SECTION 1: THE OVERALL HOUSING PICTURE IN 1953 Chapter I SALIENT DEVELOPMENTS IN THE HHFA A. A Year of Review and Development During the year 1953 the Nation's housing problems and methods for meeting them were brought into sharper focus than ever before. A comprehensive review and reappraisal of Federal housing activities produced a new concept of an integrated approach to the whole housing field to replace the piecemeal efforts of the past. New proposals were advanced to insure a dynamic housing industry that would meet the housing demands of all Americans within the productive means of a sound economy. At the same time, 1953 was a year in which existing programs were employed by the Administration to make a maximum contribution to the filling of current housing needs. The new integrated approach resulted largely from a broadscale survey of housing problems and activities conducted by the HHFA Administrator and by the President's Advisory Committee on Housing Policies and Programs. The initial phases of the study consisted of a series of "shirtsleeve" conferences held by the new HHFA Administrator soon after his appointment in March as head of the Government's principal agency in charge of housing and home financing activities. In Washington and in key cities across the Nation, the Administrator met with private and public leaders in housing, mortgage, finance, construction, and community development. Ultimately, a 23-man President's advisory committee1 was appointed to undertake a review of all Government housing programs, 1 Members of the President's Advisory Committee on Housing Policies and Programs: Ernest J. Bohn, Director, Cleveland Metropolitan Housing Authority, Cleveland, Ohio. Ehney A. Camp, Jr., Vice President and Treasurer, Liberty National Life Insurance Company, Birmingham, Ala. Miles L. Colean, Economist and Author, Washington, D. C. A. R. Gardner, Past President and Executive Consultant, Federal Home Loan Bank of Chicago, Chicago, Ill. Richard J. Gray, President, Building and Construction Trades Department, A. F. of L., Washington, D. C. R. G. Hughes, First Vice President, National Association of Home Builders, Pampa, Tex. and to prepare recommendations for improvement on the basis of its studies. With the HHFA Administrator as chairman, the committee brought together all the major housing interests around a common table. To accomplish its objectives the committee functioned through four subcommittees covering housing credit facilities; Federal Housing Administration and Veterans' Administration programs; urban redevelopment, rehabilitation, and conservation; and housing for lowincome families. A five-man executive committee coordinated the studies and reviewed the organization of Federal housing activities. In its report to the President,2 the committee stated its basic policy: It is the conviction of this committee that the constant improvement of the living conditions of all the people is best accomplished under a strong, free, competitive economy, that every action taken by Government in respect to housing should be for the purpose of facilitating the operation of that economy to provide adequate housing for all the people, to meet demands for new building, to assure the maintenance, restoration, and utilization of the existing stock of housing, and the elimination of conditions that create hazards to public safety and welfare and to the economic health of our communities, and that only those measures that prove to be successful in meeting these objectives should be continued. Out of the deliberations of the advisory committee came three basic concepts for a new housing program that would integrate the aspirations of all varied housing interests. All are interdependent and essential parts of a comprehensive and coordinated movement to better our housing and urban standards. In general, they aim to broaden the effective range of private industry toward meeting all housing requirements through the free enterprise system, and to extend a helping hand to local communities in carrying out coordinated, overall housing and urban improvement programs that they initiate and execute. Rodney M. Lockwood, Past President, National Association of Home Builders, Detroit, Mich. William A. Marcus, Senior Vice President, American Trust Company, San Francisco, Calif. Norman P. Mason, Treasurer, William P. Proctor Company, North Chelmsford, Mass. Robert M. Morgan, Vice President and Treasurer, The Boston Five Cents Savings Bank, Boston, Mass. Thomas W. Moses, Attorney, Pittsburgh, Pa. Aksel Nielsen, President, Title Guaranty Company, Denver, Colo. Robert B. Patrick, Financial Vice President, Bankers Life Insurance Company, Des Moines, Iowa. James W. Rouse, The Moss-Rouse Company, Baltimore, Md. Bruce C. Savage, Bruce Savage Company, Indianapolis, Ind. John J. Scully, Vice President, The Chase National Bank of the City of New York. Alexander Summer, Alexander Summer Company, Teaneck, N. J. James G. Thimmes, Chairman, CIO Housing Committee, Pittsburgh, Pa. Ralph T. Walker, Past President, American Institute of Architects, New York City. Ben H. Wooten, President, First National Bank, Dallas, Tex. W. Herbert Welch, Executive Director. 