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done, where obviously money is no object, comes out pretty bad esthetically. I am not sure that you can build cheaply and still have esthetically attractive and desirable building.

That leads me to a question about a comment that Mr. Biederman made and a comment that Mr. Finger did not make; an omission which worries me a little.

Mr. Biederman, you said that we need the means to discover and uncover what is acceptable to a mass market in order to justify mass production; in other words, what the tastes of the public are with reference to the kind of housing they would like to have. I notice in the seven points mentioned in Operation Breakthrough nothing about any effort to assess the market and discover what the people are interested in. Do we know what role, habit, or style preferences of the renter or buyer play in the housing field, either regionally or nationwide? I am under the impression, perhaps incorrectly, that one of the reasons that the Lustron Home experiment failed was because people decided they did not want metal homes, or homes made of metal parts, and that, therefore, it never really got off the ground in terms of attracting a mass market.

What study has been made here by HUD, or is anticipated by HUD on the one hand and by Levitt on the other, in planning the marketability of their homes; that is, to determine what the public really is interested in? I think this is significant if we are going into a viable industrialized production, and certainly, if we are going into what I gather is the implication of some of the other suggestions here, a federalizing of the market to some extent. I will go into that a little further, later.

Mr. FINGER. Congressman Brown, one of the essential ingredients of Operation Breakthrough is the construction of prototypes of the various concepts that we select from this competition, from the proposals submitted to us. We expect that we will pick somewhere between 10 and 20 contractors, each of whom will have, I am sure, a variety of designs. We propose to build these different concepts on eight regional prototype sites and then to invite sponsor organizations, private, nonprofit, public, as well as limited dividend sponsor organizations, consumer groups, into those sites to examine these various concepts and select those that they want to have produced in volume in their areas to satisfy their needs.

In addition, it does appear that many of the bigger builders have a very good feel for what the market does want. They have gone through many of the market analyses. So we are basing a good bit of our thrust on their understanding of this area.

In addition, another factor in determining where the prototype sites should be is the need to judge market variations throughout the country. We want the prototype sites in locations where there is a large market; where there are variations in climate and weather conditions and so on, but also where there is a variation in market taste. I am, in fact, setting up a way of judging this and I am frankly going to be relying quite heavily on the experience that FHA already has in market assurance or in assurance of its loan commitments throughout the country on the kind of housing units that appear to be in greatest demand. They have a history of demand, of foreclosures, and so on, that

I think should be of great help in this area. Therefore, I am proposing to use a good bit of that data.

So there are the three approaches that we are going to rely on. The prototype construction and the market evaluation by groups that come through to examine these units and their use of land; the proposals that have been made by industry which should have had experience with market assessment; and the third approach is the experience that may have been gained through the FHA files and the experience we have had in FHA.

Mr. BIEDERMAN. There is one thing I would like to add that I think is very, very important as far as user needs of low-cost housing. Our research has indicated that unless you involve the community, unless you have community participation in the project, regardless of what you provide, it will not be accepted to the same degree as that project which involved the community in the first place; which gave the community the ability to take pride in what was being built because they had a pride in seeing it built. This seems to be more particularly true with low-income groups than with middle-income and highincome groups.

Too often, we say that the low-income group wants this and wants that; and what do they need big closets for, they have not very many clothes; and we will put 20-story highrise buildings and give them all a nice apartment and therefore, they should like it, without ever consulting what they want. The experiences in Boston and more recently in New York have indicated very, very strongly that by involving the community where the project will be built, at the very early stages, a tremendous amount of success can be achieved that would not normally be achieved without this community participation. That very definitely is a part of user needs and marketability of product. We do it on a formal basis by having consumer roundtables for our middle-income and high-income housing; where we will ask housewives and homeowners, breadwinners, to come into our offices, sit with us, evaluate our designs in the very early stages, criticize them and actually design with us the product that we will be offering next year and the year after.

