so anyway because we have tried to maintain the independent autonomy of each of these three agencies, except that they be required to coordinate their general activities in an over-all Government housing policy.

By setting up this Commission we emphasize still more the National Housing Administrator still has some independent authority here to do various things, but we have tried to make it clear that we do not desire to interfere with the autonomy of these three agencies; that they sit on the Board, they join in the discussion of all Federal housing policy, and the thing is worked out as a coordinating agency to see that the Federal bureaus are not overlapping, are not treading on each other's toes, are not pursuing diametrically opposite policies at the same time.

That is a substantial change in the bill from last year, and meets with the approval of certain interests which primarily suggested it themselves, and I think it reasonably meets with the approval of those who have been directly connected with these various agencies.

Title V deals with the Federal Home Loan Bank Administration, and is intended to give those banks power to make loans and have wider authority than they have had. I do not think I can at this time, without taking all day, go into the various detailed changes that have been made.

You will hear, I think, that probably the Federal Home Loan Bank System would like to go a little further and have a little more authority than we have given it.

The question, for instance, of whether they should have the right to make these unsecured loans for improvement of houses.

Under title I of the FHA, the FHA has insured those loans for some years and it has been a successful operation. We have given here the Federal Home Loan Bank System, the Federal building and loan associations, power to make those loans when insured by the FHA. They would like to have the power to do it without insurance by the FHA.

In that, however, they would depart, in making unsecured loans on houses, from the whole tradition of building and loan associations, and of which most people think building and loan associations ought to do.

However, those are questions of detail. We have tried to bring them up to date and to see that they are a full effective agency and are not limited by any Government restrictions in their power to make loans entirely on a private basis.

The bill makes substantial changes in the FHA.

Well, there is a title IV dealing with housing research. We have cut down considerably the extensive nature of the research power given in the bill last year, on the theory that other agencies are now conducting a good deal of these research agencies and we do not want to duplicate them. We do, however, give power to conduct and encourage programs of technical research, particularly into the development of cheaper methods of constructing houses.

The FHA title V and title VI, I think, deal with the FHA and attempt to extend somewhat further the assistance to be given by FHA to the financing of homes. There is not any doubt but what the Government enters into the financing of mortgages. The insurance of mortgages through the FHA has been the greatest single step forward in

housing that the Government has ever taken, in my opinion. They have gotten rid of all the old second-mortgage technique. They have developed a uniform system of financing homes over a long period, and made it far more uniform than it was before.

People can obtain all the money necessary, or at very reasonable rates today, and of course the financing, the interest that you pay and the manner in which you finance, and the length of time which the mortgage extends, has a very substantial bearing on the rental that you pay. Not quite as much as the actual cost of construction, but it has a great effect.

We have succeeded in reducing the cost of financing. That job has been well done. The job of trying to reduce the cost of construction has hardly been touched. In fact, of course, that cost has rather moved the other way than down.

We have tried here to push a little further the savings in financing costs, but that does not really offer a great field for cheapening rents or cheapening the cost of those who live in new houses.

We have particularly authorized special provisions for a low-cost house. That is in title VI. A house that will cost here, at the time we wrote this, $5,000-I think we permitted a slight increase. We give a mortgage to builders up to 95 percent, where ordinarily the builder can only get 80 percent mortgage.

We give him, on this particular low type of house, an 85 percent mortgage in order that he may put less capital into cheaper houses; in order that he may have an incentive to try constantly to build cheaper houses.

We have raised somewhat the rate of interest. There were several places in the bill that the rate of interest was 3%1⁄2 percent. One of the substantial objections we had here last year from Mr. Lewis Douglas and other insurance people was that we were batting down the rates of interest more than was justified by the actual conditions in the interest market.

We have to bear in mind that anybody can get 2% percent for his money by handing the money to the Government, and with absolutely no effort and no work.

If we are going to get people to put money into housing, even on a loan basis, you have to pay them somewhat more than the 21⁄2 percent, and it seems to me that at a time that the various people have to handle the thing, get a very reasonable return, that 4 percent is probably as low as we should go.

