I am afraid under this provision, limiting it to $7,500 that the builders are going to skimp on the room count and the room size, in the elevator-type structures, and by increasing it-if we say 17 percent, then the total cost should be raised 17 percent. Otherwise you will find more efficiencies and small one-bedroom apartments with small sized kitchens, which they must put in in order to build at that cost. And if given a realistic price they could and would want to put in bigger apartments.

5. We are opposed to the proviso that present statutory mortgage limits would continue unless the President has prescribed higher limits. These higher limits are needed now and should be incorporated in this bill.

Clarification of present statute: In the President's Advisory Committee on Housing report, on page 40, recommendation No. 14, reads as follows:

Your subcommittee recommends that section 207 of the present statute be amended to clarify the authority of FHA to insure loans up to 90 percent of value but not in excess of $7,200. The statute is presently interpreted to restrict this special aid to projects in which all units have two or more bedrooms. The subcommittee recommends that this be changed to projects in which the average number of bedrooms is not less than two per unit.

This is part of the bill that you passed last year. The FHA has interpreted it to mean if there is only one 1-bedroom unit in a project and all the rest are 2 bedrooms it would still go on the 80 percent basis, rather than averaging it as I am sure you gentlemen intended it to be.

Title II, section 128: 6. We are in favor of eliminating any termination date on this section as we feel it fulfills a definite need in the rental field.

The construction industry in this country has grown far beyond the position it formerly occupied and is now one of the most important industries in the United States today. I include all phases of construction in this category, housing, commercial, road building, dams, and general construction which takes in construction of public buildings, schools, defense factories, and so on.

The economic growth, health, defense, education and wealth of this country are all directly dependent on this industry, yet, the Government does not fully recognize or make full use of the mighty, but now disassembled arm.

A Department of Housing and Construction should be set up and a new cabinet post of Secretary of Housing and Construction created. I know this is not pertinent to this bill, but I felt by bringing it to the attention of your Action Committee, at this time, that the movement would start. The choice of a Secretary of Housing and Constuction is ready-made and proven in the present Housing Administrator, Mr. Albert Cole.

I again thank you for your consideration.

The CHAIRMAN. Any questions, Senator Sparkman?

Senator SPARKMAN. No.

The CHAIRMAN. I think your statement is very clear, and it speaks for itself.

You make some recommendations. I don't know whether they are good or not, but we will certainly go into them. We are going to have them analyzed and we will consider each and every recommendation made by our witnesses.

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Mr. BIALAC. Thank you very much.

The CHAIRMAN. We will now stand in recess until 10 o'clock tomorrow morning, at which time we will have the following witnesses. United States Savings and Loan League, National Association of Home Builders, Disabled American Veterans, and Ralph Perk, councilman, city of Cleveland.

We will now stand in recess until 10 o'clock tomorrow morning.

(Whereupon, at 11:55 a. m., the committee recessed to reconvene at 10 a. m., Tuesday, March 23, 1954.)

HOUSING ACT OF 1954

TUESDAY, MARCH 23, 1954

UNITED STATES SENATE,

COMMITTEE ON BANKING AND CURRENCY,

Washington, D. C. The committee met, pursuant to recess at 10 a. m., in room 301, Senate Office Building, Senator A. Willis Robertson, presiding.

Present: Senators Capehart, Beall, Maybank, Robertson, Sparkman, Frear, and Lehman.

Senator ROBERTSON. The hearing will be in order. The first witness this morning is Mr. Charles E. Foster, representing the Disabled American Veterans. We will be glad to hear Mr. Foster.

STATEMENT OF CHARLES E. FOSTER, ASSISTANT NATIONAL DIRECTOR OF LEGISLATION, DISABLED AMERICAN VETERANS

Mr. FOSTER. Senator Robertson, I am Charles E. Foster, assistant national director of legislation, Disabled American Veterans.

We appreciate the opportunity to appear before you relative to our position on S. 2938, the Housing Act of 1954.

Our interest in this bill is confined to those provisions which have a bearing, directly and indirectly, on the home loan program of the Veterans' Administration, and the housing preferences afforded veterans by existing law.

In enacting Public Law 346, commonly known as the GI bill, together with its amendments, the Congress has enabled approximately 3.25 million World War II and Korean veterans to acquire residential and farm dwellings for themselves and their families. Time has proven that the home-loan provisions of the GI bill has been both a social and economic gain to the Nation as a whole.

Socially, because it has enabled millions of young veterans to start their families in the environment of a new home; economically, because it has been a stimulus to the building trades, and the repayment record of these veterans' loans is without equal in the history of lending institutions.

At the present time, there are still many millions of World War II veterans and Korean veterans who are now, or shortly will be in the market for homes or farms under the same credit terms. The DAV is alarmed that the amendments to title II of the National Housing Act, as proposed by S. 2938, will impair the credit preference veterans now enjoy by extending virtually the same preference to nonveterans as well.

In other words, if the Congress extends this credit preference, as provided in the bill, to everyone, the preference will cease to exist.

