Land development loan insurance has been studied for 7 years to our knowledge, and this proposal was first made when the financial community was not yet accustomed to this type of lending. In the last 7 years, however, there has been a widespread recognition of the need for this type financing and a large growth in the number and types of investors willing and able to invest funds in land development loans.

The results are nowhere more apparent than in the area surrounding Washington, D.C. New subdivisions can scarcely be counted and approximately 15 new towns the largest of which contemplates housing 100,000 people—are in the process of development. It is estimated that the number of new towns now in the process of planning or development will be adequate to take care of the largest part of the population increase anticipated by the year 2000. All of these projects are privately financed, although the planning is of a caliber to meet FHA subdivision requirements in order that the benefits of this type of home mortgage will be available to purchasers.

We may well ask ourselves what the effect would be of making land financing easier. It is almost impossible to escape the conclusion that easier financing would lead to overspeculation and further increases in land prices. It would place an unnecessary workload on FHA and HHFA. It would be far better, in our judgment, to leave them free to work on those problems for which the solutions are not yet apparent. Already FHA is required to spend a disproportionate amount of time on special-purpose programs to the detriment of basic programs serving a broad segment of the population.

May we point out that many members of this association throughout the country are currently engaged in land development activities. The techniques of this type financing are well known to our members. While it requires a firm of substantial financial strength to undertake anything as large as the development of a new town, this does not mean that small builders are precluded from enjoying the benefits of the developed building sites. Few land developers hold all of the developed properties for their own construction. Particularly is this true when a mortgage banker is the developer. It is customary to make developed building sites available to a wide range of builders, who can, and will, develop the properties in a manner consistent with the development plan. Even with an FHA insurance program, few small builders would be in a position financially, or organizationally, to undertake any significant land development. The present proponents of this program argue its necessity to assume availability funds at reasonable prices. We believe it is evident that adequate funds are currently available to finance as many of this type of project as the market is in a position to absorb. Life insurance companies, savings and loan associations, commercial banks, and mortgage bankers are all involved in land development financing. Competition is increasing as more investors and the rapidly growing accumulation of savings make increased funds available for mortgage lending. Under such circumstances the cost of funds for these activities is certain to be highly competitive. We can see no benefit to be derived from an insured lending program for land development at this time.

SUPPLEMENTAL STATEMENT OF MORTGAGE BANKERS ASSOCIATION OF AMERICA

8. 2520

The inauguration of a new direct loan program is not necessary. The requirement that direct loans will not be made unless "the applicant shows that it is unable to secure the necessary funds from other sources upon terms and conditions equally as favorable as the term under this section" would be no restriction at all for not even the U.S. Treasury can borrow at 3 percent for 50 years. The FHA section 232 program has been successful in stimulating construction of new and rehabilitated nursing home facilities. So many have been built in some areas that there is an excess supply.

Loans at less than Treasury costs of borrowing should not be made. 8. 2652

We continue to be opposed to further extension of direct loans at rates of interest less than Treasury borrowing costs.

The FHA insured loan for elderly housing has demonstrated that good, safe, standard accommodations can be built for the elderly at market rates of in

terest. The section 202 program operates as direct Government competition to private enterprise and experience has shown that too often the lower loan interest has simply been utilized to provide superior accommodation at rents comparable to those charged in projects financed at market rates.

Any reduction of rates, if considered, should be accompanied by strict limits on per unit costs and incomes of occupants.

S. 3057

We do not believe the FHA should be compelled to reduce insurance premiums on any single program. The FHA Commissioner has the authority to adjust premiums when the agency's actuarial studies indicate the appropriateness of such action.

For many years FHA has been subjected to a variety of pressures to reduce insurance premiums, and has resisted this pressure on the basis that reserves should be built to the point where they would be adequate to handle major adversity without resort to Treasury borrowing. The soundness of their thinking has been adequately demonstrated in the last few years when foreclosures have soared despite our booming economy.

Although experience to date with cooperative housing may be good, forcing FHA to reduce premiums would not seem desirable. The same arguments were used with respect to the mutual mortgage insurance fund a few years ago, but had the agency yielded they would likely have had some financial difficulty in recent years.

It should be noted that the co-op fund is now mutual so any excess reserves can be returned at an appropriate time.

