Mr. MASON. Mr. McVey, this act keeps business in business, rather than actually replacing business with Government. In all cases FHA loans are made by private banks. This just provides that private banking with the opportunity to make this loan, with their depositors' money, without taking an undue risk, and still give the citizen of this country a little better break than would be possible if it were just a hard, cold banker who had to be absolutely sure of the safety of the loan.

I look at it as really not Government replacing business, but Government simply assisting business to do a fuller job.

Mr. McVEY. That is all.

The CHAIRMAN. Mr. Hiestand.

Mr. HIESTAND. I would like to ask if you have had any evidence that the present owners of Wherry housing projects are fearful of getting badly hurt by the discontinuance of the program and the replacement by military housing?

Mr. MASON. It would be perfectly natural that they would feel this way, and I do have evidence, from the remarks of many of these people, that they are concerned, and I think Congress should, if it passes whatever legislation it passes, be sure to provide some measure of protection for existing Wherry Act housing.

Existing Wherry Act housing was limited in cost. Any new proposed legislation, such as that supported by direct appropriation, or that supported by one of the measures which has been proposed, provides for a more expensive structure to be built, and it would be perfectly natural, therefore, for everybody to want to live in a nicer housing, and we believe it is important to protect the projects which have been built.

We also believe it is important to protect communities, not to support uneconomic housing, which in some cases has arisen, but to protect good projects in those communities, and not to build stuff, in other words,which is not needed.

Mr. HIESTAND. How can those who are now being hurt be helped? Mr. MASON. Well, they are not now being hurt, I don't think, Mr. Hiestand, but the proposal was, if the Wherry Act method of Wherry Act housing is abandoned, how would you protect them, and I think it could be done by simply writing a requirement in the legislation that if the present project is to be superseded, that the military would have to take it over, perhaps, or something of that kind. I am sure my staff would be glad to work with the committee in considering something of this sort.

Mr. HIESTAND. Thank you.

That is all, Mr. Chairman.

The CHAIRMAN. Mr. Nicholson.

Mr. NICHOLSON. Did I understand you to say that we are going to have this with us always?

Mr. COLE. FHA?

Mr. NICHOLSON. This housing problem.

Mr. COLE. We are always going to have housing problems, Mr. Nicholson. I don't frankly, Mr. Nicholson, looking at it practically and realistically, I don't see any movement on the part of Congress or the people of the country, or the Government, or this Administration, under any present conceivable future, that FHA will be abandoned.

Mr. NICHOLSON. Do you think the Congress is out of step with what people are thinking?

Mr. COLE. No, I don't in this instance. I think the people want FHA, and I think the Congress does, and I am sure the Administration does.

Mr. NICHOLSON. Three times we have had in the Congress, lately, public housing. The Government was going to build so many houses, and it has been turned down three times. Still they come back. Which is probably an admission to me that they don't think Congress knows what it is doing.

Mr. COLE. No, Mr. Nicholson, I am addressing myself now solely to FHA, and we will come to public housing in a minute.

I may comment on that, as a policy-Congress is the one that makes the decision, and the Administration can make a recommendation

Mr. NICHOLSON. Well, we were on this committee together some 7 or 8 years ago. Of course, I am just back and I am green again, but it seems to me that in those days we were only building about threequarters of a million houses, and in the past 2 or 3 years I am told we are almost up to a million and a half houses.

Mr. COLE. We are on a rate now of approximately 1,300,000. Mr. NICHOLSON. So that apparently private industry is meeting the housing situation pretty well?

Mr. COLE. Private industry is doing a remarkable, wonderful job in producing housing for this country.

Mr. NICHOLSON. I would like to ask what is going to happen when this emergency is over, and we don't need these defense establishments, or perhaps so many Army camps? What are you going to do with the houses that were built in those localities? Tear them down? Mr. COLE. That is a very important and difficult question.

Mr. NICHOLSON. There is nobody there, what are you going to do with them?

Mr. COLE. Mr. Nicholson, some of them can be absorbed. The Wherry Act was enacted by Congress to meet that very problem. You must remember that when the war began there was a great expansion of Military Establishments, of Defense establishments, manufacturing establishments, and so forth, to support the war effort.

