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Public housing

LOW-RENT PUBLIC HOUSING

Section 13. Continuation of Public Housing and Modification of Restriction : This section would authorize additional public housing for 2 more years at the rate authorized for fiscal year 1955 under the Housing Act of 1954. It would maintain the basic purpose of meeting the relocation needs of families of low income displaced by slum clearance and urban renewal projects under title I of the Housing Act of 1949, as amended, or by other governmental action. The section would, however, make necessary and desirable modifications of statutory restrictions which are holding up the provision of housing needed for those families and preventing the use of the authorization intended by the Congress. Accordingly, the section would amend subsection 10 (i) of the United States Housing Act of 1937 (as amended by the Housing Act of 1954) to make the following changes :

1. The authority to enter into new annual contributions contracts for additional public housing would be increased by 70,000 units, in increments of 35,000 becoming available annually beginning July 1, 1955. This conforms to the recommendation of the President in his State of the Union message. The present authorization (for 35,000 units expiring June 30, 1955, under present law) would be extended to June 30, 1956, and each of the new increments of 35,000 units would remain available for 2 years after the first date on which it becomes available. Thus, the 35,000 units becoming available on July 1, 1955, would remain available until the middle of 1957 and the 35,000 units becoming available on July 1, 1956, would remain available until the middle of 1958. This would establish a reasonable deadline for using the authorization without unduly disrupting program operations.

2. As under the existing law, the restrictions in the revised subsection 10 (i) would be made applicable to annual contributions contracts, thus effectively controlling the size of the new program. However, it would be made clear that preliminary loan contracts, under the revised subsection, would not be subject to these restrictions, in order that preliminary planning could start at a date early enough to assure that the low-rent housing will be available when needed to rehouse low-income families displaced by governmental action. This is consistent with the present provisions of subsection 101 (c) of the Housing Act of 1949, as amended, which makes definitive contracts for low-rent housing and title I urban renewal projects subjects to the approval of a "workable program” for the prevention and elimination of slums and blight, but does not make preliminary or planning loans subject to such approval. The proposed language, however, would permit preliminary loan contracts for only a sufficient number of units to assure that annual contributions contracts could be entered into for the number of units authorized.

3. There would be incorporated in the revised subsection the requirement (presently included in sec. 101 (c) of the Housing Act of 1949) that the Housing and Home Finance Administrator make the determination and certification relating to a workable program as prescribed in that section. The new language provides, however, as in the case of FHA mortgage insurance under section 221 of the National Housing Act for housing for displaced families, that the workable program requirement is not applicable in the case of a locality where there is being carried out an urban redevelopment project covered by a Feedral contract executed, or prior approval granted, by the Housing and Home Finance Administrator under title I of the Housing Act of 1949, as amended, before the effective date of the Housing Act of 1954. This is in recognition of the fact that the concept of a workable program is newly created by the Housing Act of 1954 and requires time for development of techniques and procedures; and where a title I project has been approved previously it ought not to wait for approval of a workable program before public housing or section 221 housing can go forward to provide dwellings for the families displaced by the title I project. Existing law permits the undertaking and completion of such title I projects although the community does not have, or will not have, a workable program. There will thus be the same problem of relocating displaced families of low income from those projects as from projects in communities having workable programs, and public housing should not be barred where needed for such families.

4. The present requirement that there must be a title I urban renewal project being carried out in the community is eliminated, since it seems unfair to deny public housing assistance for displaced families in communities which have

workable programs and eliminate slums without Federal aid under title I. This would be parallel to the provision with respect to FHA insurance under section 221 for housing for displaced families which is predicated on the elimination of slums but does not require the carrying out of a title I project as a condition precedent to such insurance.

5. In place of the present requirement of a certification by the local governing body that the project is necessary to assist in meeting the relocation requirements of section 105 (c) of title I of the Housing Act of 1949, the proposed legislation would require only that the local governing body approve the additional units by resolution. This would carry out the apparent intent of the existing requirement but eliminate language which has raised serious questions of interpretation. The present language would also be inconsistent with the proposed removal of the requirement that there must be a title I project being carried out in the community.

