many as one out of eight of the families in that group is housed in dwellings which do not meet even minimum acceptable standards. The lack of adequate income in this group is clearly an important factor in their housing situation since so substantial a number of this income group are certainly not neglecting their housing needs as a matter of choice. The connection between the lack of adequate income and the lack of adequate housing in this group becomes abundantly clear if we compare their housing condition with that of the next higher group receiving $6,000 to $8,000 a year. In the latter group the percentage living in substandard housing was significantly lower. As one moves from the $4,000 $6,000 income group to the next higher income group, the proportion of homeowners living in units that are both dilapidated and lacking essential plumbing facilities drops from 9.9 percent to 4.7 percent, a drop of more than one-half. In the case of renters, the drop 18 from 15.6 percent to 10.2 percent, or more than one-third. (See Table 1.)

3. National Averages Tend to Hide Problem Conditions in Different Places. The use of national averages in the comparison of overall housing conditions with the housing condition of middle income families obscures the variations that exist in different places. There are enormous differences as one moves across the country, and from large urban centers to rural areas, in the real incomes of families in the $4,000 to $6,000 income group. It is small comfort to an ill housed family living in a high cost area in a cold climate to know that it belongs to a dollar income group which can afford fairly decent housing in a rural area which is warm almost all of the year.

The

4. The Role of the FHA in Serving Middle Income Families. suggestion has been made that the FHA is now adequately serving the middle income market. It is of course true that the FHA is accomplishing a great deal in serving this market, but it is by no means serving anywhere near all of the market.

Only 5.1 percent of all families buying new homes during 1960 under the regular FHA section 203 program reported total current income of less than $5,000. In the case of existing homes, the percentage is only 8.4. While these percentages are not insignificant, they show that the FHA is just barely reaching into the lower half of the $4,000 to $6,000 market and is still far away from serving it adequately even in low cost areas. In this connection, the percentages should be contrasted with the fact that families earning less than $5,000 constitute about 45 percent of all American families.

Table 1

Condition and Plumbing Facilities of All Occupied Dwelling Units, and Units Occupied by Primary Families and Primary Individuals With Incomes in 1956 of

Mr. RAINS. The next witness is Mr. John H. Arrington, of the Office of the Assistant Secretary of Defense, on Capehart housing.

STATEMENT OF JOHN H. ARRINGTON, CHIEF, FAMILY HOUSING DIVISION, OFFICE OF THE ASSISTANT SECRETARY OF DEFENSE; ACCOMPANIED BY ANDREW MAYER, OFFICE OF COUNSEL, DEPARTMENT OF DEFENSE

Mr. ARRINGTON. I have with me Mr. Andrew Mayer, of our Office of Counsel.

Mr. RAINS. We are glad to have you, Mr. Mayer. I see you have a very short statement, Mr. Arrington. You may proceed with it.

Mr. ARRINGTON. Thank you, sir. I appreciate the opportunity to appear before you today on behalf of the Department of Defense, in order to testify in support of proposed legislation now pending before this committee, and report on the progress of our military housing programs.

The Capehart-Rains program, which has contributed so greatly to the morale and welfare of military families, has continued to be our major source of new family housing. As of April 1, 1961, more than 80,000 units have been completed and occupied, over 24,000 of these having been finished during the past 12 months. An additional 23,500 units are currently being built at this time, and we expect to be able to place the balance of our current execution program under construction by the end of June.

This program will soon have provided housing for Armed Services families at more than 213 military installations. Although the great majority of these installations are in the continental United States, 17 are offshore; there are 11 in Hawaii, 3 in Puerto Rico, 2 on the island of Guam and 1 in the Panama Canal Zone.

In addition to the 116,141 units now in various stages of development, we have requested authorization for an additional 7,074 units in our fiscal year 1962 program. Since the balance of our presently authorized program and the new authorization requested cannot be put under contract prior to October 1, 1961 (the current expiration date for the Capehart-Rains program), we have recommended that the expiration date be advanced by 1 year to October 1, 1962.

Recently there has been a great deal of interest in the seven Capehart projects which were being built by Hal B. Hayes, on which work stopped during the latter part of May 1960. These 7 projects at 5 different installations, involved 28 mortgages (initially valued at about $55,900,000) and 3,448 housing units.

However, at the time work stopped 4 mortgages valued at $9,222,000 and covering 582 units in 2 projects had been accepted by the Air Force, thereby reducing the housing involved in the work stoppage to 2,866 units under 24 mortgages valued at about $46,665,000. Moreover, 350 units under 3 mortgages valued at $6,143,000 were practically completed and have since been occupied by Air Force personnel. Therefore the housing involved in completion contracts. will be 2,516 units.

On February 23, 1961, the Department of Defense and the Federal Housing Administration signed a memorandum of agreement which designated DOD as FHA's agent for completing construction. Since

that time the military departments have moved rapidly, and it is expected that construction will be resumed on all projects prior to the middle of May.

