Mr. VANIK. Well, we in Congress sometimes do it every 2 years. I think that most of us here have no longer lease on life and a great many Congressmen find homeownership very important. General LEMAY. You are in a different salary bracket, however. Mr. VANIK. Well, General, perhaps you should have a report on our net. General LEMAY. All right. I will match savings with you. Let me give you an example of what I tried to do along this line. We moved in a new base at Lincoln, Nebr. We had a housing problem. At that time Congress had just passed the bill making all of us who stayed in service eligible for the GI bill of rights. Up to that time we were not veterans so we could not borrow money and buy a house. They changed that, so that those who remained in the service could then get a guaranteed loan and build a house under the GI bill. We made arrangements with the officials and the city of Lincoln to get some builders interested, an area was set up, and to build some houses which we hoped our people would buy. We had an unusual condition here, that we were moving a unit into that field that was already organized. It was one of the units we were bringing back from Korea. So we got everything ready, with architects' drawings of the houses, the areas, everything in color, a good display, and took it over to the Far East to show our people and said, "Now, look, here is what you can do. If you can get $500 together you can build yourself a house here and you will have a place to live at your new station.” They didn't buy it. They built the houses, but the civilians in town bought them, and then they rented their old ones. That is the sit uation. Generally speaking, they do not buy houses. They want to rent. Mr. VANIK. Have you ever conducted a survey of the personnel to make a determination of their preferences, if we had adequate housing available? General LEMAY. Not along those definite lines, no. Mr. VANIK. I was merely trying to determine preference. General LEMAY. But I can tell you what it will be. The answer is that they would prefer not to own their own homes because of the fact that they move so much. Mr. VANIK. Thank you very much, General. I am generally in support of the amendments you desire. The CHAIRMAN. Mr. Hiestand? Mr. HIESTAND. I think we should compliment the general on the effectiveness of his testimony. We normally could expect, of course, appreciation of this morale factor from an officer of his rank. However, this testimony is very convincing to many members of this committee, and I am certainly happy to have sat in on it. The CHAIRMAN. I think you are a fine representative of the Air Force, General. General, how far does the quarters allowance permit the officers to obtain offbase housing? Do they have to supplement it by their salaries? General LEMAY. All of us have a rental allowance that we get in case we are not furnished public quarters. Do you mean if that pays for the cost of the rental? I am not sure I understood your question, sir. The CHAIRMAN. I wanted to know if, to secure adequate quarters, it was often necessary for the officers to supplement their quarters allowance, or if the quarters allowance was usually sufficient to obtain offbase housing? General LEMAY. I would say by and large that it doesn't quite pay the bill. Colonel DRYER. It costs me about $30 a month more than my rental allowance for my house. I bought one, incidentally. And when I rented in town a year prior to that it cost me about $30 more plus my transportation, 11 miles from the base. The CHAIRMAN. Is that condition general? Does that prevail at most installations? General LEMAY. I think it is generally true. You cannot rent a house and pay the additional expense in heat, utilities, transportation, and things of that sort, with your rental allowance. Mr. MUMMA. Where is your home, Colonel Dryer? Mr. MULTER. Mr. Chairman. The CHAIRMAN. Mr. Multer. Mr. MULTER. General, I don't mind saying that when I found things wrong in the Department of Defense I was one of the first to talk up and say so. I want to take this opportunity to say that I am very happy at the things I have seen and learned as I went through many of the bases under your command. I am very happy to say that I have learned that from the lowest rank to the highest rank under your command they have the utmost respect for you. They know that not only do you know all the military aspects of your job, but also what their morale requires. I am very happy that you were able to come in here and tell us the story that you have told us. I would like to ask this one question: Are you doing everything that is feasible and practicable and in complete accord with all the military requirements to keep men as long as possible at a single base? General LEMAY. Yes, sir; I am doing everything that I can, in my command. You must remember that I don't have full control over everything that happens to my people. I have to furnish replacements on order from the Air Staff, for overseas assignments, and things of that sort. But we are doing everything that we can to keep from moving people around. Mr. MULTER. Thank you, sir. The CHAIRMAN. I know I express the sentiment of the whole committee when I say thank you for your testimony, and I am sure it will have great weight with the committee when it goes into executive session. You may stand aside, General. General LEMAY. Thank you, Mr. Chairman. Mr. TALLE. Mr. Chairman, I was requested by Mr. Nicholson to say that