Senator IVES. I have to leave in about 10 minutes. I would like to have Mr. Cole follow that up a little bit. How, in light of the $7,000 limitation on the mortgage is that going to apply in New York City?

Mr. COLE. Senator, it would not apply on Manhattan Island, except, Senator, on existing housing, to be used for rehabilitation purposes. This section 221 for new construction, naturally, cannot possibly be built in high-cost land areas.

Senator IVES. I cite New York City merely because I happen to know about it. There are other cities in New York State where it would be applicable.

Mr. COLE. That is right.

Senator IVES. And many other cities in the country.

Mr. COLE. That is right.

Senator IVES. Aren't we going to have to have some kind of public housing program for them?"

Mr. COLE. We have said here a public-housing program is necessary to be continued until we find such other methods

Senator IVES. I understand this bill doesn't provide anything, does it, in the way of public housing?

Mr. COLE. This bill does not provide anything for increased public housing, Senator.

Senator IVES. That was the purpose of Senator Maybank's amendment; was it not?

Mr. COLE. That would accomplish that objective. As you are well aware, the present law authorizes 135,000 units per year.

Senator IVES. I understand.

Mr. COLE. That is the reason it is not in this present law.

Senator IVES. It would go out of existence if this law is enacted, as it stands.

Mr. COLE. It would go out of existence if the present limitation of the appropriation measure remains; yes.

The CHAIRMAN. Let me ask is it necessary for this committee to write into this bill any public housing, because we had already passed the public housing law, which act is still a law. It seems, however, from the ruling that we had a moment ago, here, that was placed into the record, that the Appropriations Committee, by their action, nullified what we did some few years ago when we authorized, by legislation, 800,000 public housing units. Therefore, unless the Appropriations Committee or the Congress, through the Appropriations Committee, has nullified our action here some 3 or 4 years ago, it isn't necessary to write it in.

Senator IVES. Isn't that a good idea, Mr. Chairman, to rewrite the section into this law?

The CHAIRMAN. That is entirely up to the committee. I see nothing wrong with it. As I said, we placed Senator Maybank's amendment in the record, and we will consider it when we start writing up the bill.

Senator LEHMAN. Mr. Chairman, I am not quite sure that I heard Senator Ives' question and your answer.

Senator IVES. I am a little bit disturbed about cities like New York, and New York is not the only one in the country.

Senator LEHMAN. I was going to ask what provision is there in this bill, for new public housing.

Mr. COLE. There are no provisions in this bill for new public housing, Senator, for the reason that no new basic legislation is necessary in my opinion. The present law authorizes 135,000 units per year. This committee, unless it wanted to expand the 135,000 to a greater number, in my judgment, can or cannot act upon that present law, as you see fit. That is within the province, of course, of this committee. Senator LEHMAN. As I recall it 2 years ago, 35,000 units were authorized.

Mr. COLE. Two years ago; yes, sir.

Senator LEHMAN. Last year 20,000; is that correct?

Mr. COLE. Not authorized, sir; that was through the Appropriations Committee. It was a limitation on the basic rate authorized in the existing substantive legislation.

The CHAIRMAN. If the Senator will yield, so we may keep the record straight, this committee passed-and it is still existing law, the Housing Act of 1949-a law calling for 810,000 public housing units at the rate of 135,000 a year. That law has never been repealed, but it has been controlled and pretty much nullified by the Appropriations Committee, and of course, later by a vote of the Congress, from year to year, and therefore, we didn't think it was necessary to write any public housing legislation into this act, because it is already there. Senator ROBERTSON. Mr. Chairman, we can only authorize any bill. We can't appropriate.

The CHAIRMAN. That is right.

Senator DOUGLAS. Mr. Chairman, following out your line of thought, is it not true that in the appropriation measures adopted last year, and in the debates, that the specific statement was made that no further appropriations would be made for public housing unless there was additional authorization from Congress?

The CHAIRMAN. I don't know that it was

Senator DOUGLAS. I think the record will show this.

The CHAIRMAN. I will say this: Before you arrived, Senator Maybank introduced an amendment to this bill to cover public housing, and placed in the record an opinion from the attorney for FHA that the action of the Appropriations Committee, later concurred in, of course, by the Congress, nullified our legislation on public housing. Senator DOUGLAS. That was my understanding.

