would have the effect of making the bill almost ineffective, as in almost all low-rent housing projects there are eligible families awaiting admission. S. 1642 would amend the same act to authorize loans and annual contributions to public housing agencies for the development, acquisition, and administration of low-rent housing specifically designed and reserved for occupancy by elderly persons. Elderly single persons and families composed of elderly persons would be eligible. All of the existing provisions of the act would apply to this housing except those relating to veterans' preferences and to the occupancy of dwelling units by family groups. The bill would authorize the construction of 50,000 units a year for 4 successive years and authorize the Public Housing Commissioner, during each of the years in that period, to enter into contracts for annual contributions for the life of the . projects aggregating not more than $3 million a year with respect to projects contracted for during that year. Also, authority would be given to reconstruct or remodel existing low-rent dwelling units specifically for occupancy by elderly persons where a finding is made that there is an acute shortage of adequate housing for elderly persons of low income. Recently our Agency gave serious consideration to recommending to the Congress that the United States Housing Act be amended to make elderly single persons eligible for low-rent public housing. In. looking further into the problem, however, we realized that a number of important questions should first be answered concerning the types of accommodations which should be provided and whether changes should be made in other programs of our Agency in order to assist in the provision of housing for the aged. Also, as housing represents only one phase of the general and growing problem of assistance to the aged, the question exists as to whether special action should be undertaken in this field independently of action in other related fields. We have initiated a field survey to assemble facts on some of these questions, but are not prepared to answer them at present. If your committee believes it desirable to enact legislation at this time which would be limited to making aged single persons eligible for low-rent public housing under the United States Housing Act, I would suggest an amendment to S. 1800 for this purpose. A draft of this amendment is submitted for the record. Senator SPARKMAN. Without objection, it may be made a part of the record. (The amendment referred follows:) AMENDMENT OF S. 1800-ELIGIBILITY OF ELDERLY SINGLE PERSONS Amend S. 1800 by amending section 13 as follows: Strike line 19 at page 7 and substitute "amended, is hereby amended (i) by inserting the words ', and single persons 60 years of age and over,' after the words 'means families' in subsection 2 (2) thereof and (ii) by deleting section 10 (i) thereof and". Mr. COLE. Under this amendment, single persons 60 years of age or over could be made eligible for low-rent housing on the same basis as families, where such persons can be made eligible under State or local law. This would undoubtedly be of assitance in the relocation of aged single persons displaced from urban renewal projects. 62736-55- -7 If, on the other hand, your committee believes it desirable to enact legislation which would permit local authorities to earmark a specified portion of their present and future low-rent programs for the housing of elderly families and single persons, a more extensive amendment would be needed. Such an amendment should not, however, go so far as to make housing for the elderly a program separate and distinct from that for other families. Senator SPARKMAN. Any questions, Senator Lehman? Senator SPARKMAN. Are there any other questions by any Senator? Mr. COLE. I think if I may then turn to page 11, that would be best, because the chairman of the committee has an interest in that. Senator SPARKMAN. All right. I would like to say perhaps after you are gone when we are talking to Mr. Slusser, I will ask him some questions about this. Senator PAYNE. I have some on that also at that time. Senator SPARKMAN. All right. Page 11. Mr. COLE. Yes, sir. College housing Two of the bills being considered by your committee relate to the loan program of the Housing Agency to assist educational institutions of higher learning in providing housing for students and faculties. COLLEGE HOUSING AMENDMENTS OF 1955 (S. 1744) One of these bills, S. 1744, would broaden and liberalize the present loan program in two principal respects: First, it would broaden the purposes for which loans could be made; and, second, it would authorize loans to be made on more liberal terms. Before indicating the changes which this bill would make, I wish to state my belief that the present program is working satisfactorily, and I know of no need for additional legislation. With respect to the more liberal terms, it should be noted that existing law permits us to provide incentives for private financing, which has resulted in