feel that our membership is particularly hard hit, since it cannot meet the rentals in the $85 and $95 category in the apartments now being built by FHA.

Congressman Buchanan raised a question about the effect of this bill on the construction industry for 1950. He mentioned that the industry is presumed to be operating at a very high level, and he raised. the question whether this bill might possibly mean that the industry would not be able to furnish by implication the labor and materials to do an extra housing job.

In that connection, I would like to call attention to the fact_that the construction figures published by the Labor Department and the Department of Commerce show that, although it is quite true that 1949 was a record construction year, they show, also, that in the private housing field the 1949 total was below 1948.

Construction in industrial and commercial buildings has definitely slackened, and as a result there is labor and materials available to put additional time and effort in on the home construction part of the industry.

Mr. MITCHELL. Mr. Chairman.

The CHAIRMAN. Mr. Mitchell.

Mr. MITCHELL. Has the American Federation of Labor made any estimate as to the number of homes which will be constructed in 1950?

Mr. HENLE. Under this new program?

Mr. MITCHELL. Under the present program, assuming there are no legislative changes.

Mr. HENLE. We think that the production of housing units will fall below the 1949 level, and we recognize, of course, that a lot of the forecasting cannot be done with pin-point accuracy, and a lot, also, depends on the action the Congress takes on the various housing measures before it.

Mr. MITCHELL. Assuming that 608 is not continued, and certainly the FHA has indicated that it will not push that program even if Congress extended the authorization; how much will this reduce home construction? Do you know how many units were constructed in 1949 under the 608 program?

Mr. HENLE. I am sorry, I don't have those figures available, but I would certainly say that for 1950 it would certainly be that the number of units that would be constructed under the new 207 program instead of the old 608 program would fall substantially below the number constructed under the 608 program.

The CHAIRMAN. What is the membership of your organization engaged in the building industry?

Mr. HENLE. Approximately two million.

The CHAIRMAN. What is the total membership of your organization?

Mr. HENLE. Approximately eight million.

The CHAIRMAN. That will mean probably 30 million people dependent on members of the American Federation of Labor for their daily bread; isn't that true?

Mr. HENLE. I think that would be a very good estimate. The only other question that I wanted to make a couple of comments on was a question that Congressman Kilburn raised regarding the 50-year mortgage.

He pointed out that it might seem perhaps a little unwise and impractical for a young couple settling in a new house to accept a 50year mortgage, assuming that the couple was 30 years old at the time that they purchased the home. That would mean that the home would not be mortgage-free until the couple was 80 years old.

There are a couple of things that I think need to be brought out in this connection: First of all, it must be realized that the length of the period for amortization is a very important factor in determining the total cost or rent of any particular dwelling unit. It is one of the chief ways whereby the cost of the unit can be reduced to a couple or a family buying a new house or renting a new apartment.

For that reason, we vigorously favor the 50-year terms which are now in the bill. We favor it as a method for reducing the cost of the apartment.

In this connection, however, I want to point out this: There is no reason why individuals and families should not be able to accelerate their payments under this particular bill. I am sure a program whereby that can be done can be effectively worked out. Then, in addition, let me point this out: A family moving into a new home or a new unit feels that that home is theirs and acts as though it is their own personal property, even though there is a mortgage on it.

I think I can say from personal experience that young families moving into a house do not feel that the house belongs to someone else simply because there is a mortgage on it. They obtain the benefits of home ownership, even if they have to make monthly payments on their mortgage.

It is far better to obtain those benefits of home ownership under an extended amortization period of 50 years than not to obtain the benefits at all. In other words, without the 50-year mortgage, the costs rise substantially and the couple would not be able to afford the new home at all.

Mr. KILBURN. In that connection, according to that argument, why not make it a hundred years?

Mr. HENLE. In several European countries, amortization periods do run as long as 100 years.

Mr. MULTER. And without loss of any of the money invested?
Mr. HENLE. That is correct.

Mr. KILBURN. Do you favor 100 years?

Mr. HENLE. We consider our proposal a little more practical and we think that 50 years is a practical, effective program without heading for something that the people would throw up their hands at.

One other statement that I think you made, Congressman, that I would like to comment on. You mentioned that we built homes faster last year than any other country.

Mr. KILBURN. The last few years.

