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We agree that adequate housing for military personnel is an important morale factor and is an added incentive to make the military service a career.

We question, however, the method of providing this housing as proposed in S. 1501.

To require FHA to insure the mortgages on homes declared to be necessary by a branch of the military service without giving FHA any

a discretion or authority to make an independent determination as to the impact of such housing on other housing in the community, make an inspection of the property, and provide other functions necessary to protect the Agency and the Government is, we believe, unsound.

It also strikes us as being unnecessary for one agency of the Government to insure mortgages which another branch of the Government will assume, following construction of the housing.

In any legislative program for military housing such housing should be limited to those installations which, insofar as it can be predetermined, are permanent installations.

Senator MONRONEY. There are no further witnesses today.
The committee will stand in recess until 10 o'clock Monday morning.

(Whereupon, at 12:10 p. m., the subcommittee recessed until 10 a. m., Monday, May 16, 1955.)

HOUSING ACT OF 1955

MONDAY, MAY 16, 1955

UNITED STATES SENATE,
COMMITTEE ON BANKING AND CURRENCY,

SUBCOMMITTEE ON HOUSING,

Washington, D.O. The subcommittee met, pursuant to recess, in room 301, Senate Office Building, at 10:05 a. m., Senator J. William Fulbright presiding.

Present: Senators Fulbright, Lehman, Douglas, and Capehart.
Senator FULBRIGHT. The committee will come to order.

We will open the hearings on the college housing bills, S. 1744 and S. 1766. I would like to insert in the record at the beginning a statement that I made on the introduction of this bill, and also following that I have letters from the president of Springfield College, Springfield, Mass., Donald C. Stone, and from the President of Loretto Heights College, Loretto, Colo., Sister Frances Marie; and a telegram from L. J. Elias, past president, Northwest Association of Junior Colleges.

(The material referred to follows:) College housing

STATEMENT BY SENATOR FULBRIGHT INTRODUCING COLLEGE HOUSING BILL

Mr. President, in 1950, upon the initiative of my friend, the Senator from Alabama, Mr. Sparkman, the Congress recognized the critical housing need of students and teachers in colleges and universities all over the country. To help meet this need, the Housing Act of 1950 inaugurated a program of long-term loans at low-interest rates to provide funds for the construction of dormitories and residences at rentals which college students and teachers could afford to pay. Because of the war in Korea, the program did not become generally effective until 1953. A complete summary of the program, as it has operated to date, was introduced into the Congressional Record on February 4, 1955, by our colleague from Virginia, Senator Byrd.

I have studied this summary and have studied data expressing the continuing critical housing situation facing our colleges and universities, and am convinced that the college housing program should be strengthened. Here are some of the factors which lead me to such a conclusion.

1. Increasing enrollment.--In the fall of 1954 enrollment in our higher educational institutions reached approximately 2.5 million—an alltime high. According to the Department of Health, Education, and Welfare, this enrollment will rise steadily. By 1960, enrollment will reach 3 million-an increase of about 20 percent over 1954. By 1965, it will reach almost 4 million-an increase of about 60 percent over 1954. This increase of prospective students is inevitable, and is attributable to our normal population growth accentuated by the high birth rate of the 1940's.

2. Present inadequacy of college housing.Not only is present housing inadequate to meet the need for future enrollment—it is inadequate for enrollment in 1955. Mr. Albert M. Cole, Administrator of the Housing and Home Finance Agency, reports that old barracks and other temporary structures pressed into use in the late forties are deteriorating beyond use. He says that, “Many of these must now be removed because they are fire hazards, uneconomical to maintain, and because the special permits under which they were erected have expired."

This table shows that money borrowed at 234 percent interest for 50 years will provide shelter at approximately $31 per month. Loans for 40 years at 342 percent interest (the present private loan rate which, if available, will cause the HHFA to refuse a loan) will provide shelter for approximately $36 per month. Five-dollars-per-month savings for shelter alone is significant in determining whether a young man or woman can afford to go to college.

I believe that the public interest justifies loans at the lowest possible interest rate. Based upon the average cost of borrowed money to the Government during recent years, the interest rate on these loans can be fixed at a maximum of approximately 234 percent and still cover the cost of money obtained from the Treasury and the cost of administering the program. Two and three-fourths percent should be a maximum rate and I can see no reason for establishing a statutory rate which varies from month to month or which is subject to periodic revision by administrators of the program.