As a veterans' organization, we are irrevocably committed to the proposition that veterans are a special class. Operating on this premise, we must necessarily oppose the cancellation of a veterans' preference by the somewhat unique approach of extending such preference to everyone. We may be criticized that this is a selfish position to take, but as an organization representing America's wartime disabled, we sincerely feel that we have no alternative.

We are likewise opposed to section 201 of the bill, beginning on line 9, page 40. If enacted, it would authorize officials of the execu tive branch of the Government to regulate the maximum interest rate which may be established from time to time on residential and farm mortgage loans guaranteed by the Veterans' Administration.

The section provides that the rate of interest may not exceed 21⁄2 percent, plus the annual rate of interest determined by the Secretary of the Treasury by estimating the average yield to maturity on outstanding marketable obligations of the United States having remaining maturity of 15 years or more, adjusted to the nearest one-eighth of 1 percent.

The DAV vigorously opposed the increase in the rate of interest of GI-guaranteed home and farm loans from 4 to 42 percent. We have the utmost confidence in the elected representatives of the people serving in the Congress of the United States and deplore the delegation of authority by Congress to officials in the executive branch of the Government to tamper with the interest rate on GI home loans. We have to recognize that such officials are far more susceptible to pressure from groups seeking an increase in the interest rates and we sincerely believe that if the Congress had not delegated authority to the Administrator of Veterans' Affairs and the Secretary of the Treasury to increase rates of interest on GI home and farm loans, that the rates would still be 4 percent.

If the provisions of section 201 had been in effect during the calendar year 1953, the maximum interest rate on GI loans could have been 514, rather than the prevailing 4 and 42 percent. On the basis of the number of loans guaranteed by the Veterans' Administration during this time, the increased cost to the veteran would have aggregated $429 million over the life of the loans.

Looking at it from another angle, and taking the figure of $9,480 as the average loan made to veterans in 1953, the increase in the interest rate from 42 to 54 percent would have cost each veteran, as additional interest payment, $932.83 for a 20-year loan. The increase in interest during the first year on a 20-year loan in the amount of $9.480 would have been $70.72.

We, therefore, urge the Congress not to take any action which might tend to increase the interest rates on GI guaranteed loans by delegating authority to the executive branch of the Government to fix or determine the prevailing rate of interest. We should remember there are still many millions of veterans in this country who will be in the market for homes and farms within the next few years. These veterans should have the same opportunity as those who have already used their entitlement to GI guaranteed loans.

Title VIII of the bill would appear to eliminate the preference accorded veterans by existing law to acquire Government-built housing. Inasmuch as this preference is of but 30 days' duration, we can

not see any justification for discontinuing the present veteran preference in the acquisition of surplus Government-built housing.

In addition to the foregoing, we present for your consideration a proposed amendment to section 502 (b) of the Housing Act of 1948. Under section 502 (b) of the Housing Act of 1948, the Public Housing Administrator, at his discretion, can exclude the amount paid to veterans for service-incurred disability or death in determining eligibility for admission to public-housing units. Disability and death compensation, however, is considered as income in determining the rent of such prospective tenants. We recommend to the Congress that section 502 (b) of the Housing Act of 1948-Title 42: United States Code, section 1404 (a)-be amended by adding at the end thereof the following:

In determining net income for the purpose of establishing the rent to be charged any tenant in a low-rent housing project assisted pursuant to the United States Housing Act of 1937, the Public Housing Administrator shall exclude any amount paid by the United States Government to such tenant for disability or death occurring in connection with military service.

We also recommend for your consideration that section 15 (8) (b) of the Housing Act of 1937, as amended, be further amended by striking out "not later than 5 years after March 1, 1949," and inserting "not later than March 1, 1959." This provision of the law, which expired March 1 of this year, extended a preference to veterans and servicemen applying for admission to low-rent housing. Our proposed amendment would renew and continue such preference until March 1, 1959.

Again, I wish to express my thanks to the chairman and members of this committee for allowing us an opportunity to present our views with respect to the bill S. 2938.

Senator ROBERTSON. On behalf of the committee, I want to express our appreciation of the statement you have made.

Are there any questions?

Senator LEHMAN. On page 3, I think you are overly modest when you say:

If the provisions of section 201 had been in effect during the calendar year 1953, the maximum interest rate on GI loans could have been 51⁄4 rather than the prevailing 4 and 4% percent.

I think it should have been higher than 54 percent, because, as I recall that section, the interest rate is based on the current interest rate on Government loans, plus a maximum of 22 percent. If I recall, last year there was 1 Government loan issued-1 long-term Government loan issued-at 314 percent.

Had that been taken as the criterion, with the added 21⁄2 percent it might have been 534 percent, instead of 514 percent.

Mr. FOSTER. I think that may be correct, Senator. I tried to be as conservative as possible, and yet be factual. I think actually it might have been higher than 54 percent.

Senator ROBERTSON. With reference to your last statement about expiration on March 1 of section 15 (8) (b) of the act, the House passed an extension of that to August 1, so you might mention that to some of your friends on the House side. We don't have control over there.