That is the provisions in the present bill. We only gave 3/21⁄2 percent before to cooperative agencies, to universities, and to this very lowI don't think in the last draft we gave it to the very low-income house, anyway.

Senator BUCK. Senator, you have undertaken to reduce the cost of financing. Is there any way by statute that you think we can reduce the cost of construction?

Senator TAFT. I know of no way by statute to reduce the cost of construction. I think an intelligent Federal Housing Agency is constantly taking steps-well, through the research, through the encouragement of prefabricated housing. Up to date prefabricated housing has not been able to prove that they are any cheaper than housing construction in the conventional manner and yet there is certainly a hope that by mass-production methods they may be able to do so.

A general encouragement of that under the bill last year I think was a very wise provision. It may have been carried a little too far in trying to finance people without their putting up any money at all, which is apparently what Mr. Wyatt wanted the RFC to do, but the general idea of encouraging them to go ahead and try to develop that industry certainly is a wise one and may have ultimately a bearing on

cost.

Conferences with the labor people, the possibility of trying to develop an annual-wage system, may reduce the cost of labor. There may be combinations, monopolies, and so forth, in some of the construction materials which the Department of Justice could go after. In general I think it can only be done by cooperation between the industry and labor, but the Government certainly could take some part in stimulating meetings of that kind to reduce the cost of housing. Title VII is the same as FHA also. Title VII is the so-called yield insurance section. Title VII is on page 36 and runs to page 54. Senator BUCK. Is that not a new section?

Senator TAFT. No. That was in the old bill. Senator Ellender considered taking it out of this bill and put it only in effect to raise the question. The idea is the insurance of equity investments for large-scale housing projects for insurance companies.

One of the great difficulties in this whole field is to get people to put money into rental housing. The returns are so uncertain that very few people have been willing on the whole to put money into rental housing and a lot of people want rental housing. They do not want to have to buy their homes. Today they are almost forced to buy their homes, under present conditions, sooner or later. I am all for home owning and I think there ought to be a very large percentage of home owning.

On the other hand, there are people who probably ought not to own homes, and the cheapest way to get rents down probably is largescale housing projects.

The

Some of the insurance companies, as you know, have invested their funds which represent the savings from millions of people, in housing projects. We thought we might encourage them further to do so. Possibly also large estates who are looking for an investment. insurance companies take the position-the reason we were doubtful about putting this in this year was that the insurance companies now take the position that this is not a section that they will use, that the return guaranty is not adequate, and that they will not make use of it under its present form.

I am hopeful that they may come in here and be willing to tell us under what changes they might use it. After all, we have got to insure mortgages up to 90 percent, even 95 percent in some caseswe might almost as well insure the equity investment, if we are going to do it under proper restrictions. This is a very guarded insurance of such projects. Maybe it is so conservative that nobody will use it. It is nothing but an experiment.

Senator BUCK. What are the objections to it?

Senator TAFT. My understanding is that they think either there is too much regulation or that the amount guaranteed-the return of 24 percent guaranteed is so low that they would rather prefer if they are going to do it at all, to take a chance on it and forget all the Government operation.

If the insurance companies still take that position when they appear before you I would drop it out, unless you find that by some reasonable adjustment you think they think they can make use of it, but I regard title VII as an experiment and not as an integral part of the bill. Title VIII is the result of the working over of the so-called urban redevelopment plan. We had two or three bills 2 years ago, different types of urban redevelopment. The idea is to assist cities to buy up large sections of so-called blighted areas, and redevelop them. Assistance up to date, as you know, has been limited to public housing. The effort here is to do something which will not limit it to public housing.

A city may redevelop it, they may buy part of it for playgrounds and city parks. The school districts may buy part of it for schools, it may be resold for properly zoned commercial activities, it may be resold for private housing development, or it may be resold for public housing development if public housing is continued.

It may be used for any purpose. It is a general redevelopment program. We have rewritten that section from last year. It was extremely complicated.

