accelerated program contemplated by the bill. It should be noted that an increase in funds for salaries and expenses for the fiscal year 1959 from $4,709,000 to $6 million for urban renewal activities has already been approved by the Committee on Appropriations, House of Representatives. If this increase receives final approval, it may be expected to result in an increase of from 605 to some 770 employees engaged in urban renewal activities. Such an increase well might be sufficient to take care of increased activity in this program for the coming fiscal year.

For the reasons stated above, we do not recommend favorable action on S. 3548. Sincerely yours,

JOSEPH CAMPBELL, Comptroller General of the United States.

Senator SPARKMAN. We have a statement by Senator Payne of Maine, which will be made a part of the record at this point. (The statement referred to follows:)

STATEMENT OF FREDERICK G. PAYNE, A UNITED STATES SENATOR FROM THE STATE OF MAINE

We are dealing here today with a matter of the utmost importance to any modern and progressive nation-the state of its housing. The expression "a roof over one's head" and "a man's home is his castle" are probably very trite, but this nevertheless does not detract from the truth of these expressions. Housing is, like food and water, a necessity of life, and this Nation has long recognized this fact. For many years Congress has authorized appropriations to permit the Federal Government to share some of the burden and responsibility for adequate housing. This has been necessary, because evidence shows that private individuals, and local and State governments alone are unable to provide all that is necessary by way of adequate housing needed in a nation which desires all of its population to enjoy a proper standard of living. For this reason, the Federal Government has undertaken a number of programs designed to supplement the efforts of private enterprise and those of local and State governments. The hearings on which we are embarking today mark another step in the Nation's efforts to improve these various programs. This year, however, these hearings take on added importance in view of the current state of our economy. Housing and related programs have proven to be valuable weapons in the past in combating economic recessions. Today they are again serving the Nation in this capacity, and our action in this subcommittee will determine their future status. The administration is making full use of our housing programs. It is now up to Congress to make certain that they be allowed to continue effectively into the future.

Since late December the administration has released more than $450 million for direct and indirect support of housing programs. Requirements for FHA mortgage insurance have been eased considerably during this same period. The President has ordered that the processing of applications for mortgage insurance as well as urban renewal funds be accelerated. The purpose of each of these decisions by the President is to alleviate the current unemployment problem by stimulating home-construction and slum-clearance projects. This is what the administration has done to make housing serve as an antirecession program as well as one of great value to improve the living standards of the Nation.

Likewise Congress has moved ahead along these same lines. The emergency housing bill, signed by the President last month, is already increasing the amount of funds available for home construction. Both administration and congressional moves, therefore, should stimulate new home construction and should spark employment throughout the Nation, since the demand for housing is still high and only awaits more reasonable financing opportunities in order to be satisfied. Home building affects probably more facets of a nation's economy than any other industry. It involves the labor of both skilled and unskilled workers. Beyond that it effects the transportation industry and the vast number of workers employed by the building supply industries. Appliance and furniture workers are also involved. In other words, housing is a basic industry affecting innumerable other segments of the economy. For this reason its contributions in a period of economic slump are of great value.

'During the course of these hearings, the Housing Subcommittee will proceed with the study of additional housing legislation to aid not only the economy but

to benefit the well-being of millions of our citizens through improved living conditions. Among the more important subjects to be covered during these hearings will be the housing needs of our senior citizens. Americans of 65 years of age and over are rapidly becoming a greater and greater percentage of our total population, and it is incumbent upon this subcommittee to prepare legislation to meet their specific housing needs. The first step in this direction was taken in 1956 when housing amendments tailored to the requirements of our elderly citizens which I proposed were originally enacted. The elderly housing program must be continued and I shall fully support sound legislative proposals to provide for better housing for this important segment of our population. Emphasis in these hearings will probably be placed also on the problems of urban renewal and its related programs. Urban renewal has come of age and is ready to take a stronger and more permanent position in the wide scope of Federal housing activity. Since its inception some 9 years ago, it has grown and developed as a program until today more than 200 cities from coast to coast are participating and an even greater number of cities have renewal projects in the early planning stages. The value of urban renewal cannot for a moment be doubted. One has only to look at the accomplishments in Philadelphia and Chicago to realize the enormous returns which this program offers to cities, both in the form of increased property valuations and, more important, in the better living conditions it provides their citizens. Medium-sized cities are now coming into the program in increasing numbers. I am, for example, extremely proud of the achievements made by Portland, Maine. There, 1 project is in the process of completion and 2 others are in the planning stage.

Extension and improvement of the urban-renewal programs should be the goals of this subcommittee's legislative activity in the urban-renewal field this year. With this in mind I have introduced two bills which are aimed at rounding out the program.

