nonwhite population rose by a third, while the number of dwelling units they occupied increased by only a fourth. Negroes are moving from farm to townand from South to North and West; almost 3,000,000 nonwhites migrated during 1940-47, with 1.2 million moving between noncontiguous States. Nonwhites are migrating farther and faster than whites. Meanwhile, on the more encouraging side, the proportion of nonfarm units in sound physical condition occupied by the nonwhites increased almost 60 percent, while the comparable improvement for such units occupied by the whites rose less than 20 percent. But even after this improvement, the proportion of nonwhites occupying substandard housing units was still almost six times as high as that for whites, and the proportionate overcrowding among nonwhites exceeded, by four times, that for whites. In addition, the proportion of owner-occupancy rose more sharply among nonwhite households (40 percent) than among white households (27 percent). But even with this striking rise in home ownership, the proportion of rental-occupancy was still excessively high among nonwhite households in 1947, i. e., 66 percent among nonwhite compared to 46 percent among white households. Although the incomes of Negroes and other nonwhites have generally doubled since 1939, with significant numbers of families moving into the middle and higher income categories, the majority of these racial families still earn too little to buy or rent decent housing provided by private enterprise at current costs. On the other hand, United States census estimates of nonfarm income distribution show that, with the recent doubling of nonwhite incomes since 1939, approximately 20 percent of the nonwhite families in nonfarm areas received incomes of $3,000 or more for 1947-with nearly 10 percent with incomes of $4,000 or more evidencing a strong potential but largely untapped "middle income" market for private enterprise housing. In this connection, we ask permission to have inserted in the record at this point, as exhibit C, a table developed by Douglas Rosenbaum in his article on "The Housing Needs of the Nonwhite Population in Nonfarm Areas," published in the Journal of Land Economics, November 1948, which presents, so far as we know, the first such national estimates of nonwhite need for housing. In providing for the housing needs of minorities, these striking new factors in the situation today should receive due cognizance: nonwhites are moving farther and faster into cities; their incomes have doubled since 1939; their search for decent homes is more insistent. The critical housing problems that face Negroes and other minorities consistently require accurate definition and wider real understanding of their specific nature at all levels of public or private decisions-national, State, and local-to converge as a whole on accomplishment of their solution through concerted, unified action community by community pursuant to the established national housing objective. Obviously, the opportunity for all American families to have a decent home in a good neighborhood is the only possible housing goal that makes sense for the United States. This fact has been explicitly recognized by the American people through congressional enactment of the Housing Act of 1949 with its declaration of national housing policy and objective. No less is to be expected from a nation in the position of world leader in economic resources, productive enterprise, standard of living, and democratic principles, as well as in the search for peace, security, and freedom of mankind. The decisive test of any soundly conceived housing objective and successfully operated housing policy, plan, program, or activity pursuant thereto whether at the neighborhood, community, State, or national level is its adequacy in meeting the housing requirements of Negroes and other minorities, along with all American families, in accordance with their family size and income. The two core obstacles for minorities, acquiring adequate sites and finance, are admittedly among the most difficult as well as neglected of all housing problems. This critical situation points up the dual responsibility and challenge to private initiative and public endeavor, demanding the utmost teamwork of private industry, finance, labor, and governmentFederal, State, and local. Racial covenants and other restrictions still limit the proportion of the existing housing supply open to Negroes; similar restrictions on most desirable open areas preclude Negro occupancy on building sites adequately provided with utilities, community services and facilities. Lending institutions, reluctant to finance developments open to Negroes even in "Negro neighborhoods," balk entirely at extending loans for housing open to Negroes in areas outside the over-congested "Negro ghettos" or for developments to be occupied by more than one racial group. Thus is the operation of traditional practices in keeping Negroes, whatever their income or cultural levels, still contained in tightly constricted ghettos within the older and more deteriorated sections of our cities and towns. Even the leavening potential in the United States Supreme Court decisions barring governmental enforcement and support of racial covenants is thwarted by the determination of financing institutions to issue no loans to Negroes to purchase or develop properties covered by racial covenants or located in areas outside the racial ghettos even though sellers and buyers are both ready and willing. According to a January 17, 1949, news release, "A United Press survey of major cities from coast to coast revealed numerous instances of realtors, banks, and other lending_institutions upholding in actual practice the 'white gentiles only' rule that no longer can be enforced in court. * * * many bankers still hold, in spite of the Supreme Court ruling, that property has a cloudy title if there is evidence that a covenant has been violated." At this point, we ask that the