New Albany, Ind.-12031. Elyria, Ohio-33262. Euclid, Ohio-33071. However, that list, since it is based upon that, is not necessarily a closed list, insofar as we are concerned, and the suggestion has been made in the Senate hearing that it might be advisable to insert some sort of an escape clause so that others might be added later, in which case I would assume that the Administrator would have to come back to Congress for authority to transfer under the basic provisions of the Lanham Act. I pointed out in my testimony yesterday that one of the things that has made difficult the problem of disposition, has been the vagueness of the underlying requirements of law as to when and how. One of the things among many that we are seeking through this bill to accomplish is to get a much more definite statement of the intent of Congress. I therefore suggested that it would be preferable to add to the list as it appears in the bill, such other projects as Members of Congress or the committees of Congress might want to add, rather than to put some kind of a general escape clause in which would just restore the old situation. I think that would be the proper way to proceed. Mr. RAINS. One other thing. Have you had a chance to read the testimony or hear about the testimony of some witnesses we had here yesterday, from the armed services, in which they were requesting certain housing projects for the military services? Mr. FOLEY. I know of their testimony, although I have not had a chance to read the transcript of it. I think I am aware of the points that they raised. One of them, I believe, in a recommendation that the military be given what amounted to a veto power over transfer for low-rent use of these projects, and the other and I would like to be corrected if I am wrong-a preference for military personnel in such projects after they were transferred for low-rent use, regardless of income limitations. I believe it was stated that the first of those at least had been found to be in accord with the program of the President. I am advised that that statement resulted from a misunderstanding and a confusion in the usual clearance processes, that the first is not necessarily in accord with the program of the President, that the second also is not. The first is now under discussion to see whether or not there is some other solution we might find to meet the needs of the military, and the second because it would probably be in violation of underlying State laws controlling the operation of low-rent bousing, and that, therefore we could not support such a proposal. Mr. RAINS. Have you heard of the proposal made yesterday that the military be given priority but that the military be required to pay an economic rent? In other words, not based on the low-rent features? Mr. FOLEY. That would bring you into the same conflict with State laws. I may say, Congressman, that obviously we are as anxious as anyone to have a set-up which will be appropriate and proper and furnish whatever aid we can to the military, and discussions are going forward now to see whether there is not something which might be offered. If there is, we will try to get it to this committee before it concludes these hearings. Mr. RAINS. As a matter of fact, those that are known to me personally, as I stated during my questioning yesterday, are such that, for example, i Mobile, the military does not need all the housing, and I think the housing should go to those more desperately in need of it. I was therefore anxious to have it cleared up because this seemed to be a conflict as to what the military wanted and how they should get it. Mr. FOLEY. We are carrying forward those discussions and will try to have something for the committee on it. Mr. RAINS. Thank you. Mr. MCKINNON. Mr. Foley, I wonder if you could give me any idea as to what can be done with regard to the disposal of this permanent housing, such as we have in San Diego and throughout the country, where, under Lanham Act regulations, people were able to move into these houses, not based upon their income, but purely based upon their needs, and what they happened to be doing at the time they got into these projects. Under the disposal plan, as outlined in the bill, of giving preference to an occupant who is not a veteran, some of these people happen to own property elsewhere in the town and they are taking advantage of the low rent in the housing project, are living there and renting their own places for a higher rent. Could we do something that would stop these prople from taking advantage of the disposal provision to make a profit? Mr. FOLEY. You are referring to the sale of permanent war housing under this system of priorities referred to here? Mr. MCKINNON. Yes, sir. Mr. FOLEY. If I understand correctly, Congressman-correct me if I am wrong-your problem is that certain people are presently living there who have properly been admitted in the first instance, and who would have a preference under this set-up, let us say, because they are veterans, but who themselves already own a home which they are renting to somebody else? Mr. MCKINNON. In this case they are not veterans, but are occupants. Mr. FOLEY. And they already own a home? Mr. MCKINNON. Yes, sir. Mr. FOLEY. And your