April 26, 1967
Page 10919
SENATOR SPARKMAN ADDRESSES NATIONAL HOUSING CONFERENCE
Mr. MUSKIE. Mr. President, one of the Nation's leading authorities on housing is the distinguished chairman of the Committee on Banking and Currency [Mr. SPARKMAN]. As chairman of the Subcommittee on Housing since its inception, Senator SPARKMAN has played a major role in developing some of the most comprehensive and far-reaching legislation of our time. For the past 8 years it has been my privilege to serve on this subcommittee. During this time I have grown to admire Senator SPARKMAN's knowledge of housing problems and skill in working out the details of complex housing legislation.
Earlier this month, Senator SPARKMAN addressed the 36th annual convention of the National Housing Conference. I ask unanimous consent that the text of this speech be printed in the RECORD.
There being no objection, the speech was ordered to be printed in the RECORD; . as follows
ADDRESS BY HON. JOAN SPARKMAN, U.S. SENATOR FROM ALABAMA, BEFORE THE 36TH ANNUAL CONVENTION OF THE NATIONAL HOUSING CONFERENCE, HOTEL STATLER HILTON, WASHINGTON, D.C.
I welcome the opportunity of speaking at the Thirty-Sixth Annual Convention of the National Housing Conference. Thirty-six annual meetings – that covers a long span of years starting back in the days when Federal housing legislation was only a gleam in the eyes of your early pioneers.
Your contribution to good housing over the years has been outstanding and you should be proud of your long history of faithful and continuous service to the cause of housing and better living conditions for the American people.
Your meeting date this year is a little ahead of our legislative hearing period so that I have little to report to you on progress of 1967 housing legislation.
The Administration's bill, which I introduced last week, is one of the most modest proposals we have had for years. One of the most significant new items is the request for authorization to establish a new assistant secretary within the Department of Housing and Urban Development for research and development.
A research and development program for housing is long overdue and I hope that the Congress will fully support the Department's request to move ahead in this badly neglected field.
Without studying the other provisions of the bill, I cannot predict their outcome but, offhand, I see no critical issues involved.
We have a number of other bills pending before us, including part of the Administration's civil rights bill. All of these bills will be the subject of hearings tentatively scheduled for late May or early June.
As you probably know, Senator Ervin has announced hearings on the President's omnibus civil rights bill starting May 23rd. These hearings will cover the same housing provisions as in the bill pending before us. I hope that we can make arrangements to avoid a duplication of the testimony before both committees.
I do not believe that the Congress is in a mood to pass any big housing bill this year, so that the final version passing the Senate will probably be quite modest and refer mainly to existing law.
After the heavy legislative years of 1964, 1965 and 1966, I welcome the opportunity of spending less time on new programs and more time on the progress of existing programs.
When one has been involved with housing legislation as long as I have, some doubts begin to develop about the necessity of constantly coming up with new programs to do what you were told existing programs were supposed to do years before. I sometimes wonder who is "tending the store" on the administration of existing programs when I see so much energy being expended on new programs.
I am convinced that much more could be done if a more imaginative and conscientious application were made of the laws now on the books, and I have urged this on the Secretary and his staff in the Housing Department.
With this in mind, the Housing Subcommittee this year took on the task of checking into two basic programs vital to the attainment of the nation's housing goals – rehabilitation and mortgage credit.
On rehabilitation, our first step was to look at field experience and learn what was being done in various cities to implement the laws on the books.
You will not be surprised if I tell you that we were a bit shocked by what we found. It is quite apparent that rehabilitation as a tool for city rebuilding is just not working.
Needless to say, rehabilitation is a tremendously complex undertaking, involving solutions to a whole series of technical, economic and social problems. With so little precedent, each project is practically on its own in developing its technique and procedure in mobilizing the needed community resources.
It is because of this that we were disheartened to see the relative lack of vital attention being given to the subject by high ranking local and Federal officials.
We have been exploring with HUD officials and others what can be done to make rehabilitation an effective program, and we have requested a full report from the Housing Department on the subject.
It seems to us a rather drastic new approach will have to be worked out if we are ever to meet our objectives of renewing the American cities under the model cities program or any other program.
To cut costs and reduce time involved, some methods of mass production will have to be introduced. Volume acquisition and volume reconstruction under acceptable financing terms which will protect the rights of the residents and produce housing at prices they can afford are essential to getting the job done.
Private enterprise with all of its technical resources and managerial skills should carry the maximum burden with government providing the leadership and the financial subsidy when necessary.
I note that the President plans to bring together outstanding leaders in home construction and home financing to consider ways to get this program off the ground and make it work. We will look forward to this meeting and will be happy to work closely with the President in solving this very difficult problem.
Another area of concern to all of us in meeting the national housing goals is mortgage credit. Without proper financing, decent housing, either new or old, cannot be provided.
The year 1966 was one of the poorest mortgage credit years since the thirties. Money for home financing soared to prices unheard of since the late 1920s. Some people had no choice but were forced to pay mortgage interest rates of 7 and 8 percent, and it was not unusual to hear of FHA mortgage loans calling for 10 discount points.
I will not go into detail on how all of this came about only to say that it was the result of an unusually heavy hand of the Federal Reserve Board in its attempts to prevent inflation.
The total money supply and credit available to the nation were reduced to the point of nearly causing a panic in August of last year. The final turnabout came when the seven percent investment tax credit was repealed and the Federal Reserve Board cooperated by loosening bank credit last fall.
Our current posture is a peculiar one. Prime bank rates are down to 5½ percent but prime mortgage rates are still running between 6 and 6½ percent.