The completion contract was awarded for the Fort Bliss project on April 6, and it is expected that the Camp LeJeune project will be awarded today. Information has been provided to FHA on the low bidders at Ellsworth Air Force Base and on Beale Air Force Base projects Nos. 1 and 2, and contracts will be awarded promptly on receipt of FHA approval. Similar information will be provided to FHA on Grand Forks projects Nos. 1 and 2 early this week.

Attached is a tabulation which lists the projects, the amount of the completion contract or the low bid, and the funds available for completion (mostly undisbursed mortgage proceeds, with some escrowed funds). It will be noted that the indicated total deficit amounts only to a little over half a million dollars. This deficit will be met from reserves in the Armed Services Housing Insurance Fund; and the FHA will seek to recover this loss from the bonding company.

Another program under title VIII of the National Housing Act which has aided in providing housing at military installations is the section 809 program. As you know, this program was created by Public Law 574, 84th Congress, and provides mortgage insurance on sales housing for essential civilian employees of the military departments and their contractors at research or development installations.

To date certificates of need have been issued to the Federal Housing Administration for 6,555 units for 10 installations; on 1,100 of these units, the FHA has not required the military department to guarantee the mortgage insurance fund.

As of January 1, FHA had endorsed mortgages on 5,121 units, of which 1,863 were in the Huntsville, Ala. area and 2,605 were in the vicinity of Cape Canaveral, Fla.

Based on reports from the military departments, it appears that losses on these mortgages have been relatively low; for example, of the 4,260 which are under military guarantee, only 11 are in default with FHA and only 17 are in default with the lender.

With respect to the Wherry housing program, the DOD has acquired a total of 69,618 units of the 83,742 constructed for defense use. In addition, another 2,023 units are in process of acquisition or are planned for acquisition prior to June 30, 1961.

Accordingly, by the end of fiscal year 1961, the Defense Department will have acquired a total of 71,641 units, leaving an unacquired balance of only 12,101 units. Of these, it is expected that approximately 5,000 units will be acquired during fiscal year 1962; there are no plans for acquisition of the remaining approximately 7,000 units; which include some 4,000 units in default. It will be seen from the above that the DOD program for acquisition of Wherry housing has progressed satisfactorily and has provided the military departments with a substantial number of family housing units.

I shall be glad to answer any questions on the military family housing programs which the committee may wish to ask.

Mr. RAINS. Thank you, Mr. Arrington.

Have these 7074 units in fiscal 1962 that you have requested been approved by Mr. Vinson's committee?

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Mr. ARRINGTON. Yes, sir.

Mr. RAINS. Do they have to be approved through the Senate committee or not?

Mr. ARRINGTON. Yes, sir; they do.

Mr. RAINS. Have they been approved over there as yet?

Mr. ARRINGTON. Not as yet to my knowledge.

Mr. RAINS. I know the bill before us would only extend this military housing program for an additional year. What would you think of a 2-year extension so as to give us enough time to get the program through, instead of just continuing it for 1 year at a time?

Mr. ARRINGTON. A year is really the minimum that we need.

Mr. RAINS. Well, isn't there a considerable timelag in this operation?

Mr. ARRINGTON. There frequently is.

Mr. RAINS. Well, I am not asking you to go counter to what the administration bill proposes, but is there any good reason for not extending it 2 years?

Does the Department of Defense expect to use it for the next 2 years? Would it take that long to get the programs through?

Mr. ARRINGTON. I think the Department of Defense will certainly use it until we place current and proposed authorizations under construction, and if there are unanticipated timelags it could well require more than 1 year.

Mr. RAINS. What about the section 810 program that we put in the 1959 Housing Act for off-base housing? What happened to it, if anything?

Mr. ARRINGTON. In our guidelines for submission by the three military departments of proposed housing projects for fiscal year 1962 we authorized the military departments to come in not only with requests for Capehart-Rains units but also for 810. None of the military departments submitted requests for 810 housing.

Mr. RAINS. They didn't find a use for it?

Mr. ARRINGTON. That is correct.

Mr. RAINS. Now, this Hal Hayes episode, as you know, has given the military housing program a black eye. Some newspapers have written sensational headlines. We read in the newspapers of the country that the Government had lost many millions of dollars because of the failure of this contractor to carry through. I want to pinpoint, if I can, first of all, about what the loss appears to be as of now. I note in your statement you say $500 thousand which the FHA is proceeding to try to collect from the bonding company, is that correct?

Mr. ARRINGTON. Based on the low bids which we have received on all seven of the projects involved, we have an indication that the loss will be in the vicinity of half a million dollars. This is far lower than we had once been fearful it might be.

Mr. RAINS. Proceedings are being initiated by FHA to collect that, is that correct?

Mr. ARRINGTON. So I understand.

Mr. RAINS. What caused the trouble in these projects?

Mr. ARRINGTON. From all that I have heard and read in connection with this particular problem, it appears to me that Mr. Hayes took these contracts at too low a price.

Mr. RAINS. And was not able to deliver on that.