point is that under this series of preferences, they could demand the right to buy the unit in which they live? Mr. MCKINNON. The second house; yes, sir. Mr. FOLEY. I would think it could be handled administratively by regulation. At least that would be our desire. Mr. MCKINNON. You would not be sympathetic to the idea of a person who happens to be living in a housing unit and also owns housing in that community, acquiring a second place? Mr. FOLEY. I would not, of course, unless there were special circumstances which could affect any case. I would think that in that case it would be presumed that you had more prospective buyers than we had units. We might be able to regulate it administratively at least in favor of the veteran nonoccupant. I am glad you raised the question, and we will give it some study. Mr. MCKINNON. You feel that it should be dealt with administratively? Mr. FOLEY. Yes, I believe so, and my general counsel suggests that he thinks it can. Mr. MCKINNON. In your testimony here a moment ago, Mr. Foley, you mentioned the fact that quite a bit of this temporary housing is located on land privately owned and leased to the Government under wartime powers and that in case of transfer a new lease would have to be worked out which would give a fair return on the property value. Can you tell me how you would arrive at that? Mr. FOLEY. In that case, under this bill, the transferee would have to make arrangements with the owner of the land so as to take over the lease and so as to relieve the Federal Government of responsibility under the lease. Presumably they would enter into terms which would be satisfactory on both sides. There is another situation, however, to which I referred before, and that would be in situations where we would not necessarily be transferring immediately, and where, under the conditions of the wartime and immediate postwar, people entered into leases not expecting the land to be tied up as long as it has been, not expecting, for instance, that there would be extensions of the time for removal, as there have been, and as there perhaps will have to be in the future, and are not getting a proper return. All legal advice, however, is that the Administrator is not able to adjust that lease to pay any larger return as the law now stands. This bill specifically proposes that the Administrator be given authority to adjust those payments within certain limits set up in the bill. Mr. MCKINNON. What limitation would that be? Mr. FOLEY. That would be 6 percent return on the valuation as of the time of acquisition by the Government, plus taxes. Mr. PATMAN (presiding). Are there any other questions on title III? Mr. GAMBLE. I would like to ask a question. Mr. PATMAN. Go right ahead. Mr. GAMBLE. Do I understand, Mr. Foley, that in connection with the transfer of these houses under this title, there would be no subsidy involved or no payment yearly such as now is made under the USHA program? The temporaries would simply be transferred to the municipalities and that ends it. In the permanents you get the net rental, if any, that accrues to those buildings over a period of time? Mr. FOLEY. Those that are transferred for low-rent use? Mr. GAMBLE. Yes, sir. Mr. FOLEY. Both statements are correct, Congressman. One, there is a specific prohibition in the bill for payment of annual grants or subsidies and the bill specifically provides for the return to the Government of low-rent proceeds. Mr. GAMBLE. I was sure of that, but someone told me that I was wrong, that there was a subsidy and/or grant payment to be made annually under the USHA program. Mr. FOLEY. No, sir. Mr. GAMBLE. In the case where the Government owns the land, which is very infrequent, I believe you stated, would you transfer that land without reimbursement, or would that be paid for by the municipality? Mr. FOLEY. Where we do own the land, the bill provides that it shall be purchased by the municipality, either for cash or on not more than a 10-year term of payment. Mr. GAMBLE. In most cases with the facilities installed by the Government under the war housing provisions of the act? Mr. FOLEY. In most cases, yes, sir, and I might go on to say that the bill provides for certain qualifications of the appraisal. The improvements placed upon the land would not be included in the price fixed, except where there was extraordinary fill, and the reason for that is that quite commonly, while those improvements may have been costly, they would probably have been of a little more permanent use in the reuse of the land. Mr. GAMBLE. I was thinking of facilities such as gas, water, and electricity services, roads and so forth, more than fill. There would be some price put upon these facilities and the municipality would be expected to pay for it, you say? Mr. FOLEY. As I indicated, in most of these projects, the manner of the installation to serve this kind of a project would probably be of little use for the redeveloped use once this housing is taken off, so the exception is made, and we are not required to charge for it. Mr. GAMBLE. I would assume that in the case of the permanents, where the facilities were paid for by the Federal Government, there is probably a contractual obligation there or an agreement between