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This file contains material relating to Homeownership Subsidy Program, "235 Program", Foreclosures, Tandem Program.
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10/23/75 - Building Products Executives Conference
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10/23/75 - Building Products Executives Conference
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This file contains material relating to Homeownership Subsidy Program, "235 Program", Foreclosures, Tandem Program.
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Carla A. Hills Speeches
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1975
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1975
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The original documents are located in Box 1, folder "10/23/75 - Building Products
Executives Conference" of the Carla A. Hills Speeches at the Gerald R. Ford Presidential
Library.
Copyright Notice
The copyright law of the United States (Title 17, United States Code) governs the making of
photocopies or other reproductions of copyrighted material. Gerald Ford donated to the United
States of America his copyrights in all of his unpublished writings in National Archives collections.
Works prepared by U.S. Government employees as part of their official duties are in the public
domain. The copyrights to materials written by other individuals or organizations are presumed to
remain with them. If you think any of the information displayed in the PDF is subject to a valid
copyright claim, please contact the Gerald R. Ford Presidential Library.
Digitized from Box 1 of the Carla A. Hills Speeches at the Gerald R. Ford Presidential Library
FINAL
BUILDING PRODUCTS EXECUTIVES CONFERENCE
OCTOBER 23, 1975
THANK YOU FOR INVITING ME TO YOUR 36TH ANNUAL CONVENTION.
You HAVE A LONG DAY AHEAD.
So, I'LL KEEP MY REMARKS SHORT --- AND GIVE THE MAJOR
PORTION OF MY TIME OVER TO YOUR SPECIFIC QUESTIONS.
As YOU KNOW -- SINCE MY CRITICS KEPT LETTING THE BIG
SECRET OUT OF THE BAG DURING MY SENATE CONFIRMATION HEARINGS
-- I DIDN'T START OUT AT HUD AS A "HOUSING EXPERT".
THAT HAS ITS ADVANTAGES -- BECAUSE IT RELIEVES ME OF
THE NECESSITY OF BLINDLY FOLLOWING THE "EXPERTLY" ROUTED
COURSES THAT HELPED LEAD THE HOUSING INDUSTRY INTO ITS
PRESENT CONDITION.
TOGETHER, WE MIGHT NOT ALWAYS THINK THE SAME WAY --
BUT, LIKE THE REDS AND THE RED Sox, WE ARE BOTH THINKING
ABOUT THE SAME THING.
GERALD
A. FORD LIBHARTY
-2-
My ASSIGNED TOPIC IS "TODAY'S HOUSING NEEDS".
AND, I AM SURE WE ARE THINKING THE SAME THING ABOUT
THE GREATEST HOUSING "NEED" OF ALL,
AND THAT IS: UNLESS WE ALL PULL TOGETHER TO GET
AMERICA'S HOUSING INDUSTRY OUT OF THE SWAMP AND ONTO THE
HARD GROUND OF ENERGETIC PRODUCTION, THIS NATION WILL NOT
HAVE ENOUGH HOMES TO HOUSE AMERICA.
My JOB ENTAILS MANY THINGS -- MANY LAWS, MANY ISSUES
AND MANY PROBLEMS OF MANY INTEREST GROUPS.
BUT, THEY ALL BOIL DOWN TO MY ONE OVERRIDING CONCERN,
THERE ARE 16 MILLION AMERICANS LIVING IN SLUM CONDITIONS
-- AND IT'S MY JOB TO HELP THIS NATION PROVIDE THEM WITH
DECENT HOUSING IN.A SUITABLE LIVING CONDITION.
? F. FORD
-3-
IF YOU TOOK HUD's ENTIRE BUDGET FOR ANY GIVEN YEAR
AND SPREAD IT AROUND IN CASH GRANTS -- YOU MIGHT BE ABLE
TO GIVE A PITTANCE TO EVERYONE LIVING IN A SLUM -- AND
THAT WOULD SOLVE NOBODY'S HOUSING NEED.
IN TRUTH, HUD-SUBSIDIZED AND HUD-INSURED HOUSING
(INCLUDING MOBILE HOMES) ACCOUNT FOR FAR LESS THAN ONE-
QUARTER OF TOTAL BUILDING ACTIVITY IN ANY GIVEN YEAR.
BUT, IF HUD IS NEITHER THE WELL NOR THE PUMP OF THE
INDUSTRY, IT CAN BE -- AND SHOULD BE -- A PRUDENT PRIMER.
