be at work on that activity, the sooner we can bring it to bear upon the basic reasons for high cost of production in housing. Mr. WOLCOTT. That takes a matter of months?

Mr. FOLEY. It will take many months before you get the final results from it.

Mr. WOLCOTT. What can Congress do now immediately to reduce the cost of housing, if that is the reason why we are not getting full production?

Mr. FOLEY. That, I think, is the basic reason. The real core of the housing problem is, and has been for many years, the fact that it costs too much. It costs too much in relation to the income of the people who have needed it.

Mr. WOLCOTT. What can we do about it, immediately?

Mr. FOLEY. I do not know that Congress can do anything to immediately bring down the cost of housing unless, of course, you are willing to go to the matter of controls and the setting of prices, and so on. That is not proposed in H. R. 4009. Nor do I think that it is necessary for housing at this time.

Mr. WOLCOTT. Are you advocating the subsidization of private enterprises to get full production?

Mr. FOLEY. I do not think that would reduce the cost of producing housing, Congressman. It might make it possible to reduce the sale price of it to the consumer.

Mr. WOLCOTT. That is it.

Mr. FOLEY. Again I think what we must do is bring about the solution of the basic problem, a reduction of the cost of housing; of the cost of producing, so that the cost of producing it—and presumably a better house for either selling or renting-will be more in accordance with the paying ability of the people we are concerned with. The people we are concerned with, outside of the people of the lower-income group, for whom we propose a subsidy through public aid, are those in the great mass of the market, commonly referred to as the middle income.

Now bringing down the cost of production is finally the answer. I think there are many helpful indications right now. There are some indications of reducing costs right now. Some materials are down in price. Whether they will remain down, of course, I am not prophet enough to say with certainty, but I believe they will. There is a growing efficiency in production, both in labor and management. There is certainly a very strongly growing recognition throughout the industry of the necessity for reducing costs and I think that is the first essential.

It is extremely difficult to bring about a realization of that necessity in all the various elements of the industry and has been during the past 2 years when in the postwar shortage it was possible to sell at almost any price because of compulsion of seeking shelter.

Mr. WOLCOTT. That is not true now.

Mr. FOLEY. It is less and less the case. This campaign we are conducting now under the leadership of the Housing Agency and with the cooperation of most of the elements of industry throughout the country, or what we call the economy housing program, for want of a better name, is beginning to show some real results: some development of means of reducing costs locally and increasing efficiency and

so on. I think the situation is encouraging in that respect. I do not think there is any likelihood of there being suddenly overnight, or within a matter of a few weeks, or even a matter of a few months, so great a reduction in the cost of housing that it will solve this problem we are talking about, but it will bring about amelioration of situation. Mr. WOLCOTT. What could we do immediately to encourage the development of multiple dwellings and apartment houses in big cities? Mr. FOLEY. The real problem there again, Congressman, is not the production of multiple dwelling units per se, but the production of multiple dwelling units at relatively lower rent than is presently being produced.

Mr. WOLCOTT. Short of subsidy, what can we do?

Mr. FOLEY. I do not know. I have no ready answer for that question, Congressman. If I did have, I would certainly be up here with a bill requesting action upon it. I do not know. I think it is one of our most serious problems. We are studying every proposal that comes along and out of them we may develop something, but, again, the key solution to that question is bringing down the cost of producing that unit, rather than trying to find some way of supporting the high cost and still making it possible for the public to absorb it.

Mr. WOLCOTT. What can we do immediately, short of subsidy, to bring down the cost to the ultimate purchaser?

Mr. FOLEY. I think I have already given you the answer to that, Congressman Wolcott. I just do not know of any action that Congress can take that will bring down the cost of production. There are various actions Congress can take that will help to absorb the cost to the public but discussing the key problem, the cost of production, I do not know of any, other than the one I mentioned a while ago.

Mr. WOLCOTT. About the only way we could do that would be to subsidize the difference between what the home owner can afford to purchase for, and the cost of production?

Mr. FOLEY. Yes. That would be an action, you see, to absorb the cost of production rather than to reduce the cost of production.

Mr. WOLCOTT. Do you have any estimate to what that sum would amount to? How much would we have to appropriate?

