project, is being built by totally industrialized techniques. While it was in its early stages, I studied the design drawings at some length. The variety and the excitement they are creating there are wonderful. So it is not one of the prerequisites of industrialized housing that it have this sameness about it.

Senator PERCY. From within the industrial community, how much excitement has been created by HUD's Operation Breakthrough? Do you see a good deal of interest being developed now on the part of American companies? Maybe this is a redundant question, but how many American companies have really responded and reacted favorably to Operation Breakthrough?

Mr. BIEDERMAN. Mr. Finger can answer the question how many. I can tell you that from our standpoint, we have a great deal of interest in it and the companies that we do business with have expressed equal interest.

Mr. FINGER. Senator Percy, we have sent out something over 2,000 requests for proposals. A good number of those were specifically requested by the companies to whom we sent them. I do not expect we are going to get 2,000 proposals. For that matter, I hope we will not get that many. It will be impossible to evaluate them. But we will, I am confident, get a very high, large number of proposals from organizations that do have the capability to do high-volume production housing and development.

But in addition, in Breakthrough, we are also looking for more advanced concepts that may not be ready for application but that need support in order to develop these more advanced ideas so that we have a continual improvement in the housing business, rather than taking only a single-step jump through Operation Breakthrough. We just have to keep a continual improvement going.

We expect in this meeting that we have scheduled Friday with the industrial people who are interested in Breakthrough to have something over a thousand people representing these companies present.

Senator PERCY. Are you going to be looking to Congress for more money than you planned to ask for to make this operation a success? Mr. FINGER. For fiscal year 1970, we think the funds we have requested, both the combination of housing program funds and the research and technology program funds, should take care of our needs for this year. There is no question that as we go on in this program, if it is at all successful, we are going to have to have an increase in funding to take care of the full benefits of it and achieve the results from it.

Senator PERCY. The New York State Legislature has given the New York State Urban Development Corp. the power to go into any locality in the State and build what it deems necessary regardless of local zoning and code restrictions. Have any other States tried to overcome these obstacles to greater industrialized housing provided by local zoning in the same way?

Mr. FINGER. Not quite in the same way. That is a fairly unique authority, but there are other States working in that direction-New Jersey, Pennsylvania, other States are considering moving in that direction. The States now have authority in the area of building codes. We have asked them to take a role in these issues and to work with municipalities as well as counties and the States in order to try to en

courage all of them to take part in our program so they will accept the testing that we do, the evaluation and designs that we develop, regardless of existing code requirements. But that is a very powerful authority that the Urban Development Corp. has in New York. We think it is a very beneficial one and will be very helpful.

Senator PERCY. If it is that beneficial and foresighted would you share that knowledge with other States? Who will bring that knowledge to the attention of other States as to how New York has broken through on this problem and really put some oomph behind a program to break down a restrictive set of codes that exists in municipalities that are the despair of builders and the despair of anyone looking to do the kind of breakthrough operation that you are working on?

Mr. FINGER. Senator Percy, we have brought it to the attention of other States and cities. In a series of meetings that we had early in May, the Urban Development concept was generally described. We just had a meeting last week in which we had representatives of most of the States, some Governors, quite a few mayors and representatives of cities, as well as county government, and we described there the Operation Breakthrough requirement that we break through some of these zoning and building code barriers to effective housing; and there again we described this as one possibility. But it does depend on each community and State determining what its best approach is. We cannot very well specify it as the approach to be followed at this moment. Senator PERCY. Mr. Chairman, I have just a few more questions, but I would rather yield back to you and the other committee members and then come back later.

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Chairman BOLLING. Thank you, Senator.

Mr. Biederman, you made a very minor point in terms of the scope your whole statement that interested me, because it revealed another one of my total ignorances. I was not aware that a mobile home was treated as personal property for tax purposes as opposed to other types of homes. Would you explain to me in more or less general terms, if you know, No. 1, the reasons for that particular treatment, and No. 2, the effect?

