FOR FANNIE MAY

Within the President's committee there was a good deal of dispute over some of these recommendations, especially the last. The builders wanted the National Mortgage Marketing Corp. to have government backing, so that it would support the committee's proposed programs for guaranteeing mortgages in "urban renewal" areas and for guaranteeing 40-year, low downpayment loans to poor families. It does them little good, the builders argued, to guarantee a 40-year mortgage if private money is not willing to buy that mortgage.

The argument is almost sure to be hashed over in Congress, and it appears that Fannie May still has a chance. At all events, money is becoming more plentiful. Interest rates are softening. Banks and insurance companies are buying more and more FHA-guaranteed mortgages, and pension trust funds are seriously considering them. A privately owned secondary mortgage facility, if one is set up, could conceivably serve the builders well; but if it did not perform as the builders thought it should, they surely would throw their weight around in Washington. That weight, these days, is considerable. Taking everything together, it seems reasonable to anticipate that the housing industry will continue to get the kind of financing to which it has been accustomed.

SCRAPPAGE AND REHABILITATION

There may be one flaw in the picture. Vacancies in multifamily units in the cities are rising fast, but are still low among single-family units. What will happen if builders turn out such irresistible houses at such irresistible prices that people rush out and buy new houses as they buy new cars? That is, what will happen to the houses nobody wants?

When a car has run its life it can easily be driven away and scrapped. But a house that nobody wants cannot ordinarily be demolished so easily. Not being readily movable, it stands empty, a burden on the community.

The answer is not wholly clear, for the housebuilding industry has never enjoyed a true replacement market of any consequence. Over the long run, however, the question should provide its own good answer. With housebuilders still underselling their market, a high vacancy rate should result not in a distressed market for expensive housing, as it did in the late 1920's, but in demolition of wornout, dilapidated, submarginal housing. Dwellers in a substandard house, when confronted with the opportunity of living in a modern prefabricated house and acquiring an equity in it to boot for about $50 a month, are not going to stick to their old houses. What will happen to the obsolete vacancies is exactly what should happen: they will become the problem of the community.

This brings up a problem whose solution can cut into the potential new-house market-the well-known problem of urban blight. As big cities lose more and more middle-class citizens to the suburbs, they are being left with an increasing percentage of low-income families, who always account for a large percentage of the city's expenses but pay only a small part of its taxes.

What must be done is all too well known: city governments and industry must jointly take inventory, replace and plan new neighborhoods, undertake programs to help (and in some cases force) owners to maintan homes to minimum standards or destroy them; they must set up courts to enforce new ordinances; enforce proper land utilization; and where necessary they must subsidize housing locally. Many cities, such as Los Angeles, Milwaukee, and Chicago (Fortune, December 1953), have undertaken rehabilitation programs, but many others have done little but talk. So the ability of the mass builders and prefabricators to provide decent housing outside the city for the lowest income groups may be just the development that will force more cities to undertake seriously the rehabilitation programs so many have talked about for so long and so few have done anything tangible about. If FHA is authorized to help, a genuine, widespread movement might get under way soon.

Such a movement would stimulate remodeling and rehabilitation of all kindsnot only the modernization of substandard dwellings but the upgrading of more or less standard ones. Up till now there has been no real "industry" of remodeling specialists, although people have been spending billions on remodeling. Much of it was done by homeowners themselves. The rest was done by local carpenters and contractors. Except when they were pushed by the building materials companies, they rarely developed anything like a technique for doing it efficiently.

FHA and NAHB, moreover, have mounted a campaign to persuade builders to take houses on trade-ins, just as auto dealers take secondhand cars as part payment for new ones. Last August FHA guaranteed loans to builders for

rehabilitating houses taken in trade. The President's Advisory Committee has recommended that FHA encourage trade-ins still further.

All this, of course, will compete with new housing, just as some inexpensive method for making old cars new again would cut into the new-car market. If cities undertake rehabilitation programs, they will again compete with the suburbs. If the remodeling business gets going, the man with a house will yearn less for a brand-new one.

Yet there should be plenty of business for both remodelers and builders of new houses. As things now look, there will be over a million new starts in 1954. Emanuel M. Spiegel, president of the National Association of Home Builders, talks in terms of better housing for 2 million families a year: 250,000 trade-ins, 750,000 units rehabilitated in urban redevolpment programs, and a million new starts. Now Mr. Spiegel's predictions were made in a wave of enthusiasm following the completion of the report of the President's Committee, and even so he was careful to note that they would come true only if Congress enacted the committee's recommendations and if financing was made "available in adequate volume" by a Government-supervised mortgage facility.

Thus hedged, Mr. Spiegel's predictions may not be so extravagant as they sound. The building industry can and should aim not only to take care of the 800,000 or more new households that will be formed each year. It can and should aim to hasten the day when every American who works for a living can live in a house that is as much a credit to the productivity of America as the car he drives to work, or the office or factory where he earns his living.

