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apartment are: Washington, $65 (the local office is so convinced that the area is overbuilt that it is actually processing nothing but applications for Negro housing) ; Los Angeles, $80; Detroit, $75; Atlanta, $65. Last summer the New York FHA office found a rental lag as high as 4 months in buildings in outlying sections and stopped processing rents higher than $110 for a two-bedroom apartment. By October, this ceiling was discovered to be still too high and rents were again cut (to $88 for the comparable two-bedroom apartment). But these belated rent cuts will make little difference in the rent levels of 608 projects built throughout 1950, because commitments run so far ahead of actual building. For example, when New York set a November 1 dead line for its most recent rent crack-down, it already had applications on file for 3,100 units, all of which will have to be processed at the old ceiling of about $25 per room.
The big 608 building boom was set off in 1948 when FHA made an important shift in its formula for computing loan limits. Previously the loan limit had been $1,800 per room and builders had argued that it simply was not possible to meet FHA minimum requirements at that price. When FHA changed the loan limit to $8,100 per apartment unit, applications zoomed. The shift meant that the builder could stretch the loan limit by putting plenty of one-and-one-half-room or two room “efficiency” units. This started the building of elevator apartments high-priced locations. In the first 11 months of 1947 only 2.6 percent of 608 applications had covered elevator apartments; by 1949, elevator apartments accounted for 24 percent. Examination of commitments issued during the first 6 months of 1949 shows that roughly half of them were for units of three and onehalf rooms or less (a three-and-one-half-count: living room, bedroom, kitchen, dining alcove)
-a size inadequate for a family with even one child. By last November, most local FHA offices had stopped accepting plans including anything less than one-bedroom units and were refusing to pass any large number of these.
When FHA began to plug the 608 rental program late in 1946, it hoped to meet the accumulated shortage of rental housing and give veterans some alternative to buying a house in a peak-cost period. FHA said it was especially eager to increase rental supply in smaller communities and offered quicker processing for small projects. How far these latter aims were met can be gaged by the fact that roughly half of all 608 commitments so far issued are clustered in the environs of the cities of New York, Washington, and Baltimore. At the end of 1948, over 56 percent of dwelling units were in projects of 100 units or more (16 percent of these were in projects of 300 units or more).
Of all the parties involved in a 608 deal, the FHA is the only one with a real financial stake in the long-term value of the properties. FHA's principal mechanism for getting long-term value is a document called Minimum Property Requirements for Multi-Family Dwellings and the countless decisions made by hundreds of overworked, underpaid FHA employees in relating the blueprints before them to the standards set by this bible and to the unpredictable future of the rental market. Neither the minimum standards themselves nor the design philosophy which sets them are adequate protection for the unparalleled risk involved in this $2,000,000,000 worth of Government-backed loans.
One trouble with officialy set minimum standards of any sort is that they tend to become maximums. Many architects say that the average FHA official is more enthusiastic than the builder himself in holding plans to the required minimums. One architect recalls that he persuaded the sponsor to adopt larger-room sizes and other amenities not required by FHA in the interest of long-term rentability, only to have the sponsor told by the FHA examiner: “You're crazy to build anything this big."
One giant exception to the general mediocrity of 608 work is Park Forest, a complete new city of 11,000 population built 21 miles from Chicago's loop-39 minutes by electric train. Planned by Chicago architects Loebl, Schlossman & Bennett, this development is located on 2,400 acres of rolling, wooded farmland. Its handsome five- and six-room duplexes cover only 11 percent of the building site (110 families per acre). The development is owned by American Community Builders, Inc., a firm organized by Philip Klutznick, Nathan Manilow, and Jerrold Loebl. Park Forest was started in 1947 under the old $1,800 per room 608 loan limit. But very little other 608 building got under way in the Chicago area until FHA adopted its $8,100 per apartment unit loan limit. Currently dozens of tall elevator apartments are under construction within the city limits and builders have not yet felt the chill of lagging rentals which has blighted the eastern garden-apartment belt.
Many architects argue that FHA minimum standards are already substandard. Its minimum 150-square-foot living room is 10 square feet less than the minimum living room acceptable to the New York City Housing Authority for a family of four. Its master bedroom minimum of 100 square feet compares with a master bedroom of 125 square feet in New York public housing. Useful size of the living room is generally further reduced by the fact that it is used as a passage to reach other rooms. FHA uses the interesting phrase "semiprivacy" to lend special approval to those plans where this passage is accomplished at one end of the living room rather than diagonally across it. Corner ventilation (two windows at right angles as distinguished from through ventilation) is a minimum requirement for all bedrooms, but even this is usually waived in the case of small apartments.