The CHAIRMAN. Therefore, if you are going to have any public housing this year, or rather, have any legislation on public housing, we have to put it in this act.

Senator LEHMAN. I think that is important to keep in mind.

The CHAIRMAN. The amendment has been introduced by Senator Maybank.

Senator ROBERTSON. There is another phase of section 221 that could pertain to New York City. I am no expert on slum conditions up there, but I have seen some that are primarily apartment slums. Section 221, in this bill, provides for nonprofit corporations building apartment houses, and it could be utilized there to tear down the old dilapidated apartments. When that is done, section 221 authorizes aid to the city in providing recreational facilities, and rebuilding of schools and other things that will make a community attractive and modern. That certainly would apply in New York, as anywhere else, because if they can't build apartment houses for less than $7,000 a unit, they are in a bad way.

44750-54-pt. 1- -5

Senator IVES. May I observe in that connection that it might apply in a sense, but the question I am disturbed about is whether it applies sufficiently.

The CHAIRMAN. Let me say this: What we are trying to do in this section, and frankly the thing that I hope we can do, is to set up some sort of a system whereby people can buy their apartments, or their houses, over a long period of time on payments about equal to that which they would pay as rent in public housing so we can get more people buying them.

Senator IVES. The question, Mr. Chairman, is whether the type of tenants you have in public housing today, with that type of person that would be workable. I doubt it would be.

The CHAIRMAN. There are about three kinds of people in the United States as far as housing goes: The person who can buy any price house; the group that can pay $50,000 or $75,000 a year; the second group which can pay very little but are working and have some incomes, and that is the group, of course, that we are trying to cover; and then there is the third group, of course, which have absolutely no income at all, which either the Federal Government or the State government or the city government or some other governmental agency must take care of.

Senator IVES. That is exactly my thought. Unless we have a distinct provision in this bill to take care of that group by way of public housing they will be utterly neglected.

The CHAIRMAN. That is the group that just have no income and society must take care of them.

Senator ROBERTSON. What group would you put those in that don't work and never intend to work?

The CHAIRMAN. I presume you would have to put them in the last group that society has to take care of. That is generally what happens. But we are trying to work out a plan if we can whereby the people with very, very little income, that are now living in public housing projects, can acquire their own house or their own apartment, even though the payments are very, very small, and even though it might take 40 or 50 years to pay for them. We think it would be less expensive to the taxpayers and much better for the country as a whole if we handle it on that basis.

Proceed, Mr. Cole.

Mr. COLE. The proposed section 221 FHA program should be particularly helpful in facilitating urban renewal programs in many communities by providing housing for many of the families displaced from their homes as a result of urban renewal activities. The enforcement of local housing codes to reduce overoccupancy, the rehabilitation of housing, the clearance of slum areas, and other renewal activities generate needs for housing for relocation purposes. The relocation needs of the low-income families, particularly the minority group, are particularly acute and require special provisions.

The section 221 program would make mortgage insurance available on very favorable terms so that displaced low-income families could buy these homes or acquire them on lease-and-purchase options. The maximum mortgage amount would be $7,000 and not in excess of 100 percent of value for a single-family dwelling where the mortgagor is the owner-occupant.

The CHAIRMAN. Will you yield a moment? We don't seem to be following you.

Mr. COLE. I am sorry; I am on page

The CHAIRMAN. Are you jumping around?

Mr. COLE. I did when we picked up the questions on section 221. I am on page 27 of the printed statement. Mr. Chairman, I must apologize. I intended to call it to the attention of the committee. In view of the questions on section 221 I thought it better to go to the part of my statement dealing with that section, so we are on page 27. I apologize for not informing the committee of that.

Senator DOUGLAS. Mr. Cole, on what page in the bill is section 221? Mr. HOLLYDAY. Twenty-five, sir, I think that is.

Senator DOUGLAS. Thank you.

The CHAIRMAN. You have a copy of this summary of provisions of the Housing Act of 1954?

Mr. COLE. Yes.

The CHAIRMAN. I think if you will keep that before you and your people will keep that before them, it will be helpful here. We will keep a copy of that before us, too.

