investor in home loans, and particularly Federal Housing Adminis tration insured mortgage loans, in which we have invested more than $210,000,000 since 1935.

The general views which I present here today are those of the chamber as reflected by a poll of all members on this and other vital subjects taken earlier this year.

Senator ELLENDER. Is your statement different from the preceding witness, who represented the Association of Commerce?

Mr. MEREDITHI. Yes, sir. Mr. McCord tried to present to you the Indianapolis plan, and this statement deals with S. 1592 in general principles.

Senator ELLENDER. Very well.

Mr. MEREDITH. We fully recognize the careful thought, diligent efforts, and the motives which have prompted the preparation and introduction of S. 1592. It is easy for us, too, to recognize that an acute housing shortage exists in the United States at the present time; that there always has been and always will be room for improvement in the housing facilities of our Nation, and that housing activities represent a very important factor in the economic structure of our country. At the same time we are unable to agree with many of the principles and methods proposed by S. 1592 for remedying unsatis factory housing conditions of the present and for improving the housing standards of the Nation over the next generation.

Present housing standards are high. Whenever a situation such as the current housing shortage develops it becomes very easy for each of us to focus our attention upon acute current conditions and to overlook or to minimize the fact that the American people enjoy the highest standard of living in the world. And housing is an important factor in that standard of living.

A recent survey of the United States Bureau of Census indicated that well over four-fifths of the occupied dwellings in the United States have ample room space as measured by the high standard of

one person per room.

Well over four-fifths also have electricity or gas lighting.

Four-fifths of the urban dwellings have private bathtubs or showers for the exclusive use of their occupants and 65 percent of all occupied dwellings have such facilities.

The four-fifths of the population who are well housed are the energetic, self-supporting families who have led the way in the past and can be relied upon to improve the standards of the future.

This recent housing survey reveals there has been a decided improvement in housing for the country as a whole during the war years from 1940 to 1944. More dwellings are better equipped today than they were 5 years ago, despite wartime shortages. In addition, there has been a marked increase in home ownership during these years. In October 1944 there were 18,573,000 dwelling units occupied by owners, which represented an increase of 22 percent over April 1940.

It is significant, too, that not all of these housing accommodations are high-priced residences. More than half of the one and one-half million home owners purchasing single-family houses insured by FHA are now paying for them in installments of less than $40 a month. In 1941, the last normal building year, 40 out of 100 owners were paying for their homes and meeting all fixed charges with monthly payments of $30 to $40, while 28 out of every 100 were paying less than $30.

The American family's will to improve its housing standards and to own its own home is demonstrated fact. So also is the ability of the private home-building industry to meet these widespread and persistent demands for better housing.

What is the housing problem? Review of the facts just stated properly leads us to consideration of the question: What is the American housing problem?

An acute housing shortage in practically every city in the country results from necessary restrictions on construction during the war period, from a rapid increase in marriages, and the fact that reconversion not yet has reached the state at which houses can be produced in volume. Then there is, as always, the group of individuals with very low income whose housing conditions could be greatly improved. Yet it is difficult for many of us to see anything in the so-called housing problem which cannot be cared for by private enterprise and private production.

A widespread fallacy of much current thinking about housing arises from the mistaken conception that new accommodations must be provided for particular groups, such as low-income persons. New houses should be provided for all families who are willing and able to pay for them. When new housing is constructed, the occupants vacate less expensive quarters, which, in turn, are available to another group, and thus the process of shifting occupancy extends throughout the income scale only the poorest housing remains unoccupied. The quickest and most economical way to meet housing needs is to leave private enterprise free to build for the demand whenever it may appear. The critical problem which faces the building industry now, and will for some years to come, is a problem of production and costs. This problem cannot be solved by legislation directed primarily at affecting the supply of credit, as is contemplated by S. 1592. It can be solved only by industry and by community action designed to speed up the production of building materials and houses and to lower costs. The home-building industry is an outstanding example of small business in action. It is comprised of hundreds of thousands of contractors, builders, suppliers, professional firms, and lending institutions. They have their roots deep in the community life of this country, and they have done a good job. For example, figures of the United States Bureau of Labor Statistics show that the average cost of one-family dwellings erected has declined almost steadily during the last 18 years, falling from $4,593 in 1925 to $4,228 in 1935 and to $3,890 in 1940.

