SEC. 1112. EARTHQUAKE STUDY

This section would amend section 5 of the Southeast Hurricane Disaster Relief Act of 1965 by extending the date of Secretary of HUD is required to report his findings and recommendations on earthquake insurance from October 31, 1968 to June 30, 1969.

An extension of time for this study would allow the Secretary to present a more complete and conclusive report to the Congress. In conducting studies such as this, it is necessary to collect and analyze great quantities of raw data and the number of qualified professionals available for such work is very limited.

SEC. 1113. TECHNICAL AMENDMENTS

Subsection (a) would amend section 110 (c) of the Housing Act of 1949 to make it clear that urban renewal project funds can be used for "the restoration of acquired properties of historical or architectural value."

Subsection (b) would amend section 110 (d) of the Housing Act of 1949 to make it clear that grant-in-aid credit can be given for expenditures by a public body for the construction of foundations and platforms on air rights sites in urban renewal projects to the same extent that such work could now be done with project funds.

Subsection (c) would amend section 110(e) of the Housing Act of 1949 to make it clear that the restoration of historic properties can be carried out as an urban renewal project cost for those projects approved for three-fourths Federal grant assistance on a limited project cost basis.

Subsection (d) would amend setcion 1101(c)(3) of the National Housing Act to permit amortization of the mortgage term under the medical group practice facilities program to commence after completion of construction of the facility rather than at the time the mortgage is executed.

Subsection (e) would amend section 213 (o) of the National Housing Act to clarify the authority of the Secretary to invest all moneys, not currently needed for the operation of the cooperative management housing insurance fund, in Government bonds or obligations, or in the purchase on the open market of debentures which are the obligations of the fund.

Subsection (f) would amend section 810 (e) of the National Housing Act to permit an individual, who is approved by the Secretary, to be a mortgagor under the FHA section 810 housing program for military personnel or employees or personnel of NASA or AEC research or development installations. (The following material was also received from Secretary Weaver :)

DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT,
Washington, D.C., March 20, 1968.

Hon. JOHN SPARKMAN,

Chairman, Committee on Banking and Currency, U.S. Senate, New Senate Office Building, Washington, D.C.

DEAR MR. CHAIRMAN: In light of current administration proposals, I thought you would be interested in knowing of this activity involving a new turnkey project.

I think you can see that we are already working in new kinds of ways to assist homeownership of low-income families; ways which are responsive to suggestions from the Congress.

Sincerely yours,

ROBERT C. WEAVER, Secretary.

[From the New Orleans Times-Picayune, Jan. 28, 1968]

LOW-INCOME FAMILIES TO BUY HOUSES
(By Frank Schneider)

When the new federally promoted turnkey project gets underway in Gulfport, Miss., it will unveil the most progressive and far-reaching housing program for low-income families in U.S. history.

The Department of Housing and Urban Development sees the project on the gulf coast as one of great national potential for homeownership among lowincome families. What it intends to do is give a whole new look to public housing and boost the socioeconomic potential of its occupants.

Sponsored by the National Council of Negro Women and planned and executed by a Gulfport builder, the project will present 200 single family dwellings all for 91-619-68-pt. 19

sale under the Turnkey program. Officials expect to break ground for the project

soon.

HUD Secretary Robert C. Weaver has said in Washington, D.C., that in this experiment tenants built up equity by doing maintenance work and by increasing rental payments as their incomes rise. Eventually, when the equity reaches a determined amount, the occupant purchases the house under an FHA- or VAbacked mortgage. The housing authority will buy the housing from the private developer upon completion and the authority, in turn, sells the housing to the occupants.

The Gulfport development is like nothing ever done before in the low-income housing field. The builder has designed 200 brick single homes with three-, four-, and five-bedroom plans, all with central heat, and in cul-de-sac street arrangements. Garden plots and a greenbelt will be among prime features in the wooded section north of Gulfport. The area, while secluded, is not isolated and is serv iced with public transportation. There will be no look alikes.

Secretary Weaver calls the Mississippi project the first of its kind in the Nation with a process for developing housing faster and cheaper. It will include the most promising innovations in the 30-year history of public housing, he said. The turnkey program is expected to provide a greater volume of housing than that under the traditional way of public housing, he said.