substantial savings to the Federal Government. As I will explain, S. 1744 would stop most, if not all, of this private participation in the program. ENLARGING SCOPE OF PROGRAM Under the bill, loans would be authorized not only for housing but for "other educational facilities" which would be defined as structures of a self-liquidating nature suitable for use as cafeterias or dining halls, student centers or student unions, infirmaries or other inpatient or outpatient health facilities, and other essential service facilities. There seems to be general agreement that additional facilities of all kinds are needed by our colleges and universities in the face of mounting enrollments. Under the present loan program, dining and cafeteria facilities may be included in the projects to the extent they are necessary for students living in the dormitories constructed with loan proceeds. These facilities are, however, incidental to the major purpose of housing the students and faculty. The desirability of authorizing loans for facilities independent of the dormitories or other housing assisted by the Federal Government rests on general considerations of aid to educational institutions rather than assistance for residential construction. If the scope of the program is to be broadened as contemplated by the bill, we would recommend clarification of the phrase "other essential service facilities," which could be regarded as covering, for example, stadiums, gymnasiums, and other types of athletic facilities. LIBERALIZING LOAN TERMS The bill would increase the maximum terms of the loans to colleges and other educational institutions from 40 years to 50 years and, in effect, establish the interest charge to the institutions at a lower rate than under present law. For instance, under the formula provided in the bill, the rate which would be charged to the school (under present circumstances) would be 234 percent. Under the existing program, the present rate being charged is 314 percent. The bill would also amend the existing law to reduce the rate paid by the Agency on borrowings from the Treasury to provide funds for loans. The rate under the bill would be (under present circumstances) 212 percent, whereas under the existing law this Agency is paying 234 percent on new borrowings from the Treasury. The differential then between the rate charged to the colleges and that paid to the Treasury under the bill would amount to one-fourth of 1 percent, instead of the one-half of 1 percent under existing law. The present one-half percent margin (with somewhat higher margins on past loans) will cover all administrative expenses and a reserve for losses. Although not initially self-supporting, the existing programs will become so, after a sufficiently large volume of loans are outstanding. On the basis of our experience so far, we believe that the smaller margin of one-fourth percent would be inadequate, at least during the early years of the program when administrative expenses are higher in relation to income. The bill indicates that an eligible loan is to be made unless funds can be obtained upon terms equally as favorable as the terms of the Government loan. This, together with the lower interest rate and longer maturities would have the effect of stopping most, if not all, of the private participation in the program, as private funds could rarely be obtained at equally favorable terms. The bill would eliminate an effective incentive for private financing under the existing program which requires that, if private financing can be obtained by a college at a reasonable interest rate (now determined to be 31⁄2 percent or less) the college must accept such private financing. However, if a private sale can now be made only at a rate of more than 32 percent, a Government loan would be made at the rate of 34 percent. Under this plan, a total of about $20 million has been placed privately, and about $80 million has been taken directly by the Government. Incidentally, all issues sold privately to date were for taxsupported educational institutions, and in a number of cases only the first 20- or 30-year maturities of the serial issues extending to 40 years were privately financed, with the longer maturities going to the Government. The more liberal terms for the college loans and the elimination of private financing in the program would, of course, increase the expenditures for the program by the Federal Government. The basic question for the Congress to determine seems to be whether the ultimate benefit which the bill would provide college students warrants the added expenditures by the Federal Government. It is estimated that the reduced debt service under the bill, as compared with our existing program, would average about $40 a year per student. I think the Congress will also want to consider whether this amount of Federal aid to students is best furnished through reduction of dormitory rentals or through some other form of assistance. The Office of Education, of course, is in better position to advise in this