1 and 2 bedrooms instead of 2 and 3 bedrooms then it would be made a project which would bring in income to the prospective owner and, therefore, the project should be completely redone with 1 and 2 bedrooms instead of 2 and 3, defeating the purpose of getting a goodsized, livable project which the people could afford to pay on a nonsubsidized housing basis. The FHA is trying to work out others, but we are confident these will not be worked out. If they do in 1 or 2 cases it will be because of the unique character of that particular case, rather than because the program will work. The other amendments which we have in mind are outlined in H. R. 5663, introduced by Congressman Wright Patman in the House of Representatives. Senator Sparkman indicated he will introduce similar amendments the coming week. These amendments would strengthen the cooperative housing program and give it the status which these 5 years of experience indicate is warranted. (1) The restoration of the post of Assistant Commissioner for cooperative housing, which was cut out by the Appropriations Committee 2 years ago. An effective, hard-hitting program calls for a status within the FHA which would give adequate prestige, staff, and direct responsibility to the program. A steady decline in the cooperative housing activity and interest has been noted since the Congress eliminated the position of Assistant Commissioner. This action was unfortunately interpreted by some within and outside of the FHA as an indication of the Congress' disinterest in the measure. Some of you on this committee will remember the Senate restored that position, but lost it in a conference with the House. (2) The Federal National Mortgage Association is already empowered to assist in certain types of important housing programs. One of the amendments proposed would authorize FNMA to make advance commitments for up to $50 million worth of consumer-sponsored cooperative housing projects at any given time. Not more than $15 million, however, would be available in any one State. This would, in fact, be a revolving fund and would assure readily available financing for any project which might not be able to secure financing in the open market, either because of unfamiliarity with the program or an actual shortage of mortgage money. (3) Another amendment would apply to the existing section 223 covering disposition of Government-owned housing projects. The amendment would make it possible for cooperative groups of tenants of those projects to use the cooperative mortgage provisions of the act to purchase the Government-owned projects on a cooperative basis. (4) This amendment would provide for a reduction of the percentage of veteran participation in cooperative projects from 65 percent to 50 percent. This would allow the maximum available mortgage for such projects and give a broader group of home purchasers in multifamily projects the kind of liberal mortgage already provided for single-family home purchasers under section 203. (5) The final amendment would lift the ceilings on mortgages for cooperative projects from the present $5 million limitation to $30 million for any single project. This would apply particularly in the larger cities where it is often advisable for economic reasons to build larger projects than were envisaged at the time the Congress fixed the $5 million ceiling. Let me give you an example of the Morningside housing project in New York City, of which President Eisenhower was a member of the board before he became President of the United States. It calls for about $18 million investment in a cooperative housing project in the Morningside Heights area. It is a large project and is not eligible under the FHA proposal, because it is more than the $5 million ceiling for the number of units. To summarize: The purpose of these proposed amendments is to enable the cooperative-housing program to recover its prior position of importance by restoring "replacement cost" instead of the "value" concept in mortgage insurance; and to allow for the eventual enlargement of the program so that it can serve a great many more American middle-income families by strengthening the existing legislation. These amendments will not meet the great need which still exists in the middle-income-housing field-the huge need ahead of us. If you feel that this is the appropriate time to pass legislation to meet that larger need-and we feel it is-we recommend to your renewed attention the middle income housing bill introduced by Senator Sparkman and others in 1950 and recommended to the Senate by your Banking and Currency Committee. That program was defeated by a very narrow margin, due largely to a misunderstanding of its objectives. It is more essential today than it was when you recommended it 5 years ago. We appreciate the opportunity to present our views to this committee. Senator MONRONEY. Thank you very much, Mr. Campbell. Senator CAPEHART. I have no questions; but I would like to say I believe our investigation last year pretty much proved that we did not find many real co-ops. We found primarily a promoter who would take his own people and organize them into a corporation and make them the officers and build it and make a profit out of it. Then it would finally end up being owned by the members, and there was not much saving or advantage to the members. In fact, they actually lost out. They would have been better off if they had been Mr. CAMPBELL. I am very happy you raised that question, Senator, because it is a very important one. I am here, as you know, representing a consumer group. Senator CAPEHART. Of course. Mr. CAMPBELL. So that I have no stake either personally or as an organization representative in the builder-sponsored type of cooperative-housing project. Those have made up, I would say, about 90 percent of the co-ops built under the section 213 program. This much I must say, however: That under the law as it is now written, it is just as legal for a builder to take the initiative in getting together five people to set up a cooperative corporation as it is for a veterans' post in Oklahoma, which did the same thing, or for the Greenbelt Veterans Housing Co-op, whose board members may not live in the new development, to also sponsor a cooperative project. We are all in favor of having consumer sponsorship and have it either by the individual consumers or by organizations for consumers which can take the initiative. I must say this, however, that the builder-sponsored co-ops did include a few which we did not like at all, but there were quite a number of good builders who found that this was a way to take advantage of the 40-year amortization and the 414 percent interest. They did make as much money building this way as they would have building under another part of the program, but on completion of the project under the law they were forced to turn the project over to the members. Senator CAPEHART. Well, they sold it. Mr. CAMPBELL. They sold it to the members. That meant these people then became owners of that cooperative project, and they were freed from paying rent from now into eternity to somebody else. It gave them Senator CAPEHART. The point I wanted to make was that as a result of these builders or contractors operating under the cooperative section of the law, they would be the incorporators with their own employees? Mr. CAMPBELL. That is right. Senator CAPEHART. They built them, and they just sold them, and made a nice, big profit, and then they got completely out and left it in the hands of the people to whom they sold them? Mr. CAMPBELL. That is right. Senator CAPEHART. Certainly they are not co-ops in any sense of the word, because the profit that they made belonged to the people that bought the apartments. Mr. CAMPBELL. Well, I would like to suggest this. There is in New York a Council of Presidents of FHA 213 Co-ops that were built under this kind of a builder-sponsored arrangement. They have gone through the headaches involved in having somebody else conceive the project and build it and then sell it to them. They are aware of all of the pitfalls involved, and yet these people who are now living in those feel that they have a better deal as consumers than they would have gotten if it had not been for the program. I would like to suggest that you invite this group of presidents of these co-ops, or 1 or 2 representatives Senator CAPEHART. Can you bring me a single instance of a real co-op under section 213? Mr. CAMPBELL. Yes. One in Chicago. Senator CAPEHART. I wish you would. Mr. Chairman, it would be very, very interesting. How many projects have been built under section 213? Mr. CAMPBELL. There have been 270 projects, and I would say that of the genuine consumer-sponsored projects there are not more than 25. Senator CAPEHART. About 25 out of the 270? Mr. CAMPBELL. Yes. Senator CAPEHART. Mr. Chairman, I suggest the staff be authorized to get the names and addresses of those section 213's, and that they study them and give us a report. Senator MONRONEY. Mr. Campbell has those. Can you not furnish them? Mr. CAMPBELL. We can furnish them. We will have to identify from an FHA list those which are consumer-sponsored. Senator MONRONEY. The staff could get it just as well. Mr. CAMPBELL. The FHA people have to say under the law, "These are all cooperatives." We can help you identify those. (The information referred to follows:) 012-30034 ...do. _do. Brooklyn.. Flushing.. Mitchell Gardens No. 3. Fillmore Gardens. Hilltop Village, Sec. 1. |