Mr. WOODRUM. The Army and Navy are also doing some housing of their own?

Mr. SNYDER. Yes, sir.

Mr. WOODRUM. They are doing the building for their own personnel? Mr. SNYDER. Yes, sir; to a certain extent. We also have done some for such personnel.

HOUSING ACCOMPLISHMENTS FROM FUNDS AUTHORIZED

Mr. KEYSERLING. Now, going on to the next point, let me just summarize in terms of simple alternatives what we have done. Let us go back a year ago today. A year ago today we had one of two alternatives. We had authority from Congress to build $800,000,000 worth of housing. A certain amount of that housing had not yet been started. We could do either one of two things; we could either continue that as part of the general slum-clearance program, or build defense houses. We concluded-not we alone, but in connection with the other people concerned who are responsible-we elected to devote that money to the construction of defense housing and some of those houses are now being occupied which indicates, I think, our foresight. That was a good thing.

Now, someone raised the question whether we were doing it under the same formula as our regular program. The answer is "No."

Insofar as defense housing requires less or no subsidy to reduce the rent, we are not applying such subsidies to defense housing as we are applying to the regular housing. Secondly, insofar as the circumstance permits, we are establisning the projects on vacant land so that they can be built quickly, and they are being redesigned to meet the defense situation.

This concludes my first point-that we are not doing work now that is not defense work, except the operation of opened projects and a small number of projects on which O. P. M. has granted priorities to avoid waste by permitting the completion of projects under

construction.

RELATIONSHIP OF WORK LOAD TO BUDGET ESTIMATES FOR ADMINISTRATION

My second point has to do with the relationship of the work load we are carrying to our budget. Some of the members of the committee may recall that I was here 2 years ago, and I said the U. S. H. A. was striving constantly, although the program had expanded, to see that the increase in administrative expenses was less than the workload increase. I can say now that we have done that.

Here is a very small chart [exhibiting]. This chart was made up of certain combined figures in determining the work load. In 1941, I said that, although the work load was increasing about 25 percent, our administrative budget, as shown by the Budget figure, was remaining fairly constant. Now if you will go over here to 1943, you will see that while the work load is increasing this year 10.5 percent above last year, our administrative budget, which we are placing this year at $4,568,430. Allowing for administrative ingrade promotions required by the Ramspeck Act, this is less than 3 percent over last year.

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Now, you do reach the point of diminishing returns in a thing of this kind. In other words, you cannot always decrease your budget proportionately by as much as you did in the year before. But if you will look back to 1939, you will see what U. S. H. A. has done. That was the first full year of our program. Here is our work load in that year; here is our administrative budget [indicating]. Here is the work load this year; here is our administrative budget [indicating]. Our administrative budget, over the 5-year period, has increased, roughly speaking, by about 10 percent, as near as we can figure. The work load has practically doubled. And I say now that, if we can continue to endure, we will come back next year with a constant showing in the same direction.

Mr. DIRKSEN. That would indicate four major constituents of the work load.

Mr. KEYSERLING. Yes.

Mr. DIRKSEN. What are they?

Mr. KEYSERLING. The four major constituents of our projects development appear under "Preparation for Loan Contract"; "land acquisition and preparation of plans," which is second; "construction" is third, and "tenant selection and general supervision and management" is fourth.

Mr. DIRKSEN. What is the pink section?

Mr. KEYSERLING. The pink section is supervision and review of management operation. In other words, prudent management.

I am going to refer in my testimony in a moment to the figures on that and show how it works out, but now all I want to say in summary is: First, that we are doing a defense housing job; second, our administrative budget shows a constant relative decrease to our work load. We are asking this year for 2.9 percent increase in our budget, after allowing $71,430 for in-grade promotions under the Ramspeck Act, as against 10.5 percent increase in the work load.

Mr. WIGGLESWORTH. What is that percentage; what is the 2.9 percent?

Mr. KEYSERLING. The 2.9 represents an increase of $127,000 over the $4,370,000 authorized for 1942. This gives a total of $4,497,000. This amount plus the $71,430 required for in-grade promotions makes the total requested $4,568,430.

