General REEDER. The lowest point of the whole Army, including the Air Force, I think was 118,000.

General FAIRCHILD. I believe that is correct.

The CHAIRMAN. At the low point it was 118,000, of which 15,000 were Air Force?

General FAIRCHILD. About 12,000 were Air Force.

The CHAIRMAN. That is 106,000 and 12,000. Now, the Army next year will have approximately 600,000?

General REEDER. Six hundred seventy-seven thousand.

The CHAIRMAN. Six hundred seventy-seven thousand?
General REEDER. Yes, sir.

The CHAIRMAN. What about the Air Force?

General FAIRCHILD. Our present strength, sir, is about 418,000. The CHAIRMAN. That would be about 1,100,000 as against 118,000. Ten times as much.

General REEDER. Yes, sir.

The CHAIRMAN. General Fairchild, there is no use to put that in the record then, since we have that now.

Senator CAIN. Have you, General, been an engineering officer?
General REEDER. No, sir. I am basically Signal Corps.

Senator CAIN. I wanted to ask some officer of any of the services who is qualified to tell us a little more about the contracts being pursued for building purposes in Alaska and Guam, and I will not bother to ask you that question, sir.

General REEDER. Well, I know a little of the difficulties they have had up there. Possibly I can answer the question, and possibly not. Senator CAIN. Well, are you still utilizing cost-plus-fixed-fee contracts for home construction purposes in either Guam or Alaska or any other Territory of America?

General REEDER. Our policy is lump-sum bids, and we are trying to get rid of all the cost-plus-fixed-fee contracts.

Senator CAIN. Meaning you are moving away from cost-plus-fixedfee?

General REEDER. That is right.

Senator CAIN. But you still have a number?

General REEDER. Existing? I believe so.

Senator CAIN. Thank you, sir.

The CHAIRMAN. Go ahead, General.

General REEDER. I believe there is one feature which may not possibly have been fully brought out, in which this bill and the housing resulting therefrom will prove to be a considerable amelioration of the noncommissioned officers' lot. Just to run back over a little statistics, when you have deducted all the people who are not married and who would not occupy quarters for one reason or another, there is still a total housing requirement of 134,000, and against that we have gotten 33,500 of all types of housing. Of that number, less than 9,000 are permanent type houses.

These thirty-three-thousand-odd quarters are occupied now by officers, enlisted men, and civilians. When there is additional rental housing available, within the means of officers, the officers can vacate many Government-owned quarters now occupied by them and enlisted men can be assigned to these Government-owned quarters. The enlisted men will then give up only their rental allowance to get a home.

This is generally a much better solution for an enlisted man than is the renting of a house. Many enlisted men can therefore be benefited directly by housing constructed under this bill even though they do not occupy the housing themselves.

The CHAIRMAN. General, have you anything further?
General REEDER. No, sir.

The CHAIRMAN. Well, General, let me ask you this. You said you were not a construction engineer. I was going to ask you this: Would the Army engineers believe that you would get more and better housing at a 95-percent guaranty rather than 90 percent? You would not get better housing, of course, because the specifications are all the same.

General REEDER. Well, the Department of the Army, of course, has no position, because the Bureau of the Budget has not stated a position, so I presume you are asking me as an individual?

The CHAIRMAN. That is correct, sir.

General REEDER. I would say that you are apt to get better coverage, more housing, on the 95 percent, and I say it for this reason: I do not believe it is so much a matter of construction as general business. The builder who goes into an area to build in normal times is in a position of caveat emptor, and it is free to him to assess all the tendencies of that community to grow, to die out here, the desirability of this location as against that, the accessibility of transportation. That is his judgment, on which he risks his money.

He goes into an Army post and he meets with a factor over which he has no control and on which he can make no prediction. And that is how long this will hold up at its present level and how far will the personalities of unseen men in Washington who change with administration and sometimes oftener affect the investment he is about to make.

I believe that under those circumstances we will attract more capital and housing and still be fair in using the 95 percent rather than the 90 percent. Does that answer your question?

The CHAIRMAN. Yes; as best you can. But, of course, I realize you are not in a position to answer it.

General REEDER. Yes, sir.

