Senator STENNIS. I think each member would be interested in looking over this statement. Do you have something further, Mr. Hill? Mr. HILL. No. I would like to stress the importance of a mandatory acquisition for many reasons, one of which is that it appears quite obvious to us that it would be to the great benefit of the military if they had all of the housing-past, present, and future housingunder complete control, and if we had mandatory legislation it would not be very long before they could have it under complete control. Senator STENNIS. Do all of your people agree on this mandatory legislation? Mr. HILL. At our last membership meeting here, which was held in Washington in February, it was unanimously passed that we should make that request of Congress this year. Senator STENNIS. All right; do you have some language to that effect now? We get down to words, you know. Mr. HILL. Yes. We will supply you with an exact copy from the minutes. I will be happy to supply it. Senator STENNIS. No, I mean for an amendment here. have language on the amendment that you are asking for? have it written out? Do you Do you Mr. HILL. I do not have it written out in that form. I can supply that for you. Senator STENNIS. I wish you would. Mr. HILL. I will be happy to. I want to offer the regrets of Mr. Boyd, our general counsel, for being unable to be here today. His statement is here, however, along with mine, and will be filed for the record. Senator STENNIS. We will put that in the record. (The document referred to follows:) STATEMENT OF ROLAND BOYD, GENERAL COUNSEL, WHERRY HOUSING ASSOCIATION Chairman John Stennis and gentlemen, my name is Roland Boyd. I live in McKinney, Tex., where I am engaged in the private practice of civil law. I am general counsel for the Wherry Housing Association. The Wherry Housing Association is a voluntary, nonprofit organization consisting of the owners of most of the 82,000 units of Wherry housing located at 176 military installations in the United States and its possessions. The association was originally formed as a medium for the exchange of information and ideas to assist in the maintenance and operation of Wherry projects. On the first day of this session I wrote the chairman of this committee requesting that we be given an opportunity to appear before you. We are grateful to you for the opportunity you have given us to bring certain matters to your attention which vitally concern many of our members. I will discuss the following subjects: I. History and background of Wherry housing. II. The military and private enterprise are not compatible in the field of ownership and management of military housing. III. Construction of Capehart houses leaves the Wherry owner no choice, he must get out of the ownership and management of military housing. IV. In 1956 when you in Congress got the facts, you took prompt action. You refused to pass confiscatory legislation and did pass Public Law 1020. V. Congress has determined that it is in the best Government interest that Wherry housing be acquired. VI. There are many sound reasons for acquisition of Wherry. VIII. In spite of penalties which Public Law 1020 places on price of Wherry houses, experience proves that most owners will sell by negotiation rather than go to condemnation. IX. Much strife has developed between the different branches of the military service and Wherry owners in acquisition under condemnation. X. Status of Wherry acquisition as of January 22, 1959. XI. Experience has proven that if an acquisition program is properly administered, from 80 to 85 percent of the property will be acquired by negotiation. XII. The results being produced by failure to have a uniform acquisition policy properly and diligently administered. XIII. What is happening with Wherry at the courthouse? XIV. What are the courts saying about the value of Wherry property? VI. What new legislation is needed? I. HISTORY AND BACKGROUND OF WHERRY HOUSING In the late 1940's the military had an acute housing shortage. The Congress of the United States by act of August 5, 1947 (10 U.S.C. 1270, p. 977), authorized the Secretary of the Army, when he shall deem it advantageous to the Government, to lease such real estate to such lessees, upon such terms and conditions as in his judgment will promote the national defense. The Congress by act of August 8, 1949 (Public Law 211, 81st Cong., ch. 403), amended the National Housing Act (12 U.S.C.A. 1701 et seq.) by adding thereto Title VIII-The Military Housing Insurance Law. This law authorized the Federal Housing Commissioner to insure 90 percent mortgage loans, up to $8,100 per unit, for family housing at military installations to relieve acute housing shortages; this law specifically provided that— "No mortgage shall be insured under this title unless the Secretary of Defense or his designee shall have certified to the Commissioner that the housing with respect to which the mortgage is made is necessary to provide adequate housing for such personnel; that such installation is deemed to be a permanent part of the Military Establishment, and that there is no present intention to substantially curtail