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of 100,000 is not as large as the annual figures quoted in H. R. 4009 and the duration of the building period differs. The VFW adheres to its resolution but does not desire to make these differences points of contention. We feel that the Congress can best deside the appropriate amount of public housing to be provided after careful consideration of the need and the ability of PHA to produce.

Another facet of the VFW resolution which has not attracted a great deal of attention in past years has been our desire to see public housing units sold to veterans 10 years or so after completion. We still feel that the idea is sound in that it would

1. Solve the immediate low-rent problem;

2. Eventually place the ownership of low-cost homes in the hands of our citizens;

3. Return funds to the Treasury, thus providing means for erection of more housing units or other public projects. Our resolution asks that eligible veterans and veterans families have rental priority on public housing units. Section 202 of the bill sets up a preference first for families which are displaced or are to be displaced by any low-rent housing project or slum-clearance project, and second for veterans. In view of our resolution and because it is entirely possible that, as the bill now appears, there will be no effective veteran's preference, the VFW must urge that lines 24 and 25 on page 28, and lines 1 through 11 on page 29 be deleted and that an effective first preference be granted to veterans.

There is also a phrase inserted in each paragraph dealing with veteran preference which would limit veteran's preference to a period terminating 5 years after March 1, 1919. We have felt that a continued preference without time limit is justified, and, in fact, have received some assurances from the Senate committee that the Senate bill S. 1070 will be amended to delete the 5-year limitation. Commissioner Egan of the PHA has also stated that he has no objection to the deletion of the 5-year limitation on veteran's preference.

Also in connection with preference as between veterans and disabled veterans we feel that the bill is not sufficiently explicit. In order to avoid confusion we suggest that the preference given to disabled veterans above that granted nondisabled veterans to those having a disability of 10 percent or more.

I should like to make a brief statement on Title III-Housing Research. It is evident that a large part of the progress we have made in America has been due to the ever-continuing search for improved methods and materials in almost every line of endeavor. In the automobile industry, for example, consider how research and mass production have improved the product and reduced the price, in comparison with the first hand-built models. The same is true of radios, aircraft, household appliances, and the thousand and one items that touch our daily life. Research has been the important factor in finding new methods and materials in all these industries. But there has been little change in the housing industry. With few exceptions houses are still built largely as they were many years ago. Brick is placed on top of brick; each board is delivered, measured, cut, and nailed in place at the site. We cannot help but feel that there must be some way of improving present construction practices. If there is, and if research can find it, an adequate research program will be more than justified.

Title IV proposes a combination of loans and grants to farm owners to enable them to construct, improve, alter, repair, or replace dwellings and other farm buildings. Loans may be made to owners of adequate farms, potentially adequate farms, and special loans and grants to farm owners who cannot qualify for the above-mentioned loans. These loans may be made for a period not to exceed 33 years at not to exceed 4 percent interest. Special considerations such as annual contributions and moratoriums are included. The VFW has no special mandate on farm housing as such, and, therefore, I shall not discuss this title at length. I cannot resist, however, expressing the wistful desire that these same generous provisions could be applied to veterans generally. They would, I am sure, provide an answer to the problems which face many veterans today.

In conclusion, the VFW hopes that this committee will consider housing as a matter of first priority and will favorably report H. R. 4009 with the changes suggested in this presentation.

The CHAIRMAN. Thank you, Mr. Carter. If there are no questions you may stand aside. We are very glad to have your testimony, Mr Carter.

Mr. Ketchum, do you wish to say something?

STATEMENT OF OMAR KETCHUM, DIRECTOR, NATIONAL

LEGISLATIVE SERVICE, VETERANS OF FOREIGN WARS Mr. KETCHUM. Mr. Chairman, all I could add to the statement presented by Mr. Carter is that the position we take is based on resolution adopted by our national convention and by action of our national housing committee. In other words, we attempted to harmonize our existing position with respect to housing, to this bill, which is presently under consideration by the committee, and we have made certain recommendations.

The CHAIRMAN. Have you incorporated those resolutions in the testimony?

Mr. KETCHUM. Yes, sir.

