The number of workers employed by all general contractors decreased approximately 13 percent last year, while there were 18 percent fewer persons employed by the special trade contractors. Among the dozen different types of construction employers, only the heavy construction operators reported an important increase-22 percent above the 1959 level. Today there are an estimated 8 million families with incomes of less than $2,500, 7 million more with incomes between $2,500 and $4,000. The greatest majority of these families have therefore been priced out of the market. For example, a family buying a home with a 30-year FHA loan now finds that it pays more for financing than it does for the home itself. For example, the financing costs on a $13,500 loan now total about $16,200. These financing costs include $4,500 added by interest rate increases under the present program. If the family did not have to pay this extra amount to the lender, they might have gotten another bathroom and bedroom for their new home. Or, again, take a family that needs a $15,000 loan to buy a home. In 1952, a 30-year FHA loan for this amount could be had for a monthly payment of only $80. But today, high interest rates have jumped that payment to $94 a month for exactly the same loan. Little wonder that many potential homebuyers are not in the market. The enactment of H.R. 6028 will greatly benefit the 16 million elderly citizens of the country who have very limited incomes. The direct-loan authorization of $100 million for low-rent public housing for these elderly persons will provide comfortable quarters for many who are presently living in substandard accommodations. In regard to rural housing, I too feel that special attention should be given to the problems of our small communities and rural areas. The Federal Government has always extended a helping hand to urban areas in the field of housing. We should now recognize the fact that 47 percent of the people in the United States live in smaller cities, towns, villages, and boroughs and in rural areas. These people require assistance in order to create a favorable climate for their growth since we do not want them to become ghost towns, but instead we hope to make it possible for them to undergo normal development. Latest figures show that over one-fifth of the rural area dwellings are in such a state of disrepair that immediate replacement must be undertaken to bring them up to a livable standard. These distressing conditions are not a result of a lack of desire or initiative on the part of the farmer to improve his lot, but a complete absence of adequate financial assistance through existing conventional lending institutions. Therefore, I strongly recommend the extension for 5 additional years of the farm housing loan authority of the Secretary of Agriculture. With the expansion and extension of urban renewal and urban planning, as recommended by the President, and the sharpening of such tools as public housing and FHA mortgage insurance-particularly for moderate-income housing- orderly renewal and revitalization of urban communities can be assured. A well rounded, efficiently administered program of urban renewal, coupled with the cooperation of local authorities, the construction industry, planning and other Government officials, as well as local citizens, can achieve the goals of the 1949 Housing Act. The instruments for use in achieving this goal are contained in the President's proposals which are embodied in the housing legislation now before the Congress. I trust that every Member of the Congress, regardless of party affiliation, will recognize the urgent necessity for the passage of this measure to assure the success of the wealth-producing program of urban renewal to honor our pledge to provide decent housing to all American families. Thank you. Mr. RAINS. Thank you, ladies and gentlemen, for staying with us. We will meet tomorrow morning at 10 o'clock. (The following statement has been submitted and is inserted in the record at this point :) STATEMENT OF HON. RALPH J. RIVERS, A REPRESENTATIVE AT LARGE FROM THE STATE OF ALASKA Mr. Chairman and members of the subcommittee, I wish to first thank you for the opportunity to be heard in regard to H.R. 6028, a bill to assist in the provision of housing for moderate and low income families, to promote orderly urban development, to extend and amend laws relating to housing, urban renewal, and community facilities, and for other purposes. I speak in support of this legislation, but would propose that adopt an amendment which has been submitted by Senator E. L. Bartlett to the Committee on Banking and Currency, of the Senate, before which legislation identical to H.R. 6028 is now pending. This amendment would take into consideration the high cost of room construction in Alaska. The amendment which Senator Bartlett has prepared and which I respectfully submit to this subcommittee, was suggested by Mr. Maurice G. Gebhart, executive director of the Alaska Housing Authority and would amend section 15, paragraph 5, of the U.S. Housing Act of 1937 (42 U.S.C. 1415 (5)), covered by title V of H.R. 6028, to increase the already special provision relating to Alaska payments per room from the present level of $2,500 to a new level of $3,000. It is my understanding that a parallel in existing law to the request offered by Mr. Gebhart on behalf of the State housing authority is the provision for special Alaska ceilings which now pertain to FHA mortgage insurance. According to Mr. Gebhart, the increase of an Alaska per room payment from $2,500 to $3,000 in the area of public housing would constitute a recognition of Alaska's cost level parallel to that which exists with respect to FHA mortgage ceilings. This takes into account that the public housing per room payment in States other than Alaska is $2,000. Alaska with a $3,000 per room payment would receive one-half again as much a level consistent with the finding which has already been accepted with respect to private, FHA mortgaged property. Because his letter clearly demonstrates the need for increasing the public housing per room cost limitation from $2,500 to $3,000 with respect to projects in Alaska, I respectfully request that Mr. Gebhart's letter, copy of which was sent to me, also be made part of the record in conjunction herewith. Mr. Chairman, in closing I wish to express my appreciation of the committee's consideration. ALASKA STATE HOUSING AUTHORITY, Hon. E. L. BARTLETT, Senate Office Building, Washington, D.C. April 19, 1961. DEAR SENATOR BARTLETT: This letter is in further regard to my letter of April 7, 1961, to Governor Egan, wherein I suggested that the Congress give consideration to increasing cost limitations under all sections of the National Housing Act as they apply to the construction of housing facilities in Alaska. I cited the public housing portion particularly, in view of the fact that additional units for various Alaska cities are in the planning stage. Ever since the 81st Congress passed Public Law 52, formal recognition has been given to