As you know, the National Association of Home Builders is the sole spokesman for the home building industry, with over 33,000 members affiliated in 225 local associations in all sections of the country.

Much of the proposed legislation now before you consists of technical amendments and extensions or enlargement of existing housing programs. Therefore. without discussing all of the provisions in S. 1800 and related bills, I wish to bring to your attention our views and confine this statement wholly to the key proposals in this legisltaion as they affect the home-building industry.

Mortgage insurance authorization

I. FEDERAL HOUSING ADMINISTRATION AMENDMENTS

By far the most important of these amendments is section 6 of S. 1800, authoriz ing an increase of $4 billion in FHA's general mortgage insurance limit. We strongly support this proposed increase and urge its passage. Continuation of the FHA mortgage insurance system, made possible by this amendment, is a vital necessity both for the home-building industry and thousands of future home buyers and for the continued health and prosperty of the national economy.

The FHA system of mortgage insurance has been the most important factor in the past 20 years in developing home building into a modern, mass-production industry. By pooling mortgage risks on a scale beyond the reach of any private lender or group of lenders, FHA has provided a thoroughly sound method of consumer home financing. It has made possible the low down payments and low monthly charges without which today the average man, even though a sound credit risk, would have difficulty in buying a home.

For more than 10 years FHA has been entirely self-supporting and a wholly privately financed institution. It has repaid to the Treasury all of the Government's initial investment, totaling over $65 million together with additional $20 million in interest. The FHA insurance system more than amply protects the contingent liability of the Government through (1) the very sound values of the properties and real estate securing insured loans, (2) the lengthy time period provided by its unique debenture-payment system and (3) its very substantial cash reserves. To date, all losses have been paid out of operating income. Therefore, there is every reason to approve this proposed increase in FHA insurance authorization.

It is absolutely essential, however, that this increase be in an appropriate amount. We are not sure this is the case in S. 1800. We appreciate that Congress may wish to reexamine FHA's maximum insurance limit each year, but on the basis of FHA's own figures (in the Agency's section-by-section analysis) the amount of $4 billion seems inadequate.

FHA's prospective net use of insurance authorization during fiscal 1956 is estimated to come within $1.2 million of the proposed $4 billion increase. If the use of remaining authorization during fiscal 1955 or the anticipated use during fiscal 1956 has been underestimated by just 120 new or existing houses with insured mortgages of $10,000, FHA will not have sufficient insurance authorization to last the year out.

Surely, this is too close for operating convenience. As a practical matter, it means that FHA's operations will come to a quick halt if their insured loans during this fiscal year or next come within 200 to 500 units of their estimates. Not even 1 month's operating leeway is provided by the proposed increase. There is no reason why FHA should exist from crisis to crisis, or why the Congress should be required to hurry through supplemental authorization merely because of an inadequate increase at this time. This increase in authorization in no way affects either the national debt or the budget. Certainly it should be in a larger and more adequate amount.

Although home builders generally do not participate in the program, we certainly wish also to support the 5-year extension of FHA's title I home repair and modernization loan insurance (sec. 2 of S.1800). This program is an integral part of the overall effort to aid renewal and rehabilitation work on existing housing and thus prevent the spread of slums and blighted housing. It is also a great help to the relatively new home buyers in financing necessary maintenance and improvements which result in sounder mortgages and more satisfied homeowners.

On rental housing, the proposed increases in maximum mortgage amounts (sec. 5) may prove helpful when and if the more basic problems involved in attracting investment capital are solved. These involve adequate administra

tion and legislative recognition of the need for proper valuations, sufficient profit incentive and appropriate equity recovery. I am pleased to learn that these matters have already been the subject of discussion at the round table hearings held by your Subcommittee on Housing.

Unless both law and agency interpretations recognize the highly speculative risk involved in equity investment in the construction of rental housing, investors will undoubtedly continue to choose other less hazardous avenues of investment. These factors currently inhibit production under the several rental sections of the National Housing Act. They have been particularly important in preventing more rapid accomplishment in urban redevelopment.

