supporting this legislation, we recommend certain amendments which we believe will better accomplish the purposes of the program and serve the public interest.

I will briefly comment on some of the special features of the legislation which relate to the cooperative program and indicate the reasons for our support of these provisions. In addition, I will describe briefly the amendments which we propose:

1. The demonstration cities program should help rebuild or restore entire city neighborhoods through the combination of Federal aids and local resources. Our major concern is to assure that an adequate additional housing supply is provided for our growing population and for those who would be displaced in carrying out this and other governmental programs. To produce this additional supply of housing for moderate-income and low-income families, substantial increases are required in the authorizations for these programs. Moreover, it is necessary to utilize vacant land outside of the cities, as well as the land within the cities. These requirements should be added as conditions which a city must meet to qualify for the additional Federal aid contemplated by the demonstration cities program.

2. We wholeheartedly support the amendments contained in section 102 of the Housing and Urban Development Amendments which will remove technical obstacles in transferring management-type cooperative mortgages to the mutual insurance fund.

3. We strongly oppose the repealer which is listed among the technical amendments in nomenclature in title II of the housing and urban amendments bill. This would abolish the FHA position of Special Assistant for Cooperative Housing which Congress established in section 102(h) of the Housing Amendments of 1955. Certainly such a repeal is not a technical amendment or change in nomenclature. It is a matter of major importance and substance. The Cooperative League of the U.S.A. urges and recommends that this provision in the present law should not be repealed. Instead, it should be strengthened and reaffirmed for the following reasons:

(a) In enacting the existing law 11 years ago, the Congress carefully considered the need for such legislation which was supported by cooperative, consumer, and public interest groups. It therefore provided for a special assistant and staff on cooperative housing to provide necessary assistance, guidance, and expediting in order to carry out the laws and mandates of the Congress relating to the encouragement of the cooperative housing program.

(b) The need for that law not only continues today, but is even more urgent. New programs have since been enacted by the Congress, such as the rent-supplement program and the below-market-interest-rate program, which include projects undertaken by housing cooperatives. To implement and effectuate this program it is necessary to have the skills and experience of those who have specialized in cooperative housing.

(c) There is a need for the special assistant and supporting staff which will have the responsibility (under the Commission's supervision) to devisem policies, procedures, and documents for use in the cooper

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ent.

I

We support the Demonstration Cities Act of 1966, proposed by President Johnson in his special message to Congress on January 26. This is an important and auspicious step in the right direction.

At the same time, we believe that the specific recommendations proposed to carry out this program are unduly modest. Their scope should be enlarged to make possible a truly effective onslaught on urban blight in cities and towns, large and small.

If massive additions to the supply of low- and moderate-cost housing, proposed by the President, are to be realized, additional legislation is needed.

We believe provision must be made to step up construction of low-rent public housing to a yearly rate of at least 125,000 dwelling units a year. We also urge that adequate funds be made promptly available to implement the rent supplement program for disadvantaged people, enacted by the Housing and Urban Development Act of 1965.

The authorization of the 1965 act for urban renewal was inadequate to meet the needs of communities seeking to clear their slums and rejuvenate their blighted and detericrated areas. We therefore urge that the capital grant authorizations be increased by $1 billion per year for a 3-year period.

America's urban problems are of foremost importance to the Nation's future welfare and growth. Now is the time to begin with vision and courage, the necessary long-term effort that measures up to their complexity and their size.

Mr. BARRETT. We now have Mr. Dwight Townsend, director, Washington office of the Cooperative League of the United States.

Mr. SHISHKIN. As a word of departure, Mr. Chairman, let me say that I endorse everything Mr. Townsend will provide, I have had an fs opportunity to examine his statement in advance, and it is a good one, and I hope you will give him all the attention you can.

Mr. BARRETT. Thank you.

Mr. Townsend, we are certainly glad to have you. We have had some of your excellent testimony before. And I am quite sure what you offer today is going to be very helpful.

We will give you a chance to complete your statement, and then if it is agreeable to you, some of the members will want to ask you some

questions.

