Senator BUCK. Does the Government guarantee you against loss? Mr. RODMAN. Exactly. That is what I am coming to. The Government guaranteed-market clause is up to the end of 1947. Since most of us will not get into production probably until August or September, you can readily see that the market guarantee is of little value. Therefore, I am here to urge very strongly that the bill contain a clause permitting market guarantee for at least another year, to the end of 1948.

Senator MAYBANK. What expense have you got, if you have a Government building and the Government is going to guarantee it? Mr. RODMAN. That is in case houses are produced, and they are piled up on us.

Senator MAYBANK. And go down?

Mr. RODMAN. And there is no one to take them. After all, it is a new industry. How acceptable it will be. How quickly will we be able to overcome obstacles of codes?

For instance, we are supposed to place 54 of our homes on sites near Alexandria, Va., within the next month.

Senator MAYBANK. Who is going to pay for the placing of those? The Government?

Mr. RODMAN. No. We have arranged for FHA.

Senator MAYBANK. But FHA is going to put up the money?

Mr. RODMAN. Yes.

Senator MAYBANK. It is a Government guarantee.

Mr. RODMAN. Yes. There is no denial of the fact that without Government aid we could not have gotten anywhere.

Senator CAIN. How did RFC give the money?

Mr. RODMAN. RFC demanded three to one. They gave us $3 for every $1 we put in.

Senator CAIN. But you want to be fully guaranteed against loss? Mr. RODMAN. The market guaranty provides, under which we operate, to the end of this year. We would like to be able to operate for another year. In the event no one-

The CHAIRMAN. If you have sales resistance to the unknown quantity of aluminum as a house, Uncle Sam holds the bag.

Mr. RODMAN. It takes the cost of production only.

Senator CAIN. Would that get you out 100 cents on the dollar?
Mr. RODMAN. To the extent that it is a new industry.

And to the extent that it is simply a guaranty which we may never have to

resort to.

Senator CAIN. I would think it would be a very excellent business to go into.

Senator MAYBANK. Some of the boys in the wheat market would have liked that last week.

Senator BUCK. Who arranged this for you? Wyatt? Before he got out?

Mr. RODMAN. The market guaranty has been available now for some time. That was passed some time ago.

Senator BUCK. I do not think it is intended, when that was before this committee, that it would include the Government plan to put up 3 to 1 and then guarantee

Mr. RODMAN. The 3 to 1 has nothing to do with it. I was simply asked how RFC gave us money. I explained that the banking was based on that idea, that you fellows put money in, too.

Senator BUCK. Have you any money in it?

Mr. RODMAN. We have. Three to one.

Senator CAIN. But if you build a house on the basis of 3 to 1, and you cannot sell that house, then you get out 100 cents on the dollar?

Mr. RODMAN. No. We are not building a house at 3 to 1. In order to be able to manufacture, to set yourself up, you need equipment and machinery yourself. You need a good deal of capital to

carry on.

The market guaranty simply provides, this being a new industry, that if for some reason you have not been able to market it, the Government takes it over at cost.

Senator CAIN. It is a good deal.

Mr. RODMAN. We certainly think it is a good deal. Otherwise we would not recommend it. We believe it will make for more construction of houses.

Senator BRICKER. What was the money you were loaned by the RFC?

Mr. RODMAN. Two hundred twenty-five thousand dollars.
Senator BRICKER. On the Columbus project alone?

Mr. RODMAN. That is not the Columbus project. That is for setting ourselves up in the business.

Senator BRICKER. What was the amount of the loan by the RFC on the Columbus project?

Mr. RODMAN. We have no project at Columbus. Our factory is operating in Columbus.

Senator MAYBANK. In a Government building?

Mr. RODMAN. Yes; we pay rent to the War Assets Corporation, of course.

Senator MAYBANK. You did not invest any money, or you would not pay any rent.

Mr. RODMAN. We certainly did invest money. I just made

clear-

Senator MAYBANK. You invested the Government money in a Government building on which you pay rent.

