STATEMENT OF O. C. BECK, CHAIRMAN, ASSOCIATION OF HOME BUILDERS OF LOS ANGELES, BELL GARDENS, CALIF. Mr. BECK. Thank you, Mr. Congressman. Mr. Ford, the Representative from our community of Los Angeles, ladies and gentlemen, it has been my pleasure to make this trip here to acquaint you in a small way with my activities in this 20 years in the metropolitan industrial district of Los Angeles. The corporations that I represent have built thousands of homes for what is commonly termed the low-salaried-bracket employees in our district. During the past 8 years, beginning January 16 of 1933, you gentlemen all remember that time when we had the bank holiday, the conditions were rather bad, and we started a development to take care of the man, the forgotten man, the man that could not buy a home or that could not afford to pay the rental that he had to pay even during those times, those hard times. Mr. PATMAN. Mr. Beck, I would like to hear you on the question of how this particular amendment, which is proposed by you and your group and Congressman Kramer, will change the terms of this bill and why the change should be made; especially with reference to requiring that only defense workers be permitted to buy these homes, and particularly on the evasion point I raised awhile ago, how are you going to enforce it if you just require a defense worker to be the original purchaser, but have no strings on it after that? He can immediately then turn around and transfer it to anyone he wants to transfer it to. I would like to hear you on those two points: One is, whether or not you should restrict the rentals to only defense workers, and next, the question of evasion, if you restrict the sale only to defense workers? Mr. BECK. I am not familiar with the rentals, the rental proposition in this amendment, as we only build for sale small homes. There is no need at the present time for financing, insuring financing by the Government for small homes, other than for defense workers. We have available all of the money that we can use. Mr. PATMAN. Well, you are talking about your particular locality? Mr. BECK. I am speaking of our district, of course. Mr. PATMAN. Well, we must look over the entire needs. There are some places that have and some places that do not. Mr. BECK. However, there is no money available-I am speaking for our district—there is no money available for the low-salaried bracket defense employee, for this reason, and that is to say the legitimate developers our building and loan associations and banks will not allow us, or will not furnish us with the proper financing or with financing to build homes to sell to the defense employees in the low bracket because of the hazard of the situation. Mr. PATMAN. Well, this should cure that evil; that is one of the objects of this bill. Mr. BECK. Yes; but if you throw this open, and you do not restrict it entirely to defense employees, you are simply duplicating what is already being done today. Mr. PATMAN. Well, what harm is there if you duplicate it, if you just increase the amount that can be borrowed? Mr. BECK. The purpose, of course, as I understand, is to help defense projects; people that are driving 30 miles. We have employees today in the Vultee plant who are driving 30 miles to work, and that means, of course, they are not efficient when they get to their job. Mr. PATMAN. They have been doing that in New York, all the time. Mr. BECK. Driving 30 miles? Mr. PATMAN. Yes. They might not go in automobiles; they go on trains. If they want to do that, it is alright for them to do it. Mr. BECK. I am speaking of California now, and we have to drive by car from San Fernando, and some of the employees live in San Fernando Valley. Mr. PATMAN. If you have good roads, sometimes it is quicker that way than in Washington, even if you only live in Chevy Chase. Mr. BECK. If this act is a defense act, then why take the mortgages away from those people who cannot be taken care of by it? We have all the money available that we want to build homes for those that are not in defense employment, and there are plenty of builders, we have built mass production, hundreds of homes at a time-mass production builders. Mr. PATMAN. I am sympathetic in hearing your remarks, but I would like you to give us just a little better reason why it should be restricted that way. Mr. BECK. Well, speaking, of course, of our district entirely, since we have all of the money we want to build small homes for the lowbracket man excepting in defense employment, why ruin the wonderful work we are doing with Federal Housing today by reducing the mortgage price when it is not necessary. If this is not a defense project, then why make any change in the Federal Housing? It takes care of the man who makes $125 a month and who has a good credit rating, and he can get a Federal Housing loan with a financial institution, providing he is not working in a defense project or the defense plant of some kind. He could get all the loans he wants. And we can take care of the man getting less than $125; we can take care of the man getting $80 a month, and