The CHAIRMAN. I am sure this committee will consider them. Thank you very much, Mr. Ketchum.

Mr. KETCHUM. I am sorry, Mr. Chairman, that we had to testify when we know the committee had to get on the floor of the House. It makes it a little awkward. But we appreciate the privilege of being heard.

The CHAIRMAN. If you desire to do so, we will be glad to give you the opportunity to return.

Mr. KETCHUM. Thank you.

The CHAIRMAN. Withont obiection the statement of Frank D. Scriven, cochairman, AMVETS National Housing Committee, will be inserted in the record.

(The statement above referred to is as follows:)

TESTIMONY ON HOUSING BEFORE THE HOUSE BANKING AND CURRENCY COMMITTEE

BY FRANK D. SCRIVEN, CO-CHAIRMAN, AMVETS NATIONAL HOUSING COMMITTEE

Gentlemen, it is a pleasure to be representing AMVETS and as cochairman of the AMVETS National Housing Committee. Working, with me as cochairman is your own Member of Congress, the Honorable John Kennedy of Massachusetts.

We would first like to discuss the administration bill covering slum-clearance and low-rent public housing.

There seems to be a general acceptance on the part of both the Democrats and Republicans of the necessity of furnishing the Nation with public-housing and slum-clearance legislation. AMVETS' stand is that there is a deficiency in Public Law 901, passed at the special session of Congress last year, in this regard, and we favor the approach now being made by both parties.

In general, most of the bills providing slum clearance and public housing have AMVETS' approval, except in one regard. AMVETS feels there is failure to provide adequate cost limitations. Our convention-adopted suggestion in regard to construction cost is as follows:

'Construction costs for low-rent housing units shall not be in excess of average costs of similar construction in the community at the time of such construction.”

Under Section 203, there is a cost of construction and equipirent limit of $1,750 per room. This gives no specification as to the size of said room, nor what constitutes a room, and we believe that, where there is a limit of cost, that limit becomes the minimum cost as well as maximum cost. On an advertised competive-bid basis, we suggest that a local board examine all bids to determine whether they are in line with construction costs at the time such bids are made. General construction prices are softening at this time, and we feel that a dollar limit per roon would be disadvantageous. The fact that many of the other bills dealing with public housing have variable amounts as to the room-cost limit indicates that there is no adequate basis on which this can be judged, as localities vary in regard to costs and types of construction, and it is entirely a regional problem.

The AMVETS convention mandate regarding low-rent housing reads: "That we urge Congress to provide 125,000 low-rent housing units, better known as publichousing units, in each year for a period of 4 years."

As the cochairmen, both members of the convention housing committee, are aware of the feeling of that committee, we should state at this point that we feel that the wording of the resolution should be interpreted as 'minimum requirements in public housing, and not a maximum, so that bill calling for numbers of units in excess of the 125,000 meet as much with our approval as the set number.

The convention mandate further reads: "To further implement this program and prevent a shortage of housing materials, we urge Congress to create an investigative body to check commodity-control operations in an attempt to discover illegal exporting or improper allocating of shortage materials in housing. The same committee should explore the practicability of importation of construction materials in shortage; the salvage and return of scrap steel, and the importations of other raw materials implementing the efforts of the manufacturers or the suppliers of the construction needs."

While AMVETS accepts in principle H. R. 4009, it has several points of issue with Senator Maybank's bill, H. R. 1938. These point of issue are caused by the bill's not making adequate provision for the functioning of the Servicemen's Readjustment Act under the bill's program. The fact that the Servicemen's Readjustment Act in its home-loan guaranty provisions is administered by the Veterans' Administration should not cause the Housing and Home Finance Agency to attempt to vitiate the purposes of the act—as it apparently does in H. R. 1938. We recognize that agency jealousies exist in Washington; but, when their existence disrupts the veteran-home program, we start yelling.

