In addition, nearly 10 per cent of banking's $60 billion in commercial loans outstanding at the end of 1972 was in mobile home loans. According to the ABA, mobile homes now account for 20 per cent of all single-family housing in the U.S. and 75 per cent of all single-family housing costing less than $20,000. STATEMENT OF NATIONAL ASSOCIATION OF REAL ESTATE BROKERS, INC. Our National Association (NAREB)—which has headquarters located at 1025 Vermont Avenue, N. W., Washington, D.C., and affiliated local boards across the Nation is a Professional Trade Organization whose membership serves largely the minorities and low-to-moderate income housing renters and purchasers as they seek to improve their housing situation and quality of life. It is noteworthy that careful study of the President's Housing Message to Congress clearly reveals the posture of the Administration's significantly focused in three directions: (1) Specific proposals of Federal Assistance are offered to relieve the current residential mortgage credit shortage and make more such mortgage funds available to those able to pay current market prices for housing. (2) Little or no substantial Federal assistance or encouragement are offered for those who most need decent housing and are unable to pay market prices or rents for housing currently, while the question of any substantial Federal efforts to provide equal housing opportunity and choice to low and moderate income members of the public is deferred to an uncertain future decision, possibly in late 1974 or in 1975. (3) The intent of the Administration is in essence to leave the ultimate results in Housing Policy Determination to the interaction of private Housing Market Forces. Most of the item (1) proposals appear to be generally constructive efforts, but perhaps limited in effects, to ease the current home mortgage credit pinch, which in large part results from the Administration's own anti-inflation program failings and the consequent efforts of the Federal Reserve's high-interest-rate policies to stem the inflation tide. Our Association can find little of any consequence in the President's Housing Policy Recommendations to the Congress that will assist currently in relieving the dire housing needs of the disadvantaged and neglected members of the public, whom we largely serve, through improving their opportunity and choice in acquiring decent housing within their means. The basic overall stance of the President's Housing Message is continued abandonment of existing subsidy programs and deferral of decisions on hard questions of housing strategy, with resultant lack of progress in realizing the established National "goal of a decent home and a suitable environment for every American family". Such deferral of effective means of providing equal housing opportunity to the disadvantaged members of the public, who cannot make it alone without help, is in simple fact unlawful denial of equal opportunity to them. It is a frustrating and tragic fate facing low-to-moderate income residents in that after five years under this Administration and six months of intensive study by HUD of existing subsidy programs since being mostly abandoned last January by the Administration as unworkable failures, the Administration has not yet made a definite decision on housing strategy. In lieu of existing subsidy programs, the President prefers a Program of Housing Allowances for housing low and moderate income members, but proposes further experimentation and study in the application of such program, preferably in assisting the elderly, while deferring a definitive decision until late 1974 or early 1975. Our cumulative experience attests that any use of a Housing Allowance Program approach in viable manner to serve low- and moderate-income housing needs and opportunities must be conditioned on requisite consumer protections ensuring that such housing allowance payment: (a) Will be used to house recipients solely in standard dwellings and to preclude their being housed in substandard units. (b) Will not be allowed to inflate housing charges in existing standard housing available to recipients. (c) Will be used solely to pay housing costs for recipients and not be diverted or used for other purposes. (d) Will result in adding to the current limited supply of standard housing available to recipients through standard quality new construction and rehabilitation until such time as ample supplies of vacant standard dwellings in a suitable environment become available. (e) Will provide standard housing to low- and moderate-income householders at a cost per dwelling unit not exceeding the unit dwelling cost of providing such housing under other existing programs and does not involve a larger budget expenditure than the annual budget cost under existing programs. We believe that a housing allowance program with these protections incorporated can be a constructive tool to include among others in a viable kit of Federal assistance for low and moderate income housing but not solely or mainly to the exclusion of others. We would be unalterably opposed, however, to any Housing Allowance Program which does not have these indicated protections as an inherent part. In light of the foregoing indications of gaps and inadequacies in the President's housing message to the Congress, while continuing his Administration's veritable abandonment of existing housing subsidy programs and deferral of firm decision on new or alternative programs for another year or more, we would strongly urge the Senate Committee to proceed with its own more comprehensive and adequate housing and community development proposal. Also, we firmly believe and strongly urge that a Congressional Mandate be enacted ordering HUD to reinstate the programs under the Administration's moratorium until a comprehensive program can be developed. In the process, the Committee's proposals should be complemented with what appears realistic and constructive in the President's proposals, in order to enact in this session the most comprehensive legislation possible toward fulfillment of the 1968 and 1949 housing goals. Finally, commulative experience during recent decades indicate grave doubt that low and moderate income renters and purchasers upon being armed with housing allowance money can, acting solely on their own, succeed in getting a fair and equitable housing shake from the results of conventional private housing market determinations. Indeed, the predominant indication from experience is that the results of sole reliance on private housing market determinations will be universally more favorable to