respect. There are a few technical amendments to the bill which we would like to have the privilege of submitting if your committee decides to give favorable consideration to the bill. Senator SPARKMAN. Are there any questions? Senator BUSH. May I ask a question there, Mr. Chairman? Senator BUSH. You were speaking there of the advantage that has been taken of existing legislation. Is that correct? You said under this plan a total of about $20 million has been placed privately, and about $80 million has been taken directly by the Government, that is, under existing legislation. Mr. COLE. Under existing legislation, Senator. Senator SPARKMAN. This program was written into the law in 1950, if I remember it correctly. Mr. COLE. That is right. Senator SPARKMAN. But it never got started because the Korean war came on and it was not until we caught up with our shortage of materials and got through our inflation, and so forth, after the Korean war. So it has been going really for a year and a half or 2 years at the most. Mr. HAZELTINE. The private part of the program has been going for 2 years at the most. There were loans prior to that time. Senator LEHMAN. Do I understand that you permit on a project part of the cost be privately financed, and part to be financed through guaranteed loans, that is, FHA loans? Mr. COLE. In effect, that may be accurate. What happens occasionally, as I indicated in my statement, is that the private investors will take a part of the bonds and the long terms may remain with the Government. Senator LEHMAN. That is the reason why I asked the question. I was not certain of the policy. Mr. COLE. But there is no guaranty. Senator SPARKMAN. They are direct loans. Mr. COLE. They are direct loans. Senator LEHMAN. I see. Mr. COLE. The Government's part is a direct loan. Senator SPARKMAN. By the way, before you go I would like to ask one thing of you. The Hoover reports recently came out in the latter part of March or the first part of April, I think. There are eight different recommendations in it pertaining to the subject of housing generally, the Home Loan Bank Board, the Housing and Home Finance Agency, Federal Savings and Loan Insurance Corporation, and so forth. I shall not ask you to take the time to comment now, but what I should like to do would be to insert those recommendations in the record and invite you to give us your comment on them. Mr. COLE. Yes, Mr. Chairman. Would you like to have that done by us filing a statement for the record, or coming back and explaining it? Senator SPARKMAN. I think that would probably suit your convenience to file a statement. Mr. COLE. Yes. Senator SPARKMAN. It will be all right, because undoubtedly these questions will come up from time to time throughout the hearings. Mr. COLE. Yes. Senator SPARKMAN. And we would like to have your official position stated on these recommendations. Mr. COLE. Thank you, sir. Senator SPARKMAN. Without objection, the recommendations will be made a part of the record at this point. (The recommendations follow :) HOOVER COMMISSION RECOMMENDATIONS Recommendation No. 1 That the law limiting the right of the Federal Savings and Loan Insurance Corporation to repay the federally owned capital stock be repealed and that the Federal Savings and Loan Insurance Corporation be required to surrender to the Treasury $66,800,000 of the Government securities that it holds either (1) in full repayment of the remaining investment of the Government in the capital stock of the Corporation, or (2) in exchange for a noninterest-bearing credit in an equivalent amount. Recommendation No. 2 That either the authority to transfer funds given to the Administrator of the Housing and Home Finance Agency, insofar as the Home Loan Bank System is concerned, be rescinded, or alternatively, that the Home Loan Bank System, including the Federal Savings and Loan Insurance Corporation, be given independent status similar to that of the Federal Reserve System. Recommendation No. 3 That the authorization of the Secretary of the Treasury to lend to the Home Loan Bank System $1 billion and the Federal Savings and Loan Insurance Corporation $750 million be carried on the Treasury statement as contingent liabilities. Recommendation No. 4 That no person be permitted to serve as a member of the Home Loan Bank Board and the Federal Savings and Loan Insurance Corporation at the same time. Recommendation No. 5 That studies be made of prospective foreclosure and loss experience of all phases of the Government's housing programs. Recommendation No. 6 That, with a view to assuring better appraisal and cost estimates, securing more substantial and continued owners' interest in maintenance, and the elimination of windfalls, the whole organization of the apartment house program be further tightened up and full advantage taken of the commendable provisions of the Housing Act of 1954. Recommendation No. 7 (a) That the President be given the authority to increase equities required on new mortgages insured by the Federal Housing Administration; and |