This association has for some years supported the idea of redevelopment and rehabilitation of our cities through private enterprise. But to accomplish this, a workable financing vehicle is essential. Section 220 of the National Housing Act, enacted last year, was intended to provide this. It should be noted that lack of recognition of the realities of rental investment, pointed out above, has thus far prevented its effective use.

We support the amendment in S.1800 (sec. 7) which would eliminate cost certification requirements on single family home construction under section 221. Cost certification serves no useful purpose for single-family housing since the benefit of a high-ratio mortgage accrues to the home buyer, not the builder.

We believe a further amendment of present law is required in order to obtain full benefit from section 221. Programing of housing under this section should not be confined solely to families displaced by slum clearance or rehabilitation or redevelopment projects.

Use of section 221 should follow the recommendations of the President's Advisory Committee's Report on Housing, which contemplated a programed use of this section for all low-income families, whether or not displaced by governmental action. If used in this way, this section could be of great benefit particularly in providing more adequate housing for minority groups. The FNMA specialassistance provisions approved by Congress last year were specifically designed to provide financing if necessary for section 221 and 220 projects. Thus, if section 221 housing were available for programing wherever needed, it would mean that financing would also be available. The necessary amendatory language is as follows:

Suggested amendment to section 221, National Housing Act: In the first sentence of section 221 (a) of the National Housing Act, as amended, strike the word "relocating" and insert in lieu thereof "meeting the needs of low-income families that are not and cannot be met from the existing supply of all other private financing and to provide preference to"; in the first proviso of the second sentence, strike the words "to be so displaced"; and in the second proviso of the second sentence, strike the words "the relocation of families to be so displaced and who would be" and insert in lieu thereof "low-income families".

For the past 2 years we have taken the position that the extension of the title VIII (Maybank-Wherry Act) military housing mortgage insurance and of the title IX defense housing mortgage-insurance programs is justified only if requested and supported by the armed services. Therefore, we concur in the proposals in S.1800 (secs. 9 and 10) which, in effect, terminate both programs except for outstanding commitments or certifications.

This association is desirous of cooperating in every way possible to assure that the Nation's military forces and families have available sufficient, adequate and satisfactory housing. We believe that this can be accomplished only through the use of all available housing aids, including in particular proper recognition of and reliance upon the high production of the private home building industry. Passage of the section 222, FHA armed services insurance program last year was a step in the right direction of giving special help to military families in the buying of their own homes.

We are concerned at certain features of S. 1501, now before this committee, which would provide a new FHA title X mortgage insurance program for armed services housing. As we understand the bill, it would place the FHA in the position of insuring loans on construction as to which FHA would have no underwriting, inspection, or approval responsibilities whatsoever. The FHA would carry the burden of financial risk without having any voice in its assumption. We believe this runs wholly contrary to the purpose of the Federal Housing Administration. Either FHA should be given its usual market analysis, underwriting, inspection and approval functions, or the responsibility for carrying the risk of the loan should be borne by the military service making those determinations. The present proposal would be an unwise use of the FHA system

and might well weaken its general acceptability as a sound operation in mortgage insurance.

There are other uncertainties as to the operation of the proposed mortgage insurance program. It is not clear, for example, that the allocation of monthly quarters allowances is sufficieint to support the financing of the size housing anticipated or will necessarily continue to be sufficient to cover monthly amortization payments. If not, this may give rise to an additional appropriated subsidy as is the case with other aspects of the program. Thus, the costs of sponsorship, maintenance, land, development, landscaping, sewerage, water, gas and other facilities, roads, sidewalks, and other off-site improvements we assume would have to be paid for by the military services from other general appropriations. These hidden subsidies raise a very real question as to the true cost of this proposed program.

A very serious consideration with respect to all new military housing, especially that for which the location and need is determined by the armed services, is the problem of properly protecting existing Wherry Act and title IX defense housing as well as local private housing markets. It has been the experience of the home building industry generally that local market analyses by the military forces are not apt to give much weight to existing housing and the rate of local housing production. We strongly urge, therefore, that any further military housing programs be made subject to a review before approval for construction. This should be done by the HHFA which has overall responsibility for all housing. A step was made in this direction by the Appropriation Committees of Congress in 1954. In approving funds for the new program of on-base military family housing, they required the Secretary of Defense to certify (1) that it is impractical to construct family housing under the provisions of title VIII of the National Housing Act, (2) that adequate housing at reasonable rental rates is not available in the immediate vicinity of the military installation, and (3) that it is impractical to acquire suitable housing under other existing provisions of the law.

