1 Calculated with garage at 75 percent of actual, and basement at 50 percent of actual. 2 Best available estimate.

Senator SPARKMAN. Our next witness is Admiral Thornton C. Miller, inspector of chaplains of the United States Navy. We are glad to have you here.

Senator FLANDERS. I will be glad to know what you find on inspection.

STATEMENT OF REAR ADM. THORNTON C. MILLER, CHAPLAIN CORPS, UNITED STATES NAVY

Admiral MILLER. That is a great story,

sir.

Senator FLANDERS. But not pertinent to our inquiry.

Senator SPARKMAN. Do you have an assistant with you that you would like to bring around?

Admiral MILLER. No, sir; I have not.

Senator SPARKMAN. Do you have a prepared statement?

Admiral MILLER. No, sir.

Senator SPARKMAN. Áll right, sir; you may be seated, if you wish, and just proceed in your own way;

Admiral MILLER. I have spent about 30 years working with families in the service of the lower pay brackets, and in 1938 in San Diego we had been having some serious difficulties as to discipline.

We made a survey, and discovered that the major portion of our disciplinary problems came from the families who were living in units which might be called almost slum units, because of their low pay,

and the places they were living. As a result of that, we ran onto the idea that we might call some of our families together and see if we could not help each other in improving the housing situation.

At that time we organized a Navy Homebuilders' Cooperative, a nonprofit organization, and it was incorporated in the State of California on the 11th day of October 1948. We started out, and these enlisted men got together and built 16 homes, averaging from $2,200 to $2,800.

The electrical union, the plumbers' union, and other unions in the city, after we contacted them, would permit a man to go in and work in his own house, and the contractor would give him the same salary he would pay an electrician or a plumber, or a man doing that similar type of work.

He could turn the check right in on his home.

In this cooperative, then, we built these first 16 houses. I remember so distinctly the results. We had some problem boys, with families. When they built a house they ceased to be a problem. It was one of the finest morale boosters we had ever had.

I might tell you this, that over 50 percent of the boys who started out in this very small cooperative became commissioned officers in World War II.

Now, since the war, the cooperative, I understand, has picked up where it left off, and they are building many houses now. I took the matter up with the Chief of Naval Personnel, who is always interested we are always interested in the housing of our personnel, and it has always been a serious problem. I took it up with Vice Admiral Sprague, and he heard my story and thought it was interesting, but not until he went out to the west coast, and was on duty as commander of the Air Force of the Pacific Fleet did he have an opportunity to investigate this particular situation.

I should like to read for you three paragraphs from a letter written to me by him recently about the Navy Home-Builders' Cooperative.

I had an opportunity yesterday to look at four of the houses under construction under the cooperative plan with which you are so familiar. My guides were Charlie Hatcher and David Rubenstein.

You would be proud to see the houses they are currently working on. It appears that they will cost about $9 a square foot, and are of excellent workmanship and material throughout. Houses of similar character would cost between $10,000 and $12,000, but will cost the co-op owner in the neighborhood of $7,350. It is really a remarkable showing.

In addition to the above, I would like to suggest that you be very helpful to these boys, and if you could make a visit out here and exchange ideas, you might help them in future expansion of the program.

Naturally, being a chaplain, my interest is in the individual, and his morale, and the only thing that I am competent in saying at this place here is that our Government will stand long on the character and morale of the individual citizen, and if such a program as I understand you are contemplating here is put into effect, where you do not hand the man some money but you give him an opportunity, as an individual, to become self-respecting and do something for himself, and instead of paying exorbitant rent he pays on this house he is building, it is his own, and his morale is changed.

He becomes a responsible citizen. He assumes more responsibility. He is more capable of doing the thing that he ought to do as a good American citizen.

I want to close my remarks by saying that we did not believe it was a good plan to pick out an area and build it all up as a Navy community. These boys went any place they wanted to and got a lot and built a house.

It made them a part of the community. Their children were in the schools. They were on the school boards, or in the Parent-Teachers' Association. They had a feeling of being good Americans.

Senator SPARKMAN. Admiral, two of the gentlemen connected with this particular cooperative called me, Saturday I believe it wasFriday or Saturday and talked with me about it. I believe one of the gentlemen was named Hatcher.

Admiral MILLER. Hatcher. He was an enlisted man then. He is now a retired officer.

Senator SPARKMAN. But he is active in the operation of this project? Admiral MILLER. One of the original members of this project. Senator SPARKMAN. And another man named Rubenstein? Admiral MILLER. He is the man they contracted with to build for them. He is a contractor in that community.

Senator SPARKMAN. Most of my conference was with Mr. Hatcher, and I gathered he was the one who represented the group. He told me that he wished very much that he could come to Washington to tell of their experience out there, but unfortunately they did not have the funds with which to do it, but he wanted to tell me over the telephone. He just wanted to bear testimony to the fact that such a project was feasible, that it had been administered well there, and successfully. The payments had been met, and it was a working project.

Now, he made reference to something, and I wonder if you can give us a little light on this. It may be that Senator Flanders or Senator Bricker or some other one would know this.

He said that under a law that the State of California passed they found it possible to get 3 percent money. I don't think I am misunderstanding it, but can you tell us just what he referred to?

Admiral MILLER. I understand that California did pass a law loaning a certain amount of money for 21 years at 3 percent.

it?

Senator SPARKMAN. Then the State itself lends the money; is that

Admiral MILLER. That is something new,

Senator SPARKMAN. I understood him to say they got 3 percent money under a law that the State of California had passed.