The Federal Government can play its most effective role by encouraging and clearing the way for this decentralized industry and community action.

Government activity in the field of mortgage credit: Congress should be especially careful now not to undo, as a result of pressure of the readjustment period, what has been built up through the effective teamwork of the Federal Government and the private lending institutions.

The Federal Government, prior to the war, initiated several farreaching activities of a permament nature, the purpose of which was to improve the home financing or mortgage credit facilities of the country. These activities were undertaken primarily in the interest of those millions of private individuals who are home owners, or want

to purchase a home, and those millions of private individuals who have placed their savings in lending institutions which, in turn, used them to help finance home ownership. Never in the history of this country has the credit for the purchase of homes been more ample or available on more favorable terms than today.

These activities of the Federal Government which have been highly successful may be described briefly as follows:

1. The Federal Home Loan Bank System, consisting of 12 regional banks, from which the members of this System-for the most part savings and loan associations, although other types of mortgage lending institutions are eligible for membership and are members-may borrow on the security of eligible home mortgages, or of obligations issued or guaranteed by the Government. The System and the Corporation to date have been self-supporting.

2. The Federal Housing Administration, which provides for the mutual insurance of private loans of high ratio up to 80 percent and in some cases to 90 percent of the value of the property. The insuring function of this Administration is available to, and used by, practically all types of mortgage lenders and to date has been selfsupporting.

3. The mortgage companies of the Reconstruction Finance Corporation, which buy and sell mortgages on income properties, and also mortgages by the Federal Housing Administration.

In addition to these new agencies, established facilities in the field of mortgage finance have been enlarged and modernized, including the liberalization of previous restrictions in national banks.

Prior to the war, these three major innovations in the field of mortgage finance-the Federal Home Loan Bank System, the Federal Housing Administration, the Federal mortgage companies-were grouped together along with the RFC in the Federal Loan Administration.

This satisfactory arrangement was disrupted during the war through the setting up by Executive order of a temporary war agency, the National Housing Agency, which brought the Federal Home Loan Bank System and the Federal Housing Administration under its jurisdiction. The United States Housing Authority, now the Federal Public Housing Administration, also was placed under it.

S. 1592 proposes to continue in a modified form the wartime supervision and direction of the activities of these agencies. Under the terms of title I of this bill, the wartime National Housing Agency becomes permanent. The National Housing Administration is made responsible for the general supervision and for the coordination of the functions, activities, and programs of the Federal Home Loan Bank Administration, comprising all of the activities formerly under the direction of the members of the Federal Home Loan Bank Board, for the Federal Housing Administration, and for the Federal Public Housing Administration, which succeeds to all the functions of the United States Housing Authority and all the wartime Federal Public Housing activities. The Administrator is directed by title X to esti mate the housing needs of all communities throughout the country and of all rural areas and to recommend to Congress such governmental action as he feels necessary to see to it that the needs which he estimates are taken care of. This in effect continues in peacetime the wartime control or so-called "programing" activities of the National Housing Agency.

The adverse effects upon the private home financing and building industries of using the wartime National Housing Agency as a model for the peacetime organization of the Federal Government's "housing" activities are patent.

During wartime all new residential building was channeled through the National Housing Agency due to the necessity for distributing building materials so as to meet emergency housing needs in specific numbers in certain areas at a given time. This was controlled by "programing."

What harm did this "programing" do the private home financing and home building industries?

The answer is: No harm in wartime, any more than the War Production Board's regimentation of all industry harmed the manufacturers of the country. The injury many individuals suffered is more than compensated by the good which came from victory.

