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Mr. GREgg. Well, actually, the rents have been increased 16% percent. We have talked to the FHA, to make a temporary moratorium on the increase in the rents. Mr. Roberts, the sponsor of the project, has not increased the rents where there would be personal hardships. Since that time, we had the matter thoroughly investigated by the Department and all the facts are in the Secretary's Office and they are under consideration right now, sir. Mr. BATEs. All the facts have been in my office for several months, The point I am interested in is getting a decision on the thing. If this is going to be something that is going to develop throughout the entire country, as you indicate now in California, what are we going to do for these enlisted personnel and what are we going to do about the responsibility of the Government to keep these occupied? ow, if we didn't have that responsibility, that is one thing. But we are not going to get out of this just by letting the thing continue and having enlisted men pay the bill. I just don’t think that is right. The CHAIRMAN. All right. Let's get this for the record. Mr. BATEs. Now, I want to find out. Now, you got this new one here. Why are you acquiring the new one, this one here at Indianhead 2 What is that case? Mr. LANKFORD. Mr. Chairman, if the gentleman will yield, I think, I can tell him something about that, since it is in my district, the item we are discussing. Indianhead was certified and built in 1952 and 1953, if I recall, and the best figure I have is that it has never been occupied over some 50 percent since it was built. The CHAIRMAN. Fifty percent? Mr. LANKFORD. Yes, sir. The CHAIRMAN. Occupied? • * Mr. LANKFORD. That is about all. The CHAIRMAN. Then, why should we acquire it? Mr. LANKFORD. Well The CHAIRMAN. Oh, that is right. We guaranteed it. Mr. LANKFORD. We have a moral obligation. The CHAIRMAN. That is right. Mr. LANKFORD. If nothing else. The CHAIRMAN. That is right. We guaranteed the full rental. Mr. BRAY. Mr. Chairman, legally, in regard to Indianhead or any Wherry housing project that goes sour, so to speak, if they do not keep up their payments to the Government, the FHA then files Suit The CHAIRMAN. That is right. Mr. BRAY. In the appropriate court and forecloses, like any other foreclosure, and then it appoints a receiver and ultimately sells it. That is what they are doing at the present time at Crane. Nobody apparently wants to build there. But somebody in the Government did. It is only about 30 to 50 percent occupied. It has been foreclosed and will be sold within the next few days. And that would be the alternative here, if the Navy didn't take over. There, they just said, “Turn it over to the FHA,” and the FHA did take over and foreclose. Mr. LANKFORD. In this case, the Navy certified there was a need. Mr. BRAY. Oh, they certified to it

Mr. LANKFORD. They got down here, community support of 846 units and the town of Indianhead only has 500 people in it on election day.

The CHAIRMAN. Of course, we are liable to the builder for the full occupancy of the premises, are we not?

Mr. BRAY. No.
Admiral AILES. We are under a moral obligation to him; yes, sir.
The CHAIRMAN. Do we pay for it?
Admiral AILES. No, sir.
Mr. LANKFORD. No, sir.

Mr. Bray. There is no obligation, except the moral obligation, to insist in putting them in there. Then, if it goes sour, they can bail them out or they can let the FHA foreclose and sell it on the market. The FHA takes the loss, and not the Navy.

Mr. LANKFORD. But, Mr. Bray-if you will yield there for a minute?

There is a very strong moral obligation, because the Navy asked for proposals on this, certifying a need. Mr. BRAY. They did in every one of them.

Mr. LANKFORD. It was not a case of the builder coming in and saying “Let me build Wherry housing here."

The Navy went out and asked the builders to come in and build the Wherry.

Mr. Bray. If I understand correctly, they had to do that in every Wherry case.

The "CHAIRMAN. Now, let's make some progress, now.

Mr. BATES. Let me find out a little bit more about Squantum. The rents have gone up 1623 percent?

Mr. GREGG. They have, sir.
Mr. BATES. On the average?
Mr. GREGG. Yes, sir.
Mr. BATEs. That is the first increment, apparently.
Mr. GREGG. Yes, sir.