in the building and loan associations all over the United States, in my understanding, they have the same thing. I mean, they will make him a loan, to those people if they have a good credit rating. But we cannot care for the man that is working in a defense project; he cannot be taken care of either by the Federal Housing or the savings and loan or the banks or private parties. Mr. KOPPLEMANN. Why? Mr. BECK. For the simple reason the restriction placed on Federal Housing does not allow us, or rather financial institutions or a bank or a corporation to make these loans. Mr. KOPPLEMANN. That does not mean Mr. PATMAN. Wait a minute; let him finish. Mr. BECK. Unless he makes $125 a month, in our district, and unless he has been employed for a term of 1 year. We cannot sell that man under the present Federal Housing. Mr. PATMAN. Well, this will permit you to sell him. Mr. BECK. That is true; but we have other financing. If this bill were passed as it is, it is my opinion it would drive out the financing we have in this country today. You are throwing this thing wide open until your financial institutions will refuse to make any loans whatever. When you state you are going to build around 25,000 homes, to be built without any regard to down payment or without any regard to a man's income or ability to pay or willingness to pay, or anything else, you are going to stop the legitimate developments all over the Unted States. Mr. PATMAN. Let me see; how many homes in America? Mr. BECK. I beg your pardon? Mr. PATMAN. I don't know how many. Miss SUMNER. Seventeen billion dollars' worth of mortgages. Mr. PATMAN. How many individual homes; do you know? Mr. WILLIAMS. Thirty-three or thirty-four million, I think; I don't know. Mr. PATMAN. Anyway, twenty-five or thirty million homes. Mr. SMITH. Twenty-nine million homes. Mr. PATMAN. And you think 25,000 would have a serious effect? Mr. MONRONEY. It would cause some dislocation as far as the cheaper financing is involved; is not that the point? Mr. BECK. It would disrupt the entire business. I would recommend to my corporations, and we have five, that we make no general development of any kind, because we could not unless we went into this thing like the fly-by-night builders will go into it. We are not in business just today; we are here for 15 or 20 years. But the fly-bynight builders will go into it. The mass-production builders who have been years in the business will not take the chances on building the houses, and those builders are going to take the chances. We have been in the business, and we are legitimate developers, and we have been in it for 20 years, and we are going to stay. But we must quit if this act as it is today is passed by this Congress. Mr. MONRONEY. If this act is amended as proposed in these amendments, you would feel safe enough to go ahead under this defense housing business, too? Mr. BECK. Yes, sir; we will do this; we will agree the same as we have in the past under Federal Housing, title II, that we will sell only to defense employees. Now, you can protect yourselves, just the same as you protected yourselves against any builder taking secondary financing under title II. It is fraud if you do take secondary financing of any kind under title II. And there have been a number of cases where they have prosecuted builders who have done this-violated the law. So you can protect yourselves by restricting these houses, restricting the developer from selling to anyone excepting a defense employee; just the same as you can restrict the developer from taking secondary financing. It is fraud, and no one is going to do it unless he wants to go to the penitentiary. Legitimate outfits won't do those things. So you can protect yourselves. And it will give the defense employee an opportunity to have a home, which he is entitled to, inasmuch as he is doing his share in this defense program today. Mr. MONRONEY. You do not think there is any possibility of builders building these hundred homes and then finding they could not sell them, and then come to the F. H. A. and saying, "We cannot get these defense workers to buy under this new law, and we are stuck; can't you help us?" Do you think there is any possibility of that if the builders did take the houses with this amendment in there? Mr. BECK. Yes; I agree with you, that will probably happen to the fly-by-night builders; not the legitimate builders, but it will happen to the fly-by-night builders; there is no question about that. Mr. PATMAN. The Administrator may stop that, Mr. Beck. Mr. BECK. The Administrator is not going to allow these fly-bynight outfits to secure these loans. Mr. PATMAN. Then there is nothing to your objection, is there? Mr. PATMAN. If the Administrator will not permit the fly-bynighters to secure the loans, you have no objection? Mr. BECK. I have no objection to the act, except I wanted it amended so that you cannot sell to anyone excepting to a defense employee. And then if I contract to build a thousand or two thousand houses, or whatever amount I do contract to build, I am going to be darn sure I can sell