Total paid employment and total obligations fiscal 1959, 1960, and 1961 actual compared with estimates 1962 regular bill and 1959 actual supplemental Continued 1960 actual 1961 actual 1962 estimates NOTE.-Dollar amounts for 1959 and 1960 have not been adjusted for changes in salary rates, employee benefits, etc. HOUSING FOR THE ELDERLY Mr. THOMAS. Now let us turn to housing for the elderly for which $50 million is requested in House Document 217. Insert D-1, 2, 3, 4, and 5 in the record. (The pages referred to follow :) COMMUNITY FACILITIES ADMINISTRATION "For an additional amount for the revolving fund established pursuant to section 202 of the Housing Act of 1959, as amended, (12 U.S.C. 1701-q et seq.), including an additional amount of not to exceed $225,000 for administrative expenses during the current fiscal year, $50,000,000." Available, independent offices appropriation bill, 1962 (H.R. 7445). Supplemental, H. Doc. 217, for expanded and liberalized program authorized in the Housing Act of 1961 Revised estimate.. 75,000,000 (575,000) JUSTIFICATION Description of program The Housing Act of 1961 made three basic changes in the program of direct loans for housing for the elderly which was initiated in the Housing Act of 1959. The new law 1. Increased the authorization for appropriations from $50 million to $125 million; 2. Increased the maximum loan from 98 to 100 percent of development cost as defined in the statute; 3. Made consumer cooperatives and certain public bodies eligible borrowers, in addition to the private nonprofit corporations provided for in the original legislation. Thus under the revised program, the Administrator is authorized to make 100percent loans at low-interest rates and with terms up to 50 years to private nonprofit corporations, consumer cooperatives, and public bodies or agencies which propose to sponsor rental housing and related facilities for elderly families and persons. The act provides for the annual determination of interest rates by the Administrator according to a formula which, for the fiscal year 1962, produces an interest rate of 3% percent to eligible borrowers. Program appropriations The Housing Act of 1959 authorized appropriations up to a total of $50 million for the direct loan program. The Housing Act of 1961, approved June 30, 1961, increased this authorization to a total of $125 million. Appropriations totaling $45 million have been approved to date, $20 million in the Independent Offices Appropriation Act, 1961, and $25 million in the independent offices appropriation bill, 1962. The present supplemental appropriation request is for $50 million. If approved, it will bring cumulative appropriations to $95 million and leave an unappropriated balance of $30 million within the statutory authorization. Budget program The original 1962 budget program for housing for the elderly (contained in H. Doc. 157, dated May 9, 1961) was limited to the unappropriated balance remaining from the original authorization. The $30 million appropriation request was reduced to $25 million in the independent offices appropriation bill for 1962 as approved by both Houses of the Congress. The revised budget program contemplates a total loan program for fiscal 1962 amounting to $75 million. It is estimated that some 75 loans will be approved during the year at an average of $1 million each. During the debate on the Housing Act of 1961 and since its enactment, there has been a rapid upsurge of interest on a nationwide basis in the program of loans for housing the elderly. More and more church connected, charitable, fraternal, and labor organizations are becoming interested in undertaking projects. The workload impact of the new types of eligible sponsors-public bodies and consumer cooperatives-has not yet been felt, but there can be no doubt that it will be substantial. New applications received in June amounted to some $31.7 million involving about 2,850 units. New applications in July rose to $32.7 million for over 3,000 units. Thus in this 2-month period, the $64.4 million total of Federal loans requested represented more than 75 percent of the total requested in the preceding year. Because the program is still very new and not fully understood, and because some of the sponsoring organizations are lacking in experience and technical skills, it is evident that a substantial part of this large volume of applications will prove to be ineligible, infeasible, or financially unsound. Nevertheless, it is clear that even if the full supplemental amount is appropriated-making available $75 million for the current fiscal year-the Agency will be faced with an important problem of selectivity to be certain that the projects approved are those which will make the greatest contribution in terms of providing housing for the elderly and exploring the advantages of different types of construction, design, location, amenities, and similar factors. Administrative expenses The supplemental budget estimate for administrative expenses for fiscal 1962 is $225,000. With the $350,000 limitation approved in the pending annual appropriation bill, this would provide a total of $575,000. Administrative expenses are funded out of appropriations to the revolving