Title IV of the pending bill provides additional measures of Federal assistance to encourage private construction and financing of rental housing for families of moderate and lower income and to assist cooperative groups seeking the benefits of home ownership through this device. These measures involve further refinement and adaptation of the tested principle of Federal Housing Administration insurance and, as in the case with all other Federal Housing Administration insurance, contemplate a self-sustaining program supported by appropriate insurance premiums.

Building on the Federal Housing Administration's experience in insuring rental housing projects under sections 207 and 608 of the National Housing Act, the bill would authorize insurance of 40-year mortgages at a maximum interest rate of 4 percent to finance new rental housing for families of moderate income. These mortgages would cover up to 90 percent of the value of the completed projects.

This title of the bill would make the same terms available to housing cooperatives that are made available to rental housing sponsors and, in the case of cooperatives comprised primarily of veterans of World War II, the insured mortgage could cover up to 95 percent of the value of the project.

The members of the committee are aware, I know, of the growing interest in housing cooperatives, particularly among veterans, as a means of achieving the benefits of home ownership at lower costs than would otherwise be attainable. Cooperative associations have already demonstrated their effectiveness in some fields, notably in the case of farm cooperatives.

I believe that this objective merits encouragement and assistance from the Federal Government. Such assistance should, of course, involve appropriate safeguards assuring soundness in the planning and execution of these projects. In my judgment, these safeguards would be adequately met in this Title of the bill by surrounding the projects with the usual Federal Housing Administration inspection of the construction. Furthermore, the Federal Housing Administration should furnish necessary technical advice and assistance in the planning and development of the projects.

To assure that adequate financing will be available for any cooperative housing project under this proposal, and particularly during its developmental phase, the title makes clear that any Federal agency authorized to provide a secondary market for mortgages insured by the Federal Housing Administration under Titles II or VI of the National Housing Act may also provide a secondary market for mortgages insured on cooperative projects.

Title IV of the bill would also establish a new form of Federal Housing Administration insurance covering debt-free equity investments in newly constructed, moderate-rental housing by private institutions. This yield insurance plan, which has been under study both in and out of Government for several years, is designed to appeal to investing institutions interested primarily in long-term security of principal and the assurance of a moderate but secure return on that principal. The plan would seek to help in overcoming the shortage of long-term equity capital for rental housing.

Under this proposal, the Federal Housing Administration would, in effect, guarantee investors utilizing the plan a minimum return of

234 percent of their outstanding investment plus a minimum annual amortization of 2 percent of their original investment. This insurance would be available until 90 percent of the original investment has been amortized. Initial rent schedules would be set at a level contemplating an annual return of not less than 32 percent of the outstanding investment, after all expenses and the usual reserves. If, because of efficient operations or unusually favorable vacancy experience, the annual earnings exceeded this rate, the plan provides that the investor could credit as excess earnings, for the purpose of his insurance contract, 50 percent of the earnings above 312 percent level, or such higher level as may have been fixed in the insurance contract, until the earnings for any one year reached a maximum of 5 percent. The balance of the excess earnings would be applied to accelerated amortization of the investment.

There can, of course, be no assurance in advance of the extent to which financial institutions will participate in any new program of this nature. Some of the most active FHA-insured lenders originally opposed the Federal Housing Administration program. There are a variety of institutions, including life insurance companies, trust and endowment funds and savings institutions to whom this plan should be attractive. Certainly the plan should be viewed as experimental. However, in my opinion, it is soundly conceived, and I am confident that, after actual experience in operation, the plan would in all probability produce an important additional volume of urgently needed rental housing at moderate rents and would also contribute to increased stability in the rental housing field.

Next, Title V-Slum Clearance and Urban Redevelopment.

The clearance and rebuilding of slums and blighted areas which has been accomplished up to the present time with Federal aid has been done in connection with public housing. As a continuing approach this would have two disadvantages. It would tend to limit the amount of slum clearance and redevelopment to the size of the public housing program. It would have the effect of requiring the land in these areas to be redeveloped solely for low-rent public housing, even though the most suitable use of such land may be for other

purposes.

