been able to have read. In our 212 years of experience we have sold all of the existing units in our first part of our subdivision. These people have come down from cities like New York and Chicago, and most of them have bought after having seen what we have to offer. The biggest problem we run into, through, in attempting to take advantage of the present-day legislation, is that although you have made provision under section 203 (b) to qualify a person 60 years old or older for a mortgage of 20 or 30 years' duration, the minimum property requirements under section 203 (b) having been derived after an education of approximately 30 years when the FHA had its inception, have reached the point now where it takes more and more. The average section 203 (b) low-income house is in the neighborhood of $13,000 to $15,000. That in itself, along with the square footage requirements under minimum property requirements and lot requirements, is not conducive to a low-income person making those monthly payments, despite the fact that you elongate the time of payment over a period of 30 years. Under section 203 (i), where you limit the maximum mortgage to a maximum of $8,400, there is a class or a group of regulations that would relate more to our way of thinking to low-income retiree. There a person can buy a house and finance it for 30 years and have it within a monthly payment and downpayment factor that would allow him to go ahead and make his monthly payments. I have discussed this problem with various officials right here in the FHA in Washington in an attempt to clarify our own problems. They have reached the position that section 203 (i) of the law prohibits them from issuing a mortgage commitment to a retired person if the construction has been started, or if the building is existing prior to their having issued a mortgage commitment to insure the mortgage. It has been our experience in conducting this elderly retirement village that we have been building, that the average retiree will get in the family vehicle and load their personal effects into it. They have made up their minds that they want to come to Florida, or whatever the particular State might be, to retire. When they get there they see something they like and if it can be handled within the income they have, they get it. The idea that a person 60 or 65 years old is an indigent person or somebody who has to be looked after, is a fallacy completely. We have very active people living in our own particular village, and I am sure you yourself realize that. However, when they see a home or something that they want to buy, they do not have the means to quarter themselves in a motel and find an architect and engage a builder and arrange the necessary mortgage payments and the various applications that the FHA wants, and then sit down and pay the motel or hotel bill until such time as they can move into their house. If they see it, they should be afforded the same privilege that a young person has, that is, after they fill out the necessary applications, if they qualify in that respect and the monthly payments are such that they are able to handle them with the income they have, they should be allowed to buy a house. I do not purport to be a legislator, but the provisions of section 203 (i), as I see it, would more closely fit the aspect of retired housing if it could be broadened to include the same aspects as section 203 (b), which allows the FHA to finance existing housing. 25834-58- -24 As I stated, I have discussed this with the FHA people over here. They have sent several of their representatives down to visit our project and have interviewed our people. We have received quite a bit of sympathy with the type of work we are doing there, and they definitely have made the statement that they feel what we have meets the intent of Congress, but under the provisions of section 203 (i) with the provision that the construction must not have been started prior to the mortgage commitment being issued, we would need a change in the legislation in order to effect or facilitate our situation. I will be glad to entertain any questions you may have. As I stated earlier, I am a developer and not an attorney, but I have lived with this problem for approximately 21⁄2 years, and I have learned quite a bit about the social and psychological aspects of it. Senator SPARKMAN. As I understand it, the thing you are up against is that requirement in the law that applications for insurance must have been made prior to construction? Mr. RYAN. That is just what they have led us to believe when we discussed this problem with the FHA. They claim their hands are tied. Senator SPARKMAN. Is it their contention that that is the thing that stops them from acting? Mr. RYAN. Yes, sir, because that is definitely stated emphatically in the law. Do you have a copy of the law there, Mr. Chairman? Senator SPARKMAN. Yes. I was reading from it. Mr. RYAN. They pointed that out to us. We had a meeting with Mr. Prothro, their attorney, and Mr. Victor, along with Mr. Edwards, the Assistant Commissioner of Operations. After going through every possible act that we could go through and the various sections of the FHA law, that was the section that would more nearly cover low-income retiree houses, or furnish a method for a retired person to get in his car and drive down and decide that he wants to retire in Florida, and find something that he likes there and buy it. To give you an example, we are pretty proud of the sales record we have on our present development. We could substantiate the fact that most of our sales are made outside of the