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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 housebuilding 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 housing-if the investor can manage to hold onto 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 power—instead 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.
Six HUNDRED AND Eight DEFENDED-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 1612 cents per cubic foot, while the FHA builder was erecting an entire apartment project for 24 cents per cubic foot.
In my experience as an 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 building can be answered in a few words. Th 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 real 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 one 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.
Forum's stress on the great default will also affect the insurance companies and banks who are lending money on non-608 apartments and commercial buildings. A close analysis will disclose that their typical mortgage amount has about doubled over 1939. I know of no 608 loan which has exceeded 100 percent of a 207 loan of 1939. If the 608 mortgage set-up is wrong, then we must condemn every maximum private loan made.
The condemnation of efficiency units in 608 is both unfair and unproven. The truth of the matter is that, as a 608 sponsor, I can honestly state that the efficiency apartments are the first to rent and stay rented. The proof in longterm occupancy, as any owner of apartments during our last depression will testify, is that the so-called efficiency apartments stayed rented at all times, unless the apartments were built in a suburban area where they did not belong in the first place.
The FHA court fetish could possibly have been overdone. I am one architect who literally developed high-blood pressure while in constant war with the Land Planning Section of FHA over site lay-out, in which work I take particular care and pride. However, when I look back in retrospect I believe the fault lay with all concerned. Land planning is a field by itself and very few architects have the touch in developing a suitable site plan. The constant work-load pressure on the various FHA architectural sections has led them to leave site-planning criticism to the overworked and undermanned Land Planning Section, which in turn took on a shell consisting of a court, a re-angle and a cul-de-sac. Quite a few lay-outs which I had to jam down the thrcats of experts appeared later in the experts' books as recommended lay-outs. Perhaps we should all go back to school to learn how to build a $10,000 apartment for $7,000 without the sponsor previding the $3,000 difference.
Forum's solution in the substitution of 207 for 608 brings a hearty guffaw to this pioneer, for 207 was always fraught with red tape, strict compliance to rent schedules and profit limitations. A 207 can only be built where taxes are extremely low. The real bugaboo in Forum's desire for modern thought in apartments is that, if the cost figures disclose a greater differential than 5 percent over the capitalized figures, then the project must be abandoned altogether. I believe that 207 will work when some of the good sections of 608 are added to it.
Source : Architectural Forum, January 1950
Mr. MULTER. Mr. Goodman, I am addressing you, because you were answering Mr. Cole's questions rather than Mr. Green.
Regardless of how many hours it takes that employee to earn that dollar today, when he gets that dollar, he can use that same dollar to buy either private housing or rental housing or cooperative housing. Is that not right?
Mr. GOODMAN. Yes.
Mr. MULTER. This bill will not make him work 1 hour longer to get his dollar, if we can make the means available for him to put that dollar into housing.
Mr. GOODMAN. That is right.
Mr. MULTER. I recall also that it was not so long ago that we heard a great deal of talk from a large vocal group in this country that the way to beat inflation was to increase production.
Mr. GOODMAN. Correct.
Mr. MULTER. This is a method of increasing production without increasing cost; is that not so?
Mr. GOODMAN. That is correct.
Mr. MULTER. Even if it does not reduce costs, it certainly will increase production without any increased cost; is that not so?
Mr. GOODMAN. That is right.
Mr. MULTER. So, we have an additional benefit to gain, if in addition to that we can also reduce the cost.
Mr. GOODMAN. Yes, sir.
Mr. DEANE. I would like to point out that in the consideration of this legislation we should not lose sight of the fact that the proposed housing we are considering is in the interest of human beings.
Mr. GOODMAN. I would like to say first off, picking up the point of discussion with Congressman Cole, that we believe that one of the impacts would help reduce the inflationary factors existing in the present housing field by establishing a yardstick.
Those of you who come from the TVA area know how important the establishment of a yardstick is. It brought down the cost of electricity to the residents in your area. We believe this program will do the same in the housing field generally and will expand housing production in the United States.
Last year we produced approximately 1,000,000 units. This bill will help boost the annual producetion rate, with all of the beneficial effects that will flow from that, closer to the million and a half that the Council of Economic Advisers recently stated were essential to begin to meet our housing needs.
Those two aspects, a deflationary effect in the major cost of housing plus an increase in production, is exactly what many of the large business interests in this country were saying is most essential to begin to meet our housing needs.
This bill will aid both of those factors.
What do you think would be the general, universal interest in this legislation that we are enacting? I am thinking now of the smaller
rural or urban areas of the country. What reception do you think it would receive or have you made a study of those areas to determine whether or not a cooperative could be wisely set up and operated?