The CHAIRMAN. If there are no other questions, we will recess until 10 o'clock tomorrow morning, in our regular committee hearing room, at which time our witnesses will be the National Association for the Advancement of Colored People, Mayor Russell G. Hileman, of Michigan City, Ind., the National Apartment Owners Association, the Architectural Forum, City of Philadelphia Housing Coordinator, and the United Community Defense Services. That is going to be a big hearing.

Does anyone else want to testify? Then we will recess until 10 o'clock tomorrow morning.

(Whereupon, at 3:10 p. m., the committee recessed, to reconvene at 10 a. m., Wednesday, March 24, 1954.)

HOUSING ACT OF 1954

WEDNESDAY, MARCH 24, 1954

UNITED STATES SENATE,

Committee on Banking and Currency,

Washington, D. C.

The committee met, pursuant to recess, at 10: 10 a. m., in room 301, Senate Office Building, Senator Homer E. Capehart, chairman, presiding.

Present: Senators Capehart, Bennett, and Frear.

Also present: Senator Burke.

The CHAIRMAN. The committee will please come to order.

Our first witness will be E. L. Bartlett, Delegate from Alaska. Mr. Bartlett, you may proceed.

STATEMENT OF E. L. BARTLETT, A DELEGATE IN CONGRESS FROM THE TERRITORY OF ALASKA

Mr. BARTLETT. Thank you, Mr. Chairman. My name is E. L. Bartlett, Delegate in Congress from the Territory of Alaska.

I requested this opportunity to appear before you so that I might voice my objection to the inclusion in the bill of section 305, which is to be found on page 70 of S. 2938.

The repeal would go to the Public Law 52 of the 81st Congress, known as the Alaska Housing Act.

I am not aware, Mr. Chairman, because the Housing and Home Finance Agency has not consulted with me at any time about this, why the repeal of subsection (b) of section 2 of the Alaska Housing Act is desired. However, I would like to urge the committee to consider this most carefully before adopting the proposed language. The Alaska Housing Act became law on April 23, 1949, after very extensive hearings before this very committee

The CHAIRMAN. Will you yield a moment? What did the House committee do with this section; do you know?

Mr. BARTLETT. No. I don't, and I was going to speak about that. The CHAIRMAN. They have closed their hearings.

Mr. BARTLETT. I did not appear before the House committee, because, to tell you the truth, I did not know this language was in the bill until yesterday morning. It is a long bill, and although I had known in a general way that the Housing and Home Finance Agency had taken a rather dim look at some of the provisions of the Alaska Housing Act, I did not know that they were suggesting an outright repeal of this very essential provision. So I am going to be required to resort to making my views known to the House committee by way of a letter, which makes me feel very badly. But I did not know it was in here.

The hearings before your committee legislatively, Mr. Chairman, back in 1949, ran more than 50 pages. This was very carefully considered. I want to say to you that the Alaska Housing Act has done the job in Alaska that you expected it to. It has been marvelously successful. Over 6,000 units have been built under it. My understanding is that by and large, as of the moment, most of the housing needs have been met. There are two situations where the secondary mortgage powers of the Alaska housing authority, as created by the Alaska Housing Act, subsection (b) of section 2, will probably be needed this year. But my point is this: That Alaska is in a fluid state. It is growing very rapidly, and the housing needs at Anchorage and Fairbanks, where they may have been met for the moment, we don't know what new community may spring up in Alaska the day after tomorrow.

The Defense Department may decide to make a whole new installation, which would necessitate a civilian community. I don't know why it wouldn't be well to leave the legislative authority existing, even if they didn't employ it for the time being. I simply ca i't follow this sort of thing.

The CHAIRMAN. Well, we are looking up now the reason given by Mr. Cole, the Administrator, for recommending it be repealed.

Mr. BARTLETT. While that is being done, Mr. Chairman, may I read just a couple of sentences from a letter sent to me by Mr. E. Glea Wilder, executive director of the Alaska Housing Authority, under date of March 19, 1954, about this very matter. Mr. Wilder appeared before the committee in consideration of the legislation originally. He wrote me, and I quote:

Unless there is some other device elsewhere, it would appear to me that a repeal of this section of the Alaska Housing Act would defeat one of the purposes of our whole program here; namely, to promote a self-sufficient private building industry in the Territory. If it tends to give the result of removing the potential market of the Federal National Mortgage Association for mortgage loans, I would then say that section 305 would be very damaging to the Alaska housing program.

I don't have anything more to contribute to this, Mr. Chairman, but I hope that the committee will give very serious consideration to it.

The CHAIRMAN. We certainly will. We will give real serious consideration to it, and we will find out about it. There seems to be no direct testimony on it at all.

Mr. BARTLETT. There doesn't seem to be any harm done by leaving this in law.

The CHAIRMAN. I will ask our chief clerk to ascertain immediately from Mr. Cole and the FHA people why they recommended it be repealed, so we can make it a part of the record. We will also give you the right to place anything in the record you might care to later.

Mr. BARTLETT. Thank you.

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