activities at such installation." In response to this demand and in accordance with this legislation a crosssection of private industry pitched in and constructed 260 projects at 176 military installations, for a total of over 82,000 single-family units. The plan for each of these houses either was approved by the military or was designed by military-approved architects on a $9,000 estimated cost. The Secretary of Defense certified that these military installations were permanent, that these houses were needed. The Government, acting through local governmental agencies, which knew local building conditions, determined according to the prevailing conditions, whether they were willing to issue a commitment to insure a mortgage for $8,100 per unit on the project, after its completion and acceptance. After the plans for the project had received military approval and the Government had issued a mortgage insurance commitment, then the owner had to provide interim financing. Many owners had to pledge all their other resources and lay themselves liable to being completely wiped out if unforeseen conditions arose which they could not cope with. The construction of these projects was subject daily to rigid and continuous governmental inspection and approval. These 260 projects were constructed by a cross section of private American enterprise. Due to experience, efficiency, luck in material and labor cost, weather, coupled with the owner's control or connection with material sources, many were able to complete their projects for a cash outlay of less than the mortgage amounts. On the other hand, due to inexperience or bad luck in material and labor cost, or weather, coupled with unforeseen construction problems, many owners were compelled to invest substantial sums in order to complete their projects; others had to turn their projects over to other builders to get them completed, and were completely washed out by the undertaking. Most of these projects were completed 6 or 7 years ago. On completion, the owners signed a promissory note for the full mortgage amounts. They executed mortgages on their projects to secure these notes. The mortgages provide for a 32-year-plus payout. The owners have an agreement with the Government whereby they can operate these projects and rent these houses (some for 50 years and others for 75 years), and may expect to receive up to 61⁄2 percent per year earnings returns on FHA estimate of total replacement value. The owners have a right to expect full occupancy. The great majority of these owners bound themselves in good faith and have tried diligently to discharge their responsibility in a clean and conscientious manner. I think every owner at the time he undertook his obligation in the matter had a dream that he could make some money on the construction and if he did not there, certainly on the operation of the project thereafter. It is an inherent characteristic with private American industry that if they cannot see a possible profit, they don't enter that field. This is the foundation of our greatness. That is the basis of our capitalistic system. If you consider the 82,000 units as a group, there is no other way that the Government could have secured the construction as quickly and obtained as much house for the money as they did under this program. If a mistake has been made in the program, it was the turning of ownership, operation and management of military housing over to private industry. II. THE MILITARY AND PRIVATE ENTERPRISE ARE NOT COMPATIBLE IN THE FIELD OF OWNERSHIP AND MANAGEMENT OF MILITARY HOUSING If we face the facts, we all must admit that the military and private industry are not compatible in the military housing field. Their primary objectives are different. Private industry is based on profit; without profit it perishes. The military are interested in having the best, happiest, most contented, and strongest soldier, sailor, marine, and airman possible. Some concrete examples of this incompatibility are as follows: (1) At one housing project, due to troop movements, there were many Wherry units vacated. The owner wanted to fill the houses immediately with other available approved military personnel; the commanding officer wanted to hold the units vacant for 2 or 3 months so as to have them available for a certain class of personnel which would arrive at that time. The owner was studying about the rents he would lose; the commanding officer was studying about military management. (2) One owner was notified that the cost of his utilities would immediately be increased by a substantial figure. To apply for, justify, and secure a rent increase will probably take several months. Therefore, he will suffer a substantial loss. (3) At one installation the military applied to Congress for 60 appropriatedfund houses because they were needed for personnel which were having to commute great distances to work, some considerably over 100 miles. The funds were appropriated for 30 houses, the houses built, and immediately 30 families were moved out of the Wherry projects into the appropriated-fund houses, and the people continued to commute, all to the