he regrets not being able to be present this morning because of an urgent matter requiring his presence in the Public Works Committee. The CHAIRMAN. We will now hear from Members of Congress. Mr. Holtzman, will you come forward, please? Mr. HOLTZMAN. Thank you, Mr. Chairman. STATEMENT OF HON. LESTER HOLTZMAN, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF NEW YORK Mr. HOLTZMAN. Mr. Chairman and members of the committee, first, I would like to express my appreciation to you for granting me an opportunity to appear before you to testify in behalf of H. R. 4443, a bill I introduced during the last session, which would reduce the premium rates for FHA insurance on cooperative housing from one-half of 1 percent to one-fourth of 1 percent. I realize that the Housing and Home Finance Agency has not reported favorably on this legislation, indicating that it is the Agency's view that the amount of mortgage insurance premium should be directly related to the risk involved and the adequacy of the various insurance funds set out in the National Housing Act. The Agency also states that from their experience they have found no evidence which would indicate that the risk involved in the case of cooperative housing is any less than the risk involved in the other insurance programs administered under the National Housing Act, or that the insurance fund for cooperative housing is of such a nature that a reduced premium is warranted. However, I would like to point out a few facts. Since the end of the war there has been a very critical shortage of housing for the middle-income group, many of whom are veterans. Section 213 of the Housing Act was designed to fill the gap between public housing for the low-income groups, and private homes and luxury apartments for the high-income groups. Unfortunately, as we have learned, some builders were able to use section 213 for their own private gain, far in excess of a reasonable profit, to the detriment of the very people for whom section 213 was intended. The net result has been that in every section 213 cooperative which has been built, increases in carrying charges have occurred ranging from 10 to 30 percent and more, forcing many of our citizens, most of them veterans, to vacate their apartments because they were unable to meet these increased charges. The residents of the 213 cooperatives are deserving of relief. Practically all of them relied upon the representations of the builders that the various cooperatives were under the supervision and guidance of the FHA, which implied that the FHA had carefully scrutinized the proposed carrying charges and verified them. That, in fact, was not done, and it either should have been done, or the FHA should have forced the builders to represent the true picture of the co-op corporations before the tenant-stockholders purchased stock and signed occupancy agreements. One feasible avenue of relief for the section 213 cooperatives is the reduction of the FHA mortgage insurance premium from one-half to one-fourth of 1 percent per annum of the amount of the principal application of the mortgage outstanding at any time. Experience has shown that there have been practically no foreclosures of section 213 cooperatives, and thus the fund created by the mortgage insurance premiums has not been touched. It is reasonable and fair to assume that the continued prosperity of section 213 cooperatives and the nonexistence of foreclosures will continue. Moreover, the fund created by the mortgage insurance premiums is not an escrow or separate fund, but is part of the general funds of the FHA, not specifically designated to indemnify the Government in the event it becomes liable, pursuant to Government-guaranteed mortgages issued pursuant to section 213. Reduction of the mortgage insurance premiums as set forth in my proposed bill will enable all cooperatives built under section 213 to resist further carrying charge increases at no expense to the FHA, and without causing any detriment to that agency. The section 213 cooperatives have proven to be excellent insurance risks in the past, and the reduction in the present mortgage insurance premiums will be a tremendous help to the tenant-stockholders. The cooperatives have shown that with strong and intelligent management they have been able to operate and maintain their properties at a minimum cost. If the FHA had taken definite steps in the first place to protect the tenant-stockholders who bought into the cooperatives, the terrific increases in carrying charges would not have taken place. These people are entitled to our consideration and support, and I urge you to study H. R. 4443 carefully with a view toward reporting it favorably to the House of Representatives. In addition, I might suggest that you permit some of those most closely associated with the operation of these cooperatives to testify before your committee so that they can give you a true and factual picture of the problems faced by these projects under the present system. That completes my statement, Mr. Chairman. I would also like to submit this letter for inclusion in the record. The CHAIRMAN. That may be done, without objection. (The letter referred to is as follows:) Hon. LESTER HOLTZMAN, NEW YORK, N. Y., May 21, 1956. House of Representatives, Washington, D. C. DEAR CONGRESSMAN HOLTZMAN: As chairman of the "Conference of Presidents of Section 213 Cooperatives," an association of the officers and directors of the housing cooperatives