Mr. DOWNER. I read a story in the paper; yes, sir, to that effect. Mr. RAINS. I am one of those who agrees with you. I think the time has come for the removal of that regulation X because I can't see-and I am speaking only for myself-any good purpose which it now serves. You say that the people who are precluded, under that regulation, are mostly veterans; is that right?

Mr. DOWNER. Well, sir, the law as it now exists, sets the downpayment limits, as I mentioned in the statement, of 4, 6, and 8 percent for housing financed under the Servicemen's Readjustment Act.

The bill before this committee, as written, would remove that restriction, and place the veterans' home-loan program in the same. category and place it all under regulation X.

Mr. RAINS. Of course, one of the reasons for the regulation is not only to curb inflationary tendencies, but also because of the extreme shortage of building materials which now we are told have eased up considerably and are in much better shape than a year ago.

Mr. DOWNER. Yes, sir; I think that is correct.

Mr. RAINS. That is all.

The CHAIRMAN. You are interested entirely in the regulations on veterans' homes?

Mr. DOWNER. Yes, sir.

Mr. COLE. Mr. Downer, is the National Headquarters here receiving a lot of letters or complaints from its local posts about the housing situation?

Mr. DOWNER. Do you mean in regard to the scarcity of financing? Mr. COLE. Yes.

Mr. DOWNER. Yes, Mr. Cole, we receive some such complaints. Mr. COLE. On the basis of those complaints, is the attitude of your organization that something must be done to assist the veteran in his desire to purchase a home?

Mr. DOWNER. Yes, sir.

Mr. RAINS. I would like to ask one other question, if I might. It has nothing to do with this particular bill, but since you are here and representing the Veterans of Foreign Wars and in view of the question which Mr. Cole asked you, and since we are both of us on a subcommittee looking into shoddy and defective housing, let me ask if you are getting many complaints at the national office, from veterans who have bought houses, financed under the VA program, in which they complain of shoddy and defective construction?

Mr. DOWNER. We have had hundreds of such complaints in the past. I don't recall that we have had very many recently. But over the past year or two we have had hundreds of such complaints from all parts of the country.

Mr. RAINS. What did you do with them? Refer them to the Veterans' Administration?

Mr. DOWNER. Well, actually, in most instances there would be nothing we could do, except advise the veteran to consult a local lawyer to determine whether or not he had any right of action.

The CHAIRMAN. I think we will agree that it is not only essential that the veterans be able to secure homes, but that when they get homes they should be the type of homes they expected to get under the specifications. I think we should do everything we can to assist them on that score.

Mr. DOWNER. Thank you, sir.

The CHAIRMAN. Are there any further questions? If there are no further questions, you may stand aside.

Call the next witness, Mr. Clerk.

The CLERK. The next witness is Mr. Allan E. Brockbank, president of the National Association of Home Builders.

STATEMENT OF ALLAN E. BROCKBANK, PRESIDENT,

NATIONAL ASSOCIATION OF HOME BUILDERS

Mr. BROCKBANK. My name is Allan E. Brockbank. I am home builder active in Salt Lake City, Utah, and appear before you today in my capacity as elected president, for the current year, of the National Association of Home Builders.

Our association has grown in the last few years to where at this time it has approximately 25,000 members in nearly 200 cities. We feel that our membership builds from 75 to 80 percent of the houses in this country. Like the former witness, we feel that our chief interest in the Defense Production Act concerns the regulation of housing credit. We are very much concerned about the fact that this bill not only extends the authority for the housing regulations, but it goes back to the old program which was in effect before the Congress, in our opinion very wisely, changed it last September. This bill does away with all the authority or changes that were made by Congress, and reinstates the old program, which we considered to be very discriminatory.

Now, if you will remember, last September the changes were made principally as to the houses selling for less than $12,000, and more particularly, as the former witness stated, with respect to the veterans housing program. We feel that there is no reason whatsoever that we know of why real estate credit controls should be carried on any further at this time.

