Page images
[ocr errors]

Senator ROBERTSON of Virginia. In Washington and in and around the cities in Virginia there are very few new houses that are being offered for less than $10,000.

Mr. NELSON. These are not new houses that I am speaking about. These are vacant houses that come on the market.

Senator ROBERTSON of Virginia. The Senator from Alabama said in his observation there are very few houses being offered for less than $10,000. I wondered if the guaranteed mortgage division that you would like to see continued finances the kind of house that a man needs to buy at a range of $5,000 or $6,000, and he cannot afford to buy at a higher price than that.

Mr. NELSON. The $5,000 or $6,000 house is a thing of the past, we have to adjust our minds to it. About 90 percent of the cost of the house is labor. Labor costs have gone up to stay. There is not anybody that believes that we are going to recede from those costs who is in the business. The cost of construction has doubled since 1939, and we do not know how to turn that clock back.

I do not think you are going to get any $5,000 or $6,000 houses. Senator ROBERTSON of Virginia. Is 20 percent of a man's income about a fair share of income that he should expect to put in his house, either by way of rental or purchase?

Mr. NELSON. That has always been a matter for the public itself to determine. We used to figure that the public was willing to spend as much as a quarter of the family income for housing. Now, through rent control that has been reduced to one-sixth of the family income, which is an arbitrary action by Government. As we said a while ago, it is 22 percent of the family income.

Senator BUCK. In your wide experience in this field, I would like to have your advice on this. If the committee, in its infinite wisdom, would see fit to decontrol new housing and newly reconditioned units, in passing a rent control bill, will that make a big difference in the rental situation?

Mr. NELSON. Of course, sir, it will help, and also if you would add to that, all new rentings. For instance, there are 200,000 houses a year, roughly, that come on the market which have not been rented before.

Senator BUCK. We include that.

Mr. NELSON. You include the new rentings?

Senator BUCK. Yes.

Mr. NELSON. That will be a great help; but on the whole, you will not get much new rental building unless there is some help.

Senator BUCK. You will get some?

Mr. NELSON. You will get some, but the people who now own the housing of the country, the rental housing, are the people you have to look to to build the new housing, and until they get some evidence of good faith on the part of Congress on existing rents, you are going to have that enormous fear in their minds that they will go ahead and build new housing without controls, and once it is up, it will be controlled. We have seen that happen in every country in Europe. Senator CAPEHART. On a $6,000 house, I want this in the record at this point, how much will the Government loan on this $6,000 house; that is, guarantee the mortgage?

Mr. NELSON. Under title VI, it would be a 90-percent figure, $5,400.
Senator CAPEHART. That is the present law, or the new bill?
Mr. NELSON. That is the present law.

Senator CAPEHART. They will guarantee up to 90 percent?
Mr. NELSON. Yes, sir.

Senator CAPEHART. For what period of time?

Mr. NELSON. That is 25 years.

Senator CAPEHART. For 25 years?

Mr. NELSON. The loan is amortized at 4-percent interest.
Senator CAPEHART. You feel that should be continued?

Mr. NELSON. Yes, sir; for the balance of this year title VI ought to be continued.

Senator BUCK. If they can raise the assessments, in some cases, it is 100-percent loan.

Mr. NELSON. In practice, it tends to become a 100-percent loan. Title 608 for rental housing is even wider open than that. The builder or the entrepreneur has nothing in that at all. He gets 100-percent mortgage. That is public housing.

Senator CAPEHART. Thank you very much.

(The prepared statement of Mr. Nelson is as follows:)


My name is Herbert U. Nelson. I represent the National Association of Real Estate Boards, an organization with member boards in nearly 900 communities throughout the United States, having 36,000 members employing about 400,000 people. These members form an important segment of the housing industry of the United States. They are engaged in financing, building, and operating housing developments.

I am appearing in opposition to S. 866.

At the outbreak of war, when it was recognized that for a few years the Nation's home building would be sharply limited and, in fact, be carried on only as directly related to the war effort, an Executive order merged the Federal agencies under the control of a temporary emergency administrator. The effect of title II of the bill now before the committee is, in principle, to retain this wartime merger in the permanent organization of the Federal Government.

