STATEMENT OF A. Mr. KAZAN. Well, I am here to speak in favor of cooperative housing. I would like to recite to you our experience in cooperative housing during the last 20 years. In order to save time, I have prepared a short statement and I will read it to you. Mr. PATMAN. Very well, Mr. Kazan. Mr. KAZAN. The cooperative building projects undertaken under the sponsorship of the Amalgamated Clothing Workers of America have been hailed as America's model in low-cost cooperative housing. This development was initiated in 1926, as a result of the acute shortage of housing in that period. In order to meet present lack of housing accommodations, the projects are being enlarged so that upon completion 2,500 families will be decently housed in three separate developments. The total investment is over $20,000,000. One of the projects is located in the Bronx, at the outskirts of the city. The other two are in the lower part of Manhattan, in the heart of the slum area of the east side. Amalgamated Housing Corp. and Amalgamated Dwellings, Inc., are limited-divided companies organized under New York State law. The third, Sidney Hillman Housing Corp., is a redevelopment corporation. Mr. TALLE. Do I understand that later on you will explain the tax-exemption features? Mr. KAZAN. If you want me to. Mr. TALLE. Yes, I wish you would, and will you indicate the extent of tax exemption, please. Mr. KAZAN. Very well. The title to the land and buildings is in each case in the name of the cooperative organization. Each tenant subscribes to the stock of the corporation in proportion to the number of rooms or the size of the dwellings he intends to occupy. In some cases the equity requirement is $500 per room. Due to the present high cost of construction, the equity requirement was raised in the Bronx projects to $650 per room, and in the case of the Sidney Hillman project to $600 per room. Dividends are not declared in the form of cash; if the rent income in any particular year exceeds the operating expenses for that period, it is distributed, if at all, in the form of a rent refund. In cases where the individual member does not have sufficient money to supply the equity required, he is assisted through loans from the Amalgamated Bank. These loans are guaranteed by the Amalgamated Clothing Workers of America. In addition to the equity subscribed to by the tenant incorporators, first-mortgage loans were secured in the case of Amalgamated Housing in the amount of $6,500,000, and in the case of the Sidney Hillman project of $7,000,000. In both cases the interest rate is 31⁄2 percent per annum, and the amortization is approximately 21⁄2 percent annually. The main obstacles to a cooperative housing program are: 1. The absence of sufficient cooperative agencies. Faced with the impossibility of securing adequate housing facilities at a rent they could afford, in an effort at self-help dozens of cooperative organizations have mushroomed throughout the country. But most of them get into difficulties because they lack sufficient experience and training in this specialized field. There is, therefore, a great need to establish a constituent unit within the Housing and Home finance Agency, to be headed by a separate Commissioner to furnish technical advice and assistance in the organization of housing cooperatives and in their development and operation. The bills this committee is considering do contain such a provision. His appointment should preferably be by the President. 2. The lack of low-rate interest-mortgage money, and the absence of adequate equity financing. Even where experienced groups do start, the cooperators lack sufficient capital. Even where mortgage money is obtainable, the interest rate makes the cost too high. In addition, since the mortgage in most cases is limited to two-thirds of the cost of the project, the individual cooperators often lack sufficient capital to put up the amounts necessary over and above private mortgage. Any bill to meet the needs of cooperative housing must find an answer to this problem. It seems to me that there are two alternatives, each of which would meet the issue: (a) The Government should make direct loans to the cooperative organizations. This loan should be in an amount equal to 90 percent of the cost of the project. The rate of interest should not exceed the going rate of Government interest, and the amortization should be based upon the life of the project, not less than 50 nor more than 60 years. Ten percent would then be the investment required of the tenant incorporators, which is an amount usually not above the means of the ordinary incorporator. (b) The Government should supply secondary financing up to 30 percent of the cost of the project. The rate of interest should again not be higher than the going