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to be known as the National Housing Commission.

This Commission would

be composed of a National Housing Administrator and staff and a Coordinating Council. The functions and duties of the Commission would in general be to develop coordinated policies and programs to implement the national housing policy established by this bill and to see so far as possible that such policies and programs were carried out.

The National Housing Administrator is also charged with the duty of administering the provisions of title VIII of the bill, which deal with land assembly and its preparation for development.

Apparently it is intended under the title III of this bill to give the constituent agencies of the National Housing Agency-namely, the Federal Housing Administration, the Federal Home Loan Bank Administration; and the Federal Public Housing Administration—a greater degree of independence in administering their operations than they now have under the National Housing Agency or they would have had under S. 1592 had it become law. Nevertheless, such independence appears to be largely illusory since each of these agencies is "charged with the duty to cooperate actively in the work of the Commission and to coordinate and administer its housing activities consistently with the general policies and programs developed" by the Commission.

The creation of this new agency is subject to the same objection to the continuation of the present National Housing Agency as proposed in S. 1592. At a time when every effort is being made to shrink the overexpanded governmental bureaucracy, it seems inappropriate to add to this bureaucracy by superimposing another agency, the need for which is questionable to say the least. Additional appropriations would be required to pay the salaries of the Administrator and his staff plus the other administrative expense of the Commission, when instead a reduction in expenditure should be the aim.

The set-up of the Commission makes it clear that the Administrator would have the dominant position in the determination of housing policies and programs. He would be operating on a day-to-day basis whereas the Council would meet only on his call (although at least once a month). He would carry or guide all of the research upon which such policies and programs would be based. His position calls for unbiased and impartial judgment and yet the bill charges him with the administration of the urban redevelopment title of the bill which involves direct Government loans and grants and is closely related to public housing programs.

Government housing activities fall mainly in two categories. One of these is exemplified by agencies dealing with private lenders such as the Federal Housing Administration which administers a mutual fund for insuring mortgage loans made by private financial institutions and by the Federal Home Loan Bank Administration consisting of a system of mortgage discount banks and privately owned through federally chartered thrift and home-financing associations.

The other category is exemplified by agencies providing direct financial aid to public instrumentalities such as the Federal Public Housing Authority which administers the United States Housing Act under which direct Federal loans and grants are made to local public housing bodies.

These two categories are of such diverse character that they are not susceptible of coordination. If any coordination is desirable it should take the form of correlating the housing activities in the first category with other governmental agencies dealing with private financial institutions and correlating the activities in the second category with the Government agency or agencies furnishing direct aid to public bodies. Such a coordination was brought about under the Reorganization Act of 1939 when by Executive order of the President pursuant thereto the Federal Housing Administration and the Federal Home Loan Bank Administration (then the Federal Home Loan Bank Board) was transferred to the Federal Loan Agency and the Federal Public Housing Administration (then the United States Housing Authority) was transferred to the Federal Works Agency. Obviously it would lead to more efficient operation of these agencies and be a sounder and more economical plan generally if, instead of setting up the new National Housing Commission as contemplated in this bill, the National Housing Agency was terminated and the Federal Housing Administration and Federal Home Loan Bank Administration were retransferred to the Federal Loan Agency and the Federal Public Housing Administration was retransferred to the Federal Works Agency or these constituent agencies of the National Housing Agency were restored to their former wholly independent status.


Sections 501 to 506, inclusive, of this title contain amendments to the laws administered by the Federal Home Loan Bank Administration. Without passing upon the merits of these amendments they seem to have no place in this bill. They appear to be largely technical amendments which have no relationship to the objectives set forth in section 101 of the bill and could in no way forward the attainment of these objectives. For example, section 501 (a) would authorize the Federal home loan banks when investing in United States obligations to invest both in those issued directly by the United States and those fully guaranteed as to principal and interest by the United States. Section 502 would permit the conversion of a Federal savings and loan association into a State-chartered association. Section 504 would reduce the number of examinations of the Federal home loan banks by the Federal Home Loan Bank Administration from two a year to one a year. Section 505 would add certain criminal provisions for acts committed by or against institutions in the Federal home loan bank system. Section 506 would reduce the dividend rate on the capital stock of the Federal Savings and Loan Insurance Corporation and authorize the Secretary of the Treasury to purchase its obligations.

It is difficult to see how any of these proposed amendments would "remedy the serious cumulative housing shortage, eliminate slums and blighted areas,' or in any way contribute to the attainment of "the goal of a decent home and a suitable living environment for every American family," which are the stated objectives of the bill.

Section 507 to section 515, inclusive, amend certain sections of the National Housing Act to liberalize existing insurance of modernization and mortgage loans. As has been stated heretofore, ample credit on liberal terms is already available without a further liberalization of insurance or guarantee of loans.


This title purports to be designed to supplement existing systems of mortgage insurance with special systems of mortgage insurance for families of lower income who require more favorable terms than such existing systems offer.