The Gulfport development will also feature a special day-care center with nursery and kindergarten in the section off Highway No. 49.

These houses have been designed specifically to be sold to their occupants, the most important form of the turnkey program.

Public housing officials are enthusiastic about the program which they say offers a new incentive for low-income families.

Meanwhile New Orleans has several projects being planned, most of which will present the townhouse concept with common wall construction and twolevel housing.

Ronald L. Brignac, deputy executive officer of the Housing Authority of New Orleans, said that of the dozen turnkey projects being planned for New Orleans, two are specifically being created as for sale housing.

There are three turnkey programs available. In these porgrams the local housing authorities and private developers enter into agreements for construetion of public housing units. In one phase the housing authority enters into a contract with an interim managing group. The latter selects tenants, trains them in all of the aspects of homeownership, trains them in the aspects of property maintenance. In another phase, turnkey III, the actual sale from the housing authority to the occupant is concluded.

In turnkey III all occupants enter the program obliged to eventually purchase the property as their equity and payments build up. Called sweat equity, the process actually credits the occupant for his work in the property.

The interim managementship phase is an interesting facet of the whole project wherein professional managers or special groups become a vital part of the project to make it workable for low-income families.

Secretary Weaver has stated that it is the hope of HUD that managers will be willing to give attention to the economic and social advancement of residents and greater possibilities to the tenants themselves.

HOUSING AND URBAN DEVELOPMENT LEGISLATION

OF 1968

MONDAY, MARCH 11, 1968

U.S. SENATE,

COMMITTEE ON BANKING AND CURRENCY,

SUBCOMMITTEE ON HOUSING AND URBAN AFFAIRS,

Washington, D.C. The subcommittee met, pursuant to recess, at 9:30 a.m., in room 3302, New Senate Office Building, Senator William Proxmire, presiding.

Present: Senators Proxmire and Percy.
Also present: Senator Brooke.

Senator PROXMIRE. The Subcommittee on Housing and Urban Affairs of the Senate Banking and Currency Committee will resume its hearing.

Our first witness this morning is Mr. Dwight D. Townsend, vice president and director of public affairs of the Cooperative League of the U.S.A.

Mr. Townsend, we are very happy to have you.

STATEMENT OF DWIGHT D. TOWNSEND, VICE PRESIDENT AND DIRECTOR OF PUBLIC AFFAIRS, COOPERATIVE LEAGUE OF THE U.S.A.

Mr. TOWNSEND. Thank you, Senator.

Mr. Chairman, the Cooperative League is always pleased to appear before this committee. In view of the new emphasis on the importance of homeownership for low- and modern-income families, we are particularly pleased to testify this year concerning the importance of cooperative and other homeownership for such families.

At the league's biennial congress last year a resolution was adopted in which the league supports necessary measures for:

Getting cooperative homeownership to more middle and low income people, utilizing among other things the insurance and finance programs of the Federal government and others. Cooperatives should be encouraged to continue on an ever-increasing scale the expansion of their housing programs in view of the growing and urgent need for such housing at prices which people can afford. As you know, the league represents not only housing cooperatives, but also cooperatives dealing with farm supplies and marketing, credit unions, group health plans, food distribution, insurance, and rural electrification. In all, these cooperatives serve more than 18 million families. I would like to insert in the record the full text of our resolutions.

Senator PROXMIRE. Without objection. (The document referred to follows:)

RESOLUTION ADOPTED AT BIENNIAL CONGRESS OF THE COOPERATIVE League of the U.S.A. HELD IN OCTOBER 1967

RESOLUTION NO. 4-COOPERATIVE HOUSING

Shelter is one of man's basic necessities.

Despite the prosperity of our times, housing conditions in many urban and rural areas are not adequate to meet the needs of people.

Our present rate of building is less than 1.5 million units per year, less than half of what is necessary to meet even present needs, let alone to meet the expected population increase of 55 million persons in the next twenty years.

The decline in home building requires that we reemphasize and reorient our endeavors in getting cooperative home ownership to more middle and low income people, utilizing among other things the insurance and finance programs of the Federal government and others. Cooperatives should be encouraged to continue on an ever-increasing scale the expansion of their housing programs in view of growing and urgent need for such housing at prices which people can afford.

