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by the local governing body prior to the closing of a preliminary loan contract, and a demonstration by the local public housing agency that there is a need for low-rent housing in the locality which is not being met by private enterprise. It would strengthen further the statutory requirements restricting occupancy of public housing to lowincome families and barring any possibility of competition with privately owned housing of adequate standards. It would require the local agencies to set maximum-income limits for admission to public housing and for continued occupancy, and would require annual reexamination of tenant incomes. In establishing maximum-income limits for admission, there would have to be a gap of at least 20 percent between the upper rental limits for admission to the public housing project and the lowest rents at which decent private housing, new or old, is generally available in the locality involved.

Low-income families displaced by slum-clearance projects would be given first preference for admission to low-rent housing. Among eligible applicants, veterans of World War II would be given preference for a period of 5 years, with disabled veterans having first priority

In order to permit the development of public housing projects at prevailing construction costs and more adequate accommodations for larger families, the pending bill would increase the maximum construction cost limitations in the present act, and would place these limits on a per-room basis. At the same time it retains safeguards assuring economical and unelaborate construction. The fact that those safeguards were observed in the prewar public housing program is illustrated by the low level of development costs achieved—$4,649 per dwelling, including land and all site improvements and utility installations.

By various aniendments to the financing provisions of the United States Housing Act, title II, would make it possible to carry out substantially all the permanent financing of projects through the sale of local housing authority bonds to private investors rather than through borrowings from the Federal Government. In view of the improved security for local bonds which would result from these amendments and in view of the substantial flotations of local issues which would result, the pending bill at another point would broaden the market for these issues by authorizing national banks to underwrite them and invest in them without restriction as to amount. As fully explained in the statement which Commissioner Egan has filed with your committee, this seems essential in order to secure the lowest possible interest rates and thus reduce costs.

Title II also recognizes the need for low-rent housing on the part of low-income families in rural nonfarm areas and assures their equitable participation by requiring that 10 percent of the authorizations for annual contributions be reserved for rural nonfarm housing for a 3-year period after those authorizations become available.

With respect to the total authorization, title II would authorize the President to increase the annual rate of construction to not more than 250.000 units in any 1 year or to reduce it to not less than 50,000 units, if he finds such action to be in the public interest after advice from the Council of Economic Advisers as to the effect of such action on conditions in the building industry and on the general economy.

After completion of the total program authorized in title II, the maximum cost to the Federal Government through annual contributions to the projects assisted under the program could be $400,000,000 a year. On the basis of the experience under the present program, it is anticipated that actual payments of contributions would not average more than two-thirds or three-fourths of the maximum amount. However, even the maximum rate of contributions would not exceed 1 percent of the present Federal budget. In the light of the direct public interest in achieving decent housing conditions for the Ameri can people, this would be a modest price to pay for substantial alleviation of the plight of families who otherwise would be forced to continue to live in the degrading, repressive and unhealthy surroundings of the slums.

Mr. Brown. You referred to national banks financing these loans. Many communities do not have national banks but only have State banks.

Mr. FOLEY. I am afraid I did not understand your question.

Mr. Brown. You refer to the amendment regarding national banks. What about State banks?

Mr. FOLEY. I will ask our counsel about that.

I am informed that the State members of the Federal Reserve bank would be included in the amendment, which is section 502.

Mr. PATMAN. How would they carry these bonds! They would be due over a long period of time. Suppose the bank should need its money, could they rediscount them at the Federal Reserve bank?

Mr. Egan. No; they could not, Congressman.

Mr. PATMAN. You would be loading the banks down with paper that would not be liquid.

Mr. EGAN. They could resell them to their clients, I think.
Mr. PATMAN. But not rediscount them?
Mr. Egan. That is right.

Mr. FOLEY. That has been the experience, as a matter of fact, in those institutions which have purchased them.

Mr. PATMAN. What rate of interest will these private financial bonds bear?