I am always amazed at our banking friends who espouse the market place as the best regulator of prices on the way up, but never explain why the market place is so sticky on mortgage rates when they should be coming down.
It seems that the market place invariably operates to the disadavantage of the borrower.
Homebuyers have not been educated to shop around for the best mortgage terms – consequently they do not always get the lowest rate.
Consumer-oriented groups like yours would do well to help educate the public on matters of this sort.
With savings flowing again – in fact,' the first two months of 1967 were near record savings months – there are some who believe that the mortgage credit crisis is over and nothing further needs to be done.
It is not as simple as that.
In the first place, our economy and our forward progress in reaching national housing goals cannot afford years like 1966. Housing bore the brunt of a bad mix of monetary and fiscal policies and we should not let it happen again. Furthermore, it should not be taken for granted that the institutional pattern of savings and lending, which was so drastically upturned by the 1966 experience, will now return to normal.
In addition, a two million a year housing start level, which is demanded to meet current needs, will require a sharp increase in mortgage funds over normal levels.
In view of these facts, the Subcommittee on Housing is conducting a Study of Mortgage Credit to determine what needs to be done to insure adequate home financing for the future.
Papers have been requested from government agencies, industry organizations, and a select number of outstanding experts in the field of finance, monetary controls, capital flows, pension funds and savings. Your President, Nat Keith, has promised to prepare a paper.
These papers will be published in early May following which hearings will be held to boil down the recommendations and to draw conclusions.
I see no reason why, in this modern age with all its expertness in the management of capital and money flows in our economy, we cannot develop the necessary institutions to insure adequate mortgage credit to meet our housing needs.
Now let me return again to legislative matters pending before us.
I have seen your opus on legislative proposals. However, I must be honest with you and tell you that I have not read all of it. I believe that it has 36 legal size pages. Someone has done a herculean task in bringing together so much material and I congratulate you on it.
I should like to comment on only a few of your proposals.
Your long-range look at the housing needs of our nation deserves the attention of everyone interested in housing.
You have established goals – both for the immediate future and for the next 20 years. The dollar requirements to meet these goals are overwhelming. You face a tremendous problem to obtain Congressional concurrence. A doubling and tripling of grants for urban renewal, public housing, community facilities and FNMA purchases would not have much of a chance of enactment with the present Congress.
Such a tremendous expansion will require a lot of work on your part to prove the need. I am sure you can do it but it will take time.
Merely presenting your bill to Congress will never work. You must prove your case. My personal reservation is a concern that you are placing too much reliance upon the Federal government.
Somehow we have to learn how to make better use of the resources available at the local level and from private enterprise.
I should like to remind you of the 1949 National Housing Policy statement which outlined our goals but indicated that private enterprise shall be encouraged to serve as large a part of the total need as it can, and government should be utilized to help private enterprise, not as a substitute for it.
There are several large segments of private enterprise which need to be drawn in closer to meet the problems outlined in your prospectus.
Homebuilders and home improvement technicians need to be shown how they can do the job in city rebuilding at a reasonable profit.
Savings and loan and other thrift institutions need to be brought into city rebuilding to finance the improvements at a profit and yet without an unreasonable risk.
Pension and welfare funds need to be tapped to supply the credit to help finance the building programs to which you refer.
Government should provide the leadership and the direction but, in the long run, private enterprise should carry the bulk of the load.
I think a good illustration of the private enterprise potential is your experience in turnkey public housing where it is said that private enterprise can build projects 20 percent cheaper than government. The reason for this savings is not only the avoidance of government red tape, but the motivation and incentives provided to the builder working for himself.
The task before us is to develop the proper mix of government subsidy and private enterprise so that, on the one hand, our social objectives will be achieved through government subsidy and, on the other, maximum production will be attained from private enterprise with a fair profit.
As you know, our last few housing bills contained provisions to carry out this objective. The rent supplement program is an example. Unfortunately, it has run into difficulty getting appropriations and, as all of you know, it will take all of your combined support to get funds in this year's Congress.
Another program currently in difficulty is the FHA section 220 program because of what appears to be an unacceptable high loss rate.
A few bad experiences have caused a reaction against this program so that it is in danger of being smothered out of existence by an overdose of caution.
I am afraid some of its critics do not understand the purposes of the program,that is, to provide the financing tool to help in the rebuilding in urban renewal areas. The Federal government spends huge sums of money in its support of urban renewal and should not let this money go down the drain by failing to support programs to rebuild the areas.
We intend to take a closer look at the 220 program and hopefully take action to remove the cloud that seems to hover over it at the present time.
With further reference to your policy statement urging a larger share of national resources for housing and better communities, I do not have to remind you of the one big obstacle – the Viet Nam war.
No matter how you feel about it, whether you are a dove or a hawk or something in between, the facts are that we are in this war and we are spending a large share of our resources for it.
Some claim that our nation is rich enough to afford both guns and butter and that we should continue to expand our domestic programs despite our commitments in Viet Nam.
I think this is unrealistic.
I agree that we should look hard at other non-essential programs in our economy and establish priorities in terms of the greatest need. And you can be assured of a sympathetic ear on what you believe is the proper priority for housing and city rebuilding programs.
Your policy statement' pointing out the needs of our cities' contains most convincing agreements which cannot be ignored.
I believe that it is unrealistic to expect an expansion of Federal funds for your programs under today's circumstances. On the other hand, I see no reason why we should not be planning full steam ahead in preparation for the day, which we all pray will come soon, of a peaceful settlement of this unfortunate war.
Let me again congratulate you on your policy statement and I wish you every success in your efforts to provide good housing and a suitable living environment for every American family.