Mr. RODMAN. In addition to that RFC was not going to give us any loan as any other banker would not, unless they saw private investment in it.

I will be specific with you. RFC said "We will give you this loan if you can produce an investment of your own, up to $65,000 or $70,000," which we did. Whereupon, an arrangement was made that we lease part of the premises of the Curtiss-Wright plant at $20,000 per year, for 50,000 square feet, at 41 cents a square foot, which any real-estate person will tell you is a pretty good price.

Now, we are entering into production. We will produce houses that will probably sell at $6,000 per house, including the land. We hope ultimately to produce a $5,000 home, a three-bedroom house.

Needless to tell you, if we are successful, and others in the industry are successful, probably more than a hundred thousand homes may be produced in the course of a year, which will meet the needs that Mrs. Douglas just presented a few minutes ago, either on a rental or on a purchase basis.

If on a purchase basis a veteran earning $40 a week, can afford to live in a $5,000 home.

Senator CAIN. You are not intending just to build houses for veterans, are you?

Mr. RODMAN. No; we do not mind who buys them.

Senator CAIN. The problem before the committee is to see that houses are built for Americans.

Mr. RODMAN. That is right. We feel that the need in housing is not limited to veterans. The veteran makes the strongest appeal for obvious reasons. But we know that it is a general problem.

We further know that the terrific need of housing will not be met only by our small group of 15 or 20 manufacturers, assuming that they are all successful in getting into the manufacturing. It is a much bigger problem than our own. But we may be able to contribute the equivalent of 100,000 such homes in the course of a year. I do not hesitate to tell you that we could not have been able to get started were it not for the help given us, and I believe that we are perfectly in line with the bill presented by you people. We believe it is going to help housing. That is why I am here.

Senator CAIN. It will help numbers of others like you.

Mr. RODMAN. Undoubtedly.

Senator CAIN. Guarantee you against loss on a competitive market.

Mr. RODMAN. If the bill were to be amended to extend the market guaranty, which we would like to have.

Senator CAIN. You want more in the bill than is presently in the bill?

Mr. RODMAN. Yes.

Senator MAYBANK. He wants to guarantee the loss.

The CHAIRMAN. What more would you have than 100 percent that you have now?

Mr. RODMAN. We want to extend it for another year, to 1948, for this reason: The guaranty which we now have runs out in December 1947. Before most of us are in production the guaranty is meaningless. Most of us will be in production, let us say, some time in October or November.

The CHAIRMAN. How much working capital have you got?

Mr. RODMAN. Our particular organization?

The CHAIRMAN. Yes.

Mr. RODMAN. We have close to $300,000.

The CHAIRMAN. And that is all in acreage? People have to take securities for that?

Mr. RODMAN. No; I say we got a loan from RFC.

The CHAIRMAN. How much did you put in?

Mr. RODMAN. We put $70,000 in.

The CHAIRMAN. What security did you have for that stock?

Mr. RODMAN. Naturally, everything we have is mortgaged to RFC. Our patent rights, machinery.

Yes; three of us own stock.

The CHAIRMAN. Any stockholders?
Mr. RODMAN. It is a corporation.
Senator BUCK. Is that up to the RFC, too?

Mr. RODMAN. Yes; all of it is mortgaged. RFC dealt with us as any banker would.

Senator BUCK. Is your stock up as collateral?

Mr. RODMAN. Everything; everything we own.

Senator CAIN. I do not mean to be discourteous. You are a builder by profession, back through the years?

Mr. RODMAN. Yes.

Senator CAIN. You have had experience?

Mr. RODMAN. I have had experience in real estate.

The most effective way to reduce the capital costs of housing is to use modern industrial processes and mass-production methods. Just as the cost of factory-produced clothing is less than the cost of tailormade clothes, so the cost of factory-made houses will be less than the cost of conventionally built talor-made houses.

I need not labor this point. Part of the reason for this is the fact that the number of man-hours that goes into a house is substantially reduced. Another reason is the efficiencies of machine methods make for lower costs as compared with handicraft methods which are now used.