Mr. BIEDERMAN. I have not been a history major, so it is kind of hard to tell you how it started. It had something to do, I suppose, with the fact that the mobile home is not attached to a permanent foundation. Most real estate tax laws relate to real taxable property as that which is permanently attached to the land. Since the mobile home is not, it slips around the side and in virtually every State that I know of, is not taxed as real property. The effect has been that the carrying costs of maintaining a mobile home have been reduced and the mobile home industry in general, which is manufacturing a less expensive or less costly product than a permanent house, has been able to capture well over 90 percent of the housing market below $14,000.

Chairman BOLLING. That explains the phenomenon that I have been curious about.

You indicated in your testimony, if I am correct, that when Levitt began, it was building houses for less than $8,000 and that now the average would run around $29,000. Is that a change in the market to which Levitt directs its attention or a change in the cost of housing, or a combination of the two?

Mr. BIEDERMAN. It is primarily because we cannot afford to build a house for less. We think that the mass market is still below $20,000. We cannot produce a house for under $20,000 and stay in busi

ness.

Chairman BOLLING. That is the answer I expected. That leads me to the next point.

It seems to me that so far we have been really discussing middleincome housing, and I do not think we have even gotten to lowermiddle-income housing. We are really talking about middle-income housing largely. I would like to find out what you gentlemen, either or both of you, think about, for example, the Douglas Commission that was mentioned by Senator Percy. This body estimated that onethird of the 60 million housing units in the United States need replacing the present 60 million. It goes on to point out that the group needing new housing has an estimated average income per family of about $5,800 per year.

Is this an insuperable gap? Is this a gap that can be met substantially by the development of industrial techniques, or does it indicate a need for a very large increase if those people are to be housed, if the national policy is to see to it that these people have decent housing; although perhaps a little uniform, at least it would involve an escape from the enormous diversity that one finds often in slums, and one does often find great diversity involved. What are the implications of those two figures-20 million housing units need to be replaced; the people that need new housing most are people with an income of $5,800 or less?

Would either of you care to comment on the problem?

Mr. FINGER. May I comment briefly on one part of that question? There really is no low-cost housing that we can point to. As Mr. Biederman indicated, even a company that operates as efficiently as Levitt, can't produce housing down below $20,000 effectively. There are some areas of the country where that may be possible, but at least where they operate, it is not. As a result, we must think in terms of the subsidies that are available in the Housing Act-the rent supplements and home ownership subsidies-as making housing available to lower- and moderate-income families, not through lowering the basic cost. The ceilings that are contained within even those subsidy provisions indicate that although there is difficulty in some areas living within those ceilings because of the recent rise in cost. Housing becomes available to lower- and moderate-income families through the subsidies contained in our housing acts and the appropriations requests we make.

Chairman BOLLING. Do those particular sets of subsidies that have been developed in a sort of hodge-podge fashion over the last 20 years— the first few years of which I incidentally served in the banking committee and concerned myself a good deal about is there any realistic hope that the subsidies which now exist of all sorts, hidden and real and obvious and so on, can meet the need of the people we are talking about?

Mr. FINGER. It still does not get, Mr. Chairman

Chairman BOLLING. It does not even get close, does it?

Mr. FINGER. It does not get to the very lowest income people. For example, the section 235 homeownership subsidy has within it a re

quirement that the potential homeowner pay 20 percent of his income for the housing. The Government provides an interest subsidy, which could result in the interest paid by the buyer to be as low as 1 percent. That immediately puts a minimum salary level on that potential homeowner. That number varies by the cost of the house and the level of property taxes, so it differs from place to place. But it does put a minimum into the system. It does not, still, get to the lowest income families.

Public housing and rent supplement housing does provide a greater opportunity for lower income families to be housed primarily through rentals. Even here the very lowest income families have difficulty in meeting the needed rents.

Chairman BOLLING. In other words, what that amounts to, and I do not want to give the impression that I am downgrading the enormous importance of the kinds of contributions you have both made in terms of a higher level of income housing, because I think that is critically important, too. But what we are really talking about when we talk about doing something about the people that I suppose you could say need housing and have least ability to get it is something that would aggregate the market quite remarkably, and that is a tremendous Government subsidy.

