By reducing the premium rates on FHA insurance by one-fourth of 1 percent it would mean a substantial savings to those people who are desperately in need of help. We all know that premium rates on insurance should be based on the calculated risk that is or may be involved. In this particular instance, not one substantial default among the many "213's" has taken place, and I am positive that none are in immediate or future sight. If this bill H. R. 4443 is enacted into law, as it should, it would mean a great deal in cutting down the monthly charges of these cooperative tenants. It was the original intent of the law to help keep at a minimum the costs to cooperative tenants. Yet from the reports I have received from these tenants, they are experiencing the payment of higher monthly charges than originally anticipated. I am sure you gentlemen will appreciate the fact that passage of H. R. 4443 will save these cooperative tenants a substantial sum of money. I am aware of the expressed opposition of the FHA to this type of legislation. These objections are readily understandable-no agency which draws from its receipts is expected to give approval to this kind of measure. After all, it would cut down its income. But that should not control the deliberation of this committee on the merits of this bill. If it has merits, which I assure the committee it has, then the committee should report it out favorably, notwithstanding the oppposition of any agency of Government. This is a humanitarian piece of legislation which will help relieve a heavy burden now on the shoulders of cooperative tenants. In urging favorable consideration of this bill, I wish to state that it is the responsibility of this committee and this Congress to mete out justice to weigh the merits of this legislation, and consider it solely on its merits, and not on the basis of selfish oppposition by the FHA. The CHAIRMAN. Thank you, Mr. Fino, we appreciate your views. The next witness is Congressman Latham of New York. STATEMENT OF HON. HENRY J. LATHAM, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF NEW YORK Mr. LATHAM. Mr. Chairman and colleagues, I would like to urge upon the members of your committee that they very carefully and sympathetically consider the merits of H. R. 4443. This bill would reduce by one-fourth of 1 percent the premium rates for FHA insurance on cooperative housing built under section 213 of the Housing Act. There are several large cooperative projects in my district, the largest known as Deepdale Gardens, where the cooperative housing plan, outlined in section 213 of the law, has worked very well. Many families are living together happily in a modern, garden apartment project, which is cooperatively managed, supported, and maintained. To reduce the interest rate on the blanket mortgages covering these multifamily residences would ease the financial burden of the owners, most of whom are veterans. I would also like to point out that, as far as I know, there have been no demands on the FHA mortgage insurance funds to pay losses 77603-56-39 as a result of operations under the 213 program. The mortgage guarantee fund appears to be secure. But cost, to the owners, of maintenance and operation, as well as taxes, has steadily risen. Furthermore, it has been the contention of the owners of this project that the construction was faulty; necessary repairs have already been made at a very considerable expense, and more are needed. I would like to suggegst that the passage of this bill would be one way to at least partially compensate for these unexpected costs, which were not contemplated at the time of the original purchase. I ask that the bill be reported favorably. The CHAIRMAN. Thank you, Mr. Latham. The CLERK. The next witness, Mr. Chairman, is the Honorable Jack Westland, of Washington. STATEMENT OF HON. JACK WESTLAND, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF WASHINGTON Mr. WESTLAND. Mr. Chairman and committee members, my name is Jack Westland, Congressman from the Second District of Washington. I am appearing before you on behalf of H. R. 3718, a bill which I introduced to provide housing in Government low-rent projects for single elderly persons. H. R. 3718 would authorize the Public Housing Commissioner to enter into agreements with local public housing authorities for the admission of widows, widowers, or a single person 60 or over to federally assisted low-rent housing projects. Under the terms of the bill their income must not exceed applicable income limits and their admission must not prevent or delay the admission of any eligible family to the project. Once admitted, the same conditions for continued occupancy would apply as with respecto to family tenants. I do not believe it is necessary to belabor the point that there are more elderly people in our society than ever before. Statisticians have proven that longevity is steadily increasing. The percentage of aged persons in my State is increasing rapidly due to migration of families to the growing West and the healthful, invigorating climate of the area. Statistics furnished by the Bureau of the Census conservatively estimate there to be at least 1,600,000 widows, widowers, and single persons in the country who could otherwise qualify for low-rent housing if they were not single. While I have been unable to compile figures on a national scale to indicate the need these people have for low-rent housing, I have figures from my own district and the Puget Sound area which do indicate a grave need. Furthermore, they indicate that if my bill were adopted facilities would be available. We have Federal housing units in Seattle, Bremerton, and Everett. Managers of the units have reported that they have received numerous applications from single elderly persons, now barred from occupying Federal low-rent housing. For instance, in Everett, there are more than 1,000 single persons over 65 drawing old-age benefits who are desperately in need of adequate housing at low cost. They live in a relatively high-cost area on small, fixed incomes. The Government housing unit in Everett has 100 single living units and the director of the Everett Housing Authority has stated that 35 to 40 of these are often vacant and would be available