Congress believed, and I believed at that time, that the workers in the Defense Establishments, that the military, should be housed. In that regard, then, they must be housed immediately. Expansion had to occur rapidly. Therefore, even though the military might change its minds about where a given base would be located, the important part was to get the people housed, and if certain mistakes were made, or certain changes in plans were made, that the Government should take the responsibility of bearing the cost.

This was a risk knowingly undertaken by the Congress, when this type of housing was programed.

Now, what happens to it? We don't know. Nobody knows. We think that it is possible that certain things can be done, but let us assume that there was a military base set up at some very remote area, and it was very important in the defense of this country, and for the security of this country. Let us just assume these facts. People had to be moved there. The military personnel had to be moved there. Why? For the protection of this country.

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Now, when the military finds that this base is no longer needed it seems proper and right that they should be moved out. When they are the housing may be there. This was a risk, underwritten by the Government, for this purpose.

Mr. NICHOLSON. So we have to build a house for somebody every time they move; is that it? The Government? Mr. COLE. I don't think that is quite it.

Mr. MCDONOUGH. Will the gentleman yield?
Mr. NICHOLSON. Yes, I am all through, anyway.

Mr. MCDONOUGH. Mr. Cole, didn't we go through that experience so far as the Lanham housing is concerned?

Mr. COLE. Yes.

Mr. MCDONOUGH. Aren't we now going through with disposing of housing that was needed at the time, but is not now needed, as far as colleges are concerned?

Mr. COLE. Very true.

Mr. MCDONOUGH. So it has gotten to the point where housing is just as essential as a suit of clothes. You have to have housing for people, just as you have to have clothing for people, where they are put in remote areas.

Mr. COLE. I think so.

Mr. NICHOLSON. We don't buy any suits of clothes.

The CHAIRMAN. Mrs. Griffiths.

Mrs. GRIFFITHS. I have no questions, Mr. Chairman.

Mr. COLE. Mr. Chairman, if you have completed on FHA

The CHAIRMAN. Mr. Cole, to what extent do you think there is a shortage of decent housing in the United States now?

Mr. COLE. Mr. Chairman, I think there is quite a shortage of decent housing.

The CHAIRMAN. You don't consider that we have reached the saturation point?

Mr. COLE. No, I do not. There is a great shortage of decent housing for people in America. I may say to the Chairman that the statistics which are available, by and through the Bureau of the Census, give certain figures about the numbers of housing that are deteriorating, dilapidated, and so forth, indicating quite a large number of housing that could and should be replaced.

Frankly, I think it is one of the great housing markets of the future, the removal of dilapidated housing which is now a part of the inventory.

The CHAIRMAN. Is there a surplus of housing in some areas, and a shortage in others?

Mr. COLE. Yes. The surplus, The surplus, as Mr. Mason so ably pointed out a while ago, in our judgment, is not great. It is in a specified few areas, but not great.

Mr. MASON. And is being absorbed, Mr. Spence.

I would like to add to Mr. Cole's statement, that we find in surveys undertaken by various Government groups that vacancy ratios in our cities are still very, very low. They are so low as to indicate, certainly, that there is a future market, even in these cities which we think of as fully built.

The CHAIRMAN. Is that largely accounted for, the variation between shortage and surplus, because of the shifting population?

Mr. MASON. Our population does shift rapidly, Mr. Spence, from area to area, and this does call for need for housing, and does create housing surpluses.

The CHAIRMAN. Are there further questions?

Mr. MCDONOUGH. Mr. Chairman, I would like to ask Mr. Mason a question.

The CHAIRMAN. Mr. McDonough.

Mr. MCDONOUGH. What is the situation, insofar as the saturation of housing is concerned, in southern California?

Mr. MASON. Well, I can't comment specifically, Mr. McDonough, on that situation without getting the facts exactly for you.

Mr. MCDONOUGH. Has your attention been called recently to any evidence that it has reached the saturation point?

Mr. MASON. I would say that I wouldn't want to comment without having the facts to present to you, but I would be very happy to get them for you, Mr. McDonough.