built in the metropolitan area in the city of New York under section 213 of the United States Housing Act, I urge your support for the passage of H. R. 4443, which is a bill to reduce the FHA mortgage insurance premium payable by these cooperatives from the present rate of one-half of 1 percent of the balance of FHA-insured mortgages to one-fourth of 1 percent thereof. The mortgage insurance premium above referred to, is in essence, an insurance premium paid to the FHA for insuring the various mortgagees for mortgage money advanced to finance the construction of our housing cooperatives. Like any other insurance premium the same should be based upon the prospective losses which can be reasonably anticipated. It is the belief of the conference, that because the housing cooperatives constructed under section 213 of the United States Housing Act are less susceptible to failure and insolvency than the other types of projects financed by FHAinsured funds, that the mortgage insurance premium should be reduced commensurate to the risk that is involved to the Government as an insurer. Notwithstanding that our cooperatives in the main have been builder-sponsored, the history of these cooperatives, over the past 4 years, has demonstrated that the stockholders residing therein have proven their ability to successfully emerge from the turbulence incidental to the initial occupany of their apartments and the surrender of control by the builder. These stockholders, by producing intelligent and energetic leadership, have been able to overcome certain initial problems so that they now have emerged as strong, well maintained, well managed, and well integrated housing communities. They have time and again demonstrated their ability to manage and maintain their properties at a cost far below comparable housing units which are privately owned. When we add to these savings the savings of the profit factor charged by landlords to tenants residing in privately owned units, we find that the housing coopera tive is in a most advantageous competitive position with respect to obtaining prospective stockholder-occupants. As a consequence, it is manifestly clear that our cooperatives, even during times of economic distress, will be able to compete successfully for occupants with privately owned housing units. They therefore are capable of minimizing and perhaps eliminating the probability of apartment vacancies and loss of income which bring financial failure to housing developments. Furthermore, these cooperatives have proven their ability to organize and to operate various educational and recreational facilities making their housing communities more desirable from a renting point of view than competing privately owned housing developments. For the reasons aforesaid it is obvious to us, that because of the economic advantages inherent in cooperative living, which Congress felt sufficiently vital to cause the enactment of section 213 of the United States Housing Act, that the premium charge-back by the Government for insuring mortgages covering our properties should be reduced to the limits specified in H. R. 4443. Respectfully yours, LEIGH M. MEDINE, Chairman, Conference of Presidents. The CLERK. The next witness, Mr. Chairman, is Congressman Paul A. Fino of New York. STATEMENT OF HON. PAUL A. FINO, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF NEW YORK Mr. FINO. Mr. Chairman and members of the committee, I welcome the privilege and opportunity to appear before this committee in support of H. R. 4443 which proposes to reduce the premium rates for FHA insurance on cooperative housing to one-fourth of 1 percent. I speak on behalf of 15,000 families residing in "213" cooperatives in the New York City area. Many of these famiiles are living in my Congressional District, and they are particularly interested in this proposal to lower the rate of insurance premium from its present one-half of 1 percent to one-fourth of 1 percent. As you gentlemen well know, cooperative housing in New York City has made a more substantial contribution to the needs of the people for modest-priced homes than any other area in this country. While the intent of the law was to provide and encourage cooperative housing ventures for veterans of the middle income group and to eliminate the speculative profits of builders by constructing these apartment houses under nonprofit cooperative organizations, we have discovered that not only the letter but the spirit of the law has been defeated. As the result of the uncovered scandal, we found out that cooperative tenants were made to suffer financially at the expense of unscrupulous builders who were able to reap "windfall profits". As you gentlemen also know, as a result of a Senate investigation. evidence was uncovered which showed that tenants were overcharged for construction costs; they are forced to pay unreasonable, high land rentals; high rate of interest on mortgage loans and last, but by no means least, high FHA mortgage insurance premium rates. While the Congress has given assurances that it intends to alleviate the possibility of recurrences of these incidents, the fact remains that the present cooperative tenants are still holding the bag. They are deserving of sympathetic consideration-they are entitled to prompt relief from some of these unrealistic burdens. I say to you gentlemen that H. R. 4443 is a step in the right direction. It will grant some degree of financial relief to these people. |