A number of companies are now about ready to go into production of houses in factories. Some of these houses will be produced from aluminum, some from steel, some from vitreous enamel, some from plywood which will be assembled through the use of glue, rather than nailing processes so as to enable the use of assembly line techniques. These houses will all sell substantially below the level at which conventionally produced houses are sold. The prices generally will range from $5,500 to $8,000 for a house completely erected on land, allowing an average of $1,000 for the lot. This price will be for a two-bedroom house, and the house will be of a most sturdy quality.

The significant fact, however, is not the initial prices that are contemplated for these houses. Admittedly, the initial prices include allowances for contingencies and do not take into account the added efficiencies and economies that will be realized as mass production techniques are perfected. Our company, and the same is true of other companies, anticipates that within a year or two the house prices will be reduced very materially below the figure quoted. The objective of our company, and the same is true of other companies, is to produce houses in volume at a price which the average veteran and the average American can afford.

Thus, the initial price for the two-bedroom house which General Homes, Inc., will produce is $5,865 completely erected. Adding $1,000 for land will bring the price to $6,865. We hope within the next couple of years to bring the total figure to less than $5,000. That is where the mass market is in this country. That is the market we want to reach.

In order to accomplish this objective, this company and other companies need to obtain financing to supplement the equity investments which we are making. We have found, as a matter of experience, that it is not possible to obtain satisfactory financing from private lending institutions or from the RFC, unless we can give the lenders the security protection of a market guarantee contract.

We want to commend the Congress for having included in the Veterans' Emergency Housing Act provisions for market guaranteed contracts. However, these provisions continue in force only until the end of this year.

The effect of these market guaranty contracts is to provide an assurance to lenders and producers that there will be a market for the

houses that are manufactured. It may seem odd to you that such protection is necessary in view of the great need for housing.

The reason that this protection is necessary, however, is because lenders are not prepared to take the risks involved in the marketing of factory-produced houses or new type materials. They require, and I can see merit to their attitude as lenders, some protection against risks that may prevent the marketing of factory-produced houses or new type materials as quickly as necessary to meet financial conditions and commitments.

These risks include the obstacles of some of the obsolete building codes in this country, the possibilities of labor difficulties, and fear that some time may be taken in overcoming consumer resistance to new products.

The market guaranty contract provides an insurance protection to the lender and the producer against these factors which may interfere with marketing. At the same time that it provides this protection, the contract is very carefully worded to carry out the policy expressed by the Congress that in the event the Government must temporarily take delivery of any houses, it does so without any profit to the producer.

In other words, the contract is merely a Government underwriting of risks in order to attract venture capital and enable borrowing by prospective producers to finance their production. Such a Government underwriting is in line with the sound Government policy of housing insurance, as with FHA or the GI guaranties, to enable private enterprise to meet housing needs.

I want to urge the inclusion on the Taft-Ellender-Wagner bill of an amendment which would continue the provisions for market guaranty contracts until the end of 1948. This one-year extension would enable many more companies to get started in producing lower-priced housing. It would also be very helpful to companies in getting necessary financing by providing market protection for a sufficient initial period of production.

Such an amendment is most necessary to encourage the development of this new industry and meet the critical needs for moderate-priced housing among veterans.

Another amendment that I wish to urge is one to encourage further research and development of new-type building materials and new techniques in the production of housing. Great results could be achieved by relatively small expenditures of funds.

I think the bill should be amended to authorize the Government to make advances to prospective manufacturers of housing for the purpose of developing and testing new types of materials or techniques and new housing processes. If the materials or techniques prove successful, then the advances should be required to be repaid.

If they do not prove successful, the costs should be charged as a cost of housing research in the effort to achieve lower capital costs which are so vital to the solution of our housing problem. The transfer of $25,000,000 of the unused premium-payment money for such advances for housing research and development would bring great dividends in terms of solutions to housing problems.

As a representative of one company that will be engaged in the mass production and the mass marketing of houses, I wish to express