STATEMENT OF DWIGHT D. TOWNSEND, DIRECTOR, WASHINGTON OFFICE, COOPERATIVE LEAGUE OF THE UNITED STATES

Mr. TOWNSEND. I have a statement, and I have it in brief form. And I also have a backup statement that I would like to put in the record that will further explain the materials that are contained in it, because some of them are technical in nature.

Mr. BARRETT. That may be done without objection.

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Mr. TOWNSEND. I would like to make the morning unanimous by saying also that I have a very great regard for Boris Shishkin. It has my pleasure to work with him on the board of the National Housing Conference, and other civic activities, and I respect his judgment a great deal.

I

am pleased to have this opportunity to present the views of the Cooperative League of the United States concerning some aspects of the legislation pending before your committee.

We are in favor of the enactment of the four bills before your committee; namely, the demonstration cities bill, the urban development bill, the Housing and Urban Development Amendments of 1966, and the group practices facilities bill. We believe the enactment of these bills will provide necessary additional tools to help meet urgent housing needs and eliminate slum and blighted conditions in our cities. In

supporting this legislation, we recommend certain amendments which we believe will better accomplish the purposes of the program and serve the public interest.

I will briefly comment on some of the special features of the legislation which relate to the cooperative program and indicate the reasons for our support of these provisions. In addition, I will describe briefly the amendments which we propose:

1. The demonstration cíties program should help rebuild or restore entire city neighborhoods through the combination of Federal aids and local resources. Our major concern is to assure that an adequate additional housing supply is provided for our growing population and for those who would be displaced in carrying out this and other governmental programs. To produce this additional supply of housing for moderate-income and low-income families, substantial increases are required in the authorizations for these programs. Moreover, it is necessary to utilize vacant land outside of the cities, as well as the land within the cities. These requirements should be added as conditions which a city must meet to qualify for the additional Federal aid contemplated by the demonstration cities program.

2. We wholeheartedly support the amendments contained in section 102 of the Housing and Urban Development Amendments which will remove technical obstacles in transferring management-type cooperative mortgages to the mutual insurance fund.

3. We strongly oppose the repealer which is listed among the technical amendments in nomenclature in title II of the housing and urban amendments bill. This would abolish the FHA position of Special Assistant for Cooperative Housing which Congress established in section 102(h) of the Housing Amendments of 1955. Certainly such a repeal is not a technical amendment or change in nomenclature. It is a matter of major importance and substance. The Cooperative League of the U.S.A. urges and recommends that this provision in the present law should not be repealed. Instead, it should be strengthened and reaffirmed for the following reasons:

(a) In enacting the existing law 11 years ago, the Congress carefully considered the need for such legislation which was supported by cooperative, consumer, and public interest groups. It therefore provided for a special assistant and staff on cooperative housing to provide necossary assistance, guidance, and expediting in order to carry out the laws and mandates of the Congress relating to the encouragement of the cooperative housing program.

(b) The need for that law not only continues today, but is even more urgent. New programs have since been enacted by the Congress, such as the rent-supplement program and the below-market-interest-rate program, which include projects undertaken by housing cooperatives. To implement and effectuate this program it is necessary to have the skills and experience of those who have specialized in cooperative housing.

(e) There is a need for the special assistant and supporting staff which will have the responsibility under the Commission's supervision) to devise uniform policies, procedures, and documents for use in the cooperative housing program. Cooperative housing is dif ferent from single-family homes and multifamily rental projects. The differences must be recognized and reflected in policies, procedures,

and documents which are prepared by those who have a special knowledge and experience with this program.

(d) It is necessary to update section 102 (h) of the housing amendlements so that it will refer not only to cooperative housing which is to be insured by FHA under section 213, but also cooperative housing rief to be insured under section 221 (d) (3) or under the rent supplement provisions contained in section 101 of the Housing and Urban Developtrement Act of 1965. Instead of repealing section 102 (h) of the Housing aid Amendments of 1965, we urge that this provision be retained in the law and amended and strengthened by referring to other laws subseand quently enacted by the Congress relating to cooperative housing.

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4. With the recent increase in interest rates in the private financial sing market, it is becoming increasingly difficult to obtain construction financing at reasonable interest rates and reasonable service charges. This poses a serious threat to the housing programs under section land 221(d) (3), including the below-market-interest-rate program to serve moderate-income families and the rent supplement program to serve low-income families.

