Veto of Bill Relating to Housing and Urban Renewal.
To the Senate of the United States:
I am returning herewith, without my approval, S. 57, "An Act to extend and amend laws relating to the provision and improvement of housing and the renewal of urban communities, and for other purposes."
For many months I have been looking forward to approving a sound and constructive housing bill. New homes are now being built at near record rates. I had hoped to receive from the Congress legislation that would further advance the cause of better housing for Americans within the limits of fiscal responsibility.
To my disappointment, the Congress has instead presented me with a bill so excessive in the spending it proposes, and so defective in other respects, that it would do far more damage than good.
First, the bill is extravagant and much of the spending it authorizes is unnecessary. Its spending authorizations total a minimum of billion--all of which would be available for commitment without further Congressional or Presidential action. The comparable budget recommendations of the Administration totaled $810 million.
Its authorizations of $900 million for urban renewal--telescoped into two years--are excessive.
Even though we have over 100,000 previously authorized public housing units as yet unbuilt, the bill would authorize 190,000 more.
A new program of direct Federal lending is authorized for housing for elderly persons when needs in this area can be adequately met by private funds invested under the protection of Federal insurance. The college housing loan program would be continued with increased authorizations at interest rates below the cost of money to the Treasury and a new program for college classrooms and related academic facilities at the same subsidy interest rates would be started. Although the amounts initially authorized for the latter program would be relatively small, the eventual demand for these loans would reach staggering proportions. To the extent that these and other programs merely displace private financing they lead to Federal spending that is entirely unnecessary.
Second, the bill is inflationary. The spending authorizations of S. 57, taken together with other seriously objectionable provisions would be inflationary and therefore an obstacle to constructive progress toward better housing for Americans. One of the most damaging effects of inflation is that it dries up the sources of long term credit. There is perhaps no industry in the nation more heavily dependent for its operations on long-term funds borrowed at reasonable rates of interest than the housing industry. We have made good progress in the light against inflation but we cannot win that fight if we add one spending program to another, without thought of how they are going to be paid for, and invite deficits in times of general prosperity. No one can gain from a fiscal policy of this inflationary type--least of all, the housing industry.
Third, the bill would tend to substitute Federal spending for private investment. Many provisions of the bill, instead of stimulating private investment, would drive private credit from areas where it is urgently needed.
The requirement that the Federal National Mortgage Association buy mortgages at par under its special assistance program, regardless of the price that these mortgages command in the open market, would have this effect.
So also would the provision of the bill limiting the fees that FNMA may charge when purchasing mortgages.
The provisions authorizing college housing and college classroom loans at subsidized interest rates, additional Federal purchases of cooperative housing mortgages and a new program of short-term loans by the Federal Government on the security of mortgages would similarly substitute public for private financing.
Fourth, the bill places needless limitations on the FHA program and contains provisions that would impair FHA's soundness. Instead of removing the wholly unnecessary limit on the amount of the mortgage insurance authority of the Federal Housing Administration, the bill would continue these important programs on an uncertain, hand-to-mouth basis.
Through lower down payments and longer maturities the bill would introduce underwriting provisions of questionable soundness into a number of FHA's loan insurance programs.
Fifth, the bill contains provisions which are discriminatory and unfair. The way the bill is written a few large cities, by making early application, could tie up all the funds available under the Urban Renewal Program. The Administration would be specifically prohibited from preventing this discrimination against our smaller cities which have not yet entered the program or which do not have large planning staffs.
Under present law cities can count streets and other local improvements, which they had already intended to construct, as a part of their share of the costs of an urban renewal project. S. 57 would extend these credits retroactively to include such improvements made by cities up to five years before commencement of the project. As it is, the local cash contribution has averaged only about 14 per cent of the cost of acquiring and preparing a project site for development. S. 57 would reduce such contributions even further.
In view of these defects, I have withheld my approval from this bill.
There remains, however, a need for the enactment in this session of the Congress of legislation, such as I recommended last January, which will carry forward our important housing programs on a sound basis:
1. The insurance authority of the Federal Housing Administration, which does not involve the lending of Federal funds and does not cost the taxpayer a cent, is nearly exhausted. Additional mortgage insurance authority should be granted by eliminating the ceiling on this authority.
2. The Federal Housing Administration program for insurance of property improvement loans, which expires September 30, 1959, should be extended at least through this fiscal year.
3. The Federal Housing Administration program for insurance of Capehart military housing loans expired on June 30, 1959, and should be extended for 1 year.
4. The Voluntary Home Mortgage Credit Program, which expires July 31, 1959, should also be continued.
5. Authorizations for urban renewal grants should be replenished, the local share of the costs should be increased, and the college housing program proposed in the Budget Message should be enacted.
6. The statutory interest rate ceilings governing mortgages insured under the Federal Housing Administration's regular rental housing and cooperative housing programs should be raised.
Legislation along these lines will help make private housing funds available for investment in housing and related construction, will promote the effective use of the resources and energies of State and local governments in housing and urban renewal activities, and will allow the Federal Government to play its part in a truly constructive and non-inflationary manner. This is the way to provide more and better housing for the American people.
DWIGHT D. EISENHOWER
Note: See also Item 208 and note.
Dwight D. Eisenhower, Veto of Bill Relating to Housing and Urban Renewal. Online by Gerhard Peters and John T. Woolley, The American Presidency Project https://www.presidency.ucsb.edu/node/235132