I agree wholeheartedly with a statement on this matter of term and interest rate in a recent article by Mr. Albert M. Cole, Administrator of the Housing and Home Finance Agency. Mr. Cole said : “Even with the 40-year maximum amortization and the current 314 percent interest rate provided under the college housing program, it is almost impossible to work out projects which are completely self-liquidating from the moderate rentals which are economically feasible for college students today. Nearly every college housing loan requires additional revenues from other debt-free buildings, student fees, or other sources. Thus, each institution must work out its own individual solution to a financial problem whose principal components are the construction cost per bed and monthly rent per student.” But I cannot agree with the solution which he advocates to relieve this impossible situation. He urges borrowing from private lenders at 312 percent interest and at terms up to 40 years. Such a solutivi places an even greater burden on additional revenues to supplement income froli, the buildings themselves. A more reasonable, and the only practical, solution is to reduce the interest rate and increase the maximum term. By these means it is possible to achieve self-liquidation, which is the goal our colleges ar universities are seeking.

The fourth change is concerned with the interest rate which the Treasur charges the HHFA. Prior to the hard-money policy this rate was as low as percent. I understand that the present charge to the HHFA is 3 percent. ! money costing the HHFA as much as 3 percent, it is forced to set its discretio ary interest rate to the colleges at some higher amount-and at the present ti. it is 374 percent. Thus the rate to the colleges is a full one-half of 1 pere: higher than it was in 1950 when the program started. This rise is largely atti utable to the manner by which the Treasury has exercised its discretion und the law.

For this reason I propose that this discretion be removed and that the statu fix a fair charge for money made available to HHFA. I think that 242 perce is a fair charge. This exceeds the average cost of money obtained by the Trei ury. If by any chance this cost should rise above 242 percent, the bill provii that the charge to HHFA and the charge to the colleges will rise correspondins

If the HHFA can obtain money from the Treasury at 212 percent and lenti colleges at 234 percent, the return of 14 percent should be sufficient to offset ! costs of administration.

The fifth change is to correct what I think has been an unwise use of discre' granted under existing law. As now written, the law requires the HHFA Adı istrator to turn down any loan application if the applicant can obtain a pri loan upon "comparable terms and conditions." This concept of "comparabil is not defined in the law and is left to the discretion of the Administrator.

Up until July 1954, this discretion was exercised by a decision to deny application if a private loan was available at not more than one-tenth percent above the rate being charged by the Administrator. In July 1954, h ever, this policy was changed and the private interest rate is determined to "comparable” if it is not more than one-fourth of 1 percent higher than the being charged by the Administrator.

The Administrator's rate is now 344 percent, and this "comparability” po means that the Administrator will not make a loan if a private lender 01 money at 312 percent. To my mind, this does not represent “comparable te and conditions.” Consequently, I propose a change in law to require that pri

than 10 percent of the money may be borrowed by institutions in any single State.

The bill which I introduce makes the following changes in the present law:

(1) It expands the purposes for which loans may be made to include cafeterias, dining halls, infirmaries, student unions or student centers, and other essential service buildings, all of which are capable of self-liquidation.

(2) It increases the maximum term of the loans to 50 years,

(3) It fixes the interest charge to the colleges at a reasonable rate, but at a rate lower than that available under the present law.

(4) It fixes the interest charge to the Housing and Home Finance Administrator at a fair return to the Treasury, but at a rate lower than he is now forced

to pay,

(5) It fixes the conditions under which Federal loans may be denied on grounds that comparable private loans are available, and

(6) It increases the overall ceiling on loans to $500 million. Each of these changes is necessary and can be justified.

The first change recognizes that cafeterias, dining halls, and infirmaries are just as essential to the college campus as classrooms and dormitories. Such buildings must be financed by private or public gifts or grants, by general college revenue, or by income from the services which the building provide. There is no other way.

Gifts and grants are apparently not forthcoming in sufficient quantity and general revenues cannot be spread to cover the cost of these buildings which leaves self-liquidation as the only reasonable alternative. These buildings can be substantially self-liquidating if they are financed by long term loans at low interest rates.

