d to har lieve th said ear ese facil commun but I uld get diters dinators DEMONSTRATION CITIES AND URBAN DEVELOPMENT 519 Mr. MOORHEAD. One of the witnesses that came before this subcom- Mr. BLACKMON. I believe I answered the gentleman here awhile ago If he be local and understands the local situation, I think he has got to be versatile enough to work with the local people. As far as the Bureau of the Budget is concerned, as I understand, these programs are already under law and they are merely administernang what we already have in existence, I can't see why the Bureau of the Budget should enter into it at this particular point. ities Mr. MOORHEAD. I am not urging, I am just searching for ideas. Some of the programs come out of HEW, the Department of Agriculture, OEO, or other departments, and there is only one agency in Government that has control over all of the agencies. Mr. BLACKMON. Wherever he comes from, I think he has got to be responsible. Mr. MOORHEAD. I quite agree with you. The individual, if he is a good one, can do it no matter where he comes from. If he is no good, it does not matter where he comes from. I agree with you. Thank you, Mr. Chairman. Mr. BARRETT. Mr. Stephens? Mr. STEPHENS. To further follow up on the question about the coordinator, it seems to me that if there is a coordinator, that it would be more sensible for the State of Texas or the State of Georgia to employ somebody that would be working for the State of Texas or Georgia, instead of for the United States, as a coordinator. And then he would feel, and I know, in Georgia, we would feel that they had somebody that was on their side all the time and was looking out for their interests. It would save some money for the United States not to have the coordinators, and I think it might be better to put him on the State payroll. What do you think of that? Mr. BLACKMON. We are fortunate in the great State of Texas that our Governor had the foresight, that he has established an office here in Washington which he has staffed to try to coordinate the activities of the Federal Government with our State and I think he should be commended for trying to do this. However, when you get to a State level, you find that there could be a conflict-the coordinator is responsible, really, to make the program operate on a local basis, and work with the local citizens. I can see that if you have many programs going in a State-again it gets back to the local government and working closely with the local people that he could do probably a better job. If you have one State man, he may have a conflict between the communities. Mr. STEPHENS. What I had in mind would be, as in the watershed programs. Those watershed programs are community projects. They go through the State committee and work out pretty good, finally coming to the Federal representatives for advice and counsel. The STANFORD NBRARIES final steps are concluded by the Soil Conservation Service in Washington. It looks like that would be a possible way of working with these types of projects. Mr. BLACKMON. I am not quite as familiar with your State. Do you have one FHA office in Atlanta covering the entire State? Mr. STEPHENS. Yes. Mr. BLACKMON. You have more than one office? Mr. STEPHENS. We have a regional office. Georgians come there more frequently than is possible in some of the other States of the region. Mr. BLACKMON. Where you have one office, this could be a workable thing. We have five in our particular State and since I operate under several offices, I get several different versions of what the little operating book says, very frankly, and it could lead to some confusion. Mr. STEPHENS. I know what you mean. I just read in the paper this morning where in spite of the fact that we passed a bank merger bill, it is not being read by the Justice Department like I read it. The other thing I wanted to inquire of you does not have a direct bearing on this testimony, but before long we are going to try to get an appropriation for the rent supplement program. It is my understanding that the National Home Builders Association has endorsed this program and is still in favor of the rent supplement being initiated. Is that correct? Mr. BLACKMON. That is correct. We came before you last year and endorsed rent supplements as a free enterprise way to house lowincome families of this country. We think it has many aspects that are an improvement over public housing. I recall that some citizens living in public housing in certain areas, once they reach a particular income bracket, are required to move. Then they move out of public housing and move into-they actually wind up moving into less desirable housing, and it costs more money. We contend that in this rent subsidy program, a man can live there and once he obtains sufficient amount of money to pay his way, he can still continue to live there, and over all the time he is reaching the point where he would be paying his own way, three-fourths of the money goes to his family. It further can provide, under the rent supplement program, homeownership. As the man not only attains the point to where he does not need rent subsidy, where he obtains additional money by which he can make a downpayment or begin to pay a market rate, then he can, if properly conceived, become a homeowner and this is very desirable, as Mrs. Sullivan indicated. We also believe that economics will result in compromises to the public housing program. It will cost the taxpayers less, from a rent supplement standpoint. It will be economically desirable when it comes to the amount of money it takes to house these people. Therefore, it is desirable from that point of view as well. Mr. BARRETT. Will the gentleman yield? Mr. Blackmon, I just want to say that the gentleman from Georgia has been a great advocate of rent supplements and has done a splendid job on that legislation. Mr. BLACKMON. He is to be commended and we in the private sector of our business feel that this is a real step in the right direction of housing these low-income families and we welcome the opportunity to do something about it. We hope that Congress will take action 2 Is th itizes in Wad -king viti State. D te! me ther es of the workabl te under we open on. De pape merge ad it. a dire Y to S unde on this appropriation and make it available so that the program can You all authorized the legislation last year, but until now we do Mr. STEPHENS. May I ask you if you would agree with the position that I have taken that we already have in the public housing a rent supplement? Mr. BLACKMON. Yes, sir. You have a Federal contribution by the local housing authorities of approximately 5 percent of whatever the cost of the unit is on an annual contribution basis and you all make appropriations every year to fund this. So there is a subsidy, or whatever you want to call it, to the local housing authority and, instead of having Federal ownership, we are having private ownership. We favor private ownership over public ownership. Mr. STEPHENS. It is not also true that besides the Federal contribution that you are talking about, the people who live in public housing cannot get the same accommodations for the same low rent in the private sector in general? Mr. BLACKMON. Well, because of the subsidy they get-and they get it in two