Mr. BATEs. So the estimate is it will go up 25 or 30 percent. That was the estimate.

Mr. GREGG. Yes, sir.

Mr. BATEs. Now, whether or not the local community should have put taxes on it is their business. I don't think they should. That is the way I look at it.

Admiral AILES. We don't think so, either.

Mr. BATES. I think they ought to be grateful for the amount of military work that we provide for the local people. That is my personal opinion on the matter. But nevertheless under the court decision they can do it, and have done it.

Now, are the people staying in Squantum Gardens?

Mr. Gregg. Some are moving out. We notice a lot of fleet people moving in, sir.

Mr. Bates. That are moving in?
Mr. GREGG. Yes, sir.

That 1643-percent increase: the project is still a fair rental value for the type of housing it does furnish. Anything above that--I think the housing ashore would be more competitive.

Mr. BATES. Do you think the way it is
The CHAIRMAN. Now the-

Mr. BATES. Mr. Chairman, let me finish.

You think the way it is right now, the values are fair compared with other units?

Mr. GREGG. On the 1642-percent increase, yes, sir.

Mr. BaTEs. To compare with rent they are paying in other places throughout the country?

Mr. Gregg. In that particular area, sir, metropolitan Boston area, in that area.

Mr. BATEs. Of course, in downtown Boston, things are a little bit expensive. But is it much out of line with, say, rental allowances?

Mr. LANKFORD. Salem.
Mr. GREGG. No, it is within a rental allowance, sir, still.
Mr. BATES. It is within the rental allowance, now?
Mr. GREGG. On the 1623, within the majority or normal case.

The CHAIRMAN. The question before the committee is in regard to Indianhead.

Admiral AILES. Yes, sir.

The CHAIRMAN. Hasn't the subcommittee had some consideration of that, as to permissive and mandatory acquisition ?

Mandatory is necessary because you built the Capehart houses. Now, here it is a Wherry project that is not necessary to buy to meet the requirement of Capehart houses.

Now, you are asking the committee to buy them. You started down in Norfolk and bought 20 in one place and 20 at another. And that was a permissive acquisition. No Capehart houses were being built there to force you to get rid of the Wherry houses.

Now, you haven't any limitation as to the expenditure you are going to make on these houses at Indianhead. How much are you going to spend per unit?

Admiral Ailes. I think we have an estimate of the price, sir.
Mr. GREGG. Not to exceed $3,000 on the average.
The CHAIRMAN. Of course, I know that.
Mr. RIVERS. We know that.
The CHAIRMAN. That is the maximum we wrote.
Mr. HARDY. That is a silly answer.

The CHAIRMAN. I think that is wrong, because you are going to spend $3,000 on each unit. That is what you are going to do. And you haven't made any personal inspection to see how much each unit would need.

What you want to spend is exactly what it needs to put it in good condition and not on the basis of $3,000 for any one unit.

Mr. GREGG. I have an explanation, sir.
The CHAIRMAN. I think you need one.

Mr. GREGG. From the 385 units we propose to reduce them down to 290 units.

No. 1, we built a type of housing that is not normal in the area. We have 11 and 12 families off a common hallway. That has been the major objection since the houses were constructed. They are relatively small.

Secretary Bantz went down there and Secretary Bryant, and they agreed we have a problem on the housing. It exists. We can't do anything about it. We must solve it.

We do have on the station some World War I housing, temporary, and some World War II housing that is very temporary, and it has high maintenance cost. So how do we solve the situation?

We must start with what we have there. And we have had an expert, one of our architects from the Bureau of Yards and Docks, go down there to see if we could meet the family pattern existing on the station by altering the existing Wherry housing and what could be done.

The CHAIRMAN. All right. How many units are you proposing to acquire, Wherry units? Mr. GREGG. 385 units. The CHAIRMAN. How many? Mr. GREGG. 385 units, sir. The CHAIRMAN. 385.

And after you get through remodeling them, you are going to have 200 and how many!

Mr. GREGG. 290, sir.
The CHAIRMAN. 209.
Mr. RIVERS. 290.
Mr. KELLEHER. 290.