the stronger population elements and less favorable to the disadvantaged weaker elements encompassing the low and moderate groups having the most acute but neglected housing needs. How in good conscience can the fate of equal opportunity and choice for low-tomoderate income groups be left to reliance on results of traditional operation of private housing market forces which, based on the past record to date, usually favor the stronger over the weaker and needier population elements? We appreciate this opportunity to present the views of our Association, and earnestly urge favorable consideration of them. Respectfully submitted, JOHNSON T. MCCLURKIN, Additional views of the NATIONAL ASSOCIATION OF REALTORS® October 10, 1973 On July 30, 1973, the NATIONAL ASSOCIATION OF REALTORS® presented testimony before the Senate Housing Subcommittee during its hearings on omnibus housing and community development legislation. We are taking this opportunity to supplement the statement made at that time in three areas where our earlier position is no longer current. They are: 1. The need for Congressional action to ease the housing credit crisis; 2. 3. The desirability of exempting commercial and industrial properties The significance of the President's recommendations for a limited The Credit Crisis: Stabilizing the Housing Market The President's September 19 housing message puts forward three recommendations for short-term easing of the immediate money crisis, and five proposals for Congressional action to improve and stabilize credit availability over the long term. The NATIONAL ASSOCIATION OF REALTORS supports most of the long-term recommendations as significant steps in the right direction, although we question their sufficiency as true solutions to the long-run problems of credit availability for housing. Concerning the Administration's short-term strategy, we have more serious reservations. Only two of the three emergency proposals are truly short-term in the sense that they do not require further Congressional action. The authorization of $2.5 billion in forward commitments through the Federal Home Loan Bank system is a very positive step; in fact, we consider the FHLB advance mechanism one of the most valuable tools for stabilizing housing credit. However, we have serious questions about the workability of the program, in view of the 8.5% interest rate that the regional FHLBanks themselves must pay for these funds. This high cost, combined with the requirement of a 0.25% service fee, may put the rate on the forward commitment mortgages beyond the viable range, particularly in states with mortgage usury laws. We urge the Congress to give priority attention to developing ways to reduce the interest rate cost of these funds. The President's other non-legislative proposal, for limited reinstatement of the Government National Mortgage Association's Tandem Plan, is even less promising because it has been restricted to apply only to newly constructed homes. Two and a half existing homes are sold in this country for every new one, making the existing home market far more important than the availability of new construction. This significance is reinforced by the structure of the housing market, where the buyers of newly built houses often are already home owners and must therefore be able to sell existing homes before making a new purchase. In essence, then, the President's only two recommendations for a truly shortterm response to the credit crisis are far from sufficient. We must note, however, that the Administration has at least put forward some kind of strategy. This is in contrast to the Congress, which has taken no significant action. Both houses of Congress have now turned their attention to omnibus housing legislation, which is not expected to reach completion this year. The only direct Congressional action on the housing crisis was last week's passage of the so-called "wild card" resolution, intended to reimpose interest rate ceilings on savings certificates under $100,000. This action, coming after the third largest outflow of savings and loan savings deposits in history, is expected to have little real effect on the housing market crisis. At the present time, funds are widely unavailable in the private mortgage market. This hurts the majority of people who traditionally seek unsubsidized housing, and also hits ever harder that marginal portion of the market which can be absorbed by the private system only when credit conditions are healthy. Congress, in moving to consideration of a housing bill which ignores this emergency credit situation, is overlooking the most important issue in housing today. Accordingly, we urge the Congress to enact emergency housing legislation with the dual purpose of easing current mortgage credit conditions, and preventing additional housing downturns during future periods of tight monetary policy. The key to this kind of credit stabilization is to moderate the disproportionate impact which tight money now has on housing by spreading the burden of monetary restraint more equally throughout the credit market. Since our July 30 appearance before this Committee, we testified at hearings in the House which were specifically aimed at examining the credit crisis. We are attaching the portions of that testimony which detail our recommendations for fundamental redistribution of the burdens of tight money to stabilize housing credit. (See Attachment B.) While our Association's recommendations go considerably beyond the President's message on easing tight credit, we do wish to comment on the Administration's proposals which we believe should be considered in an emergency housing bill. 1. Freeing the FHA/VA interest rate. Our strong support goes to the proposed removal of federal interest rate ceilings on FHA and VA loans. This action, as argued by the President, would widen the availability of government-insured mortgages in general, and would eliminate the subterfuges associated with FHA/VA lending. 2. Increasing the maximum loan amounts on FHA mortgages. We support this proposal also, as a means of expanding the availability of low downpayment FHA loans to more people, particularly in view of the escalation in housing prices since the current limits were set. 3. Flexible repayment plans. The Association urges consideration of the proposal that flexible repayment schedules be instituted on an experimental basis on FHA loans. This approach would gear the responsibilities of a mortgage more closely to the home owner's life cycle, thereby expanding the availability of home ownership, particularly to younger families. |