following United Press story, titled "Realty Covenants Still Barring Minority Groups in United States Cities,' reporting on its survey of major cities from coast to coast be read into the record as exhibit D: SEQUEL TO COURT RULING-REALTY COVENANTS STILL BARRING MINORITY GROUPS IN UNITED STATES CITIES (By the United Press) Minority groups in many cities are still being barred from swank neighborhoods by restrictive real estate covenants which the Supreme Court has declared legally unenforceable. A United Press survey of major cities from coast to coast revealed numerous instances of realtors, banks and other lending institutions upholding in actual practice the "white gentiles only" rule that no longer can be enforced in court. The Supreme Court ruling, handed down last summer, did not say it is illegal for private property owners to agree among themselves that none of them will ever sell to members of an "unacceptable" race or religion. The ruling simply forbade any court to take action against a private individual who, having signed such a covenant, decides to ignore it. There was a widespread belief at the time that the Court had dealt restrictive covenants a mortal blow. What good is a contract, it was asked, if it can't be enforced in court? But this reasoning overlooked important facts. Most people, in order to buy a house or a building lot, have to borrow money. Banks and other lending institutions won't make loans on property that is regarded as having "a cloud in the title." And finally, many bankers still hold, in spite of the Supreme Court ruling, that property has a cloudy title if there is evidence that a covenant has been violated. A Cleveland banker said all lenders consider it "poor business" to take a lien over real estate where there is any question whatever about possible litigation. In Minneapolis, a banker said he knew of no institution that would lend money for the purchase of property which had a "cloudy title" because of a covenant violation. "As far as we're concerned, property owners are required to abide by covenants, or get them canceled," he said. Several Los Angeles bank executives said that strictly from the standpoint of protecting loans, property which has been sold in violation of covenants is regarded as a poor risk, A prominent Washington, D. C., realtor said flatly: "The covenants are still effective because people who want to violate them can't borrow money.' An official of the Chicago Real Estate Board believed that banks generally are adhering to the covenants as a matter of "practicality." He explained that banks are primarily interested in protecting their loans with "stable" property values. And property values in a high-priced neighborhood might drop if racial covenants were violated, he said. An Atlanta banker said “It is not a question of races but of a drop in value on property." He said banks believe the risk is poor on property in neighborhoods that are "changing" from white to Negro occupancy, but that "when the change is completed and a street goes from white to all Negro, it would again be an excellent risk." In Memphis, a Negro banker said that in his opinion any bank would be taking a risky step if it loaned money on property sold in violation of racial restrictions. One candid real-estate man in San Francisco said bluntly that the "cloudy title" difficulty in obtaining loans is sometimes used by realtors as an "out" when they themselves don't want to sell restricted property to "the wrong people." It is interesting to note that this United Press survey found these conditions prevailing in January 1949, despite the fact that 5 years earlier in 1944 the National Association of Real Estate Boards, through its forty-third semiannual survey of member boards in 330 cities all over the country, made these significant related findings: That the provision of good housing for Negroes can be carried out as a sound business operation and that the Negro family that wants good housing is usually a good economic risk. That as a class, the Negro home buyer meets his payments faithfully-often more faithfully than other race groups in the same economic level-and that if his property is in good repair when he obtains it, he takes care of it after he buys it. As a tenant, he takes as good care of such premises as other tenants of his economic class. That there is no reason why insurance companies should not purchase mortgages on properly located and managed property to be occupied by Negroes. We ask that the news release and report on the findings of the National Association of Real Estate Boards on this subject be inserted in the record at this point as exhibits E and F, respectively. To the degree that traditional forces unduly limit the opportunity of Negroes to bargain freely for decent housing in the open market of our "free" private enterprise system, the inevitable outcome is overcongestion of Negroes into racial ghettos with resultant deterioration of physical, economic, human, and spirtual resources of the entire community. These conditions are aggravated by the pressure of the swelling tide of migration of Negroes into cities, augmented by their increased purchasing power. Extensive property deterioration, reduced tax returns, increasing incidence of ill health, delinquency and crime, rising frustrations, resentment, and tensions may only be relieved by-(1) lifting of space restrictions; (2) loosening up of mortgage money; (3) providing governmental funds and credit to close the gap between housing costs and family income. With few exceptions, the public and private resources of cities and States alone have proved unequal to the task. The additional assistance of the Federal Government is imperative. In committing ourselves to do everything possible to relieve the acute conditions and deficiencies outlined, we subscribe to these principles and objectives: 1. National housing goal of a decent home and suitable living environment for every American family. 