being permitted to give its views on the proposed "housing bill" under consideration.

At the outset, I would like to say that we are unalterably opposed to Government's interference or participation in activities which are part of or competitive to private business. We believe that none of these activities should be continued by Government unless they are absolutely essential to the national welfare and cannot be provided just as efficiently and economically by private enterprise.

The housing bill now being considered is very broad in scope. It includes "aid in the provision and improvement of housing, the elimination and prevention of slums, and the conservation and the development of urban communities." It will effect our banks, savings and loans and mortgage banking institutions. The National Apartment Owners Association will limit itself to the consideration of its effect on our present supply of housing.

I would like to emphasize that we believe it highly desirable and extremely beneficial to have virtually every American family own its own home. We believe the family and society benefit through home ownership. Nevertheless, since the Second World War we have been living under laws designed for the encouragement of home construction and ownership. We have had increasingly generous provisions for higher financing and lower downpayments. We must face the fact that sometime-if we have not already done so-we will reach a point where all these seeming benefits will work a great disfavor to their recipients, and a hardship on the entire Nation.

In coming here as a representative of the association, I wish to emphasize that, of necessity, I must speak for all housing, whether privately owned or rental. Private and rental housing are joined together with the common purpose of furnishing homes for our people. What affects one segment of our housing very quickly affects the other. With but minor exceptions their economic life is inseparable.

In our considerations, we are deciding not only the fate of future housing, but, more importantly, solving the fate of our present housing as well. There are approximately 43 million nonfarm housing units. This total is composed of approximately 24 million owner-occupied units, 18 million tenant units with about 1 million unclassified. These 43 million housing units are the Nation's largest single asset. It is larger than any industry in the country and may well be of more value than all industries combined.

The importance of maintaining the values of our present stock of housing becomes evident when we realize that to 24 million families, the equity in their home is their largest asset. Any situation which may adversely affect the values of their homes will, in turn, affect the financial stability of their owners and the Nation.

This bill is of equal interest to some 7 million citizens, owners of the 18 million rental units in the country. To a large extent this property represents the savings of the great American middle class. These people are equally anxious to prevent a chain reaction causing vacancies-cheaper housing, cheaper rents-followed by a deflation in the values of homes and rental property.

Recession versus depression:

We have studied the report of the President's Advisory Committee on Housing and have been impressed by the diligent effort it represented and the laudible purposes which it liberally expressed. How

ever, I would also like to suggest that a well-planned housing program could help keep our economy on an even keel. Conversely, an illconceived plan could further emphasize our excessive inventory in all goods and throw us into a serious depression.

In considering this problem, we should remember the significant fact that virtually every serious depression in this country has occurred when there was a recession in industry coupled with a recession in real estate. The depressions of the 1840's, 1870's, 1890's, and 1930's are examples of this economic phenomenon.

I have brought several charts with me of real-estate activity, and I would like to refer to them at the present time.

I think in determining what we should do with this bill, we must determine where we are in the real-estate cycle. I think we will all agree that timing is of the utmost importance to all business. Let us take, for instance, an automobile agency.

Seven or eight years ago it would have been the proper time to start an automobile agency. If we would consider starting one now, I think our judgment would be that it would be just the opposite. Real estate is also subject to this sort of timing.

At the top of this graph, you will find two different cycles represented. The top one is business-activity graph produced by the Cleveland Press Co., and the bottom one is the real-estate-activity graph produced by Roy Winslick & Co. of St. Louis.

By that graph, we know exactly what happened any one particular year in each of these business activities.

I have testified previously that the really serious depressions of this country have occurred when business was in the recession at the same time that real estate was in the recession.

This is perfectly evident in this spot of the 1870's, when you see that business has gone down

The CHAIRMAN. Is real estate the bottom of the line?

Mr. DULAURENCE. Real-estate activity is shown by the bottom line.

The top one is the business-activity cycle.

The CHAIRMAN. But the bottom one is the real estate?

Mr. DULAURENCE. Yes.

The CHAIRMAN. What is the shady area?

Mr. DULAURENCE. I have cut up a few of these charts. Perhaps it would be easier to follow me if I passed these around.

We see here the great depression of the 1870's. This was really a very serious depression, as you will notice, more people lost their properties percentagewise in the depression of the 1870's than ever since, including the depression of the 1930's. The foreclosure rate was the highest ever known in our statistical history.

You see the great depression of the 1890's. In this case we also have a business recession, coupled with a real-estate recession. And, of course, most of us have lived through, or known intimately something about the great depression of the 1930's, where we had a business recession, coupled with real-estate recession.

Now, over, and on top of this real-estate activity chart is superimposed an idealized cycle of approximately 18 years. This is not affected by the tops and the bottoms of the chart, but is merely superimposed so that from the top of one cycle to the top of the other cycle, we have a period of 18 years.