It has been said that S. 866, with its provisions for a coordinating council, does not establish the ironclad administrative control that was provided in S. 1592 before this committee last year. We point out, however, that it is the administrator and not the council who interprets the broad range policies of the proposed act. It is the administrator and not the coordinating council who coordinates. This bill would put those agencies of the Government which have to do with private home building under the domination of the National Housing Administrator, just as would have been the case under last year's bill. The committee will recall that in the last session of Congress, when this particular title was made a separate proposal-known as Reorganization Plan No. 1—it was defeated by both Houses of Congress, and among those who voted against it was the Senior Senator from Ohio.

We submit, Mr. Chairman and members of the committee, that for more than a year centralized control in housing has had its day and its opportunity to prove what it can do. Its principal productive achievements are in directives, orders, regulations, restrictions, and propaganda.

Title IV of the bill writes a blank check to carry out a wide variety of housing research within the proposed permanent National Housing Commission. The proposed National Housing Commission would not be a logical coordinating agency for housing research. This agency, having an operating program of its own, has a bias and a point of view which can and does influence the preparation of its statistical material. Let me give you an example, which will illustrate the difference between a fact-gathering agency with no ax to grind and the promotional attitude of an agency that has its own program to expand.

You have probably heard the Bureau of the Census quoted dozens of times as authority for the information that there are from 6 to 10 million substandard homes in the United States. The clear fact, which can be checked with a phone call, is that the Bureau of the Census has never said that any house in America is substandard. It has tabulated the number of houses that are in need of what it calls major repairs, and Census officials tell us they use the term "major repairs" so that it may also mean "essential repairs." The result is that a house needing an “essential" repair costing only 50 cents could get into the Census figures as a house in need of "major repairs." The National Housing Agency has taken these figures, and of its own accord called them substandard homes, citing the Census Bureau as authority for the statement. Even as recently as last week, Ivan Carson, Rent Administrator, used this term "substandard" in his testimony before the House Banking and Currency Committee.

When findings of the Bureau of the Census do not suit the propaganda purpose of the NHA, it simply ignores them or even tries to suppress them. On this point, I refer members of the committee to the Congressional Record of July 27, 1946, pages 10377 and following. This indicates, Mr. Chairman, that when the Census Bureau in 1945 made a survey of American housing at the request of the National Housing Agency and found that housing conditions generally were tremendously improved over the results shown in the 1940 census, NHA was not above an attempt to keep the information from the public. Only a few days ago, Senator Taft appeared before this committee citing only the 1940 census figures and avoiding completely the more recent and far different 1945 figures. Housing research conducted by NHA cannot be expected to get credence or respect from the public or from industry.

Titles V and VI of the bill make available more credit. We have had shortages of building material. We may be heading into a shortage of labor, but for years there has been no shortage of credit or ample financing. The National Housing Agency itself issued a statement last August in which it said that it had surveyed the credit resources of the home finance industry, including individual savings deposited in lending institutions, liquid assets, and secondary credit facilities of the Federal Home Loan Bank System. Its conclusion was that these resources are sufficient to meet the entire demands of the emergency housing program. The committee could find much more to work on in the field of restrictive practices which must go if we are to accomplish anything in better home values.

When Senator Taft discussed the yield insurance provisions of title VII in S. 866, he told the members of this committee that it is "nothing but an experiment." We take the same view. It is in fact an experiment in a new type of property ownership that is neither private nor public but a curious mixture of both. Under its provisions any investor who would carry out a housing development according to Government specifications as to design, size, type, and rent, and who would, furthermore, forego an opportunity for return greater than 4 percent, would be guaranteed a minimum return of 24 percent by the Government.

Potential investors at whom this title is directed are the large life-insurance companies who have said through their spokesmen that they're not interested in it, that it could not help them, that they want no part of it.