BACK IN FEBRUARY; I COMMITTED MYSELF -- BOTH TO
PRESIDENT FORD AND THE CONGRESS -- TO USE EVERY LAWFUL
MEANS NECESSARY TO HELP GET THE HOUSING INDUSTRY BACK
ON ITS FEET -- AS A LOGICAL PREREQUISITE TO THE
ACCOMPLISHMENT OF HUD's ULTIMATE MISSION OF HOUSING
OUR LOWER INCOME FAMILIES.
As YOU so WELL KNOW, WASHINGTON ABOUNDS WITH "EXPERTS"
WHO CAN TELL YOU AT A DROP OF A SYLLABLE, WHAT "SHOULD"
BE DONE,
-4-
My INTEREST HAS BEEN, AND IS -- IN WHAT "COULD AND
CAN" BE DONE.
LAST FRIDAY, IT WAS MY PLEASURE TO ANNOUNCE THE
REACTIVATION OF HUD's HOMEOWNERSHIP SUBSIDY PROGRAM --
IN SUBSTANTIALLY REVISED FORM, TO SPUR NEW CONSTRUCTION
AND SUBSTANTIAL REHABILITATION OF SINGLE-FAMILY HOMES
FOR LOW AND MODERATE INCOME FAMILIES AND TO EXPAND
OWNERSHIP OPPORTUNITY FOR THOSE INCOME GROUPS.
Now, I'M PREPARED TO FACE THE FACT THAT THE "235
PROGRAM" -- AS IT'S CALLED -- ISN'T GOING TO BE LOVED
BY EVERYBODY. BUT, WHATEVER ITS CRITICS MIGHT SAY --
THE NEW PROGRAM WILL HELP GET THE HOUSING MACHINE MOVING
AGAIN.
IT MIGHT OCCUR TO YOU TO ASK: "IF 235 IS ALL THAT
GREAT, WHY DID IT GET SHUT OFF IN THE FIRST PLACE?"
AND THE ANSWER TO THAT IS: UNDER THE OLD PROVISIONS,
IT WASN'T VERY GREAT AT ALL, THE PARTS OF THE PROGRAM
THAT DID WORK, WERE MORE THAN CANCELLED OUT BY ALL THE
PARTS THAT DIDN'T WORK,
-5-
BECAUSE OUR "235 PUMP-PRIMER" WILL BE OF PRIME
IMPORTANCE TO THIS AUDIENCE -- LET ME TAKE A FEW
MINUTES TO CONSIDER ITS BASIC DESIGN,
PRESIDENT FORD HAS AUTHORIZED ME TO RELEASE
PREVIOUSLY IMPOUNDED FUNDS -- INVOLVING $264.1 MILLION
IN NEW CONTRACT AUTHORITY.
THE PROGRAM WILL FOCUS ON NEW AND SUBSTANTIAL
REHABILITATION. IT IS INTENDED TO MOVE "MAJOR SUPPLIES"
-- NOT "COSMETIC KITS" -- TO BUILDING SITES.
BY TOTAL INDUSTRY YARDSTICK, $264.1 MILLION MIGHT
SEEM LIKE A SMALL PATCH ON THE ROOF, BUT, IT'S ENOUGH
TO SUBSIDIZE MORE THAN 250,000 NEW UNITS OF HOUSING,
AND, 250,000 UNITS TRANSLATES INTO ABOUT SIX-AND-
ONE-HALF BILLION DOLLARS IN NEW CONSTRUCTION ACTIVITY
AND THE CREATION OF MORE THAN 500,000 NEW CONSTRUCTION
JOBS.
-6-
ONE IMPORTANT KEY TO THE REVISED HOMEOWNERSHIP SUBSIDY
PROGRAM IS THAT IT IS TARGETED TO THAT RANGE OF LOWER INCOME
FAMILIES WHO HAVE BEEN AMERICA'S TRADITIONAL BUYERS OF NEW
HOMES -- BUT WHO HAVE BEEN PRICED OUT OF THE MARKET BY THE
INFLATIONARY SPIRAL,
THE PROGRAM WILL COVER THE FULL RANGE OF HOUSING
STRUCTURES -- SINGLE-FAMILY DETACHED, TOWN HOUSES,
CONDOMINIUMS AND COOPERATIVES -- so THAT IT WILL HAVE APPLICATION
TO OUR CITIES AS WELL AS OUR LESS DENSELY POPULATED AREAS,
RIGHT NOW, THERE ARE ONLY 60,000 NEW SINGLE-FAMILY
HOMES ON THE MARKET, NATIONALLY, THAT SELL FOR LESS THAN
$30,000, AND, LAST YEAR, THE INDUSTRY ONLY SOLD ABOUT
100,000 HOMES IN THAT PRICE RANGE. IT IS HERE THAT THE
INDUSTRY AND HUD CAN FIND MUCH COMMON GROUND.
