(a) A strenghtened mandatory builder's warranty against any structural defects that may develop within the first 2 years after completion of the house. (b) A "lapsed payments" plan permitting home purchasers to postpone regular payments for a limited period when forced to do so by unemployment, illness, death in the family, or other unpreventable causes. (c) Establishment of an advisory committee to the Housing and Home Finance Agency representing labór, home owners, tenants and other consumer interests. (5) Requirements for payment of the prevailing wage to all workers engaged in construction under federally assisted housing programs; and be it further Resolved, That the American Federation of Labor take action to secure introduction and enactment of this program early in the next session of Congress. Mr. BROWN. Mr. Wolcott? Mr. WOLCOTT. No questions? Mr. O'HARA. I wish to congratulate the witness on the very splendid statement he has made on the housing problem. My concern has been, as you have outlined to all of us, that we have a housing program that has not reached the low-income or the average income group of the American people, and apparently we are making no progress in meeting the need of that group. I always have had confidence in the ingenuity of private industry in America, and I know that has always been true of the American Federation of Labor. Now, why is it that with all the ingenuity we have in the construction field that builders have not devised some kind of a residence that can be built and sold to this great number of people who have an income of $75 or $80 a week? I know you have given much thought to this. What is your conclusion? Mr. SEIDMAN. Yes, sir, we have given a great deal of thought to this problem. Of course, not everything has been done by any means to improve the efficiency of the construction industry to the point where the actual construction costs can be reduced to the lowest point that might be cbtainable, and more can be done along these lines. However, I do not by any means want to underestimate the actual increases in efficiency which have occurred in the construction, particularly, of the large scale housing projects. A great deal is being done along those lines. You may have seen an article in Business Week, a week or two ago, which describes the on-site prefabrication methods which are being used to reduce costs. We think that a major problem is the financing cost. We believe that the real problem is to reduce the monthly payments on the mortgage. Now, you can do this in 1 or 2 ways or a combination of these 2 methods: You can either increase the amortization period, the period over which the purchaser makes the payments on the mortage-in other words, you divide the total amount over a longer period-or you can decrease the interest rate, or you can do both. The tendency during recent years has been to increase the amortization period. We think the amortization period can be increased still further. But we wish to point out that the longer a person is paying interest, over an amortization period, the more he is paying, in the long run, for that house. At the present time it is likely to run to 22 and even 3 times the original selling price, as it is given to him when he buys the house. Therefore, we say that the only way in which this problem can be met, in a way which would actually reduce the costs to the purchaser, and at the same time not force him to carry, over the long-term period, a cost which is far greater than the item which he is buying, namely the house, is to not only extend the amortization period but also to reduce the interest rate. We think that this is entirely feasible. We think that the interest rates are too high in view of the lack of risk to the lender. Mr. O'HARA. I was interested in your observation that if the interest rate were decreased, in the manner in which you have suggested, it would bring the cost of a home down to some considerable extent. How much would it reduce the cost, say, on a $10,000 home. Mr. SEIDMAN. Well, it would depend Mr. O'HARA. You gave some percentage figure, if I recall correctly. I think you said it would reduce the cost a third. Mr. SEIDMAN. It might reduce it as much as a third in terms of monthly payments, particularly if combined with a longer amortization period. Mr. O'HARA. That is one way of bringing housing more within the reach of our low-income people. Mr. SEIDMAN. Yes, sir. Mr. O'HARA. We can't reduce the costs of construction at the present time. We can't reduce the labor costs. But we can reduce materially the cost of homes by a different system of planning, lower interest rates, and possibly the establishment of a new assistance program by the Government. Does this follow the lines of your suggestions, which I have found most constructive and helpful? Is that your suggestion? Mr. SEIDMAN. Yes, sir, Mr. O'Hara; that is the suggestion we are making, and we think further efforts can be made and are being made to reduce construction costs, but we don't think they can be reduced fast enough or low enough to meet this fundamental