HOUSING ACT OF 1955 TUESDAY, MAY 17, 1955 UNITED STATES SENATE COMMITTEE ON BANKING AND CURRENCY SUBCOMMITTEE ON HOUSING, The subcommittee met, pursuant to recess, in room 301, Senate Office Building, at 10: 15 a. m., Senator John J. Sparkman (chairman of the subcommittee) presiding. Present: Senators Sparkman, Lehman, Capehart, and Payne. Senator SPARKMAN. The committee will come to order. Senator Kuchel was supposed to be our first witness, but he is not here. I think we better move on and take the next witness, who is the representative of the National Association of Real Estate Boards, Mr. Henry G. Waltemade, president of the association. We have your prepared statement, which will be accepted in toto. You may proceed as you wish. STATEMENT OF HENRY G. WALTEMADE, PRESIDENT, NATIONAL ASSOCIATION OF REAL ESTATE BOARDS, ACCOMPANIED BY JOHN C. WILLIAMSON, SECRETARY-COUNSEL, REALTOR'S WASHINGTON COMMITTEE Mr. WALTEMADE. Mr. Chairman and members of the committee, I am Henry G. Waltemade, president of the National Association of Real Estate Boards. I am president of Henry Waltemade, Inc., New York City, a trustee of the Dollar Savings Bank of the City of New York, the fifth largest savings bank in the country, a director of the Manhattan Life Insurance Co., also a member of the real estate mortgage committees of both institutions, and a member of the real estate and mortgage advisory committee of the Manufacturers' Trust Co. of New York. I have been actively engaged in all phases of the realestate industry for more than thirty years. The National Association of Real Estate Boards consists of more than 54,000 realtors in 1,191 local real-estate boards throughout the 48 States, District of Columbia, Hawaii, Puerto Rico, and Alaska. Mr. Chairman, we are most appreciative of this opportunity to present the views of our association with respect to housing legislation now before you. Most of the subjects covered in the bill have been considered from time to time by the conventions of our association, and the views to be expressed and amendments proposed herein have been under study for several years. My testimony will proceed in the order in which the subjects appear in the bill before you, S. 1800. Home repair and modernization FEDERAL HOUSING ADMINISTRATION -REHABILITATION AND MODERNIZATION OF HOMES The bill proposes a 5-year extension of the FHA title I program, so essential to conservation of our neighborhoods and the improvement and maintenance of our inventory of existing housing. We urge the favorable consideration of this amendment by the committee. Last year we shared with the Congress and the public the concern over evidence of widespread abuses in the title I program. However, administrative regulations issued by FHA in the fall of 1953, coupled with the changes in the law approved by the Congress last year, have succeeded, we believe, in preventing abuses in this valuable program and have restored it to its rightful place as an effective weapon in the nationwide attack against the spread of blight and decay. We do recommend that the committee give favorable consideration to the recommendations of the President's Advisory Committee on Housing, with respect to strengthening the title I program by increasing the maximum amount of such loans from $2,500 to $3,000 and the term from 3 years to 5 years. Also, with respect to repair and modernization of multifamily structures we recommend a maximum of $10,000 per structure or $1,500 per unit, whichever is greater, and a maximum of 10 years instead of the 7 years as provided in the present law. We believe that such changes would encourage the improvement of much of our housing inventory and would assist in restoring many neighborhoods to sound, healthy condition. Federal loans and grants at best can deal effectively with only a fraction of the Nation's total slum and blight problem. It is equally as important to prevent the decay of housing as it is to remove slums. Only through a manypronged effort will the Nation successfully meet the challenge expressed so dramatically by the President's Advisory Committee that at the 1953 rate of slum clearance and demolition the job of eliminating slums will take over 200 years. We urge the extension and expansion of the title I program as one of the major weapons in the nationwide effort to improve family living conditions in our neighborhoods and our cities. Multifamily housing mortgage limitation MAXIMUM MORTGAGE AMOUNTS FOR MULTIFAMILY PROGRAMS We endorse the provisions of the bill increasing the maximum mortgage amounts for the FHA multifamily programs from $5 million to $12.5 million and the limitation on the latter to the aggregate amount of any commitment or commitments issued and outstanding under the particular section at any time with respect to a project or projects in the same housing market area and involving the same mortgagor. We also endorse the increase in the maximum mortgage amount under section 220 (rehabilitation) for private mortgagors from the present $5 million to the $50 million limitation which is applicable now only to publicly supervised mortgagors. The basis for this change is that the control exercised by FHA over private mortgagors makes unnecessary the difference in mortgage amounts as between private and public mortgagors. Before leaving the section 220 program, we want to express our confidence in the ultimate success of this program which, as the committee knows, is designed to make mortgage insurance available for rehabilitation of existing properties and new construction in older areas undergoing urban renewal treatment, federally assisted, under the Housing Act of 1954. The program did not get off to a quick start, and this is understandable realizing that the philosophy underlying the program is one of greater acceptance by local governments of their responsibility for housing-code enforcement. Many communities have had to appeal to their legislatures for authority to promulgate the proper housing codes; others have dragged their feet, not sure of just how taut the purse strings were on the Federal grants for urban renewal. However, we want to express one word of caution over increasing the maximum mortgage amount on section 220 loans to $50 million. We trust that this will not be construed as congressional sanction of the mass demolition approach to urban renewal. Such blockbuster methods unduly emphasize new construction as the principal or major objective of the section 220 program. Instead, we hope the Congress will underscore the primary role of the section 220 program as the rehabilitation of existing properties within a defined urban renewal area. We have urged the FHA to show a greater appreciation of the tremendous potentiality of this section in accomplishing the objectives of urban renewal through rehabilitation, rather than to concentrate on demolition and new construction as its primary objective. Conservation and rehabilitation are the basic objectives of the Build America Better program of our national association, which is meeting with success in many parts of the country. Mortgage insurance authorization FHA AUTHORIZATION We endorse the recommendation in the bill that the