UNDER THE NEW PROGRAM THE GOVERNMENT CAN SUBSIDIZE
DOWN TO 5 PERCENT THE INTEREST ON A MORTGAGE IN THE RANGE
OF $20,000 TO $25,000 HELD BY A PARTICIPATING LOW INCOME
FAMILY.
-7-
THE BENEFITED FAMILY MUST CONTRIBUTE AT LEAST 20
PERCENT OF ITS ADJUSTED GROSS INCOME TOWARDS THE MONTHLY
MORTGAGE PAYMENTS, INSURANCE AND PROPERTY TAX. As THE
FAMILY INCOME GROWS THE 20 PERCENT CONTRIBUTION REDUCES
THE AMOUNT OF THE NEEDED SUBSIDY.
SUBSIDY PAYMENTS CAN CONTINUE (1) THROUGHOUT THE
TERM OF THE MORTGAGE; (2) UNTIL THE PROPERTY IS SOLD; OR
(3) UNTIL THE FAMILY'S FINANCES REACH THE POINT WHERE
20 PERCENT OF ADJUSTED GROSS INCOME ALLOWS IT TO COVER
THE MONTHLY MORTGAGE, INSURANCE AND TAXES.
WE ARE IN THE PROCESS OF DRAFTING THE NECESSARY
REGULATIONS. WE HOPE TO HAVE THEM OUT FOR COMMENT IN
EARLY NOVEMBER, AND TO HAVE THIS NEW PROGRAM READY FOR
IMPLEMENTATION BY THE FIRST OF THE YEAR,
THERE ARE SIGNIFICANT CHANGES IN OUR REINCARNATED
PROGRAM WHICH WILL SAFEGUARD AGAINST THE BAD RISK FEATURES
OF THE PAST, AND, AT THE SAME TIME, TO GIVE LASTING
VITALITY TO THE NEW HOUSING MARKET IT CREATES.
-8-
FIRST, WE WILL ENSURE THAT THE UNITS ARE DISTRIBUTED
ON A GEOGRAPHICALLY FAIR BASIS, WHICH WILL COUNTER THE
COMPLAINT THAT THE OLD PROGRAM WAS CONCENTRATED IN ONLY A
FEW STATES.
SECOND, WE WILL RESTRICT THE UNITS IN SUBDIVISIONS
TO 30 PERCENT so AS TO PREVENT THE CONCENTRATION OF
SUBSIDIZED FAMILIES IN A HORIZONTAL GHETTO.
THIRD, BY SUBSIDIZING THE INTEREST RATE DOWN TO 5
PERCENT --- NOT 1 PERCENT AS UNDER THE OLD PROGRAM, WE WILL
DECREASE THE DIFFERENTIAL BETWEEN AVAILABLE INTEREST RATES
AND HENCE DECREASE THE CHARGES OF INEQUITY THAT PLAGUED
THE OLD PROGRAM. IT WILL ALSO SPREAD THE SUBSIDY ASSISTANCE
TO MORE FAMILIES THAN IN THE PAST,
FINALLY, AND MOST IMPORTANTLY, WE WILL REQUIRE A 3
PERCENT DOWN PAYMENT SO THAT WITH TRANSFER COSTS, THE
HOMEBUYER WILL HAVE AN INVESTMENT IN THE HOME OF $1500 TO
$2000, NOT $200 AS UNDER THE OLD PROGRAM,
-9-
THESE REQUIREMENTS WILL FOCUS THE PROGRAM ON FAMILIES
IN THE $9,000 TO $11,000 INCOME BRACKET -- THE UPWARDLY
MOBILE FAMILIES ON THE LOWER END OF THE NATION'S INCOME
CURVE -- WHO HAD THE GREATEST RECORD OF SUCCESS UNDER THE
OLD 235 PROGRAM.
THAT CERTAINLY DOES NOT MEAN THAT HUD IS TURNING ITS
BACK ON OUR LOWEST INCOME FAMILIES.
