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STATEMENT OF JOSEPH H. DECKMAN, NATIONAL HOME AND PROPERTY OWNERS FOUNDATION, WASHINGTON, D. C.—Resumed
Mr. DECKMAN. I will start with the cost analysis I made, and I will answer the 60-year question.
I will call to your attention the fact that I stated in my testimony that this bill, S. 866, is based on the old Housing Act of 1937, which has been in existence 10 years. That bill called for 60-year period, and that is the figure I used. I stated that the total cost to the taxpayer in this exhibit B is based on subsidy tax exemption and interest under title 2 of the United States Housing Act.
I gave you this because I had to collect my material in a hurry, and this is material I have had over a 4-year period of studying this matter, and I had it ready, and I could show you in comparison what this thing costs, and then it can be broken down in this bill.
The cost of the project is a million dollars. That has to come from some place. If it comes from the Federal Treasury, as it can, or if it comes from private enterprise, it must be gotten to build a project. The project cost is $1,000,000. That is set up here as a cost which I do not think can be denied.
Now, then, the subsidy is the subsidy that is arranged if you are going to make low-rent housing out of these projects, and as I read in other testimony before you, there is no question that there is this 312 percent subsidy, and if it is paid out over 60 years, in which a written contract is entered into, between the Federal Public Housing Authority, for the old United States Housing Authority, for a period of 60 years and this local authority, which so much emphasis is being placed on as being purely local, but which is a creature of the Federal Government and nothing more.
These contracts are drawn so that simultaneously with the borrowing of money from the bank or Treasury, a sound contract is entered into between the FPHA or the old United States Housing Authority, to pay an annual subsidy. That is how the credit is extended to get this million dollars.
That goes on for 60 years, and the faith and credit of the United States Government is pledged so long as that subsidy is needed to house low-income groups.
During the war these places have been filled up with people who can afford to pay full rents, and the subsidy has not been used in full. This is taking into account that we are going to house these people we have talked about, and this is the cost if we are going to do it.
At the present time we have people making $3,000 and $4,000, living in public housing, due to the war. But we are now talking about doing the program, and that cost runs on for 60 years.
As ample proof of it, Mr. Whitten last year over in the House became so excited about it that he made a speech on the floor of the House, and put it in the Record, calling attention to it, because he was amazed, although he is on the Appropriations Committee, that when the FPHA came in, they had to give them this money. That is the definite commitment if we are going to house these people.
The tax exemptions here in Washington, they had no money so they gave tax exemptions, $1.75 a hundred on full value, which we have here. Over 60 years that will amount to the cost of the project, and a little bit over.
Senator ROBERTSON of Virginia. May I interrupt to ask where is that?
Mr. DECKMAN. That is the old United States Housing Act.
We critics complained about 60 years being such a tremendous long life, and I will clear that up right now.
This 60 years, they base their economic rents on a 60-year amortization and interest rate, 1 percent more than the going rate of interest, and they set up their so-called economic rent based on that amortization.
When you consider private rent, you get down to not more than 25 years amortization, and they are paying 5 to 6 percent. Certainly their rents are higher. They have nothing at all comparable with what they are being accused of not being able to do.
Mr. Taft states that Foley says that FHA is critical of going to 30 years for private enterprise for these low-cost-housing jobs. Yet if private enterprise has the tools of 60 years, some of your $5,000 houses at this same period would not rent for more than their socalled economic rent.
It is what way they figure the things, and what you are accusing private enterprise of, and what you are doing for it. That would not be even a subsidy if it was handled on this longer amortization, which I will get into further.
This 60 years I used here was the old act of 1937; $800,000,000 has been spent under that act We are committed for $28,000,000 a year for 60 years under it. It all is not being used now due to this war condition, but the commitment is there, and as soon as they get back into housing the so-called low-income groups are going to spend at that rate and that $800,000,000 is already spent for low-rent housing for that purpose.
Senator ROBERTSON of Virginia. Actual experiment in the same kind of undertaking.
Mr. DECKMAN. My studies of 4 years before this 866 was brought out. This is what is already in existence. This is already in existence. I repeat this 60-year formula, we have 155,000 low-rent units at the present time operating under this plan.