S. 3064 is designed to help meet the pressing relocation problem encountered in many medium-sized cities, such as Portland. This bill was, in fact, first recommended by officials of the Portland Slum Clearance and Redevelopment Authority. It would extend the liberal mortgage insurance provisions of section 221 to include 2-, 3-, and 4-family dwellings. It requires that the owner must be an occupant of one of the family units; and the remaining units to be allotted to similarly dislocated families. The bill would permit, therefore, more effective utilization of provisions in section 221 in areas where it is desirable to use existing multifamily dwellings.

Section 221, originally designed to aid relocation of families forced to move as a result of urban renewal activities, now allows these families to be relocated only in single-family dwelling or in cooperative structures of 10 or more units. The bill I have introduced would be especially valuable in medium and smaller sized cities where the relatively small number of families to be relocated makes large housing developments uneconomical. The provisions of this bill were incorporated into the omnibus housing bill approved by the Senate last year but were deleted in conference. It is hoped that this year it will be enacted into law. The second bill which I have introduced is Senate Joint Resolution 153 to extend the benefits of the Federal urban renewal program to those localities which, for reasons of their small size, have been unable to undertake their own projects. Because of the high cost of establishing and maintaining a local urban renewal authority as prescribed by law, most small cities and towns have been unable to participate in the urban renewal program. I know this to be a fact in Maine where several such localities evidenced a great deal of initial enthusiasm in the program but lost interest when faced by the size of the outlays needed to administer the program.

To meet this need, urban renewal legislation and procedures must be modified. Specifically, title I should be modified in order to permit the establishment of urban redevelopment and renewal authorities on the State level-authorities which could then act in behalf of the smaller cities and towns desiring urban renewal programs. The approval of these communities would be required, but thereafter the State agency could take over the planning and administrative work necessary to begin and carry through the urban renewal projects. The overall economies which could be realized by a statewide urban renewal authority are obvious, and yet such an agency would be close enough to the local situation to evaluate properly the requirements of each community in the program. In a State such as Maine where the population is predominantly located in smaller communities, this improvement in urban renewal legislation would be particularly

valuable.

Both of my proposals are aimed at perfecting the urban renewal program in order that it might more adequately accomplish the task of eliminating urban blight and slums throughout the Nation. No nation with our resources should permit such conditions to exist. Their adverse social, psychological, and economic effects on our people cannot be tolerated in these times when, with concerted effort, something can be done to eliminate them. The need for sound housing legislation is still great, and I am certain that these hearings will contribute to the development of such legislation this year.

Senator SPARKMAN. We are delighted to have the officials of the Housing and Home Finance Agency and the Federal Housing Administration before us first this morning in the person of our long-time friend, Mr. Albert Cole, and our good friend, Mr. Mason.

I want to say to both of you that I greatly appreciate the fine cooperation you have always shown us, not only in these hearings but in the administration of the housing program. I welcome you before the subcommittee again.

At this time I call on Mr. Cole.

STATEMENT OF ALBERT M. COLE, ADMINISTRATOR, HOUSING AND HOME FINANCE AGENCY

Mr. COLE. Thank you very much, Mr. Chairman.

Mr. Chairman and members of the committee, I appreciate the opportunity to present the views of the Housing and Home Finance Agency on the housing legislation being considered by your committee today.

The proposals of the administration are contained in S. 3399, referred to as the housing bill of 1958, and S. 3398, relating to one phase of FNMA operations. I have been authorized to advise that these bills, and amendments we will discuss, are in accord with the program of the President. The bills would provide legislation necessary to expand, or continue, or more effectively carry out, programs of the Housing and Home Finance Agency for the provision and improvement of housing and for the removal and prevention of slums. and blight. These interrelated programs have the common objective of providing adequate housing in suitable neighborhoods for all persons in communities throughout our country.

The programs also have a vital effect on our entire national economy. The residential construction industry is itself a major industry, and it directly affects not only the producers and manufacturers of lumber and brick and electrical and heating equipment and countless other products which enter into the construction of a home, but also hundreds of other industries and trades which supply homefurnishings and services and which depend for an important share of their business on continued residential construction.

Programs of each of the five constituent organizations of our Agency are dealt with in S. 3399. Following my general observations on each title, I would like, if agreeable to your committee, to have the head of the constituent involved give a detailed statement of the views of the Housing and Home Finance Agency on the provisions in that title. I will then be available, with him, to answer questions on those provisions or on the programs of the constituent. The provisions of S. 3398 will be discussed in connection with title II of S. 3399, as both relate to FNMA operations.

TITLE I-FHA MORTGAGE INSURANCE

Title I of S. 3399 relates to the mortgage insurance operations of the FHA. Mr. Norman Mason, the Federal Housing Commissioner, is with me at the witness table.