IT MERELY REFLECTS THE HARD EXPERIENCE OF HUD AND
THE INDUSTRY WITH THE HOMEOWNERSHIP SUBSIDY PROGRAM. WE
LEARNED THAT IT IS SIMPLY NOT REALISTIC TO EXPECT THE
VERY POOR WHO CANNOT AFFORD THE MORTGAGE PAYMENTS, LET
ALONE THE INEXORABLE COSTS OF UPKEEP, UTILITIES AND TAXES
TO MAKE A SUCCESS OF HOMEOWNERSHIP. WE PAID DEARLY FOR
THAT LESSON, HUD NOW HOLDS TITLE TO OVER 20,000 ABANDONED
235 HOMES.
-10-
WE NOW KNOW THAT WE CAN BETTER HELP OUR VERY POOR
WITH OUR -- SECTION 8 -- RENTAL SUBSIDY PROGRAM, UNDER
THAT PROGRAM THE GOVERNMENT PAYS THE DIFFERENCE BETWEEN
15 OR 25 PERCENT OF THE FAMILY'S INCOME AND THE FAIR
RENTAL COST FOR DECENT HOUSING. THE LANDLORD PAYS THE
COST OF UPKEEP, UTILITIES AND TAXES AND REFLECTS THOSE
COSTS IN THE RENT, BUT AS THE RENT INCREASES, so DOES THE
SUBSIDY.
THE NEW "235" HOMEOWNERSHIP PROGRAM DOVETAILS WITH
OUR RENTAL SUBSIDY PROGRAM TO ATTACK A LONG-STANDING NEED
OF OUR HOUSING POOR.
AND, THAT IS THE NEED TO BREAK UP THE SELF-DEFEATING
-- CONCENTRATION OF LOWEST INCOME FAMILIES IN ONE NEIGHBORHOOD.
IT IS THAT FACTOR -- NOT THE AGE OF A BUILDING OR A
NEIGHBORHOOD -- THAT HAS BEEN THE HISTORIC BREEDER-REACTOR
OF THE NATION'S GHETTOS, AND EVENTUALLY SUCCEEDS IN DESPOILING
AN EVER WIDENING RING OF VALUABLE REAL ESTATE.
-11-
WE HAVE COME TO THE REALIZATION IN THE LAST HALF
DECADE THAT AMERICA'S RESOURCES ARE PRECIOUSLY FINITE.
WE CANNOT LONG SURVIVE THE GAME OF HOUSING CHECKERS THAT
MAKES TODAY'S DEVELOPMENT TOMORROW'S SLUM.
No CITY AND NO TOWN CAN LONG ENDURE IF ITS TAXPAYING
CITIZENS MERELY PACK UP AND MOVE OUT -- AS THE ONLY ANSWER
TO PROBLEMS OF ECONOMIC INTEGRATION.
THE "IDEA" OF PROVIDING A HEALTHY MIX OF INCOME
FAMILIES IN DEVELOPMENT PLANNING FOR THE FUTURE ISN'T JUST
A MATTER OF COMPASSION -- IT'S A MATTER OF COMMON SENSE.
AND, IN BOTH OUR HOMEOWNERSHIP AND RENTAL SUBSIDY
PROGRAMS, WE HAVE WRITTEN A SAFEGUARD -- DESIGNED TO BREAK
UP THE SELF-DEFEATING -- CONCENTRATION OF LOW INCOME
FAMILIES IN ONE NEIGHBORHOOD.
HUD's RENTAL SUBSIDY FORMULA FOR NEW AND SUBSTANTIALLY
REHABILITATED MULTI-FAMILY UNITS REQUIRES A RANGE OF TENANT
INCOMES TO ASSURE AGAINST HOUSING ONLY THE POOREST FAMILIES
WITH THE POOREST FAMILIES. THE SUBSIDY IS OPEN-ENDED TO
COVER FLUCTUATING COSTS -- AND TO ASSURE THE OWNER OF
A
CONTINUED REASONABLE RETURN ON HIS INVESTMENT.
GERALD
-12-
THE SAME STRATEGY APPLIES TO THE NEW 235 HOMEOWNERSHIP
SUBSIDY. THE RULE THAT NOT MORE THAN 30 PERCENT OF HOMES
IN ANY DEVELOPMENT WILL BE SUBSIDIZED SEEKS TO ENSURE THE
FUTURE VIABILITY OF THE UNITS THAT WE WILL BUILD TODAY,
BUT, WE WON'T ACHIEVE A HEALTHY HOUSING INDUSTRY
WITHOUT A STEADY SUPPLY OF REASONABLY PRICED MORTGAGE FUNDS.
