course, there is no alternative for summation because of the fact that land has to be determined by expert opinion testimony.

Most of the conflict between the various builders and the FHA administrative office have taken place in respect to value, because of the fact that they have disagreed with low values placed on particular land. Now, if we take value in respect to fixing the entire mortgage amount, we are going to hit a situation where we multiply the troubles that we had before, because after all, the land end of it was a small portion of the entire project. And I think it would be unwise to leave a question of valuation in the hands of the various local offices, whether it can be tied down more definitely by setting forth the summation theory of determining the criteria for mortgage amount limitations.

So that I say, that even though this proposed act has increased substantially the per room mortgage amount limitation, that may be completely nullified by a particular local office or a particular district director or underwriter in that particular office.

It is my suggestion, therefore, that if possible, the change that is anticipated in the new legislation, by going from capitalization to summation, be eliminated and that the act in that respect remain exactly as it was, namely by setting up as one of the criteria, a ratio of mortgage loan to summation, or replacement cost, rather than to value or capitalization.

That is the only point that I am going to take up, although I also think there is a further provision of the bill requiring the affirmative act of the President before the increase in the mortgage limitation can take effect. The building program, for this year, is just about ready to start with the spring weather coming on. I don't know how long this bill will take to come out of committee, and then be finally enacted, but we will then meet a situation, under the provisions of the proposed bill, that the President must give his affirmative approval of the new increase. Otherwise, the old act remains in effect.

It is my suggestion for the purpose of speeding up the activity of building sadly needed in the city of New York, that reference in the proposed bill to the affirmative action of the President be eliminated. Mr. Benjamin will talk about other phases of 207 and minority housing.

Mr. DOLLINGER. May I ask a question, Mr. Chairman?

The CHAIRMAN. Mr. Dollinger.

Mr. DOLLINGER. You made reference in your statement to the effect that if we reduced the downpayment there would be more purchasing of property.

Mr. RAIDER. I believe so.

Mr. DOLLINGER. What would the monthly charges be with the present downpayment schedule and what would they be if we used the new limitations? The monthly carrying charges?

Mr. RAIDER. The only effect it would have on your monthly carrying charges would be that by an increase in mortgage you would have an increase in amortization and interest payments.

Mr. DOLLINGER. What would that amount to?

Mr. RAIDER. Well, I would take 44 or 434, roughly 5 percent of an increase of a thousand dollar mortgage, on a unit would be, let's say, $4 a month, roughly.

Mr. DOLLINGER. About $50 a year?

Mr. RAIDER. That is right. If it were an increased $1,500, it would be an increase of $75 a year. But that would be-in other words, you would have a lower downpayment and you would amortize that obligation over 40 years.

Mr. DOLLINGER. But their carrying charges would be greater and the thing that bothers me is we are trying to help people who don't have sufficient money. They are living on budgets. Won't that make it more difficult for them?

Mr. RAIDER. No, in this respect. A lot of these people are in position to meet the carrying charges but they don't care to set up these large deposits, $1,500, $2,000, or $2,500. They would be glad to amortize it over a 40-year period.

Mr. DOLLINGER. I should imagine they would want to reduce the rent as they go along and not increase it.

Mr. RAIDER. Well, they are just not in position to make the downpayment. Take an individual purchasing a 1-family house. That individual no doubt would prefer to buy a $15,000 house with no downpayment. He would have no carrying charge in relation to amortization and interest on the mortgage. But since he is not in a position to do that, you have your GI mortgages where they carry as much as $14,000 and $14,500 on a $15,000 unit. That individual is able to purchase a home that he wouldn't be able to purchase otherwise. Mr. DOLLINGER. I hope you are right. I don't think it is going to increase the amount of housing purchased by these people, because they are going to be concerned with carrying charges.

Mr. RAIDER. No, if you can't sell, you can't create 213.

Mr. DOLLINGER. That is the reason I think you can't sell 213. Because your carrying charges there are too high. That is the reason people are not going into those projects.