AGREEMENT NOT TO COMPETE
There is no way of knowing how many other exceptions have been made to the already low 608 minimums. In each local insurance office, the chief underwriter has the right to waive minimum standards if local need for housing is severe.
Although they are certainly not intended to do so, FHA minimums actually serve as a general agreement to restrain competition. Because the buildings are protected from the normal hazards of future rentability by Government insurance, nobody needs to build any bigger rooms than anybody else.
One member of the New York Chapter A. I. A. housing committee which has just begun an investigation of 608 design standards says: “Minimum standards on mechanical work are not being adequately met. FHA requires that mechanical work be designed by a registered engineer, but builders who don't want to pay an engineer's fee frequently turn to engineers employed as salesmen by equipment manufacturers. With the minimum examination of mechanical work permitted by FHA, this subterfuge often succeeds. These men can't give much time to each individual job; they often are obliged to use rule-of-the-thumb methods. We were once able to reduce the cost of a mechanical installation by one-half over the plans presented by the manufacturer who designed the job.”
This same architect, a member of one of the few top-rank architectural firms which have had a chance to do 608 work, also recalls that, on one big recent job, the mechanical subcontractor called up to inquire if the plans would show the size of the boilers, size of piping, where the valves were going, etc. He was unaccustomed to getting such detailed plans on 608 work and said that he was obliged to increase his bid where he had to supply mechanical information.
It was not always so. When FHA appeared in the house-building business in the depressed year of 1934, its planning and construction standards were actually regarded as a great light in a wildernes at the mercy of jerrybuilders and fly-by-nighters. In the area of the moderate- and low-cost single-family house this was, during FHA's early years, pretty close to the facts. In the area of rental housing, FHA's effect was more limited since, until the advent of 608 in 1942, it had insured only about $144,000,000 worth of loans covering 37,964 units. Even so, it can be credited with popularizing the livable 2- and 3story garden apartment, a building type which appeared before the depression and held its rent levels remarkably well in the real-estate disaster which followed.
But as the agency and its standards aged, its initial crusading fervor was buried under an impregnable conservativism. Meanwhile, the house-building industry itself, as a result of war expansion and of an accumulated technological advance, finally passed across the threshhold of the industrial revolution. As FHA acquired a large interest in existing residential real-estate values, it became increasingly fearful of any threat to those values-either through the introduction of new construction techniques or new planning principles. Moreover, FHA's specialty was the single-family house, and its standards for the apartment building were in many cases simply adapted from standards considered adequate for the detached dwelling. When the 608 rental program suddenly boomed to enormous proportions in 1948, FHA was dealing with a building type with which it had had little previous experience and to which its whole point of view was maladapted.
One of the most fascinating aspects of FHA's underwriting position in today's rental building is its strange mixture of financial radicalism on the one hand
and design conservativism on the other. That is, FHA shows an optimism in going along with nonexistent equities and inflated loans that would make a conservative banker blanch. But it is far more conservative than the average banker in its refusal to take a chance on any new architectural solutions for the problem of rental building.
FHA's well-known hostility to the great body of new building techniques loosely labeled as “modern design” is probably the surest way to expose the already dubious value of its insured projects to severe competition from new rental building in the future. The quickest way to demonstrate this is to examine what many architects call FHA's court fetish.
If there is one area in which modern designers excel, it is undoubtedly in their ability to extract the maximum use from whatever inside and outdoor space is allotted by the financial exigencies of the building problem. That is, by freeing both the site plan and the building plan from the requirements of traditional symmetry, they are able to provide more space for the requirements of family living.
But FHA seems irrevocably wed to the court plan. That is, apartment buildings must be twisted around a court-sometimes only 50 feet wide-even if this means sitting against the grade. ("Once they had us moving half the hillside around," one architect says.) Orientation to sun, to prevailing winds, to view-all this is likely to be overlooked in favor of a “pretty” court plan. While the court plan may mean slightly less total building perimeter, it also means an irregular interior, where the tendency is to squeeze rooms into not fully usable corners.
In defense of the court plan, it must be said that where projects are built on barren flats or close to the building line in heavily developed areas, perhaps the best that can be done is to create a little landscaping and turn the view inside. But architects who have engaged in near mortal combat with FHA on the matter say that the court is required even where all semblance of reason has disappeared-in cases where the contour is rolling and the view magnificent.
