with incomes from $4,000 to $6,000. We are now attempting to provide a tool to extend to these income groups FHA assistance. Mr. DERWINSKI. Well, wasn't one of the problems or isn't one of the problems these income groups face the fact that the cost of land to a developer, the cost of home construction is such they they do find many homes outside of their ability to entertain? Mr. WEAVER. Obviously. Mr. HARDY. As a matter of fact, one good indication of that is the fact that the income range of $4,000 to $5,000 in 1955, for example, represented 26.5 percent of all FHA mortgagors as compared with 7.6 last year. Mr. DERWINSKI. Wouldn't the solution to the problem be to construct housing at lower cost? Aren't we approaching this indirectly? Mr. WEAVER. No, I don't think so. That is part of the problem. The long-range problem we face is the problem of cost. That is why we want a program of experimentation. It is why we want research. But this is also a problem which has been with us for many, many years. It is not going to be solved directly and quickly. It is going to take some time. In the meantime we have these people needing housing. In the meantime we have a homebuilding industry needing activity. So we have to do something immediately, and this program is admittedly an experimental short-range program to fit a shortrange gap. We hope that as this goes on we will also at the same time be able to develop a long-range program to get at these longrange factors which you so aptly indicate. Mr. DERWINSKI. There is one other problem which the homebuilding industry has faced on and off and that is the occasional lack of funds since the flow of money into the mortgage market isn't constant. It changes with, for example, the changing conditions in savings and all of the other factors that affect mortgage funds. Now, when we set up these 40-year, no-downpayment loans, aren't we in effect restricting the actual amount of mortgages that could be made since we are going to be tying this money up in a no-downpayment loan that would be spread over future loans where a 10- or 15- or 20-percent downpayment could pick up some of this slack! Mr. WEAVER. Again I think you have a long-range problem and a short-range problem but I will let Commissioner Hardy answer that. Mr. HARDY. There is no question that the arithmetic works out as you say, as you extend the time of repayment of the debt, the rollover of funds is at a much slower rate. As I indicated this morning, we have felt as Dr. Weaver has just indicated, that one of the principal justifications for this approach is that it is in terms of immediate action about the only way that we can see to make it possible for families now deprived of decent houses to acquire on a very modest growing equity basis housing better in quality and probably cheaper in monthly carrying charge than the rental accommodations they are occupying. Mr. DERWINSKI. Well, let me just for a moment move on to an entirely different subject and that is the question of H.R. 6423, the open land bill. I am using the definition now contained in the bill and I quote section 104A, which defines open land space, that has economic and social value as means of shaping the character, direction, and timing of community development. Earlier in this section it men tions the rapid and wasteful expansion and sprawl of the Nation's urban areas. Now, tying these two thoughts together, take a situation where a local community in the orderly expansion of its area decided on granting, for example, permission to a subdivider to develop 200 or 300 homes in the community and finds they are in conflict with some vague idea of timing that we may arrive at here in Washington. Mr. WEAVER. This would not be arrived at in Washington. It would be arrived at in a local planning process. Washington may have facilitated the planning by some financial assistance, but it would not be Washington's timing. Mr. DERWINSKI. Well, what do we mean by timing of community development? Mr. WEAVER. The process of planning whereby the community looks at its problem, its assets, its hopes, and it brings these together through a process of getting the facts and preparing a plan for development, for meeting the problems, and for using its facilities in the way that it thinks is desirable. Mr. DERWINSKI. To what degree, then, would our regulations and our directions and sense of well-being shape a community in its desire to form its own character or direction or timing? Mr. WEAVER. We help it to do this on a planned basis and we give it the wherewithall to do this on a planned basis. We say certain grants, certain Federal aids will not be given to you unless you have an overall plan which you want. Mr. DERWINSKI. Incidentally we use the term "predominantly undeveloped land." Would this mean that a community which is basically a suburban community which has, let us say, developed the major part of its area, it would then not have any predominantly undeveloped land. It is not your intention that it be affected by this approach. Mr. WEAVER. Well, let me put what our intention is rather than answer that, if I may, I think what we mean here is, if we have a site of land which is for future development the fact that it had a few buildings on it