HOUSING ACT OF 1949

MONDAY, APRIL 11, 1949

HOUSE OF REPRESENTATIVES,

COMMITTEE ON BANKING AND CURRENCY,
Washington, D. C.

The committee met, pursuant to adjournment, at 10 a. m., the Honorable Brent Spence (chairman) presiding.

Present: Messrs. Spence, Brown, Patman, Monroney, Buchanan, Multer, Deane, O'Brien, Mrs. Woodhouse, Messrs. McKinnon, Addonizio, Mitchell, O'Hara, Kunkel, Talle, McMillen, Kilburn, Cole, Hull, and Nicholson.

The CHAIRMAN. The committee will be in order. Mr. Foley and Mr. Egan have returned this morning to be interrogated by Mr. Mitchell and Mr. O'Hara.

STATEMENT OF RAYMOND M. FOLEY, HOUSING AND HOME FINANCE ADMINISTRATOR, ACCOMPANIED BY JOHN TAYLOR EGAN, PUBLIC HOUSING COMMISSIONER-Resumed

The CHAIRMAN. Mr. Mitchell is not here as yet, so you may proceed, Mr. O'Hara.

Mr. O'HARA. Thank you, Mr. Chairman.

I represent the city of Chicago, and some questions have been asked that may have left the impression that a greater burden should be placed upon the municipalities than the municipalities have assumed. The Chicago Housing Authority's recommendation was that every level of Government-Federal, State, and local-assume financial support for providing additional low-rent public housing, You agree with that recommendation, do you not, Mr. Foley? Mr. FOLEY. I do, sir.

Mr. O'HARA. Now, the State of Illinois has made a contribution, in 1947, providing $10,000,000 for clearance, $3,330,000 to assist in rehousing, and $6,567,000 to assist in construction. You would call that a generous appropriation, would you not, Mr. Foley?

Mr. FOLEY. I would think so, insofar as I know what the possibilities are there. I am of the impression that they are endeavoring to do all that they can.

Mr. O'HARA. And in 1947, the city council of Chicago referred to the people a bond issue totaling $30,000,000, $15,000,000 for slum clearance and $15,000,000 for the purpose of providing rehousing. That you would designate, would you not, Mr. Foley, as a generous approach?

Mr. FOLEY. I would certainly say that it indicated a keen interest on the part of the community and certainly no desire on its part to shirk its responsibility.

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Mr. O'HARA. Now, in Chicago, Mr. Foley, it is the fact, is it not, that there are 10 square miles of blight? Would you say that is approximately correct?

Mr. FOLEY. I would not know the exact mileage, Congressman, but, of course, there is a very large area of blight and slum.

Mr. O'HARA. And also that there are 25 square miles of near-blight. In all, there are about 35 square miles of blight and near-blight in the city of Chicago, which has to be attended to in the way of slum clearance and the construction of livable residences.

Mr. FOLEY. I would accept your figures as you are probably more familiar with the exact area than I am.

Mr. O'HARA. And you agree that there must be, Mr. Foley, the cooperation of the State Government, the municipal government, and the Federal Government?

Mr. FOLEY. Certainly, sir.

Mr. O'HARA. And do you agree with the statement of Senator McMahon, a year or two ago, that only the Federal Government is big enough to tackle this problem of providing decent, low-cost housing, a problem which, if left unsolved, will threaten the social foundations of the country? Do you agree with that, Mr. Foley?

Mr. FOLEY. In general, yes.

Mr. O'HARA. Mr. Foley, is there any way of solving our housing problem unless the Federal Government, through the enactment of this and other legislation, takes the lead?

Mr. FOLEY. I think our views on that have been made pretty clear in general testimony which we have already given, Congressman, and I think I might restate it very briefly, if you wish, as follows: In fact, it is very much in accord with what you have just said, namely, that it is necessary to have the highest degree of cooperation in Federal Government, local government, and all elements of the private building industry, if we are to get to a final satisfactory solution of the housing problem, and certainly the resources and the leadership of the Federal Government must be exercised to the fullest extent consistent with the decisions of Congress and the general application of the American system.

I do not think there is any question as to the attitude of the agency with respect to that question, as repeatedly stated here before this committee.

