. Edmund G. Brown asked President Johnson today for relief from a new Federal regulation which "will seriously depress the homebuilding industry in California."

The Governor cited action by the Federal National Mortgage Association in reducing the maximum amount of mortgage it will accept under secondary market operations from $30,000 to $15,000 per family unit.

Such a change will have "an unequal, unfair effect on California," Governor Brown wrote the President.

The change "will make it more difficult for Californians to purchase adequate housing and will increase unemployment in the building trades."

Following is the full text of a statement which Governor Brown sent to the President:

"On April 1, 1966, the Federal National Mortgage Association (FNMA) promulgated a change in their regulations reducing the maximum amount of mortgage they would accept for purchase under their secondary market operations from $30.000 to $15,000 per family unit.

"Since the Federal Reserve Board increased their rediscount rate this past December, FNMA has served as a major support to the FHA and VA mortgage market. It is to be noted that, during this period, FNMA has made several adjustments in the prices they pay for mortgages, reflecting changing money market conditions. Nonetheless, the support of that agency in the mortgage market has been a key to assuring an adequate flow of mortgage money to the residential construction industry. This most recent change referred to above, in reducing the maximum loan acceptable for purchase by FNMA, is having a devastating effect on homebuilding activities in our great State of California. "I have received numerous communications from leaders of the building industry, building trades unions, the California Real Estate Association and financing institutions seeking my help in bringing this grave problem to your attention. The building industry has been under severe hardships since last December because of a reduction of mortgage money available and sharp increases in the cost of borrowing from those limited sources with funds available to lend. The one saving grace throughout this tenuous situation during the past 4 months has been the stabilizing effect of mortgage purchases by FNMA. However, with this recent change in FNMA's purchasing policy, this effective support of the mortgage market in California has, for all intents and purposes been removed.

"This action particularly affects California because of higher land and construction costs than the average for the rest of the Nation. Recent estimates show that approximately 90 percent of new residential mortgages are in excess of $15,000 in California.

"We are already suffering high rates of unemployment in the building trades. Leaders of the building trades councils have informed me that they are now suffering unemployment rates of from 15 to 20 percent. and they estimate a further substantial increase as a result of the impact of this new FNMA regula

tion. We must also consider the further unemployment impact when considering that for each person directly employed in construction, there are normally an additional 21⁄2 persons employed as an indirect result of the industry. Leaders in the homebuilding industry have expressed their considered opinion that if this position is not changed, we can expect a further major decline in homebuilding during the next 12-month period.

"The impact of this cutback in residential construction in California will do irreparable harm to our economy over the next several months. Realtors have expressed grave concern over the inability to finance sales of existing housing as well as construction of new housing.

"It would appear that the homebuilding industry has been singled out to bear the brunt of anti-inflationary measures. I believe that these measures would have little impact in directing the homebuilding industry toward greater activities in lower cost housing, since the cost of land and the basic costs of construction mitigate against such a development.

"Therefore, I urge consideration for granting relief in this area of our concern by either requesting that FNMA rescind its action of April 1 or that it at least adjust the maximum amount of mortgage eligible for purchase in higher cost regions such as California to more nearly reflect regional variations in construction and land costs, as they are reflected in mortgage amounts. Recent estimates show that the average FHA/VA mortgage in California is approximately $20,000. I therefore suggest that the maximum mortgage eligible for sale to FNMA in California be established at at least $20,000 in order to reduce the effects of the FNMA changes in this State."

Mr. STALFORD. Along that line, one second further, sir. In speaking with FNMA, the reason behind this promulgation of this limitation, among other reasons, is the fact that FNMA is running out of borrowing authority. As of the present time FNMA's borrowing authority is limited to a balance of $700 million. If they did not place this limitation of $15,000 per unit, they would have been receiving offerings at the rate of $50 to $60 million per week.

Now, as a result of this $15,000 limitation per mortgage, they have been able to reduce the offerings down to $30 million per week over the last couple of weeks.

FNMA operates under a debt limit ratio of 10 times their outstanding stock.

Now, one way to overcome this problem is if Congress would direct the Treasury to increase its holdings of preferred stock in FNMA in order to increase this very much needed support in our mortgage market.

I am sure that you have had called to your attention the various effects of the raising of the rediscount rate and the increase in interest rate being paid by commercial banks on certificates of deposit which have been draining deposits away from our savings institutions who are basically involved in investing in mortgages.

However, the commercial banks are utilizing these new deposit inflows to finance other business needs, and not much of it is finding its way into the mortgage market.

We are faced with a very serious shortage of mortgage money in this country at this time.

Senator SPARK MAN. Well, thanks very much. That is a matter of interest to us. We shall certainly be glad to look into it.