The CHAIRMAN. Let me get through and everybody will have a chance.

How much money are you going to spend on your 209? What is going to be the total cost?

Mr. GREGG. Approximately $2,700, $2,800, sir.
Mr. RIVERS. 290.
Mr.KILDAY. 290.
The CHAIRMAN. 290.
And they are going to be how much!

GREGG. $2,700 to $2,800, approximately.
The CHAIRMAN. $27 to $2,800 per unit?
Mr. GREGG. Yes, sir.
The CHAIRMAN. Now, in dollars and cents, how much does that
come to! Figure it out.

Mr. RIVERS. About $800,000.
The CHAIRMAN. $800,000.
Mr. KELLEHER. $880,000, Mr. Chairman.

The CHAIRMAN. Have you figured out how much these 385 units are going to cost you?

Mr. GREGG. They will be acquired on the basis of a fair market appraisal, sir.

The CHAIRMAN. How much do we have to pay the sponsor? How much equity he has in that? You got it all figured out, haven't you?

Mr. GREGG. On the basis of unvalidated costs, sir, his equity is in the neighborhood of $65,000.

The CHAIRMAN. Then we would have to assume the obligation and pay the sponsor some $65,000.

Mr. Gregg. No, sir. If the property is appraised on a fair market value, we may not

pay him anywheres near that, sir. The CHAIRMAN. Well, at the outset, from what you have just said, it wouldn't be over $65,000 to the sponsor.

Mr. KELLEHER. That is the formula?
Mr. GREGG. That is-

The CHAIRMAN. How much did the sponsor make in the first instance?

Mr. GREGG. Actually, our records indicate, sir, that the sponsor has money in the project.

Mr. GREGG. He has money in the project, sir.
The CHAIRMAN. He has what?
Mr. GREGG. He has money in the project, sir.
Mr. KELLEHER. He put in some of his own, which is rare.

Mr. LANKFORD. Mr. Chairman, if I may add here, sir: the sponsor has lost money on this.

Mr. RIVERS. Mr. Chairman, let me say this about these projects.

To start with, this was not a good risk. The FHA would not have taken this project on a business proposition. The Navy went in there and urged them—and they can overrule the FHA under the lawand built these houses of a questionable design.

Now, they are going to cut them down 100 units and rehabilitate them to the extent of eight-hundred-thousand-odd dollars.

We are faced with a moral obligation here; if there is one. This is not a business proposition. So, we are just faced with it.

Now, the good thing the Yard and Docks has done is go down there with their architect and try to salvage what is good in this project. I think we owe it, to approve this project.

The CHAIRMAN. In view of what Mr. Rivers has said, the amendment is agreed to.

Mr. BRAY. Mr. Chairman-
The CHAIRMAN. Mr. Bray.
Mr. BRAY. I have a question. There are now 385 units?
Mr. GREGG. Yes, sir.
Mr. Bray. And you are cutting it down to how many?
Mr. GREGG. Down to 290, sir, more or less.
Mr. BRAY. 290; almost 100 units.
Mr. GREGG. Yes, sir.
The CHAIRMAN. Without-
Mr. BRAY. Mr. Chairman, it seems to me.

I don't know what could be done. I don't like to see the man who built it lose.

Of course, at Crane he took the loss. It should never have been built at Crane, and it shouldn't have been built here. To me, it isn't possible to eliminate 100 units without the taxpayers in the end paying for it.

I personally couldn't agree, without knowing more about it, to eliminate that number of units. As late as that was built and with that poor planning, the guy that apparently 0. K.'d it and planned it should be the man that pays it. I don't know who he is and how to get hold of him.

I would like to help work out something to take care of this fellow within reason, but I am not going to agree to destroy 100 units of Government housing.

The CHAIRMAN. I suggest we do this: We go ahead and agree to this amendment and then the subcommittee will look into the reconditioning of the 385 and see what is the appropriate thing to do.

Admiral Ailes. That is still our responsibility, to clear that in detail with the subcommittee, sir.

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