ing, construction supervision, and tenant selection as well as the development of the basic mutual home-ownership program.

At no time was there ever any question as to what group would be given first preference. Every housing agency of the Federal Government with which we have had dealings has agreed that the residents, through their respective mutual home-ownership corporations, would be given first opportunity to purchase the projects.

The Audubon Park project has been managed, maintained, and operated by the nonprofit Audubon Mutual Housing Corp. since 1940 under an agency agreement with the Federal Works Agency and its successor housing agencies. At intermittent periods negotiations looking toward the purchase of Audubon Park by its residents were undertaken with the several agencies and persons who had jurisdiction over the project. A final purchase agreement has not yet been reached.

In the case of at least two of the original eight mutual ownership projects-Walnut Grove and Greenmont, located in Dayton, Ohio, and South Bend, Ind.-negotiations for purchase by the residents' mutual-housing corporations have culminated in sales agreements. Negotiations are presently under way between the Housing and Home Finance Agency and the Winfield Mutual Housing Corp. representing the residents of the Winfield project in northern New Jersey for the purchase of that 700-unit project.

Therefore, the adoption by the Congress of legislation containing provisions which would make impossible the sale of the balance of the mutual-ownership projects to the respective residents on

similar to that on which some of the projects have already been sold would be discriminatory and would undoubtedly alter the opinion of the residents of the remaining projects concerning the value of the promises and commitments made to them by responsible Government representatives.

Section (f) of the bill as referred to above contains the proviso that the terms of sale of such projects must stipulate that full payment be made to the Government within a period not exceeding 25 years with interest on unpaid balance at not less than 4 percent per annum.

This provision of the bill is definitely inconsistent with promises and commitments made to the residents of the projects in whose behalf this statement is respectfully submitted. In the formulation of the mutual home-ownership program, representatives of several of the mutual-ownership projects agreed with the Federal Works Agency representatives and with representatives of the Federal Public Housing Agency, the PWA's successor, that a 3 percent interest rate would possibly provide inducement for the investment of private capital in mutual ownership housing developments and would provide a just and adequate return to the Federal Government upon its investment in the housing projects built during the emergency period.

The application of this provision of the bill in the sale of the balance of the mutual-ownership projects would require such excessive increases in the amount of monthly payments by the residents as might jeopardize the worth-while prospect of ultimate ownership of the projects by the residents which was, and is, the objective of the mutualownership plan which we helped to develop.

Negotiations for purchase of Audubon Park by its residents have been conducted since 1940. The fact that the purchase has not been

consummated can be attributed to many factors, among which the following seem to be the most significant:

1. Negotiations were necessarily slow at the outset since Audubon Park was the pilot project and it was anticipated that the purchase documents and terms would provide the basic pattern for the disposition of the balance of the mutual-ownership projects as well as a pattern for private mutual ownership developments.

2. Changes of jurisdiction of mutual-ownership projects from one Federal agency to another as well as personnel changes within each successive agency made the settlement of a purchase policy extremely difficult.

3. The lack of precedents for the sale of mutual-ownership projects to resident corporations and the absence of a clear congressional policy for such cases.

The establishment of sales prices and terms of sale are subjects of pending negotiations between the resident corporations at Audubon Park, Bellmawr Park, and Pennypack Woods projects and the Housing and Home Finance Agency. The enactment of this legislation without provisions for the sale of the balance of the mutualownership projects to the respective residents on the basis of the promises and commitments made to them by the Federal Government is not, we feel certain, your desire.

We share with you the hope that the bill you are considering will alleviate the dire housing situation. We hope that you will share our concern for the maintenance of the good faith of the Federal Government and that you will make provision in this legislation for the carrying out of the promises and commitments given to us as residents by responsible Government representatives:

1. Sales preference of mutual-ownership projects to existing resident nonprofit mutual-ownership corporations in the respective projects.

2. Payment to the Federal Government of the sales price of the mutual-ownership projects by the resident corporations over a period of not less than 45 years at an interest rate not exceeding 3 percent. We regret the necessity for so lengthy a statement. We feel, however, that you will understand our sincere desire to draw to your attention a matter which we feel can alter the dreams, the hopes, and the plans of at least a thousand families in our projects who have believed for 8 years that their Government would keep its promise to make mutual-home ownership possible for us.

The CHAIRMAN. Mr. Sheppard.