Mr. FOLEY. I am afraid that is a pretty large field to work on through one question. I think it would require a lot of study. If the Congressman wants an answer, we will try to develop one.

Mr. WOLCOTT. I think we all agree it would run up into the billions. Mr. FOLEY. If I understand your question correctly, I think it would, Congressman.

Mr. WOLCOTT. My question was aimed at this situation: a person cannot afford to buy a house or cannot afford to pay the rent which is necessary to finance the construction of multiple dwellings. One remedy for that and about the only remedy for that, as you say, would be for the Congressman to appropriate enough money to bridge that gap between what the purchaser can afford to pay and what the construction demands. That would run into many billions of dollars. Mr. FOLEY. It would run into a lot of money, if you are trying to figure out the amount of money necessary to bridge the gap between the paying ability of certain groups of people, who would have to be

defined, and the production of rental housing in areas which you would have to define, because costs differ, at present costs. I am unwilling to assume that present cost of production must continue.

Mr. WOLCOTT. You would not think it would be feasible for the Federal Government to bridge that gap through an appropriation of money?

Mr. FOLEY. I would certainly want to figure out much more exactly than I can from this brief discussion, what would be involved in it before I attempted to answer that question.

Mr. PATMAN. Mr. Wolcott asked you what could be done immediately in bringing down the cost of housing. Have you given consideration to cooperative housing? I know that recently a number of employees organized for the purpose of acquiring a large tract of land out here at Glenn Echo, and they are putting probably 200 residential units on that land, either with 4 units to the building or 16 or 32, and by going in together that way they are buying their materials at wholesale prices. The way we do it now, we are paying retail prices for everything except public housing, as I understand it. Do you not think you can bring down the cost of housing immediately by making it possible for more people to go in together that way and build together that way and get the benefit of the lower prices?

Mr. FOLEY. That is one of the things I had in mind when I said to Congressman Wolcott I was unwilling to assume a continuation of the present cost of housing. That is one of the ways we are now proposing in S. 712, which I said previously I thought would be helpful if passed by the Congres. I believe the same provisions are in H. R. 1938. It is a companion to Senate 712. I remember that because I testified on it. There we make certain proposals with reference to cooperatives. Expansion of authorities we already have.

Mr. PATMAN. Do you give veterans any preference in that bill, Mr. Foley?

Mr. FOLEY. Yes.

Mr. PATMAN. Do you have to have a certain number of veterans in a certain project in order to get preference?

Mr. FOLEY. I believe it is 80 percent and then they can get 100 percent loans.

Mr. PATMAN. Would you be in favor of changing that to where there would be no certain percentage required and if there was just one veteran in the project he would still get the benefit of it but the nonveterans would not, but at the same time they would not have to shop around and try to get enough veterans to qualify?

Mr. FOLEY. I think there would be a goodly amount of adminstrative difficulty in attempting to do what you suggest, particularly if I understand you correctly, in applying it to a rental-type project. Mr. PATMAN. I am talking about purchase, now; I am talking about them owning their own homes. Does S. 712 contemplate only rental housing or home ownership?

Mr. FOLEY. As a matter of fact, Congressman, in what you are talking about, building cooperatively for sale to members

Mr. PATMAN. No, they are building themselves.

Mr. FOLEY. But they become individual owners?

Mr. PATMAN. They become individual owners of the residential units.

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Mr. FOLEY. In that situation the individual veteran would have the opportunity presently of getting a 100 percent loan through the provisions of the Veterans' Administration.

Mr. PATMAN. That is only to build a separate house, though, is it not?

Mr. FOLEY. Yes.

Mr. PATMAN. I am now talking about going in together and building an apartment house if he wants to. If 100 of them want to build an apartment house large enough to shelter 100, why shouldn't the veteran have his preference there just as in any other place?

Mr. FOLEY. I do not think that is possible under present legislation. Mr. PATMAN. I know it is not. I am asking you if it would be all right if we changed the law.

Mr. FOLEY. I would like to study that. I do not know what the difficulties would be.

Mr. PATMAN. Have you examined H. R. 2811?

Mr. FOLEY. Only briefly.