would not make it ineligible. Otherwise you might find, for example, acres and acres with two or three buildings that would not be eligible. This is what we want to avoid. Mr. DERWINSKI. The problem in housing legislation is the complex nature not only of the bill before us but of the whole housing picture. For example, in 1 year it may be the lack of funds for mortgages, in another year it could be as you seem to feel a lack of ability for a certain income group to purchase homes, and all of these things tend to have an effect and relationship to each other. Now, we have noted and statistics indicate this, that in recent months there is a lowering of interest rates on mortgages because of the accumulation of funds. In other words, the law of supply and demand seems to be working to reduce interest rates on mortgages. Now, this is going to be a shot in the arm to the homebuilding industry. To what degree do you take into account these natural forces which exist in the homebuilding industry? Mr. WEAVER. Well, I think that the lowering of the mortgage interest rate is an indication of several things. It is an indication first that there is a less effective demand for more mortgage money and,. therefore, there is more competition among those that have it to put it out so the price goes down. As to how the public will react to a lowering in some rate or mortgage rates in this instance depends not solely upon the amount of the reduction but also upon the effective demand. This again is why we are concentrating on these income sectors where we think there is a potential effective demand so that there will be a response to this lowering of the interest rate and so that there will be a maximization of the benefits resulting from those lower rates. Incidentally, this includes Government action, too, because we have lowered some of the rates. Mr. DERWINSKI. In our natural preoccupation with the Government programs in homebuilding, home financing, and so forth, you sometimes forget that a rather substantial portion of the homes are purchased under conventional mortgage plans, nongovernmental mortgage plans and under these plans as a group, the larger the downpayment, the lower the interest rate, the smaller the downpayment, the higher the interest rate. This is because of the possible risk involved to the lender. Now, it seems to be sometimes that we run right smack into an economic problem when we set up a 40-year, no downpayment loan at an artificial interest rate, this is defying the natural laws which seem to govern the amount of interest that an investor should receive from return for a certain risk. Mr. WEAVER. There isn't any artificial interest rate on this 40-year loan. It is at the market rate. As to the impact of this on the money market and the homebuilders I will let Commissioner Hardy or President Baughman answer. Mr. DERWINSKI. I have just one question, Mr. Chairman, which might appear at first glance to be slightly astray from our subject but I think you will find it pertinent. Dr. Weaver, we will be studying at a future date I am sure the proposal of the administration for a Department of Urban Affairs. I was just thinking this is an extremely complex piece of legislation we have here and supposing we do find a Cabinet post for an Urban Affairs Department, would we not be saddling this new official in advance with a detailed housing bill which at that time he might determine is impractical to administer. Shouldn't we first set up this new Department and then have that Department come in with an overall housing bill rather than to put the cart before the horse? Mr. WEAVER. Well, I think the idea of a Department of Urban Affairs and Housing is a part of the whole metropolitan complex. This bill, the President's message, and our testimony are but first steps. There is so much left for an Urban Department to do that this bill will not clutter it up at all. Mr. DERWINSKI. Thank you. Under the proposed legislation, section 607A would permit local authorities to acquire properties, improve them and resell them to private owners. Are there localities now requesting urban renewal aid that would not have the authority because of local law to participate in this project? Mr. SLAYTON. Yes, there are. Not all local redevelopment agencies would have the authority to spend money for this. Mrs. GRIFFITHIS. Is it an insignificant amount or does it have some significance? Mr. SLAYTON. I don't have a breakdown on the States that do grant that authority. I think it is a relatively insignificant amount. We have had a fair amount of interest expressed in this already by a number of redevelopment agencies. Mr. RAINS. As a matter of fact, isn't it two States, Mrs. Griffiths, isn't it the State of Florida and the State of Utah? Mr. SLAYTON. Mr. Chairman, this goes a little bit beyond the basic enabling legislation. Some States' enabling legislation would not permit redevelopment agencies to spend money for the actual rehabilitation of the structure, even though they would have the broad authority to undertake urban renewal. Mr. RAINS. All right. Mrs. GRIFFITHS. In your judgment, should we limit the law to the number of houses that could be rehabilitated in any one project or not? Mr. SLAYTON. We think it is