6. The present law requires that the Housing and Home Finance Administrator determine that the additional units will not exceed the total number to be neded for families to be displaced by Federal, State, or local government action. The proposed amendment would require, in lieu of this provision, that the Housing and Home Finance Administrator make a determination that the additional units will not exceed the number of low-income families to be displaced (within the metropolitan or housing market area) by Federal, State, or local governmental action, thus making it clear that the Administrator is not required to take account of vacancies which may occur in existing low-rent housing projects. The proposed legislation would permit new housing to be provided for families to be displaced by all governmental action without affecting occupancy in existing projects, which could then continue to serve other eligible families of low income. Such eligible families include those (1) who leave the slums on their own initiative without being forced out as a result of governmental action, (2) who are displaced by private enterprise which is clearing a slum site on its own initiative, or (3) who are displaced as a result of fire or other catastrophe. Home loan bank

HOME LOAN BANK BOARD

Section 14 (1). Change in Amount of Required Stock Subscription by Member of Federal Home Loan Bank: The Federal Home Loan Bank Act, enacted in 1932, originally required that each institution eligible for membership in a Federal Home Loan Bank must subscribe to the stock of that bank in an amount equal to at least 1 percent of the aggregate unpaid principal of all the home mortgage loans held by such institution (but not less than $1,500, which amount was later reduced to $500). That requirement was not changed further until 1950 when a new subsection 6 (1) was added to the act requiring an increase in the amount of stock subscription from 1 to 2 percent for the purpose of acquiring additional funds to enable the Federal home loan banks to retire all Gov. ernment stock holdings in these banks. All of the stock held by the Government in these banks has now been retired and there is no longer necessity for the higher stock ownership. Therefore, this section would provide that the Board could determine the amount of required stock subscription, but that in no event could it be less than 1 percent nor more than 2 percent of the aggregate of the member's home mortgage loans. However, it would be provided that this would not reduce at any time the amount of stock required to be held by a member below the amount required to be held as of the date of enactment of this section.

An additional safeguard which would avoid any substantial reduction in the amount of stock subscriptions arises from the existing requirement in section 10 (c) of the act that at no time shall the aggregate advances by a Federal homeloan bank exceed 12 times the amount of bank stock held by the member institution. Any appreciable increase in demands by a member institution for advances from the bank would, in most cases, necessitate an increase above 2 percent in subscriptions to the bank stock in order to maintain the required 12 to 1 ratio.

Section 14 (2). Termination of Bank Membership: This section would amend the Federal Home Loan Bank Act so as to provide that any member institution may be removed from membership if in the judgment of the Board it is insolvent or the character of such institution's management or its home-financing policy is inconsistent with sound and economical home-financing or with the purposes of that act. A member institution (which is a savings and loan or building and loan type) would be deemed insolvent if its assets are less than its obligations to its creditors and others, including the holders of its withdrawable accounts.

The act currently provides that no institution shall be eligible to become a member of a bank if in the judgment of the Board its financial condition is such that advances may not safely be made to it or if the character of its management and home-financing policy is inconsistent with sound and economical homefinancing or with the provisions of the act. There is, however, no provision for removal of a member institution for these grounds once the institution becomes a member of the Federal Home Loan Bank System.

A conservator can be appointed for a Federal savings and loan association on grounds somewhat similar to those just referred to. Also, under the Housing Act of 1954, legislation was enacted which authorizes the termination of insurance of accounts of an insured institution for somewhat similar grounds. However, a State-chartered institution which is a member of the Federal Home Loan Bank System, but is not insured, could not be deprived of further membership, although if such an institution were insured, its insurance could be terminated. This section would thus merely fill a gap in the statutory authority of the Board to terminate benefits to unsound institutions.

The section also expressly provides that a Federal savings and loan association may not voluntarily withdraw from membership. These institutions are required by law to become members of a Federal home-loan bank. The present law requiring these institutions to be insured does not permit them to voluntarily cancel insurance of accounts by the Federal Savings and Loan Insurance Corporation.

Section 14 (3). This is a technical amendment.

Section 14 (4). Increase in the Number of Elected Directors in Certain Federal Home Loan Banks: The Federal Home Loan Bank Act presently provides for a board of 12 directors in each Federal home loan bank. Eight directors are elected to each board by the members of the bank and four are appointed by the Home Loan Bank Board. This section would permit the Board, in any district in which there are more than four States (that is, more than half the number of elected directors) to increase the directorate so that there could be as many as, but not more than, twice as many elective directors as there are States.

