Senator SPARKMAN. May I interject a thought there? It seems to me as far as the cost of the money is concerned, assuming there is good management there will be no difference in either plan.

Senator PAYNE. That is right.

Senator SPARKMAN. Mr. Secretary, there is a very serious question in my mind, however, and it is an old one which has been there for a long time. It has been in the minds of members of this committee for several years with reference to housing built by the services themselves by the direct-appropriation method. Senator Maybank, who was chairman of this committee and also was a member of the Subcommittee on Appropriations of the Armed Forces, used to raise this question quite frequently. That is, it seems that housing built by the services is simply too costly for the individual units. The planning and designing has always seemed to be too expensive.

It seems to me if you could satisfy us with reference to that cost part of the program, then my own personal view is the direct appropriation method would be the most efficient and the more practical. But that question has been raised many, many times; that is, that the cost of housing built by the services themselves is excessive. I wonder if you would comment on that?

Secretary FLOETE. Well, sir, you see very few houses were built directly by the services in the last 5 or 6 years. I believe there were only 800 built in the United States prior to the last year over the last 4 or 5 years because of the Wherry Act taking up the slack in there at that time. So we started out last year without a very good experience on the cost. We did not have very many places that we could point to. Under the appropriation made last year, there have not been too many contracts let. However, they are running pretty close to other civilian experiences. In other words, in the neighborhood of $11 a square foot.

Senator SPARKMAN. This is a question that Senator Payne raised the other day: Would that include the costs that a civilian builder would have to meet, that is, the cost of the land and the preparation of the land and the extension of utilities, grading, paving of streets, and all of those things that a civilian builder would have to include?

Secretary FLOETE. I think that the Army figures are tending to show that, including those things, it would cost about $11. I think that is a pretty optimistic figure. I think we ought to take $12 or $12.50. But I think that compares with civilian experience pretty well. The dollar cost, you see, is a little larger than it has been under Wherry because the size of the units we are trying to build are more comparable with what they really need.

Under the Wherry Act, they got only an average of about 900 square feet, and that is pretty small for a married man with 2 or 3 children. We are trying to build these houses

Senator SARKMAN. You know, Mr. Secretary, I know a little about that Wherry housing because my daughter has been living in one of them at a naval base. I have visited in their quarters a good many times. I certainly think what you have said is true with reference to that.

Secretary FLOETE. We are trying to get 1,080 square feet for enlisted men, and I do not think that is too much.

Senator SPARKMAN. One thousand and eighty feet?

Secretary FLOETE. Yes. That is permanent law. You see, it was passed in the 81st Congress, I believe. We give an enlisted man 1,080 square feet, and then it graduates up to a general or the commanding officer of the post with 2,100 square feet. That was proportionate to his quarters allowance, which runs, in the case of an enlisted man with three or more dependents, from $96 up to a general with $171. So we are asking that the permanent law be reaffirmed this year, and we do not have to stay with the 1,080 for an enlisted man, or an average of 1,250 square feet, which has been in the authorization law.

Senator CAPEHART. Under S. 1501, of course, the Army would enter into contracts with architects to design these houses and you would advertise and award the contracts to the private builders to build them.

Secretary FLOETE. That is correct.

Senator CAPEHART. Award them to the lowest bidder if he was a responsible man; and he would proceed to build them and complete them in every respect and turn them over to the service to handle them. They would then assume the payment of the mortgages and take over the ownership of all of the stock in the respective projects, and make the mortgage payments out of the proceeds of the rent or quarters allowance, whichever you care to call that. We would limit the number of units that can be built in any 1 year, and of course we would write into the act a lot of safeguards, not only from the standpoint of the Defense Establishment, but from the standpoint of existing Wherry housing, and safeguards in respect to not overbuilding in a section where there was plenty of public housing and plenty of private housing at the moment. Such safeguards as you yourselves would be naturally as much interested in as we are. This legislation is not very complicated. It is quite simple. If we can make up our minds that we need the houses for the boys, I think we can very easily write the legislation and get started.

Secretary FLOETE. I think these figures here prove we should do something about it, because in the last 3 years the United States paid on this quarters allowance alone $1,133 million in 1952, and $1,322 million in 1953.

Senator CAPEHART. What period is that for?

Secretary FLOETE. These are different fiscal years. For 1952 we paid $1,133 million.