Mr. O'HARA. I notice that you state that you are the champion of private enterprise.

Mr. FOLEY. That is correct, sir.

Mr. O'HARA. And that you look to private enterprise to be an instrumentality in the permanent solution of the housing problem? Mr. FOLEY. That is true.

Mr. O'HARA. You are depending upon private enterprise?

Mr. FOLEY. Yes, sir, and this proposed legislation is based upon private enterprise progressively accomplishing more in the housing field.

Mr. O'HARA. And does this, Mr. Foley, support your thought in that matter, that when the State of Illinois and the city of Chicago have generously appropriated for the beginning of the solution of this problem, private enterprise has stepped in. As illustrated, the New York Life Insurance Co. and other insurance companies, with

the cooperation of and resultant to what local and State governments have done, are, at the present moment making their plans for the construction of low-rental residences in the city of Chicago.

Mr. FOLEY. The mayor of Chicago, in a conference I had with him very recently, advised me that there was a very active interest on the part of the insurance companies in building housing in slum areas once the clearance can take place. As a matter of fact, insurance companies particularly have previously expressed their active interest in the possibilities of housing, if the sites can be made available through such provisions as are contained in the slum-clearance section of this bill.

Mr. O'HARA. And that, Mr. Foley, is substantial and convincing proof of the soundness of your thought, that the legislation we are proposing will help to bring about the cooperation, in the fullest measure, of private enterprise?

Mr. FOLEY. Certainly it seems to me, Congressman, that it is convincing evidence, but only one of the many pieces of convincing evidence that could be marshaled to prove the contention that we have consistently and sincerely made, that the whole general approach, in this bill, is one not in opposition or tending toward the weakening of private enterprise, but in support and tending toward the strenghening of private enterprise.

Mr. O'HARA. Mr. Foley, something has been said about city codes. Do you think that city codes, in many cases, should be changed— building codes?

Mr. FOLEY. That is true.

Mr. O'HARA. But in every locality that must be left to the citizens of that locality and to local government, must it not? They all have their peculiar local conditions to consider; is that not correct?

Mr. FOLEY. I would think, generally speaking, yes. In other words, we are not proposing, in this bill, or otherwise, that there be any authority granted to Federal Government to impose a code upon local communities, or to adopt and enforce a national code, but by the same token, the very problems involved in the development of adequate, modernized and progressive codes, and the necessity of the situation with respect to bringing about greater uniformity, across the country, in codes, creates a job which is beyond the ready solution, at least, and probably beyond practical solution, by individual communities acting separately everywhere. That, I think, fundamentally, is the basis of the authority and reason for the authority already given to us by Congress in connection with codes-the attempt to develop and to make available and to encourage and promote the adoption by communities and States of uniform codes which, in the main, are intended to be designed to promote both economy and improvement in housing. The cities are very much interested in adopting good codes and the Federal Government can furnish the kind of help they

need.

Mr. O'HARA. That is, you are not saying to any municipality: "Here is a code which you must take." You are merely submitting to the locality such suggestions as come from your experience and research leaving it to the intelligence of the officials and the people in the municipalities to adopt the suggestions to their own peculiar situations.

Mr. FOLEY. That is true, plus the developments that will come about through the extensive research in connection with codes, which Congress has already authorized us to undertake. But, again, the key point in your question, it seems to me, is whether or not such a code having been developed and agreed upon at a Federal level as being desirable, would we have any authority or disposition to impose it upon the local authorities. The answer to that is "No."

Mr. O'HARA. You are finding, Mr. Foley, that at the present time the following of your policy in that regard is bringing fruitful results?

Mr. FOLEY. I think most encouraging results thus far, particularly in connection with the point that I think you have in mind, namely, is there a widespread desire among the communities of this country to have assistance in the development of the kind of codes that will promote better quality in housing and reduce the cost of housing? Yes, we are finding that there is a very strong desire on their part, and we are receiving many inquiries for help in that direction.

Mr. O'HARA. And the municipal authorities are coming to you voluntarily for such advice and help as you can give them? Mr. FOLEY. That is true, sir.