As you remember very well, there were two reasons given for the establishment of credit controls. One of them was the need to conserve critical materials. The other one was to curtail the excessive flow of credit in the mortgage financing field, because it was felt that if that was not done it would add to the inflationary tendencies in the country, and that would seriously jeopardize our economy.

With respect to materials, I need only say to you that last Thursday the controls on materials were greatly relaxed even to the extent that we could, beginning on the first day of July, build recreation centers and buildings which have been stopped for a long while. In fact, it was the first building that was stopped, and that is to be relaxed again on the first day of July so that we can go ahead with even that kind of construction.

I think this is indication enough that there is no need for further control of materials. In fact, so far as your program is concerned, with the possible exception of copper, we have had no trouble whatsoever obtaining materials all the way through the program since the Korean incident started. And we are told, by people who are in our business, so far as suppliers are concerned, that there is an ample supply-in fact, there may be even a larger inventory than normal in this country, in building materials.

So, of course, that is an indication that we no longer need the controls for that reason.

Now with respect to the matter of credit, as you have just heard and as I am sure you very well know, within the last 2 or 3 weeks the Federal Reserve Board has released the voluntary restraint program, which restricted bank credit on a voluntary basis. Then, later, the Board relaxed and entirely suspended regulation W. In so doing we feel that there is a definite indication on their part that they feel that credit controls are no longer needed, particularly in those fields.

Now with respect to regulation X, and its accompanying regulations and I would like to point out to you that regulation X itself regulates the credit on conventional loans, whereas the FHA has a program which goes along with it, as well as the Veterans' Administration, so we call it regulation X and its accompanying controlsit has come to the point where in our opinion they are no longer needed.

We cannot see the difference, frankly. Why should housing, so necessary to the people of this country, be further controlled when other segments of our economy are being decontrolled?

We would like to point out to you, in addition, that a large percentage of the housing of this country would be built under FHA and VA controls in any event-that is, they have a means of regulating what the builder sells the house for, if it is a sale to the veteran, or the amount of the loan, if it is a loan which FHA insures.

They would continue their control on our economy, which was wisely given to them, years ago, by the Congress. So, with them to a large extent doing a major part of the financing of housing in this country, we see no reason why any further controls are necessary at this time.

I would like to point out to you, at this time, that we were not opposed to the controls becoming effective when they were originally placed on our industry. We felt that, in the wisdom of the Congress and of those who were trying to make the defense effort work, we could not continue to do everything that we had done in an economy where we did not have a defense effort. But now we feel that that has passed, that time is gone, and it is time now that we talk about this thing on a basis in which the economy is free, and the forces of our economy that are normally at work are allowed to function.

I would like to point out that those forces are rather large in their scope. In the first place, the amount of money that is available at this time for mortgage credit is not as large as it has been in the pastat least at the going rates. As you possibly very well know, the Senate Banking and Currency Committee held a round table discussion on mortgage financing earlier this year, and as I recall it, some of the leaders in the financial field of this country were present at that conference. The discussion largerly centered around the fact that there was not the yield available from mortgage credit that there had been in the past, particularly for defense and military housing and for veterans' housing. Since that time a very great effort has been made to try to make money available for mortgages on defense and military housing. We have worked very diligently with the mortgage banking fraternity of this Nation in an attempt to bring that about through a private enterprise program. There is a bill now on the Senate side of the Congress for the purpose of making credit available for defense. and military housing, which at this time is beginning to lag a little bit because of the lack of funds.

Now I point that out to you to show that the real lifeblood of the home-building industry is the credit end of it. If there is no money available, then the housing will not be built.

I also want to point out to you that in the recent months, the real control that is beginning to take place on our industry, as it has in many other industries, is this: The public of this country has begun to lose entirely its zest for purchasing anything for the sake of purchasing. It looks with a very critical eye on everything it buys, and insists on getting its money's worth.

They, after all, are the real controllers of our economy. They, with the banking group-and if I may say so, the builders themselves, who are looking not only at the market but at their product and the credit end of their program-are watching the economy carefully. Builders are starting houses only when they feel that there is a full and com'plete market for them.

