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A major part of the President's Message deals with the question of

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low cost housing. The U.S. Savings and Loan League was not among those who viewed with distaste or alarm the programs initiated in the Housing Act of 1968, and particularly the Section 235 and 236 programs. These programs suffered from some poor administration, but particularly they suffered from bad newspaper publicity relative to FHA foreclosures in general often foreclosures which did not involve the assisted programs at all. As you may know, we joined with the National Association of Home Builders and the National Association of Mutual Savings Banks in engaging Anthony Downs of Chicago to make an exhaustive, independent survey of the whole question of housing subsidies and how best to approach the problem of providing better housing and better living environment for lowincome families. We subscribe to his conclusions which essentially are that of all the ways to help low income families in their search for better housing, the 235 and 236 approach is the best.

As we noted in our testimony to your Committee last April, the experiences of the savings and loan business with the Section 235 and 236 programs were good. We believe that the overall record of this program was such that it did not deserve the summary execution given it by the Administration in

January.

We question, too, the reliance on a completely new and still experimental housing allowance program or direct cash assistance to provide for the housing needs of Americans in the lower economic brackets.

I think that the costs of a broad housing allowance program versus the cost of subsidies via the 235 and 236 programs should be looked at very carefully. We find it hard to believe that the housing allowance program would be significantly less costly in the long run than the 235-236 program. Possibly housing allowances or general income maintenance should be the principal means of assisting the very lowest income families in obtaining adequate shelter. But, a production subsidy along the lines of the 235 program may be needed,

as well, for areas of tight supply and for the moderate income families (above poverty but below median-income levels) who can afford to pay some, but not all, of the interest costs involved in home ownership.

The Senate took a significant step Monday in restoring flows of funds to the mortgage market and, for our part, the United States League will do what is necessary and appropriate to expand savings and loan participation in the financing of homes for lower income families under whatever program Congress decides is most appropriate for effective action to bring better housing to all American families.

The CHAIRMAN. Our next witness is Mr. George C. Martin of the National Association of Home Builders. We are happy to welcome you again. Please identify your associates.

STATEMENT OF MR. GEORGE C. MARTIN ON BEHALF OF THE NATIONAL ASSOCIATION OF HOME BUILDERS, ACCOMPANIED BY CARL A. S. COAN, JR., LEGISLATIVE COUNSEL; NATHANIEL H. ROGG, EXECUTIVE VICE PRESIDENT; AND MICHAEL SUMICHRAST, CHIEF ECONOMIST

Mr. MARTIN. Mr. Chairman, and members of the committee, I am George Martin, the president of the National Association of Home Builders, and I speak to you today as a representative of our trade association which represents 72,000 builders/members throughout the

country.

I have with me Mike Sumichrast, our chief economist, Dr. Nat Rogg, our executive vice president, and Carl Coan, our legislative counsel. We appreciate the opportunity to appear today, and present our views on the administration's housing proposals as embodied in the President's message of September 19 and the legislative proposals forwarded to the Congress this week.

I must say however that while we appreciate the opportunity to appear, we regret that what is before the subcommittee today does little to meet the housing needs of the American people, especially those of low and moderate income.

In my appearance before you on July 23 I spoke at some length on the housing situation then confronting us as a result of escalating mortgage interest rates and the tight availability of mortgage money at any price. I also presented our views on the major bills pending before the subcommittee, including S. 2182, which would consolidate and simplify the various HUD housing programs and S. 1743 and S. 1744, different apprpaches to consolidating and simplifying the various HUD urban development programs.

I would like to reiterate our support for most of the provisions of S. 2182 and S. 1744. These two bills basically embrace the provisions of S. 3248 passed by the Senate in March 1972 which we thought was a very good bill and regret that it never became law.

We urge this subcommittee to move quickly to approve legislation along the basic lines of last year's Senate approved bill.

If anything the housing situation is worse than it was on July 23. Mortgage money become considerably tighter and even more expensive.

Housing starts in August were at their lowest level since October 1971 and building permits for August were at their lowest level since February 1971. Both have been on a downward trend since the first of the year and seem headed down even further for the next several months to come.

This deterioration was not unexpected but it is nevertheless unwelcome and we believe unnecessary. We predicted it earlier this year.

The principal cause has been the administration's and the Federal Reserve Board's principal reliance on monetary policy to stem in

flation. Housing, of course, is hardest hit when such heavy reliance is placed on high interest rates and tight money to slow down general inflationary patterns.

With the prime rate at 10 percent at most banks, mortgage interest rates according to a survey made by us in the early part of September have reached a median level of 9.2 percent. All indications are that these rates have gone higher since that survey.

