so-called rich; labor versus business; veterans versus nonveterans as well as distinctions between races, colors, and religion. The tendency in Federal legislation is to deal with problems on the basis of minority groups. It is bad enough from the standpoint of each group trying to get its hand into the Federal treasury first, but a more dangerous situation is developing which may be difficult to control. Even the casual observer notes the bickering at the local level between these groups. The tendency for one minority group to feel that it does not receive its share of the benefits under Federal legislation can easily lead to envy and distrust. Every piece of class legislation leads to additional demands from other classes or groups that did not benefit from the latest one, and we may find ourselves going around in a vicious circle. Title II of the bill providing for the disposition of housing counstructed during the war under the so-called Lanham Act appears to violate the congressional intent expressed in the Lanham Act. Mr. Ferguson, I think, did a better job, perhaps, than I can in explaining just what I mean. In that act, as you know, it was declared that the housing developed under that program was to be sold and disposed of as expeditiously as possible. It was not supposed to be conveyed to public or private agencies organized for slum clearance nor to provide subsidized public housing for persons of low income unless specific authority was obtained from Congress. Obviously, the purpose of this legislation is to give congressional approval of its transfer to municipalities, 32,000 units of which are to be used for public housing. I would assume that the temporary units given the municipalities will be used for the purpose of relocating people of low incomes in slum areas. If so, then we must be prepared to face the substitution of one slum area for another. My own son has lived in one of these temporary units, and I know what I speak of. Up until the passage of the Housing Act of 1949, there was no disposition on the part of the administration to indicate that the Lanham Act housing would be used to supplement the so-called public housing program. The outright gift of 32,000 units of permanent housing to the municipalities probably will not be any more expensive than the 40-year amortization program provided for in Public Law 171, but if these units are turned over to the municipalities and the 810,000 limit on the Federal Government's participation in the public housing program was an honest limitation, then an equivalent number of units should be subtracted from the Public Law 171. If there was ever any real intention of Congress providing reasonable cost housing for veterans-and I believe there was no better or cheaper way could have been provided than making this housing available to veterans at a reasonable price without loss to the Govern ment. Most of these housing accommodations were constructed in the early war years, prior to the increase in building costs, and if they had been offered for sale to the veterans it would have been at a price within the veterans' reach. With this housing available for sale to veterans at reasonable prices it seems to us that Congress has worked an injustice on the veteran by forcing them to purchase new homes at a higher cost. In this bill is is proposed to promote housing cooperatives, with emphasis on veterans cooperatives, at costs higher than the veterans could purchase many of these Lanham Act projects. There appears to be some duplicity in this deal with the veterans. The House, during the last Congress, approved a bill providing for the disposition of this housing with preference to veterans, but no action was taken, in the Senate. Had this housing been left under the jurisdiction of the Public Works Administration, I feel sure that most of it would have been in the hands of veterans at this time. I think it was unfortunate that this housing was ever transferred to the Housing Agency for administration. The slowness with which they have proceeded with disposition indicates that that agency always had in mind the disposition proposed in this bill. The 32,000 permanent housing units to be transferred to the Public Housing Authority without consideration under section 606 should be disposed of the same as the 110,000 units to be disposed of under section 607. However, we think there should be an amendment to section 607 requiring the Administrator to sell at a reasonable price, but not necessarily the current market price, and a down payment of at least. 