problem. Mr. O'HARA. Am I correct in this? The American Federation of Labor is interested in the continuance of the construction trend? Mr. SEIDERMAN. Yes, sir, we want expanded construction. Mr. O'HARA. And your interests, in this regard, are exactly the same as those of private industry, the builders? Mr. SEIDMAN. I am sure that in that regard our interest is the same as that of the builders. Not only do we have a large proportion of our membership in the building industry, but we are also interested in housing as consumers of housing. Mr. O'HARA. I recall that back in the 1920's that the depression was hastened and deepened by the curtailing of construction. We do not want that to happen again, but it can happen if we continue to build only homes which are beyond the financial reach of many of our people in the modest-income group. Mr. SEIDMAN. I believe that is true. I think that what is happening today is that many of the people who are purchasing housesyoung veterans, and young people generally, are buying houses at costs that they really can't afford. They are paying one-third and one-fourth of their total income for housing, and even more, just because that is the cost of the only houses available. But I think we will come to a day of reckoning. Besides that, it is the families even below that level that have the greatest need for housing, and as Mayor Clark emphasized, those people can't even begin to purchase houses. Mr. BROWN. Will you yield? Mr. O'HARA. I yield. Mr. BROWN. Mr. Seidman, you live in Washington? Mr. SEIDMAN. Yes, sir. Mr. BROWN. Could you come back next Thursday and finish your testimony? We have some out-of-town witnesses who must leave today. Mr. SEIDMAN. I will be glad to do that. Mr. BROWN. If you don't care to do it, we will go ahead. But we have the mayor of Syracuse and he wants to get back. Is it all right with you to appear next Thursday? Mr. SEIDMAN. Certainly. I will have no further statement at that time, but there may be some further questions. I will be glad to return. Mr. BROWN. Will you return at 10 o'clock Thursday morning? Mr. O'HARA. I have concluded my questioning, Mr. Chairman, but there may be other members of the committee who wish to question Mr. Seidman. He has been of great aid to us and his testimony has been outstanding. Mr. BROWN. Yes, sir; we will expect you back at 10 o'clock on Thursday, Mr. Seidman. Mr. SEIDMAN. Thank you, Mr. Chairman. Mr. BROWN. We will hear now the mayor of Syracuse, Mr. Donald Mead. Mr. MULTER. Mr. Chairman, by way of introduction of Donald H. Mead, the distinguished mayor of the city of Syracuse, in our great State of New York, may I say that the mayor has made a very fine record as a public servant in our State legislature, and then the people of his city elected him as their mayor, where he continues to do a good job, and even though I am of the opposite political faith, I wish to welcome one whom I consider to be a very good public servant. Mr. MEAD. Thank you. Mr. BROWN. You may proceed, Mr. Mayor. Mr. MEAD. Thank you very much. STATEMENT OF HON. DONALD H. MEAD, MAYOR OF THE CITY OF SYRACUSE, N. Y. I am Donald H. Mead, mayor of the city of Syracuse, N. Y., and a member of the executive committee of the American Municipal Association, which represents 12.000 municipalities across the Nation. I am speaking to you today in behalf of that association. I am also accompanied by my executive secretary, Mr. Richard F. Torrey, and there are also present two staff members of the American Municipal Association. Last year I had the honor of representing the American Municipal Association in testimony on the Housing Act of 1954. Even at that time, with only a few months service as mayor, I could appreciate the importance of urban renewal legislation. Now, a year later, I am in a position to discuss urban renewal on the basis of some actual experience, and with much greater feeling. I hasten to admit, however, that I do not even now consider myself an expert in the field. Those of us who are operating city officials recognize the immensity of the problem of blighted areas and slums in our communities, as I am sure you do, also. We have inherited the fruits of decades of neglect. We are trying now to reverse the trend. We appreciate the help of the Federal Government. But to be perfectly honest, we need more of it. Municipal finances are stretched to a breaking point. We are still trying to catch up from the war years in new schools and public improvements. It has been said, you know, that all governments are fishing in the same taxpayers' pond-the Federal Government fishes with a net; the State governments with a hook and line, and the municipal governments with a bent pin. Be that as it may, the job of clearing slums and redeveloping the land is expensive. Let's look at the report of the President's Advisory Committee on Public Housing which was released in December 1953. The committee in its investigations and deliberations learned that there are at least 5 million dwelling units which should be demolished in the slum areas of our Nation's cities. Indications