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first instance, closing costs have not, under any of the Four Phases of the President's Economic Policy, been stabilized because of a policy judgment that closing costs are merely one cost of loan money. So while States Attorney General have ruled that points do not constitute interest for purposes of state usury laws, they are held to be a type of interest in order to exempt them from economic controls. This situation is, to say the least, illogical, and perhaps it is the Cost of Living Council that should take a harder look at the costs of procuring mortgage money.

In this connection, the President's message to the Congress on September 19, 1973 proposed to eliminate the point system for Federally underwritten mortgage loans, allowing such mortgage to be written at market rates of interest; that is certainly an important first step. A review of the whole range or mortgage and title related costs should follow in its wake.

ADMINISTRATION'S 1973 HOUSING PROPOSALS

THURSDAY, OCTOBER 4, 1973

U.S. SENATE,

COMMITTEE ON BANKING, HOUSING AND URBAN AFFAIRS,
Washington, D.C.

The committee met at 10:20 a.m., pursuant to recess, in room 5302, Dirksen Senate Office Building, Senator John Sparkman [chairman] presiding.

Present: Senators Sparkman, Proxmire, Tower, Brock, and Brooke. The CHAIRMAN. Let the committee come to order, please. We are very pleased to have with us this morning as our first witness Gov. Winfield Dunn, Governor of the State of Tennessee, representing the National Governors' Conference.

Yesterday we had the mayors here. You are going to have to do mighty well, now, to match them. I know you will do it, though. Governor DUNN. Thany you, Mr. Chairman.

The CHAIRMAN. I think Senator Brock may have something to say. Senator BROCK. I wanted to take the opportunity, Mr. Chairman, to present my Governor to the Committee. We are very proud of Winfield Dunn in Tennessee. We think he is about as fine a Governor as any State has in the Union, and I am very grateful for the opportunity to have him before our committee. We are proud of him. I look forward to your testimony, Governor.

The CHAIRMAN. I may say we are proud of him down in Alabama. I live pretty close to your State. I might say something else, both my grandfathers came from Tennessee.

Senator BROCK. I think we might as well claim him right now.

The CHAIRMAN. We are very glad to have you, sir, and will you proceed in your own way.

STATEMENT OF WINFIELD DUNN, GOVERNOR OF THE STATE OF
TENNESSEE, REPRESENTING
REPRESENTING THE NATIONAL GOVERNORS'
CONFERENCE, ACCOMPANIED BY JOSEPH H. TORRENCE, ACTING
EXECUTIVE DIRECTOR OF THE TENNESSEE HOUSING DEVELOP-
MENT AGENCY, AND RICHARD W. LINCOLN, SPECIAL ASSISTANT,
NATIONAL GOVERNORS CONFERENCE

Governor DUNN. Mr. Chairman, and members of the subcommittee, I am Winfield Dunn, Governor of the State of Tennessee, representing both Tennessee and the National Governors' Conference presenting the views of myself and my colleagues on national housing policies. With me today are Mr. Joseph H. Torrence, acting executive director of the Tennessee Housing Development Agency, and Mr. (211)

Richard W. Lincoln, special assistant with the National Governors' Conference from their Washington office.

The CHAIRMAN. Governor Dunn, your full statement will be printed in the record. You may treat it as you like.

Governor DUNN. You are very kind and I appreciate it, particularly your kind and warm remarks. Senator Brock, I thank you, sir, for your fine words, and I am extremely grateful to be here.

Mr. Chairman, as you know, the lack of adequate housing is a problem which has greatly concerned all conscientious public servants as well as thousands upon thousands of Americans who down through the years have suffered from this great lack.

State government has made a major effort in an attempt to solve the problems of low- and moderate-income families as far as housing is concerned.

At this time I understand 31 States have taken a most significant step ahead in the creation of State housing financing agencies of some sort, which agencies are empowered to provide low- and moderateincome housing on a statewide basis.

Several of these agencies have been operating for a number of years and have achieved truly impressive records. As I am sure Senator Brock knows, our own State of Tennessee recently joined that group of States through the enactment of legislation creating the Tennessee Housing Development Agency. This program has been and will continue to be a major priority of my administration, and I believe it indicates a willingness of our general assembly for State government commitment to the problems and solution of inadequate housing, to meet and ovrcome the problems of inadequate housing.

As the Governor of a State which has taken this positive step in attempting to meet my State's housing needs, I am pleased to welcome the President's initiative in attempting to get the Federal Government to deal more effectively with the housing difficulties which we all face. I must say that I agree with many of the observers who feel that the present programs have not worked as effectively as they might have in many cases. We have all witnessed, in the past, a number of abuses in the administration of Federal programs and it is incumbent upon all of us to correct these differences whenever we can identify them.

Thus, I fully agreed with former Secretary Romney's conclusion that our entire housing subsidy approach needed to be reexamined in light of past performance and current needs.

Specifically, examining the President's recent housing proposals, I am pleased to endorse his general effort to open up the private mortgage market for middle-income families. The mortgage pinch has had a severe detrimental effect in my State of Tennessee, as it has in most every State and community across the Nation. It has resulted in effectively denying access to housing to not simply a minority of our citizens but, in fact, a significant majority.

For example, the downpayment of a new but modest three-bedroom home valued at $21,000, under the FHA's current interest rate, is over $1,300-an often prohibitive cost for moderate-income households with small cash savings. To continue the example: Monthly costs for taxes, insurance, utilities, and maintenance will average approximately $75 in my State.

