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 economie 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 II. R. 4443 is a step in the right direction. It will grant some degree of financial relief to these people.

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 commiittee 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

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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