2. Primary responsibility of private enterprise for financing the development of decent living accommodations. 3. Responsibility of Government to support and supplement the efforts of private lenders and builders to the fullest extent possible to achieve the national housing goal. 4. Federal aid and leadership to technical and economic research to reduce housing costs and define market characteristics. 5. Exercise of governmental aid and credit to assist local communities to clear slums and provide housing for families whose needs cannot be met at a reasonable profit by private developers. 6. Additional financing aids, especially for rental and cooperative housing, to meet the middle-income sector of the housing market where family incomes are too high for public and too low for decent private housing. 7. Direct as well as indirect use of Government funds and credits to provide loans for economically sound housing open to middle- and upper-income families in instances where adequate financing on economical terms is otherwise unavailable from conventional private financing sources. 8. Federal leadership in reorienting private valuation and financing practices into line with current experience with Negroes as credit risks and as purchasers and users of private residential property. In light of our analysis of the current situation, based upon our experience as practical operators over a number of years in this field, it is naturally our earnest hope that this committee will find its way clear to accept the substance of these principles and objectives, which we believe eminently sound, and reflect them in its final report of findings and recommendations to the Congress on the legislation now being considered in H. R. 5631 and S. 2246. We are confident that the consideration now being given the present legislation reflects the aim and desire of the Congress, once having enacted the Housing Act of 1949 establishing the declaration of national housing policy and objective, to move promptly and resolutely to round out provisions to meet the middle-income gaps existing as a major deficiency in our otherwise comprehensive program of national housing legislation. Unless these gaps are filled by providing for the needs of the middle-income groups, we can never achieve our established goal of "a decent home and a suitable living environment for every American family." The housing amendments of 1949 would contribute substantially toward filling these gaps, particularly would they help materially in the solution of peculiar difficulties encountered by racial minorities in their search for decent homes. Because racial minorities are so predominantly concentrated in the low- and middle-income housing markets, we have long advocated and vigorously supported public housing as well as slum clearance-urban redevelopment programs of Federal aid. We know from personal experience the many instances of Negro families in public housing who, having improved their living standards, increased their earning capacity, and become more useful and productive citizens of the community, find themselves ineligible to remain in public housing but unable to find any other standard housing open to them. Indeed, the graduates of public housing have supplied the bulk of customers for my business as a private builder in Atlanta, Ga., during and since the war. In fact, we have been personally too busy trying to supply these graduates of public housing with decent homes within their pocketbooks to become involved in any controversy in opposition to public housing. We believe there is ample room and need for various types of housing to tax the utmost capacity of all of us in the housing field if we are ever to catch up with the shortage and realize our national goal of decent homes for all the people. With all the work we see ahead for us in supplying housing to those who can pay the rents and the sales prices of private housing, we are perfectly content for local, State, and Federal tax funds and credit to be used to get the poorer people into decent housing so that they can get an appetite for better housing and get themselves ready to graduate into the market for private builders. In the existing low-rent public housing program alone at the end of 1948, Negroes and other nonwhite families occupied 63,617 units, of which some 10,664 of these families were ineligible to remain (because of higher incomes) and waiting to graduate with no other decent housing available to them. The break-down of this situation by field offices of the Public Housing Administration is shown in this table which we ask to be inserted in the record as exhibit G. It is significant to note that the average annual income of these ineligible tenants for the 10 field offices of PHA ranged from a low of $2,285 to a high of $3,654. In addition, some 43,000 (Lanham Act) war housing units were occupied by Negro families in March 1949-about 6,000 permanent, 6,500 demountable, and nearly 31,000 temporary family units. The comparable break-down of this situation for the war housing program is shown in the table marked exhibit H, which we also ask to be inserted in the record immediately following exhibit G. In the disposition of the war program, most of these and other families residing in war housing will be forced to seek other housing. Thus, they offer a large potential market for decent private housing within their means yet to be supplied. Unless we now move promptly to fill in the gaps in our legislative kit of tools through ample provisions for the middle-income groups, we shall have penalized instead of encouraging and helping the millions of earnest, self-supporting, decent American families of all races, colors, and origins. That is why we are so strong in our support of the housing amendments of 1949. We have carefully reviewed all of the titles of the companion bills H. R. 5631 and S. 2246 and are convinced that all of the provisions represent constructive steps in the right direction and, therefore, merit