HOUSING LEGISLATION OF 1966 479 Thirty percent of the dwellings have no bathing facilities and 25 cent lack even a kitchen sink with running water. it privies serve 33 percent of dwellings occupied by general farmkers. he Governor's advisory commission concluded: he small rural town with its economy supported mainly by the low wages and onal employment of its residents is simply without the resources to meet most fundamental needs of utilities and sanitation * * *. The immediate most fundamental need of these communities is for assistance in providing most elementary amenities-those which precede the development of housi.e., water, sewage, planning, schooling, and similar facilities fundamental ny civilized community. It is manifest that this aspect of California's lem has not received consideration in national housing and farm-aid proning. n order to meet those needs, it is our recommendation that the mers Home Administration authority and operations should be anded in the following manner: . Expand the section 515 below-market interest rate Farmers me rental multiple-housing program for low- and moderate-income erly to include all low-income persons and families regardless of and to increase the loan maximum from the present $200,000 to million. This would provide larger projects for more people of all ages in d of low- and moderate-income housing. A rural rent supplement program coordinated with section 514 I the expanded section 515 Farmers Home programs should be ated in a manner similar to the present urban rent supplement prom coordinated with the section 221(d)(3) market interest rate below-market interest rate programs. This would make it possible to provide rentals which reflect rural ants' ability to pay, rather than only the need to repay outstandmortgages. As incomes and rent-paying ability increase, as they doubt will, the supplements would be proportionately reduced. 6. A conditional commitment program should be initiated by the rmers Home Administration in a manner similar to the methods this regard used by the Federal Housing Administration under tion 203(b). This would encourage the private homebuilding industry to enter actively into the rural housing market as it has during the past two ades in the urban areas. -. The Secretary of Agriculture should establish a definition for cial interest rates. Moreover, such definitions should recognize t-of-living regional variations as is done by the Federal Housing ministration and the Public Housing Administration. 5. A direct loan fund should be created in the Farmers Home Adnistration loan program to supplement the farmers mortgage inrance program. This would furnish a source of funds for those plicants unable to purchase housing under the Farmers Home Adnistration insured loan program interest rates. 3. The housing grant available under section 504 for improvements. ailable in rural areas should be raised from $1,000 to $1,500. This would more nearly reflect the actual cost of home improve -nts. 62-551-66-pt. 1- -32 7. Under sections 502 and 517 only the new farm home immediate lot (not exceeding 1 acre) should be encumber mortgage to the Farmers Home Administration. This would avoid the need to encumber the total acreage, leaving security available for crop and other much-needed 1 B. Other general recommendations concerning the Federal ment of Housing and Urban Development 1. We are in full accord with the principle that all comm adopt workable programs and thereby energetically prev spread of blight; however, to require such a workable prog order for rent supplements and section 221 (d) (3) housing to mitted in a community in effect denies thousands of low-incor dents of California housing units they can afford because, thro fault of their own, their community does not have a W program. 2. Projects covered by rent supplement payments should subject to approval by the local community as recently requi a rider in the proposed House appropriation measure, since this permit local governing bodies to capriciously exclude a muchhousing resource for their low-income families. 3. The extremely successful section 221(d) (3) program pr does not permit projects designed exclusively for the elderly. program should be expanded in order to provide an additiona tive tool toward housing our low-income elderly. 4. A program should be developed to provide a Federal supp to low- and moderate-income home purchasers to help them ma terest payments. Such supplement should be geared to the come of the home purchaser with the supplement decreasing income increases. The interest rate allowable for mortgages in in this program should be related to prevailing FHA and conven rates, with the FHA Commissioner determining what the dis on the loans would be and setting an appropriate interest rate. We have one further amendment not included in our written mony, Mr. Chairman, and that is that under the rent suppl program, in order for a tenant to be eligible, he must either b living in a substandard housing unit or be a displacee, or be 1 capped, or elderly. We have noted that in analyzing housing conditions in the area of Los Angeles, where the riots of last summer took place few of those occupants of those housing