S. 3058

We have no objection to the provisions of S. 3058. S. 3097

The association's legislative committees have not had the opportunity to express a position on S. 3097, but we believe they would favor legislation to preserve our truly historic structures.

Senator SPARKMAN. Next is Mr. Alan L. Emlen, chairman, Realtors' Washington Committee, National Association of Real Estate Boards; accompanied by Mr. Jack Williamson, counsel; Mr. Charles T. Stewart, director of public affairs.

We are glad to have you.

Are we missing one?

Mr. EMLEN. Mr. Stewart will not be here.

Senator SPARKMAN. We are glad to have both of you, and you proceed in your own way.

STATEMENT OF ALAN L. EMLEN, CHAIRMAN, REALTORS' WASHINGTON COMMITTEE, NATIONAL ASSOCIATION OF REAL ESTATE BOARDS; ACCOMPANIED BY JACK WILLIAMSON, COUNSEL, AND CHARLES T. STEWART, DIRECTOR OF PUBLIC AFFAIRS

Mr. EMLEN. Mr. Chairman and members of the subcommittee, I am Alan L. Emlen, a realtor engaged in the business of real estate brokerage in Philadelphia. I appear here today as chairman of the Realtors' Washington Committee of the National Association of Real Estate Boards. Our association consists presently of 1,519 local boards of realtors with a membership of more than 83,000.

We propose to comment on provisions of three bills pending before the subcommittee, and we will cover these in the order of their

introduction.

S. 2842, THE DEMONSTRATION CITIES ACT OF 1966

Briefly, the bill would provide a monetary inducement to a limited number of communities to plan more comprehensively and to demonstrate more effectively their desire to improve the quality of urban

life.

The incentive takes the form of the Federal Government absorbing up to 80 percent of the normal State or local share of a vast number of Federal grant-in-aid programs to the extent that such grant-in-aid programs are involved in the demonstration project. In addition, the Federal Government would provide 90 percent of the cost of planning and developing these comprehensive city demonstration programs.

The fundamental weakness in the bill is that it seeks solely, by means of money, to induce the cities to do that which they should have been doing in the years when they prevailed on the Federal Government to execute billions of dollars in binding contracts for urban renewal including urban planning, community renewal planning, and general neighborhood renewal planning.

The proposal would have some validity if the Congress had been remiss in the past in supplying funds for urban planning. With respect to the three such programs presently in existence, we note the absence of any critique of these programs in the Secretary's testimony of April 19 before the subcommittee. As of December 31, 1965, 2,286 urban planning projects have been approved involving $99.9 million. For more detailed planning the Congress has provided financial assistance under community renewal programs and general neighborhood renewal planning. A total number of 146 CRP's have been approved involving approximately $23 million, and 232 GNRP's have been approved involving $128 million.

These programs have been repeatedly nurtured by annual housing and appropriation bills and the record is silent as to their shortcomings, if any. Now the Department of Housing and Urban Development tells us that these planning programs, along with the many grant-in-aid programs such as urban renewal, are insufficient and that something dramatic is needed, a bold new course of action to induce the cities to exploit existing Federal programs more zealously. The antidote is more money, this time an approximate $400 million per year over each of the next 6 years.

The Secretary, on page 2 of his detailed statement filed with the subcommittee, advises that the $2.3 billion will provide, among other things, "massive additions to the supply of decent, low- and moderateincome housing."

How will this be accomplished when none of the basic housing statutes involving low- and moderate-income housing is amended by this bill? Will it provide more public housing?

It cannot because Congress last year fixed the annual rate of unit authorizations.

Will it provide more section 221(d)(3) below-market rate housing for moderate-income families?

No, because FNMA special assistance authorization is fixed by prior law.

Will it provide more rent supplement projects?

Here, too, the Congress last year approved a level of activity for the next 4 years, a level which is not disturbed by this bill.

The Federal grant-in-aid programs qualifying under this bill amount to approximately 70. According to the seventh annual report of the Advisory Commission on Intergovernmental Relations, 25 new Federal grant programs or major expansions of existing programs were enacted by the 1st session of the 89th Congress. Thus the Congress has been most generous in its approach to Federal grant-in-aid programs. The authorizations for these are not increased by this bill, yet $400 million per year is being offered as an inducement to exploit these programs more zealously and more efficiently.