Now, that might sound like an enviable sort of cost to some, but in my State it has a significant bearing on our problem at that figure.

A mortgagor's total monthly housing expense for this modest home will be nearly $245. That figure represents over 48 percent -nearly one-half of the median monthly income of all Tennessee households as reported for 1970.

Among the President's proposals that I am particularly pleased to see put forward are:

An increase in currently unrealistic FHA mortgage limits; The suggestion that the Federal Home Loan Bank Board be authorized to enter into long-range commitments for large amounts of mortgage money; and

The so-called "tandem plan" of the Government National Mortgage Association.

These proposals, along with others contained in the President's housing message, should be of great assistance in attempting to make private mortgage funds more available to middle and, to a limited degree, long-income families throughout the Nation.

Second, I wish to commend President Nixon in his willingness to suggest a radical departure from our present housing subsidy programs of production assistance.

I am inclined to agree with President Nixon in his conclusion that an approach of cash assistance for income maintenance may well be the key to a long-reaching solution to the housing problems of our low- and moderate-income citizens.

However, such an approach must be closely tied to the delivery system. I also agree, and believe that most of my fellow Governors would concur, that much more careful scrutiny and study must be done before we can design programs which attempt to implement a housing allowance program as the sole basis for the national housing policy.

It must be very clearly and carefully noted, however, that the potential for the long-range success of a cash assistance approach to housing subsidies rests very firmly on the need for an adequate supply of decent, rentable housing in a variety of locations and in a variety of price ranges in every housing market area.

While it is true that certain areas of the country, and specifically several areas of my State, are currently blessed with reasonably high vacancy rates among decent dwelling units, many other areas in the country, and again many in my State, are not so fortunate. In the hill country of Tennessee, as well as in the urban centers such as in my home town, Memphis, there simply are not at this time enough adequate housing units available to allow a housing allowance program to operate effectively.

Given no incentive other than increased purchasing power among lower income housing consumers, I am not convinced that the private market will respond in an adequate way to meet the increased demand on an already very tight low- and moderate-income housing market.

Thus, I believe that there is a substantial need now and in the immediate future for new programs of assistance for the production of new housing units and the rehabilitation of sound, existing housing in many areas of the country. Put simply and bluntly, the President has taken bold new initiatives which I generally support enthusiastically, but I believe that he has understated the need for additional new units of housing; 150,000 new units per year in the United States simply will not meet the need.

Gentlemen, the urgent need for a commitment to a balanced program of housing assistance is a widely held view by my fellow Governors.

I would first of all refer the committee to the formal policy position on housing adopted by the National Governors' Conference, which reads in part:

Congress and the administration should give careful consideration to an overall housing program which provides a balance between subsidies to "producers" of housing and housing "consumers."

That statement, which was first adopted by the Nation's Governors in June of 1972, and unanimously reaffirmed this past June at our annual meeting in Lake Tahoe, expresses, I believe, the generally held view of most of my colleagues.

In addition, I refer the members of the committee to the August 28, 1972, letter from Governor Daniel J. Evans of Washington, the current chairman of the National Governors' Conference, to the Department of Housing and Urban Development's Under Secretary Floyd Hyde, in which Governor Evans, on behalf of the executive committee of the Governors Conference, expressed his concerns about the lack of a significant production assistance program in the administration's draft proposals.

Mr. Chairman, I have included, as part of my prepared comments, copies of both the documents to which I referred, and ask that they be made part of the record.

The CHAIRMAN. Without objection, that will be done. [The documents follow:]

Hon. FLOYD H. HYDE,

NATIONAL GOVERNORS' CONFERENCE,
Washington, D.C., August 28, 1973.

Undersecretary, U.S. Department of Housing and Urban Development,
Washington, D.C.

DEAR MR. SECRETARY: On behalf of my fellow Governors, I wish to take this opportunity to thank you and Assistant Secretary Moskow for your presentation to the National Governors' Conference Executive Committee yesterday. While I remain concerned that the Nation's Governors were not provided an opportunity to make their views known earlier, I do wish to take up your suggestion and present these thoughts prior to your final submission to the White House later this week. First, I agree with the statement which you and Mike Moskow made several times that it is essential for some emphasis on new construction in certain market areas. I think it is clear from a review of the current National Governors' Conference position on "National Housing Policy" (copy attached) and, more importantly, from your discussions yesterday with the Governors, that we strongly support a housing program which provides a balance of subsidies to both producers and consumers. While I am inclined to agree with your conclusion that the long term solutions to our nations' housing needs should focus on an income strategy, and probably a complete revision of the welfare system with it, I remain convinced that we cannot hope to house a significant number of those in need in the next several years without a sizable and direct program of housing production and rehabilitation assistance. This is not in any way to reject the notion of direct cash assistance; it is, rather, to suggest the need for both types of subsidy.

Secondly, and closely related to the preceding point, I believe that flexibility in applying the different basic types of assistance (production and cash assistance) is essential and workable. From the comments of several Governors yesterday, I think you know we feel the States can and should assess housing needs within our States, and then be given, within reasonable limits, the flexibility to determine the type of housing assistance to best meet those particular needs. While this suggestion stops well short of a "block grant" approach, it does, I think, provide some of its best features as tools to state and local governments.

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