Mr. STALFORD. Thank you very much for the opportunity of testifying today.

Senator SPARKMAN. I thank both of you gentlemen.
Mr. Webbon, will you come around, please?

Richard Webbon is from Virginia Beach, Va.

Senator SPARKMAN. I understand you are a housing coordinator. Is this correct?

STATEMENT OF RICHARD J. WEBBON, COORDINATOR OF URBAN AFFAIRS, CITY OF VIRGINIA BEACH, VA.

Mr. WEBBON. No; I am a coordinator of urban affairs.

Senator SPARKMAN. You have heard some of the testimony here raising questions about the Federal coordinator. Could you, out of your experience, give us any light on the subject?

Mr. WEBBON. I thank the Senator from Alabama for this opportunity to talk to him regarding this matter.

My name, of course, you have. I am the coordinator of Urban Affairs of the City of Virginia Beach. I was formerly the director of public works and the executive secretary of old Princess Anne County, which is now the major portion of the new city of Virginia Beach.

I am a bona fide, qualified city manager, a member of the International City Managers Association and a charter member of the National Association of County Administrators.

I have studied this problem very carefully while these discussions were going on, and perhaps it might clarify it a little bit if I explained what the purpose of my position is in relation to the city of Virginia Beach.

The city of Virginia Beach established the position of coordinator of urban affairs with the idea of having an individual go thoroughly into the laws which were passed by the Congress relating to distribution of Federal funds for the purposes of city improvement.

My work is at the direction of the city council through the city manager to inquire as to the availability of funds for community facilities, open space, and the various programs including urban renewal funds which have been sponsored by the Federal Government. The position itself, by its very name, indicates that it is to a certain extent without any power. It is simply a coordinator.

A coordinator is one who in my estimation takes the various factors and the various departments and pulls them together in order to give a better understanding to the persons or the individuals or the city desiring to utilize the funds or the programs which are available.

In working with the position in the last 3 or 4 months, the Housing and Urban Development Department has been most helpful. The various offices of the Senators and the Congressmen have been most helpful. However, there are two or three things which I would like to mention.

The first is that if you do establish the position of coordinator in the Federal Government setup, I believe he should be a person who is under the joint control of both the city and the Federal Government in relation to his position and in relation to his salary. In that way he can be unbiased and be entirely free to render his opinion both to the Federal Government and to the locality regarding whatever program in which they might want to engage.

In working with the program, I have run across one or two items which I think might be of interest. The so-called "comprehensive

workable program" is understandable and is certainly usable by the larger cities having planning commissions and zoning boards. However, some of the smaller cities, and particularly the counties, do not have planning commissions as such, and it involves an additional expense which in many instances they are not able to afford.

It would appear to me that there should be some adjustment made for the smaller cities and the counties desiring to participate whereby they could in some way perhaps furnish some sort of a statement or some sort of a program at the direction of the city council or of the county government, as the case might be, indicating what their program would be for the future.

That would obviate, to some extent, the requirement for a complete workable program in a small city or in a county.

I am referring particularly to items such as community facilities, water and sewer programs, where the need for a workable program would be desirable but would be not entirely necessary.

I would like also to mention the certification which is required by the various agencies. I will give you a specific example.

We have had submitted a plan for sewage facilities. It was submitted in Philadelphia. This is no reflection on the Bureau, because we understand that they are in the process of being reorganized. This was in the latter part of February.

The program was submitted together with the specifications and plans. It was then forwarded to Charlottesville, Va. for approval by the Department of Health, Education, and Welfare. From there it went to Richmond for approval by the State water control board, and from there it went to the Health Department of the State of Virginia. From there it was returned to Philadelphia, for their approval.

We are in the process with the Congressman's office and through the Senator's office in trying to get the matter cleared and clarified, because we very, very badly need the sewer facilities.

But this gives you an example of the work which is done by this type of office.

In other words, we not only indicate to the city councils what is available, but we also process the work through the various departments of both the Federal Government and the State and the localities.

I noticed the gentlemen in speaking before were talking about certification by the various departments as to the health hazards and the fire hazards. Most of our cities of any size possess the necessary inspection departments, and to me it would seem to be a duplication of the efforts on the part of the cities to set up such an organization. If it is necessary that these reports be made, they could be made to the coordinator and then forwarded to HUD.

But I think that is a responsibility of the cities themselves, and it should be placed on the city shoulders rather than on some Federal department.

I believe that is going into the realm of the cities.

If there are any questions I can answer, sir, I would be very glad to do it.

Senator SPARKMAN. How much is involved in your coordination of urban renewal? Is that just for Virginia Beach?

Mr. WEBBON. This is only for the city of Virginia Beach. That is correct. In other words, I am employed by the city of Virginia