Mr. HENLE. I do not believe that is true. I have seen certain figures, although I don't have them before me, that indicate that in 1949 a number of countries, based on population, built more homes than the United States. I am fairly certain that both New Zealand and Sweden were included in that group.

Mr. O'BRIEN. During these hearings, sometimes occupants are referred to as renters and sometimes witnesses refer to them as purchasers. Does that depend on the cooperative itself whether its mem

bers, occupants of these units, rent or purchase a contract, or how does that work out?

Mr. HENLE. I think perhaps a certain confusion over language has developed in the discussion of the bill. As we see the program, under the cooperative-housing feature, everyone would become an owner; they own their own unit. It may be that their unit is an apartment unit, a type of unit which was normally rented on the private market rather than sold and so, therefore, there may be some carryover of that language, if you see what I mean, but actually as we visualize the program, there will be both apartment-type units and single free-standing homes built.

Mr. O'BRIEN. Under this bill, can cooperatives be organized and construct their buildings and then rent the apartments strictly on a rental basis to members of the cooperative?

Mr. HENLE. I do not believe that that could be done.

Mr. O'BRIEN. The occupants of the unit then have to be members of the cooperative; is that it?

Mr. HENLE. Yes. Normally, I believe there would be rules and regulations of the cooperative governing that particular point.

Mr. O'BRIEN. And each occupant then would be buying his unit on an installment basis?

Mr. HENLE. That is correct; yes.

Mr. O'BRIEN. There is no provision for a purely rental relationship? Mr. HENLE. I think that would depend on the administration. I don't know whether the bill itself would prohibit it.

Mr. O'BRIEN. Couldn't a cooperative be organized under this bill that would rent units?

Mr. HENLE. That certainly isn't the type of program that we have in mind. It may very well be that under the nonprofit

Mr. O'BRIEN. What is the type that you have in mind? Under the type that you have in mind, what is the status of the occupant of the apartment? Is the purchaser building up an equity which he will ultimately own, or is he a renter?

Mr. HENLE. He is a purchaser building up his equity. Then is this arrangement for nonprofit corporations to construct units, and it may be that under that provision such units will be built for rent, but that is not the primary type of emphasis that we feel would be coming out of this bill.

Mr. MULTER. This bill doesn't provide for rentals. It is for multiple and single or free-standing homes?

Mr. HENLE. That is right.

Mr. MULTER. We have heard a great deal in the last few years that the way to overcome inflation was to increase production without increasing costs. Now, the argument is being raised against this bill that this is going to increase production and, therefore, increase inflation.

Do you care to make any comment about that?

Mr. HENLE. I am very glad that you brought that up. In our view, this bill is anti-inflationary and very clearly so. For the first time it seems to us that the country is offered a program whereby the speculative elements in the real-estate industry, those elements which have been helping to boost costs and boost prices, can be taken out of at least a certain part of the construction industry.

The cooperative provision, the nonprofit feature, of this bill will mean, if it is adopted, that there will be pressure on all parts of the industry to reduce costs and to give the consumer a better value for his housing dollar, and I think, therefore, it is clearly anti-inflationary.

Mr. MULTER. It is the considered opinion of the responsible authorities in your organization that this will not create any undue competition, either in the labor or material field, so as to boost costs.

Mr. HENLE. We think that there is plenty of room in the building construction industry, both on the labor and material side to go ahead with this program.

Mr. MULTER. And even if under this cooperative building, contemplated by this bill, there should be no decrease in the actual cost, taking a comparative unit of the same kind, one in private industry and one in cooperative building, at a cost of $7,000, $8,000, and $9,000, as the case may be, you can still have a lower monthly gross maintenance charge because of your 3-percent rate and your 50-year amortization in the cooperative building as against the other building; isn't that so? Mr. HENLE. That is quite true.

Mr. MULTER. Then, if because of your cooperative building, you can cut your cost under that $7,000, $8,000, or $9,000 per unit, there will be a still further saving?

Mr. HENLE. That is right. Then in addition, a very important feature of the program will be the type of self-help and tenant maintenance under the cooperative project that will save additional dollars to the owner.

Mr. MULTER. Thank you.

The CHAIRMAN. Are there any further questions?

(No response.)

The CHAIRMAN. If there are no further questions, you may stand aside.