material detriment of the Wherry owner. These are but a few examples of incompatibility. The basic strife comes from the fact that the military must have "to much" if they want to continue to win wars; private enterprise must have "too little" if they want a healthy profit situation. The difference is inherent, it is through no fault of either. III. CONSTRUCTION OF CAPEHART HOUSES LEAVES THE WHERRY OWNER NO CHOICE. HE MUST GET OUT OF THE OWNERSHIP AND MANAGEMENT OF MILITARY HOUSING In 1956, with the exception of the 19 Wherry projects which were forced into default because they never had sufficient occupancy to permit a successful op eration, the big majority of projects were doing well; they were providing the serviceman a fairly decent and adequate home for himself and family, at a rent he could afford to pay, which was much less than the same house would cost a civilian; the project owner was meeting his operating expenses and making his insurance and mortgage payments and making a reasonable profit on his undertaking. Except for the basic strife mentioned above, things were going reasonably well. Most projects had their 97 percent or above occupancy, which was the occupancy rate FHA had figured as necessary for most projects to function in a healthy manner. A few had less than 93 percent occupancy which was the breaking point as estimated by FHA, but by 1956 most project owners had recovered from the shock that they had earlier suffered in seeing many projects default for lack of tenants. Most owners had found that by being doubly careful in the service they rendered their tenants they could keep their projects full in spite of the fact that under the law, servicemen were not required to live in Wherry houses. In this atmosphere the Capehart housing program got underway. Where Wherry had built only 82,000 units there were to be 200,000 Capehart units built, and under the Capehart plan the military would manage and operate the houses and the serviceman would be ordered into the Capehart house. Facing this kind of competition for the future the Wherry owner could see no hope, other than to get out of the picture. If you had owned a 500-unit Wherry project which had a 95- or 96 percent occupancy, that your houses had been built under the limitation of $9,000 per unit and that the project had to be maintained, the mortgage amortized and your profit, if any, all had to come out of the low rent which was set by the Government; and it was announced that 300 units of Capehart housing was going to be built at the base where your project was located, that the new houses were going to be built under a $16,000 per unit limit and that the serviceman was going to be ordered into the new house, what would have been your reaction? We have no doubt that it would have been any different than that of the average Wherry owner. But, be that as it may, the Wherry owner decided he must get out of the ownership and management of military housing. About the time the Wherry owner learned what was facing him in the future he also learned that the military were sponsoring legislation which authorized acquisition of Wherry housing by the Government under a formula for price determination which in many instances would mean that the Wherry owner not only would receive nothing for his property, but that he would have to pay the Government a sizable sum. To say that this realization alarmed the Wherry owners, is indeed an understatement. Prompted by the natural instinct of selfpreservation Wherry owners individually and collectively started calling the facts to the attention of the Congress. YOU IV. IN 1956 WHEN YOU IN CONGRESS GOT THE FACTS, YOU TOOK PROMPT ACTION. REFUSED TO PASS THE CONFISCATORY LEGISLATION AND DID PASS PUBLIC LAW 1020 When the situation was called to your attention, you, the Armed Services Committee of the Senate, and your counterpart in the House refused to pass the confiscatory provisions, and the Banking and Currency Committees of both Houses passed Public Law 1020. By refusing to pass the provisions which would have been attempting to confiscate the Wherry property, you avoided probably 10 to 20 years of litigation. You were recognizing provision of our Constitution as interpreted by the courts: The Supreme Court in the case of Hallinger v. Davis (146 U.S. 314, 36 L. Ed. 986) says that the "due process of law" provision of the Constitution is a limitation of the power of the Governments, and in the case of Baltimore and Ohio Railroad Co. v. U.S. (298 U.S. 349, 80 L. Ed. 1209) the same court says the final determination of what constitutes "due process of law," is with the judiciary. Courts are uniform in holding that any law, whether State or Federal, which takes away any of the essential attributes of private property is denial of "due process of law" as was held in the case of Wissner v. Wissner (201 par. (2d) 626). The Supreme Court in the case of U.S. v. Central Pacific Railroad Co. (118 U.S. 245, 30 L. Ed. 173) held that where certain sections of an act of Congress, taken together constituted a contract between the United States and a railroad company, the contract is binding on the