5 percent. Subsection (f) of section 607 would indicate that the. Administrator could dispose of these units without any down payment. The provisions of title III dealing with cooperative housing raises the question of whether cooperative housing is a sound venture. If cooperatives are sound, it seems to us that they should stand or fall in competition with other types of housing, just as in business cooperatives should compete with business on an equal basis. The proposal for Federal aid in the way of preliminary advances, direct loans, and low interest rate provides an advantage not available to the person preferring his own individual home. The growth of the cooperative movement in this country, subsidized through tax exemption, threatens to engulf small individual enterprises. Certainly if cooperative housing can be made to operate successfully, and then obtains the advantage of long-term loans. at low interest rates, private money would withdraw from the rental field. As private money withdraws, Government money on the same terms will have to fill the vacuum. This unfortunately will spell the end of private enterprise in the rental field. It would even have its effect on private enterprise in the field of building homes for individual ownership. There has always been competition between the builders providing rental housing and the builders providing homes for ownership. If the economic advantage swings to rental units, people, especially in the metropolitan areas, will forego the advantages of home ownershp and embrace the cooperative movement, even though they would prefer their individually owned home if they were on an equally competitive basis. The concept involved in this section of the bill seems to be even more dangerous than the concept involved in publichousing. Since the Government cannot lend money any cheaper than the private lending institutions, there must be a subsidy which will have to be paid in the form of taxes. I venture that the cost of raising taxes with which to finance this program, the cost of administering the program and the cost of servicing the loans will exceed the costs of operating a private lending institution. The net result of this is a loss. to the Government which must be made up out of taxes. I assume that the proposal under title IV to provide direct loans to veterans at 4 percent arises from what some consider a promise by the Government to provide 4 percent financing on veterans housing. If the intent of this section is to try to force private lenders to make veteran loans at 4 percent under the threat of direct Government lending, I believe you will find it will have the reverse effect and that the $300,000,000 made available under this section will be wholly inadequate. In the first place, there is no basis for the assumption that Congress promises the veterans 4 percent on their housing. Even at this time there is permissive authority for the Administration to increase the interest rate up to 41⁄2 percent if the mortgage market required such increase. During the latter part of 1948 the need for the rate charged was evident with the rapid decline of veterans home loan activity. Early in January, Administrator Gray issued a statement more or less apologizing for the fact that he wasn't going to increase the interest rate even though GI loans had, by that time, gone down to less than half the volume of late 1947. If the mortgage market requires an increase in the interest rate, why hasn't some action been taken under the permissive authority? Certainly the fact that the permissive authority existed does not support the fact that the Government guaranteed the veterans a 4 percent interest rate. An attempt to peg interest rates for any particular activity or any segment of our people necessarily leads to the controlling of other interest rates. That is this business of class legislation. What is true of commodities is necessarily true of interest. One control leads to another. What we need is a realistic rate which is common both to GI loans and FHA guaranteed loans. If one interest rate is higher than the other, it is only natural to expect money to flow to the higher source. This brings me to the question of providing direct Federal loans to educational institutions for 40 years at 21⁄2 percent. The excuse for this proposal, as I understand it, is that educational institutions have invested their endowment funds in low-return securities. One of the reasons, in my opinion, why the investments have a low return is the fact that the Federal Government is continually depressing returns on investments through its competitive controls and its direct lending. In other words, the educational institutions now find themselves in the same position of the veteran who wants to borrow at a low interest rate, yet decries the fact that there is no return on the money he invests. The portions of this legislation that will produce the greatest amount of good for all our people will be discussed in detail by Mr. Broderson. I would like to state, however, that if you enact the provisions of title I of this bill with some amendments most of the current problems would be well taken care of. The Administration has the authority to meet the balance of the basic issues involved in this legislation. The CHAIRMAN. Are there any questions? If not, you may stand aside, Mr. Mason. STATEMENT OF L. F. BRODERSON, ON BEHALF OF THE NATIONAL RETAIL LUMBER DEALERS ASSOCIATION Mr. BRODERSON. Mr. Chairman and members of the committee, my name is L. F. Broderson. Mr. MONRONEY. Mr. Broderson, I might add, is one of our main builders and lenders in Oklahoma City. He is well acquainted with low-cost housing in Oklahoma City. I hope you have brought some of the pictures of the houses you have built with you. Mr. BRODERSON. Thank you, Congressman Monroney. I have, sir. I have been associated with the retail building and supply business for over 35 years. My present position is manager of the retail yard of Long Bell Lumber Co. at Oklahoma City. I am representing the National Retail Lumber Dealers Association