The CHAIRMAN. We have a full schedule for all of today and for all day Monday. As all of the witnesses know, they are to summarize their testimony in 10 minutes or less, with the understanding that they may file for the record any documents or further explanations of their position as they desire. So long as it relates to the subject.

We will do our best to make sure that all members have full opportunity to question the witnesses. We shall proceed under the 5minute rule and, if necessary, we will ask witnesses whom the members have not had a chance to interrogate fully to return for subsequent hearings.

Following the conclusion of hearings from outside witnesses we will have the Secretary of HUD, the Honorable George Romney, appear before the committee.

It is my intention to move this legislation as expeditiously as possible. It is possible, in my opinion, to complete most-if not all-of the markup of this legislation by the full committee prior to the July recess and I hope all members will assist me in meeting this schedule. The proposed plan for a recess is from June 30 until July 17.

Our witnesses this morning include representatives of the National Association of Homebuilders, Mr. Waranch-is he here? Take your place at the committee table, please.

Mr. Jackson of the Mortgage Bankers, and Mr. Roessner. Is Mr. Roessner here? And Mr. Zeiser of the Lawyers Title Insurance Co., is he here? You may take your seat, sir.

All right, we will start off first with Stanley Waranch, is he here? He is here.

All right, Mr. Waranch, you are recognized first, for 10 minutes and you have the authority, the privilege, of extending your remarks and placing anything in the record that is relevant to our discussion and the subject matter at hand.

Please observe the time. We will depend upon you to do that, and by doing that we can expedite the hearings. So you are recognized. STATEMENT OF STANLEY WARANCH, PRESIDENT OF THE NATIONAL ASSOCIATION OF HOMEBUILDERS; ACCOMPANIED BY CARL A. S. COAN, JR., STAFF VICE PRESIDENT AND LEGISLATIVE COUNSEL; AND BURTON C. WOOD, DEPUTY LEGISLATIVE COUNSEL

Mr. WARANCH. My name is Stanley Waranch and I am a homebuilder from Norfolk, Va. I appear here today as president of the National Association of Homebuilders. Our association has a membership of almost 62,000 in 518 associations throughout the 50 States and Puerto Rico.

I have with me Carl A. S. Coan, Jr., our staff vice president and legislative counsel and Burton C. Wood, our deputy legislative counsel. We greatly appreciate this opportunity to appear before you today to express to you our deep distress over several of the provisions in the subcommittee's bill. It is our feeling that, if the bill were to be adopted into law, in its present form, our ability to continue to produce housing at present levels, would be seriously jeopardized. This is especially true with respect to low and moderate income housing. The cost of FHA housing would be unnecessarily increased, disqual

ifying many families now eligible. Even more serious, perhaps, is that there would be a serious weakening of the private enterprise housing production system which has worked well in providing good housing for such a large percentage of our citizens.

The subcommittee's bill received close consideration at our board of directors' meeting held here in Washington just a little over 2 weeks ago.

I have attached a copy of that resolution to my prepared statement so that you may understand the degree of concern felt by those attending this meeting.

We testified at length before the Housing Subcommittee on September 17, 1971, on the many housing bills then pending before the subcommittee. I will not repeat that testimony, but refer each of you to our statement, which appears on page 1246 of the subcommittee's hearings.

Most of the adverse provisions in the subcommittee's bill were not then pending before the subcommittee and we, therefore, did not testify on these points. It is because of these many additions to the legislation that we, and others, urged the chairman to hold these hearings. We are deeply grateful to him for scheduling the hearings, and thank you for giving us this opportunity to explain to you why we believe these added provisions would so drastically affect housing production.

Before getting to our particular points of concern, I would like to say a few words about what I believe might be the basis for some of the decisions of the subcommittee. We are all aware, and probably you more so than most, of the great amount of attention which has been focused recently on the difficulties that have been experienced by FHA, primarily in inner city areas. These difficulties have been very serious and have been the subject of a tremendous amount of press attention. They have also been looked into by several congressional committees, including this committee. These investigations have brought to light many deficiencies in the way some of the FHA programs have been administered.

We do not dispute the right, and in fact the obligation, of the Congress to make changes in programs where it has been demonstrated that abuses have occurred which result from structural deficiencies in programs. This, we believe however, is not the case in connection with most of the problems which FHA has been experiencing. Rather, these difficulties stem from administrative difficulties experienced by FHA in attempting to deal with new programs, in new circumstances, and without adequate numbers of people, with proper training, to carry out these programs. HUD has recognized many of these problems and it is to Secretary Romney's great credit that he has taken quick and, we hope, effective steps to correct these deficiencies.