Mr. Egan. In actual offerings, we have gotten interest rates as low as 114 percent in some instances. Under present conditions we anticipate rates slightly under 2 percent, depending upon the market at the time the offerings are made, Mr. Patman.

Mr. FOLEY. Shall I go on, Mr. Chairman?
The CHAIRMAN. You may proceed, Mr. Foley.

TITLE III-HOUSING RESEARCH

Mr. Foley. The fourth major provision of the pending bill is contained in title III. That would authorize the Housing and Home Finance Agency to undertake a comprehensive program of housing research. This provision is the outgrowth of the several exhaustive housing studies conducted by committees of Congress over the past several years. All of those studies highlighted the plain fact that a major obstacle to housing progress is the high cost of production. All of those studies concluded that we must apply that increased knowledge to a continuing attack on the cost problem.

The central fact about housing research is that every group that is concerned with finding a solution to the housing problem needs the kind of help that such a program can provide. That applies to the home builder who is seeking ways to redirect his output to a larger volume at lower prices to avoid the withering up of his market, and for the people he employs, who want stable employment at good wages. It applies to the mortgage investor who seeks a safe outlet for the funds in his charge and for the producer or distributor of building materials who must now answer the question of plant modernization or expansion with hesitation in view of the past violent fluctuations in residential building. The leaders of our communities particularly need help, for it is they who see at first hand the effect of bad housing on their communities. And lastly, the Federal Government must itself establish the factual basis for selecting the wisest actions possible in its attack on this complex problem.

The housing problem has so many facets that it will not do to place all our hopes on any one field of action. It is my belief that Federal housing research must be broad enough to disclose the possibility of constructive action in every field, whether it be engineering, financing, management, labor, or local or Federal administration. It must analyze all of the factors that in any way impede housing production, add to its cost, prevent the improvement of our housing standards, or cast doubt on the value of housing as an investment. The formula of progressively higher volume and lower unit costs is too successful in too many other American industries not to work in home building.

Indeed, I feel it is one of the major functions of the Federal Government to investigate and point the way toward removal of whatever unjustified factors are preventing industry from bringing the benefits of that formula to the American people in their search for adequate housing. The basic purpose of this whole research activity should, I believe, be to see that the benefits of improved technology, simplified building codes, and the like are made available through the homebuilding industry to the American people in terms of better housing, more stable employment, and a more stable total economy.

We also need to know more about home building as a businesswhat factors tend to produce stability and growth, and what factors inhibit them. We need to understand better the working capital requirements of building enterprises of various sizes, as well as the management and labor problems that various classes of builders experience. We need to devise better ways of applying good design and improved construction techniques and standards to the low-cost house. We need to find additional means of spreading these and other overhead costs over a larger number of units, thereby achieving a lower per-unit cost.

At the same time we were examining into the nature of the production operation, we would undertake design studies to find out if less elaborate and costly elements can be devised. We have examples of what can be done in this direction in the studies of roof design and septic-tank construction made under earlier limited programs. In the former case it was demonstrated that a simplified roof framing would result in a saving of about $80 in certain types of houses, and our research work convinced us that a better septice tank could be produced at a saving of about $150 per house. If the results of this work had been applied to only 10 percent of the new homes started in 1948, it could have resulted in cost reductions in the neighborhood of $20,000,000. Those savings would continue to be repeated year after year. We are convinced that there are numerous such items where savings can be made.

Another important research activity would be aimed at improving our knowledge of how the housing market operates. The housing industry needs to know more about the size of local markets and how they fluctuate from time to time, and what the relationships are between family income and active market demand. We especially need to expand our knowledge of the housing market in connection with the problems of minority groups.

In connection with this subject of housing market analysis, I want to emphasize the importance of establishing the community itself as the informed source of information about its housing problems. That is where the primary responsibility should rest for developing sound and well-organized data as to local needs and markets.