Mr. O'HARA. That is certainly true in the case of the city of Chicago, is it not?

Mr. FOLEY. I believe so.

Mr. O'HARA. Our corporation counsel, Mr. Adamowski, has been in communication with your office and has asked for any suggestions and any help that you can give Chicago in the solving of our code problem there.

Mr. FOLEY. The people in charge of that work tell me that is true. Mr. O'HARA. Then, you are satisfied, Mr. Foley, that your work in that direction will aid materially in solving such problems as bad building codes present?

Mr. FOLEY. I am satisfied that our work in that direction will result in substantial progress. It is a long-term job-no one can solve all the code problems overnight.

Mr. O'HARA. I was very much interested in your remarks about one of the purposes of your research work-the stabilizing of the construction industry. Now, has it not been the fact, Mr. Foley, that in the past home construction has been associated too much with an element of speculation rather than being based upon fundamentally sound business planning?

Mr. FOLEY. Well, there are certain implications possible in your question that I think would need a lot of study and careful answer, so that the wrong impressions not be conveyed. But fundamentally, I think what you are asking me and correct me if I am wrong—is whether or not the industry has not been on such a fluctuating and unstabilized basis that the element of speculation has necessarily entered very largely into the production of housing. The answer to that, I think, is "Yes" because there has been no basic set of data, no basic plan, no long-range, comprehensive approach in which the resources of private enterprise and of the Government are teamed up. It has resulted in this up-and-down situation-the overbuilding in certain parts of the country, and in certain price ranges, the improper distribution of the types of housing produced, the lack of gearing of pro

duction to need. One of the very important results that can come, and we believe will come, from the type of research program here proposed, is the development of the necessary data and information out of which a long-range program can be developed by industry and Government together so as to avoid these very wide fluctuations to a large extent. I think that covers the point you made, Congressman.

Mr. O'HARA. Mr. Foley, there was much construction in the 1920's, was there not?

Mr. FOLEY. Yes, we reached our highest point during the 1920's in the residential field.

Mr. O'HARA. And that was because speculators or some banking interests were more interested in selling bonds to people who did not have financial counselors than in supplying an existing housing need? Mr. FOLEY. I doubt whether I would be able, at this distance, to render a judgment on what the motives of the persons involved in the building industry at that time were, and I think it is quite unnecessary that I should in ordert o find a solution for the future. The fact of the matter is we had a very imperfect system at that time, even much more imperfect than we have now, particularly with reference to financing. We had even less knowledge then of what is a well-balanced housing program than we have today. We have learned a great deal since that time. The fact is, however, that we had then about as good a demonstration as we can well imagine, I think, of what results from attempting to meet a pressing housing need without the proper tools and without a long-range program and conception of how to do it. Mr. O'HARA. Mr. Foley, you misunderstand me if you think that I seek to have you criticize the motivation of someone back in the 1920's. That was not the purpose of my question. I am seeking to make a contribution which I think is sound. In the 1920's, Mr. Foley, about $15,000,000,000 of real-estate bonds were sold. They carried a yield of about 8 percent when industrials in which men with financial counselors put their money, carried a lesser yield. The bonds were readily sold, and after one issue was sold, there had to be another issue because there was a market among these people in the prosperous period when they were putting their savings into those bonds. So construction went up very rapidly. There was overtime pay. Ordinary workers, as you probably know, Mr. Foley, made as much as $250 and $300 per week. That was because of overtime, work on Saturdays and work on Sundays, so that the construction might quickly be completed and other bonds sold. It all ended with the bonds in default, the bond holders impoverished, most of the equity owners wiped out, the workers in the building trades practically idle for several years, and the construction industry stagnated.

Now, following that period came a depression and this real-estate activity which unregulated and wild financing worked into a frenzied boom, and which inevitably collapsed, contributed to that depression. It is to avoid the repetition of boom-and-bust of that sort, is it not, that you have in mind a research that will bring stability into the construction business in its relation to residential properties?

Mr. FOLEY. Yes, that is true, Congressman. Through research and the combination of other provisions, particularly those contained in this bill, I believe that there will result a situation out of which there will be much, much less likelihood of the depressed conditions which came about in the 1930's.