the municipality and the Government as to what would happen to the facility in case of the disposal of the permanents? Mr. FOLEY. What I have been saying applied to temporaries, not to permanents. Mr. GAMBLE. Yes, I understand. Mr. PATMAN. Are there any other questions? If not, you may go on to title III, Mr. Foley. Mr. FOLEY. Very well. I will now take up cooperative housing. Title III of H. R. 5631 would establish a new program of direct Federal lending to cooperative ownership or other private nonprofit housing corporations for the construction of housing for families of moderate income who cannot afford to pay the rents at which comparable dwellings in new privately financed rental housing are currently being made available in their locality. The title would authorize loans at the going Federal rate of interest for long-term issues plus one-half of 1 percent (equivalent to a 3 percent rate under current conditions). These loans would cover 100 percent of the development cost of the projects and could extend over periods of as long as 60 years, but not exceeding the estimated useful life of the project. A loan authorization of $500,000,000 would be set up, with authority in the President to increase this amount by not more than an additional $500,000,000. It is clear that the purpose of this title is to provide a volume of adequate housing for middle-income families who cannot afford the new housing being produced by private enterprise in their locality but whose incomes nevertheless are too high to qualify them for admission to the low-rent public housing projects which will be assisted under the recently enacted Housing Act of 1949. In view of this purpose, I believe it will be helpful to the committee to describe briefly the general dimensions and nature of the middle-income housing market. On the basis of data published by the Bureau of the Census, the middle-income housing market consists generally of those nonfarm families with current cash incomes of between $2,500 and $4,000 per year. Approximately one-third of the nonfarm families had incomes within that range in 1947, according to the estimates of the Bureau of the Census. In accord with the generally accepted principle that monthly expenditures for housing preferably should not exceed 20 percent of income (particularly in the case of families of lower income), housing suitable for the range of needs of those middle-income families should be available at gross rents, including all utilities and necessary expenses, ranging from about $42 per month to about $67 per month or at a national median gross rent of about $55 per month. Over the years, increasing efforts have been made to stimulate and assist greater activity by private enterprise in serving the needs of this middle-income market. This has been particularly important recently and continues to be so today, in view of the fact that the high prices and costs of housing have had the effect of pricing many middleincome families out of the new housing market at the same time that the housing shortage has seriously limited the supply of adequate existing housing available to them at prices within their means. However, even at today's construction costs and prices, some volume of new housing is being produced in some sections of the country at monthly rents or charges suitable for the upper segment of the middleincome group. Moreover, there are encouraging evidences of increasing activity in this market, reflecting the stimulus of current governmental programs together with some decrease in basic construction costs and the effect of competitive market conditions on housing prices and on the direction of new building activity by the housing industry. The provisions of title I of H. R. 5631 are, of course, aimed almost exclusively at increasing the effectiveness of the Federal Government's aids and incentives to private enterprise to expend its operations in the middle-income housing market. Over the longer range, the impact of these proposals should also be decisively strengthened by the operation of programs to reduce the high costs of producing housing through improved methods and techniques. As this committee will recall, the development of such improved methods and techniques, leading toward reduced housing costs and better standards, is one of the primary objectives of the comprehensive program of housing research recently authorized in the Housing Act of 1949. Notwithstanding the present and proposed measures for expanding the effective area of operations for private housing, it is clear that, under current conditions and those foreseeable in the near future, there will remain a considerable segment of the middle-income housing market which will not be everywhere served by the current production of the private housing industry, or by the existing inventory of older housing. As in all other segments of the market, the extent to which new production increases will have an important bearing on the availability of good older housing for middle-income families. It has bever been contended by this Agency that its recommendations as to further aids for private housing, which are substantially contained in title I of this bill, would make it possible to meet the entire |