The results of this survey and other information compiled by our economics department on the present housing situation are set out in our Housing Starts Bulletin of September 19, 1973, a copy of which is attached. I might comment, that when Mr. Burns testified before the House Banking Committee, he said that there was an overbuilding situation because housing sales had slowed down in the last 2 or 3 months. He didn't see any connection between the 91⁄2percent interest rates and the slowdown of purchases in the last 2 or 3 months. [Laughter.]

We had hoped of course that the President's message would recognize the seriousness of the present housing situation and propose significant tools to deal with it. Unfortunately it fell far short. The $2.5 billion in forward commitments to be made available to S. & L.'s by the Home Loan Bank System and the reinstitution of the GNMA tandem plan for new unsubsidized FHA and VA mortgages are, of course, welcome. However, the $2.5 billion in advance commitments will only make money available at rates in excess of 9% percent to the ultimate borrower and if the tandem plan had not been originally suspended in June, it probably would have been operating at a $3 billion annual level at this time anyway.

There was no indication of any effort to bring down the cost of mortgage money, the real culprit in today's slowed-down housing market.

With respect to housing the low and moderate income the President's proposals are little short of disastrous. They have completely abandoned the low- and moderate-income families in the proposals that have been brought forward by the administration.

After suspending the present subsidy programs, the administration promised that a full-scale review would be undertaken and new proposals to meet this need where justified would be forthcoming. The review has been completed and it seems to have done little other than to justify the preconceptions articulated by administraton spokesmen at the time of the suspension in January.

They have asked for all sorts of information, reports, documentation, and they seem to take the reports that disagree with their views and put them over on one side and anything that agrees with their views, they take as gospel. After an expense of millions of taxpayers' dollars, all that the low and moderate income have to console them is the hope that 2 or 3 years in the future some type of housing allowance program may be instituted on a gradual basis to help them obtain decent housing.

In the interim they are to be consoled with 200,000 units, while the national housing goals call for an annual production in excess of 600,000 units a year.

Before I get into some of the particulars of the President's message and the bill he has sent to the Congress I would like to touch on two

areas of immediate concern. The first of these is the necessity to take early action to relieve the present mortgage money crisis.

Secretary Lynn, in his statement 2 days ago, called for early action on legislation to increase the FHA mortgage limits and to adjust the downpayment requirements for FHA mortgages. We fully agree with this proposal.

The FHA mortgage limits have not been raised in almost 4 years, during which time we have experienced a severe inflation throughout our economy. With interest rates at levels in excess of 9 percent there is absolutely no mortgage money available in those States with 8 percent and similar usury limits.

Since most of these States, however, do exempt from their usury limit FHA and VA mortgages, it is important that the FHA mortgage limits reflect today's cost levels.

We also believe it would be helpful if adjustments were made in the maximum mortgage limits for the FNMA and Federal Home Loan Mortgage Corp. conventional, secondary markets These two important institutions have been circumscribed in their ability to assist effectively the conventional mortgage market because of outmoded mortgage limits. Legislation making these important adjustments should be acted on expeditiously by the Congress.

Beyond these relatively technical adjustments, however, we believe that it is crucial that the Congress pay early attention to the need to alleviate the present mortgage crisis and provide through legislation the mechanisms that will help prevent the recurrence of future crises. There is no one single way of dealing with these crises but we believe that through a combination of legislative and administrative actions it is possible to prevent them from recurring in the future.

At our board of directors' meeting in New Orleans last week our board adopted two resolutions dealing with the present situation. The first of these sets out a many faceted program which we believe should be put into effect. The second reaffirmed the housing goals adopted by the Congress in 1968 and called upon the Federal Government to act quickly to deal with the present problems. Copies of these resolutions are attached to my statement.

I commend to you the program set out in these resolutions. There is no question that if the past is any indication of the future we will ultimately come out of the present crisis but the toll will be great in lost efficiency in the housing industry and increased costs to the housing consumer. We cannot allow such a basic need as housing our people to be subject to the vicissitudes of a boom-or-bust policy.

Second, it is important that we get on with the job as has been pointed out by other witnesses before this committee, of providing decent housing for the Nation's low- and moderate-income families. For 9 months now this effort has been on the shelf while present programs have been studied. This study has now been completed, and we find a further study proposed. We also find to our dismay that the administration has asked the Congress to find and declare that the present Federal subsidized housing programs have not made an adequate contribution toward meeting the Nation's housing goals and that they are wasteful and inequitable and that they have otherwise been useless.

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