It has seemed to me, however, that this presents a much broader and more important question. It poses the question as to whether sufficient progress in the rebuilding of slums and blighted urban areas does not depend upon making it possible to reuse the land, not just for low-rent public housing, but for a variety of purposes-for privately financed housing for middle- and upper-income families, for parks, for commercial uses, or for whatever purpose the locality itself officially determines to be the best use of that land in relationship to local needs. It poses the question as to whether the private building of housing should continue to be forced progressively to outlying areas, while cities continue to decay at their cores.

This is the heart of the problem, and the continuing inability to overcome it has resulted in the increasing concern of city officials, civic-minded citizens, the home-building industry, and others interested in the elimination of slums and the development. of financially sound and attractive urban communities.

From either the economic or the social standpoint, I believe we must make a start in solving this problem. We cannot avoid it, be

cause it must be apparent that the longer we neglect it, the larger and the more costly it will eventually become. In the long run, it seems to me that it would be far less costly to begin to attack it now, rather than at some later date.

The problem is essentially a fiscal one. Characteristically, the cost of acquiring slum areas, clearing them, and preparing the land for redevelopment greatly exceeds the reuse value of the land. Since the reuse value is the price that a developer would pay for the land in order to develop it for appropriate use, this title of the bill proposes a means of bridging the gap between the two.

I believe that there is a rather general agreement that a combination of Federal and local fiscal aid is necessary to make any substantial dent in this special problem area. The fiscal aid provided must bẹ sufficient to cover the difference between the costs of assembling and clearing a slum or blighted area and preparing the land for redevelopment, and the returns which it will then yield when sold for that purpose. That, it seems to me, is the fundamental fact that must be squarely met in any method developed to make possible the clearance and redevelopment of these areas.

The Federal assistance contemplated by this bill takes two forms: loans to cover the initial cost of projects and capital grants to help bring the price of the land down to its value for redevelopment. The Government would be authorized to make loans to the locality to finance initially the cost of acquiring the land in a slum or blighted area, clearing it and preparing it for redevelopment. After the land in such an area was assembled, cleared, and made ready for redevelopment, then, in accordance with a redevelopment plan for that area approved by the governing body of the locality, the land therein would be sold or leased for the purposes determined by the locality to be the most suitable uses for the land, according to its own needs.

The land sold or leased would be made available at its reuse value, and the proceeds received from the sale or lease of the land would repay a portion of the loan. The difference between the total cost of the project and the proceeds received from the sale or lease of the land would represent the loss involved in making the land in these areas available for redevelopment. This loss would be shared by the Federal Government and the local community on a two-to-one basis. The Federal Government's portion would be paid in the form of capital grants and the locality's portion would be paid through the local grants-in-aid required by the bill. The amount of the Federal capital grants can never be more than two-thirds of this write-down, and the remaining one-third must be made up through local grantsin-aid.

Under this bill, a project includes only the assembly of the land, and its clearance and preparation for redevelopment. The actual rebuilding of this particular area is subsequent to this operation, and none of the Federal aid provided by this Title of the bill would be available for this rebuilding.

The Federal aid contemplated under this title of the bill is directed solely toward the purpose of helping to bring the price of the assembled and cleared land in these areas down to the point where it is feasible to redevelop the area in accordance with the use of the land best suited to the needs of the locality.

To provide the necessary loan funds, the Housing and Home Finance Administrator would be authorized to borrow from the Treasury for this purpose. He would be authorized to issue and have outstanding at any time after July 1, 1948, obligations in the amount of $10,000,000, with this limit to be increased by $200,000,000 on July 1, 1949, increasing by further amounts of $200,000,000 on July 1 of each of the succeeding 4 years. This would provide a total loan authorization of $1,010,000,000. These are fully repayable with interest.

The subsidy assistance under this title takes the form of capital grants. Under the bill, the Administrator would be authorized to enter into capital grant contracts on and after July 1, 1948, aggregating not more than $100,000,000, which limit would be increased by further amounts of $100,000,000 on July 1 of each of the succeeding 4 years. This would provide a total capital grant authorization of $500,000,000.