We urge a dynamic, comprehensive and coordinated public, private and cooperative program to meet our present and future needs. The initial emphasis of such a program should be directed towards the elimination of the ten and a half million homes now below standard, replacing them with housing within the price range the families now occupying these dwellings can afford.

We urge government to further the participation of private and cooperative groups to build more low and moderate cost housing by supplying low cost, low term mortgage financing.

Mr. TOWNSEND. We commend this committee for its outstanding leadership in initiating and reporting S. 2700 last year. As indicated in the President's message, the program of interest subsidies recommended by the President follows the broad outlines which were set forth in S. 2700.

We support the housing and urban development bill of 1968 and the insurance development bill which were introduced by the chairman as S. 3029 and S. 3028, subject to amendments which I will describe. We strongly recommend the interest subsidy proposed in S. 3029 which would achieve an effective interest rate ranging from 1 percent upward, depending upon the income of the family. This lower interest rate is necessary to provide cooperative and other homeownership and rental housing for lower income families who can only afford a 1percent interest rate.

We also recommend the need for urban programs to be extended for low- and moderate-income families in rural areas. This is done in S. 3029 which provides that the proposed interest subsidy will operate in rural areas.

Past experience with cooperative housing for low- and moderateincome families demonstrates the wisdom of the proposed legislation to launch a comprehensive program for cooperative and other homeownership by low- and moderate-income families.

Let me summarize that experience:

1. Low- and moderate-income families have regularly met their mortgage payments when they had a chance to achieve ownership. Thus, in the cooperative program for moderate-income families under section 221 (d) (3), there is not a single default in any cooperative mort

gage.

2. Cooperatives for low- and moderate-income families have produced more attractive and stable communities, with pride and self

respect evident among the resident owners. This reflects the fact that the people have a stake in their own homes.

3. Cooperative and other homeownership offers a real hope to people who are without hope in ghetto and slum areas. It provides them an incentive to conserve and care for their property. During last summer's riots in Detroit, this was evident from the fact that two moderateincome cooperative projects in the riot area were not damaged or molested, despite the damage and destruction of surrounding properties.

In my testimony I wish to describe briefly some of the recommendations which directly relate to cooperatives and protection of the consumer's interest, namely:

1. We oppose the proposal contained in the new section 236-which would be added to the law by section 201 of S. 3029-to increase from 20 percent to 25 percent the percentage of income which a family in the moderate or lower income group must pay for total housing expensesincluding mortgage payments, real estate taxes, utilities, heat, and the estimated cost of maintenance and repair.

The proposed interest subsidy would pay only the excess of total housing expense above the amount which represents 25 percent of family income.

During 1966, the statistics show that a median of 19.6 percent of income was spent for total housing expense under the FHA 203 program. We recommend that the present 20-percent requirement under section 221 (d) (3) be retained in the interest subsidy programs under the new proposed section 236.

2. We also oppose the requirement that families spend 20 percent of their income for mortgage payments only-including insurance and real estate taxes-under the homeownership program for low- and moderate-income families under the new proposed section 235. Statistics show that a median of 15.5 percent of income was spent for such mortgage payments, as distinguished from total housing expense, under the FHA 203 program. We recommend a requirement that 15 percent of income be spent for mortgage payments under the new program for homeownership by low- and moderate-income families.

3. The foregoing amendments are necessary to assure that low- and moderate-income families will have enough income remaining to pay for food, clothing, and other requirements for a decent standard of living.

4. We recommend that FNMA special assistance funds should be made available and used for the following purposes:

(a) To purchase FHA-insured mortagages or cash flow debentures under the new programs to be added to the National Housing Act as sections 235, 236, and 237 and the new communities title.

(b) To continue purchases of mortgages under the below market interest rate programs of section 221(d) (3) and 221(b) at any time that alternative financing with interest subsidies is not available under the new proposed section 236.

(c) To purchase FHA-insured mortgages on other projects which accomplish desirable social objectives or otherwise promote the public interest, including the cooperative housing program under section 213, nonprofit housing for elderly, and housing in urban renewal areas.