II. FEDERAL NATIONAL MORTGAGE ASSOCIATION

We believe the committee should also consider along with these housing bills the problem already evident in the operation of the rechartered FNMA secondary mortgage market provisions. Since passage of the Housing Act of 1954, the operation of this FNMA program has borne out our testimony of a year ago that unless its statutory provisions are amended it will, in our opinion, prove unworkable and possibly do more to depress than to assist the mortgage market. Its terms go far beyond those reasonably necessary to prevent excessive use and, in effect, amount to a complete denial of the facility to the very users for whom it is intended.

In the first place, the requirement of at least a 3 per cent stock investment to use FNMA is too high. Taken together with the fees and charges and discounted prices that must be paid to FNMA, the price of doing business comes close to exhorbitant. We believe the 3-percent requirement should be changed to 2per cent. This will still enable FNMA to operate on a businesslike basis as we pointed out in detail to this committee in 1954.

Also clear on the basis of the past several months' experience is that FNMA purchase prices for mortgages, under its present statute, depress rather than aid the general mortgage market. The Association should be authorized to buy loans at a reasonable price level determined by it from time to time rather than at the market price. FNMA should be able to take into account the reasonably foreseeable market for mortgages of the same class and current yields on, as well as the reasonably foreseeable price trend of, long-term Government bonds and other forms of investment. This would enable FNMA to stabilize the mortgage market by raising its purchase prices slightly when the market threatens to sag or by dropping its purchase offers when the market is strong. The necessary amendatory language is as follows:

Suggested amendment of section 303 (b) of title III, National Housing Act: In the first sentence of section 303 (b) strike the numeral "3" and insert the numeral "2."

Suggested amendment to section 304 (a) of title III, National Housing Act: In the second sentence of section 304 (a) strike the words "at the market price" and insert in lieu thereof "at a reasonable price level, as determined by the Association, taking into consideration the market price for the particular class of mortgage involved, the reasonably foreseeable market for mortgages of the same general class, and current yields on, and reasonably foreseeable price trends of, long-term Government bonds and other forms of long-term investment."

Public housing

III. PUBLIC HOUSING AMENDMENTS

Our position on public housing has always been clear. An increasing number of public housing projects are unable to obtain tenants except by substantially increasing their limits on family income for eligible occupants. The increase in consumer incomes during the last 10 years and the tremendous increase in the supply of new and used homes available at low cost have drastically diminished, if not eliminated entirely, the problem at which the original public housing program was aimed.

In the economic climate now prevailing, we believe a further Federal public housing program is unnecessary. We vigorously oppose the proposed program of 70,000 new public housing units in section 13 of S. 1800. Actually, this section would authorize approximately 87,000 or more new units because of the continuation for 1 year of the authority to place under contract the units authorized for fiscal 1955 but which will remain without contracts. Together with the units authorized prior to fiscal 1955 which still remain to be constructed, it may well be that more than 120,000 units of new public housing will be built or contracted for during the coming year.

We are shocked also to see proposed the elimination of some of those provisions of law expressly designed to assure the availability of public housing for families relocated from slums. Is it so difficult for a city to enact or enforce a sound housing code and to provide a degree of self-help in planning and rehabilitation? Should cities be given preliminary loan contracts (which, in effect, commit future public housing funds) without proving their desire to help themselves? Should more public housing subsidies be given to cities which have already been given huge Federal redevelopment funds, unless these cities take steps to coordinate their planning and attack on slums? Should public housing be made available where there is no federally approved urban renewal program?

Yet,

Certainly the answer to all of the above questions is an emphatic "No." if the revised section 10 (i) as proposed in section 13 of S. 1800 is approved, that will be precisely the result.

