The American family's will to improve its housing standards and to own its own home is demonstrated fact. So also is the ability of the private home-building industry to meet these widespread and persistent demands for better housing.

What is the housing problem? Review of the facts just stated properly leads us to consideration of the question: What is the American housing problem?

An acute housing shortage in practically every city in the country results from necessary restrictions on construction during the war period, from a rapid increase in marriages, and the fact that reconversion not yet has reached the state at which houses can be produced in volume. Then there is, as always, the group of individuals with very low income whose housing conditions could be greatly improved. Yet it is difficult for many of us to see anything in the so-called housing problem which cannot be cared for by private enterprise and private production.

A widespread fallacy of much current thinking about housing arises from the mistaken conception that new accommodations must be provided for particular groups, such as low-income persons. New.houses should be provided for all families who are willing and able to pay for them. When new housing is constructed, the occupants vacate less expensive quarters, which, in turn, are available to another group, and thus the process of shifting occupancy extends throughout the income scale only the poorest housing remains unoccupied. The quickest and most economical way to meet housing needs is to leave private enterprise free to build for the demand whenever it may appear. The critical problem which faces the building industry now, and will for some years to come, is a problem of production and costs. This problem cannot be solved by legislation directed primarily at affecting the supply of credit, as is contemplated by S. 1592. It can be solved only by industry and by community action designed to speed up the production of building materials and houses and to lower costs.

The home-building industry is an outstanding example of small business in action. It is comprised of hundreds of thousands of contractors, builders, suppliers, professional firms, and lending institutions. They have their roots deep in the community life of this country, and they have done a good job. For example, figures of the United States Bureau of Labor Statistics show that the average cost of one-family dwellings erected has declined almost steadily during the last 18 years, falling from $4,593 in 1925 to $4,228 in 1935 and to $3,890 in 1940.

The Federal Government can play its most effective role by encouraging and clearing the way for this decentralized industry and community action.

Government activity in the field of mortgage credit: Congress should be especially careful now not to undo, as a result of pressure of the readjustment period, what has been built up through the effective teamwork of the Federal Government and the private lending institutions.

The Federal Government, prior to the war, initiated several farreaching activities of a permament nature, the purpose of which was to improve the home financing or mortgage credit facilities of the country. These activities were undertaken primarily in the interest of those millions of private individuals who are home owners, or want

to purchase a home, and those millions of private individuals who have placed their savings in lending institutions which, in turn, used them to help finance home ownership. Never in the history of this country has the credit for the purchase of homes been more ample or available on more favorable terms than today.

These activities of the Federal Government which have been highly successful may be described briefly as follows:

1. The Federal Home Loan Bank System, consisting of 12 regional banks, from which the members of this System-for the most part savings and loan associations, although other types of mortgage lending institutions are eligible for membership and are members-may borrow on the security of eligible home mortgages, or of obligations issued or guaranteed by the Government. The System and the Corporation to date have been self-supporting.

2. The Federal Housing Administration, which provides for the mutual insurance of private loans of high ratio up to 80 percent and in some cases to 90 percent of the value of the property. The insuring function of this Administration is available to, and used by, practically all types of mortgage lenders and to date has been selfsupporting.

3. The mortgage companies of the Reconstruction Finance Corporation, which buy and sell mortgages on income properties, and also mortgages by the Federal Housing Administration.

In addition to these new agencies, established facilities in the field of mortgage finance have been enlarged and modernized, including the liberalization of previous restrictions in national banks.

Prior to the war, these three major innovations in the field of mortgage finance-the Federal Home Loan Bank System, the Federal Housing Administration, the Federal mortgage companies-were grouped together along with the RFC in the Federal Loan Administration.

This satisfactory arrangement was disrupted during the war through the setting up by Executive order of a temporary war agency, the National Housing Agency, which brought the Federal Home Loan Bank System and the Federal Housing Administration under its jurisdiction. The United States Housing Authority, now the Federal Public Housing Administration, also was placed under it.