fund. The workload now anticipated contemplates a program nearly three times as great as that in the original budget. A much smaller proportional increase is requested in administrative funds. This amount would provide for an increase of 48 in employment during the year. The program is currently being administered at the departmental level by the Community Facilities Administration. Regional office assistance is provided as needed, e.g., initial site inspections, and supervision of projects during the construction period. It is probable that the program will be decentralized for regional operation when it reaches sufficient volume and when policies have been established and tested and operating experience has been gained. However, at the present early stage no firm plans or schedule for such decentralization have been established. The following summary compares the original and revised estimates of program activity during the fiscal year: The table on the following page presents the detail of the administrative expense and employment estimates for the presently available limitation and for the revised estimate. Mr. THOMAS. You have a total authorization so far of how much?$50 million, was it not, for this program? Mr. WEAVER. That is right. Mr. THOMAS. For the first year you were given $20 million? Mr. WEAVER. That is right, for 1961. Mr. THOMAS. The second year, 1962, it was increased to $25 million? Mr. WEAVER. That is right. Mr. THOMAS. Leaving an unappropriated balance of $5 million. The program has been increased by how much? Mr. WEAVER. $75 million. Mr. THOMAS. It gives you an unfinanced legislative authority of $80 million. Mr. WEAVER. That is correct. Mr. THOMAS. If you will turn to the table on page D-4, gentlemen. It tells the story. You are looking for 48 new jobs; is that correct? Mr. WEAVER. That is right. Mr. THOMAS (reading): Because the program is still very new and not fully understood, and because some of the sponsoring organizations are lacking in experience and technical skills, it is evident that a substantial part of this large volume of applications will prove to be ineligible, infeasible, or financially unsound. Nevertheless, it is clear that even if the full supplemental amount is appropriated-making available $75 million for the current fiscal year-the Agency will be faced with an important problem of selectivity to be certain that the projects approved are those which will make the greatest contribution in terms of providing housing for the elderly and exploring the advantages of different types of construction, design, location, amenities, and similar factors. The supplemental budget estimate for administrative expenses for fiscal year 1962 is $225,000. With the $350,000 limitation approved in the pending annual appropriation bill this would provide a total of $575,000. This is for administrative expenses. This amount, namely the $225,000 you are looking for here, will provide an increase of 48 jobs. How many do you have under the regular 1962 bill? Mr. FRANTZ. Forty. Mr. THOMAS. And this gives you 108 percent of the increase? Mr. FRANTZ. Yes, sir. Mr. THOMAS. Looking at the bottom of D-2, "The revised budget program contemplates a total loan program for fiscal 1962 amounting to $75 million. It is estimated that some 75 loans will be approved during the year at an average of $1 million each." That is guesswork on the lenient side. Mr. WEAVER. We have some experience to justify that. Most have been $200,000 and $250,000 and that is a long way from $1 million. So far as I know nobody here is against this program and we want to see it work. Again, as we did in the regular bill, we want to caution you to go slow and use your best available judgment. This program is just beginning. We do not want you to wake up in about 18 months with about 50 percent of your loans sour. These loans have been increased from 98 percent total loans to a 100 percent total loan. Your interest rate has been changed. What was the original interest rate? INTEREST RATE Mr. FRANTZ. Three and a half percent. Mr. THOMAS. What is the interest rate in the new program? Mr. FRANTZ. Three and three-eighths. Mr. THOMAS. Based upon a formula it figures out to three and three-eighths? Mr. FRANTZ. Yes, sir. Mr. THOMAS. A little less than the original program? Mr. FRANTZ. The same formula-but the rate dropped at June 30. Mr. THOMAS. The committee is aware that this is a 100 percent Government loan and it bears no subsidy other than the differential between the statutory rate of 32 or 33% against the commercial laons which are about 512 or 534. Mr. BAUGHMAN. Five and a quarter right now. FHA is five and a quarter. Mr. THOMAS. Plus the administrative costs. So we don't want you to wake up with some loans on your hands that you can't handle. There is no subsidy in here for maintenance operation-that is a big field, in my judgment, that you are going to have to have one to make the program work and there is no construction subsidy in here and my judgment is that you are going to have to have a little of that to make it work. You have a limited market. We may as well be practical about it. When you skim the cream off that limited market is when you had better look and listen. |