Under section 602 of this title a mortgage on a single family residence would be insurable if: (1) it is approved for insurance prior to the beginning of construction; (2) it does not exceed $5,000 in amount and does not exceed 95 percent of the appraised value of the property or if the builder is the ownermortgagor it does not exceed 85 percent of such value; (3) it has a maturity not exceeding 30 years; (4) the interest rate does not exceed 4 percent.

This proposed liberalization of the insurance eligibility requirements has very serious faults.

First, its immediate effect would be to increase the number of potential buyers of newly constructed homes through the smaller initial cash payment required on a 95-percent loan and the lower monthly amortization payments resulting from the longer maturity. This would mean increased competition for building materials and labor thus tending to prolong the period of high prices and wages resulting from scarcities.

Furthermore, lengthening the period for repayment of the loan will increase the total amount of interest which the borrower must pay, thereby increasing the cost of the home.

Second, its long range effect would be to impair the mutual mortgage incurance fund by reason of the losses which will necessarily result from these high risk loans. The amortization payments on a 95-percent mortgage loan repayable over a 30-year period would not even equal the normal annual depreciation of the property during the first 8 or 10 years. Thus, the owner could to his advantage simply occupy the home for a few years and then walk out and buy a new home, leaving the mortgagee no alternative but to foreclose the mortgage and make claim on the insurance fund. Also, since the owner is building up no real equity in the property he is likely to look upon the amortization payments as rent, lack the incentive to maintain the property in good condition and, with any adverse change in his economic circumstances, allow the mortgage payments to go into default, agaln requiring foreclosure and a charge against the insurance fund.

The mutual mortgage insurance plan was oringinally conceived as a sound program. The greater losses which would result from the liberalization proposed in this title permitting the insurance of 95-percent 30-year loans would be unfair to the lenders whose mortgages are already insured. Also it would undoubtedly

impair the confidence of mortgage lenders in the fund and would discourage them from insuring mortgages in the future. This result would have the effect of destroying the usefulness of the FHA mortgage insurance plan.

Similar if not stronger objections can be made to an 85 percent loan to builders. There appears to be no sound reason why a speculative builder should be required to have only 15 percent of his own funds invested in the property particularly when a large part thereof will be represented by his profit.

Similarly the proposal in section 604 of this title to insure 90 percent mortgages on rental properties is fundamentally unsound. While it is recognized that such insurance has already been provided in title VI of the National Housing Act to stimulate the building of rental housing for veterans, it was designed as only a temporary emergency measure to meet the immediate housing crisis. Insurance of 90 percent mortgages on rental property should have no place in a long-range housing program as it would lend itself to abuses by attracting speculators who would see a chance for profit without any risk to themselves and in the knowledge that losses would be absorbed by the taxpayers.


This title would add a new title to the National Housing Act and provide a system of so-called yield insurance. In effect it would guarantee to owners of rental dwelling projects a minimum return on their investment if certain conditions are met.

This proposal to have the Government guarantee the return on private investment would put the Government into an entirely new field and establish a dangerous precedent. If the Government guarantees the owners of apartment houses a return on their investment, isn't it equally logical for the Government to guarantee a return on the investment of the owners of any income producing property or business? Surely it is not the function of the Government to protect its citizens against ordinary business risks.


Urban redevelopment is the responsibility of the States and local communities in cooperation with private enterprise. States and local communities generally are in a sound financial condition and should be well able to undertake the entire cost of land assembly and its preparation for development as contemplated in this title.

There has been too much reliance in recent years by the States and their political subdivisions on financial aid from the Federal Government in the form of loans and grants. As heretofore pointed out, the Federal debt is tremendous. Unless this trend is reversed there can never be a balancing of the budget much less a surplus with which to make a start on debt retirement.


What has been said with respect to title VIII is equally pertinent to the financial aid proposed in this title for an expanded public-housing program.


It is difficult to see how these two titles can be rationalized in the light of the policy stated in section 101 that "(1) Private enterprise shall be encouraged to serve as large a part of the total need as it can; and (2) governmental assistance shall be utilized where feasible to enable private enterprise to serve more of the total need."

Private enterprise as represented by private institutional lenders and cooperative farm credit institutions are now adequately supplying most of the credit needs for rural housing, both new construction and repairs, and improvements. Furthermore, Congress in 1946 enacted the Farmers' Home Administration Act which set up a comprehensive program of direct governmental credit aid to farmers unable to obtain credit from such private and cooperative lenders. This measure also provides proper safeguards to assure that such assistance will not be abused and will be used only to supplement and not supplant such private and cooperative credit.

Moreover these titles appear to be an attempt to revive the paternalistic features of the former Farm Security Administration and to make provision for another series of "greenbelt" developments such as those which were built

and operated by the Rural Resettlement Administration which was the predecessor of the Farm Security Administration. Congress in the Farmers' Home Administration Act and in the report of the Select Committee of the House Committee on Agriculture to Investigate the Activities of the Farm Security Administration created pursuant to House Resolution 119, Seventy-eight Congress, clearly repudiated these activities of the Farm Security Administration and Rural Resettlement Administration which would be revived by these titles.



Chairman, Senate Banking and Currency Committee,

March 26, 1947.

Washington, D. C.