The practical fact is, however, that to a large extent the technical experience with local housing market analysis has been concentrated in the Federal housing agencies that have had to develop suitable methods in connection either with underwriting or war-programing activities. It seems clear that this experience should now be made available to the communities, and we propose to accomplish this through such means as technical bulletins, demonstration studies, and advisory assistance.

A third major area in which our proposed research program can make a substantial contribution is the field of statistical information, There are a number of very significant gaps in our present body of housing data. My attention has frequently been drawn to these deficiencies and to the way in which this lack of precise and complete information hampers the formulation of sound business and public policy.

Before leaving the subject of research, I want to emphasize the point that while, in finding solutions to the whole housing problem, leadership must be supplied by the Housing and Home Finance Agency, that Agency cannot by any means undertake the entire task. The fact-finding problems are too broad and too many, and we must bear in mind that what we are seeking are answers to our problems, rather than exclusive credit for finding them. That is why in the research title itself the Administrator is called upon to utilize to the fullest extent feasible the research facilities of other Government departments, and to consult with and advise those departments concerning ways and means through which their facilities could contribute additional service.

Mr. Rains. Mr. Foley, in that particular title, is it envisioned to require the adoption of national building codes?

Mr. FOLEY. To require the adoption !
Mr. Rains. Yes.

Mr. FOLEY. There is no authority contained in this bill or anywhere else, that I know of, for the Federal agency to require the adoption of a standardized or uniform code. The authority we already have under legislation passed in the last Congress with respect to code problems is to conduct the research necessary to the development of standard codes and standard practices of administration and to promote and encourage their adoption.

Mr. Rains. There would be no reason for trying to adopt a fixed code for all sections of the country and there is no such intention in this bill?

Mr. FOLEY. Nothing in this bill would require or enforce the adoption of a code.

Mr. RAINS. Very well.

TITLE IV--FARM HOUSING

Mr. FOLEY. Title IV of the bill would establish a program of finan, cial aid for farm housing through the Secretary of Agriculture and the Farmers Home Administration.

I am in full agreement with the position that an effective program for the improvement of housing conditions on the farms is an indispensable part of any national housing program. Census Bureau surveys show clearly that a much larger proportion of farm housing is in poorer physical condition than is the case in cities and towns. I am also advised that, despite the sharp rise in over-all farm income during recent years, nearly a third of our farm families have insufficient incomes to finance the construction or needed improvements to their homes and other essential farm buildings without the special aids proposed in this title.

Title IV would authorize loans, and in some cases contributions and grants, to farm owners who are unable to finance such construction or improvements through their own resources or through other sources of credit. I am not an expert on farm matters, and I understand the committee will hear testimony from the Department of Agriculture on the detailed provisions of this title.

However, I do wish to state to your committee that this proposed program, although modest in size, impresses me as a reasonable and effective approach to this special housing problem. On the basis of my experience in nonfarm housing, I am in accord with the proposition that the programs of housing aid designed to operate in cities or in rural nonfarm communities are not practicable as a means of meeting the farm housing problem and that a special program is needed to meet the peculiar problems resulting from the close relationship of farm housing and other farm structures with the farm as an economic unit. That is the procedure which would be established by this title, which would also integrate this program with the other programs of agricultural aid.

I have been authorized by the Director of the Bureau of the Budget to advise that there is no objection to the statement which I have filed with your committee or to the presentation of this statement. I have also been advised by the Director of the Budget that the enactment of H. R. 4009 would be in accord with the program of the President. It may be that we will want to file a letter with some suggested changes. (The letter referred to above follows:)

HOUSING AND HOME FINANCE AGENCY,

OFFICE OF THE ADMINISTRATOR,

Washington 25, D. C., April 28, 1949. Hon. BRENT SPENCE,

House of Representatives, Washington, D. C. DEAR CONGRESSMAN SPENCE: You will recall that when I was privileged to appear before your committee in support of H. R. 4009, I indicated at the conclusion of my prepared statement that there might be additional comments on the bill

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