While I think it was sound, it was so complicated that I, at least, had great difficulty in understanding it and had to study it an hour or so every morning, every time I had to speak about it again, so we have redrafted and it is a fairly simple plan. It rests however still on a two-thirds Federal grant or assistance through subsidy. The city must put up one-third of the cash involved in the loss. Almost all of these operations will involve a loss. You will have to pay more for the land than you can dispose of it for.

Even assuming the city pays proper value for what they take and that everybody else pays the proper value for what they take, still there is a loss involved, and the plan, roughly, is that the Federal Government shall offer to pay two-thirds of that and the cities one-third.

The amount given is not very large, and it wouldn't take care of more than a few projects to get started in an experimental way, and we could see then how the thing works out.

Senator BUCK. Are you limited as to the amount of money to be devoted for that purpose?

Senator TAFT. Yes. It is limited to-I think the loans, a part of which are merely temporary to get the thing turning over, are $500,000,000.

Senator BRICKER. That covers only slums and not any city planning?

Senator TAFT. It is fairly broad. It is supposed to cover slums and those that are predominantly residential. It may take in wrecked commercial districts, blighted commercial districts, and warehouses and wholesale districts, and things of that kind. They take in areas like the bottoms in Cincinnati where you have got perhaps predominantly wholesale areas.

Senator BRICKER. Four or five years ago, there was a State bill right along the same line.

Senator TAFT. This couldn't be done practically unless the States passed a bill to take advantage of it. It couldn't be done. It would take State legislative authority for any city or State to undertake to do this. They would have to pass something. The loans are to be

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repaid. The actual cost to the Government is limited to $4,000,000 per annum; $20,000,000 per annum would be the ultimate amount in the Federal budget, total cost in the Federal budget authorized by this particular section.

You can build it up at the rate of $4,000,000 a year for 5 years and then you would stop and see whether you want to do any more of it

or not.

It would be an addition of $20,000,000 to the Federal budget per annum, and that would be a more or less permanent condition until the whole thing was cleared up. If you want to capitalize it you would have to pay a grant based on whatever the interest rate is on that $20,000,000.

Senator BRICKER. Are you confident that that couldn't be made financially profitable for the local community?

Senator TAFT. Of course, if it can be made financially profitable for the local community there would not be any loss for the Federal Government to pay. You could stimulate them with loans. You could say, "Here now we will loan you money to get this started." But there is no loss involved so that you have got to pay that loan back in due time, and we would get out of it entirely without any cost to the Federal Government at all.

If you could develop a program; and, of course, the National Housing Agency should want to develop such a program. They should want to develop programs that cost the Government just as little as possible.

Senator BRICKER. It seems to me if we are limited to a slum area that you are bound to buy them at a depressed value and if there is some improvement on them, some city planning, any building you put on that is presently a good building; it looks like there would be a good increment to that that would certainly take care of any loss.

Senator TAFT. I think this language is perhaps a little broad. We had that discussion last year and my effort in the beginning was to confine it strictly to residential-that is, slum means residentialareas, but the slums are all mixed up with the rest of the blighted areas. When an area gets in that condition people live in garrets and second and third floors and all sorts of places over wholesale establishments. Senator FLANDERS. Is it general that slum areas are entirely unproductive?

Senator TAFT. Yes. I think the Senator's suggestion that you could buy them up cheap is not quite so, because by spending no money at all on them and just going in and going around and collecting rent, particularly collecting 13 months every year, the way it is when you have weekly collections, some of those areas return a good deal and you have a pretty hard time, when you condemn them, to get them for a reasonable price.

Senator FLANDERS. In the cases you are most anxious to cover? Senator TAFT. Yes. You cannot be certain. . Some of the realestate people think that you can work out these things without loss. Personally, I rather question it.

Senator BRICKER. Of course you can eliminate your slums, where you have got an intermingling of your warehousing, railroad tracks, and things of that kind, and your housing facilities, you can eliminate that of course through your city zoning, if that is the only purpose. Senator TAFT. Yes. You can get rid of those.