Mr. COLE. Senator, I thoroughly agree as a former Member of Congress that substantive legislation should be and is properly written and recommended and presented to the Congress through substantive committees.

Senator SPARKMAN. When the cutoff came last year there were a great number of smaller towns which had just gotten their program underway. Of course, it was late coming in. I know in my State there were some 32 or 34 projects that were cut off.

What will be the status of those projects in the event new authorization somes through?

Mr. SLUSSER. Senator, those would be reviewed, and would become a part of the program.

Senator SPARKMAN. In other words, they are not dead. They would take up right where they left off, subject to review?

Mr. SLUSSER. As of now they are being liquidated. That is the preliminary loan contracts but we would review those, as, if and when the new program is presented to the Agency.

Senator SPARKMAN. That is all, Mr. Chairman.
Senator IVES (presiding). Proceed, Mr. Cole.

Mr. COLE. The next, then, Mr. Chairman, is returning to the FHA, Mr. Hollyday. Mr. Hollyday was partially through with his statement yesterday and will pick up at this point.

Senator SPARKMAN. Mr. Chairman, before we start on that may I ask Mr. Cole this question: Awhile ago you referred-while Mr. McAllister was there-to one provision that was agreed on as between the Home Loan Bank Board and the HHFA.

Is there any other provision relating to changes in the home-loan bank law?

Mr. COLE. No. In the law?

Senator SPARKMAN. Yes.

Mr. COLE. No.

Senator SPARKMAN. I understood when the message came up or when the advisory committee report came up there might be something with reference to revising the supervision. Is that included in the legislation?

Mr. COLE. Senator, are you commenting upon a possible reorganization plan?

Senator SPARK MAN. Was that to be included in the overall reorganization?

Mr. COLE. There will be, as the Senator knows and as the President announced in his message, a reorganization plan submitted.

Senator SPARKMAN. That is not included in the legislation?
Mr. COLE. That is not included in this legislation.

Senator IVES. Will you proceed?

Mr. HOLLYDAY. Yes.

Senator IVES. Do you want to summarize up to this point where you are so we will catch up with you? You can do it very briefly, I think. Mr. HOLLYDAY. Senator, the most important item that I covered, I believe, in the consideration of the committee, had to do with section 220, which is the neighborhood and rehabilitation program and I had just started discusing section 221, which has to do with low-cost housing for people displaced by public improvements. I actually read

down to the end of the first paragraph, on page 6. With your permission I would like to start at the top of page

Senator IVES. Do you want to start there on page 5, section 221?

Mr. HOLLYDAY. Yes, sir. That would be the second paragraph on page 5.

I believe section 221 is an intelligent approach to a very serious problem. Let me briefly summarize its specific terms.

Section 221 is to be available only in communities which have been certified by the Administrator of the Housing and Home Finance Agency as having workable programs for the elimination and prevention of urban blight. It would be available only for housing to be built or rehabilitated for families being displaced from their homes by governmental action in such communities. It is intended for use in those situations where there is an insufficient supply of suitable housing available from other sources to take care of such displaced families.

The maximum mortgage under section 221 would be $7,000 per unit. Senator IVES. Right there I would like to ask a question or two. What kind of a house would this be?

Mr. HOLLYDAY. I have just talked to our supervisor in the New York area and he tells me that there were a reasonable number of houses built under title I, section 8, which started in 1950-1,359 such houses were built in the New York suburban area. They were essentially 2-bedroom houses but of a stand not equal to section 203.

He tells me that the difference between what you could get for $7,000 and the section 8 mortgage ceiling, which in the majority of those houses was $4,750 and only raised last year to $5,700, and the program wasn't very active last year due to the stringent situation of the money market-that for that $7,000 you would certainly be able to have a better house than had been built with 2-bedroom accommodations in a suburban area of New York.

The figure for the Detroit suburban area, during that same time, was 2,900 houses, so a 2-bedroom house we would expect on Long Island, let us say, or in the suburbs of Detroit, a 2-bedroom house that would be, I think, suitable for decent living for individuals displaced. Senator IVES. In that connection, what would be the carrying charge?

Mr. HOLLYDAY. Our estimated national average is $62.92.

Senator IVES. What would be the rental if they were to rent the houses?