United States and it cannot, without the consent of the company, change its terms by subsequent legislation. In passing Public Law 1020 Congress was recognizing that whatever rights the Wherry owner has were vested at the time his project was completed, accepted and all final papers signed. That the Government has certain contractual obligations which are binding upon it with reference to these projects. This means that the military, Congress, or no one else could take these vested rights away from the owner without his being paid therefor. Any legislation which attempted to do this would be held to be unconstitutional. The Federal Constitution (amendment 5-F.C.A. p. 65) provides— "No person shall be *** deprived of *** property, without the process of law; "*** nor shall private property be taken for public use, without just compensation." The Supreme Court in U.S. v. General Motors Corp. (89 L. Ed. 311) says that this amendment is addressed to every sort of interest the citizen may possess, and that "just compensation" means the full and perfect equivalent in money of the property taken, and the owner is to be put in as good position pecuniarily as he would have occupied if his property had not been taken. The Court in the case of United States v. 194,717 square feet of land (60 Fed. Supp. 314) held a leasehold interest is independent of the fee and the owner thereof is vested with a right to compensation therefor. Again in the case of United States v. 542 acres of land (182 Fed. (2) 787) the Court held that the owner of the lease was entitled to "market value" therefor. V. CONGRESS HAS DETERMINED THAT IT IS IN THE BEST GOVERNMENT INTEREST THAT WHERRY HOUSING BE ACQUIRED Typical examples of committee reports are as follows: 1. The Banking and Currency Committee of the House on page 18 of Report No. 313 (85th Cong. 1st sess. 1957) said: "Your committee believes strongly that Wherry housing on or adjacent to military bases should be owned and operated by the military department concerned." 2. The Armed Services Committee of the House, in Report No. 638, page 31, June 26, 1957, said: "As the Armed Services Committee pointed out last year the savings to be effected are so large that it would be an unreasonable man indeed who would deny the wisdom of embarking upon this program of purchase." 3. The Senate Armed Services Committee in Report No. 842, page 6, August 8, 1957, said: "Recognizing that Wherry units would be in existence at military installations for perhaps the next 60 to 70 years and that in many instances it would be desirable for the military departments to purchase them, Congress enacted permissive acquisition legislation in 1955." 4. The Senate Committee on Appropriations in Report No. 980, page 11, August 15, 1957, said: "It appears that the continued operation of these projects under the present conditions is excessively expensive to the Government, and that the best interest of the Government will be served if the military will proceed with dispatch and acquire these projects." 5. The House Committee on Appropriations in Report No. 1009, page 6, August 6, 1957, said: "These owners have businesses to operate and are certainly entitled to know what the plans of the Government are with respect to the acquisition of these projects." From the above it is amply clear that Congress wants these projects acquired. VI. THERE ARE MANY SOUND REASONS FOR ACQUISITION OF WHERRY 1. It would permit reduction in rents. 2. It would resolve problems involving local taxes. 3. It would permit alteration and repairs to bring some units up to appropriated housing standards. 4. It would permit assignment of personnel to such units, and allow the military to more efficiently manage their housing establishment, in that they would have management and control of Wherry the same as they do old appropriated fund housing, new appropriated fund housing, and Capehart housing. This increased efficiency would certainly aid troop morale. 5. It would relieve fear of competition now experienced by practically all project owners. Owners in order to protect themselves, feel that they must continually be alert as the military asks for appropriated fund housing or as Capehart is completed. They feel that as the number of Capehart units increases the military are going to favor those installations and that whether Capehart is at or near their location or not, their occupancy will suffer. They are disturbed by reports that Capehart has been canceled or deferred at many bases purely because the military did not want to acquire Wherry. 6. It would reduce the chances of expensive litigation. Eighteen projects have defaulted. There are a few more which have never had sufficient occupancy to make it a successful operation. Some of these owners have tremendous investments in money, time and effort in these projects. Two projects have already filed cases in the Court of Claims; doubtless many more will in the future. Acquisition would eliminate this litigation. 7. Acquisition would resolve the problems brought about by the incompatibility of the military and private enterprise in the management of military housing. |