Senator ROBERTSON of Virginia. You say we spent $800,00,000?
Senator TAFT. We did not spend it. Wait a minute. The metropolitan housing authority spent it, and borrowed most of it from the public, and not from the Federal Government.
Mr. DECKMAN. We have over $16,000,000 worth of these in Washington right here, owned by the National Capital Housing Authority, with 3,000 units which are in that.
Senator TAFT. I gave you the figures. There have been issued $655,000,000 of bonds, of which $378,000,000 are held by the public and $276,000,000 by the Government, and those will be salable tomorrow if this bill is passed-am I not correct?-salable to the public tomorrow, so that my point is that you cannot add that to the subsidy. You have to take one or the other. You cannot take them both.
Mr. DECKMAN. I take the subsidy off in my bookkeeping here. If you notice below the total line, that is good bookkeeping. You set up what your costs are, and then set up
Senator TAFT. I think you are wrong. I think the subsidy is what it costs. You better take the rest of it.
Mr. DECKMAN. The tax exemption goes on in the locality. We are losing $300,000 a year taxes on public property in the District of Columbia.
Senator TAFT. That is not cost to the Federal Government.
Mr. DECKMAN. This is cost to the taxpayer, whether Federal or local. This is the cost of public housing.
At the same time we are paying $500,000 a year for public welfare, and at the most we have had about 80 people on public welfare living in this $16,000,000 worth of housing.
Senator ROBERTSON of Virginia. Before you leave this point, I want to see if I can get it clear in my mind.
You claim we have spent $800,000,000 for 135,000 units.
Senator ROBERTSON of Virginia. What does that average per unit? Mr. DECKMAN. The average is not quite $6,000. The limit was $5,000 per unit under the United States Housing Act for public housing. This cost went up, and in this bill you will notice that they are asking for $1,500 a room, which is $7,500 for a five-room house, which is not low-cost housing in any manner of means.
Under this limit they had $5,000, and the costs went up and I found that they left out such things as plumbing and electrical work, called them public utilities so they could keep the costs down.
I brought it out in testimony here before the Senate committee investigating the local affairs when we got a private-enterprise bill passed that I will refer to later. Their costs went over it.
Senator ROBERTSON of Virginia. Let me interrupt. Is it your contention that under present building conditions, the cost of this program will be more than 155,000 units built?
Mr. DECKMAN. Those 155,000 units, yes; on the basis of five-room houses, costing $5,000 back in 1937, 1938, and 1939, today that would be $7,500, and the bill so states that they shall not pay more than $1,500 a room for the type of housing they built.
Senator TAFT. If you will look at Mr. Myer's testimony, the first page, and see what the costs really were, the figures are actual there. And they will see also that a large part of the cost of public housing is this slum-elimination figure; that is, paying more for the land then it is worth in order to get rid of the slum end of it.
Mr. DECKMAN. I might say on that subject, when they compute their rents, gentlemen, they write down the cost of the property just like they are talking about private enterprise doing.
In one case in Washington, the cost was written down as far as 85 percent of it.
Senator TAFT. What do you mean by that, Mr. Deckman? That seems to me an absolutely inaccurate statement. I do not know what this Alley Dwelling Authority may have done in some of its special stuff, but that is something else; but take the public-housing project: How do they write down the cost?
Mr. DECKMAN. When they acquire a property-this is fixing the rents when they acquire a property in a slum area-and they only acquired one-third of the projects they built in slums, the rest on vacant land and very sparsely settled land-they set up their so-called economic rent.
Senator TAFT. You are talking about economic rent. This has nothing to do with that.
Mr. DECKMAN. The rent that these public housers use to accuse private enterprise of not being able to meet this.
Senator TAFT. Private enterprise has accused me of being everything under the sun, but I have never accused them of not doing anything except doing the right thing, building under natural conditions. Mr. DECKMAN. I do not know whether we should continue this argument before I complete this, but I would like to have the time to submit my solution to this thing in comparison with Senator Taft's and then let you gentlemen judge for yourselves which is the solution.