Mr. WIGGLESWORTH. That percentage reflects your administrative expenditure?

Mr. KEYSERLING. This is all administrative expenditures.

Mr. WIGGLESWORTH. Is the 2.9 the total for the year, or the increase?

Mr. KEYSERLING. The 2.9 is the increase.

Mr. WIGGLESWORTH. What is the total?

Mr. KEYSERLING. The total we are asking for the fiscal year 1943 is $4,568,430.

Mr. WIGGLESWORTH. What percentage does that represent?

Mr. KEYSERLING. Of what?

Mr. WIGGLESWORTH. Of the work you do.

Mr. FITZPATRICK. Of the total amount of money spent on your projects and everything combined?

Mr. KEYSERLING. Projecting it over a 4- or 5-year period, I think our administrative expenses are running about 2 percent of our program operations, which is an unusually low average. I brought that up before the committee 2 years ago.

Mr. WIGGLESWORTH. The Public Works Administration has functioned better than that, have they not?

Mr. KEYSERLING. That may be. I do not know. I think it is difficult to compare different programs, because they have altogether different types of operations.

I want now to point out to the committee the main reasons why we have not done even better.

FACTORS CAUSING INABILITY TO REDUCE EXPENDITURES

There are certain factors which have reduced our possibilities of cutting expenditures, although we have cut them some. These are: First of all, as soon as we began operating on a basis of converting the 65,000 units to defense purposes, the speed factor entered and, because of that speed factor, we revised our program and put on extra pressure.

The simplest example I can think of is that if you drive an automobile, it costs you more per mile to go at 60 miles per hour than to go at 20 miles per hour. Likewise, in this program, as we have converted these units, we are aiming toward and have already achieved on some of the defense jobs over-all time schedules of something like 7 months, as contrasted with the original period of 20 months or more on the regular program.

REDESIGNING OF PROJECTS TO MEET DEFENSE CONDITIONS

This is one of the factors that has affected the work this year. The second one is redesigning the projects to meet defense conditions. That has taken two forms. In the first place, we had to redesign the projects to eliminate strategic materials.

In other words, even if we are building a project for defense workers and it is absolutely necessary, we have to eliminate materials that are needed for tanks and battleships, and we have had to do that all along the line. And having done the job on that, it is not only helpful to our technical staff, but also to the technical staffs of some of the other agencies and to the Coordinator's Office. In the second place, we have had to redesign projects because the materials cost has increased in the houses we are building. In relation to that, it is very interesting to note the drop in cost figures. They began to show some increase over the past 8 months, because of the general rise in prices, but we have cut that in the last 4 months and, during the last 4 months, due to redesigning the projects, they have been averaging lower cost than for the 4 months before that, although the price level generally is higher.

Mr. DIRKSEN. In the field of redesigning, have you gone into prefabrication?

Mr. KEYSERLING. We have done as much as we could. We have also gone into the demountable houses, which is another speed method, and, as a matter of fact, involves

Mr. HOUSTON. Have you operated on defense housing in States where they have not passed enabling legislation for the United States Housing Authority?

Mr. KEYSERLING. Not at all, because we operate through the local housing agencies which show special techniques, experience and skill, and we have made utilization of the local agencies wherever we can;

therefore, we have been most useful in those areas where you have those local housing agencies.

Mr. STARNES. Will you pursue further there this question of your effort to reduce the cost of the temporary housing program for defense purposes? I think that is highly important, and I was interested to hear you say you were dealing with the subject of prefabricated and demountable houses; then in connection with the fact that you do utilize the skill and experience of the local housing authority to enable us to build a cheaper type of shelter for our workers at huge plants that are being put up purely and simply to operate during the emergency to turn out materials for war only during the emergency. And I think the housing program should coordinate with the defense effort in that respect, because of the savings in money now and the savings of a lot of headaches afterward.

Mr. KEYSERLING. I think you are 100 percent right on that; I agree with that, and I intend to make a little more specific reference to this whole question of cost and savings, but I want to speak now on the general line.

Mr. STARNES. I want you to be sure to bring that out.
Mr. KEYSERLING. I am coming to that very specifically.