Mr. BIEDERMAN. Section 235 could, if it were tied into a cost-of-living index and did not have fixed limits, and if it were funded far more extensively than it is now, could begin to meet the kind of needs you are talking about. But there are other aspects of the problem beyond subsidies.

When I said that our average-price house is now selling for about $29,000, that considers the fact that we are selling $50,000 houses, but we are also selling attached row houses that are completely air conditioned, that come with private gardens, that come with community swimming pools, that come with lawn maintenance, snow removal, streets, lighting, very, very comfortable, completely equipped kitchens, laundries, and sell for under $20,000. This is not an advertisement for our product. The reason I bring this up is that these are townhouses and we achieve this because we are putting them on a minimum of eight units to the acre. We would like to build townhouses or attached row houses far more extensively than we do, but we cannot, because we cannot find the land zoned for townhouses or attached rowhouses. Obviously, since land is one of those commodities we cannot reproduce, we cannot manufacture it and the price of land is increasing all the time. This is the single greatest thing that is hitting us as far as the cost of housing is concerned. You compound that by restrictive zoning practices in some communities, as much as one house per 5 acres and the most of housing is maintained at a high level. If we could have PUD zoning, which is "Planned Urban Development," or planned urban residential development zoning, to allow for increased densities so we could get up to 12 townhouses per acre or 20 per acre, or garden apartments, or whatever, we could make a serious dent in the price of housing.

Chairman BOLLING. Would you translate that into what income level could afford that housing?

Mr. BIEDERMAN. The general rule of thumb is that a family can afford a house that is about twice their income.

Chairman BOLLING. That still applies? I know that is the old rule of thumb 20 and 30 years ago. But is it still a good rule of thumb today? Senator PERCY. With present interest costs?

Mr. BIEDERMAN. Nobody can afford housing with present interest costs. It does apply, not with present interest costs.

Mr. FINGER. In effect, our housing act recognizes that. Section 235 calls for the potential homeowner to pay 20 percent of his income, including taxes and insurance, but not maintenance; so in total, it comes, even in that act, to 25 percent of his income for housing.

Mr. BIEDERMAN. The other aspect, if I may, that would have a serious effect on the price of housing is the fact that we are trying to keep the same number of cities we have and just expand them. And everybody wants to be within commuting distance, for some reason, to the center of town. We have the same number of major cities that this country had 60 or 70 years ago, but we have far more people than we had 60 or 70 years ago. It seems to me that we should start thinking about the creation of new cities. There are vast areas of this countryI think somebody once said we could house the entire population of the United States in Texas.

There are vast areas of this country that could, from the standpoint of transportation, of communication, very seriously house new cities, totally new cities.

Chairman BOLLING. Let me assure you that this subcommittee is thinking about that.

Senator Percy, I understand, has to leave and would like to ask a question. You are recognized, Senator Percy.

Senator PERCY. Thank you, Mr. Chairman. I would just like to commend you for your foresight in calling these hearings. I think they are going to be exceedingly valuable. I regret that I was late and have to leave now, but I have six simultaneous hearings today. All the television cameras are down on the other hearing, but I think there would be more profound change in American life and more good done for more people in this country by the proceedings of these 3 days than anything else that has gone on in this building and the building across

the street.

From Mr. Finger's testimony, I think there is also wisdom in your decision to actually take the committee members to see the industrialized housing in other countries, and I deeply regret that I am not able to go. I regret also, that we have not been able to have a breakthrough in our old thinking and get new thinking in this country. I will do everything I can, even though I cannot be with you, to help you implement the concepts and ideas and breakthroughs you bring back.

I think we are very fortunate in having Secretary Finger in this field. He is a creative new thinker himself and has great expertise. Ilinois enjoys working with him and Secretary Romney.

May I ask a question of Levitt? Is this a subsidiary of I.T. & T.? Mr. BIEDERMAN. Yes, it is.

Senator PERCY. Are you a conglomerate?

Mr. BIEDERMAN. Levitt?

Senator PERCY. I.T. & T.

Mr. BIEDERMAN. If I knew what a conglomerate was, I could answer the question. I am not sure I do.

Senator PERCY. I think you do and I think you are a conglomerate and I hope you would never hesitate to admit that you are. I spent