as well as the building supply dealers of Oklahoma. I want to express, on behalf of the lumber dealers, their appreciation for the committee having afforded me an opportunity to appear in connection with the consideration of this legislation. The lumber dealer is not only the distributor of building materials. He is, in a large measure, directly or indirectly responsible for most of the homes constructed in smaller communities and even in some of the larger metropolitan areas. A lumber dealer finances the smaller builder during the construction period, arranges financing for the home owner, provides the plans and generally supervises the construction. Construction is usually in direct proportion to population and a large majority of the population of our country is not in the large metropolitan areas like New York City, Chicago, and San Francisco. Normally over 75 percent of the homes built are in cities of a population of 50,000 or less and the big bulk of this is in the communities of less than 2,500. This is evidenced by the break-down of the distribution outlets. Over half of the 25,000 building supply dealers are in communities having a population of 25,000 or less. It is in the smaller communities and in the rural areas where we find the lag in new construction. In spite of the testimony this industry has presented in the past, little attention has been paid to the matter by the administration and by the Congress. The National Retail Lumber Dealers Association for several years has advocated the extension of the title II type of financing to fit the needs of lower-income families desirous of building homes in the suburban and rural areas. Some of the site requirements under title II and the apparent reluctance of FHA to extend their inspection facilities to the suburban and rural areas has made title II inoperative in these outlying districts. Although some of the provisions of title I were designed to encourage lending institutions to lend money on homes constructed in the outlying areas, the program has not proven successful. Mr. Foley, Administrator of the Housing and Home Finance Agency, in a letter to Senator Maybank dated March 16, 1949, concedes the inadequacy of 94397-49- -21 I assume that the proposal under title IV to provide direct loans to veterans at 4 percent arises from what some consider a promise by the Government to provide 4 percent financing on veterans housing. If the intent of this section is to try to force private lenders to make veteran loans at 4 percent under the threat of direct Government lending, I believe you will find it will have the reverse effect and that the $300,000,000 made available under this section will be wholly inadequate. In the first place, there is no basis for the assumption that Congress promises the veterans 4 percent on their housing. Even at this time there is permissive authority for the Administration to increase the interest rate up to 41⁄2 percent if the mortgage market required such increase. During the latter part of 1948 the need for the rate charged was evident with the rapid decline of veterans home loan activity. Early in January, Administrator Gray issued a statement more or less apologizing for the fact that he wasn't going to increase the interest rate even though GI loans had, by that time, gone down to less than half the volume of late 1947. If the mortgage market requires an increase in the interest rate, why hasn't some action been taken under the permissive authority? Certainly the fact that the permissive authority existed does not support the fact that the Government guaranteed the veterans a 4 percent interest rate. An attempt to peg interest rates for any particular activity or any segment of our people necessarily leads to the controlling of other interest rates. That is this business of class legislation. What is true of commodities is necessarily true of interest. One control leads to another. What we need is a realistic rate which is common both to GI loans and FHA guaranteed loans. If one interest rate is higher than the other, it is only natural to expect money to flow to the higher source. This brings me to the question of providing direct Federal loans to educational institutions for 40 years at 21⁄2 percent. The excuse for this proposal, as I understand it, is that educational institutions have invested their endowment funds in low-return securities. One of the reasons, in my opinion, why the investments have a low return is the fact that the Federal Government is continually depressing returns on investments through its competitive controls and its direct lending. In other words, the educational institutions now find themselves in the same position of the veteran who wants to borrow at a low interest rate, yet decries the fact that there is no return on the money he invests. The portions of this legislation that will produce the greatest amount of good for all our people will be discussed in detail by Mr. Broderson. I would like to state, however, that if you enact the provisions of title I of this bill with some amendments most of the current problems would be well taken care of. The Administration has the authority to meet the balance of the basic issues involved in this legislation. The CHAIRMAN. Are there any questions? If not, you may stand aside, Mr. Mason. |