May we preface our remarks on this matter by making the statement that activities of the Federal Reserve Board can nullify legislation dealing with interest rates on Government-insured mortgages Money is a commodity; and, as with all other commodities, it is susceptible to the market. The Federal Reserve Board is in a position to affect this money market more than any other one factor. To illustrate this point, the Board lowered support price of Government bonds, resulting in increased yields. This tended toward increasing yields on municipal and corporate bonds, drawing investment funds away from a legislated percent-yield mortgage market-that is, that mortgage market of Federal-insured mortgages. If the Board raises rediscount rates, on the other hand, there is a general tightening of credit. And all of these actions have a direct action on the marketability of federally insured mortgages.

How, then, does H. R. 1938 disrupt the veteran housing program? We shall attempt to show you the manner.

We have been specific in our demands that interest rates be kept at as low a level as possible. We have not changed our opinion. Several months ago AMVETS disapproved a rate increase of one-half of 1 percent, from 4 to 4142 percent, on the Servicemen's Readjustment Act. AMVETS today would oppose such an increase, were it not for the fact that the intent of the act—to provide the veteran with a 100 percent mortgage market-is being completely bypassed. In many localities, the veteran is being forced into first-mortgage FHA loans with second-mortgage GI loans. This has been costly to the veteran, and has made him pay approximately 4.9 percent interest on his total loan, along with other extra costs and with two Governmental agencies involved.

H. R. 1938 provides 412 percent interest under title II, as compared with 4 percent under the Servicemen's Readjustment Act. Both provide loans for individual homes, and investors would naturally prefer title II at the additional 12 percent than the GI loan. It leaves the GI loan uncompetitive in the money market.

Under the new section 213, replacing section 207, dealing with cooperatives, the interest rate is unchanged at 4 percent. But-and this is a big but-if there is no market for the 4 percent money, the Government will loan direct. So the act caters to the cooperative by providing a direct market here, but fails to provide one under the GI bill. Isn't this discriminatory?

At the same time, under section 610, it is proposed that permissible interest rate can be increased from 4 to 5 percent. This covers disposal of Governmentowned property. Isn't this a tacit admission that the present 4 percent market is drying up and increased rates are essential, yet they are providing for no increase in the GI bill? AMVETS further feels that the increase authorized under section 610 is indisputable evidence that the Government is catering to the lending institutions' desire for increasing interest returns.

Under section 301 of H. R. 1938, a 100 percent secondary-mortgage market is denied, except in certain cases. Under the GI loan they will supply a secondary market of 100 percent if the amount of the mortgage does not exceed $7,000, and there is no provision for retroactively picking up paper which lending institutions have absorbed under no secondary market or a limited one. AMVETS was specific in its convention resolution : "Increase to 100 percent from 50 percent secondary market for GI home loans and FHA-insured mortgages, to be retroactive and effective as of April 1, 1947.” This law, then, wants to tell the veteran what he can pay for a home, even though he has presumably adequate protection in section 501 (3) of the Servicemen's Readjustment Act, reading: “That the price paid, or to be paid, by the veteran for such property or for the cost of construction, repairs or alterations, does not exceed the reasonable value thereof, as determined by proper appraisal made by an appraiser designated by the Administrator." If this bill were intended to attempt to lower building costs, why is not a similar clause applicable to all loans-not just GI-for it seems adequate? AMVETS' contention is that the law pays lip service only to lowering building costs, and cares little or nothing for the under-the-table transactions, or total cost to the buyer.

If all of the above discrepancies mentioned in this bill do not total up an attempt of the HIFA to make ineffective the GI bill program, then AMVETS have been misled. We say that FHA resents the intrusion of VA in their private bailiwick of insuring home mortgages. They are certain, too, that any attempt to remove the mortgage-guaranty provision of the GI bill would meet with such mass protest from all veterans that it would not be practical. So they are stifling it by making it inoperative.

We feel that there are several methods of approach to this problem. Senator Sparkman's bill (S. 686) provides a direct-loan method and a price limit 100 percent secondary market, but has no retroactive features.

Senator Thomas, in S. 616, has provided an unlimited secondary market retroactively (as AMVETS specifically requested) ; does away with the FHA section of the GI bill which has been saddling the veteran with two mortgages and a rate of about 4.9 percent interest and additional charges, and provides a maximum rate of 412 percent making the GI loan as attractive as the competing FHA. It further provides a flexible interest rate as the market demands, which sounds like a practical approach to keep the GI bill operative.