S. 1592 proposes to continue in a modified form the wartime supervision and direction of the activities of these agencies. Under the terms of title I of this bill, the wartime National Housing Agency becomes permanent. The National Housing Administration is made responsible for the general supervision and for the coordination of the functions, activities, and programs of the Federal Home Loan Bank Administration, comprising all of the activities formerly under the direction of the members of the Federal Home Loan Bank Board, for the Federal Housing Administration, and for the Federal Public Housing Administration, which succeeds to all the functions of the United States Housing Authority and all the wartime Federal Public Housing activities. The Administrator is directed by title X to estimate the housing needs of all communities throughout the country and of all rural areas and to recommend to Congress such governmental action as he feels necessary to see to it that the needs which he estimates are taken care of. This in effect continues in peacetime the wartime control or so-called "programing" activities of the National Housing Agency.

The adverse effects upon the private home financing and building industries of using the wartime National Housing Agency as a model for the peacetime organization of the Federal Government's "housing" activities are patent.

During wartime all new residential building was channeled through the National Housing Agency due to the necessity for distributing building materials so as to meet emergency housing needs in specific numbers in certain areas at a given time. This was controlled by "programing."

What harm did this "programing" do the private home financing and home building industries?

The answer is: No harm in wartime, any more than the War Production Board's regimentation of all industry harmed the manufacturers of the country. The injury many individuals suffered is more than compensated by the good which came from victory.

However, if "programing" in any form is to be continued after the war when materials and labor are in plentiful supply, it will mean increasing control from Washington of the real estate and mortgage markets and of the home building industry. This, ir. turn, will mean restraints on manufacturers of building materials and equipment and their dealers. Also, it would mean the determination of community housing needs by a far removed governmental bureau, rather than by the people of the community well acquainted with local requirements. Prewar coordination of credit activities should be restored: It is highly important to the prompt recovery of home building that this wartime supervision and direction of the activities of these agencies of proven value should be terminated. There is no reason why this should not be done at once. The war work of the National Housing Agency is completed.

It also should be borne in mind that the basic functions of each of the agencies under the NAH are different. The Federal home-loan banks are banks for making advances to their members. The Federal Housing Administration is an agency which insures mortgage loans, while the Federal Public Housing Administration, in the final analysis, is a relief agency. It does not seem to us that governmental agencies with interests as varied as these are should be continued under one administrative head.

Congress should restore at once the Federal Housing Administration. and the Federal Home Loan Bank Board to their previous positions of influence, leadership, and responsibility in the Federal Loan Agency. We know of no action which would be more encouraging at this time to the progressive forces in the home-building and home-financing industry.

Proposals to improve the operations of the Federal Housing Administration and of the Federal Home Loan Bank Board should be considered by Congress on their merits. They should be considered entirely apart from the attempted objectives of S. 1592 to use both private and public lending agencies, and also Government subsidies, for the purpose of providing new homes for families of all income groups.

Over-all housing policies and program are impractical.

The proponents of this bill are apparently of the opinion that the housing problem of the country is a total problem, but that its solution

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calls for adoption of an over-all housing policy, to be carried out by a single Federal bureau.

But the plain fact is that Congress never has been able to adopt an over-all housing policy. It has been impractical to do so. A striking recent example is the failure to bring within the scope of this bill either the activities of the Veterans' Administration or the Public Roads Administration.

Yet in the next 10 years the home-loan provisions for veterans may directly affect up to one-half the entire housing market. Likewise, in connection with public roads, Congress has earmarked $125,000,000 to be spent annually for 3 years on a matching 50-50 basis to build modern thoroughfares within cities, and there is probably no single factor that is more influential upon urban housing than transportation. Again, the bill divides responsibility for rural housing between the Department of Agriculture and the National Housing Agency.