units would be eligibl the rent supplement program simply because their housing units not meet the test of substandard housing. They do, however, meet a test of overcrowded conditions, wh not an eligibility requirement under the law. So we recommend that the eligibility requirements for rent plement be extended to include overcrowded living conditions. This concludes our testimony, and we would just like to ad thing, Mr. Chairman. That is, we have been very much conce about an April 1, 1966, regulation change of FNMA which limit maximum mortgage to $15,000 under their secondary market o tions program. HOUSING LEGISLATION OF 1966 481 At the urging of various segments of the building industry in ifornia, and with the full support of our department, Governor own sent off a letter just last Friday to President Johnson asking relief under this order and to either eliminate this change and ree the $30,000 limit or otherwise to consider a new limitation of aximum of $20,000, to more clearly reflect conditions in California. Between high construction cost and high land cost, it is just about possible to produce a house with a mortgage of under $15,000 in our te, whereas in other States of the Union this may be entirely sible. would like to introduce for the record the press release on this er from the Governor to the President, if I may. It is just a twoe document. Senator SPARKMAN. That will be received and made a part of the ord. The press release referred to follows:) PRESS RELEASE: GOV. EDMUND G. BROWN, APRIL 22, 1966 ov. Edmund G. Brown asked President Johnson today for relief from a new eral regulation which "will seriously depress the homebuilding industry in ifornia." he Governor cited action by the Federal National Mortgage Association in reing the maximum amount of mortgage it will accept under secondary market rations from $30,000 to $15,000 per family unit. uch a change will have "an unequal, unfair effect on California," Governor -wn wrote the President. The change "will make it more difficult for Californians to purchase adequate sing and will increase unemployment in the building trades." 'ollowing is the full text of a statement which Governor Brown sent to the sident: On April 1, 1966, the Federal National Mortgage Association (FNMA) promuled a change in their regulations reducing the maximum amount of mortgage y would accept for purchase under their secondary market operations from .000 to $15,000 per family unit. Since the Federal Reserve Board increased their rediscount rate this past ember, FNMA has served as a major support to the FHA and VA mortgage rket. It is to be noted that, during this period, FNMA has made several ustments in the prices they pay for mortgages, reflecting changing money rket conditions. Nonetheless, the support of that agency in the mortgage rket has been a key to assuring an adequate flow of mortgage money to the idential construction industry. This most recent change referred to above, reducing the maximum loan acceptable for purchase by FNMA, is having a astating effect on homebuilding activities in our great State of California. I have received numerous communications from leaders of the building indus, building trades unions, the California Real Estate Association and financing titutions seeking my help in bringing this grave problem to your attention. e building industry has been under severe hardships since last December bease of a reduction of mortgage money available and sharp increases in the cost borrowing from those limited sources with funds available to lend. The one ing grace throughout this tenuous situation during the past 4 months has been stabilizing effect of mortgage purchases by FNMA. However, with this ent change in FNMA's purchasing policy, this effective support of the mortgage rket in California has, for all intents and purposes been removed. This action particularly affects California because of higher land and conuction costs than the average for the rest of the Nation. Recent estimates w that approximately 90 percent of new residential mortgages are in excess $15,000 in California. We are already suffering high rates of unemployment in the building trades. aders of the building trades councils have informed me that they are now Tering unemployment rates of from 15 to 20 percent, and they estimate a ther substantial increase as a result of the impact of this new FNMA regula tion. We must also consider the further unemployment impact when co that for each person directly employed in construction, there are no additional 22 persons employed as an indirect result of the industry. in the homebuilding industry have expressed their considered opinion tl position is not changed, we can expect a further major decline in hom during the next 12-month period. "The impact of this cutback in residential construction in Californi irreparable harm to our economy over the next several months. Real expressed grave concern over the inability to finance sales of existing h well as construction of new housing. "It would appear that the homebuilding industry has been singled ou the brunt of anti-inflationary measures. I believe that these measur have little impact in directing the homebuilding industry toward