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My name is Jean Halloran.

I am Research Director of INFORM

and the editor of INFORM's three-volume study of the retail land

sales and subdivision industry entitled PROMISED LANDS. With me is

Leslie Allan, primary author of PROMISED LANDS.

By way of background, I would just like to say that INFORM

is a nonprofit public-interest research organization that studies

the impact of business on society. We have a permanent full-time

staff of 20 and a subscriber list of over 100 major corporations,

institutions and government agencies. Our organization has been

studying the practices and regulation of the land sales industry for

five years.

Our primary finding has been that the land sales and subdivision

industry is rife with consumer abuse;

that it is riddled with problems

of consumer deception and fraud. Our conclusion was that a new

regulatory approach is sorely needed.

For this reason, we feel

Congressman Minish's effort to reform the Interstate Land Sales Full

Disclosure Act is a vital step forward, a step which could save

ordinary people millions of dollars. For the same reason, we are

extremely dismayed to see Senator Nelson's bill, which would exempt

vast numbers of developers from what little regulation now exists,

progressing through the legislative process.

We understand and in

deed support the goal of reducing the regulatory burden on small

legitimate businessmen and freeing federal regulators for more impor

tant tasks. But

the broadly worded Nelson provisions go far beyond

this goal. The past history of this industry docs not justify such

loosely drawn exemptions, nor does it justify the hasty consideration

given the Nelson amendments by the Senate Banking Committee prior to substituting them for the Administration proposals in the Housing and Community Development Act of 1978.

I would like, if I may, to tell you some of what we found in our research, and then discuss specifically how this relates to the various legislative proposals on land sales you have before you today.

The impact of the land sales industry is enormous, but no one

seems to know exactly how enormous. Existing fragments of descriptive data only suggest the broad features of land sales activities.

The land sales industry is generally defined as consisting of

companies engaged in selling lots in subdivisions.

The companies

range from mom-and-pop affairs to multi-million-dollar corporations

traded on the stock exchange. The lots range from 1/8 acre "townhouse"

lots to 40 or 50 "ranchettes;" and the subdivisions from 5-lot develop

ments to 200,000 lot "planned new communities." Since 1969, companies

selling lots of less than 5 acres

in size

in subdivisions of over

50 lots in size must file with the Federal Office of Interstate Land

Sales Registration. Alan Kappeler, of OILSR, estimated in June of '76

that approximately 6200 individual subdivision projects are registered with his agency.

The President's Council on Environmental Quality has found that most developments registered with TUD arc relatively

large, averaging about 1,000 acres, and that most of the lots marketed

are relatively small, about a quarter-acre to one acre.

Another analysis of OILSR's filings indicates that there are

subdivisions registered in all states except North Dakota and Rhode Island, and that the most subdivision activity is concentrated in six

states: Florida, New Mexico, Arizona, California, Colorado, and Texas.

llowever, OILSR's filings may be very incomplete. For example, it had

315 projects registered for Colorado, while the Colorado Real Estate

Commission had 1,000 projects registered. Similarly, OILSR shows half

a million acres subdivided in California, while California's Department

licus of Real Estate Shos 2-1/2 million acres subdivided. Frankly, we have

been unable to come up with an adequate explanation for this discrepancy:

whether it reflects the existence of many federally unregistered

subdivisions or whether it reflects simply poor or inadequate record

keeping.

9

Considering both state and federal information, one industry expert estimates that the total standing stock of lots subdivided in this

country covers 35 to 40 million acres of land.

This amounts to 62,000

square miles, which is about 2 percent of the continental United States.

Assuming three residents per subdivision lot, this land could accomodate

45 to 60 million people.

That is more than the populations of Los Angeles,

San Francisco, Chicago, Detroit, Boston, New York, Philadelphia, and

Washington, and the entire State of New Jersey, combined.

These figures on the scope of the industry are sometimes challenged

on the grounds that land sales are declining, and the problems are now moot. The recession of the mid 1970's did cause a precipitous slide in industry

volume. However, a survey conducted by the American Land Development

Association indicates that sales are on the upswing. The industry seems

to be riding on the shirt-tails of the current real estate boom.

Of 163

companies surveyed, 78% had better sales in 1976 than 1975, and most

were planning new projects.

Most observers agree that since 1969 OILSR and the FTC have had a

chilling effect on some of the most flagrant abuses conducted by the

very largest companies. Yet OILSR continues to receive about 3000 consumer complaints a year, as it has for each of the past six years. The land sales industry has historically gone through boom-and-bust cycles and will undoubtedly continue to do so, particularly if it remains relatively free from substantive government regulation.

INFORM has studied in detail a sample of companies and sites

mass mort et portion of which represents the various aspects of theq industry in the states with the most widespread land sales activity. They are old and new, large and small, and in varied terrains. They are marketed by the

largest companies, who should be the most responsible.

Our primary finding was that the industry is in radical need of reforn. Problems begin with the representations made in advertising,

which is generally the purchaser's first contact with the subdivision

project. As an example, promotional materials for Colorado City, a

Great Western United project, promised "plenty of water," and promi nently featured a photograph of a lushly flowing Greenhorn Creek; yet, the subdivision has the legal rights to only enough water for, at best, a tenth of its projected population.

Similarly, Palm Coast, ITT's huge, 100,000-acre project in northeast Floraida, was promoted as "not an ordinary development." Full

puge ads stated, "Only the intense resources of a giant organization like ITT could build a community of this scope." Yet, at Palm Coast, development is being financed not by the multibillion dollar ITT Corporation, but by a subdivision subsidiary so small that its assets are not listed separately in ITT's annual report. The water supply for

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