MY DEAR SENATOR TOBEY: I had hoped to meet you personally at the National Public Housing Conference at the Palmer House in Chicago, Ill., on March 12, 1947, but was called away on the last day of the conference and, therefore, did not get the opportunity to do so or to hear your address on public housing.

I am enclosing herewith the front page of our local newspaper with a story regarding our tentative program for low rent and slum clearance in the city of Joliet. This city, like all other of the older cities, is infested with slums and blighted areas, which can only be cleaned up through Federal aid.

We, therefore, appeal to you to do all you can to bring about the passage of Senate bill No. 866 in order to give the low-income group a decent place to live and raise their families.

Very truly yours,

HARRY W. OSMAN, Executive Director.


Seeking $4,493,000 from the Federal Public Housing Authority for the financing of a low-cost housing project and slum clearance program expected to take 3 years to complete, the Housing Authority of Joliet has filed an "on the shelf" application for that sum, if and when the funds become available, it was reported today by Harry W. Osman, executive director of the Housing Authority of Joliet. It was pointed out by Osman that the outcome of the loan application depends on the passage of the Taft-Wagner-Ellender housing bill which is up for congressional approval.

The local project would be in three units, as tentatively planned. There would be 60 homes for colored families and 100 for white families developed on property now regarded as constituting slum areas. There would be another 362 units for white families built on what is now vacant land. The major slum clearance program would be south of the loop on the outer rim of the city and east of the waterway wall, it is believed.

"In submitting this request, the local authority states its considered opinion that the proposed projects are consistent with a sound public housing program for the locality, and that none of the families to be served can afford to pay enough to cause private enterprise to build an adequate supply of decent, safe, and sanitary dwellings for their use," says the letter to Orville Olmsted, regional director of the FPHA. The application was signed by the Reverend Lee E. Coleman, vice chairman of the Housing Authority of Joliet, in the absence of Chairman Albert J. Felman.

Lowest gross monthly rent or rental equivalent at which an additional supply of average-sized standard housing, either new or existing, appears likely to be provided by private enterprise is rated at $55 a month in the report. So that the low price rental units proposed by the Housing Authority of Joliet would not

interfere with private enterprise, the monthly rent, allowing a 36 percent margin of safety below the rental amounts of private sources, would be $35 monthly, it is stated.

At present there are 26.5 percent whites and 22.3 percent of the Joliet nonwhite population living in substandard housing but paying gross monthly rents above $35, the upper limit of the low-rent public housing market proposed. The number of such families totals 1,300, with 70 being nonwhite, Oswan said.

While financing of 522 units for the major low-cost housing project is sought now, the Housing Authority of Joliet points out that the net number of additional low-rent public housing units needed to accommodate families in the lowrent public housing market is 1,890 whites and 199 nonwhites, for a total of 2,089 units. Thus the first proposed low-cost housing would meet the needs of 25 percent of the people in the low-income earning brackets and before the entire community's housing problems for the low-cost groups could be solved some $18,000,000 would be needed.

However, the authority members feel that if the first phase of the project for 522 homes is launched and completed, many of the local housing bottlenecks will be eliminated and local residents will be able to live somewhat normal lives again instead of being forced to live three and four families under one roof in three or four rooms.

Rents in the proposed 3-year program and incomes of average-sized families to be served would place the average all rent grade at $28 a month, with the highest rent grade for admission at $35 a month for both whites and nonwhites. The average monthly shelter rent would be $18 for all grades, with the highest shelter rent being $25 a month.

The average income of all rent grades of families living in the units would be $1,680 a year and the upper limit, or highest rent grade, for admission would be families earning $2,100.

Rent would be based on the family income, with the low charge being $15 to $19.99 in one bracket for the nonwhites and $23 to $23.99 for the whites. The highest rent group for both classes would be between $30 and $34.99 a month. The types of structures under consideration are semidetached and group houses. Plans are not sufficiently advanced to detrmine the exact number of each type of units to be sought.

Most of the units, or 55 percent, would be two-bedroom type, while 18 percent would be one-bedroom, 15 percent three bedrooms, and 12 percent four bedrooms. It is anticipated that each project will have a playground, a community building with a small assembly room and also a large assembly room for meetings, indoor sports and games. The Housing Authority of Joliet is of the opinion that Joliet park district employees might supervise the outdoor activities and the local YMCA supervise indoor activities.

Total development cost per unit on vacant land would be $8,275 and on slum land $9,330, it is estimated. Average total development cost per unit under the 3-year building program would be $8,600.


1. Recommendations to the United States Senate and House Banking and Currency Committee, from

2. The Army and Navy Union, United States of America, endorsed by,

3. The United War Veterans' Board of New York City.

4. Membership: United Spanish War Veterans, Veterans of Foreign Wars, Disabled American Veterans, Catholic War Veterans, Jewish War Veterans, Army and Navy Union, United States of America.

5. Articles: (a) Proposal. (b) The corporation. (c) The veteran investors. (d) The investing institution. (e) The Government-State municipalities. (f) Prospectus on cost for example. (g) Statement of principle.

6. Respectfully submitted.


National Legislative Officer, Army and Navy Union, United States of
America; President, United War Veterans' Board, City of New York.

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