CHAPTER VIII A National Advisory Finally, the Task Force believes it desirable to bring into being the ad hoc commission on low-income housing provided for in the housing legislation of 1968. The development of a new approach to Federal assistance in the housing area, referred to above in this report, should be high on the agenda of such a group. Accordingly, the Task Force 31. RECOMMENDS that the Administration establish without delay a NATIONAL ADVISORY COMMISSION ON LOW-INCOME HOUSING for which the Housing and Urban Urban Development Act of 1968 made statutory provision-and that this Report of The Task Force on Low-Income Housing be made available to the commission as a starting point for further study of ways and means of improving our national performance in this area. 48-279 70 - pt. 2 - 51 Statement of Dissent Although the Preface to the final draft of the Task Force Report acknowledges the urgency of the nation's housing needs, the substance of the Report does not convey as deep a sense of urgency, nor does it stress enough the importance of achieving the national housing goals, as I believe it should. I feel that the Report fails to assign high enough priority to policies for meeting the low-income housing needs. My comments on the specific proposals of our Task Force Report follow: Chapter I-Financing I am strongly opposed to extension of the surtax because it compounds the inequities that exist in the Federal income tax system. Organized labor has strongly endorsed both tax reform and responsible fiscal policy. These are not conflicting goals. I cannot agree with the recommendations that ceilings on FHA and VA home loan interest rates be removed. In my view, the action taken by Secretary Romney on December 30, in raising the ceiling on FHA and VA home mortgages from 72 to 82 percent was a grave disservice to homebuyers and to residential construction. There is no blinking of the fact that during 1969 the highest level of interest rates in 100 years has boosted housing costs, priced a growing percentage of families out of the market for homes and depressed home-building. Home-building, which has already declined 27% since last January, will drop even further as a result of this action at a time when America needs a sharp rise in residential construction. And unemployment of construction workers, which rose from 5% in June to 5.6% in November, will continue to climb. Obviously, many who will go jobless will be Negroes—at the very time the Administration is claiming it wants to put blacks to work in the construction industry. The new jump in the mortgage interest rates will result in another severe setback for the national goal of 26 million dwelling units in 10 years established in Concessional action in the Housing and Udar Development: Ax of 1958 Auber efex i arrke is TN montis permens I FRIDA and meet or a § ve $2.00 Dogart wil botas 19%, that tax die hus er de M of the mortgage wil be $5.00 more. The economics department of the National Association of Horse Bulders reports that monthly payments on principal and interest on a 25-year mortgage with 20% down pament now from $189,9° Är $25.000 house purchased in June 1958 to $156.95 for a smilar bought in mid-August 1969, as the result of soaring money own. This is a rise of $17.16, or over 12% to be paid each and every month for 25 years. The Task Force Report tells us that the ceiling on VA and FHA mortgages must be eliminated, so that the interest rate would be pers mitted to rise, in order to increase the flow of money into the mortgage market. In effect, we are being told that the interest rate is being held hostage, and those of us who are opposed to high interest rates are expected to surrender as the price of realizing the needed vast increase in residential construction. If higher mortgage rates were to produce more dwelling units on a sustained basis, we might at least understand the argument. But, on that basis, the experience of recent years is sufficient proof of its falsehood, Interest rates have moved up sharply and the supply of funds in the mortgage market has dropped; and home building is moving into a recessionary decline. In 1968, we were told that the statutory limit on all VA and FHA mortgages must be eliminated to increase the flow of mortgage money and boost the volume of home building. The mortgage rates have been increased several times since then, in an across-the-board upward movement-with mortgage rates following the general rise of other interest rates. The movement has been from one higher plateau of interest rates to another. After several months at each plateau, new pressures have been generated for another rise in mortgage rates, with a repetition of the same story, the same promises and the same failure. of home building to rise on a sustained basis. Painful history has taught us that rises in the mortgage rate did not bring any appreciable flow of funds into the market and housing starts, if spurred at all, improved only for a matter of a few months. We are also told--as we have been told many times in the past number of years that the increase in mortgage rates would eliminate discount points. We are well aware that discount points are a cash burden But points are the leakage in the present system and there i Statement of Dissent Although the Preface to the final draft of the Task Force Report acknowledges the urgency of the nation's housing needs, the substance of the Report does not convey as deep a sense of urgency, nor does it stress enough the importance of achieving the national housing goals, as I believe it should. I feel that the Report fails to assign high enough priority to policies for meeting the low-income housing needs. My comments on the specific proposals of our Task Force Report follow: Chapter I-Financing I am strongly opposed to extension of the surtax because it compounds the inequities that exist in the Federal income tax system. Organized labor has strongly endorsed both tax reform and responsible fiscal policy. These are not conflicting goals. I cannot agree with the recommendations that ceilings on FHA and VA home loan interest rates be removed. In my view, the action taken by Secretary Romney on December 30, in raising the ceiling on FHA and VA home mortgages from 72 to 82 percent was a grave disservice to homebuyers and to residential construction. There is no blinking of the fact that during 1969 the highest level of interest rates in 100 years has boosted housing costs, priced a growing percentage of families out of the market for homes and depressed home-building. Home-building, which has already declined 27% since last January, will drop even further as a result of this action at a time when America needs a sharp rise in residential construction. And unemployment of construction workers, which rose from 5% in June to 5.6% in November, will continue to climb. Obviously, many who will go jobless will be Negroes—at the very time the Administration is claiming it wants to put blacks to work in the construction industry. The new jump in the mortgage interest rates will result in another severe setback for the national goal of 26 million dwelling units in 10 years, established by Congressional action in the Housing and Urban Development Act of 1968. Another effect of the new mortgage interest rate rise will be that monthly payments on principal and interest on a 30 year $20,000 mortgage will increase 10%, so that the cost of the house over the life of the mortgage will be $5,000 more. The economics department of the National Association of Home Builders reports that monthly payments on principal and interest on a 25-year mortgage with 20% down payment rose from $139.80 for a $25,000 house purchased in June 1968 to $156.96 for a similar home bought in mid-August 1969, as the result of soaring money costs. This is a rise of $17.16, or over 12% to be paid each and every month for 25 years. The Task Force Report tells us that the ceiling on VA and FHA mortgages must be eliminated, so that the interest rate would be permitted to rise, in order to increase the flow of money into the mortgage market. In effect, we are being told that the interest rate is being held hostage, and those of us who are opposed to high interest rates are expected to surrender as the price of realizing the needed vast increase in residential construction. If higher mortgage rates were to produce more dwelling units on a sustained basis, we might at least understand the argument. But, on that basis, the experience of recent years is sufficient proof of its falsehood. Interest rates have moved up sharply and the supply of funds in the mortgage market has dropped; and home building is moving into a recessionary decline. In 1968, we were told that the statutory limit on all VA and FHA mortgages must be eliminated to increase the flow of mortgage money and boost the volume of home building. The mortgage rates have been increased several times since then, in an across-the-board upward movement-with mortgage rates following the general rise of other interest rates. The movement has been from one higher plateau of interest rates to another. After several months at each plateau, new pressures have been generated for another rise in mortgage rates, with a repetition of the same story, the same promises and the same failure of home building to rise on a sustained basis. Painful history has taught us that rises in the mortgage rate did not bring any appreciable flow of funds into the market and housing starts, if spurred at all, improved only for a matter of a few months. We are also told-as we have been told many times in the past number of years that the increase in mortgage rates would eliminate discount points. We are well aware that discount points are a cash burden. But points are the leakage in the present system and there is no ass |