Finance Agency on housing and urban renewal legislation pending before your committee. Programs of each of the five constituent organizations of our Agency are dealt with in this legislation. If agreeable to you, I would like to have the head of each constituent present a detailed statement of the views of the Housing and Home Finance Agency on the provisions relating to his operations. I will then be able with him to answer questions on those provisions. At this time, however, I wish to make some general observations concerning this legislation and to comment on a few of the major proposals involved. As you know, two comprehensive housing bills have been introduced by members of your committee: H. R. 9537, introduced on February 27 by Congressman Widnall, and H. R. 10157, introduced on March 26 by Congressman Rains. Both bills contain provisions for the continuation of several basic programs of the Housing and Home Finance Agency-FHA insurance for home repair and improvement loans, FHA mortgage insurance, financial assistance for low-rent public housing, college housing loans, and grants to assist urban planning. Our statements will comment on each of the provisions in those bills. Although the bills contain many similar provisions, they differ in a number of important respects. For reasons we will explain we strongly urge the enactment of H. R. 9537. I have been authorized by the Director of the Bureau of the Budget to advise that its enactment would be in accord with the program of the President. URBAN RENEWAL Major provisions of H. R. 9537 relating to several programs of the agency would greatly assist the efforts of our cities to eliminate and prevent slums and blight. The terms of repair and improvement loans eligible for FHA title I assistance would be made substantially more liberal by both H. R. 10157 and H. R. 9537. This would greatly assist home repair and rehabilitation which constitute a principal part of the urban renewal projects being planned or undertaken by cities. As you know, the problem of adequately relocating displaced families generally constitutes one of the serious obstacles to urban renewal projects involving slum clearance. In recognition of this problem, the Congress authorized a new program of mortgage insurance, as part of the Housing Act of 1954, to assist in the provision of low-cost housing for families displaced by urban renewal or other Governmental action in communities which have workable programs for eliminating and preventing slums and blight. However, as enacted, the mortgage insurance terms in that legislation (sec. 221 of the National Housing Act) gave almost no mortgage insurance advantage over that available in other FHA programs. Consequently, there has been very little interest in construction or rehabilitation under that section. Both H. R. 9537 and H. R. 10157 would substantially increase the mortgage insurance advantages under section 221 to make it effective as an aid to urban renewal. LOW-RENT PUBLIC HOUSING Displaced low-income families naturally present the greatest relocation problem. Additional low-rent public housing is essential for its solution. H. R. 10157 would authorize a 3-year public-housing program of 50,000 additional dwelling units each year. H. R. 9537 would authorize, and the Housing Agency recommends, a 2-year program totaling 70,000 additional public-housing units. The Housing Agency's recommendation for a 2-year program is based on the assumption that the Congress, as well as the Housing Agency, will wish to reconsider the size of the program after there has been an opportunity to observe the extent to which private enterprise is able to provide lower cost housing, particularly housing for displaced families under the more liberal terms which are being proposed for the FHA's section 221 program. Our recommendation for the enactment of a 70,000 unit program takes into consideration our best judgment of the current ability of our localities to plan and execute low-rent projects efficiently. It also takes into consideration the practical necessity for presenting a program which can gain stabilized support in the Congress. I feel that it is better to gain acceptance for a modest and smoothly moving program than to engage in controversy over large-scale proposals which, when finally acted upon, emerge as modest stop-and-go programs which are difficult to administer. In my judgment, the low-rent housing program proposed by H. R. 9537 represents the most acceptable solution to a difficult problem. The proposed additional 70,000 units, along with units becoming vacant in existing low-rent projects, would be adequate, in our judgment, to serve the needs of displaced families. However, the new and the vacated units would not be limited to the needs of displaced families, but could be made available to other low-income families in the community. In addition to the regular 3-year low-rent housing program proposed by H. R. 10157, that bill would provide for a special 3-year program totaling 30,000 low-rent public housing units to be designed specifically for elderly families and single persons. H. R. 9537 specifies no statutory number of units to be made available solely for the elderly. Instead, it would give the local community discretion in deciding what portion of its low-rent units, both old and new, should be made available to them. H. R. 9537 would permit Federal assistance for the construction of new housing or the remodeling of existing housing especially designed to serve the elderly. In connection with proposals for additional public housing, I would like to call the attention of your committee to a very important matter which is not dealt with at all by H. R. 10157, but is covered by H. R. 9537. Under existing law, a local community may not receive Federal loans or capital grants for urban renewal projects, nor may it receive special FHA mortgage insurance aids for urban renewal, unless the local community first adopts a workable program for the elimination and prevention of slums and blight. The Housing Act of 1954, in accordance with the recommendations of the President's Advisory Committee on Housing, similarly authorized new public housing only if the community first adopted a workable program. The 1954 act, however, included several other requirements for the approval of new public housing which had the effect of limiting the number of public housing units for which a particular community would be eligible. The Congress, in repealing these other requirements in 1955, also repealed the workable program_requirement for public housing. I believe that this action was based on a misunderstanding of