The second change lengthens the maximum term to 50 years. This is not to say that all loans shall be for 50 years, but where such a term is required, it should be available. Permanent buildings, soundly constructed, and conscientiously maintained, can endure far beyond 50 years. I will present a table later in this statement to show the real advantage that accrues to students and faculty, from the standpoint of monthly charges, by increasing the term of a loan.

The third change is perhaps the most important—the interest rate to be paid by the colleges. Under the original law, this interest rate was fixed as onefourth of 1 percent above the interest rate in the most recently issued bonds of the Federal Government having a maturity of 10 years or more. Under this policy, effective until the law was changed in 1953, the interest rate averaged at approximately 2.88 percent.

Then came the so-called hard money policy. The law was changed in the 83d Congress to give discretion to the Administrator of the Housing and Home Finance Agency in this matter of interest. I am sure you can imagine what happened—the interest rate went up. This same law in 1953 also gave the Secretary of the Treasury discretion regarding the amount he could charge the HHFA—which also had an upward effect on the interest charge to colleges. As a result, since mid-1953 the interest rate has averaged at approximately 3.26 percent. This rise is made even more significant in view of the fact that, because of the Korean emergency, the program was deferred and most of the loans have been made at the higher rates.

The following table, prepared in the HHFA, illustrates the effect which higher interest rates has on charges to students. The table also shows the effects of short term as opposed to long term loans :

Annual rental (9 months) required per student for self-liquidating residence hall

at various rates of interest and terms of years

(Assumptions: Cost per bed, $3,000; maintenance and operation, $100 per student; vacancy ratio, 10 percent:

coverage, 1.35 times. Computed on basis of no principal payments for first 2 years of loan)

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20 25.

30.

35 40 45 50.

11

$412
358
322
298
281
268
258

$418
363
330
306
289
276
266

$425
371
337
313
296
283
273

$431
378
343
320
303
291
281

$438
384
351
328
311
299
289

$446
392
359
335
319
307
296

$452 $460
399 407
366

373
313

351
327 336
315 323
306 314

$467
414
381
359
343
332
323

$474
421
389
368
352
341
332

$481
429
397
376
360
350
341

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Mr. President, the expansion of the facilities of our colleges and universities is central to the continued freedom and prosperity of our Nation. The programs of these institutions must be available to ever-increasing numbers of students and at prices they can afford to pay. The public interest demands that this expansion occur. The Federal Government can assist by outright gift, by subsidizing students, or by lending at low interest rates. This lending is the very least we can do, and I think that it must be done. I hope I can count on every Member of the Senate to support this necessary legislation.

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10TH NATIONAL CONFERENCE OF HIGHER EDUCATION, SPONSORED BY ASSOCIATION FOR

HIGHER EDUCATION, CHICAGO, ILL., MARCH 2, 1955—CONFERENCE RESOLUTIONS

ADOPTED
College and university housing

Whereas the present housing facilities on college and university campuses are entirely inadequate for present and anticipated enrollments despite the welcome assistance already given by the college housing program, title IV of the Housing Act of 1950 (Public Law 475, 81st Cong.), and

Whereas the regulations under which title IV of the Housing Act, 1950, now operates prevent the program from being fully practical for self-liquidating projects : Be it

Resolved, That the 10th National Conference on Higher Education recommends a modification of the regulations governing the use of the funds by providing for the lowest interest rates consistent with the original act; reducing the reserve fund requirement to the lowest reasonable level; and by making available as soon as possible the full amount of the funds provided under the act, and

Whereas the 1953 amendment to title IV of the Housing Act of 1950 gives discretionary power to the Administrator of the Housing and Home Finance Agency to change the interest rate, thus introducing further elements of uncertainty for the colleges in the effective operation of the law: Be it

Resolved, That the 10th National Conference on Higher Education recommends that title IV of the Housing Act of 1950, as amended, be further amended to withdraw the discretionary power of the Administrator of the Housing and Home Finance Agency to change the interest rate. College and university facilities for auxiliary services other than housing

Whereas the existing facilities for auxiliary services other than housing on college and university campuses fall far short of meeting the needs of present and anticipated enrollments, and

Whereas facilities for auxiliary enterprises of colleges and universities may be of a self-liquidating nature: Be it

Resolved, That the 10th National Conference on Higher Education urges amendment of title IV of the Housing Act, 1950, to include financing the construction and equipment of facilities for auxiliary services other than housing on college and university campuses.

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