Senator CAPEHART. $1,133 million?

Secretary FLOETE. Yes, sir.

Senator CAPEHART. On an average of $100 rent per month that would amount to how many units?

Secretary FLOETE. It would be about 90,000 units. In the next years it was slightly more. It was $1,322 million in 1953. Senator CAPEHART. In 3 years' time we could build

Secretary FLOETE. Our total requirements.

Senator CAPEHART. 233,000 units, and have this job completed. Secretary FLOETE. That is right. For the 3 years we have paid out a total of $3,750 million and we do not have the houses.

Senator CAPEHART. If we had permitted you to build 90,000 units under this law in 3 years you would have sufficient housing to make up for the deficit you brought out in your chart?

Secretary FLOETE. That is correct.

Senator CAPEHART. And the quarters allowance would be more than ample to take care of the amortization of the mortgages. Secretary FLOETE. That is right.

Senator CAPEHART. Is that correct?
Secretary FLOETE. That is correct.

Senator SPARKMAN. Going back to the cost of $11 per square foot for 1,080 feet, that would be $11,880. Then the 2,100 feet, which is the maximum you stated?

Secretary FLOETE. Yes, sir.

Senator SPARKMAN. That would be $23,100. If you go to your figure of $12.50, which was the maximum figure you gave, it would be $13,500 for the minimum footage and $26,250 for the maximum. Secretary FLOETE. That is right.

Senator SPARKMAN. I suppose there are a great many more toward the minimum than toward the maximum?

Secretary FLOETE. Oh, yes. You see, last year we only had 75 percent built for enlisted men and 25 percent for officers, but only less than 5 percent were in the upper grades, you see. So, I think the $13,500 figure is a fair average figure.

Senator SPARKMAN. That is a figure, I believe that is containedSenator CAPEHART. That is the maximum.

Secretary FLOETE. They will have to skirmish to meet it in every case, but there is evidence they are going to be able to do it. The Army had a big bid at Fort Lewis, Wash., this spring and they substantially beat that, but that may have been due to some local condition I do not know about. They had 800 units there that they got at a price of about $9 but I do not cite that as something we can always live up to.

Senator SPARKMAN. By the way, I wanted to ask about this. You referred here to grades E-7, E-6, É-5, and E-4. Are those the four top grades?

Secretary FLOETE. Yes, sir. And they are entitled to quarters allowances by permanent law. The other grades are not permanent law. Whether Congress will make it permanent or not we do not know, but we had to assume that.

Senator SPARKMAN. The other grades do get an allowance of a kind at the moment.

Secretary FLOETE. Yes, sir.

Senator SPARKMAN. When does that expire?

Secretary FLOETE. I think it is this year.

Senator SPARKMAN. June 30 of this year?

Secretary FLOETE. I think so.

Senator CAPEHART. Are you recommending it be extended?
Secretary DOUGLAS. Yes, I am sure we will. Very definitely.

Senator SPARKMAN. If it is extended would the dependents of those people be entitled to housing under your program?

Secretary FLOETE. If it were made permanent we would have to consider that as an added requirement.

Senator CAPEHART. I was going to ask you that. If these four lower grades that are now getting quarters allowances are given a permanent allowance by the Congress and my best judgment is they will be then how much will your requirements be, and how much will that increase the requirements on these charts?

Secretary FLOETE. Well, for easy figuring, using 3 million men, the percentages will continue about as they are. So you are going to have about 300,000 officers of whom 85 percent are married, and 245,000 units. That would give you a total gross requirementSenator SPARKMAN. You would have no additional officers.

Secretary DOUGLAS. Most of the additional groups are not married. Secretary FLOETE. That would increase that to over 800,000 gross requirements.

Senator CAPEHART. Are you sure of that?

Secretary GATES. No officers.

Senator SPARKMAN. There would be no officers added.

Senator CAPEHART. It will be just these 4 lower grades-the married men among the 4 lower grades

Secretary DOUGLAS. And the three lower grades have relaively few married men in them, so I do not think we can state it very easily or accurately.

Secretary GATES. Twenty-three percent of the lower grade seamen are married.

Senator CAPEHART. Twenty-three percent of the lower grade seamen are married?

Secretary GATES. Yes, sir.