The CHAIRMAN. But you might answer this question, because I understand you were with the Signal Corps. The Signal Corps is doing some construction in Virginia near here?

General REEDER. Talking about it, I believe.

The CHAIRMAN. Well, I understood from Senator Robertson that you were. Maybe you were going to call for bids. Senator Robertson told me yesterday that the Signal Corps-I may have misunderstood him-was either constructing or, as you say, were going to construct. I thought he said "were constructing" some houses.

General REEDER. Vint Hills, which is only ours indirectly. We carry that in the budget.

The CHAIRMAN. I understand that. Let me ask this about the Signal Corps budget. You have already got the money for it?

General REEDER. Yes, sir.

The CHAIRMAN. And you have been doing construction in the Army for some years with money appropriated for the Signal Corps. General REEDER. We turned that over to the engineers.

The CHAIRMAN. Yes, but it is allotted to the Signal Corps in the Army and charged to the Signal Corps' account, and the Army engineers go in there and build houses?

General REEDER. Yes.

The CHAIRMAN. Have you found any decrease in cost of building houses?

General REEDER. No; the Signal Corps has not. I have discussed with the engineers whether the market is not turning a little softer, and I would say this right off, that in the Washington area I think there has been a decrease, from this perfectly obvious indication: When I came here in 1946 we found workmen on housing developments working on Saturday and Sunday. It was my understanding at that time that you could not secure labor unless you could work Saturday and Sunday so they would draw overtime.

The CHAIRMAN. There was a great shortage then. The war was on. General REEDER. At the present time I do not see any Saturday or Sunday work going on, and to me that means a real decrease in labor cost.

The CHAIRMAN. Well, that part of it is regrettable. But it is good to know that with construction going ahead there is some reduction in cost. I am talking about materials.

General REEDER. Some of the materials have turned soft too. Yes. For instance, you can get brick freely now.

The CHAIRMAN. And you could not at all before.

General REEDER. Yes.

The CHAIRMAN. Would you say that you can build the type of houses you are contemplating in Virginia, say, at 10 or 15 percent less than when you came here in 1946? I do not want to pin you down to that exactly.

General REEDER. Well, let me answer it this way. I believe you will get 10 or 15 percent better value. You will gain maybe a little in money, but you will gain in the quality of the building very considerably over what was going on in 1946.

The CHAIRMAN. General, unless there are some questions from Senator Sparkman

Senator SPARKMAN. No questions.

The CHAIRMAN. Or Senator Wherry

Senator WHERRY. No questions.

The CHAIRMAN. Or Senator Cain

Senator CAIN. I will make one observation. I am not critical of these pictures from Alaska, General, but anyone who knows anything about Alaska knows that civilians unfortunately live in precisely the same sort of accommodations, and for every member of the military personnel that goes up there-and they must go there for defense reasons we must find a way to house them. Nonetheless, as we have enlarged our defense personnel up there, we have made more acute the housing situation for the civilian.

General REEDER. That is correct.

Senator CAIN. And it is one of the most serious housing areas under the American flag.

General REEDER. However, I would just say that anything you can do to ameliorate the general situation helps the other.

Senator CAIN. Yes. Recently an Alaska housing bill was passed which, when added to this one, if this legislation passes, will, we hope, be very beneficial.

The CHAIRMAN. I have been informed that representatives of a construction company and a housing company do not wish to appear. I might say for the record that I wish you would inform them if they want to put anything in the record—

The CLERK OF THE COMMITTEE. I understand the National Association of Real Estate Boards will file a statement for the record. The CHAIRMAN. What about the CIO?

The CLERK OF THE COMMITTEE. They said they would not testify. The CHAIRMAN. Do they want to put anything in the record? The CLERK OF THE COMMITTEE. No, sir.

(The statement of the National Association of Real Estate Boards is as follows:)

STATEMENT OF CALVIN K. SNYDER, SECRETARY OF THE REALTORS' WASHINGTON COMMITTEE, ON BEHALF OF THE NATIONAL ASSOCIATION OF REAL ESTATE BOARDS

Mr. Chairman, and members of the committee, let me say at the outset that if the armed forces feel this legislation is necessary to solve their housing problems, we in the industry will do everything possible to help achieve their objectives.