Another example of an obsolete point of view is FHA's requirement that the kitchen must be closed off from the living area by a door. This blanket attitude completely neglects the fact that modern ventilating devices take care of kitchen odors, that families with small children are not likely to shut the door between the kitchen and other living areas, that a cheaper and better solution might be to baffle off the kitchen from view.
Most modern architects who have encountered FHA processing agree that the most disheartening aspect of the situation is official insistence on routine planning with which they are familiar and a complete unwillingness to try anything new. With both FHA and the sponsor lined up solidly against any departure from exactly what was done yesterday, the architect is helpless. If he wants to keep his 608 clients, he soon learns not to start any arguments with FHA processors. Some local FHA offices actually go so far as to suggest that the architect simply make use of FHA's stock site or building plans, which it is happy to take off the shelf.
Part of FHA's resolute conservativism is no doubt related to what it has time to review. There is often simply not time for examiners to study new designs or new systems. If it continues to occupy its preeminent place in the Nation's housebuilding, FHA greatly needs more and more competent assistants—a reviewing staff not prejudiced against independent architectural initiative.
PRIORITY FOR GOOD PLANNING
Another factor that has conspired to hold 608 planning firmly to the familiar ways of yesterday is the builder's rush to get his plans in before some deadline or other has expired. Title VI has been extended by Congress in a series of indecisive stops and starts; various changes in administrative regulations urge builders to get their applications in before something new turns up. Builders thus want their architects to do a quick and minimum job (for a minimum fee). One very practical thing FHA could do to counteract this would be to adopt a progressive attitude on planning, then give commitment priority or other preferential treatment to applications where an excellent planning job has been done.
When the fabulous section 608 expires next March 31, Congress will be under great pressure to renew it. But this time Housing and Home Finance Administrator Raymond Foley will not be among those bringing pressure to bear. Foley has never been really happy about the continued postwar extension of various parts of the emergency title VI, a special insuring fund set up to cover the extra risks of war housing and kept separate from FHA's regular insuring fund. He will probably recommend that Congress allow 608 to lapse, but give a little more appeal to the old 207 rental program. Thus 207 loans might be authorized up to 90 percent for low-rent apartments (grading down to 80 percent in inverse ratio to rents), but the appraisal base changed from 608's *costs not higher than those of December 1947” back to title II's “reasonable long-term value.” This is about what happened on the single-house program last year. Foley and FHA Commissioner Franklin Richards have both said recently that costs have adjusted themselves to the point where there is virtually no difference between the long-term valuation and replacement-cost yardsticks.
This would undoubtedly be a step in the right direction, and would probably put FHA-insured rental buildings on a somewhat sounder financial footing. But it would not cure the basic flaw in the FHA formula for getting apartments built: the fact that there is every incentive for the builder to undercut the longterm value of the property and a complete lack of incentive for him to do anything else.
Part of the trouble with the quality of current rental building is that FHA has not fully recognized nor discharged its responsibility for representing the public interest. Congress shares some of FHA's confusion. “After all,” some Congressmen say, “the Government isn't lending the money, is it?” But the difference between making a loan on an apartment building and insuring that loan is not so great as FHA appears optimistically to believe. Actually, complete control of the building operation has passed from the private lender to FHA. Even the most cautious private lenders now exercise their prudence simply by rejecting whatever FHA-insured loans seem to them unusually precarious. On what FHA-insured loans they make, their participation in the building operation is limited to rubber-stamping the plans and specifications that have been through FHA processing.
FHA can argue that its regular inspections of the building job are more effective than lender supervision in the old days. It can point to its requirement that the owner make regular payments into a replacement reserve, so that when repairs or new equipment are necessary there will be money to provide them. But it can hardly argue that it has done much to improve apartment planning over what was commonplace in prewar building or to enlist first-rate architectural talent in the job. On the contrary, its rigid insistence on routine planning has reduced the architect to the status of a draftsman. Its prejudice against modern design has served to keep the country's best architectural talent from lending a hand in the solution of the critical problem of reducing the cost of rental housing. Its indifference to what the builder actually pays in architectural and engineering fees is enough in itself to make sure that top-rate firms will continue to have little to do with apartment building.