I believe that San Diego has some extra housing of sorts.

I want to point out, Mr. McDonough, that we get too much $12,000 housing in an area and not enough $9,000 housing, too. You know that, of course. You can have too many of one kind and not enough of another.

The CHAIRMAN. Are there further questions?

Mr. MASON. Further, I might say, that in San Diego we have too much rental housing around the naval base.

Mr. MCDONOUGH. The FHA regional office in Southern California has complained to me about the backlog on processing loans, and I remember speaking to you about that the last time you were before the committee, and you said you were doing something to correct it.. Then I was also informed that it was relieved to some extent, but another situation had developed, where your appraisers were not in the kind of category to employ the right kind of men to do the job speedily enough.

Has that been corrected?

Mr. MASON. Well, in answer to the first question, my Los Angeles office announced last week that it was on a current basis-that is 14 days' processing-which I think is a real tribute to our new director who took a disorganized office and has done an excellent job with the help the Congress gave us in the form of an appropriation.

We are meeting the second part of your question, sir, by reorganization and reappraisal of these situations, under which we have been able to change responsibilities and to provide a better classification for these technical people that are doing this work. This reorganization is just being accomplished. I have in Washington today the directors of all my insuring offices. I shall be with them presently and they are meeting to discuss how they carry through, and to get the enthusiasm and understanding they need to carry out this program that we have.

Mr. MCDONOUGH. Thank you.

Mr. WOLCOTT. Mr. Cole, we are building at an annual rate of 1,300,000 units; is that correct?

Mr. COLE. Yes, sir.

Mr. WOLCOTT. This committee has always thought, in recent years, that the economy could absorb, for the next 10 years, starting 2 years ago, about a million units annually, and that the saturation point

might be reached in 10 years. Have those figures been revised in any manner? Due to the fact that we are building at the rate of 1,300,000 units a year?

Mr. PATMAN. Mr. Wolcott, may I inquire who submitted those figures, "a million units a year"?

Mr. WOLCOTT. I think it was generally accepted on the Joint Committee on the Economic Report that we could absorb a million units a year. Then when we started building at the rate of 1,300,000 units it became apparent that we were building at a greater rate.

Have you revised those figures, and can you tell us when we will reach the saturation point, on the basis of the new figures?

Mr. COLE. Yes, Mr. Wolcott. As you are aware, the housing market, and its relation to the economic structure of the Nation, are very important to this Agency and the Government. We have been studying the question very seriously, and constantly with others in the executive branch of the Government charged with this responsibility— the Council of Economic Advisers, the Federal Reserve, the Treasury, and others in the executive branch of the Government-and, first, the statistics available are not of the best. That is an understatement.

We would like to have better statistics available to those people who understand the programs and the impact of construction upon the economy.

But with all of the information and data available, and may I say that we have recently stepped up our own machinery to obtain more and better information, with the information available it is our judgment that the economy can and will be able to absorb 1,300,000 units a year.

Mr. WOLCOTT. For how long?

Mr. COLE. We think between now and 1960. We think it can be done.

Now, as you know

Mr. WOLCOTT. If we proceeded at the rate of 1,300,000 units a year, then, we would reach the saturation point in 5 years instead of 10 years. In other words, we would reach the point where we are meeting the demand, in 5 years, instead of 10 years, or 8 years from now. Mr. COLE. No; I don't think I would put it that way, even.

Let me explain one characteristic of the market which may not have been examined as closely and carefully in the past, because the program was not moving along, as we think it will. We think there will be quite a large removal from the housing inventory of the dilapidated homes.

Secondly, we think there is a strong demand for a little larger home, a little better home.

We think that the formation of the families will, of course, contribute to this, but also there has been and will be a continuing undoubling of families in the country, together with the continued high level economy, high level employment, and our opinion is that we can for some considerable period of time sustain the 1,300,000 units annually.

We don't put it on any cutoff date. We don't say that it will be cut off at a particular time.

Mr. WOLCOTT. You imply that we might reach that point in 5 years? Mr. COLE. Not necessarily. In 1960 we will have arrived at the peak of the family formation again.