Admiral MILLER. That is something entirely new. The way we worked in the beginning, and have worked up until almost the present, is under the normal set-up of the FHA,

Senator SPARKMAN. And borrowed funds that way?

Admiral MILLER. Our cooperative had two plans, one to help the individual get the necessary down payment, or own his lot, or whatever was necessary to meet the FHA requirements.

The other was to get a contractor who would work on us, and instead of charging a flat 10 percent per house, if we built 50 houses, we would charge probably 6 or 4 or 5 percent, and a man could help in that project himself if he got 30 days' leave to do it.

Senator SPARKMAN. In other words, it was a cooperative undertaking all the way through, and according to your experience it has worked out successfully, very successfully.

Of course, my interest is particularly in the low-salaried man in the service.

I was thinking of this as you were going along, particularly in the case of the armed services. How do they meet the problem of frequent transfer of personnel?

Admiral MILLER. If I may take a minute's time, I can tell you how this cooperative did it; several ways. For example, a man finished his house, and about a week later he was ordered to another part of the world, maybe 3,000 miles away.

He could do one of two things: He would put his contract in the hands of the cooperative. They would rent his house to one of their members who would require a year or so for him to get his down payment ready. He would live in a brother cooperative member's house. He would pay the payment, plus enough for upkeep, and his rent was then even lower than the normal rent. He could do that and still own his house, or he could turn the contract over to the cooperative, and some other man would pick it up, and carry it on.

Senator SPARKMAN. Then, too, I suppose if he were going overseas, and not taking his family with him, the normal thing would be to leave his family there in the house?

Admiral MILLER. That is correct.

Senator SPARKMAN. Senator Maybank?
Senator MAYBANK. I am sorry I was late.

Senator SPARKMAN. Are there any other questions?

Senator MAYBANK. I could not be here because I had a delegation from the Charleston area up, so you will have to forgive me. Senator SPARKMAN. Mr. Dave Krooth.

Will you identify yourself for the record, and then proceed in your own way?

Mr. KROOTH. Yes, Senator.

STATEMENT OF DAVID L. KROOTH OF THE NATIONAL HOUSING

CONFERENCE, INC.

Mr. KROOTH. Mr. Chairman and members of the subcommittee, my name is David L. Krooth. I am appearing for the National Housing Conference, a nonprofit organization, which, for almost 20 years, has been a spokesman for the public interest in housing. Its objective is the achievement of a comprehensive and balanced housing program that will meet the needs of all the people.

To save the time of the committee, we will not go into any broad statement of the economic and social justification for this legislation. All of these matters were covered in our testimony before the committee last July relating to the present title III of the bill as reported by this committee.

Our statement today will be concerned solely with Senator Maybank's substitute for the present title III. We feel that this substitute is a great improvement over the present provisions of title III in a number of respects. In one respect we feel the substitute requires amendment to bring it into conformity with a superior provision of the present title III of the bill.

The first feature of the substitute title which represents a substantial improvement over the present title is its use of private capital financing methods to accomplish the same objectives. Apart from

$25,000,000 of preliminary loans to be made on a basis of not to exceed 5 percent of the cost of projects, which will be repaid out of permanent loan proceeds, all of the loans will be made by a nationalmortgage association for housing cooperatives.

This will be a mixed-ownership corporation similar to farm-financing cooperatives and the Federal home-loan banks.

The Federal Government would initially subscribe for $100,000,000 of stock in the mortgage association, and each borrower would be required to subscribe to stock in an amount equal to 71⁄2 percent of the loan requested.

The private stock subscriptions would gradually retire the preferred stock purchased by the Federal Government so that all of the stock would ultimately be privately owned. Besides lending money obtained from stock subscriptions, the mortgage association would be authorized to borrow money through normal private channels by issuing bonds against the mortgages in its portfolio, securing its loans under title III.

By issuing the bonds against the pooled assets of mortgage loans, the bonds get the protection of diversity of security, and also such consolidated financing can better tap the national market and achieve lower interest rates.

Moreover the bonds do not involve the same servicing costs as mortgage loans themselves. The bonds of the mortgage association would be guaranteed by the Government similar to the present FHA guaranties and other guaranties of private housing financing.

Second. The substitute title III contains additional features which will assure that this program will involve no cost to the Government. Both the substitute and the original contemplated that the program to make housing available to middle-income families would involve no subsidy.

However, the substitute bill contains additional provisions which eliminate the likelihood of the Government being called upon for any contingent liabilities.

Thus, the interest rate at which the money is to be loaned to cooperatives and other nonprofit corporations is to represent the cost of the money to the Mortgage Association, plus one-half of 1 percent to cover the cost of administration and one-eighth of 1 percent as a reserve against losses.

It should be noted that, in addition to this one-eighth of 1 percent reserve against losses, there is the further protection resulting from the required stock investments by borrowers equaling 71⁄2 percent of each loan.

These stock investments in the mortgage association will add to the capital of the association and provide an additional cushion to absorb any losses on loans.

Actually, with housing to be provided at the moderate monthly cost contemplated by this title and with the vast need for this housing among moderate income families, it is highly unlikely that there would be losses on the mortgage loans made under this program.

Third. The substitute title involves greater recognition of the cooperative principle by not only providing for stock subscriptions in the mortgage association by borrowers, but also providing that two of the five directors of the association are to be selected from among representatives of cooperatives.