2 Recommendations on Government Housing Policies and Programs: A Report of the President's Advisory Committee on Housing Policies and Programs, December 1953. Superintendent of Documents, U. S. Government Printing Office, Washington 25, D. C. Recommendations of the committee included: 1. Launching a multisided program of urban renewal of our cities which will both rid them of slums and undertake the conservation and restoration of sound housing and neighborhood values. 2. Bringing good housing and improved housing standards within the practical reach of all groups. This means among other things inaking the total supply of existing units available on equal terms with new units instead of discriminating against older housing, in order to make it easier for people of limited means to obtain houses which can meet their needs. 3. Treating the problem of housing for low-income families as part of the total housing market, to be served privately as far as possible, and made an integral part of the community housing supply instead of as a special segment completely dependent upon Government subsidy and control. Underlying the recommendations were several factors which emerged during the course of review more clearly than ever before. One was a major change which has been taking place in the homebuilding market, a change which has profound implications for both the housing industry and the housing consumer. During the immediate postwar years, most of the housing production was absorbed by the millions of newly created families and by the deferred needs of the war period. Other important and particular market requirements have had to wait. Now the postwar backlog has largely been met and deferred long-run needs can and must be met. Further, to sustain present high levels of building, the housing industry will have to adjust its production, to direct more of it to such specific market areas as minority groups and large families needing moderate-cost housing. A second factor is a new consideration for our supply of existing housing. Partly of necessity, most building effort has been directed towards producing new homes and increasing the supply. Improvement and marketability for older homes would greatly reduce development of new slums, enhance the opportunities and choice of families seeking better homes, and facilitate the movement of families, through their own resources, from slum and blighted areas into better homes. As families improved their housing, cities would be able to improve their standards. A third is the need for the steady, reliable flow of adequate financing to maintain a high rate of housing production. This includes adjustment of interest rates, amortization periods, and downpayments to current conditions, and means for maintaining a flow of investment funds through the secondary mortgage market from major sources to serve all areas of the Nation and all basic types of housing market demands through private channels, with minimum Government participation. B. Housing Progress During 1953 housing production continued at high levels. A total of 1,104,000 new, permanent, nonfarm homes were placed under construction. Thus, despite a small drop in volume below the previous year caused by a stringency in mortgage funds, 1953 was the third largest homebuilding year in our history. It was the fifth consecutive year in which more than 1,000,000 homes were built. Under the new administration, the basic home financing programs of the Federal Government-those of the Federal Housing Administration, the Home Loan Bank Board, and the Veterans' Administration-expanded their support of the large volume of home production. The number of units covered by home and project mortgages insured by the FHA was substantially higher than in 1952. Assets of savings and loan associations reached an all-time high, as did the funds they made available in mortgages for home purchase and construction. Both in number and amount, home loans guaranteed by the VA were higher than in 1952. In addition, several major actions were taken by the administration and Congress to meet specific housing problems. One involved alleviation of the shortage of mortgage funds resulting from the adjustments which took place in the general economy. In the early part of the year, authorized maximum interest rates on FHA-insured and VA-guaranteed mortgage rates were low in relation to returns available to lenders from competing investments. To place such loans in line with the changing money market and thus maintain an adequate flow of mortgage financing during the adjustment period, maximum permissible rates on Government-backed mortgages were increased, and the Congress authorized the charging of certain discounts in addition to those previously allowed. Allowable interest rates on single family home mortgages insured by FHA were raised from 414 to 42 percent, and those on multifamily projects insured by FHA were increased from 4 to 41⁄44 percent. Interest rates on VA-guaranteed home loans were increased from 4 to 412 percent, equal to the FHA rate for comparable types of loans. Another measure aimed to supplement the availability of advance financing for homebuilders without increasing the Government's mortgage holdings. This was a program to dispose of FHA-insured and VA-guaranteed mortgages held by the Federal National Mortgage Association on a "one-for-one" basis. Sales increased substantially beginning in July, when Congress enacted specific authority for FNMA to make firm commitments for future purchase of mortgages |