the purpose of that requirement. It is my firm belief that communities undertaking public housing with the assistance of Federal funds should likewise first adopt a workable program, just as they do in the case of an urban renewal project or special FHA aids for urban renewal. In effect, the community would merely be required to develop its own plans for meeting its overall problems of slums and blight and to make its public housing a part of those plans. The workable program requirement in no way limits the number of public housing units which a community may receive once it has a workable program. In advocating the reinstatment of the workable program requirement in connection with public housing, I want to make it clear that it is not our intent to restrict the public housing program or to hamper it with burdensome conditions. Rather, our recommendation seeks to give to public housing its rightful place as a necessary and essential instrument in the whole program of rebuilding and restoring our cities. It recognizes the sound principle that in seeking Federal help for low-rent housing a community should also utilize its other powers in solving its housing problems. The workable program requirement does not impose an onerous task on the locality. The requirement calls for preparing a program which looks to future action. It does not call for the prior completion of the actions contemplated by the program. Neither does the requirement call for a federally designed program. Rather, we believe that there is no justification for Federal assistance except to those local communities which will themselves adopt a sensible long-range program which is appropriate under local conditions. As I testified before your committee in 1954, when the workable program requirement was first enacted, we do not expect a community to undertake a protracted period of detailed and clairvoyant planning. From those cities just begining on the long road to removing slums and blight we should be understanding of the time and effort it takes to develop and to put into effect a full-scale local attack. We should take full account of varying local situations and the different circumstances confronting the large and the small city. During the past 2 years, the workable program requirement has been administered flexibly, and the policy being followed is neither paternalistic nor unduly burdensome. As of the middle of last month, 95 communities, both large and small, had adopted workable programs. I have a list of these communities, showing their populations, which I should like to offer for the record. About half of them have populations of less than 50,000. More than 40 percent have populations of less than 25,000. Twenty percent have populations of less than 10,000 and 5 communities have populations of less than 5,000. Two of these have populations of less than 2,000. I am convinced that this record shows that the requirement is not too difficult to meet. (The information is as follows:) HOUSING AND HOME FINANCE AGENCY, OFFICE OF THE ADMINISTRATOR Mr. COLE. In addition to the low-rent public housing provisions for the elderly, H. R. 9537 would provide special assistance for the elderly by means of changes in the FHA mortgage insurance programs. I believe these provisions are very desirable in view of the increasing housing needs of elderly persons throughout the country, particularly those in the low and moderate income groups. Housing represents one important phase of the general and growing problem of assistance to the aged. As Mr. Mason will more fully explain, these special FHA mortgage insurance provisions are designed to assist both sales housing and rental housing for the elderly. Assistance would be given to rental housing to be built by either nonprofit corporations or by private sponsors building for profit. FHA insured loans to approved nonprofit corporations could be as high as 90 percent of replacement cost, and would be for maximum terms up to 39 years and 3 months. I believe that these provisions constitute a new, a liberal, and a realistic approach to this important problem, which should substantially aid in the provision of the required housing. În place of these several mortgage insurance provisions, H. R. 10157 would substitute a program of direct loans by the Federal Government. Nonprofit corporations would be given 100 percent, 50-year loans, at 311⁄2 percent interest to build housing and related facilities for elderly persons. A revolving fund of $250 million would be provided. Assuming an average cost of $8,000 to $9,000 per unit, $250 million would provide for financing for about 25,000 or 30,000 units. I firmly believe that the enactment of this direct loan program would be undesirable and unwarranted for several reasons. There is no basis for concluding that necessary private financing would not be available under sufficiently liberal mortgage insurance programs to finance housing for the elderly. Direct loans under H. R. 10157 would supplant private financing in this field and would prevent the development of additional sources of private funds. The bill contains usual language stating that the loans can be made only where the borrower is unable to obtain necessary funds from other sources upon terms and conditions equally as favorable as under the bill. It is clear that this language would not bar direct loans, as private funds will in fact be unavailable for 100 percent, 50-year loans, at 32 percent interest. As this direct loan program would preclude private financing from entering the field, pressure would naturally develop for greater and greater public expenditures for this purpose. In view of the large and increasing number of elderly persons, the program would tend to make a substantial portion of the population of the country dependent upon the Government for their home financing needs over an indefinite period of time. Unless Federal funds are to be continually made available in large amounts, it is particularly important in the interest of elderly persons to be served that sources of private investment be developed and private financing encouraged to meet their needs as rapidly as possible. OTHER PROGRAMS H. R. 9537 contains a number of other provisions of major importance to the various programs of our Agency, including the secondary market operations of the Federal National Mortgage Association and the college housing loan program of the Community Facilities Administration. One of these provisions, which I believe to be extremely important, would modify the college housing loan interest rate in a way which would avoid discouraging private capital from helping to |