Mr. RAIDER. Let me say this: In comparative garden-type apartments, and I have handled many of them under 608, and I have handled garden-type apartments under 213-I will say that a 2-bedroom unit, classified as a 42-room unit under 608, today, is renting for $120 a month average, whereas I have garden-type apartments in cooperative projects, with 3 bedrooms, with a complete additional room, renting at $105 to $110 a month.

Now, there has been a lot said about increased carrying charges. All you have to do with respect to that is to go to the mayor of New York City and the Governor of the State of New York. We have already got a tax increase from 3.47 to 3.74 in the city of New York. We are going to get another increase.

Mr. DOLLINGER. Let me stop you at this point.

The reason you are having difficulty in selling these co-ops is because people, when they bought the house, were told the figures would be approximately so much, and once they made the purchase found those cari ying charges far exceeded what they anticipated and they can't afford the higher payments.

And others are not buying for that very reason.

Mr. RAIDER. My experience on that is that any increase that has come about has been due to an increase in cities like the city of New York in two respects. First, in respect of increasing assessed valuations beyond what the FHA, in their project analysis, have estimated

the assessed valuation to be, and secondly by increasing the rate this year 27 points and going up next year again.

Mr. DOLLINGER. That is only a small feature. I don't want to get myself involved in a controversy between the Governor of New York and New York City as to the shortchanging of New York City by the State of New York.

Mr. RAIDER. I do believe this, that the carrying charges increases are attributable directly to the increases in taxes.

Mr. DOLLINGER. That is only a small feature.

Mr. RAIDER. That has been my experience, but the others have been underestimated. They didn't get the correct figures. Perhaps they couldn't, I don't know. But the things that they have to think about went just beyond taxes.

Mr. DOLLINGER. That hasn't been my experience.

Mr. RAIDER. That hasn't been my experience.

Mr. DOLLINGER. That is all, Mr. Chairman.

The CHAIRMAN. Mr. Benjamin.

STATEMENT OF ALVIN BENJAMIN, OF THE FIRM OF

DAVID SHAW & CO., BROOKLYN, N. Y.

Mr. BENJAMIN. My name is Alvin Benjamin, I am with the firm of David Shaw & Co., real estate brokers, in Brooklyn. We are brokers who specialize in the securing of mortgage financing on new construction.

We are concerned currently with providing or developing projects for minority housing groups. We have made, within the last year and a half, efforts at the start of such projects.

A 213, in the New Pork area, of 300 apartments, has been successfully completed and financed by a private lending institution in New York City.

There are several other 213's in Metropolitan New York which are in the stage of being processed, on which assurances of financing by lending institutions have been given.

The problem with regard to minority housing is a question of the ability of the prospective purchaser to have the downpayment to purchase his apartment. We have found that once they have purchased their apartment and taken occupancy, their record has been uniformly good-as good as for other groups with regard to repayment of their obligations.

We feel that, with the proposed bill, which will increase the mortgage amounts that are available to them, and therefore decrease their downpayment, that more of this group will be able to take advantage of this type of housing.

And we are not dealing in generalities. We have actually sold these apartments, turned away thousands of interested purchasers who had the necessary credit status to carry the apartments but who did not have the cash downpayment to purchase the apartment.

I think part of that is due to the fact that most of these prospective purchasers were veterans who have been working for only a few years, who have recently had children, and who have growing families, and they have not had the time to develop sufficient cash reserves to make large downpayments on either houses or apartments.

I would say that at least 3,000 units are programed which can be activated if this new bill is passed.

There is also developing a program for providing rental housing for minority groups in New York City. It will be confined to that section of 207 which provides for a mortgage of $7,200 per family unit, with the average unit containing two bedrooms or more.

It is anticipated that under this section of 207 rentals of about $96 to $98 per apartment will be developed.

A rental of $96 to $98 per apartment is substantially below the current rental market for comparable six-story apartment dwellings, to the extent of $30 to $35 a room.

We feel that lending institutions, in New York, and in the Greater New York area, will provide mortgage money for this type of housing. They have one legitimate reservation, principally the fact that the amount of downpayment that they are receiving on this type of housing is not as substantial as that taken as an average on other types of housing, and they, therefore, feel that the extent of their exposure, their risk, is greater-and their risk probably is greater.