State of Florida. Ninety-two percent of the people who have been sent down from our out-of-State sales office have bought after seeing the property. Presently our financing is being done privately. We offer a unit anywhere from a studio unit to a three-bedroom house for $250 down and monthly payments of $39.50 a month, or a maximum of $59.50. There is no portion of the property that is more than one-quarter of a mile from the ocean. Senator SPARKMAN. What is your recommendation to us, or your request of us? Mr. RYAN. If you will look at this, Senator. This was not prepared actually for this meeting, but the last page of it. Senator SPARK MAN. Yes. I see you have a suggested amendment. You would strike out the language that I quoted. Mr. RYAN. Yes. I might add, Senator, in the various discussions I have had with members of your legislative committee, or, not exactly your committee, but your assistants, I asked why that language was included when all of the other aspects of the law would fit so nearly the housing for the elderly provision. As yet, I do not think that anyone has given me an answer. I was wondering if you might be able to afford that answer. Senator SPARKMAN. I do not know, Mr. Ryan. It seems to me we would have difficulty in getting the thing you proposed done, as a general matter. What attitude the committee would take on special legislation aimed at this one particular project, I do not know. Mr. RYAN. I do not mean for this one particular project, Senator. I understand that there are several instances throughout the State of Florida, and other States, particularly in the Southeast, that come under that category. Senator SPARKMAN. It may be, but, so far as I know, yours is the only one that has been called to our attention. That is the reason why I said that. I think, perhaps, you can see why that language was put in. In fact, I do not know of any FHA program, except a couple of amendments we wrote into the law last year, that permits mortgages on used properties. Mr. BURSTEN. I believe sections 207, 213, and 203 (b) all allow existing units to be financed. Senator SPARKMAN. Yes. By amendments that were agreed to in those particular cases. Just last year, I believe. I know a couple of them were last year. Mr. RYAN. I understand from Mr. Peek, assistant to Senator Smathers, that they have the same difficulty there at Cocoa, around Patrick Air Force Base. Several houses were built there under the old section 809 that are available as houses for retirees. Several persons have expressed a desire to buy them, but they are confined by the same aspect of the law. They are under $8,000, but it does not fall into the section 203 (b) bracket where they can qualify as existing housing, and the houses sit there. Thinking you would discuss that with him, he brought that point out to me when we brought up our own question. But, definitely, under section 203 (b), Senator, I have known of instances where they have insured mortgages on a house 50 years old. It was built long before any qualifications of FHA were promulgated. Mr. BURSTEN. Might I, just for a moment, clarify it? Mr. Ryan is not a lawyer, but is acquainted with the background, so I thought he should make his address. We are not interested in special legislation at all, and we did not come here to ask for any special legislation. We feel the problem we have been confronted with is a problem which has to be prevalent throughout the entire country. This is the problem of the retiree, a person over 60 years old who, because of his age, is unable to get conventional financing. His credit standing is good and his previous payment record, wherever he has been, has been good. That is the problem in every State of the country. There are people reaching retirement age in Alabama, Georgia, and Florida, and all over the country. We have felt the impact more severely than other people because we have been in the retired-village business. In analyzing the law and going over this with FHA, they admit there is a void in the housing-for-the-elderly program. Senator SPARK MAN. We all do. Senator SPARKMAN. We admit it in this committee, and it is a void we have been seeking to fill. Mr. BURSTEN. I am aware of that, Senator. Senator SPARKMAN. Whether you have proposed a reasonable proposition to us, we do not know. We never have conceived of section 203 (i) as being for the purpose of providing housing for the elderly. It may be that you are giving us an idea. Mr. BURSTEN. Senator, subsection (9) of section 203 (b) specifically ties in section 203 (i) with housing for the elderly. It is the only reference. I understand it was primarily designed to afford low-cost housing in rural areas, where the Commissioner could waive the minimum property standards. However, subsection (9) of section 203 (b), if you have it before you, goes ahead and provides, under certain circumstances, they can waive the minimum downpayment in these section 203 (i) cases where the elderly are involved. We are not trying to arrive at any brainstorm, or set up a formula for you. Our whole contention is that the elderly should be afforded an opportunity to purchase an existing rehabilitated unit as a lowcost house. Not a high-cost house, as section 203 (b) contemplates, but a low-cost house as contemplated in section 203 (i). It may be we have not hit on the right formula or vehicle. Subsection (i) may not be the right vehicle. However, there should be some provision whereby a retiree or someone over 60 who desires to buy a low-cost, existing, rehabilitated unit should be able to get the same type of liberal financing as is