for widows or widowers or other single persons if they could legally occupy them. In one project in Seattle this year there have been almost 300 applications from single persons, and the housing director estimates that there would be hundreds more were it not generally known that single persons cannot get in the projects. Of course, the question of availability of housing units is pertinent to this bill. My bill provides that single persons would have occupancy only when families are completely serviced and vacancies exist. In Bremerton, for instance, almost 10 percent of the units are vacant. This project has 280 single units out of 600 and could take care of many single elderly persons. The director of the Bremerton Housing Authority has written that finding living accommodations for aged single persons is a constant problem for the local welfare department. He further indicates that even though aged single persons have never been acceptable applicants for public housing, his office receives from 2 to 6 inquiries per week from people newly faced with this problem who are unaware of the policy. Because the life span of United States citizens is increasing and there are additional numbers of widows due to the female of the species tending to outlive their spouses, I believe the housing problem of the single aged person will become more serious on a national scale in years to come. Providing facilities in federally operated housing developments would contribute an added measure of security and relieve hardship for older people now unable to find decent, low-cost housing commensurate financially with their limited incomes. Since this bill does not call for construction of new units, but rather implements more advantageous utilizations of existing facilities, I believe it is desirable, both economically and socially, and respectfully urge your full consideration of its specifications. That completes my statement, Mr. Chairman. The CHAIRMAN. Thank you, Mr. Westland. The committee will consider your views. (The following letter was submitted for inclusion in the record:) BROOKLYN, N. Y., May 21, 1956. Hon. BRENT SPENCE, Chairman, Committee on Banking and Currency, DEAR SIR: In a letter dated May 14, 1956, I was informed by Mr. Robert L. Cardon that because of the numerous requests received by the committee from people wishing to personally express their views during the hearings on housing legislation, it would not be possible to afford me an opportunity to appear before the committee in support of H. R. 4443. The letter stated that should I so desire I could submit a statement of my views and it would be made part of the record of the hearings. I am therefore taking this opportunity to urge favorable consideration of H. R. 4443 by the Committee on Banking and Currency. H. R. 4443 would reduce the FHA mortgage insurance premium from one-half to one-fourth percent on all mortgages which have been executed by cooperative housing corporations on projects built pursuant to section 213. In 1950 section 213 of the National Housing Act, title 2, was passed. This section made it possible to construct, with FHA-insured mortgages, nonprofit cooperative housing developments, the permanent occupancy of which was restricted to those owning stock in the cooperative corporation. In creating this law Congress aimed at alleviating the critical housing shortage which had hit the middle income group, particularly the lower middle income group, and especially the veteran of World War II. The administration of this legislation was undertaken by the FHA. At present the New York office of this agency has under its jurisdiction about 85 projects built under this act in which reside approximately 30,000 families totaling in the vicinity of 120,000 people. The purposes contemplated by Congress in enacting this law are enunciated in the United States Senate Report No. 1286 (U. S. C., Congressional Record, 81st Cong., 2d sess., 1950, pp. 2100, 2102, 2103): "*** It is essential that every possible economy in financing, construction, and maintenance be translated directly into corresponding reductions in the monthly charges which the individual consumer must pay for that housing. * * And a further intent was: "Before any advances could be made, the Administrator would have to determine that a borrower is a bona fide cooperative or nonprofit corporation whose methods of operation are such as will avoid the use of funds for any speculative purpose or the payments of excessive fees, salaries, or charges." [Italic is my own.] I am sure you are familiar with the many ways in which this intent was ignored, circumvented, and disregarded to the financial detriment of the individual consumer. To refresh your recollection I respectfully refer you to the testimony given on August 24, 1954, before Senator Prescott Bush by Mr. William F. McKenna, Deputy Administrator, Housing and Home Finance Agency, Mr. Leigh Medine, and myself. This testimony is contained in a volume entitled "FHA Investigation-Hearings Before the Committee on Banking and Currency, United States Senate, 83d Congress, Second Session, Pursuant to Senate Resolution 229, Part 2." In essence, what this record reveals is: 1. When the individual was sold his cooperative apartment, the estimated monthly carrying charge given to him was underestimated; 2. The builder by dominating and controlling the board of directors of the cooperative corporation was able to (a) enter into a construction contract to build the cooperative project at the highest price permitted by FHA; (b) secure a ground lease in which the rent to be paid was based on a highly inflated land value; (c) receive payment under the construction contract despite the fact that there was inadequate performance and variances, omissions, and deviations from the plans and specifications. As a result the individual cooperator has had his monthly carrying charge raised between 10 and 20 percent within a period of 2 years, and although some of the ealier developments were constructed less than 5 years ago, they are in danger of receiving further increases to meet the expense of correcting poor constructions. In Clearview Gardens where I live, $50,000 was spent in the past year for boiler