STATEMENT OF W. MANLY SHEPPARD, WASHINGTON REPRESENTATIVE, SUNSET ENGINEERING CO., RIVERDALE, N. J.

Mr. SHEPPARD. Mr. Chairman, I am W. Manly Sheppard, Sunset Engineering Co., Riverdale, N. J.

We manufacture Crop-Maker portable aluminum irrigation systems for use on farms. We are an eastern concern whose distribution is east of the Mississippi River. There are other eastern firms, as well as a number in the West, making similar equipment.

The manufacturers in the irrigation field formed an organization early this year known as the Association of Sprinkler Irrigation Equipment Manufacturers. The officers of that organization have expressed interest in title I of the National Housing Act, but since

the bylaws and constitution of the association are now in the process of being ratified, the organization is not yet in the position to take action on legislative matters. I am not the duly authorized representative of the association; however, I have been asked by its secretary-treasurer, Mr. A. L. Marlowe, Jr., to advise you of the interest of the association and their support of this legislation. I suspect that members of the committee and other Members of Congress will hear from members of the association prior to the passage of this legislation.

I am authorized by Mr. Harold W. Umstadter, president of the Sunset Engineering Co., to speak in his behalf before this committee as his duly authorized Washington representative.

You will recall, Mr. Chairman, that when the original National Housing Act was passed in the early thirties, title I for housing renovation and modernization was considered as a so-called pump-priming measure. At that time it provided for insuring loans on stoves, refrigerators, and other mechanical devices which were classed as trade fixtures, equipment, and machinery, but you will also recall that a short time thereafter Congress specifically told the Federal Housing Administration to get out of the appliance business.

Section 2 (a) of title I carries the specific language

for the purpose of financing alterations, repairs, and improvements upon or in connection with existing structures, and the building of new structures, upon urban, suburban, or rural real property.

The law originally limited such loans to $2,000, but the limit in the present law has been raised to $2,500.

This brings us to the place where we should discuss the interpretation of the Federal Housing Administration and its regulations for property improvement loans under title I.

On May 2, 1949, in response to an inquiry from this company, we received the following letter from Assistant Commissioner Arthur J. Frentz, who administers title I of the act:

DEAR MR. SHEPPARD: We have your letter of April 29, 1949, asking whether portable sprinkler irrigation equipment will qualify for title I financing.

Title I of the National Housing Act requires improvements to be "upon or in connection with existing structures"; consequently, any irrigation system which is to be financed under this portion of the act must serve or improve one or more existing structures on the property upon which it is installed. The Commissioner is not authorized by the statute to insure, under title I, loans for the purchase of trade fixtures, equipment, and machinery. Accordingly you will readily see that irrigation systems which are installed solely for the purpose of watering crops must be considered as trade fixtures or trade equipment for use in the pursuit of a commercial enterprise rather than an improvement to an existing structure and as such they will not qualify for title I financing.

Another requirement is that the improvement must be permanently installed in such a manner that it will become a part of the realty. Therefore, a portable type sprinkler system which could readily be moved from one site to another would not be eligible.

For your information, we have previously ruled that the cost of a well or permanent pump, or both, with necessary plumbing may be defrayed with the proceeds of a title I, class 1 (a) loan if used to furnish a supply of water to one or more existing structures on the same property. For example, if the water is piped into a barn or house, the water system would be eligible even though part of the supply would be used for purposes not related to the structure such as watering land or filling stock drinking troughs.

We have also ruled that a buried or subsurface type sprinkler system may be financed with the proceeds of a class 1 (a) loan provided the primary purpose of such system is that of watering a lawn adjacent to an existing structure. Such

an improvement, of course, would clearly represent an improvement upon or in connection with an existing structure within the meaning of the act.

We appreciate the opportunity given us to explain the statutory provisions and the position of this administration with respect to improvements of this nature.

Very truly yours,

ARTHUR J. FRENTZ,
Assistant Commissioner.

We cannot question the intent of Congress when it instructed the FHA to discontinue loans on trade fixtures, equipment, and machinery, but we do not believe that it was the intent of Congress to include irrigation systems in that category. As a matter of fact, the use of portable irrigation was so far from its present state of development at that time, we do not believe it was even considered. On the other hand, the FHA officials have been importuned by many manufacturers, financial institutions, and a number of Members of Congress, within the past few months to liberalize its ruling on portable sprinkler irrigation equipment.