rate of interest, and the amortization should be spread over the course of a long period of years. This would leave financial institutions to make a first mortgage loan up to 60 percent of the cost of the project. The total of the two mortgages should not exceed 90 percent of the estimated cost of the project. It is highly desirable that each tenant cooperator should become a part owner and have a stake in the enterprise. If the second method is adopted, the 30 percent secondary financing should be in the form of loans to the individual cooperator rather than to the organization. However, merely as a clearing process it would be more expedient for the cooperative organization itself to channelize these loans. This, of course, would be subject to the supervision of the Commissioner of Cooperative Housing. In order to protect the cooperation organization, ownership should always be in the name of the cooperative. The individual tenants, being part owners and stockholders, should each be entitled to one vote. No speculation should be permitted. No stock shall be sold before it is offered back to the cooperatives at its par value; only if the cooperative refuses to purchase it, may the stock be sold. Cooperative housing can be an important device for the elimination of slums and blighted areas. It can mitigate the shelter problem for many families, not provided for by either public or private enterprise. It is important as a substitute for Government ownership. However, Government aid and stimulation is necessary before it can reach the full usefulness of which it is capable. Mr. PATMAN. Mr. Talle, do you wish to ask Mr. Kazan some questions? I believe you indicated that you wished to. Mr. TALLE. Yes. My principal question relates to what I said when I interrupted your statement, Mr. Kazan. I should like to have you make a statement for the record about the tax-exemption features of the projects of which you speak. Mr. KAZAN. A limited company in the State of New York is accorded exemption on taxes on the new improvements. Whatever the taxes are on a parcel of land, including the buildings on that parcel, at the time that project is organized, those taxes are continued. The new improvements are not assessed with further taxes. Do I make myself clear? Mr. TALLE. Yes. Mr. KAZAN. The term of years is optional with the board of estimate of the municipality. In some cases it is 20 years, and in some cases it is 25 years. In some cases it goes as high as 30 years. The tax rate in the city of New York is around 2.80 or 1.85-it varies from year to year-and the assessed value generally is about 80 percent of the cost of construction. Mr. TALLE. So there is no uniformity, then, as to the length of time during which these tax exemptions may run? Mr. KAZAN. No. In our case, on one project we are paying full taxes already. We have enjoyed 20 years' exemption. This year we begin to pay taxes on all the improvements. Mr. TALLE. And you manage that all right, do you? Mr. KAZAN. Yes. Mr. TALLE. Are you familiar with how extensively tax exemption applies in the city of New York? Could you furnish for the record a figure indicating the total amount of tax exemption or are you familiar with your own projects only? Mr. KAZAN. The total amount of taxes? Mr. TALLE. Yes, sir. Mr. KAZAN. In our uptown development, which consisted of 303 families the first project, being completed in 1926-the taxes amount to around $24,000 a year. That is what we have to pay now, which we did not pay for 20 years. Mr. TALLE. Are there other cooperative organizations that do the same thing that you do? Mr. KAZAN. Yes, there are several others. Mr. TALLE. You would not know, I suppose, about the amount of tax exemption involved in those projects? Mr. KAZAN. No, I could not tell you that. But there are several other cooperative organizations benefiting by the same legislation under which we enjoy tax exemption. Mr. TALLE. I suppose your city treasurer could furnish the total amount per year, for all projects, could he not? Mr. KAZAN. Yes, there are a number of tax-exempt buildings in the city of New York which are not cooperatives. There is one, which is owned by former Commissioner of Housing Nathan Strauss, which is one of them. It is a limited dividend company but not a cooperative. The tenants living in the project are not the owners. There are several others like that. So the city of New York has, I would say, at least 20 housing projects that are exempt from full taxation, or partial taxation, although most of them are not cooperatives. Mr. TALLE. About 20 projects and each one involves many units, I presume? Mr. KAZAN. That is right. In our case, we have 2,500 units. Each project has from about 600 to 1,500 units. Mr. TALLE. I suppose the tax exemption applies also to the