I would like to point one thing out to you: There are people who say, “Well, you built 1,090,000 houses last year. Do you not think that you possibly could build that many this year?"

And I would say, yes, we possibly could. But I also want to point out to you that, for example, the automobile industry is an industry in which only three manufacturers make somewhere between 80 and 90 percent of the automobiles. They can change the flow of their product very readily. Our product is one that is made by at least 25,000 builders, the membership of our association, who build approximately 75 to 80 percent of the houses. And those houses are not built like automobiles. It takes months of planning before a subdivision is ready. Then when the subdivision is ready, it takes months of work with credit institutions, with the FHA, and the VA, and others, to get the plans in shape before the houses are started. Then a project takes from 3 to 9 months or a year before it is built. It is not a program where you can turn it on or turn it off readily.

But as I have gone over this Nation and talked with our builders, all over the country, I am finding them very cautious about their program. It may be true that they are building houses, right now, on a basis that looks like we may produce a million houses this year, but at the same time they are keeping themselves in a position where they can readily slow their program down if it appears that the economy is not ready for their product.

And as I say, while it may appear to some that it is not slowed down fast enough, it really is slowed down on the basis of the months of time that it takes to start our products going on a high-production basis.

I would now like to point out something else to you, with respect to the experience I have had recently, in going out and talking with our builders over this country. They say and I can assure you that it is true from my own experience in meeting the public-that the public is deeply interested in their product, and I will say this conscientiouslyin the low-priced bracket and for veterans, that is particularly true. And yet, when you get down to the actual operation of making the sale, the people are saying, from one end of this country to the other, especially in the low-income brackets, "We do not have the money to pay down."

I would like to say to you that I have been stumping this country trying to get our builders interested in taking care of the people in

the low-income groups and the veterans, and particularly people in minority groups, and they are of the opinion that this is the time when those people ought to be given an opportunity to buy a house with a low down payment. I seriously would like to call your attention to the fact that people in the low-income groups are the kind of people that might be easily affected by a movement toward some kind of "ism" other than Americanism. They are the people that need housing on a low down payment and low monthly payment basis now. I hope that you clearly understand that importance and that you will help us in getting this done. And when we say that, we mean that regulation X is seriously affecting us.

We have heard some statements to the effect that if the controls were kept on, that the credit could be forced into the defense and military housing program. Our experience in the round table discussion that I have already referred to gave us a very clear impression that that would not be effective; that the real effective thing, mortgage money, is at this time trying to compete with money for the financing of defense plants, of inventories, of municipal bonds, of lots of things. That is the real competition for the money, and it will not go into defense or military housing or anywhere else unless the situation is attractive.

And yet, the need at this time is not only for the defense and military housing, but also for the veterans housing. There are veterans in this country who have not been supplied with a house yet by any means, and they need some effective help at this time. We are sure that even if credit controls were kept on for the purpose of channeling the money into defense purposes, it would not go through without the help of the FNMA program, or a change in interest rates. And we feel that the change in interest rates is something that will not occur this year.

We would like further to say to you that we have an interest in another part of this act, and that part is with respect to the wage stabilization program. We have been quite seriously affected by the wage stabilization part of this act, because, for the construction industry, an organization has been set up called the Construction Industry Stabilization Commission.

This has jurisdiction over wage stabilization for construction, including heavy construction and residential construction. Now this Commission recently issued an order making it possible for anybody in the construction industry to raise wages by 15 cents an hour, and fringe benefits by 7%1⁄2 cents an hour.

Well, that might have been a reasonable thing to have done in a community that was being hard pressed for an increase in wages. But to do it on a national basis made that whole program a target, rather than simply making it possible for it to occur. All over the country we have had a very strong urge for wages to be pushed up to the limits. In fact, in the city of Detroit, at this time, and I think all over southern Michigan, there is a strike on, asking for the entire amount that was made available through the Construction Industry Stabilization Commission, even though I am informed, from talking to our builders in that area, that there are many people in the construction industry who are out of work—which seems a rather strange thing to have occur at this time.

We feel that this is adding to inflation, rather than stabilizing the industry, and we feel very strongly that the relations between the