Because certain of the Federal home loan bank districts, such as the Greensboro district, with 7 States and the District of Columbia, and the San Francisco district, with 9 States as well as Alaska, Hawaii, and Guam, contain so many basic units, proper recognition cannot, in all cases, be afforded. At present, the Board in its regulations attempts to provide for each State to be represented on the board of directors of the Bank of its district. In the case of the San Francisco district this is, of course, at present impossible and the Board has been compelled to adopt the method of treating two States as if they were one. By regulatory provision, the representatives of these two States have been alternated. Furthermore, the present law so limits the elective directors that fair consideration cannot be effected giving recognition to the relevant financial importance of the institutions in the various States, while recognizing representation for all States. In the San Francisco district, the California members comprise approxiinately 57 percent of the entire membership and hold approximately 73 percent of the entire outstanding bank stock of the San Francisco bank. The proposed change would permit all States to be represented on the board of directors and permit recognition to be given to the relevant financial importance of the institutions in the various States.

Section 15. Removal of $2,500 Limitation on Federal Housing Administration and Veterans' Administration Improvement Loans by Federals: This section would make a correction in the existing law to remove a $2,500 limitation as applied to the amount of a Federal Housing Administration or Veterans' Administration insured or guaranteed loan made by a Federal savings and loan association.

Prior to the Housing Act of 1954, Federal Housing Administration or Veterans' Administration insured or guaranteed repair loans made by a Federal savings and loan association were not subject to a special dollar limitation. The applicable limitations were thus the ones provided for all lenders in the National Housing Act or the Servicemen's Readjustment Act. However, in enacting an amendment increasing from $1,500 to $2,500 the maximum amount of an eligible Federal association loan not insured or guaranteed, the Congress also imposed the $2,500 restriction on an insured or guaranteed loan (thus prohibiting a Federal association from making, for example, a $3,000 Federal Housing Administration title I loan for construction of a new structure). This was apparently done inadvertently, and it is important that the statute be corrected.

Section 16. FSLIC Admission Fee: The present law requires that the Federal Savings and Loan Insurance Corporation charge (in addition to premiums) lending institutions an admission fee as an initial payment for obtaining insurance coverage. That admission fee must be based upon the reserve fund of FSLIC and must constitute an equitable contribution to that fund. This section of the bill would change that requirement to provide that lending institutions applying for insurance hereafter shall pay an admission fee as determined by FSLIC, taking into consideration the cost of processing the applications. This would carry out the recommendation of the General Accounting Office (H. Doc. No. 371, p. 16, 83d Cong., April 26, 1954) and make the admission fee requirement more consistent with general insurance operations. The statement of the General Accounting Office with respect to this recommendation contains the following:

"We recommend that the National Housing Act be amended to eliminate the existing requirement for the payment of an admission fee based on the reserve fund of FSLIC and to authorize the imposition of a fee on newly insured institutions commensurate with the direct and indirect cost of granting insurance coverage.

"The admission fee charged by FSLIC against newly insured associations is required by law to be based on the reserve fund of FSLIC and to be, in its judgment, an equitable contribution * * *

“We believe that a newly insured association's contribution to an insurance reserve fund should be confined to payments for services and benefits actually received, i. e., insurance premiums for protection to be received by its investors. Further, à fee based on the ratio of the reserve fund to the total insurance risk (which would satisfy the legal requirement for an equitable contribution) might be so large as to discourage applicants for insurance membership. Federal Deposit Insurance Corporation does not charge admission fees against newly insured banks, and to our knowledge other similar risk enterprises do not make such charges.” Public works

COMMUNITY FACILITIES ADMINISTRATION

Section 17. Reserve of Planned Public Works: This section would amend section 702 of the Housing Act of 1954, which authorized the third public works advance planning program. The proposed amendments would carry out the recommendation contained under the heading “Coordination of Public Works Planning' appearing in section 4, chapter 3 of the Economic Report of the President, which was transmitted to the Congress on January 20. That report contains the following statement:

“A problem of great interest *** is the stimulation of public works planning in States and localities. Many smaller communities have projects within their master development plans for which funds are not immediately available to produce preliminary engineering surveys and designs. Assistance to such communities would help them to develop plans for public works ready for initiation, which otherwise would take months to prepare in case of need. Such a reservoir of planned public works should be of considerable magnitude to be effective. The sum of $1.5 million made available by the Congress last year for planning advances—that is, interest-free loans—to States and municipalities was a good beginning but no more than that. It is recommended that the Congress enlarge substantially the appropriaion for planning advances, and that a revolving fund be established for this purpose. The need for building a reservoir of 'ready-to-go' projects has been recognized in three separate programs of planning advances, established by the Congress within the past decade. This experience indicates that the need for preparedness, being itself continuous, is not well met by pro grams of limited duration."