our endorsement. We are concerned, however, about the apparent limitation with respect to one set of provisions, namely the authorization for direct Federal loans which appears to be limited to nonprofit and cooperative housing solely. We wholeheartedly endorse these provisions as a sound step in the right direction but feel very definitely that they do not go far enough. We feel there is ample justification for extending all the direct Government loan provisions to cover any instance where economically and structurally sound housing is unable to secure adequate financing on economical terms from conventional private sources and is therefore being obstructed solely because credit is withheld on grounds other than economic sound ness. This extension would prove of tremendous benefit to veterans and particularly Negroes and other minorities who are so largely concentrated in the middle-income market and too often confronted with inability to obtain adequate financing from conventional private sources to the same degree merited on identical terms and conditions as others. Indeed, one direct result of all the combination of forces in their traditional operation of the "free" private enterprise housing and home finance market is to force Negroes not only to spend a larger proportion of their already lower incomes for the severely constricted supply of housing open to them, but to pay more for less. According to 1940 census data already shown in exhibits A and B above, for example, nonwhites (over 95 percent Negroes) receive less value per dollar for their housing expenditure at all price and rental levels, and pay more per dollar for home finance extended to them. Among all consumer goods, only in housing do we find Negroes generally excluded from access to the entire market. It is as though Negroes were excluded from purchasing their meat supply at all shops save those which sold only tainted meat at higher prices. In fact, referring to the table, "Average Value, Average Interest Rate, and Holder of First Mortgage on One-Family Nonfarm Owner-Occupied Property, by Race of Occupant, for the United States, 1940,"in exhibit B above, you will observe: (1) Commercial banks, savings banks, life insurance companies, and mortgage companies hold a much smaller proportion of first mortgages for nonwhite occupants than for the total of mortgagors; (2) the highest proportion, almost one-third, of the mortgages for nonwhite occupants are held by the individual mortgagees who charge the highest interest rate-6.52; (3) only for mortgages held by an agency of the Federal Government--the HOLC-is the interest rate the same as between the nonwhite mortgagors and the total; (4) in all other cases, the interest rates are higher for nonwhites. We feel very strongly that it is in the public interest for the Government to intervene through direct Government credit to help correct any such long-standing deficiency of our "free" private enterprise system in providing full opportunity to so large a segment of American families in their insistent search for decent homes. We advocate this extension as a constructive step in bolstering and shoring up our "free" private enterprise system where its fear or reluctance to venture risk capital in housing and home finance is evident, until such time that it develops to the stage where it can and will do the job completely. We should also strongly recommend that the Banking and Currency Committee, in reporting this legislation to the House, include in its written report both specific cognizance of the additional problems faced by enterprising Negro families who seek to attain decent private housing in good neighborhoods and also an expression of the firm intent of the Congress that the various governmental aids to private housing be administered in such manner as to assist minority group families to overcome these added difficulties. re Mr. Chairman, three other pertinent documents which supplement our testimony but which we do not wish to take up the time of the committee to read, we should ask permission to have inserted as appendixes A, B, and C to our testimony as follows: (A) Margaret Kane's "Opportunities in a Neglec.ed Market," printed from the fourth quarter 1948 FHA Insured Mortgage Portfolio; (B) "If Your Next Neighbors Are Negroes," published by the race relations department of the American Missionary Association, Fisk University, Nashville, Tenn.; and (C) "Statement of Housing Objective" adopted by the National Association of Real Estate Brokers in their Chicago regional meeting (February 1949) reprinted in that association's Monthly Newsletter as attachment to President Morison's letter to HHFA Administrator Foley. OFFICE OF THE HOUSING EXPEDITER, Hon. BRENT SPENCE, Chairman, Banking and Currency Committee, House of Representatives, Washington, D. C. DEAR MR. SPENCE: I have been following with a great deal of interest the hearings in the Senate and the House on bills S. 2246 and H. R. 5631 to amend the National Housing Act, as amended. I am particularly interested in section 512 of H. R. 5631, entitled "Supplemental Direct Loans to Veterans." As you know, I have been experimenting with my own funds in the construction of low-cost housing for veterans. The corporation which is actually going ahead with the construction, sale, and financing of these homes made application through a broker specializing in the financing of housing projects to both the Federal Housing Administration and the Veterans' Administration for mortgage insurance. The terms for insurance offered by the Federal Housing Administration were not acceptable to me because they would have necessitated structural changes in the house which would have raised the price above the original offering price of $6,750 including lot, and consequently the veteran would have had to make larger monthly payments on his principal at a higher rate of interest. Besides that I felt the house had been designed by a good architect who was a member of |