It is necessary that affirmative measures be taken which will assure the availability of construction financing for such projects at reasonable interest rates and reasonable servicing charges. In those cases where FNMA is issuing a commitment for the purchase of an FHA-insured mortgage under section 221 (d) (3), the law should be amended to provide that FNMA can also make FHA-insured adrances during construction pursuant to such a commitment. We propose that FNMA's advances be limited to a participation of not more than 95 percent in the construction financing, so that there will be a mortgagee which would participate in the advances for the balance and which will have the responsibility of providing the necessary servicing and processing of advances during construction.

5. In the rent supplement program, overcrowding should be recognized as a substandard housing condition which would qualify a lowincome family for housing. This is done in public housing. It should also be done in the rent-supplement program.

6. In the below-market interest rate program under section 221 (d)(3), we recommend an amendment to permit occupancy by individuals who qualify as to income. Under the 1964 amendment, such eligibility of individuals was limited to those who were elderly or handicapped.

7. In the section 213 program under FHA, we recommend an amendment which would remove an obstacle to the conversion of existing rental housing to cooperative ownership. Present FHA appraisal formulas are appropriate for rental property operated on a profit basis, but they are not workable for property operated on a onprofit basis by a cooperative which seeks to produce only enough income to cover its costs.

8. Another amendment required in section 213 is to increase the Supplementary financing to enable necessary improvements to be Tade in existing cooperative housing so it can keep pace with the requirements of modernization; also, to permit the addition of community facilities when experience has demonstrated their need. 9. To help provide adequate housing for lower income families under the below-market program of section 221(d) (3) and the rent

supplement program, amendments are necessary to enable self-help programs in certain areas. This would apply to projects where the payment for services is not in cash wages, but in a reduction of housing charges for those who participate in the self-help.

10. We are in favor of the urban development bill, except that the FHA-insured loans under the new communities program should be for a 40-year term. Loans for 15 years are inadequate, particularly under a program where the land would be leased for redevelopment and the rentals would be utilized to repay the loans.

11. In the rural housing legislation of the Department of Agriculture, amendments are required to expand the purposes of direct loans to private nonprofit organizations and consumer cooperatives to include rental or cooperative housing for moderate-income families in rural areas who are not elderly. The law now permits such loans only for the elderly. In addition, a rent supplement program should be made available for low-income families who will live in such housing developments of nonprofit and cooperative organizations financed under this program for rural areas.

12. The Cooperative League supports with enthusiasm the proposed group practice facilities bill. This will meet a critical need for insured financing of facilities for cooperative medical and dental groups who operate on a nonprofit basis. Many communities require such facilities to protect the health of their residents. We understand more detailed hearings will be held on this bill, and our president, Mr. Jerry Voorhis, with whom I am sure most of the committee is acquainted, who is also secretary of Group Health Association of America, will be before you with testimony March 11.

13. Since management-type cooperatives have the best repayment record on FHA-insured mortgages, we approve the proposal in H.R. 12766 to reduce the FHA mortgage insurance premium on such cooperative mortgages.

To save the time of the committee, I am not explaining our proposed amendments in detail. However, I would like the opportunity to introduce into the record, with my statement, a fuller explanation of these amendments and some supplementary materials.

Mr. BARRETT. That may be done, without objection.
Mr. TOWNSEND. Thank you, sir.

Interest rates on multifamily housing. We are pleased that the FHA did not increase the 514-percent interest rate on cooperative and other mortgages on multifamily projects. This establishes a differ ential of one-fourth of 1 percent between the mortgage rate on multifamily housing and on individual homes. Such a differential accords with the policy statement in your report last year. It reflects the lower servicing charges and greater attraction of multifamily mortgages.

When funds are not available in the private mortgage market to purchase cooperative mortgages or urban renewal mortgages at par, plus a reasonable commitment and purchasing fee, there are special assistance funds available in FNMA, pursuant to your congressional authorization, for the purchase of these mortgages on such terms in order to protect the consumer and public interests involved in these programs. We wanted to make this observation.