publichousing units? Mr. KAZAN. Yes, definitely. Mr. TALLE. Thank you, Mr. Chairman. Mr. PATMAN. Are there any other questions, gentlemen? If not, thank you very much, Mr. Kazan; we appreciate your testimony. Mr. KAZAN. I have a bulletin published by the Bureau of Labor Statistics which describes our projects. Mr. PATMAN. Yes, if you will leave that with the committee, that would be very helpful. It will not be inserted in the record. The committee will stand in recess until 2 o'clock at which time Mr. Foley will be here. Tomorrow morning the committee will hear the two witnesses referred to by Mr. Westbrook in his testimony. We will now recess until 2 o'clock. (Whereupon, at 12:35 p. m., the committee was adjourned, to reconvene at 2 p. m. the same day.) AFTERNOON SESSION Present: Messrs. Spence, Brown, Patman, Rains, Buchanan, Multer, McKinnon, Addonizio, Bollinger, O'Hara, Gamble, Kunkel, Cole, and Mrs. Woodhouse. The CHAIRMAN. The committee will be in order. We will resume the testimony of Mr. Foley. Before that, Mr. McKinnon would like to have something inserted in the record. Mr. MCKINNON. I would like to have inserted in the record the testimony of the city manager of the city of Richmond, Calif., who has a particular problem in the matter of disposal of warehousing. The CHAIRMAN. Without objection, that may be done. (The testimony referred to above is as follows:) DEAR MR. CHAIRMAN: I believe that you and your staff are aware of the peculiar housing situation which obtains in the city of Richmond, Calif., The population of the city at present is approximately 102,000 of which approximately 60,000 are living in temporary war and veterans' housing, the disposition of which is covered by title II of H. R. 5631. In order to meet the special situation in Richmond we would propose that there be added to S. 2246 provisions which would accomplish the following: 1. Make inapplicable the provisions of section 601 to temporary housing located in any municipality in which the total number of persons, who, on December 31, 1948, were living in temporary family accommodations provided by the United States since September 8, 1939, exceeds 75 percent of the total population of such municipality, as shown by the 1940 census. 2. Provide that, in the case of any city in the category described in No. 1 above, any such temporary housing may, notwithstanding any of the provisions of this act or any other law, be transferred only to a local public agency organized for slum clearance and community redevelopment where such request for transfer or relinquishment is approved by the governing body of the locality. 3. That, in the case of any such transfer or relinquishment, the following general conditions would obtain: (a) If the temporary housing were located on land owned in fee by the United States, that such local public agency pay for such land in the manner provided by paragraph 1 of section 601 (b) of title II of H. R. 5631, or (b) If such temporary housing is located on land in which the United States has an interest less than a fee interest, that such transfer be made only where such local public body has acquired by purchase or condemnation a fee simple interest in the land. We have discussed this particular problem with the Office of the Administrator, Housing and Home Finance Agency, who have indicated that they have no objection to this particular method of dealing with the special problem faced by the city of Richmond. They have also indicated that they will prepare and submit to your committee the technical amendments to title II of H. R. 5631 to accomplish this purpose. WAYNE E. THOMPSON, City Manager, Richmond, Calif. The CHAIRMAN. Mr. Foley, you may proceed with your statement on title II. STATEMENT OF RAYMOND M. FOLEY, HOUSING AND HOME FINANCE ADMINISTRATOR-Resumed Mr. FOLEY. Mr. Chairman, before I proceed, I have some tables which I will refer to in my testimony and which I would like to have inserted in the record. The CHAIRMAN. Without objection that may be done. (The tables referred to above are as follows:) TABLE I.-Lanham Act housing: Volume, cost, income, as of Dec. 31, 1948 1 Net management income only. Does not include other returns such as $22,600,000 net receipts from disposition, $1,000,000 miscellaneous receipts. 2 Data as of Mar. 31, 1949. These data exclude a number of units removed in accordance with sec. 313 of the Lanham Act and 122,947 units transferred under the McGregor Act to educational institutions. For a summary of McGregor Act disposition, see table IV. TABLE II.-Temporary units eligible for transfer under the proposed bill,1 as of Dec. 31, 1948 1 Active units only. Excludes 20,500 inactive temporary units in war housing program. 2 Excludes income from units transferred under McGregor Act in fiscal 1949. |