Mr. PATMAN. It is the bill prepared by the American Legion. Your people were consulted, whether you were or not, about that bill, and it contemplates the purchase and rental of homes by veterans or nonveterans, and the nonveterans would get insurance loans up to a certain amount, but the veteran would get 10 points more and whether there is one veteran in the project or 95 out of 100, each veteran would get this advantage.

Mr. FOLEY. I did not know there was that distinction in that bill. Mr. PATMAN. You will find it there, yes.

If we had legislation like that, immediately people would have something in common and would begin to make plans to build houses because they could buy their materials so much cheaper. Materials have gone down considerably recently. I refer to lumber in particular. It has gone down, I expect, 25 percent or more, has it not? Mr. FOLEY. I think generally about 7 percent.

Mr. PATMAN. In the New York Times of Monday, I believe, there was an article about the reduction in price of lumber of different grades and I thought the reduction was much greater.

Mr. FOLEY. It probably is in some grades but generally the reduction is about 7 percent.

Mr. PATMAN. The article said the peckerwood mills have gone out of business, they do not have any business any more, indicating that there is a good supply of lumber on hand.

Mr. FOLEY. I think the reference in that article to the reduction was the wholesale price at the mill. The reduction is in the mill price rather than in the final figure, which is usually different.

Mr. PATMAN. Do you not agree then, Mr. Foley, that if we have legislation of that type which will encourage people to own their own homes and pay for them like rent, that we could get something done immediately in the way of starting more houses?

Mr. FOLEY. To the extent that a cooperative effort on a nonprofit basis, which is usually the chief factor in saving, can be brought to bear, yes, it produces a saving, of course.

Mr. PATMAN. Of course we are not considering that bill now, but we will consider it and the chairman expects to give us a hearing on it sometime after the recess. We are encouraged to believe he will, at

least. I hope you will acquaint yourselves with its terms and provisions and be in a position to testify because we would like to have your expert advice on it.

The CHAIRMAN. What do you consider the normal shortage of housing in the United States?

Mr. FOLEY. It would be difficult to give you a figure on the current shortage. There are about 6,100,000 substandard houses presently being occupied, I believe. I believe there are two or three million doubled-up families. The determination of how big a shortage at a given moment might be would depend upon your definition of what you want to accomplish. The estimate as between now and 1960-and we have provided in our statement detailed figures on that as to what would be needed to meet the housing need and bring about a correction substantially of the substandard situation and the doubling up situation-it would call for an average of a million and a quarter to a million and a half dwelling units a year in production. We probably will not achieve that increase in production immediately, so we will probably have a lessening strain as time goes on.

I believe that is the best I can do in answering that question at the present time, Mr. Congressman.

Mr. WOLCOTT. What is the normal doubling up?

Mr. FOLEY. I do not know that I can give you an answer because I do not know what might be considered normal in that situation. I understand that before the war we had about 1.5 million a year ordinarily of doubling up.

The CHAIRMAN. Where are the shortages in building materials? Are there still some shortages that prevent construction?

Mr. FOLEY. Presently, Mr. Chairman, I would say there are no materials that are holding up the building program generally in this country. There are some spotty situations in which one or another material may be temporarily short and may cause a little lengthening of the completion time, but the situation that existed 2 years ago in which there were critical shortages of many materials, so the average building time for the small house ran up to 8 months, 9 months, or 10 months, whereas normally it should not be more than 3 to 4 months, that situation is gone.

The CHAIRMAN. Has not the production of these materials been increased greatly up to the present time?

Mr. FOLEY. They were actually increased greatly during the last 2 years and, I think, reached a peak of production last fall. The interesting thing about that is that during those 2 years we had a constantly increasing production of housing. Last year was the second highest year in our history in starts. We had to start with a situation where the pipe lines were practically empty. The production record from building materials is rather remarkable during that period, in that it supported that near-record production of housing and at the same time filled up these pipe lines so that we cut down the completion time as sharply as I have already pointed out. It seems to me to argue very clearly that we have the productive capacity in materials for a larger production than 1,000,000 houses a year, which is contemplated.

The CHAIRMAN. Is that not the answer to the whole question, if you increase production, you lower cost?

Mr. FOLEY. I think that is true.