The basic obstacle to an over-all treatment of housing is the decentralized character of the construction industry and the extremely variegated economic interests concerned with housing-construction, material, supply, building labor, local government, finance, and property management, to name but a few.

Congress would be well advised to deal with each of these constituent elements individually through such activities as housing research, labor relations, and mortgage insurance and discount, as it is now doing, rather than to undertake a forced coordination of diverse and dissimilar organizations.

Two details involving application of the bill to FHA loans deserve special consideration.

Sections 309 (b) and 404 (c) of S. 1592 require that certain FHA loans shall include a proviso

for the extension of the period of amortization at any time the mortgagor, because of unemployment, economic conditions, or misfortune beyond his control, is unable to make a principal or interest payment due under or provided to be paid by the terms of the mortgage

The intent of these provisions is commendable, but a stipulation so generally stated might well make FHA loans much less attractive to investors. The company with which I am affiliated includes in its uninsured loans a proviso which gives the borrower a deferment privilege under certain circumstances; but this privilege is expressed in language so specific that there can be little, if any, dispute as to what it means.

Section 312 of S. 1592 amends section 203 of the National Housing Act to provide in effect that upon new construction to be insured under this section by the FHA, the general contractor must give a warranty against structural defects and any failure to comply with the construction contract.

Builders in some cities now furnish such a guaranty, and no one doubts or questions its desirability. At the same time, in a market such as the present, when there is an acute shortage of housing and when there is a plethora of funds available for purchases, it is my opinion that this provision would cause builders to shy away from FHA loans and to encourage their borrowers to finance without them. I believe, further, that it would have very serious adverse consequences on the splendid work of the Federal Housing Administration.

Provision for research: Congress should make suitable provision for existing Federal agencies, in cooperation with educational, research institutions, and the construction industry, to correlate and to encourage research on construction materials and methods. This might be done by setting up a committee on construction research, which would be composed of men from Government agencies directly concerned with research in this field, and men from private life who have an outstanding reputation for their interest and achievements in the field of research as it relates to the construction industry. Such a committee itself should not carry on research activities but should coordinate and encourage the research work which is presently being carried on by several Government agencies, by private business concerns, and by foundations and educational institutions.

It should be noted that the Department of Commerce, through its Bureau of Standards, and the Department of Agriculture, through its Forest Products Laboratory, are already deeply concerned with many phases of technical research in the building and construction field.

Action already has been taken by the Department of Commerce, with the approval of Congress, for setting up a construction division in its Bureau of Foreign and Domestic Commerce, to assemble in one place and to make available to the construction industry all pertinent statistical and other data bearing on its operations, including housing.

I submit for your consideration that the building industry needs a Henry Ford in every city, who will produce houses for a small family at $1,500, $1,800, or $2,000; but this will require extensive research as to materials and methods of production.

Herein rests the great undeveloped opportunity for cooperation by Government and private industry. Government should encourage research which will make lower-cost houses possible. Industry certainly can provide them.

Clearing the way for urban redevelopment: Another fundamental objective which must be accomplished to bring about a permanent improvement of housing is to clear the way for a resumption of community initiative and responsibility for urban redevelopment.

This objective cannot be attained through action in Washington. It is the States, and not the Federal Government, which are in a position to give cities the necessary powers to plan for and to carry out the redevelopment necessary to make them attractive places in which to live and work.

Definite progress is being made along two lines. For the first time, cities are working with the highway departments in their States in planning improvements in their major thoroughfare systems. Funds for carrying these plans into effect are available through the Federalaid highway appropriations, as previously noted.

For the first time, also, cities are being given adequate power and funds to reclaim their run-down areas.

Urban redevelopment laws have been enacted by a number of States to provide a legal basis for assembly by condemnation of land within cities for redevelopment. Outstanding among these laws is the measure enacted this year by the Indiana Legislature, which authorizes the establishment of a redevelopment commission in Indianapolis with power and funds to clear and replace slums and blighted areas,