them before I will begin to build them, because I have got to pay for them. Mr. SPENCE. Mr. Beck, a defense employee is not a very permanent relation? Mr. BECK. I agree with you. Mr. SPENCE. He might be a defense employee today and an out sider tomorrow. Mr. BECK. I agree with you. Mr. SPENCE. And he would have his right, too, under the contract, just the same as if he remained as a defense employee? Mr. BECK. If he were occupying the home, yes; he would. Mr. SPENCE. He would still have every right he had under the contract as a defense employee? Mr. BECK. The Congress then has given that man the opportunity he is entitled to have. He has no opportunity today. You are saying to this man, "Just because you are employed under a defense program in a defense plant, you cannot own a home"; that is what you are saying to him if you do this. You are telling him he cannot buy a home, that he has not the right that the average man has who is making less money than he is. Mr. SPENCE. Now, supposing he ceases to be a defense employee, what can the banker do in regard to that? Mr. BECK. That might be Mr. SPENCE. You can't do anything, can you? Mr. BECK. That might be unconstitutional if there is a contract. But you have given him the chance. By this amendment under this act you have placed all the defense employees, or the majority of the defense employees, in a position where they can buy a home. They have the same right that a man who is working in private industry has. He is entitled to the same right, and I believe he is entitled to more than the man who is working under private employment. Mr. GORE. Mr. Beck, have you built houses under mortgage-insurance financing? Mr. BECK. Yes, sir. Mr. GORE. How many? Mr. BECK. Well, we have built, oh, hundreds of them. Mr. GORE. Hundreds? Mr. BECK. Yes. Mr. GORE. That is, insured by F. H. A.? Mr. BECK. Yes. Mr. KRAMER. How many, altogether? Mr. BECK. We have built in the past 20 years, we have developedwell, in the past 8 years we have developed a city of about 30,000 population in the past 8 years. 297165-41-9 The CHAIRMAN. What he asked, if I understood, have you been building any houses insured by the F. H. A.? Mr. BECK. Yes; we have; our affiliated corporations, that is. Mr. GORE. Have you, yourself, built any under insured-mortgage financing? Mr. BгCK. Yes; as a corporation. I am only the president of the corporation. We have five different corporations the O. C. Beck Corporation and several other building organiaztions. Mr. GORE. Well, has the O C. Beck Corporation built any houses under the insurance of the F. H. A.? Mr. BECK. Through its subsidiaries it has; yes, sir. Mr GORE. Well, not directly? Mr. BECK. Through its subsidiaries. O. C. Beck organization is a selling organization. Mr. GORE. You mean that is a holding company, or something? Mr. BECK. No; it is selling-purely a selling organization. We have a building organization, an investment organization, and then, of course, a selling organization. We have a general business. Mr. GORE. You mean by "affiliated," do you mean the O. C. Beck Development Co.; do they own the subsidiary corporations? Mr. BECK. No; they are affiliated with them. That is to say, there are several corporations that might own a majority of stock, and I am president and I control and I manage. But our business is separated, and our building department is one corporation, and our loan department, and our financing department, and our selling department. Mr. GORE. Were you in favor of the enactment of the F. H. A. when it was first proposed? Mr. BECK. Yes, sir; in 1925 we did not build under title II. We built in our district, because they were all high-cost homes; we built under title I, a number of them. Mr. GORE. Are you in favor of extending its authority? Mr. BECK. Yes, sir; I am. I think it is a good thing. I am in favor of this new bill, but I am in favor of making it a defense housing project, and not throwing it open to the man that can already secure and who can afford to finance his home under the present methods of financing, and leaving out the defense employee. The defense employee is the man we want to take care of, and we must take care of. He is here to be taken care of, and he is not in here; there is no way of taking care of that man. Mr. GORE. We appreciate your concern. Mr. FORD. Mr. Beck, in making that statement, you realize in stating that, that this title is setting aside $10,000,000 in an insurance fund, and that we are doing it because it is understood that building for defense workers is more hazardous than the ordinary F. H. A. proposal; do you not? Mr. BECK. Yes, sir. Mr. FORD. Well, is it not reasonable to suppose that Mr. Ferguson and his organization in the administration of this bill will, insofar as they are able to do so, see to it that only the people who come in and require financing are requiring it for the accommodation of defense workers? Now, that is the theory of the bill, and I am sure that Mr. Ferguson will carry that out. Now, you say you can build a house and take a payment of $95 down; do I understand that is right? |