When the Congress last year created the Department of Housing and Urban Development, the new Department received a mandate to create a Director of Urban Program Coordination who "shall develop recommendations relating to the administration of Federal programs affecting such problems, particularly with respect to achieving effective cooperation among the Federal, State, and local agencies concerned."

Now the Department, for all practical purposes, came into existence when the Secretary was confirmed by the Senate on January 17. Ten days later the Department requested this legislation to pump more than $2 billion to achieve a degree of activity and coordination which the Congress last year thought could be accomplished through other and less costly administrative devices.

We suggest, therefore, that the Secretary first proceed to implement section 4(c) of the Department Act by appointing a Director of Urban Program Coordination. We believe that he will discover that the shortcomings which he proposes to solve only with money are too fundamental for such a remedy.

We respectfully suggest that it is time to stop attempting to spoonfeed the Congress and the people in the area of Federal assistance to urban communities. We should recognize that a gap in local initiative cannot be bridged by money alone.

Because this program has as its objective the granting of Federal money for purposes which may not be related to specific Federal grantin-aid programs, it is immediately suspect as an indirect device for returning Federal revenues to a limited, select group of local political instrumentalities. The problem, with its solution, requires a more fundamental approach than is reflected by this bill.

If our cities must be gathered up in the orbit of the national revenuepumping station, then the launching device must be one which is adequately equipped for the task. I have in mind the several legislative proposals for shared revenues which I am confident will be seriously and sympathetically considered by the Congress following the conclusion of the Vietnam war.

We are also confused over the general criteria for grant eligibility as set forth in the bill and in the Secretary's testimony before the subcommittee, and the specific criteria which the Secretary could apply in administering this grant program.

For example, on page 4 of the Secretary's testimony he recites as his seventh general criterion that "all citizens must have maximum opportunity in the choice of housing provided by the program.'

This is a reiteration of the President's Executive Order of November 1962 relating to nondiscrimination in federally assisted housing, and certainly a reasonable prerequisite to Federal assistance. However, 3 days before the Secretary's testimony, on April 16 in Cleveland, Ohio, the Secretary told his audience that a prerequisite for these demonstration grants would be open occupancy for the entire metropolitan area, including suburban areas.

As a practical matter, this could be accomplished only by a Federal law prohibiting discrimination in the sale or rental of all housing, an issue which will be resolved by the Congress after the President submits legislation on the subject.

We question seriously whether the Congress should approve a multibillion dollar program which apparently would require as a condition of eligibility the very objective which the President will seek in legislation that has not yet been introduced.

The House Government Operations Committee is considering S. 561, a bill which passed the Senate last year and has as its purpose "to achieve the fullest cooperation and coordination of activities between levels of government in order to improve ** the administration of grants-in-aid."

*

S. 561 would not cost any money, hence lacks the drama associated with a gift of $400 million a year to the cities which, in the Secretary's words, are "willing to face up to their responsibilities * * * willing to commit their energy and resources*** willing to undertake actions which will have widespread and profound effects on the social and physical structure of the city."

We suggest that this bill, S. 561, is a far more practical and less costly means of accomplishing the Department's objective. It is certainly worth a trial before we chalk up another multibillion dollar urban relief program.

S. 2977, THE URBAN DEVELOPMENT ACT

Metropolitan planning

Title I of this bill provides for added grants-up to 20 percent of project cost-for eight specific Federal grant-in-aid programs for those metropolitan areas which establish areawide comprehensive planning and programing. These plans must be adequate for evaluating and guiding all public and private action of metropolitanwide or interjurisdictional significance.

This proposal is presently under study by our association, and I am therefore not prepared to make a specific recommendation to the subcommittee. However, our study to date prompts us to raise certain questions about the proposal.

First, I want to assure the subcommittee that we are cognizant of the shortcomings in metropolitanwide planning involving great numbers of separate and distinct corporate political entities within each of the 227 standard metropolitan statistical areas.

However, we note that urban planning grants involving $31.1 million have been approved for 408 metropolitan and regional areas, as well as 88 projects involving $12.3 million for statewide agencies. The Secretary's testimony did not give an evaluation of these, but the subcommittee might request such an evaluation in determining the