The bill would make the following changes in the present law:

(1) The Housing Admiinstrator would be authorized to establish a revolving fund for the making of planning advances. In addition to the $10 million authorized to be appropriated by section 702 as originally enacted there would be authorized to be appropriated to the fund $12, $12, and $14 million to be made available on or after July 1, 1956, 1957, and 1958 and, in addition, such appropriations from year to year thereafter as may be estimated to be necessary to maintain not to exceed a total of $48 million in outstanding advances (and any undisbursed balances in the fund) for plans of projects which can be expected to be undertaken within a reasonable period of time.

(2) Advances outstanding to public agencies in any one State would be limited to not more than 10 per centum of the aggregate then authorized to be appropriated to the revolving fund. Under the present law not more than 5 per centum of appropriations may be expended in any one State.

(3) The July 1, 1957, expiration date for the present program would be eliminated, and the new introductory language of the revised section 702 would make it clear that a "reservoir” rather than a “shelf” of planned public works is intended.

(4) As under the present law, local public agencies must agree to complete the plan preparation promptly and to repay advances when the construction of the public works is started. Provisions would be added to the law, however, which would require a public agency to repay proportionate amounts of advances when only a portion of the construction of a planned public work is undertaken by the ļocal agency.

The bill would continue provisions in the present law which state that the advances are designed to finance the cost of engineering and architectural surveys, designs, plans, working drawings, specifications, or other action preliminary to and in preparation for the construction of State and local public works. By definition, “public works” excludes housing. The bill retains present provisions of law which make it clear that the making of planning advances in no way commits the Congress to assist in financing the construction of the public works planned.

Section 18. Salary of Community Facilities Commissioner: This section would make the salary of the Community Facilities Commissioner of the Housing and Home Finance Agency the same as that of the heads of the constituent agencies. The Housing Act of 1948 has fixed this compensation at $15,000 per annum.

A new constituent unit of the Housing and Home Finance Agency, known as the Community Facilities Administration, was established by the Housing Administrator's Reorganization Order No. 1 of December 23, 1954. There was transferred to that Administration the office of the Commissioner of Community Facilities, and the title of such office was changed to "Community Facilities Commissioner.”

The Community Facilities Commissioner is presently receiving $14,800 per year pursuant to Public Law 359, 81st Congress and Public Law 375, 82d Congress. This proposed section would therefore give the necessary statutory authority to increase the compensation of the head of this new constituent unit so that it would be equal to the compensation received by the heads of the constituent agencies and the head of another new constituent unit of the Agency, the Urban Renewal Administration. Although the salary increase provided by this section would be very small, it would serve the purpose of providing consistency in the salaries paid the heads of the constituent agencies and units of the Housing and Home Finance Agency. The Urban Renewal Commissioner already receives the same salary as the heads of constituent agencies by virtue of section 106(a) (1) of the Housing Act of 1949 and the Housing Administrator's Reorganization Order No. 1. Military housing

COMPTROLLER GENERAL OF THE UNITED STATES,

Washington, April 29, 1955. Hon. J. W. FULBRIGHT, Chairman, Committee on Banking and Currency,

United States Senate, DEAR MR. CHAIRMAN : Reference is made to letter dated April 15, 1955, from the clerk of your committee requesting our views on S. 1501, which proposed legislation is designed to take the place of the Wherry Act military housing program expiring June 30, 1955.

It is generally agreed that there is a dire need for additional military housing. The fundamental question for Congress to resolve at this point is whether to satisfy the need by continuing some form of FHA insurance program or by direct appropriations for construction of public quarters. Because the projects are intended to be constructed for, and operated to serve, the military departments, we believe that they should be financed by direct appropriations rather than the indirect financing approach of FHA insurance employed under the Wherry Act and as proposed in the new program.

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