tions with respect to which an agency charged with being knowledgeable about education, and having an awareness of what is being done by other institutions all over the country to meet this sort of need, would be in a better position to give advice.

Senator CLARK. I think that is an excellent point but you do have consultative arrangements at the moment with the housing authorities and with respect to the present college loan program; do you not? Mr. RICHARDSON. Yes, we do.

Senator CLARK. And I believe when the question arises as to whether a particular institution needs and should have another dormitory or an allied facility, your department is called into consultation; is it not? Mr. RICHARDSON. Yes. On the other hand our role is quite a limited one under the existing law with respect to college housing. I think it is a question of degree.

Senator CLARK. And again a question of judgment.

Mr. RICHARDSON. Yes.

Senator CLARK. I would agree with you when you are dealing in terms of laboratories and libraries and the like, that the role of HEW should be a greater role than when you are dealing only with dormitories. But it still seems to me an agency which has built up a valuable experience and an excellent record in connection with the college loan program to date would be well qualified to handle what is primarily the business phase of constructing additional bricks and mortar as opposed to the educational phases.

I think one might also have the feeling one does not want to establish at the Federal level a sort of authoritative reaction as to what a particular educational institution does or does not need. In other words, if it is a loan which can be reasonably assured of repayment, is it not far better to decentralize educational policy and leave it to the individual institution rather than to bureaucracy in Washington as to whether the particular facility is needed or not. If it is a loan which can be repaid and fits into the other general restrictions of the bill?

Mr. RICHARDSON. We would certainly agree, Senator, that no agency in Washington should set itself up to make determinations as to what an institution ought to have or whether it ought to have it. On the other hand, what we are really dealing with is the question whether the program is primarily educational in character and, therefore, should be administered by us with the advice and cooperation of Community Facilities on the business end, or whether it ought to be the other way around.

In either case, certainly, there ought to be very close cooperation and consultation between both agencies.

Senator CLARK. Thank you, Mr. Chairman.

Senator SPARKMAN. Thank you very much, Mr. Richardson and gentlemen. We appreciate your help.

Mr. RICHARDSON. Thank you, Mr. Chairman.

Senator SPARKMAN. Now we will have Mr. John Arrington and his group of associates from the armed services.

Good Morning. We are glad to have you. Please identify your associates for the record, Mr. Arrington.

STATEMENT OF JOHN H. ARRINGTON, CHIEF; ACCOMPANIED BY HARLOW W. HARVEY, JR., FAMILY HOUSING DIVISION, OFFICE OF THE ASSISTANT SECRETARY OF DEFENSE; AND ANDREW C. MAYER, OFFICE OF GENERAL COUNSEL, DEPARTMENT OF DEFENSE

Mr. ARRINGTON. I have with me this morning Mr. Harvey of our Family Housing Division in the Office of the Secretary of Defense, and Mr. Andrew Mayer of our Office of General Counsel.

I have a prepared statement which I would like to read, Mr. Chairman.

Senator SPARKMAN. Very good. Proceed in your own way.

Mr. ARRINGTON. I appreciate the opportunity to appear before you today on behalf of the Department of Defense, in order to report on the progress of our military housing programs, and to offer our views on proposed legislation now pending before this committee. As of this date, the Office of the Secretary of Defense has approved a total of 280 projects containing 99,223 units for development under the title VIII program; 48 of these projects, containing 9,377 units, are presently deferred pending further evaluation of need. As shown on the attached summary, these units are in the following stages of development:

Military Housing Programs Status

Total..

Completed.

Under contract.

Letter of acceptability issued.

Advertised for bids.

Underdevelopment-which means under design and processing with FHA...

Pursuant to action initiated by this committee, Congress recently included in Public Law 85-364, enacted April 1, 1958, an increase in the interest ceiling on title VIII mortgages to 42 percent. Subsequently, after consultation with the Office of the Secretary of Defense, the Federal Housing Administration Commissioner established 414 percent as the going rate in the light of current market conditions. At the same time, we specified that projects bid at 4 percent would be closed at 4 percent, but that the advertising could be amended to reflect the new rate in the case of projects where bids had not yet been opened.

This was considered to be most logical cutoff, on the basis that the contractors had bid on the basis of the bid documents, and where these papers specified 4 percent interest, the bidders had included in their bid prices the added cost of financing in the form of discounts. It will be noted that 16 projects with 5,972 units have been placed under construction since our last testimony on March 4; 3,527 units totaling $53,288,000 with permanent FNMA commitments, and 2,445 units totaling $38,493,000 with private commitments. Our present schedule calls for contracts to be signed between now and June 30 for 24 projects with 10,820 units totaling $164,697,000, all with private funds. A third of these projects, totaling 3,315 units

25834-58--15

and $50 million, will be financed under the new 44 percent interest rate.

All of the 4 percent projects appear likely to close on schedule, at discounts for the permanent financing of close to 2 points. Although precise information is difficult to obtain, it appears that the new 414 percent mortgages will yield a small fraction of a point under par.

I might say, altogether we are very happy with the construction prospects for the Capehart program at this time.

The Wherry acquisition program has been proceeding at a most satisfactory rate. Of the total of 83,718 units in the Department of Defense Wherry program, acquisitions to date total 37,776 units, divided as follows:

Army
Navy

Air Force

Units

9,990

1,073

26, 733

In addition to the above, 9,064 units (2,819 Army and 6,245 Navy) are scheduled for acquisition prior to June 30, 1958. All of these latter units will be in the mandatory or potentially mandatory category; that is, where Capehart units are under construction or are scheduled for development.