I am not sure that we would argue with the Housing Commissioner or his general counsel over their interpretation of the statute. But we would urge the members of this committee to give serious consideration to the wording of the proposed amendment in order that specific provision be made under which they could liberalize their rulings. For instance, referring to the above-quoted letter, we get the following: "Accordingly you will readily see that irrigation systems which are installed solely for the purpose of watering crops must be considered as trade fixtures or trade equipment for use in the pursuit of a commercial enterprise rather than an improvement to an existing structure and as such they will not qualify for title I financing."

Our argument on this point is that while we recognize the commercial aspects of many farm operations, we contend that guaranteed crop production in thousands of farm operations means the difference between growing any crop and growing enough surplus to be ruled a commercial enterprise. We, therefore, believe that in many cases irrigation equipment might be considered an essential improvement to the existing farm structure instead of a trade fixture for use in the pursuit of a commercial enterprise.

We agree that the general counsel has been liberal in his ruling that the cost of a well or permanent pump, or both, might be defrayed by a class 1 (a) loan if used to pipe water to a barn or a house, although it is also used for irrigation purposes. We are grateful for help in financing that much of the system, but must point out that the pump and well are only part of the system. The pipes and sprinklers are also essential to complete the job. Neither is usable without the other. We believe, however, that it will be necessary for Congress to show its intent by writing specific language into the bill to provide for loans for purposes of installing portable sprinkler irrigation systems to be considered an improvement of the existing farm structure.

We, also, believe it would be desirable to raise the $2,500 limitation to $5,000 since the average individual irrigation system, together with well and pump, generally costs between $3,000 and $5,000. Both my company and its competitors engineer and sell many systems for small operations which may be financed under the $2,500 limitation, but we urge that you consider raising the amount in order to cover the larger systems which run into higher costs.

We have no argument with our friends in the Reclamation Service, but we wish to call your attention to the fact that this service is established by law and operates in the western part of the United States. While it operates on revolving funds, millions of dollars have been appropriated to build dams and ditches, to provide water to reclaim millions of acres of land. The Reclamation Service has more recently given a great deal of attention to sprinkler irrigation as a supplement to their surface irrigation. The Reclamation Service would tell you that water is essential for any crop production.

On the other hand, turning to the Agriculture Department, the Soil Conservation Service in its operations in the West, but especially in the East, is equally conscious of the significance of water. The only difference is that in the East there is so little land that is sufficiently level for surface irrigation, it is essential to use portable sprinkler systems. As all of you know, the Soil Conservation Service is currently encouraging contour farming, crop rotation, and all other modern methods for conserving the soil and improving our production. They recommend irrigation as an important part of a successful program. We think it is the surest method of guaranteeing crop production.

The Reclamation Service, through the Public Lands Committee, has always been able to get legislative authority for its basic program. Likewise the Agriculture Department has authority, through the Agriculture Committee, for its operations. But in order to get full benefit from the use of irrigation in all its forms, those two branches of the Government and the farmers are dependent upon this committee to provide specific legislation under which portable sprinkler irrigation equipment may be financed.

I appreciate the privilege of appearing before the committee and am sure that everyone connected with our industry is grateful for that opportunity.

The CHAIRMAN. Mr. Steidle.

STATEMENT OF HARRY H. STEIDLE, MANAGER, PREFABRICATED HOME MANUFACTURERS' INSTITUTE

Mr. STEIDLE. Mr. Chairman, my name is Harry H. Steidle, manager, Prefabricated Home Manufacturers' Institute.

I would like permission to file a statement, if you are closing the hearings in a few moments.

The CHAIRMAN. You may file a statement.

(The statement referred to above is as follows:)

STATEMENT OF HARRY H. STEIDLE, MANAGER, PREFABRICATED HOME MANUFACTURERS' INSTITUTE, WASHINGTON, D. C.

Mr. Chairman, my name is Harry H. Steidle and I am manager of the Prefabricated Home Manufacturers' Institute-the national trade association of the home prefabricating industry. Our membership is comprised of 38 members who constitute the leading producers of prefabricated homes.

I would like to direct my remarks to section 603 of the legislation under consideration.

We are opposed to any further unsecured Government loans to experimental housing enterprises because it constitutes unfair competition to other American producers of acceptable prefabricated houses who must raise their own capital, pay their own rent and meet their own pay rolls out of earnings.