So, IN ADDITION TO ASSISTING OUR VERY POOR WITH A
RENTAL SUBSIDY AND FAMILIES OF MODEST MEANS THROUGH THE
HOMEOWNERSHIP SUBSIDY, THIS ADMINISTRATION HAS MOVED
DECISIVELY TO ENSURE GREATER AVAILABILITY OF MORTGAGE
CREDIT FOR FAMILIES OF MODERATE MEANS,
OVER THE PAST YEAR AND A HALF HUD, THROUGH OUR so-
CALLED TANDEM PROGRAM, HAS OFFERED TO PURCHASE $15.5 BILLION
WORTH OF MORTGAGES THAT BEAR INTEREST BELOW THE MARKET RATE.
TODAY, THE TANDEM INTEREST RATE IS 7-1/2 PERCENT WHEREAS
THE MARKET INTEREST RATE FOR A SINGLE-FAMILY MORTGAGE IS
ABOUT 9 PERCENT.
(
-13-
FOR THE FAMILY NEEDING A $35,000 MORTGAGE, A 7-1/2
PERCENT TANDEM MORTGAGE INSTEAD OF A 9 PERCENT MARKET
MORTGAGE, SAVES IT $9,500 OVER THE LIFE OF THE MORTGAGE
OF ABOUT $20 A MONTH, CLEARLY, ITS HOMEOWNERSHIP OPPORTUNITIES
ARE EXPANDED.
THE TANDEM PROGRAM HAS COMPENSATED TO A SIGNIFICANT
DEGREE FOR THE RAPIDLY RISING COSTS OF HOME FINANCING AND
HAS THUS SERVED TO CUSHION THE SEVERITY OF THE DEPRESSION
IN HOUSING,
THE $15.5 BILLION IS SUFFICIENT TO ASSIST MORE THAN
500,000 HOMEOWNERS.
CERTAINLY I AM NOT STANDING HERE TELLING YOU THAT
THESE PROGRAMS ALONE WILL MAKE EVERYTHING COME UP ROSES
THE DAY AFTER TOMORROW.
WE BOTH KNOW THAT HOUSING STARTS FOR THE FIRST THREE
QUARTERS OF THIS YEAR, ALTHOUGH DEFINITELY IMPROVED AND
IMPROVING, ARE 23 PERCENT BELOW THOSE FOR THE SAME PERIOD
LAST YEAR.
-14-
AND, WE BOTH KNOW THAT NO SINGLE TOOL CAN ADEQUATELY
CORRECT EVERY INDUSTRY PROBLEM.
BUT, THE NEW 235 PROGRAM WITH OUR RENTAL SUBSIDY PROGRAM
AND OUR TANDEM PROGRAM BLEND TO MAXIMIZE HOUSING OPPORTUNITIES
IN A VARIETY OF CIRCUMSTANCES.
WE MUST CONTINUE TO USE THESE TOOLS -- WITH CAUTION --
WITH AN EYE ON THE TOTAL ECONOMY.
WE KNOW THAT IF WE MAKE EXCESSIVE USE OF THESE STIMULANTS,
WE WILL INJURE THE HOUSING INDUSTRY JUST AS IT IS REGAINING
ITS HEALTH.
WE ALL KNOW THAT BY REQUIRING MUCH GREATER TREASURY
BORROWING WE WILL DRIVE UP THE COST OF MORTGAGE MONEY
GENERALLY AND DRIVE AWAY THOSE HOMEBUYERS WHO WOULD OTHERWISE
HAVE ENTERED THE MARKET.
THE INDUSTRY IS FORGING AHEAD -- SLOWLY, BUT STILL
SURELY. THE UPWARD CURVE IS SAW-TOOTHED, BUT IT IS SAW-
TOOTHING ITS WAY IN THE RIGHT DIRECTION.
-15-
SINCE DECEMBER, THE LOW POINT OF THE DEPRESSION, STARTS
HAVE CLIMBED MORE THAN 40 PERCENT.
By NATURE, I'M PRETTY CAUTIOUS ABOUT MAKING PREDICTIONS
ON ANYTHING so CHANCEY AS THE PROBABLE RECOVERY RATE OF ANY
INDUSTRY IN TODAY'S ECONOMY.
BUT, I HONESTLY BELIEVE THE HOUSING INDUSTRY HAS FULLY
TURNED THE CORNER, IT'S UP TO BOTH OF US TO NURTURE IT TO
ROBUST HEALTH.
IN THE LONG RUN, THE MOST IMPORTANT NEED TO ANY INDUSTRY
IS THE NEED FOR INDUSTRY CONFIDENCE.
I THINK YOU HAVE ENOUGH EVIDENCE ON THE BOOKS TODAY
TO JUSTIFY IT.
THANK YOU VERY MUCH,