As of March 31, under the section 809 program providing for-sale housing for essential civilian employees at research and development installations, the Department of Defense has authorized the services to issue certificates of need to FHA covering 3,950 units in 6 areas. The services have issued 2,079 individual certificates and FHA has finally endorsed 977 of these under a Department of Defense guaranty of the FHA mortgage insurance fund. However, this does not represent total activity under the program, because FHA has also issued conditional commitments to project developers in order to achieve the economies of volume construction. Also, as of March 31, FNMA has executed mortgage purchase commitments amounting to $211⁄2 million on 1,965 units.

Among the bills now pending before this committee is S. 3484, which proposes to amend section 404 of the Housing Amendments of 1955. Section 404 at present makes mandatory the acquisition of Wherry projects which are located at or near military installations where the Secretary of Defense has approved the construction of housing under the amended title VIII of the National Housing Act, and S. 3484 would make mandatory the acquisition of section 207 housing projects under similar circumstances. In addition, the bill would make applicable to such acquisitions all the other provisions of section 404, including the provision establishing a maximum acquisition price, the provision authorizing the use of the revolving fund, etc.

As stated in our report on this bill, the Department of Defense opposes enactment of S. 3484. Because of the low cost limitations applicable to housing constructed under the mortgage insurance provisions of section 207, it is in most cases inadequate to meet public quarters standards. Furthermor, unlike Wherry housing which is for the most part located on Government-owned land, 207 housing is not only off-base, but in many cases is an integral part of the civilian community. Accordingly, even though 207 housing might be "at or

near" a military installation where new title VIII housing had been approved, so that its acquisition would be mandatory under the subject bill, the Department of Defense would be administering isolated housing units within the civilian community. The Department of Defense has consistently objected to the concept of administering housing over which it had no control with respect to design, location, or cost, and consequently opposes the enactment of S. 3484.

In addition, the Federal Housing Commissioner has certified with respect to the new title VIII housing, that it would not substantially curtail occupancy in existing housing covered by mortgages insured under the National Housing Act. This certification, which evidences the lack of competition between 207 housing and title VIII housing, is a further reason why the acquisition of 207 projects is deemed inappropriate.

I might say we do strongly support the 1-year extension of the title VIII program contained in section 112 of S. 3399.

This statement has been cleared in substance by the Bureau of the Budget, which has no objections to its submission. I shall be glad to answer any specific questions the committee may have.

Senator SPARKMAN. I notice you have a table attached to your statement. Without objection, it will be made a part of the record at this point.

(The table referred to follows:)

Title VIII (Capehart) housing program, summary of development program as of May 13, 1958

Includes 9,377 units for which development has been deferred (Army, 4,155; Navy, 3,242; Air Force, 1,980).

Includes 5,483 units in completed projects (Army, 2,617; Navy, 160; Air Force, 2,706).

Senator SPARKMAN. I want to ask you one question.
Mr. ARRINGTON. All right, sir.

Senator SPARKMAN. S. 3484 is general in its nature, yet I believe its principal purpose is to take care of one particular section 207 project, is it not?

Mr. ARRINGTON. The Air Force wrote a very excellent report on this particular bill with respect to the one project under their cognizance, which would be affected, which is near the Turner Air Force Base in Georgia.

Senator CAPEHART. Is that project on Government-owned land? Mr. ARRINGTON. No, it is not, sir.

Senator CAPEHART. Now near is it to the base?

Mr. ARRINGTON. Just across the highway.

Senator CAPEHART. How many units are involved? Does anybody know!

Mr. ARRINGTON. Apparently 200, sir.

Senator SPARKMAN. I wanted to bring out exactly the same thing and the point I make is this: While your objections are stated in general terms I wondered to what extent the objections would be toward this one base, if it were limited and made a piece of legislation limited to this one area?

Mr. ARRINGTON. With respect to this one particular project, as the Air Force pointed out, I think the floor area averaged something in the order of 700 square feet. Were the Air Force to acquire this project it would immediately come under the provisions of the new legislation which permits us to rent substandard quarters and operate them on a rental basis but at the same time requires us to make a determination of adequacy or inadequacy. These units would be declared inadequate and we would be required to dispose of them within 2 years under existing statutes.

Their construction does not make them susceptible to being reasonably converted to even minimum quarters standards.

Senator CAPEHART. Does anyone know how many section 207 projects there are in the United States? First projects and then number of units in all projects.

Senator SPARKMAN. I would not know. I can understand the objections generally but what I was trying to get at is how valid your objections might be with reference to this one project at Turner Air Force Base. I ask that because my understanding is that really prompted the introduction of this legislation. We have a copy of the letter that the Air Force sent.

Mr. ARRINGTON. Mr. Chairman, I have here a copy of the Air Force statement on the proposed legislation and this particular project from which I would like to read briefly an excerpt.

Senator SPARKMAN. All right.

Mr. ARRINGTON. It reads:

The housing project constructed under section 207 of the National Housing Act adjacent to Turner Air Force Base provides a living area per unit of 680 square feet which is 70 square feet less than minimum standards established for enlisted grades. These are all two-bedroom units. Personnel in enlisted grades who are authorized quarters allowance and Government quarters average 4.17 members to a family and require 3- to 4-bedroom dwellings.

Under subject bill, these houses would become public quarters. A determination would then be made as to whether these units were adequate or inadequate in accordance with standards established pursuant to the provisions of section 407 (b), Public Law 241, 85th Congress. Under existing standards these units would be declared inadequate so as to place them on a rental basis pending a further determination as to whether these units could be improved to public quarters standard sufficient to justify withholding quarters allowances. From a study made by this Department it is felt these units are uneconomical to improve to public quarters standards due to basic design, construction deficiencies, and other unacceptable characteristics. As a result, these quarters would be declared rental quarters and under existing legislation would be disposed of and removed from the Air Force inventory by July 1, 1960. In addition, if acquisition was affected, local civilians and lower grade airmen now occupying these quarters would have to be given