Mr. COLE. A minimum cash outlay of $200 would be required. Builders would be permitted to obtain 85 percent loans to facilitate construction and financing pending subsequent sale to qualified owneroccupant purchasers under purchase contract or lease-option agreements. The maximum term is fixed at 40 years.

Mortgage insurance would also be provided under this section for the repair or rehabilitation of dwellings for use by 10 or more families as rental accommodations for qualified displaced families where the mortgagor is a non-profit corporation, association, or organization, public or private, which is regulated under Federal or State laws as to rents, charges, and methods of operation. The maximum mortgage would be $7,000 per family unit and not in excess of 100 percent of value, with a maximum term of 40 years.

There is one other matter about the section 221 program to which I want to call particular attention. It should be recognized frankly as an experimental program.

Senator MAYBANK. You say regulated by State laws. Supposing there is some State that doesn't regulate it?

Mr. COLE. Senator, in such a case, they could set up such nonprofit organizations as are authorized

Senator MAYBANK. If some State did not have proper legislation on the books-I am just thinking out loud-they could, as you suggest, sell to private organizations?

Mr. COLE. They could then be regulated by the FHA in my opinion, as a part of the insurance contract.

Senator MAYBANK. How do you mean?

Mr. COLE. Through their regulations, through the authority which they have. The FHA could do it as a part of the insurance contract and that would be pursuant to Federal law.

Senator MAYBANK. The door wouldn't be closed to any State because there is an FHA in every State?

Mr. COLE. That is correct.

Senator MAYBANK. Again, if I might congratulate the Administrator and the officials of the Housing Authority on paying up the FHA. It is certainly very close anyway.

Mr. COLE. Yes, Mr. Hollyday is very appreciative of that.

Senator MAYBANK. I understood that the Treasury was to be paid up by FHA.

Mr. HOLLYDAY. That is correct. On Thursday morning we give them a final check for $16 million, which will take care of principal and interest, a total of $85 million.

Senator MAYBANK. Therefore, the FHA treasury owes no more money.

Mr. HOLLYDAY. That is right.

Senator MAYBANK. Do you remember in years gone by when we increased the FHA authorization and the Treasury was always going to be stuck according to some people.

Mr. HOLLYDAY. Yes, sir.

Senator MAYBANK. We owe nothing after this week?

Mr. HOLLYDAY. That is correct, sir.

The CHAIRMAN. You will return to the Treasury all the money they advanced you?

Mr. HOLLYDAY. Yes, sir, plus $20 million worth of interest.

Senator DOUGLAS. I want to add my words of commendation to the Administration on this. This is a principle which I struggled for in connection with the Federal Deposit Insurance Corporation and which we got adopted by them. It has been adopted by one of the farm loan organizations in paying back their advances, with interest, and I want to congratulate the Administrator on that also. I think it is a sound policy.

Mr. HOLLYDAY. Thank you.

Senator DOUGLAS. We appreciate your work very much.

Mr. COLE. There is one other matter about the section 221 program to which I want to call particular attention. It should be recognized frankly as an experimental program―

Senator MAYBANK. I want to repeat again for the record: If there is any State that doesn't have State laws to cover what you are speaking about now, section 221, through the FHA, they can qualify? Mr. COLE. Yes.

Recognizing it as such, I am strongly of the opinion that it is very necessary and a very worthwhile program. The development of a better supply of adequate housing for families of low income is one of our most important and pressing problems. The urban renewal program contemplated by this bill necessarily will displace many families of low income from the unsatisfactory dwellings in which they are now living. I do not propose to turn my back on this important problem. That is why I feel so strongly that this section 221 program ought to be tried.

It is an effort to develop a practical means for making it possible to meet more of this particular need through private enterprise. But, to me, private enterprise means not only that the housing is built by private builders and owned and operated by individual families or private long-term mortgage credit supplied by private lenders who obtain the necessary funds from private sources-not from the Federal Government. Section 221 offers every inducement to make this possible. It provides a means under which lenders can invest funds in such loans without risk of loss. It provides a means under which the income hazards of long investment at a fixed rate of return are minimized by permitting any such loan in good standing to be