Mr. GOODMAN. I would like to call Congressman's attention to a recent book on co-op housing published by Elsie Dannenberg, which pointed out that the major interest in cooperative housing was in small towns and rural America.
Our own experience has been that member unions in the smaller towns throughout the country have been most anxious to try to get a program started along the lines proposed in this bill.
In Mr. Green's statement, he pointed out the fact that the rubber workers have just finished a project in Mishawaka, Ind., a small town. There is a group from Coatesville, Pa., in today trying to get a program started—a very small town.
We believe a program such as this one would provide the first real relief for mine workers who live in rural America and who are unable in their present circumstance to get adequate housing, and the same will be true for other groups in small towns in rural America.
Mr. DEANE. One other question that I think of, Mr. Chairman.
As you know, throughout many aras of the country and especially in the textile areas of the South, mills are selling the mill homes. In many cases they are finding it difficult to process the applications through FHA.
It is generally felt that perhaps this legislation will provide a suitable vehicle to carry out some of these transfers. You think that this would help management and their employees in their effort to move forward in that the employees might own their own homes.
Mr. GOODMAN. Mr. Green pointed out in his earlier statement that in periods of plant expansion the Celanese Corp. in Front Royal, Va., for example, was aided by the initiation of a cooperative housing project by the textile workers' union. They were able to carry out this expansion only because this project provided the additional housing that was necessary in the community to bring those workers in.. The same would be true where management is trying to sell off company housing and the workers are either anxious to buy or build new and more adequate housing in the present scene.
This bill would certainly be of benefit to those plants in the solving of the housing problem of its employees.
Mr. DEANE. That is all, Mr. Chairman.
Mr. Green or Mr. Goodman, you mentioned Mr. Thompson in your statement, Mr. Green; and when he was before the committee he gave the committee the results of a survey, in which he listed the towns in which they were building houses at $8,000 or under.
I have just counted the number of towns listed in what he calls the colder areas of the country, which presumably are the higher-cost construction areas of the country.
In the towns with homes listed at $8,000 or under, he names 283 towns; in the list in which he says there are houses being constructed at $6,500 or less, he names 192 towns. He was questioned during his testimony as to the number of houses being built at these prices and he did not have that figure.
The inference therefore is that there are possibly one or two houses in this cost category being built.
I am wondering whether you can give the committee information as to whether any large number of houses are now being built across the country in these 283 towns in the colder areas of the country meeting the needs in this middle-income group as an $8,000 house wouldI think we will concede that.
Mr. GREEN. Congressman, I do not have any figures. I suppose perhaps we could dig them up; but, if Mr. Thompson said they are building homes for about 6,500 across the country, I am afraid they are not homes but they are more like cheese boxes, because I saw some of the homes close to $10,000 and the materials and what-have-you going into them are inferior.
Mr. MITCHELL. And there are still a good many people rushing to buy those houses which are actually inferior houses.
Mr. GREEN. It is the best they can get, sir.
Mr. MITCHELL. If you do have any information which would show the number of $6,500 to $8,000 houses being built, I think the committee would like to have it.
Mr. GREEN. Mr. Goodman says we will check the list and supply whatever information we have.
Mr. MITCHELL. I would like to look a little bit, too, at the obverse side of the coin that Mr. Cole was examining. You mentioned the 608 projects. I think Mr. Goodman mentioned them. There will be a slow-down in the 1608 project construction this year.
One witness before the committee quoted a newspaper article saying that probably only 800,000 homes would be built in 1950. So, I would like to look at the picture from the deflationary point of view. If we do drop off from the 1,019,000 homes which were said to have been built in 1949 to 800,000 homes in 1950, what will be the deflationary effect on our economy?
Mr. GREEN. No. 1 will be unemployment without a doubt. Unemployment in any industry has its effect on other industries. As to just what amount of deflation will take place, I am in no position to say at the moment.
Mr. MITCHELL. Would you state your opinion here as to whether there is a greater degree of danger facing us from the deflationary effect if we do not pass this bill than there is facing us from an inflationary effect if we do pass it?
? Mr. GREEN. Well, as far as I am concerned, I think the bill will do the job that is necessary to keep us balanced.
We must keep away from deflation, because it is as much to be avoided as inflation, but the way I feel about it is this: Every time we come here asking for help for the fellow who can't help himself, we are told that it is inflationary.
Mr. MITCHELL. And socialistic.
Mr. GREEN. Of course, everybody is a Socialist today. I don't know; maybe I am crazy, but I thought the principle upon which America was built was to help people to help themselves, and I think we have been carrying out that principle in our aid to Europe. Strange as it may seem, there seems to be a joint opinion of the political parties in helping Europe, but to come here and try to help ourselves is called inflationary. It just doesn't jibe.
Mr. MITCHELL. Thank you.