This title also makes provision for the maintenance of separate accounts for operations conducted thereunder, and also brings those operations under the Government Corporation Control Act, with provision for an annual business or commercial-type audit by the General Accounting Office. I believe that these provisions are altogether desirable.

The fact that the loan authorization for the first year may not exceed $10,000,000 and the fact that no funds may be disbursed for land acquisition prior to July 1, 1949, assure that major expenditures will not occur during the first year. Further, this title also provides that, in view of the existing shortage of housing, there shall be no demolition of residential structures in connection with any project, assisted under this title of the bill, before July 1, 1950, if, in the opinion of the local governing body the authority involved, such demolition would result in undue hardship to the occupants of the structures.

At the same time, the authorization for the program is necessary in order to permit cities to proceed with confidence in working up the details of specific projects. This is necessarily a somewhat involved process and cannot be undertaken without assurance that assistance with the required financing will be available when needed. Next, Title VI-Low-rent Housing.

It is not my intention to discuss in my testimony, in the detail I have devoted to some of the preceding titles of the bill, the title relating to low-rent public housing. This is not because the provisions of the bill dealing with low-rent public housing are, in my judgment, any less important or less necessary. On the contrary, while there is considerable controversy concerning this subject, I am of the firm belief that it is essential that action be taken to provide Federal aid for a reasonable volume of adequate housing to be available for families with incomes too low to pay an economic rent. I also believe that no housing program could be considered complete which did not include provision for such families.

However, Mr. Egan, the Public Housing Commissioner, is here and I believe it is preferable that he comment in detail on the provisions concerning low-rent public housing which are contained in the pending bill. I am in general agreement with Mr. Egan's statement, and I am sure it will be helpful to the members of your committee.

While postponing detailed discussion of the proposals concerning low-rent public housing until Mr. Egan can present his testimony, I believe I should again make clear to your committee my own general views on this subject.

Our constant effort should be to strengthen and improve the private housing industry so as to broaden steadily the area of national housing needs which it can serve. I believe the measures in this bill which I discussed previously will give substantial impetus to this effort. With full and energetic cooperation by industry, labor and government, these measures should make it possible to reduce progressively the need for public housing by constantly enlarging the housing market which private enterprise can effectively serve, with housing both new and old.

Nevertheless, we cannot ignore the fact that notwithstanding this encouraging prospect of progress there remains today and will probably remain for years to come a percentage of families who, because of the low level of their income, must live in slums or other inadequate housing. I hope and believe that the percentage of families in this predicament will constantly decrease in ratio with the progress of the private housing industry. However, so long as any group of American families must perforce live in such housing with no hope for relief through their own efforts, I do not think that this country, with its democratic principles and its high standard of living, can turn its back upon them.

Furthermore, I do not believe there is now any practicable alternative ways of providing these families with adequate housing of minimum standards other than through public aid.

On the whole, it seems to me that the basic formula and procedures established by the United States Housing Act of 1937 have worked well and have made possible the provision of low-rent housing for low-income families. The bill seeks to improve and perfect that act. There may be better methods for extending this public aid but, if so, these methods have not yet been formulated despite intensive study of this problem area for many years. Unless and until better methods are formulated, I think we should move forward on the basis of the procedure already tested by experience.

I will comment only briefly on the remaining titles of the pending bill, since your committee will undoubtedly want to hear from the Department of Agriculture, which would be charged with the responsibility of administering the farm housing title, and from the Veterans' Administration, which would be charged with the responsibility of administering the "paraplegic" title.

While I am not an expert on the special problems of farm housing, I have studied the farm housing title of the bill and believe that it represents a workable approach to the problems in this field.

From the standpoint of the coordination of this program with the balance of the programs contained in the bill, I should point out to the committee that the Secretary of Agriculture, who would be responsible for the administration of the farm housing title, is represented on the National Housing Council.

As to the title authorizing special housing aids for the so-called paraplegic cases among veterans, I believe that veterans suffering from