Representative BROWN. Does the industry generally, including the homebuilding magazines where you can send in for plans, the prefab builder, Kaiser, and that sort of operation, have an accumulation of information which might be provided to HUD in this area? And do you believe that this information could be beneficial when you get into this further consideration of industrialized housing?

Mr. BIEDERMAN. I would have to say that based on our experience, the sophistication of marketing techniques in the housing industry has not been very good.

Representative BROWN. Is this because it does not have to be very good; because usually the homebuyer, at least in a certain economic level, arranges his own purchase?

Mr. BIEDERMAN. Yes.

Representative BROWN. He buys his own house by what he sees and likes out of what is available, or else he plans his own home and builds it. Is that not essentially the problem?

Mr. BIEDERMAN. That is true. And the average builder will generally build what the fellow down the street is doing and try to sell it for $50 less, without doing any market research of his own.

Representative BROWN. I think it should be made clear to the industry that this point is not overlooked.

I might say with reference to item No. 5 in your statement that I wish your would throw in VA applications. Then let me talk to you about what I would like to see done in the way of combining those two things so as to obviate a lot of red tape which the Federal Government has not expressed any interest in obviating, at least in the last year, because I have been working on it that long.

Mr. FINGER. I might mention, Mr. Brown, that the FHA has now made the determination to accept VA appraisals as a basis for its own, which is, I think, probably one step in the direction that you are thinking of, but may not cover the problem.

Representative BROWN. That is what I would call a real breakthrough. It should have been done about 20 years ago.

Mr. FINGER. I think it is somewhat of an indication of the problems that exist in this business.

Representative BROWN. No, the problems are not only in private industry. A lot of them are in the Government.

Mr. FINGER. Yes.

Representative BROWN. Regarding item 3, would you explain what it means to pool or aggregate the market for housing, including both the demand for housing and the available land for such housing? I do not know what you are saying.

Mr. FINGER. As it is done now, each local housing authority or sponsor goes out to make a contract on purchase of a housing type. If there is a benefit to the high-volume production, and we believe that there will be in both cost and quality and so on, then if a sponsor is to try to get the benefits of high volume, he would then be able to order only one type of housing.

However, if several sponsors get together and order, or several cities get together and order, or a State gets together and determines that it will order in volume, it can order a wide variety of housing types and each unit of that pooled order can then get the full variety. If it is a city, each city can get the full variety within the area in which it needs housing.

Now, it is not enough simply to have a need for housing or a demand for housing. You have to have land on which to place that housing. That becomes, as Mr. Biederman indicated, one of the major obstacles that we have, finding land where housing is needed and finding it at a cost that is reasonable, that does not drive the house out of market range. So we need both the land and available land identified in order to place orders.

But in order to get the real benefits of volume production, you have to have a continuing high-level ordering process.

Representative BROWN. Is it your suggestion that this all be done by the Government, or that it be done by private industry on a

Mr. FINGER. I think there are several approaches to this. One is that the project developers themselves and sponsors, we believe, should work together to try to place their orders together and to identify the land that they have together, to put a hold on it so that it is available for housing. We are also asking local authorities and the State and local authorities to assist in this process, to encourage it, to provide what staff assistance is appropriate, to coordinate it and try

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to order as a total market. We will provide whatever assistance we can, including providing grants for additional staff support to take care of this as part of the comprehensive planning program that we have. So we are trying to provide a mechanism of pooling these orders so that industry does have an incentive to try to pull together its total capability and provide the investment in facilities and plant in order to be able to change the approaches which we now need to provide for the volume needs we have over the next several decades.

Representative BROWN. One of the things you have touched on is the jumble of zoning restrictions. How do you intend to attack the problems? Would you suggest requiring federalizing of the zoning regulations around the country?

Mr. FINGER. I do not think we can do that.

Representative BROWN. What is the approach? It that not the proposal that Mr. Biederman made?

Mr. BIEDERMAN. In the same sense as the proposal made relative to building codes. That is to establish national standards of environment by a national institute and these standards would be made available to State and municipalities. The standard should be geared and developed by experts within the States and within the municipalities, not handed down from Washington.