the unique position in which Alaska finds itself in connection with housing construction costs. Numerous and detailed studies have been madeall of which prove that housing construction costs in Alaska are 50 percent higher than other high-cost areas. Numerous factors contribute to this situa tion, including practically total importation of all manufactured building sup plies, high-cost transportation, short building season, high labor costs caused by high living costs, and rigid structural requirements due to severe climatic conditions. Since the contemplated low-rent developments are planned to be of the scattered-site variety, we will be building homes instead of high-rise projects. Thus the cost factors utilized for single family and duplex construction will of neces sity apply to these. The only general community criticism we have received regarding the existing low-rent developments has been from the barracks-like appearance necessitated by the cost limitations. These required extreme economy in construction, even to the point where waivers of local building codes were necessary. Alaska presently has a very modest low-rent program consisting of 325 units located in four cities. Contemplated additions to this supply will not likely exceed 150 units. Therefore, any increase in cost to the national program brought about through the suggested increase in cost limitations would be infinitesimal. Thank you and the members of the subcommittee for your interest in our problems. Very truly yours, M. G. GEBHART, Executive Director. (Whereupon, at 3:10 p.m., the subcommittee was recessed to re convene at 10 a.m., Wednesday, May 3, 1961.) HOUSING ACT OF 1961 WEDNESDAY, MAY 3, 1961 HOUSE OF REPRESENTATIVES, COMMITTEE ON BANKING AND CURRENCY, SUBCOMMITTEE ON HOUSING, Washington, D.C. The subcommittee met at 10 a.m., pursuant to adjournment, in room 1301, New House Office Building, the Honorable Hugh J. Addonizio, presiding. Present: Representatives Addonizio (presiding), Barrett, Ashley, McDonough, and Derwinski. Mr. ADDONIZIO. The committee will be in order. Unfortunately, Chairman Rains cannot be here this morning; he is delayed, and he has asked me to start the meeting. He will try to get here as quickly as possible. Our first witness was supposed to be Boris Shishkin, representing the AFL-CIO. I don't see him here. In view of the time limitation-we have a possibility of a conference report coming on the floor shortly after noon-Chairman Rains is anxious to expedite these hearings as much as possible. Therefore we will call the next witness, Mr. Jack Adair; accompanied by Mr. Brown L. Whatley, representing the Mortgage Bankers Association. They have with them Mr. Samuel Neel, general counsel of the MBA. STATEMENT OF JACK ADAIR, CHAIRMAN OF THE LEGISLATIVE COMMITTEE, MORTGAGE BANKERS ASSOCIATION OF AMERICA; ACCOMPANIED BY BROWN L. WHATLEY AND SAMUEL NEEL, GENERAL COUNSEL, MORTGAGE BANKERS ASSOCIATION OF AMERICA Mr. ADAIR. Good morning, Mr. Chairman, my name is Jack Adair and I am president of Adair Realty & Loan Co., Atlanta, Ga. I appear before you this morning to discuss the provisions of H.R. 6028 and related bills, in by capacity as chairman of the legislative committee of the Mortgage Bankers Association of America. First, Mr. Chairman, I want to thank you and the other members of your committee for allowing us to appear before you. It is my understanding through our general counsel, Mr. Neal, that members of this committee have been furnished with a copy of this prepared statement. In view of the time element, if it meets with the chairman's approval, I will simply say that the first six or seven pages of this prepared statement deal with the section under the new proposed housing bill, dealing with the 40-year term mortgages which in ac cordance with the policy statement of the Mortgage Bankers Association we are opposing. So again in the interest of time we will skip reading this phase of it because I assume it will be part of the permanent record, and you know how we stand on that. Mr. Chairman, there are three other items of general applicability in the bill about which I would like to comment. One provision would authorize the FHA in certain cases to pay insurance proceeds in cash rather than in debentures. A second provision would authorize the FHA to reduce or do away with altogether the payment of any insurance premium. A third provision would authorize the FHA to engage in insurance programs on a "nonmutual” basis. Any one of these provisions, it seems to us, significantly alters the whole basis on which the FHA insurance program was founded. This association has, since the FHA started, concurred in the benefits to be derived from the fact that the system was a system of "mutual" mortgage insurance and from the fact that in the case of default mortgagees would receive payment in debentures and not in cash. We believe that the reasons prompting the Congress to insert these features into the program are as valid today as they were in 1934. We believe that the tendency of this bill to turn the agency into a different direction is unnecessary and not really in the best interest of borrowers or lenders. We do not believe that lenders need these kinds of "gimmicks" in order to be persuaded to participate in lending programs. If a lending program will not be used by lenders unless such advantages are made available, we believe that in all honesty it would be far better (if the Congress considers such a program to be essential) if the Government were to do whatever is necessary to finance the program directly. This does not mean that I favor a direct lending program on the part of the Government. I do not believe such "gimmicks" are necessary. I believe that lenders will and should be expected to take some risks if they are to receive the benefits of an insurance program, and among these risks should be those that are a corollary of the present system. It seems to us that programs which the Congress considers necessary can be successfully completed without such a radical departure from what experience has shown to be the essential elements of the FHA insurance program. I would like especially to comment on two items in the list of proposed amendments to H.R. 6028, compiled by the chairman and submitted for use of the committee. Suggestion No. 6 proposes an amendment which would eliminate the present prepayment penalty now required by FHA on any one-tofour family mortgage. Our association has long indicated to FHA the burdensome nature of its present requirements, and therefore, we would support this amendment in the belief that doing away with the penalty will encourage more people to pay off their existing mortgages and thus increase their equity in their homes. Suggestion No. 9 would give to FNMA a new kind of lending authority. The details of this proposal were contained in H.R. 12603 of the last Congress. This association worked in cooperation with other organizations in doing much of the preliminary work from which the proposals were developed as they appeared in H.R. 12603. |