wiser if there is some administrative discretion. There had been a proposal to specify the number of houses or limit it by a percentage of the houses in the area. We find that this has become something of a Procrustes' bed in fitting this particular demonstration project to the whole project, and it would be wiser if we had some flexibility, although we would attempt to limit the demonstration of this administratively. Mrs. GRIFFITHS. On page 9 you point out that 96 urban renewal centers have population of less than 10,000. Could you tell me how much money they are asking for? Mr. SLAYTON. The areas under 10,000? Mrs. GRIFFITHS. Yes. Mr. SLAYTON. Twenty percent of the communities. On the funds, they are spending 2 percent of the funds. Mrs. GRIFFITHS. And how much is that, I don't recall? Mr. SLAYTON. Well, in terms of our grants that is 2 percent of $2 billion, so that would be by economical calculation $40 million. Mrs. GRIFFITHS. I would like to say that in my judgment this is one of the hardest parts of this bill to administer and I would like to tie my remarks up with the Chairman's and with Mr. Widnall's this morning on the use of urban renewal in small communities. This bill, at least when I vote on it, and I am for urban renewal, in my opinion what you are going to do is take down blighted areas, and when you reach into small communities I think there is grave danger that what you are going to be asked to do is to take down old areas so that a local A. & P. can be located there or some other type of business. I think if this were done on any large basis it would defeat this part of the bill, so I thrust that you are looking seriously at every one of these because I think it has real dangers and I believe I brought one of these to your attention. Mr. SLAYTON. Yes, you did, but I have examined fairly recently examples of renewal programs in smaller cities and I have been struck not by what you are concerned by but just the opposite, that they have been able to plan really rather sizable projects in terms of their size, the size of the locality, and it has been quite a boon to the small city, and we have some excellent examples of that. Mrs. GRIFFITHS. I hope that it works out that way and it doesn't become a rezoning program for something that happened 60 years 69408 0-61-7 ago where actually the structures have not deteriorated but have been well maintained private homes. Mr. SLAYTON. It is certainly our intention not to have that happen. Mrs. GRIFFITHS. I am sure it is. Thank you very much. Mr. RAINS. In passing for the record in order to have it complete, Doctor, I would like to ask one other question about the open land bill. The interest rate on the loans I understand would be about 38 percent currently? Mr. WEAVER. That is right. Mr. RAINS. This seems a little on the high side. Would many communities find that rate attractive? Mr. WEAVER. Well, we think that they will. Again this is an area. that only experience can show. We have informal indications that some will. I would think that we will just have to try it and see whether our guess is right. Mr. RAINS. It seems to me too high a rate and I hope it will be reduced at least by a moderate amount. Mr. Harvey? Mr. HARVEY. Thank you, Mr. Chairman. Dr. Weaver, you have made a very fine and forthright statement here and a very thorough one I might add, too, and I think you are to be commended for it. Mr. WEAVER. Thank you, sir. Mr. HARVEY. However, I am one of those who still has some reservations about the no-downpayment, 40-year plan and I just wondered as I sat here and listened to some of this testimony if we were being entirely consistent. Over here, sir, we are doing everything we can to stimulate private ownership by a no-downpayment, 40-year loan and I think you would agree with me that we can't do much more than that. About the only thing we could do would be to pay the cost and capitalize that. I don't think anybody on the committee would even suggest that, but at any rate we are doing everything we possibly can to encourage private ownership but yet over here in this same bill we are making available 100,000 additional units of public housing and the two seem entirely inconsistent to me. I wonder if you would comment on that. Mr. WEAVER. No; I don't think they are inconsistent. I think what we have attempted to say, and maybe we haven't articulated it sufficiently well, is the reason that one advocates, and certainly the reason that we advocate public housing, is that there is a segment in the population which cannot afford decent, sanitary housing unless there is direct Government subsidy. For these people we feel public housing is not only necessary but it is absolutely imperative if we are going to give them decent housing. We feel, however, that there is a segment in the population whose income is between that of those who would be the recipients of the benefits of public housing and those who can now freely in the market get decent new housing. It is this segment that we hope to benefit by the 40-year, no downpayment proposal. Mr. HARVEY. Well, are you stating, sir, that there is a group that cannot afford nothing down? That is about what we are saying. We are giving them everything at nothing down and for a $200 cost. |