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NATIONAL HOUSING CONFERENCE, March 11, 1954

A SUMMARY

American housing needs, 1955–70

Housing construction has reached record levels during the 8 years since the end of World War II. During the last 4 of these years, we have built an average of 1.2 million homes a year, an achievement far exceeding previous 4-year construction levels. On the other hand, construction volume for the last 3 years has been 20 percent below the peak of 1.4 million units built in 1950. We clearly have a capacity to build from 1.5 to 2 million homes each year. Real progress has been made in overcoming the great shortages of housing which accumulated during the war years. But little progress has been made toward eliminating the slums and substandard homes inhabitated by millions of American families. We must reexamine our needs for housing in the light of these accomplishments and these deficiencies, and in the light of our vastly expanded capacity for production.

Future housing requirements must be estimated upon the assumption that the Nation will maintain full employment, will continue to expand its economy, and that our population will grow in keeping with these conditions. It is further assumed that defense expenditures will not increase, that Federal aids for housing will continue and expand, and that the Nation will desire and be able to achieve our national goal of a decent home in a suitable living environment for every American family.

The 1950 census reveals that we have 15 million substandard homes. These homes do not measure up to reasonable American standards of living because they are dilapidated, are located in slum areas, or lack interior plumbing facilities. Ten million of these homes must be cleared and replaced. More than 4.6 million substandard units may be brought up to standard by rehabilitation and modernization. These needs are summarized in millions of units, as follows:

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1 500.000 additional farm units to be abandoned.

Other housing needs arise from the formation of new families, undoubling of families who now lack separate homes, the migration of 3 million families each year, and the desire of many single persons for separate dwellings. In addition we must replace homes which are demolished by fire or other disaster, or are cleared in highway and other construction programs. Finally, many hundreds of thousands of units reach obsolescence each year. These must be replaced or our housing condition deteriorates. The sum of these annual requirements may range from 1.3 to 2.4 million units per year. If we replace the homes which were substandard in 1950 during the next 20 years and at the same time meet our annual new needs, we must build from 2 to 2.4 million new homes per year as follows:

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If we do not achieve this level of new construction, we will never be able to clear slums and eliminate substandard housing. Indeed at present levels of construction our present substandard units will never be replaced-and we will have more substandard housing in 1970 than we had in 1950. Even if we build 2 million units a year and rehabilitate 400,000 additional units each year, 5 million American families will still be using homes which were substandard in 1950 when 1970 arrives.

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These requirements arise because the number of new families being formed each year will rise sharply after 1960. Reasonable progress toward slum elimination requires construction of 2 million new homes per year from 1955 to 1960, with increases to 2.4 million by 1965–70. Lower rates of new construction imply a deterioration of our housing standards, or such low rates of replacement that slums will not be cleared during the next two generations.

With the rapid increases in gross national production which have occurred in recent years, the production of 2 million to 2.4 million homes a year is an economically feasible goal. If national output continues to grow at the rate of the last 25 years, we can achieve our housing goals even though we spend no more of our national income for housing than we have in the past. A decreasing proportion of our output could achieve these goals. Indeed, unless we can achieve and maintain a higher level of housing production, we will be unable to maintain full employment and an expanding economy.

Recent housing production has been built to serve predominantly those families in the upper income groups. Rapid increases in family incomes have made possible the continued sale of homes to these families. In the future, however, we must increasingly produce homes for middle and lower income groups. If we are to sustain a high lerel of housing construction, we must produce homes in the broad price-classes suggested below:

Nonfarm Rents or monthly purchase prices

per year 0 to $30--

520, 000 $30 to $50.

380,000 $50 to $75.

300,000 $75 and over-

560,000 This suggests that 1 million to 1.2 million homes can be sold or rented each year under the systems of financing and Federal aids now available. Ahout 600,000 additional units of private housing should be produced and financed annually to meet the needs of middle-and lower-income families who are not now able to afford new homes. An additional 200,000 units of public housing are needed to meet the needs of low-income families. In addition, more than 200,000 units per year are needed by farm families to replace substandard units.

homes

Estimated total monthly housing espenses under various financing terms

(See notes for cost data)

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IN LOW-COST AREAS

78 75 73

68
66
64

64
62
60

56
54
53

51 50 49

49 48 46

$8,000 3-bedroom home:

No downpayment. 5 percent down.

10 percent down.
$7,000 2-bedroom home:

No down payment.
5 percent down.
10 percent down

69
67
65

61
59
57

57
55
54

50 49 48

46 45 44

44 43 42

NOTES

Cost estimates: All cost data are FHA estimates for new homes built under sec. 203 and insured in 1952. Operating expenses, taxes, and insurance are as follows for the several price classes: $10,000-$18.80, $9.20, $1.50; $9,000-$17.93, $8.43, $1.24; $8,000-$16.75, $7.10, $1.15; $7,000—-$15.77, $6.41, $1.02. Cf. HHFA, 6th annual re; t., p. 280, table 27. In all cases costs used are for velue class below price shown to allow for difference between FHA value and market price.

Northern cities: FHA cost data are national averages. They therefore understate heat and utility costs in northern cities. Four dollars have been added to FHA estimates to cover this difference in northern cities. Average cost areas: FHA cost data.

Low-cost areas: FHA cost data for $8,000 and $7,000 homes probably represent cases occurring almost exclusively in southern areas and in smaller towns in such areas. Available data do not reveal major cities in which $7,000 homes are currently being marketed in significant quantities.

Single homes: All data are for single homes sold for owner occupancy.

Rental housing: Structures of similar Noor area built for rent in typical rental housing projects would probably rent for $4 to $8 per month more than the figures shown. This cost difference would arise from higher maintenance and management costs.