were, the committee said, that the cost of eliminating each unit would be about $3,000, the Federal share of that being $2,000. Now, with 5 million units to be cleared-and assuming that our communities are able to hold the line against the spread of slum areasthe total cost of clearance would be about $15 billion. At the present ratio, that would mean a Federal share of $10 billion. Under the present law, with an authorization of $100 million a year, it would take our cities 100 years to wipe cut slums. So you can see why the American Municipal Association is strongly in favor of increasing the amount of authorized Federal grants-in-aid from $100 million to $200 million per year as proposed by the Administration. Even with the doubled authorization, it would take an estimated 50 years to do the job and-again assuming we are able to hold the line against the spread of slums-we would have to look forward to the year 2005 to complete the job. This being the case, it would be very important to retain the provision in existing law for authorization of an additional $100 million to be used by the Urban Renewal Administration at the discretion of the President. I should like to refer to the provision in the bill increasing from $35 million to $70 million the amount which is exempted from the 10 percent ceiling on loans and grants to municipalities in any one State. As you know, I came from one of the older and more populous States, where the effects of blight are bound to be more extensive than in the newer sections of the country. Moreover, our big sister-New York City, as I am sure Congressman Multer can attest-can swallow 10 percent of any Federal aid without any material effect upon its digestion, its needs are so great. You will appreciate that this situation is repeated in many of our great States in the Nation. This additional allocation, therefore, is a vital necessity for those States which have a slum situation out of proportion to other States. I might also mention that the President's Advisory Committee said that 15 million dwelling units are in need of rehabilitation at an average cost of $600 each to accomplish the task. This means that $9 billion must be spent to develop our conservation areas and prevent the growth of our blighted-housing areas. Perhaps you should know how our people feel about slum clearance. Recently we tried to get State legislation which would have made it easier for us to carry out a large-scale urban renewal program. We appealed to municipal officials and citizens groups throughout the State for support. We were amazed at the intensity of interest shown by all of them. Equally amazing was the unanimity among such divergent groups as manufacturers and chambers of commerce, AFL and CIO, bankers, contractors, building supply dealers, real estate men, women's organizations, social agencies, and the press. I feel that the people are ahead of us in their appreciation of the importance of slum clearance and the urban renewal program in general. In Syracuse, even before the "workable program" requirement became a matter of law, we had been expanding our slum elimination activities by code enforcement and other local means. Our enforcement experience and our planning studies have made us realize the seriousness of the relocation problem. We are also aware of the importance of the conservation and rehabilitation areas which flank the areas requiring outright clearance. With respect to the renewal of such areas, may I comment on the amendment which I understand is being proposed by the National Association of Real Estate Boards. This amendment would authorize Federal insurance of local assessment bonds issued by local agencies concerned with improving these conservation areas. This proposal was brought to my attention only a few days ago and we have not had adequate time to fully analyze it. It appears, however, that it is worth considering as another tool in attacking one phase of the overall problem. In further reference to the possibility of using the conservation and rehabilitation areas to help solve the relocation problems, may I offer these observations: Some large homes in the conservation areas which are in good condition might be purchased and be used for public housing purposes. It is my understanding that this plan is possible under the existing law. In the past, such use of existing houses for housing of lowincome families was viewed unfavorably by the Public Housing Administration, but this agency is now more open-minded on the subject. Therefore, I need only call your attention to this possibility and to urge you to study it further, with a view to elaborating and improving the existing provisions covering such operations by amendments, if such are needed and are found feasible. One other matter bearing on the relocation problem: May I again suggest this year that section 221 (Relocation Housing) be further amended to make residents of the conservation and rehabilitation areas eligible, as well as residents of the redevelopment areas, even though they may not be displaced by governmental action. |