However, if "programing" in any form is to be continued after the war when materials and labor are in plentiful supply, it will mean increasing control from Washington of the real estate and mortgage markets and of the home building industry. This, ir. turn, will mean restraints on manufacturers of building materials and equipment and their dealers. Also, it would mean the determination of community housing needs by a far removed governmental bureau, rather than by the people of the community well acquainted with local requirements. Prewar coordination of credit activities should be restored: It is highly important to the prompt recovery of home building that this wartime supervision and direction of the activities of these agencies of proven value should be terminated. There is no reason why this should not be done at once. The war work of the National Housing Agency is completed.

It also should be borne in mind that the basic functions of each of the agencies under the NAH are different. The Federal home-loan banks are banks for making advances to their members. The Federal Housing Administration is an agency which insures mortgage loans, while the Federal Public Housing Administration, in the final analysis, is a relief agency. It does not seem to us that governmental agencies with interests as varied as these are should be continued under one administrative head.

Congress should restore at once the Federal Housing Administration and the Federal Home Loan Bank Board to their previous positions of influence, leadership, and responsibility in the Federal Loan Agency. We know of no action which would be more encouraging at this time to the progressive forces in the home-building and home-financing industry.

Proposals to improve the operations of the Federal Housing Administration and of the Federal Home Loan Bank Board should be considered by Congress on their merits. They should be considered entirely apart from the attempted objectives of S. 1592 to use both private and public lending agencies, and also Government subsidies, for the purpose of providing new homes for families of all income

groups.

Over-all housing policies and program are impractical.

The proponents of this bill are apparently of the opinion that the housing problem of the country is a total problem, but that its solution

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calls for adoption of an over-all housing policy, to be carried out by a single Federal bureau.

But the plain fact is that Congress never has been able to adopt an over-all housing policy. It has been impractical to do so. A striking recent example is the failure to bring within the scope of this bill either the activities of the Veterans' Administration or the Public Roads Administration.

Yet in the next 10 years the home-loan provisions for veterans may directly affect up to one-half the entire housing market. Likewise, in connection with public roads, Congress has earmarked $125,000,000 to be spent annually for 3 years on a matching 50-50 basis to build modern thoroughfares within cities, and there is probably no single factor that is more influential upon urban housing than transportation. Again, the bill divides responsibility for rural housing between the Department of Agriculture and the National Housing Agency.

The basic obstacle to an over-all treatment of housing is the decentralized character of the construction industry and the extremely variegated economic interests concerned with housing-construction, material, supply, building labor, local government, finance, and property management, to name but a few.

Congress would be well advised to deal with each of these constituent elements individually through such activities as housing research, labor relations, and mortgage insurance and discount, as it is now doing, rather than to undertake a forced coordination of diverse and dissimilar organizations.

Two details involving application of the bill to FHA loans deserve special consideration.

Sections 309 (b) and 404 (c) of S. 1592 require that certain FHA loans shall include a proviso

for the extension of the period of amortization at any time the mortgagor, because of unemployment, economic conditions, or misfortune beyond his control, is unable to make a principal or interest payment due under or provided to be paid by the terms of the mortgage * * *.

The intent of these provisions is commendable, but a stipulation so generally stated might well make FHA loans much less attractive to investors. The company with which I am affiliated includes in its uninsured loans a proviso which gives the borrower a deferment privilege under certain circumstances; but this privilege is expressed in language so specific that there can be little, if any, dispute as to what

it means.

Section 312 of S. 1592 amends section 203 of the National Housing Act to provide in effect that upon new construction to be insured under this section by the FHA, the general contractor must give a warranty against structural defects and any failure to comply with the construction contract.

Builders in some cities now furnish such a guaranty, and no one doubts or questions its desirability. At the same time, in a market such as the present, when there is an acute shortage of housing and when there is a plethora of funds available for purchases, it is my opinion that this provision would cause builders to shy away from FHA loans and to encourage their borrowers to finance without them. I believe, further, that it would have very serious adverse consequences on the splendid work of the Federal Housing Administration.