Present experience, according to testimony Wednesday, April 27, indicates that housing being constructed directly by some of the armed services is costing as much as $12,000 a unit and more. Recent reports advise that the housing being provided by the Atomic Energy Commission costs as much as $16,000 a unit.

The business of building houses is one needing the experienced guidance of those whose business it is to build houses in a competitive market.

The type of builder who would be attracted to the construction of the kind of housing we seek to provide in this bill is the same builder who, for the past few years, has been constructing rental and sale housing under title VI of FHA. This builder knows the procedures to get a project underway quickly. He knows how to arrange for his financing. He knows the details surrounding specific limitations on costs per unit and they present him no new problems. Five percent equity, accelerated depreciation and additional protection for the lender if a military base is moved, are provisions which would tend to stimulate interest in this type housing.

There is no secret gimmick by which the cost of housing, established by competitive market conditions, can be legislated. Material and labor costs reflect market conditions. Since this bill provides for the housing to be constructed upon leased land, the problem of land assembly and costs is proportionately diminished.

The added incentive of 95 percent mortgage insurance as against the established 90 percent seems necessary if risk capital is to be employed. Most of the military bases are miles away from established communities. It will take an additional inducement to bring private capital into play and we feel that S. 1184 offers the vehicle with the 95 percent insurance.

We believe it important to call the committee's attention to the fact that this bill could make available as many as 100,000 new family living quarters for armed service personnel. We feel, however, that some provision should be directed to assure noncommissioned officer families an opportunity to enjoy some of this new housing.

We are advised that the top noncommissioned maintenance for a sergeant is $37.50 monthly. Lesser ranks have correspondingly lesser allowances. We fail to find any provision in the bill which would bring the potential economic rentals of the project within the reach of these men and their families. It is true that temporary provisions increase this amount slightly, but this is housing of permanent character.

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With the special incentive provisions and some provision to take care of the noncom's family, S. 1184 offers a sound and economic approach to the solution of housing military personnel in and about military bases.

The CHAIRMAN. Mr. Foley, would you come forward? We are glad to have you here with us again.

Mr. FOLEY. Thank you.

STATEMENT OF RAYMOND M. FOLEY, ADMINISTRATOR, HOUSING AND HOME FINANCE AGENCY

Mr. FOLEY. I have a brief statement which I would like to read, and, if the committee pleases, I will read through it, and I think perhaps questioning could follow better afterward.

The CHAIRMAN. Without objection, Mr. Foley will read the statement through and then be questioned.

Mr. FOLEY. Representatives of the Military Establishment have described the urgent housing needs of families at military and naval installations. I am keenly aware of these needs and can appreciate the hardships which they produce. Although this particular problem relates primarily to the functions of the Military Establishment, it is also an integral part of the over-all housing problem in which our agency has principal concern and responsibility. We know that local offices of the FHA receive requests from builders and from military and naval installations for assistance in providing housing to serve the personnel of those installations. As Mr. Richards will explain, however, under existing legislation the FHA cannot provide mortgage insurance for most housing of this character.

We are sympathetic with the purpose of S. 1184-to stimulate the construction of new rental housing for civilian and military personnel. While our studies of the bill, as introduced, convinced us that it contained certain undesirable features and would not effectively accomplish its purpose, most of our objections to the original bill are not applicable to the substitute measure proposed by the sponsors. This measure would amend the National Housing Act by adding a new title VIII to provide for a more liberal form of mortgage insurance than otherwise available, in order to encourage the production of housing to serve military installations. I believe the most important feature of the proposed mortgage insurance is the waiver of the requirement that the housing meet the customary tests of acceptable risk, including standards as to neighborhood and market availability. In place of this requirement, the Military Establishment would be required to certify as to the need for the housing and the permanence of the installation.

I wish to emphasize that I do not believe this bill, or any other proposal for mortgage insurance, can provide more than a partial solution to the problem of meeting the housing needs at military and naval installations. However, in my opinion, the substitute S. 1184, with certain technical and other amendments, would provide a workable method for stimulating housing construction to meet a portion of that need.

I will be glad to submit to the committee drafts of these additional amendments-in fact, I have already done so which I recommend. Although Mr. Richards will discuss the specific provisions of the legislation, I would like to refer briefly to a few important matters.