Mr. HENDRICKS. In regard to building, I do not suppose any of those agencies build where the area has been designated as a defense area, with priorities? Take, for instance, where there is a base of some sort, or a camp, they have to have houses and rooms for the laborers, and they designate it as a defense area for priority construction: I do not suppose any of those agencies build any of those units, but they are built by private capital?

Mr. KEYSERLING. I am not thoroughly familiar with that.

Mr. HOUSTON. They have the right to get money from the Government?

Mr. KEYSERLING. I am not thoroughly familiar with what the other agencies have done.

Mr. HENDRICKS. Sometimes I think the Navy Department does build those.

OTHER FACTORS ENTERING INTO WORK LOAD

Mr. KEYSERLING. Now, the final factor in our work load pressure is the fact that since we had certain technical skills and certain accumulated staffs, we have sought to service some of the other agencies on certain specific matters; for example, like tax exemption and utilities. We have made more than 400 agreements on utilities, and more than 200 tax-exemption agreements. And this has affected our work load, although the agency in charge of the Lanham Act has been very generous in assigning the charges for that work to themselves, because a lot of our key staff people have been involved in it without their compensation being charged against those other agencies.

Mr. SNYDER. May I say at this point that is the type of technique and skill I referred to in my statement that I want to be able to continue to use. It is there and there is no use of our losing it.

Mr. KEYSERLING. That has involved large savings to the Government.

So, in summary up to this point, we have increased the work load by 10.5 percent; we are asking a budget increase of 2.9 percent. d the work load increase of 10.5 percent does not take into account,

because it is almost immeasurable, some of the special technical service rendered to the other agencies which has resulted in savings.

ADMINISTRATIVE EXPENSES TO BE COVERED BY PROFIT ON LOAN TRANSACTIONS

Now I come to the point of where we make money. That is very important and interesting. We have tried all along not to ask for actual appropriations to meet administrative expenses; we have tried to meet them out of what we call "profit on loan transactions." In other words, we have been engaged in financing experiments and, out of the various methods of finance, to make as much money as we can on our loans. You can use that as a set-off against the subsidy, or you can use it to pay administrative expenses, or for anything else. It is there, and we have been using it to pay administrative expenses. Last year we paid our entire administrative budget out of profit on loan transactions.

In addition, we had $2,000,000 beyond that which we applied toward certain depletions of our capital assets that had been used in previous years to pay administrative expenses. In other words, before that, we had dipped into some of the proceeds of the sale of limited-dividend securities to pay administrative expenses. Last year, the profit on loan transactions covered the whole of our administrative expenses, and besides we used $2,000,000 excess toward the practical wiping out of the previous charges due to administrative expenses. We are not asking any funds to be appropriated this year at all for administrative expenses, since we shall cover the whole $4,568,000, or whatever amount Congress allows, out of profit on loan transactions. In addition, we expect to make an additional profit on loan transactions this year, insofar as we can estimate current money trends, of about $4,000,000.

Mr. FITZPATRICK. In other words, this money you are asking here is not going to come out of the Treasury of the United States; it is going to come out of your own funds?

Mr. KEYSERLING. It is going to come out of our loan profit.

I predict that we will be able to come back next year, having paid this coming year's expenses out of loan profits, with $4,000,000 in addition that we will be able to apply toward next year's administrative expenses, or toward next year's charges for subsidies on the regular program under discussion.

Mr. HOUSTON. If you keep this up, you can finance W. P. A.
Mr. KEYSERLING. We are doing the best we can.

Mr. HENDRICKS. Are these housing authorities liquidating those loans?

Mr. KEYSERLING. There is absolutely no default on loans.

Mr. HENDRICKS. Anywhere?

Mr. KEYSERLING. Anywhere.

Mr. HENDRICKS. You have none?

Mr. KEYSERLING. There are absolutely no defaults whatever. Of course the regular slum-clearance program does receive a subsidy to get it down to the very low income group but that is a separate charge.

Mr. WOODRUM. That is not in this?

Mr. KEYSERLING. That is not in this.