Mr. HENLE. Thank you.

The CHAIRMAN. We will call on the Right Reverend Monsignor John O'Grady.

Mr. O'HARA. Mr. Chairman, I have a letter from the Chicago Mortgage Bankers Association, which was sent to me as the only Chicago member of the committee. I request that it be put in the record, to afford the members of the committee an opportunity to consider the suggestions made.

The CHAIRMAN. Without objection, it may be put in the record. (The letter referred to is as follows:)

Representative BARRATT O'HARA,

CHICAGO MORTGAGE BANKERS ASSOCIATION,
Chicago, Ill., January 30, 1950.

Banking and Currency Committee,

House Office Building, Washington, D. C.

DEAR REPRESENTATIVE O'HARA: We are advised that the new housing act will not provide for an extension of FHA section 608 which expires on March 1, . 1950, but that a revised section 207 act will be passed to aid in securing the building of rental housing in those sections of the country where rental housing is still needed. Chicago is one of those areas still in need of rental housing but the present section 207 would have to be drastically changed if we are to continue any apartment buildings here.

Under section 608, where there are high building costs, most recent building has been multistory and has contained small units, while our greatest need is three-story, walk-up buildings, containing two- and three-bedroom apartments.

A recent multistory building built under 608 with a loan of $933,000 would have had a loan of only $617,000 had it been built under the present 207 act.

In order to encourage apartment building, especially of the three-story, walk-up type needed in this area, we suggest the following changes in section 207:

1. A continuation of the limit of loan of $8,100 per unit in multistory buildings where the average apartment size is not under three and one-half rooms, with a limit of $10,000 in three-story, walk-up buildings where the average apartment is not less than four and one-half rooms.

2. The upper list of principal, interest, and FHA mutual mortgage insurance payments should be set at 91 percent of the cash available for debt service. At the present time, section 207 requires that 85 percent of the effective gross income be used in arriving at the net income of a property.

3. The net income permitted before depreciation should be 72 percent of the replacement cost instead of 61⁄2 percent as at present provided. A 61⁄2 percent is satisfactory in low-cost areas but not in high-cost areas.

4. The present 207 loan provides for 40-year amortization at 4 percent interest, 22 percent amortization. In some respects, this type of amortization is better because the interest reduces and payments are, therefore, less as the building becomes older. However, we suggest 2 percent amortization so that the total mortgage requirement would only be 62 percent.

5. We suggest that a loan be based on a minimum of 85 percent and a maximum of 90 percent of current costs instead of December 1947 costs.

We believe that section 207 revised along these lines will be of immediate benefit to the building industry and to the public at large in providing needed housing for them.

Very truly yours,

HARRY H. SALK, President.

The CHAIRMAN. We will next hear from Rt. Rev. Msgr. John O'Grady.

STATEMENT OF RT. REV. MSGR. JOHN O'GRADY, SECRETARY, NATIONAL CONFERENCE OF CATHOLIC CHARITIES

Monsignor O'GRADY. Before presenting my own statement, I would like to present a statement on behalf of Monsignor Ligutti, director of the National Catholic Life Conference, endorsing in broad outline the principles of this bill, and I would like to submit that as a part of my testimony.

I am greatly interested in this bill and I have been interested in many of the things that have been said around here about it. I have been interested in it as a means of providing for the middle-income groups. I have supported this low-cost public housing with the idea. that it would be confined to very low-income families, the low wage earners and that it would not get into this middle-income group, because I didn't want to see the element of subsidy entering into the support of the middle-income groups in our country, because I do not see how the economy can subsidize middle-income groups.

Now, I have been greatly confused in recent months about this whole question of what FHA is doing under 608 and 203. I have seen the large clearings in many cities in the United States-Los Angeles, Detroit, Chicago, Milwaukee, and many other cities. I have noticed, for instance, and one of the things that has impressed me about the shortage of housing for the middle-income groups was what I saw recently in the city of Los Angeles.

They have been clearing about 12,000 people out of the Bunker Hill area in Los Angeles and I was amazed to find that very, very few of them qualified to be admitted to the public low-cost homes.

Part of that clearance is due to the new speedways, and we have the same situation in many other cities. I have been interested in these new improvements, for instance, in the city of Chicago, and