INSURANCE AUTHORIZATION

One of the sections contained in this title would provide for an adjustment, at the beginning of each of the next 5 fiscal years, of the general mortgage insurance authorization which covers all FÍA programs except the property repair and improvement program under title I of the National Housing Act, and the armed services rental housing program under title VIII of that act. Under this provision of the bill, authorization sufficient for $3 billion of new insurance would be made available for use during each of the 5 years. This sum would be in addition to authorization becoming available during each year as outstanding insurance and commitments to insure are reduced through amortization or prepayment of mortgages or through the expiration of the commitments. However, any unused amount of the old authorization would lapse at the end of each of the 5 fiscal years, except 1963.

Since the introduction of S. 3399, there has been a substantial increase in the utilization of the existing insurance authorization, and it is estimated that it may be exhausted early next month. Therefore, we have sent to the Congress a proposed joint resolution to increase the authorization by $4 billion, which is the amount now estimated to be necessary to permit contínuation of FHA operations through the next fiscal year. The immediate enactment of this joint resolution is recommended. The recent increase in the utilization of the authorization has also caused us to revise our estimates of the amounts needed for subsequent fiscal years. It is accordingly recommended that the provisions of S. 3399 I have just mentioned be changed to provide $4 billion of insurance authorization for each of the 4 fiscal years following next year.

The Federal Housing Commissioner is prepared to discuss the status of the general mortgage insurance authorization, and its probable future utilization. However, I would like to comment briefly on our reason for proposing an annual adjustment of the insurance authorization during a period of years. We believe that this approach will allow the building industry to operate during that period without the risk of needless interruption and uncertainty concerning the availability of authorization. For the same reason, the Congress, in 1950, provided a 5-year insurance authorization for FHA's property repair and improvement program. In 1956, a 3year authorization was enacted for that program. Similarly, the capital grant authorization for the urban redevelopment program was enacted in 1949 for a 5-year period, and we are now proposing in this bill that additional capital grant funds for urban renewal be made available for a 6-year period. In the case of all these programs, there is nothing which would preclude the Congress from increasing or reducing any uncommitted authorization prior to the end of the several-year period in order to meet changing conditions.

MORTGAGE CEILING

Other provisions of this title would increase to $30,000 the maximum mortgage amount for a 1-, 2-, or 3-family dwelling financed under FHA's sales-housing programs. The law now provides a $20,000 mortgage ceiling for a 1- or 2-family dwelling and $27,500 mortgage ceiling for a 3-family dwelling. The purpose of this change is to permit the FHA to serve the entire normal range of homes requiring mortgage financing. FHA operations have always been concentrated in low and medium price ranges. For example, only 12.1 percent of new one-family homes assisted by the FHA in 1957 under its regular sales-housing program involved mortgage amounts of $15,000 or more.

Under the proposed amendment, the bulk of FHA assistance will continue to be in the field of low- and medium-priced homes. However, the amendment is desirable in order that the program may adequately cover homes in higher cost areas, homes which are especially suitable for large families, and those which contain the additional space and improvements frequently demanded on today's market.

The $16,000 loan maximum which was established under the original National Housing Act in 1934 was ample for almost all onefamily home mortgages. Since then, construction costs have been more than tripled, but the mortgaage ceiling for a one-family house has been raised by only 25 percent. In metropolitan areas, as many as 1 out of every 5 new homes are now estimated to be above the $22,850 valuation which is necessary for a maximum $20,000 FHAinsured mortgage. Thus, an increase in the mortgage ceiling is needed if the FHA program is to cover this segment of the housing market adequately.

INTEREST RATE CONSISTENCY

The title contains provisions relating to maximum interest rates for rental housing and cooperative housing mortgages insured by the FHA to provide consistency with such rates for sales housing. Project-type housing typically commands lower interest rates than sales housing The lower rate reflects the relatively lower costs, in relation to the interest payments received, of originating and serviceing the project mortgages. However, such administrative savings simply do not warrant the interest rate spread of three-fourths of 1 percent which now prevails as a result of limitations in the law.

The maximum statutory interest rate for all FHA sales-housing programs is 5 percent, or such higher rate, not over 6, as the Federal Housing Commissioner finds necessary to meet the mortgage market. By regulation, the maximum interest rate for all FHA sales-housing programs has been established at 54 percent. In the case of projecttype mortgages insured under the regular rental housing program and the cooperative housing program of the FHA, the maximum statutory rate is only 42 percent. Despite the recent easing in interest rates generally, this maximum is still too low to attract adequate amounts of private capital. The noncompetitive rate has undoubtedly prevented the production of many thousands of units of rental housing or apartment-type cooperative housing needed by families who are not in a position to purchase their own homes or who live in areas where it is