We think that the many steps taken by the Secretary over the past several months will be adequate to prevent recurrence of the abuses which have so disturbed all of us. We do not believe, therefore, that it is necessary to make substantial statutory changes to prevent their

recurrence.

We are especially concerned that this be recognized in connection with the 235 and 236 interest subsidy programs. Although there have

been some troubles with these programs, they are not involved in the widespread defaults and foreclosures in Philadelphia, Detroit, and elsewhere, which have been the subject of the recent news stories. Rather, the bulk of the troubles occurred in connection with nonsubsidized, existing housing, primarily insured under the FHA 203 and 213(e) programs. Unfortunately, however, it is the 235 and the 236 programs which have been blamed for most of HUD's troubles.

The 235 and the 236 programs have, in fact, been extremely successful. They have provided homes for hundreds of thousands of families who otherwise would not have been able to achieve adequate housing at a cost they could afford. To date, almost 450,000 dwelling units, under each program, have been either constructed, placed under construction, or had subsidy funds reserved for them. This is an outstanding record, considering the programs have been in operation only a little over 32 years, and that almost as much housing has been produced for low- and moderate-income families under them over this period, as had been produced in the preceding 30 years.

We prepared, just this week, a compilation of data on the 235 and 236 programs pointing out how well these programs have succeeded and I have attached a copy of that to my prepared statement. I urge each of you to look at these data.

These data and all other indications point to the fact that the 235 and the 236 programs have been an excellent means of providing lowand moderate-income housing. Where troubles have cropped up in connection with the 235 program, they have almost entirely been in connection with existing, substandard homes being bought at low prices, being given a cosmetic treatment and then being sold at inflated prices. This problem the committee recognized in the 1970 Housing Act. This legislation has been continued and expanded in the subcommittee's bill and we support it.

Otherwise, however, we see little need for any drastic revisions in these programs.

I should like now to move to our specific comments on those provisions of the subcommittee's bill which we believe would seriously curtail housing production under the FHA and public housing programs. We believe it is absolutely essential that these provisions be dropped or sharply modified by this committee before it reports out a housing bill this year.

Probably the most deleterious provisions in this bill are those which would require that the governing body of the locality, in which housing under the new 402 and 502 programs or the present 235 and 236 programs which would be replaced by 402 and 502-is proposed to be located, first approve the development. Under these provisions, any subdivision of eight or more homes, or any multifamily project, would have to be specifically approved by the city council, even though that housing was being built in accord with local zoning, in conformity with the community's comprehensive plan, and otherwise in accord with the community's requirements for the construction of privately owned housing.

The enactment of such requirements would drastically reduce the production of housing under these programs which, at this point, is being built at the rate of close to 400,000 units a year. Housing under

these programs would be stigmatized and set aside, as different from the normal housing in the community and the approval process would bring to bear upon any proposal all the fears and concerns that we are all aware so often well up in a community when lower income housing is proposed.

The undoubted result will be the denial of a great majority of the proposals for the construction of this housing. This will be especially true in suburban areas, the very place where it is so essential to provide much of this housing in order to get away from the ghetto concentrations of lower income and minority families that have been proven to be so socially disruptive. It would give a Federal sanction to the exclusionary zoning tactics of many communities, at the very time the Federal courts across the Nation are ruling such tactics are in contravention of the Civil Rights Act of 1964, the Fair Housing Act of 1968 and, in fact, the Constitution. If we are going to be able to provide housing for citizens of all income levels, in all communities and near their places of employment, it is essential that these provisions be stricken.

In place of the present 1-year warranty on new FHA one- to fourfamily housing, the subcommittee's bill would require a 3-year warranty on new single family as well as multifamily housing. To back up this expanded warranty, the bill would authorize HUD to require the builder to put up an escrow, or acquire a bond to cover the warranty. These new requirements would impose a substantial and costly burden on the FHA builder. The added cost would unnecessarily, but certainly, increase the price of the house, and be passed on to the buyer

or renter.

We find it difficult to understand this sharp increase in the warranty provision. The present 1-year warranty on new FHA housing is working well, with no indication of a need to expand it to 3 years. A home is a complex mechanism and it is therefore not surprising to find that, after construction, certain components need adjusting in order to have that mechanism properly functioning.