contemplated under sections 203 (b) and 203 (i). That is the sole point we are trying to make here today. We are not interested in any special legislation at all. We do not feel we are entitled to it. The problem of the existing rehabilitated unit, as far as low-cost housing is concerned, is one where there is a tremendous void. There is nothing on the books that can take care of that problem, and there is a definite need for it, we feel. Mr. RYAN. If I might interject, Frank Green, chairman of the Federal National Mortgage Association in the southeastern area, came down to visit our project, and was quite impressed with the type project we were affording to elderly people. In the discussion, he brought out the fact that in the $25 million appropriated by Congress last year for aiding retiree financing, $514 million was allocated to his office. It was his understanding his was the only office that used the entire allocation in the year and, further, not 1 penny of that money was used for the building of elderly housing. Every bit had been used in institutional housing under section 207. To me, that, in itself, would show definitely that something is holding back the housing-for-the-elderly program. What I think it is, is the regulations under section 203 (b). I go along with the 100 percent. I have felt a number of houses under section 203 (b) are such that, under today's cost of materials and labor, it puts them outside the income of the averagee retiree and, I would say, the greatest majority of retired persons in this country. I know you realize that, after reading that pamphlet and brochure you put out. But, with the added help of medical science which we have today, the problem is growing all the time. Senator SPARKMAN. You let us study this proposition. You have given us an idea. Let us see what we can find out about it and it may be that you have given us the very thing we have been looking for. I do not know. Mr. RYAN. Thank you very much for your time, Senator. (The prepared statement of Mr. Ryan follows:) STATEMENT OF WILLIAM RYAN, VICE PRESIDENT, FIRST STATE MORTGAGE CO., MIAMI, FLA. NEED FOR REVISION OF SECTION 203, NATIONAL HOUSING ACT AND OTHER LEGISLATION TO PROMOTE HOUSING FOR THE ELDERLY Presently section 203 (i) restricts the FHA from insuring mortgages on existing or rehabilitated housing. Section 203 (b), while it can be used to insure existing units, because it was not intended to promulgate low cost housing for the elderly, it has a set of property standards, which of necessity price it out of the low cost housing class. A 30 percent down payment requirement on existing units render it further unworkable as contrasted to the 3 percent down payment provisions of section 203 (i). At the present time there is no provision under which low cost existing or rehabilitated units can be insured on a basis of making them available to the elderly-such as flexible standards and minimum down payment. Florida, because of its particular advantages of inexpensive living, climate and sea, draws more retirees than any other place in the world. The present legislation section 203 (i) does not take into consideration the typical manner in which the retiree emigrates to Florida-he usually gets into the family jalopy and drives south since this is the least expensive way of travel-when he gets to a locality that strikes his fancy or where he finds relatives or friends he stops. As he has pulled up his stakes, the first thing he wants, is a place to live, not a hotel or motel room indefinitely while he fools around building-but something he can move into; inexpensive, preferably near the sea and other folks that have things in common with him. This is the typical emigration of the retiree who comes to Florida. The present law, section 203 (i) would force him to live in a hotel room or a motel for months while he bought a lot and built a house, or in the alternative purchased a project home. The retiree should be allowed to buy a home of his own choosing, in existence if the prefers, and be able to get the liberal financing Congress intends the elderly to have and has provided under section 203 (i) on new housing. A practical illustration of the impossibility of section 203 (i) to handle the problem of the typical retiree, is the experience of Lanark Village, which located on the Gulf of Mexico near Carabelle, Fla., some 50 miles southwest of Tallahassee. Lanark Village is a well-planned community of some 400 units, 92 percent of which have been sold primarily to elderly people; a project which has been acclaimed as a model project for the elderly, and its homeowners, primarily elderly persons, because they purchased units already in existence are unable to avail themselves of the liberalized features of section 203 (i) to obtain FHA mortgage insurance. AMENDMENTS TO S. 3399, HOUSING FOR THE ELDERLY Following changes recommended: (a) Page 3, section 229 (a), line 9, change "eight" to "one." (b) Line 10, change following "or more" to "existng new or rehabilitated units especially designed or primarily used or intended." (c) Page 4 (2) starting at line 10 following "Estimates" add "is the replacement cost of such project or property or will be the replacement cost of such property or project when the proposed improvements are completed." (d) Page 5 (7) line 14; following "designed" insert "primarily used or intended." (e) Page 5, following line 22, insert another provision "The commissioner in establishing the standards under this section shall take into consideration the intent of this act to promulgate low-cost housing for elderly people and not |