Title VIII of the bill is the provision for urban redevelopment, a subject of tremendous interest to the group I represent. This committee in its report on last year's Wagner-Ellender-Taft bill, pointed out that the thinking embodied in the bill had been crystallizing for a decade and a half. I think this is especially true of the thinking that has gone into title VIII.

Back in the late thirties, when our cities and States were broke, the financial condition of the Federal Government was such that it became the source of all bounty. We, among others, thought there might be justification for the use of Federal funds to aid cities in acquiring land to be cleared and redeveloped. Since that thinking was fashionable, both the city governments and the State governments have improved their financial positions tremendously. They enjoy in fact, the best financial status they have ever had. On the other hand, there has been a tenfold increase in the Federal debt. Our feeling, consequently, is that the propriety of this proposal whatever may have been said for it a few years before the war, is now highly questionable. Furthermore, in the study of this problem, and in experiment with it that has taken place, there has come about serious questions as to whether our slums and worst blight areas can, under any formula, be made into suitable sites for moderately priced housing, if indeed for housing of any kind.

Of course, we need to get rid of slums. We will not get rid of them on a negative basis that involves tremendous losses in the process of getting rid of them. Rather we shall do it when entirely new urban land uses and civic requirements demand those slum and blighted areas. For example, there is not a city in the United States that has escaped a most desperate need for large automobile parking terminals in its central areas. We all know perfectly well that the centers of our cities will never become accessible or convenient to get around in until we get them. Certainly when we do get them, we're going to need many of the areas that are now cross-hatched as slums and blighted districts on the maps of our city planning commissions. We're going to get new commercial and industrial building of all types, and much of it may well be located in these areas.

We have had enough experience with the problem to know that slum elimination and the redevelopment of areas that once were slums are not synonyms for low-rent housing or for housing at all. Very often it will be found that the circumstances which have caused the particular area to become blighted may also keep that area unsuitable for any kind of residential use. There is enough progress in plans now underway in Indianapolis and Detroit, which require no Federal financing, subsidy, or guaranty of any kind, to convince us that now is certainly no time for multi-million-dollar raids on the hard-pressed Federal Treasury for this purpose.

We respectfully remind members of the committee that wholly aside from financial consideration, there is no likelihood of large-scale urban redevelopment while housing conditions are tight. We will have to have a housing surplus before we can begin to tear down occupied homes, no matter how bad they may be. Title IX of the proposed bill commits the Federal Government irrevocably to a 45-year program under which Government would build new homes to be offered for rent at the price of second-hand homes with operating deficits made up by Federal subsidies. Payment of this deficit over the 45-year period would cost the Federal Treasury $4,752,000,000 or $792,000,000 more than proposed in last year's Wagner-Ellender-Taft bill.

Thus, the bill seeks expansion and continuation of the public-housing program begun in 1937 under the United States Housing Act, which was enacted primarily as a depression unemployment-relief measure. We have been told that the new purpose of public housing is to aid the veterans, but the facts are that the public-housing agencies have shown only indifference and even opposition to veterans. They have been unwilling to disturb tenants with incomes of three, four, five, and six thousand dollars now living in Government projects in order to accommodate veterans without homes. Volumes of sympathetic words mean nothing in the face of such policy.

This committee has been urged to commit the Government to nearly $5,000,000,000 of expenditure to aid the needy. Yet a review of public housing polls will convince anyone that the tenant most likely to gain access to it is the tenant with a regular income, good credit, and a general status of desirability to project managers. The needy are getting their aid for housing just as they are getting their aid for adequate food and clothing, through various private and public charity activities.

In 1945 an investigation on this very point was made here in the city of Washington, and of more than 4,000 people receiving rent assistance from the Public Welfare Department, only 47 were housed in projects of the National Capital Housing Authority. Public housing has shown us that the Government can neither build nor operate housing more economically than private enterprise. The investigation referred to above, conducted impartially by the National Industrial Conference Board, proved that public-construction costs for comparable buildings were considerably higher than private costs and that its management costs were about three times private-property management costs.