Mr. HOLLYDAY. Well, the rental usually, Senator, on these so-called low-cost, long-term housing, the rental is usually more than the payment for carrying charges.

Senator IVES. It would be around $70 at least, wouldn't it?

Mr. HOLLYDAY. Yes, sir. I would think so.

Mr. COLE. Would you pardon me just a moment?

Mr. HOLLYDAY. The figure the Administrator calls to my attention-the $62.92-does include utilities. That is an overall figure but I still think that when an entrepreneur rents houses you would expect a higher return than you would get.

Senator IVES. That is $70 rental per unit?
Mr. HOLLYDAY. $70 would be top, $60 low.

Senator IVES. In other words, this low-income group that I referred to in an earlier question I directed to Mr. Cole couldn't afford to occupy these houses, is that correct?

Mr. HOLLYDAY. No, sir. I think that ought to be specified and spelled out a bit, which I am prepared to do here on the estimate of the number of people that would be displaced, and their ability to purchase. On this basis we would go as low as about $2,200 per year for income, and up to $3,000.

Senator Ives. How could they pay rent if their income was no greater than that? How could they pay a carrying charge like that and support a family?

Mr. HOLLYDAY. I was about to insert a statement which bears on that question. May I read it?

Senator IVES. Will you read it?

Senator BUSH. I would like to have it.

Mr. HOLLYDAY. May I interpose a brief additional comment concerning the $7,000 maximum mortgage amount under section 221: It is our expectation that units produced within this limit would be generally acquired by families within the annual income ranges of $2,200 to $3,500, and mostly below $3,000. The estimated housing expense of about $63 monthly for such a house would amount to just over a fifth of the income of the $3,500-income family, and a third of the income of the $2,200-income family.

Families with incomes upward from $3,000 would more commonly desire higher priced homes which, under the terms of the bill, could be financed with section 203-that is our 1- to 4-family programmortgages with 30-year terms and downpayments as low as 5 percent. Placing the mortgage ceiling for section 221 any higher than $7,000 would run the grave danger of failing to place emphasis on production of units within the reach of families with incomes below $3,000 for whom the special advantages of 100-percent loans and 40-year terms are specially designed.

Perhaps we should also mention that the mortgagee should look upon the transaction at its inception as a 20-year loan with monthly payments based on a 40-year term.

Senator IVES. Well, I am very grateful to have that in the record, but I just want to point out again that this would not hit that average that I spoke about; the $2,200 is above that average.

Mr. HOLLYDAY. Senator, this section applies only to those people who are physically displaced by improvements in an area that has been designated, in a locality with a workable scheme for the redevelopment of their community

Senator Ives. I realize that. The thing I am trying to establish is, though, you can't take care of these very low income families on this kind of a program.

Mr. HOLLYDAY. Certainly not below $2,200.

Senator IVES. Then you have to revert to public housing. I won't get back into that. I want to ask one more question and I will subside. Does this section 221 include multiple units, too?

Mr. HOLLYDAY. Yes, sir. Multiple units are provided for only, however, where there is a nonprofit corporation, and the $7,000 mortgage per unit also applies, and it is very important to the rehabilitation of existing houses. I think I made a mistake in not bringing that out,

Senator SPARKMAN. Mr. Chairman.

Senator IVES. Senator Sparkman.

Senator SPARKMAN. Mr. Hollyday, I notice you say that of the $2,200 bracket it would require one-third of this income. Don't you think that is getting pretty high to expect people to put one-third of their income into shelter?

Mr. HOLLYDAY. Yes, sir. There is no question of that.

Senator SPARKMAN. I always felt 25 percent was just about as high as we could reasonably expect them to go. If you applied the 25-percent level where would that strike?

Mr. HOLLYDAY. Let me ask Mr. Thornton.

Mr. THORNTON. About $3,000.

Mr. HOLLYDAY. Senator, this point though is often overlooked, and that is that the prices that people pay in these neighborhoods for all commodities is very high, and in many cases, the shelter rent that is charged these people is higher than in a better neighborhood.

Senator DOUGLAS. But, Mr. Hollyday, the fact that only a millionaire can afford to live on the scale a poor man can live doesn't necessarily mean we should tolerate it. Is that true?