greater: in lower cost housing, since the cost of land and the basic costs of con mitigate against such a development. "Therefore, I urge consideration for granting relief in this area of our by either requesting that FNMA rescind its action of April 1 or that it adjust the maximum amount of mortgage eligible for purchase in hig regions such as California to more nearly reflect regional variations in tion and land costs, as they are reflected in mortgage amounts. Recent e show that the average FHA/VA mortgage in California is approximately I therefore suggest that the maximum mortgage eligible for sale to F California be established at at least $20,000 in order to reduce the effect FNMA changes in this State." Mr. STALFORD. Along that line, one second further, sir. In ing with FNMA, the reason behind this promulgation of this tion, among other reasons, is the fact that FNMA is running borrowing authority. As of the present time FNMA's bor authority is limited to a balance of $700 million. If they d place this limitation of $15,000 per unit, they would have be ceiving offerings at the rate of $50 to $60 million per week. Now, as a result of this $15,000 limitation per mortgage, the been able to reduce the offerings down to $30 million per wee the last couple of weeks. FNMA operates under a debt limit ratio of 10 times thei standing stock. Now, one way to overcome this problem is if Congress would the Treasury to increase its holdings of preferred stock in F in order to increase this very much needed support in our mo market. I am sure that you have had called to your attention the v effects of the raising of the rediscount rate and the increase in in rate being paid by commercial banks on certificates of deposit have been draining deposits away from our savings institution are basically involved in investing in mortgages. However, the commercial banks are utilizing these new d inflows to finance other business needs, and not much of it is fi its way into the mortgage market. We are faced with a very serious shortage of mortgage mon this country at this time. Senator SPARKMAN. Well, thanks very much. That is a mat interest to us. We shall certainly be glad to look into it. Mr. STALFORD. Thank you very much for the opportunity of fying today. Senator SPARKMAN. I thank both of you gentlemen. HOUSING LEGISLATION OF 1966 Richard Webbon is from Virginia Beach, Va. 483 Senator SPARKMAN. I understand you are a housing coordinator. his correct? ATEMENT OF RICHARD J. WEBBON, COORDINATOR OF URBAN AFFAIRS, CITY OF VIRGINIA BEACH, VA. Mr. WEBBON. No; I am a coordinator of urban affairs. Senator SPARK MAN. You have heard some of the testimony here sing questions about the Federal coordinator. Could you, out of ir experience, give us any light on the subject? Ir. WEBBON. I thank the Senator from Alabama for this oppority to talk to him regarding this matter. ly name, of course, you have. I am the coordinator of Urban airs of the City of Virginia Beach. I was formerly the director of olic works and the executive secretary of old Princess Anne unty, which is now the major portion of the new city of Virginia ach. I am a bona fide, qualified city manager, a member of the Internamal City Managers Association and a charter member of the Nanal Association of County Administrators. have studied this problem very carefully while these discussions re going on, and perhaps it might clarify it a little bit if I explained at the purpose of my position is in relation to the city of Virginia ich. The city of Virginia Beach established the position of coordinator urban affairs with the idea of having an individual go thoroughly o the laws which were passed by the Congress relating to distribu1 of Federal funds for the purposes of city improvement. ly work is at the direction of the city council through the city nager to inquire as to the availability of funds for community ilities, open space, and the various programs including urban real funds which have been sponsored by the Federal Government. The position itself, by its very name, indicates that it is to a certain ent without any power. It is simply a coordinator. ▲ coordinator is one who in my estimation takes the various factors I the various departments and pulls them together in order to give etter understanding to the persons or the individuals or the city iring to utilize the funds or the programs which are available. n working with the position in the last 3 or 4 months, the Housing Urban Development Department has been most helpful. The ious offices of the Senators and the Congressmen have been most oful. However, there are two or three things which I would like nention. 'he first is that if you do establish the position of coordinator in Federal Government setup, I believe he should be a person who is ler the joint control of both the city and the Federal Government elation to his position and in relation to his salary. In that way an be unbiased and be entirely free to render his opinion both to Federal Government and to the locality regarding whatever prom in which they might want to engage. n working with the program, I have run across one or two items ch I think might be of interest. The so-called “comprehensive |