There is no basis for pretending that there is some peculiar way by which Government funds can be used to get unattainable results. Anybody could operate new housing for the price of second-hand housing if the taxpayers would meet his losses. If the accommodations were going to those families who are in greatest need of housing assistance, that criticism would not be valid. Its accommodations are not going to the families in greatest need of housing assistance and could not be made available to them under the terms of this bill.

The principal sponsor of this year's bill has asked this committee to approve just a little of public housing. He has said that he personally would not urge a public-housing program that would exceed 10 percent of the total construction.

This is merely evidence that we are now going through the same era of momentous policy decision that Britain went through in the months and years immediately following the end of World War I. At that time British advocates of Government-home building were also saying that they wanted just a little public housing. They got it, and they kept getting more of it, and today in England four out of every five dwellings that go up are being built by the Government for ownership and operation by the Government. Private-home building in England is dead. It has been dying since 1919. Public housing and the continuation of World War I rent control to this day have killed it. Have the English people benefited? Has the death of private enterprise in supplying homes been compensated by ample production? The record speaks for itself. It has not. The chronic housing shortage in England has been accumulating for two decades, discounting entirely war damage.

Congress already has within its grasp the answer to the housing problem. The removal of controls on the industry which I should like to suggest, coupled with existing or proposed legislation, will do the job. It won't put the Government in the housing business, but it will get houses built. It won't socialize or amotionalize housing, but it will result in the construction of homes. And it won't cost the Government $7,000,000,000, nor commit the Congress for 45 years.

We propose that the National Housing Agency, which was born of the necessity for a wartime programing of housing within the Government, should be abolished; and that the Federal Housing Administration should be returned to its previous status created by the Congress under a separate Administrator and its functions should be confined to that for which it was originally designed-that of a mortgage insurance agency; that the Federal Home Loan Bank Board be returned to its original status as created by Congress under the supervision of a board and operating as a separate entity; that the Home Owners Loan Corporation be reestablished as a corporation, as Congress originally intended, under the administrative jurisdiction of a corporation board; that the Federal Savings Loan Insurance Corporation likewise be reestablished as was originally intended by Congress as a separate entity.

We propose that Executive Order 9070 be repealed. This order created the executive powers necessary to establish the National Housing Agency as such. We propose that sections 1 to 9, inclusive, and sections 11 and 12 of Public Law 388, Seventy-ninth Congress, approved May 22, 1946, be repealed, and that any funds made available under this act not expended or committed be returned to the Treasury. We are advised that this figure will approximate $335,000,000.

And finally, for the purpose of coordinating the Federal Government's participation in and assistance to the housing industry, we suggest that a coordinating council be created, comprised of the Secretary of the Treasury (chairman), Secretaries of Commerce and Labor, Federal Home Loan Bank Board Chairman, Federal Works Agency Administrator, Federal Housing Administrator, Veterans' Administrator, Reconstruction Finance Corporation Chairman, and Federal Reserve Board Chairman. Members of the council would serve ex officio and without additional compensation. The council could meet from time to time or at the call of the chairman, at least once a month. Its objective would be to consider those policies of Government agencies affecting construction and financing of residential properties, and to coordinate these policies so that they would not conflict. The council would not have any power to control the administration of any agency.

If the afore-mentioned points are incorporated in a bill, they will contribute to the construction by private enterprise of the homes needed, because they would assure investor and builder that Government no longer would interfere. Fear of continued controls are cited by 97 percent of 475 real-estate boards. They asserted that the lifting of all Government controls on rental housing would immediately stimulate rental construction. These 475 boards are located in 46 States, and replied to a survey just completed by the National Association of Real Estate Boards.

As step No. 2 we recommend a 15 percent across-the-board increase in rents on existing houses and the immediate removal of all controls, including rent control, on new residential construction. We commend for your consideration S. 415, referred to as the Hawkes bill. We suggest that the administration of the bill be by local courts. We do not ask for the immediate decontrol of rents, but rather a thawing-out process from the freeze which was imposed upon the industry in 1942, when rent controls were established.

As step No. 3, we concur in the legislation requested by Federal Housing Administrator Foley for the extension of title VI under the National Housing Act

« PreviousContinue »