or three ways-not only the annual contribution, but also they get it in low interest which is a form of subsidy, if you want to recognize it as such, on tax-free bonds, that may bring 25% or 3 percent or 34. Second, public housing projects make a payment in lieu of your regular taxation. I would like, gentlemen, to see this committee go on record as favoring the local community, that local communities use the below-market rate and rent-supplement program and recommend to the cities that these programs be given the same kind of tax treatment as public housing. If there is a decrease in taxes, let's let the local cities be rewarded by making this decrease eligible as part of their contribution to participation in the urban renewal program. Do I make myself clear? In one particular community of this country, in which we are building a below-market-rate project for a Negro Mason group that has a tremendous spirit of trying to help their people, the taxing authority indicated that their taxes would be as much on 140 units as it is on 854 units of public housing and this is not right. How can you hope to accomplish the housing of these people if they write the taxes up real high or discriminate against projects that are trying to house these low-income people? So this is another form of subsidy that I see-you have at least three when it comes to public housing, and in some way we should try to level this off to where, when we are housing low-income people, we do it on an equal basis. Then we can judge realistically what our accomplishments really are. Mr. STEPHENS. May I have 1 more minute? I am awfully interested in the testimony you gave on this subject. Last year when I advocated it we had a resolution from some of the real estate people at home, and it was said that this was the most socialistic piece of legislation-this rent subsidy thing that ever came down the spout. It just astounded me that it should come in that way. I did not like to be called a Socialist in the first place. It was a matter of misunderstanding and ignorance on the part of the real estate people to take a congressional newsletter that came out of STANFORD Washington that called us all Socialists who voted for the rent supple ment. Mr. BLACKMON. Congressman, I do know the statement that you made, and I know how strongly you feel about your position. You also know that the people who made that statement have since changed their position and are supporting this legislation. They have stated so publicly and I think that maybe they have seen the merits in the private enterprise approach of it. But they are not homebuilders. You said real estate people and that is the group I referred to that made the public statements here in Washington. They are now supporting the rent-supplement program. Mr. STEPHENS. I had a telegram from the Augusta Home Builders Association endorsing the rent supplement. Thank you. Mr. BARRETT. Mr. Gonzalez ? Mr. GONZALEZ. Thank you, Mr. Chairman, and thank you, Mr. Blackmon. I appreciate very much your very valuable contribution to the consideration of this proposed bill. I was going to try to comfort in some small way my colleague from Georgia. As you know, I have been called more than just a Socialist. I have been called a beatnik. But in any event, I am intensely interested in your statement, page 5 of your statement, on the economic picture in which you state that working with the Government programs, they have no choice but to either absorb the cost of points or stop using these programs. This has been a source of concern to me and others, particularly in light of the testimony that was recently given to the subcommittee by Mr. Brownstein who recently was a Commissioner. I asked him a question and he admitted that FHA today represents about-or a little less than 16 percent of the mortages and I asked him why. He said. at one time it had been as high as 49 or perhaps even 50 percent. Especially in view of the fact that FHA has been intended by Congress to provide the American family a chance to buy a home, but since this great program has degenerated to the point where the average family wishing to purchase a home has to go to the conventional mortgage market which apparently is more attractive than FHA-can you tell me if there is anything that can be done to counter or arrest this trend and restore to this program its original objectives? Mr. BLACKMON. We have a real problem, Congressman Gonzalez, today with the FHA program, especially from my part of the country and in California and the Southeast, because of the money market and the way FHA arrives at the cost of money. In one particular office, and I won't single out the office, the one that I am familiar with, they allow 13 percent for overhead and profit on a mortgage. Let's say it is a $15,000 house they allow this 13 percent to be placed at around $10,000 or two-thirds of the sales price of the unit, so this gives you a total of some $1,300 for overhead and profit. Now, if you have any kind of operation and you are conducting it in a businesslike manner, you would have, say, 4-percent overhead of cost of doing business in your office. Four percent of $15,000 gives you $600 that you have to charge as overhead, so you really only have $700 left out of the $1,300. With the discount picture in our part of the country at 4 percent or more, you can readily see that a discount which the FHA does not allow rent sug nt that ra tion. I ce chang have state erits in t people nts her tprogr Le Buk the fer to be counted as a cost to that house, but must come from the builders' I will be happy to submit to you a memorandum on this. We have I will be happy to get this to the committee. Mr. GONZALEZ. I would be most grateful. You are absolutely cor- NAHB RECOMMENDATIONS FOR INCREASED USE OF FHA MORTGAGE INSURANCE On June 27, 1966, FHA will celebrate its 32d anniversary. As a result of its have property standards, appraisal techniques, borrower credit ratings, and location alt analysis. These pioneering activities have benefited the Nation greatly through The NAHB believes it essential that the Nation's home buyers continue to However, against a national background of continuing strong demand for One principal reason for this decline was a long period of plentiful supply of Now, the irony is that in a sudden very tight money market situation, builders The problem of doing business with the agency and the interest rate matter 1. MORTGAGE MONEY SUPPLY As pointed out above, we are faced with the ironic situation that the FHA loses business in a period of plentiful mortgage money because people will avoid doing business with it; and it loses business in a tight money market because of the gouge of points. A decrease in participation in FHA programs limits the market of builders and, of course, the persons carved out of that market lose an opportunity to own a better home. In addition, the supply of nationally tradable mortgages which helps to even the regional supply of mortgage money, is reduced. The NAHB is of the opinion that some method must be adopted to enable the FHA mortgage to be competitive in all mortgage money market situations. Only two solutions seem feasible at this time: (a) Incorporating discounts in FHA's final mortgage evaluation, or 60-878-66-pt. 1--34 |