Furthermore, the Federal Government would no longer have the assurances of the local government that the number of public housing units requested is based on actual relocation requirements. The proposed amendments would substitute simply a local approval by resolution, thus placing the Federal Government back into a dependence upon local political stability. If the local government's approval is required by law (as it now is) to be tied down to a certification of need for a specific number of units for relocation purposes, there is far less likelihood of a later change of mind by the locality. Moreover, the Federal Government has a concrete and responsible expression of need to guide it, one that accurately reflects the community's view, and not that of a local housing authority bureaucrat. We urge retention of the present law on this point. advantages in avoidance of involving housing in local political disputes should be helpful to all Members of Congress.

Its

In like manner, we feel that the Housing Act of 1954 was wholly correct in giving to the HHFA Administrator power to consider all sources of rehousing for families displaced from slums. Certainly if there are existing vacancies in public housing projects, he should be permitted to take them into account before approving more new public housing for such families. While it would be nice perhaps to reserve such vacancies for other than displaced slum families, the fact remains that the major justification for the whole Federal public housing program is to rehouse families from the slums. Quite properly, the provisions of the Housing Act of 1954 hewed closely to this objective. It should not now be abandoned. It would be ridiculous for the Government to be subsidizing construction of new public housing for families that can be taken care of by existing units for which the United States is already heavily in debt. Two bills now before you, S. 1412 and S. 1642, would legislate special provisions for public housing of elderly persons of low income. We fully recognize and are highly sympathetic with the problem giving rise to these proposals. In September 1953 our association magazine, the NAHB Correlator, devoted a special issue to Housing the Aging and again in December 1954 devoted articles to this subject. A reprint of the 1953 articles is attached to this statement. We believe it is unwise, however, for the Federal Government to assume the responsibility for providing special housing facilities and programs for a segment 62736-55-39

of our population based upon such a factor as age. The principle can too easily be used to provide support for special housing programs based on a Federal governmental responsibility for other factors of life that have traditionally been the responsibility of local communities and individual families.

Public works

IV. COMMUNITY FACILITIES AND COMMUNITY GROWTH

The most serious problem affecting sound community expansion in this country is that of increasing lack of proper community facilities. As builders, we are being increasingly made aware of this problem. Moreover, we recognize that the solution or solutions will only come through a general understanding of the seriousness of the problem. This association's policy in the matter is as follows:

"The pressure of increasing population-not new home building-makes inevitable expansion of surburban communities. We face increasing shortages of land suitable for development, properly zoned and adequately served by facilities needed for modern living-good schools, sewer and water, roads, play areas-particularly for moderate priced housing needed for so many American

families.

"We recognize the need for and will support sound planning, zoning and subdivision regulations. We urge on those responsible for preparing and administering such regulations that they devise provisions related to the realities of present-day suburban development in order that all income levels of American families may be properly housed.

"This industry is keenly aware of the problems ahead, not only for builders but for communities and home-buying families. These are problems for all Americans everywhere. The builders of America pledge themselves to work in cooperation with all concerned individuals, community groups and local officials throughout the United States so that we may achieve for all the sound and balanced development which our communities must have."

We certainly support all sound Federal legislative proposals to aid communities in the solution of their problems.

The proposals contained in S. 1524, to authorize extension of credit to municipalities and other political subdivisions of States to finance public works, is meritorious. We are frankly uncertain as to the extent to which this type of aid would help communities.

In many cases the primary difficulty faced by counties and municipalities is that they are already loaned up to their legal limit. That being so, there would be no opportunity for them to issue securities or obligations or take loans, which efforts would be aided by this bill. However, it may well be that there are areas in which the debt limits do not preclude help under this proposal and for them we would certainly urge its passage.

We would urge one amendment, that "smaller municipalities" in section 5 (c) of S. 1524 be defined to include communities with a population of less than 26,000. In our opinion, these are the communities, rather than just those of 10,000 population or less, which are most in need of this community-facilities financing aid.

Housing for elderly and single persons

[NAHB Correlator, September 1953]

HOUSING FOR THE AGING

AN UNTAPPED, GROWING MARKET

(Ralph J. Johnson, consultant on housing hygiene, U. S. Public Health Service) One of the important new horizons for home building is housing designed especially for the aged. So far this sizable market is practically untouched. Some builders-especially in sunny climates-have been building small, easyto-run homes for years on the general assumption that they would be attractive to retired couples. The realization is now spreading that, because of popula