The CHAIRMAN. The time of the witness has expired. You may, of course, put your whole statement in the record and you may expand upon it if you desire. And members in questioning you will be permitted to bring out anything you want to in answers to questions later. After we hear the four witnesses we will take time interrogating the group. (Mr. Waranch's prepared statement follows:)

PREPARED STATEMENT OF STANLEY WARANCH, PRESIDENT, NATIONAL ASSOCIATION OF HOME BUILDERS

Mr. Chairman and members of the committee: My name is Stanley Waranch and I am a home builder from Norfolk, Virginia. I appear here today as President of the National Association of Home Builders. Our association has a membership of almost 62,000 in 518 associations throughout the 50 states and Puerto Rico.

I have with me Carl A. S. Coan, Jr., our Staff Vice President and Legislative Counsel and Burton C. Wood, Deputy Legislative Counsel.

Our members build approximately two-thirds of all the single and multifamily housing built annually by professional builders in this country. As such, we are vitally concerned with the contents of the proposed 1972 Housing Act which has been reported to you by the Subcommittee on Housing. Its provisions will have a direct impact on the ability of our industry to continue to construct the

housing, both sales and rental, which this Nation needs to continue to be the best housed nation in the world. The many Federal housing programs that would be affected by the provisions of this bill are a mainstay of the Nation's housing production system and are practically the only means available to provide housing for low and moderate income families.

We, therefore, greatly appreciate this opportunity to appear before you today to express to you our deep distress over several of the provisions in the Subcommittee's bill. It is our feeling that, if the bill were to be adopted into law, in its present form, our ability to continue to produce housing at present levels, would be seriously jeopardized. This is especially true with respect to low and moderate income housing. The cost of FHA housing would be unnecessarily increased, disqualifying many families now eligible. Even more serious, perhaps, is that there would be a serious weakening of the private enterprise housing production system which has worked well in providing good housing for such a large percentage of our citizens.

The Subcommittee's bill received close consideration at our Board of Directors' Meeting held here in Washington just a little over two weeks ago.

After long consideration and discussion, our 800 member Board adopted a resolution expressing its alarm over the bill. I have attached a copy of that resolution to this statement so that you may understand the degree of concern felt by those attending this meeting. (See attachment "A.")

We testified at length before the Housing Subcommittee on September 17, 1971 on the many housing bills then pending before the Subcommittee. Although we were concerned about some of the provisions of those bills, we, in general, supported the principal measures before the Subcommittee. I will not repeat that testimony, but refer each of you to our statement, which appears on page 1246 of the Subcommittee's Hearings.

Most of the adverse provisions in the Subcommittee's bill were not then pending before the Subcommittee and we, therefore, did not testify on those points. It is because of these many additions to the legislation that we, and others, urged the Chairman to hold these hearings. We are deeply grateful to him for scheduling the hearings, and thank you for giving us this opportunity to explain to you why we believe these added provisions would so drastically affect housing production.

Before getting to our particular points of concern, I would like to say a few words about what I believe might be the basis for some of the decisions of the Subcommittee. We are all aware, and probably you more so than most, of the great amount of attention which has been focused recently on the difficulties that have been experienced by FHA, primarily in inner city areas. These difficulties have been very serious and have been the subject of a tremendous amount of press attention. They have also been looked into by several Congressional committees, including this Committee. These investigations have brought to light many deficiencies in the way some of the FHA programs have been administered. We do not dispute the right, and in fact the obligation, of the Congress to make changes in programs where it has been demonstrated that abuses have occurred which result from structural deficiencies in programs. This, we believe however. is not the case in connection with most of the problems which FHA has been experiencing. Rather, these difficulties stem from administrative difficulties experienced by FHA in attempting to deal with new programs, in new circumstances, and without adequate numbers of people, with proper training, to carry out these programs. HUD has recognized many of these problems and it is to Secretary Romney's great credit that he has taken quick and, we hope, effective steps to correct these deficiencies.

We think that the many steps taken by the Secretary over the past several months will be adequate to prevent recurrence of the abuses which have so disturbed all of us. We do not believe, therefore, that it is necessary to make substantial statutory changes to prevent their recurrence.

We are especially concerned that this be recognized in connection with the 235 and 236 interest subsidy programs. Although there have been some troubles with these programs, they are not involved in the widespread defaults and foreclosures in Philadelphia, Detroit and elsewhere, which have been the subject of the recent news stories. Rather, the bulk of the troubles occurred in connection with nonsubsidized, existing housing, primarily insured under the FHA 203 and 223 (e) programs. Unfortunately, however, it is the 235 and 236 programs which have been blamed for most of HUD's troubles.