THE HOUSING PROGRAM.

Will Congress Gut It?

FEW Government ventures have done more for the U.S. family and the U.S. economy than the federal housing program. By guaranteeing mortgages and keeping interest rates low, it has helped build 4,450,000 housing units and kindled the great growth of the housing industry. Last year this industry accounted for 7% of the gross national product, directly provided jobs for 2,200,000 carpenters, painters, plumbers and other well-paid workers. Indirectly, it provided work for many more, since new houses swell the demand for washing machines, TV sets, carpets, sofas, etc.

Against the 1953-54 recession, housing stood as a bulwark. But now Congress threatens to gut the housing program.

Keystone of the program is the Federal Housing Administration, set up by the New Deal in depression-ridden 1934 to encourage housing loans by insuring mortgages. Not only has FHA helped millions build and repair their homes; it has not cost taxpayers a cent, even made $91.9 million last year. President Eisenhower asked Congress to expand and strengthen the housing program. But when scandal suddenly broke out in the FHA last April, congressional clamor arose for safeguards. Now, under the guise of cleaning up FHA, Congress is falling short on Eisenhower's housing program.

The President asked for a broad program to rehabilitate run-down neighborhoods by extending FHA's favorable terms for newhouse loan insurance to loans for purchase of old houses. The Senate Banking and Currency Committee turned him down. Eisenhower asked Congress to free Government interest rates on housing. Again, the committee turned him down. Dumped also were Eisenhower's trial plan to substitute low-cost home-ownership (with 40-year mortgages fully insured) for subsidized public housing, and his plan to lift the ceiling on FHA home-repair loans from $2,500 to $3,000. Even the parts of the Eisenhower program that have been generally approved in committee-- e.g., a temporary continuation of public housing, FHA guarantees for bigger loans, lower down payments and 30-year mortgages on new houses--still face stiff floor battles in the Senate and House.

Before the FHA and the rest of the national housing program took effect, foreclosures on home mortgages were commonplace. In 1933 some 252,400 U.S. families lost their homes because they could not pay off their debt. To buy a house in those days, a man might need half the price for a down payment, often had to take out first, second and third mortgages at up to 10% interest. By its insurance guarantees, FHA brought about the national pattern of liberal, single-mortgage financing at low interest rates. Now a man can buy an $8,000 house with $1,600 down and 20 years to pay, at 4^% interest. Result: an estimated 60% of U.S. families own their homes today v. 44% in 1940. Mortgage foreclosures have dropped (only 21,000 in 1953). A generation ago, the average man was 48 before he bought a house; today he is 31.

But there is still a big job to be done. According to the 1950 census, at least 15 million U.S houses (out of a total 46 million) are dilapidated, located in slum areas, or lack inside plumbing. Some city-planning experts estimate that the U.S. must build from 2,000,000 to 2,400,000 new houses a year for the next 20 years v. 1,000,000 starts expected in 1954. Otherwise, there will be more slums in 1970 than there are today.

Now that the facts of the FHA scandals are being unraveled, it turns out that a handful of unethical promoters took advantage of the postwar housing shortage--and a loosely written law--to profiteer off FHA's loan programs. Since FHA would insure mortgages up to 90% of the estimated cost of building new apartments, some builders simply jacked up the estimates they took to the bank and came out with more mortgage money than they actually needed to build. They then pocketed the difference--sometimes millions--and paid off the banks from rents based on the excessive mortgages.

The home-repair loan racket was practiced by high-pressure salesmen who persuaded homeowners to take out FHA-insured loans for such "improvements" as dog kennels, swimming pools and barbecue pits. Often the salesman conned the homeowner into signing everything--including a certificate of completion. The salesman could then take the certificate to the local bank, pick up the construction money and skip to another town.

But measured against FHA's accomplishments, the damage has been slight. Most losses have been borne by deceived houseowners and apartment dwellers. Loopholes in the old housing laws need closing, to prevent more million-dollar rake-offs, for a prosperous housing industry has become as much a matter for public concern as a prosperous agriculture.

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