There have been no bills (that we know of) offered that might be equally effective. Other bills might reduce interest rates on title II to 4 percent, so that it would be noncompetitive with the GI bill, with possibly only secondary-market provisions for the GI bill. Another extreme approach would be the elimination of those sections under title II entirely—that is, 203a, 203b-2-d, and 203b-2-c, and let the GI bill alone enjoy Federal insurance and secondary market, the interest rate to be determined.

If the intent of the GI bill is to be followed through by this Congress, it is essential that practical thinking be given to the manner in which it can be implemented. To do this, it must be kept in mind that long-term lending institutions are not going to cut their own throats by buying 4 percent paper when an adequate supply of 412 percent is available. The definite downward trend of the GI home loans guaranteed is indication that the bill is not working. And the statistics show that GI's are 41 percent of them now getting two mortgages at about 4.9 percent interest, against only 2 percent of them getting this treatment when he bill was first being used.

Lending institutions generally believe in the down-payment method of home purchase--a buyer's equity, they call it. The GI bill makes no such demands. And they don't like it, because it is establishing a precedent that is inimical to their thinking. They completely ignore the fact that the veteran's equity was in the shape of service to his country-not cash. AMVETS feel that it is the duty of Congress to see that the GI bill works, and not let special interests circumvent its intent.

The extension of section 608 as provided by the bill should supply a fair amount of rental housing ranging from $65 a month upward. But it still leaves unfilled the demand for rents from $30 to $65. While AMVETS has no specific mandate from the convention in this regard, the present cochairmen of the Housing Committee would like to suggest the use of the accelerated depreciation method similar to that used to accomplish the construction of a large number of plants during the war. Our proposal in brief is this:

In normal times, there is a direct ratio between the per room construction cost of a multiunit dwelling project and the rental of such units on a monthly basis. Today, the same relationship exists, but, because of high construction costs, the rentals that must be obtained to show the investor a fair return, are so high that they are beyond the reach of the great majority of tenants. In order to supply housing at reasonable rentals, builders would either have to lower the cost of construction by 30 to 60 percent (depending upon the locality), or, if they are to be encouraged to build at moderate rentals, they would have to be subsidized in some fashion. Subsidy, through accelerated depreciation of the difference between normal per room construction cost and present-day construction costs, would solve this problem.

Illustratively, a Government housing agency would determine that there was a need in a given community for 4-, 5-, and 6-room apartments at $10 to $12 per room. Let us say, for the sake of example, that building costs in that particular community have increased since 1939 by 50 percent. The builder would be permitted to take normal depreciation at 242 percent, plus an additional 10 percent depreciation for 5 years. The building, of course, at these rentals and with this depreciation factor, would show a loss each year for 5 years. The individual owner, or the corporation, would be permitted to use this loss for income-tax purposes to offset other profits. At the end of 5 years, and for the remainder of the life of the building, the builder would only be allowed to take the normal depreciation. To force the community into cooperation under such a plan, it might be made available only to those communities which limited the real estate taxes on the project to the original value of the vacant property during this 5year period. New York State has a comparable plan. We are presenting here, for your consideration, the means of implementing this plan, by the following legislative administrative steps: 1. The Administrative Agency (Probably FHA):

(a) Designate section or district or area eligible for emergency housing. (6) Designate type cr kind of housing required. (c) Designate percentage of construction costs of housing in a particular

section, district, or area eligible for certificate of necessity. (d) Designate effective date for application of types construction eligible. 2. Treasury Department (Internal Revenue Code): (a) Extend section 124 of the Internal Revenue Code to provide for the type

of facility described above. (6) Limit period of write-off to the first 5 years after completion of con

struction, (C) Certificates are not transferable. 3. State and Local Taxing Authorities : (a) Provide limitation of taxes on improvements to the original value of

vacant property during the period of the certificate of necessity when values of improvements are subject to taxes.

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