Representative BROWN. In other words, are you suggesting that if a community is to get a Federal grant for certain community purposes, it must provide within that community zoning appropriate to meet the housing needs of the community; that is, zoning where housing can be put in at a reasonable price?

Mr. BIEDERMAN. Yes.

Representative BROWN. Let me go back and ask a question about your testimony, Mr. Finger. You talk about the fact that industrialized housing was pioneered in France and yet that the rate of use of industrialized housing is still quite low by comparison with some other communities. Do you have any suggestion or some observation, you or Mr. Biederman, on your experience?

Mr. FINGER. My impression from what I have heard of it is that the availability of the industrialized housing concept did put a competitive pressure on the existing industry to try to improve the methods they apply. It did, therefore, have an effect in developing some greater competition than would otherwise have been the case. It did force some improvement.

Representative BROWN. Can you correlate that with the relative freedom of the society, and are you suggesting that in a freer society the implementation of industrialized housing and the competition of industrialized housing will drive down the costs of custom housing?

Mr. FINGER. I think it will have an effect on the traditional methods of building, so there will be improved management, improved scheduling methods, that will help in those areas as well. Yes, I am saying that I think there will be a beneficial effect result.

Representative BROWN. So that should we get the result of unesthetic industrialized housing, at least we will encourage the possibility of more esthetically appealing custom housing, will we not?

Mr. FINGER. Yes. I am very confident that we will not get unesthetic industrialized housing and should really work to assure that we do not.

Representative BROWN. Hearing what the gentleman from Illinois said about public housing, I am not as confident as you are.

Mr. FINGER. I think this will be largely privately financed, so maybe we can help in that case.

Mr. BIEDERMAN. I would like to stress again that we should not necessarily associate monotony or bad design with industrialized housing. We have put up an awful lot of public housing in this country that was not industrialized that was monotonous and ugly. There is no correlation necessarily between industrialized housing and unattractiveness.

Mr. FINGER. In fact, Congressman Brown, one of the points I was making here was that we can go through significant areas of our country where there are major housing developments, conventionally built, where there is essentially no variation from house to house as we go down the street. You really almost can't tell which is a two bedroom, which is a three or four, the porch line, the lines, everything is the same. They go one step further in lining them up along the street so there is also no variation in the way they use the land. I would say that is sort of monotonous and it is not industrialized. Representative BROWN. Maybe it is just an inborn bias. I have seen much monotonous private housing, present company excluded, of course. But I have also seen much terribly monotonous public housing, and it seems that when the dead hand of Government takes on esthetic design, again even when money is no object, buildings are not always as attractive as they might be.

Let me move on to another point, and not belabor esthetics. Let us hope your assurance is correct and certainly, every effort ought to be made to assure that it is.

In your testimony, you say "In Europe as in the United States building industry in general, the homebuilding industry in particular, has borne the brunt of recessions. This has caused cautious investment in capital-intensive equipment and plants, and has led to the alternative course of rationalizing traditional construction, preserving the existing industry structure while making use of cost and time-saving techniques."

If we go into industrialized housing, what do you think the economic impact of recession might be on industrialized housing as opposed to the economic impact of a recession on the housing industry as it is now, where smaller units can drift in and out of it sort of at will?

I think that is a fundamental question and I wish we had more time. I am sorry to bring it up at the last part of the session this morning. But it is a significant concern, I would think.

Mr. FINGER. My feeling is that there is less of a chance of getting a recession, that there is a potentially significant

Representative BROWN. Are you talking about a recession in the building industry?

Mr. FINGER. NO; I am thinking more broadly now, really. I am really saying that there is an effect on our economy of the fact that today, we cannot provide for our housing needs and, as a result, the shelter component of our cost-of-living index rises more rapidly than any other component in our cost-of-living index. Over the past year, it rose about 10 or 11 percent-higher than any other element. Part of the reason for that, we believe, is that there is such a large deficit in housing today.

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