We have a technical suggestion which should provide that in the event there is a default on the part of the purchaser of a minority house, that the bank, instead of furnished debentures on the passing of title of the house to FHA, be paid in cash. I think that would reduce the question of risk and make risk comparable on the two types of housing offerings.

But I feel that even without this alteration, that the majority of lending institutions in New York are prepared to finance this type of housing, and I think the next step is the developing of jobs for submission to them.

The CHAIRMAN. Are there questions of Mr. Benjamin or Mr. Raider?

Mr. DOLLINGER. Mr. Chairman.

The CHAIRMAN. Mr. Dollinger.

Mr. DOLLINGER. You state that banks want more assurances on the risks for minority housing than other type housing?

Mr. BENJAMIN. I didn't say that. I said if you were to take 2 mortgages, 1 with a 5-percent down payment, and 1 with a 15-percent down payment, per se the mortgage with the 15-percent down payment is the more attractive offering.

Mr. DOLLINGER. Well you have made the admission, I think, that the banks are not inclined to go along in making mortgage loans on housing for minority groups, as a rule.

Mr. BENJAMIN. I have made that statement that we have placed loans on every project which we developed to the point of submission to a lending institution.

Mr. DOLLINGER. Yes, but they weren't in restricted areas were they? Mr. BENJAMIN. They were in areas that were found attractive to the lender, the purchaser, and the builder.

Mr. DOLLINGER. But let's get down to the point basically. I don't want to fence with you.

You stated before that $98 a month would be the approximate rent for minority housing.

Where would that be?

In what areas or localities?

Mr. BENJAMIN. In what localities?

Mr. DOLLINGER. That is right.

Mr. BENJAMIN. Within the metropolitan New York area, including the Borough of the Bronx.

Mr. DOLLINGER. Were there minority groups living in the areas?

Mr. BENJAMIN. The areas in which this housing will be developed will be areas where the renter will want to live, and there will be areas that will be acceptable to the FHA, without relation to whether they are segregated or not.

Mr. DOLLINGER. The FHA will accept any area in which you can build. They wouldn't be concerned with the area itself if there are sufficient transportation facilities, and if it isn't off the beaten path. Mr. BENJAMIN. Well, the basic question as to site approval of the location still obtains, as to whether it has the facilities, whether the question of obsolescence is not a deterrent factor.

Mr. DOLLINGER. Can you go to any bank in the city of New York and get a loan on a house where Negroes reside; or would only very few banks go along with that?

Mr. BENJAMIN. I think we are confusing the question as to the securing of mortgages on existing deteriorating structures and the question of securing financing on new construction.

The question of securing financing on new construction is the problem we are confronted with here.

Mr. DOLLINGER. That is correct. But what I am trying to find out is whether the banks would go along and give a mortgage to Negro people who wanted to reside in any area they selected.

Mr. BENJAMIN. I think the first question of a builder is, Can he secure financing?

Mr. DOLLINGER. I am not fighting the builders or anyone else. I am trying to get at the facts and if you don't want to answer, why that is all right.

Mr. KILBURN. Didn't I understand you to say that you had no difficulty in getting private financing in New York City for a minority group?

Mr. BENJAMIN. Yes, sir, Mr. Kilburn, that is the answer.

Mr. KILBURN. These people are not going to go in and try to settle the colored question.

Mr. DOLLINGER. I am not trying to dictate to the builders. I do want to know whether minority groups can go anywhere and build housing and get financing.

Mr. KILBURN. He just said the minority groups had in New York no difficulty in New York City.

Mr. DOLLINGER. I know what happens in New York, and other places when a Negro family wants to move in and buy a house. They just don't get an opportunity. We were speaking of minority housing; let it be minority housing. Let's not fence and say we are giving them something when we are not.

Mr. KILBURN. I am not fencing about it. It seems to me you are. Mr. DOLLINGER. I was asking what they meant by minority housing and I now understand what they mean by that. It means they will build houses in areas selected by the builders and bankers. It means minority groups again will have no choice in selecting the site.

Mr. BENJAMIN. Then I think we have a thousand segregated areas in New York.