Mr. HOLLYDAY. Senator, I would like to give you a specific case of refinancing.

These people are deprived of the knowledge of the use of credit. The access to credit is more important than the money that goes into it.

I have in mind a man who was paying $102 for his dwelling. The wall bulged. It required a $700 repair expense. We brought in people who knew how to use credit and we consolidated his various bills. That man's payments ended up at $82 a month in place of $102, taking care of the cost of the wall, showing the use of advice from these people who know how to use credit. Most of the families we are talking about 80 percent minority groups these people's income has increased from 1940 to 1950, an average of 256 percent, so particularly lately there is more income available for these people to do something.

Senator SPARKMAN. Mr. Hollyday, I don't think that answers my question. I was talking about a family that has income of $2,200. I realize that is your minimum. Now, if you take one-third of his income it leaves only two-thirds for him to live on, and I am just using your figures: Is one-third not unreasonably high for a person to be expected to put into rent alone?

Mr. HOLLYDAY. It certainly is.

Senator SPARKMAN. I am just trying to look at it in a reasonable sense, following up what Senator Ives brought out: That while it might be that you could get down to the $2,200 level, reasonably we might expect the number at that level to be rather small, and that really the starting point is about $3,000. In other words, it seems to me that most of yours will come in the $3,000 to $3,600 bracket.

Mr. HOLLYDAY. The staff tells me here that under section 203 in 1952, new-home buyers with incomes of $2,400 to $3,000 paid an average of $68.90 monthly housing expense, and I believe the number of people-I think there is an overconservatism on your part as to the ability of these people to pay and earn. Their incomes have come up a great deal.

Senator SPARKMAN. I realize that. I am taking your figure of $2,200. That is not up. That is a fixed figure that we are arguing from.

Mr. HOLLYDAY. And the number of people that have that is relatively small.

Senator SPARKMAN. That is what I was saying, and the number in that range that would buy houses would be rather small.

Mr. HOLLYDAY. Yes, sir.

Senator SPARKMAN. Now, this may not be the proper place to bring this in, but I may not be here when you talk about the insurance features, and the regrouping, and so forth. Since you have brought in title I, section 8 housing in connection with this, and even section 203 housing-by the way, there has been a great deal of relatively low-cost housing built under those two sections, hasn't there? And there will continue to be?

Mr. HOLLYDAY. Not so much under title I, section 8, because when we gave that a lift by various measures last year we were caught in the money freeze. So the future of title I, section 8, is great in comparison to its past history.

Senator SPARKMAN. I had a letter the other day from a fellow that seemed to me to make sense and I would like to throw this suggestion in here: He said that title I, section 8 held a great potentiality for some low-cost housing-practical housing-but he said it would be much more useful if the debentures issued under that section could be usable under title II. As I understand it, it is now restricted very greatly to that one section, isn't it?

Mr. HOLLYDAY. We are following out his idea, sir. We are putting title I

Senator SPARKMAN. Thank you. I won't question you further on that.

Senator DOUGLAS. I want to get in a wisecrack, if I may, and I apologize to my colleague; at least I think it is a wisecrack. It may turn out not to be a wisecrack. Wouldn't the $2,200 man really have to have the efficiency of a $20,000 purchasing agent to be able to pull this off on the scale that you suggest?

I just don't see how a $2,200 man can pay a third of his income for rent, with all the other problems which face him of sickness and high prices of goods and high interest rates, concealed interest rates, all those things. I really think perhaps he would have to have the efficiency of a member of the National Association of Purchasing Agents, and if he had that efficiency he wouldn't be a $2,200 man. Mr. HOLLYDAY. Yes, sir.

This limit the $7,000 limit that we were referring to this limit is designed to insure provision of housing within the financial means of a substantial portion of the modest-income families being displaced from urban renewal areas. The maximum term would be 40 years and the mortgage insured by FHA could be as high as 100 percent of value. The properties covered by the insured mortgages under section 221 could be single-family homes for sale to eligible displaced families or may be projects of 10 or more units to be rehabilitated by nonprofit organizations for rent to such families. Mortgage financing is also available for single-family homes built for sale in amounts not to exceed 85 percent of value, to assist in the construction and provide financing pending subsequent sale to a qualified owner-occupant.