K-1.-Status of Department of Transportation urban mass 154 K-2.-Managerial training (sec. 10) and university research and training (sec. 11) grants-- 154 K-3.-Gross applications received and net approvals, calendar K-4.-Status of Department of Transportation urban mass 155 155 K-5.-Status of Department of Transportation urban mass 156 L. Veterans' Administration__ 157 157 Funding-- 159 Extent of coverage.. 160 Duration of entitlement__ Tables: L-1-Guaranteed or insured loans made by private lenders-- L-3.-Average number of VA guaranteed or insured loans out- Tables: L-6.-Number and amount of direct loans 160 162 163 164 164 165 166 166 L-7.—Status of direct loan funds available in lending pro- 166 L-8.-VA home loans, cumulative to June 30, 1968, by VA 167 L-9.-Property inventories, acquisitions, and dispositions__ 167 Tables: M. Department of Agriculture__. M-1.-Rural housing activity, cumulative through December M-2.-Direct and insured rural housing loans made, cumula- 168 168 170 171 172 M-4.-Labor housing loans and grants approved, cumulative 172 M-5.-Rural rental housing loans approved, as of December 173 M-6.-Number and amount of rural housing loans by fiscal N-1.-Flow of savings and mortgage lending activity, all oper- 176 N-2.-Selected balance sheet data, all operating savings and loan 177 N-3.-Distribution of savings associations and assets, by State, 178 Agency programs-Continued Department of Housing and Urban Development-Continued Secondary mortgage market.. Tables: 0-1.—FNMA mortgage activities (secondary market opera- O-2.-Summary of FNMA commitments outstanding.. 0-6.-Geographical distribution of mortgages in FNMA port- Page 179 179 182 182 182 183 184 185 PROGRESS REPORT ON FEDERAL HOUSING AND URBAN DEVELOPMENT PROGRAMS HOUSING IN 1969 Housing in 1969 suffered greatly from tight-money and its "fellow travelers" high interest rates and scarce mortgage credit. Housing starts for the year were 1,496,600 (1,479,000 non farm and 18,000 farm; 1,464,000 private and 33,000 public). This is 3 percent less than the housing starts for 1968 of 1,547,700. It is also far below the estimated number needed to meet the 10-year housing goal stated in the 1968 Housing Act which called for 26 million units started or rehabilitated between 1968 and 1978. To meet that goal it was estimated that 1,700,000 units should have been built or rehabilitated in fiscal year 1969 and 2 million units in fiscal year 1970. The primary reason for low production of housing in 1969 was the shortage of mortgage credit and high interest rates which forced up the housing costs far above the ability to pay of families of moderate income. According to a report of the Federal Home Loan Bank Board the national average contract mortgage interest rate for new homes rose from 7.09 percent in December 1968 to 8.07 percent in December 1969. On December 30, 1969, Secretary Romney of the Department of Housing and Urban Development announced an increase in the FHA-VA ceiling rate from 7.5 percent to 8.5 percent. The shortage of mortgage credit was aggravated by the shortage of savings flowing into savings and loan associations and other thrift institutions which supply most of the mortgage credit for housing. Savings and loan associations and mutual savings banks ended up the year with a total of $6,731 million net new savings, a 42 percent drop from the $11,636 million of 1968, and 9 percent below the net inflow of $6.204 million in the "credit crunch" year of 1966. The shortage of mortgage credit from the financial intermediaries was somewhat compensated for, although at a higher cost, by increased activity of the Federal National Mortgage Association and the Home Loan Bank System. The FNMA increased its commitments in 1969 by $5.7 billion and the home loan bank increased outstanding advances to member associations in 1969 by $9.3 billion. The Congress indicated great concern for the low production level of housing in 1969 in the face of rising family formations and rapidly deteriorating housing in blighted areas of cities. Higher family incomes and rising expectations in an affluent economy which showed an 8.6-percent increase in personal income from 1968 to 1969 placed great pressures on the housing market. The passage of S. 2864, the 1969 Housing Act, and S. 2577, the act to provide additional mortgage credit, were intended to support the housing market by authorizing substantial new Federal funds to purchase mortgages and by giving the President wide authority to control credit and thus stop inflation. The President did not choose to use the authority given him but is depending on the continuation of existing fiscal and monetary restraints to control inflation. The current problems in housing production are inextricably related to the state of the Nation's economy. A section in the 1970 Economic Report of the President on "Government and Housing" demonstrates the high degree of involvement of the Federal Government in housing and the necessity for more favorable consideration of the unique position of housing finance in our economy. The section from the 1970 Economic Report is quoted below: "THE GOVERNMENT AND HOUSING "All levels of government have been involved to an exceptionally high degree in the housing industry-in its financing, its technology, its labor supply and labor relations, and even in its supply of some basic materials. In addition, housing is the only major private industry for whose output a fairly specific goal has been stated by legislation. The Housing Act of 1949 declared a goal of 'a decent home ** for every American family,' and the Act of 1968 said that this goal could be met by constructing or rehabilitating 26 million houses in the next decade, of which 6 million would be for low- and moderateincome families. "The enactment of this goal was not based on a calculation of the costs of achieving it and a decision to pay those costs whatever they might be. Until the costs and possible methods of achieving this goal are assessed more accurately it cannot be regarded as a firm basis for planning. Moreover, any goal set now would certainly have to be regarded as open to review and revision as time passes. Nevertheless, the kind of concern expressed by the 26 million housing goal, together with the prospect that rising family formation will greatly increase the demand for houses in the next decade, calls for a reexamination of the Federal role with respect to housing. "A distinction should be made between policy about housing for lowincome people and housing for the rest of the population. An intention to subsidize housing for low-income people is clear. This may be explained on the same grounds as other contributions from the more affluent to the poor, although there are questions about whether in the long run subsidizing housing is an efficient way to make this transfer. "Federal policy toward the nonsubsidized part of housing is probably best understood as an effort to improve the operation of private markets. This is clearest with respect to finance. The cost of capital to finance housing has been affected by the real or apparent riskiness and illiquidity of mortgage instruments. Policies to reduce these costs, without subsidies from the Federal Government, include FHA insurance, the provision of insurance and a reserve lending source for savings and loan associations, and the establishment of the Federal National Mortgage Association (FNMA) to create a secondary market for mortgages. Further action along this line may be useful, especially to reduce the great instability of the residential construction industry, |