maximum authorization for the FHA mortgage insurance system be increased by an additional $4 billion for the fiscal year beginning July 1, 1955. In connection with this recommendation our association desires to express its confidence in the existing fundamental structure of the Federal Housing Administration. We so express ourselves realizing that the Congress, the President, and the public have been bombarded during the past several months with various proposals designed to change radically this mortgage insurance system which has made so tremendous a contribution to the principle of home ownership, the home building industry, and the national economy. In our opinion, the FHA mortgage insurance system as presently constituted is a sound one that has resulted in vast benefit to the American people without subsidy or expense to the taxpaying public. Senator CAPEHART. Will you yield just one moment? You say "We so express ourselves realizing that the Congress, the President, and the public have been bombarded during the past several months with various proposals designed to change radically this mortgage-insurance system which has made so tremendous a contribution to the principle of home ownership, the home-building industry, and the na tional economy." What are they? I am not aware of a single one. Will you relate some of these pressures? Mr. WALTEMADE. Well, I think one was the report of the Hoover Commission. The other was in the House and Home magazine, which 2 months ago had a rather lengthy discussion of a meeting that was held with some members of the industry. As a matter of fact, in their article of the roundtable discussion and their findings, they even had me as president of the National Real Estate Board concurring, at which time I had to counter and come back with another statement, since I was never present at any of those meetings. Senator CAPEHART. What were they advocating? Mr. WILLIAMSON. I just want to make one statement, Senator. It is our understanding that this roundtable represented the views or purported views of a majority of the members of the President's Advisory Committee on Housing, and they made certain recommendations which involved radical changes in the structure of FHA. For example, one would have stopped the FHA from insuring individual loans and would have either provided for a reinsurance of the portfolio with the Treasury or provided for insuring only the risk portion of the loan. Other suggestions involved a recapitalization of FHA, where mortgagees or mortgagors were to participate in the capitalization. The recommendations were so substantial that we were fearful that the Government agencies themselves might decide to recommend certain changes just for the sake of change. We have confidence in the present basic structure of FHA, and the results of your investigation certainly were not directed at the structure of FHA as much as they were the administration of certain provisions of the act. Senator CAPEHART. You say "during the past several months," and I am not conscious of being bombarded by anything with respect to that. Senator SPARKMAN. We were sent a tear sheet from House and Home in which that discussion appeared, but I do not think I would describe that as a bombardment, because we get all kinds of literature such as that. Then later you say the statement was disavowed, and I think we may have had letters from you. Mr. WALTEMADE. We have sent you letters. Senator SPARKMAN. We have had letters from several people, saying they did not agree with those findings. The Hoover Commission has recommended virtually the abolition of the FHA insurance program, has it not? Mr. WILLIAMSON. The recommendations were very obscure. They wanted to change FHA so that FHA would not have to go to the Congress as often to get its money, and of course we do not know when they refer to money whether that refers to operating expenses or authorization or what it means. But that was another example of pressure being directed at the Congress to make some basic change in FHA. Senator SPARKMAN. I agree with you that it was obscure, but as I gathered it the financing was to be obtained through the sale of bonds, underwritten by the Government. They were not drawing money out of the Treasury. Mr. WILLIAMSON. It was never clear just what the Hoover Commission meant when it said FHA should not have to keep coming back to Congress for its money. Senator SPARKMAN. Of course, FHA only gets authorization from Congress. Mr. WILLIAMSON. That is right. Senator SPARKMAN. And even as to its administrative expense it only gets the authorization to use certain portions of the funds. Is that not right? Mr. WILLIAMSON. That is right. We do not know what the Hoover Commission had in mind. Senator SPARKMAN. So it is a little hard to determine just what the Commission had in mind when it talked about FHA coming back to Congress to get its money. Mr. WILLIAMSON. But it was indicative of much talk on the subject of FHA, and that something was wrong with the basic structure of FHA. Perhaps the word "bombarded" is a little too strong. Mr. WALTEMADE. We would be glad to withdraw the word "bombardment." Senator SPARKMAN. Go ahead. Before we get away from this, I think it might be well to read into the record this recommendation of the Hoover Commission. It is found in recommendation No. 8. I believe the recommendations have already been placed in the record, and the agency has been asked to comment on them. This is the one that I think you have in mind. We believe that it is desirable that the Federal Housing Administration be reorganized so as to provide its own financing, as indicated above. Some of the more substantial of our governmental financing institutions secure funds for their lending operations through the issuance of debentures sold to the public. Here is their recommendation: Recommendation No. 8: That the Federal Housing Administration be reorganized in such a manner that it will provide its own financing without having to call on the Government for funds, subject, however, to Federal regulation. The home loan bank and the Federal Savings and Loan Insurance Corporation are examples which might be followed. My immediate impression is that the people who wrote that recommendation just did not understand how FHA operates. Can you get anything else out of it? Mr. WILLIAMSON. That is why we thought it was rather uncertain and not clear at all, but we wanted to prevent any implication that might have been made by the Commission that the present financing is wrong and should be changed. Senator SPARKMAN. In other words, you think it operates pretty well as it is, and you do not want it tinkered with? Mr. WILLIAMSON. That is correct, sir. Military housing Mr. WALTEMADE. Section 9 of the bill provides for the termination of the Wherry military housing program on June 30 except for commitments to insure issued on or before that date. We believe that this recommendation is unfortunate. Despite some recent reports of abuses in this program, we have yet to note any facts unearthed by a congressional invesigating committee in substantiation of such that could not be cured by proper administrative measures. The Wherry |