I am after the same identical purpose he is: to clear the slums, house these people, and get the job done, without going into the ownership of the home by the Federal Government to the extent of the lower third, the lower half, and all of it and eventually wind up in State socialism, or whatever you wish to call it; because when the Federal Government owns the homes of this Nation, we have State socialism pure and simple, and if we go with this theory into education with the Federal Government educating the people, and going into medicine and every other form of guaranteeing an annual wage, and so forth, by the Federal Government, we have no personal liberty and our American way of life is gone.
The plan I wish to offer is a solution through the American free enterprise system, and not scratching the surface this time with this bill with 500,000 houses, and having the Senator's remark come true. We have already $800,000,000. We have 155,000 houses.
Senator MCCARTHY. I do not have clearly in mind what you speak of when you refer to this $800,000,000 which has been spent under the 1937 act.
Mr. DECKMAN. United States Housing Act of 1937. That was the original Public Housing Act. That was put into operation in 1937 and it was based on 60-year amortization with the same subsidy plan and same tax exemption as we have in the bill 866.
Senator MCCARTHY. I do not quite have clearly in mind these figures. I understand that we spent $860,000,000 in building the homes. Mr. DECKMAN. $800,000,000.
Senator MCCARTHY. Part of that was paid for by bonds that were sold to private individuals.
Mr. DECKMAN. They are sold to private individuals, but the Federal Government annually pays the subsidy amounting to the interest and amortization to pay off the bond.
Senator MCCARTHY. How much have we spent so far by way of subsidy on that under that act?
Mr. DECKMAN. I cannot give you the exact figures, because I do not have access to them from the FPHA.
Senator MCCARTHY. Am I right in this: $860,000,000 means practically nothing to us?
That the figure of We are interested in
the amount that it costs us each year in subsidy. In other words,
since 1937—from 1937 to 1945-we have paid out some money which we will not get back.
Mr. DECKMAN. That is true.
Senator MCCARTHY. That we are concerned with. We are not concerned with the amount of bond issue, are we?
Mr. DECKMAN. Yes; you are. If the war had not come along, and we put the public housers with their priority system and their control of housing in, and they took over the program and put war workers in what was going to be built for low-rent public housing. That is the thing that confused this matter so that it is not clear. But now when we start off with this program we cerainly are not going to have people who can afford to pay private rents in this public housing, and this subsidy is going to go on every year.
Senator MCCARTHY. Let me interrupt again. You have told us that we have indulged
Senator TAFT. May I answer the question that you are asking? The original bill provides that the total limit of subsidy or guaranty per annum is $28,000,000. The actual expenditure on subsidies since the start has been about fifty or sixty million dollars, and this year is only $7,000,000.
Senator FULBRIGHT. Net cost to the Government?
Senator TAFT. Net cost to the Government. That is largely due, as Mr. Deckman says, to the fact that during the war these things turned into war worker places, and they got more income. You would have to put up more than $7,000,000 a year, although you would not get up to $28,000,000.
Senator MCCARTHY. Is that $25,000,000 the maximum which was provided for? What does that cover in addition to the guaranty of interest?
Senator TAFT. It covers guaranty of interest and amortization. Roughly speaking, Mr. Deckman is correct in saying, as he says somewhere here, the maximum amount that the Government contracts to pay as subsidy on the project is enough to pay the interest and amortization on the cost of that project. And what is charged for rent is the cost of maintenance of the project and operation of the project. That, I think, is about his statement, and that is approximately
This subsidy of 32 percent, $28,000,000, was figured on $800,000,000, which as you see is 312 percent. We have not had to pay that actually. That was the original plan.
Senator MCCARTHY. Could we safely say this: That over the 60-year period provided for in the 1937 act the Government will ultimately, in normal times, pay the complete cost of the building plus the interest on it?
Senator TAFT. That is right. There is one difference as to the amortization. These projects for the most part were fireproof projects with pretty fair 60-year life, whereas most of the FHA stuff is wooden or wood houses, and a 30-year amortization is perhaps more justifiable.
Senator MCCARTHY. One further thing. I understand that the rent that is set then is not placed high enough to take care of any of the debt retirement, but is to take care of the upkeep of the premises, and it is anticipated that the Government will ultimately pay for it. Senator TAFT. My objection is that you cannot add the $800,000 000 to the 32 percent, because the 32 percent pays the $800,000,000