In a period of acute housing shortage, there may be some excuse for hastily putting up what many architects call the slums of the future. But when FHA returns to the 207 rental-insurance program it ought immediately to set about raising and revising its minimum standards. It ought to undertake research to see how well these minimums have actually provided for family living requirements. It ought to ask itself if it will continue to exert its massive force against any improvement in American living standards. If there is any reason to extend the public credit to risks not considered prudent by private capital, it is certainly not to the risk of thin equities and inflated loan values but to risks more properly in the public interest—the risk of new planning methods and experimental building techniques.
HELP THE LONG-TERM INVESTOR
FHA will probably continue to be the dominant force in both single-family house building and apartment building for as far ahead as anybody can see. But it may not be too late to inquire if, for apartment building at least, there are not other, and perhaps better ways, to the same end. First-class rental housingif the investor can manage to hold on to it long enough—can be shown to be a better long-term risk than, as real estate operator Robert Dowling says, “than even the best-managed groups of other investments.” Most of the apartment buildings which went through the wringer of the last depression are now paying off a handsome return-although not to the original bondholders. It is this kind of long-term assurance which persuaded New York Life to put $30,000,000
into its spectacular Fresh Meadows housing development in a year of peak building costs.
But if the insurance companies are investors big enough and patient enough to wait for long-term returns on rental housing investment, there are few others. The special handicaps and hazards which beset this type of investment are usually enough to make equity stakes drop like apples in any sharp economic downturn. It might be well to consider how the Government fiscal powerinstead of being limited to the awkward FHA formula-might be employed to offset some of the disadvantages which an equity investor in rental housing must suffer. The first of these, of course, is the obsolete real estate tax system, basically unchanged since land was the nation's primary source of wealth. Federal income tax incentives for the legitimate equity investor in rental housing would be an even more powerful tool for directing the flow of money into a socially useful direction. In a future article, Forum will explore some of these alternative ways to lick the rental housing dilemma.
A rebuttal by Architect Erwin Gerber, a 608 specialist, claims, among other things, that modern architecture prices itself out of the apartment market.
One of the early pioneers of the garden type apartment, Architect Erwin Gerber of Newark, N. J., has had a long experience in the planning and design of this variety of apartment building both as an FHA technician and more recently as a prosperous practicing architect. Today he is a specialist in the design of FHA 608 apartment projects and is thus a professional colleague of the architect referred to as Mr. Smith in the preceding article. Forum showed Architect Gerber proofs of this
article and invited his comments. His statement appears below.—ED. Rather than attempt an unnecessary defense of FHA, I will endeavor to answer the charges in the preceding article against 608 as one who was in at its birth, helped to expand it and finally reaped a few of its benefits while on the outside looking in.
Not all FHA offices allow 5 percent for architectural work, some drop the fees as low as 3 percent. We must not forget that the fee includes engineering and landscape work, which in some cases exceeds the work by the architect.
The builder who is smart enough to buy a $75,000 piece of land for $25,000 should not be vilified. The builder who by smart purchasing and elimination of excess overhead and lost motion saves an additional amount should not be classified as sharp. Does the trade give a bad name to the general contractor who customarily adds 10 percent overhead, 10 percent profit, and 10 percent for emergencies to any job that he figures? Does the answer lie in public housing? This writer remembers 1939 when the preliminary costs of a public housing project, without the costs of the structure itself, ran to 1642 cents per cubic foot, while the FHA builder was erecting an entire apartment project for 24 cents per cubic foot.
In my experience as a FHA employee and later in my practice, I never found any resistance to modern architecture by FHA because it was a different trend. The trouble was that allowance could not be made for the additional square foot area or the trimmings necessary over and above a typical house. Complaints by some architects about being stymied by definite square foot area limitations in rental housing can be answered in a few words. The owner must put up in cash, in advance of start of construction, the cost over and above the mortgage amount of any excess square foot area, gingerbread, additional cost due to poor planning, etc. This naturally affects the economics of the project and few owners will venture into such a deal in these days of controlled rents.
The statement that no money is required in 608 is not correct inasmuch as at least 15 percent of the mortgage amount for front money or risk capital is required. While it is true that in the past year most projects more than bailed out, the year before most of the sponsors left approximately 12 percent additional in the projects due to the $1,800 per room limitation. The only fault in 608 was the processing time. In these price-changing days (incidentally, prices are up 4 percent on the average, since September 1) the architect designs something in the fall of 1 year, the job is processed in the fall of the following year and the contracts are let 3 months later. In the meantime prices have done flip flops.