Senator CAPEHART. If it was 20 percent in the Air Corps, Army, and Navy, how many men are involved in these four grades that are affected?

Secretary DOUGLAS. We would have in the Air Force an additional 166,000. That would mean for the Air Force, taking into consideration the three lower grades, about double the present requirement that the Air Force has at the present time.

Senator CAPEHART. Is it safe to say then that if the Congress makes permanent the quarters allowance for those four lower grades that the housing requirements would be almost double what you show on these charts?

Secretary DOUGLAS. It would be more than duoble because the gross requirement would be doubled, but the deficit, after giving credit to such assets as we have, would be more than doubled. .

Senator SPARKMAN. You are talking about the cost now?

Secretary DOUGLAS. No; I am talking about the housing units.
Senator SPARKMAN. The housing?

Secretary DOUGLAS. Yes. The units required.

Senator CAPEHART. Then instead of having a 230,000 deficit here, after taking into consideration the community support it would be double that.

Secretary DOUGLAS. It would certainly be more than double.
Senator CAPEHART. It would be approximately 500,000?
Secretary DOUGLAS. Your figure may not be so bad.

Secretary FLOETE. We will be glad to submit it more accurately. Senator SPARKMAN. I believe it would be more helpful if we did have that. It is a little surprising to me to see it would be doubled because of the fact that you are considering only the enlisted men and, furthermore, due to the fact that as you pointed out a few minutes ago you have a much lower marriage rate among those grades.

Secretary DOUGLAS. That is right.

Senator SPARKMAN. You would be pretty closely pressed though, so far as the allowance being sufficient to pay for the cost of their housing, would you not?

Secretary FLOETE. They presently get just about the same allowance if they have three dependents.

Senator CAPEHART. What does the lowest of these 4 grades receive if he is married and has 1 dependent, or 1 child, in addition to his wife? Does anybody know?

Senator SPARKMAN. $51.30 with 1 dependent.

Senator CAPEHART. And with two?

Sentaor SPARKMAN. With 2 he gets $77.10. Does the Government pay all of that, or does he pay too?

Senator CAPEHART. It is part of his compensation at the moment. Senator SPARK MAN. It is an allowance.

Secretary FLOETE. Yes, sir.

Senator SPARKMAN. They call it a class Q allotment, do they not? It is a special allotment for them, is it not?

Secretary DOUGLAS. A special temporary allowance for dependents. I cannot give you the right description.

Senator SPARKMAN. I think I have a table here, if that is correct. It might be well to put that in. For enlisted men, at least for the Navy seaman recruit, with 1 dependent it is $51.30. An apprentice with 2 dependents $77.10. I think it would be well if that table is placed in the record, if you will.

Secretary FLOETE. Yes, sir. We will do that.

Senator LEHMAN. I think it is a fair statement that everybody agrees and is convinced it is in the national interest to encourage reenlistment, and one of the very greatest factors that will encourage it will come from having adequate housing. I do not think there is any difference of opinion on the part of the members on that.

It is only a question of the best method we should follow. It seems to me the cost of this plan under S. 1501 would be very materially reduced under direct appropriations, if we are talking about the 3 percent Government loan rate as compared to a 4 percent mortgage. But in addition to that as I read the bill there is an additional half of 1 percent insurance. Of course that has to be taken into account when you compute the cost of the occupancy of the building.

Then I think there are certain other defects in the bill as it stands now. Possibly they could be corrected. One is that there is a very distinct division of authority and responsibility which is included in this bill. In other words, the Defense Department and the services would have the authority to finance and make awards and set down conditions, whereas the FHA would be compelled to insure these mortgages without any real authority or power to interfere in the construction of these buildings. I think that would be a very bad thing. Then there is another matter, which I have mentioned. That is, if I understand the bill correctly, bids are taken on a competitive basis. The bid is awarded to the lowest responsible bidder. That is, of course, done at present. Then if the building gets constructed, mortgages in the face amount of the bid are issued.

I am very much afraid of the possibility of windfalls and inflated prices. It is $2 million on the basis of the record. There is no requirement that he file a certificate of cost. I think he is entitled to a reasonable profit for the work to be done. That is, of course, a recognition of the free-enterprise system, but it is perfectly possible that the bid of $2 million, on which $2 million of mortgages have been issued, results in costs in the construction of these buildings of only a million and a half.