repairs. Add to this the steadily rising cost of operating and maintaining the buildings, together with the increasing real estate taxes, and we find a point is being rapidly approached where the monthly carrying charge will be too expensive for the people who live in the projects and not attractive enough to induce the general public to buy into a cooperative of this type. Two graphic examples of the last-mentioned point can be demonstrated by the difficulty encountered in the Whitney Manor and Southridge in selling apartments. Both are new developments formed under section 213, as amended in 1955, and are endeavoring to secure sufficient buyers to start construction. Whitney Manor is located in Brooklyn, N. Y., and Southridge in Jackson Heights, Queens, N. Y. The estimated monthly carrying charge will average a little over $26 per month per room and the investment required ranges from $190 to $230 per room. One of these projects has gone as far as to guarantee no carrying charge increase for the first 2 years of occupancy. Yet sales are moving slowly. It therefore becomes obvious that steps have to be taken to stabilize the charges in existing projects and to reduce them in future developments. One of the ways of accomplishing this is by the passage of H. R. 4443 which would reduce the FHA mortgage insurance premium from one-half to one-fourth percent. Taking as an example a cooperative which has a million dollar mortgage (a project of approximately 100 families), we find that this would reduce the monthly carrying charge $2 per month per apartment. This together with the unified effort of the developments to reduce the real estate taxes, and the indication by FHA that after 3 years of operation a project can cease funding the general operating reserve, and the tendency of cooperatives toward using their mass purchasing power to effectuate savings in buying, will continue to make these developments the excellent mortgage insurance risks they have been to date. The Federal Housing Administration is opposing this bill on the grounds that it has not had sufficient experience to justify the decrease in the mortgage insurance premium. An examination of FHA figures will show that 213 cooperatives have been an excellent risk insurancewise and that a very large surplus resulting from the payment by these projects has accumulated. As a matter of fact, this agency thinks so highly of this type of development that it is exploring the possibilities of converting some of the defaulted 608 developments into cooperatives. The only cause that can result in a mass default in the cooperatives is an economic recession. Should this occur the FHA insurance fund would be inadequate to meet its obligations in the same manner as any insurance company if it had to pay claims on most of its policies at one time, or any bank if most of its depositors withdrew their money simultaneously. For the isolated instances of default, a one-fourth percent insurance premium will be adequate to meet the situation. In objecting to H. R. 4443 the FHA conveniently ignores the fact that the necessity for the passage of this legislation is the result, in a large measure, of its lack of interest in protecting the consumer who bought into the now existing cooperatives. In testimony given before the Senate Banking and Currency Committee previously mentioned by me in this letter, Mr. William F. McKenna stated: "It is our feeling-and I think it is factual based on the investigation-that the people who live in these cooperative apartments have suffered a burden because of the way the program was administered in New York. "We believe it is clear that the conflict of interest between FHA officials and the work they were supposed to perform has contributed to that burden" (pp. 136-137). Mr. Leigh Medine testified: "That to me was clear evidence of not only a lack of adequate supervision or of negligence on the part of the Federal Housing Administration but a definite, direct way of saying, 'we want to support the builder'" (p. 1214). Another argument against H. R. 4443 is that cooperative apartments are cheaper than those in comparable conventional buildings. This reasoning ignores the entire purpose of section 213 and that segment of the public interested in living in this type of development. A check of the credit statements submitted by the people now living in the various projects will reveal, in the main, that their income ranges between $5,000 and $7,500. An examination of the records of the new developments now in the process of being sold, namely, Whitney Manor and Southridge, will show these same facts. It, therefore, becomes obvious that cooperative housing is attractive only to people within this income bracket and who, as a group, have been the greatest sufferers of the housing shortage. The noble intent and purpose of section 213 will be defeated and negated unless Congress and the FHA keep one primary thought in mind, that this law can only serve its purpose by making available healthy, wholesome housing accommodations for the lower middle income veteran and his family. The FHA policy of charging an excessive mortgage insurance premium and sitting on a large surplus is not helpful or conducive to attaining these goals. Many segments of our national population and foreign nations are receiving outright gifts from our Government as forms of assistance. The cooperatives are not asking for charity. They are requesting a reduction of a mortgage insurance premium that is excessive. The savings realized by this reduction, together with their own efforts in the economical management and operation of their individual projects, will continue to make these developments the excellent insurance risks they have been till now. Therefore, the Coordinating Council of 213 Cooperatives respectfully urges that H. R. 4443 be considered by the Committee on Banking and Currency and the committee recommends to the House of Representatives that this bill be made into law. Very truly yours, SIMON GALLET, President, Coordinating Council of 213 Cooperatives. The CHAIRMAN. The committee will recess to reconvene tomorrow morning at 10 o'clock. (Whereupon, at 11:25 a. m., the committee adjourned until Friday, May 25, 1956, at 10 a. m.) |