Cooperative housing: Cooperative housing projects offering accommodations with similar floor areas might achieve slightly lower rents or purchase prices than those shown above as a result of group purchasing of maintenance materials, suel, and utilities.

Financing terms: (1) Conventional FHA-insured, 20-year loan. The insurance charge is approximate. (2) FHA-insured, 30-year nortgage, at 442 percent, plus insurance as proposed in pending legislation.

(3) FNMA-made, FHA-insured, 40-year loan, at 4 percent, plus insurunce. This proposal differs from pending legislation in that it omits a 2 percent servicing charge.

(4) A 314 percent 40-year level payment loan.
(5) A 212 percent 40-year level payment loan.
(6) A 2/2 percent 40-year level payment loan, assuming a 10 percent reduction in purchase price.
(7) Only 4,000 homes built in this price class in 1952. Ci. idem, and ibid., p. 240, table 7.

The CHAIRMAN. The next witness will be Mayor Russell G. Hileman, of Michigan City, Ind.

Mayor, we are happy to have you here this morning. You proceed in your own way. STATEMENT OF RUSSELL G. HILEMAN, MAYOR, CITY OF MICHIGAN

CITY, IND., ACCOMPANIED BY JOHN P. DONNELLY, EXECUTIVE DIRECTOR; AND GEORGE N. HALL, ARCHITECT AND ENGINEER FOR MICHIGAN CITY HOUSING AUTHORITY

Mayor HILEMAN. My name is Russell Hileman, and I have with me this morning John Donnelly, executive director of the Michigan City Housing Authority, and George Hall, of Beine, Hall & Curran, architects and engineers for the Michigan housing project.

We have a prepared statement, and I think that I will just touch those points which we hope to—

The CHAIRMAN. You would like to have us place your statement in the record ? Mayor HILEMAN. That's right.

The CHAIRMAN. Without objection, your statement will be placed in the record at the end of your remarks as prepared, and anything you say extemporaneously will likewise be placed in the record.

Mayor HILEMAN. Thank you. In the year of 1942 a group of citizens in our community established themselves into an unofficial committee to try and clean up a slum-clearance situation that we had, which was referred to as the “patch.” We were unable to do this under existing laws at that time, or through private financing. We worked along with the problem a good many years, until I became mayor of Michigan City, and the idea of low-rent public housing in the community was conceived.

We went into this program in the year of 1951, and from then on we were dealing with the Chicago Housing Authority, in setting up and establishing the kind of program that would fit Michigan City. A very thorough survey was made by them, in Michigan City, and several plans were talked about.

In the process of getting the job done the project directors of the Chicago authority were changed, and in most cases they changed the entire set of plans for the development.

This went on until we reached the stage of where we did have an acceptable plan. This plan was presented to the authority in Chicago, and was finally sent on to Washington. Then, of course, the money was tied up and the project was temporarily abandoned.

At the present time the people of our community who have, after very serious thought, gone along with the public housing program, and the persons involved in the program since the year of 1951, have been encouraged by the thought that we would have some plan to take care of them.

We find that the new bill, as it is written, is one which certainly would be of benefit to everyone. But we do think there is some responsibility on someone, as far as smaller communities, who have gone into public housing programs in very good faith and have been left without anything to do in their particular case.

We in Michigan City have worked on this for a good many years, thinking that this was the final solution for it.

We believe that a lot of small communities in the United States who do not have the adequate means and do not have the legislation in their States, and in small cities, are left without a solution to their problem.

We would like this particular type of project which has gone so far, with some small amount of money, that it could be seen through to its completion.

The CHAIRMAN. What you are recommending is that we continue public housing, particularly small towns.

Mayor HILEMAN. Yes. Particularly in those cities which had preliminary contracts on a long-range basis. Ours extended over a period of 4 years, and through no fault of our own it couldn't be finished. We think that in the larger communities those problems were taken care of.

The CHAIRMAN. I would like to have the record show at this point that Senator Burke from Ohio is with us. While the Senator is not a member of this committee, we are delighted to have you, Senator. .

Senator BURKE. Thank you.

The CHAIRMAN. If you care to ask any questions, we will be delighted to have you do so. Senator BURKE. Thank you. The CHAIRMAN. Is it your position that the bill

Mayor HILEMAN. I do believe the bill provides for a slum clearance program which is necessary. In our case we would have to go back and set up an entire new organization.

The CHAIRMAN. In other words, you want to make certain that you might have a continuity of action on it?

Mayor HILEMAN. That is exactly right.
The CHAIRMAN. Without any stoppage or any delay?
Mayor HILEMAN. That's right.
The CHAIRMAN. You are fearful we do not have that in the bill?
Mavor HILEMAN. That is the way we feel; yes, sir.

The CHAIRMAN. We will certainly get into that, and will give every consideration to it.

Mayor HILEMAN. Where small cities

The CHAIRMAN. I don't know of anything in the bill that changes the public housing situation. As a matter of fact, there is nothing in the bill that relates to public housing. Public housing will be handled by a separate bill. It has always, in the past, been handled by a separate bill. Of course, public housing, in the Congress, has been slowed down by the Appropriations Committee over the past 2 or 3 years. It has not been in this committee. It has not been in the basic legislation authorizing public housing. This committee back in 1949 recommended 800,000 units over a period of 5 years, and the Congress authorized them. Then the Appropriations Committee have reduced them and reduced them and reduced them.

You say, “With this history and background it is the earnest plea of the city of Michigan City, Ind., that the Senate Banking and Currency Committee give favorable consideration to an amendment of existing legislation, which amendment would have the effect of repealing earlier amendments to appropriation measures, so as to permit the city of Michigan City, and other small cities and towns which

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