When we look at this chart, we readily see that, generally speaking, give and take 1 or 2 years, real estate is in an 18-year cycle, and that from the top of one real-estate boom to the bottom of the real-estate depression, to the top of the next real-estate boom, is approximately 1812 years, and this cycle has come up periodically for the entire time of this chart from 1851 on.

If this chart were long enough and extended back to the first days of our country, we would find the same type of cycle going on and the same economic phenomenon.

It is also interesting to note that before 1800 this same type of cycle went on in England. The records go back approximately 200 years on which they could base their charts, and this same type of cycle has gone on in England for approximately 200 years, except that the cycle was a 20-year cycle.

Now it must be determined just where we are at the present time in our real-estate cycle in order to see what approach should be used toward this housing bill.

In the first place, as shown by our business-activity cycle, we have had a period of 15 or 16 years of tremendous business activity. So that we now have a large inventory, not only in the hands of the manufacturer and the middle man and the retailer, but we undoubtedly have a tremendous inventory of goods in the hands of the ultimate

consumer.

And it would be only reasonable to believe that we would have some decline or recession from this high activity in business.

In the last 8 or 10 years, we have had a tremendous activity in the real-estate cycle, second only to the one in the 1890's. Also, we have had the largest construction of homes for the last 8 years of any 8-year period in the entire history of our country.

In addition to that, if we look at this idealized real-estate cycle, we will find that the cycle, itself, is definitely on the down grade.

Somebody the other day asked me whether I was superstitious about this cycle. I said, "No; I'm not superstitious about the cycle, because I see what is causing it."

The CHAIRMAN. What is this large place here? What is that?
Mr. DULAURENCE. That is probably 1946.

The CHAIRMAN. Was 1946 the biggest year in home building
Mr. DULAURENCE. That was the biggest year we had in sales.

The CHAIRMAN. In home building?

Mr. DULAURENCE. No; in all real-estate turnover, new homes, old homes, and general real-estate turnover.

The CHAIRMAN. Is this sales or built construction, or what?

Mr. DULAURENCE. Yes; these are sales of property. Forced sales and willing sales of property.

The depressions in real estate have been caused by exactly the same thing overbuilding. In the depression of the 1930's it was caused by the overbuilding of the 1920's. You will see on your chart the construction line in blue, indicating that construction was above normal. The same thing was true in the case of real-estate depression of 1912 to 1918.

The construction in the early 1900's was above normal.

The same thing was true in each one of these other real-estate depressions. In fact, the first boom that we see on this particular chart, in 1851, was caused by gold being found in California. Of course, that

started a general boom across the country which included heavy home construction.

The CHAIRMAN. Well, those are very interesting figures.

Mr. DULAURENCE. Recessions and booms in real estate have occurred in periodic cycles of fairly equal length. This is the longest perceptible business cycle and takes almost a generation to complete. Although undoubtedly affected by other business conditions, they are generally considered to occur independently of them.

And, there, I might indicate that this cycle does occur independently of other conditions. Take, for instance, the recession in real estate in the years 1914 to 1917 of the First World War. We actually had a recession in real estate at the same time we were having a business boom during the First World War. The same thing is true in the depression of 1907, which was commonly called the "bank panic of 1907." We had a recession in business, and actually it did not have too much effect on real estate. It was still above normal.

I would like to skip over to the top of page 5, to "Are we overbuilt?" One of the characteristics of a building boom is that it seems to feed on itself. Even at its crest most people see the need for more building and are fully convinced that it will continue. I think this is our situation today. Before we decide to go along with the crowd, we must consider the following:

One, that the building boom has continued for over 8 years.

Two, that much of this building has been fostered by increasingly liberal credit terms.

Three, that we have more housing per capital than ever before in our history. If we occupied our housing as we did in 1940, we would have 6,500,000 vacant units or 13 percent vacancy ratio.

The CHAIRMAN. Say that again.

Mr. DULAURENCE. If we occupied our housing in 1954, as we did in 1940, if we would have the same number of people to each housing unit, we would have a vacancy of 612 million units, or 13 percent. The CHAIRMAN. You mean a vacancy in rental property, or in all property?

Mr. DULAURENCE. All property.

Four, that the growth of our housing compared to the growth of our adult population indicates phenomenal growth in housing. Between 1940 and 1952 our adult population increased 14 million; our housing 12,700,000.

Five, that our marriage rate has been going down for several years. At the present time it is at the lowest rate in 14 years.

Six, that there will be fewer young people of marriageable age for the next few years than in the past few years. The lowest point will be reached in 1957.

Seven, that normal economic conditions will cause a contraction in the use of housing.

Eight, the clearance of slum housing and the rebuilding of slums will not prevent our overbuilt condition. However, it will give us a chance to build some extra units for direct replacement.

I would like to skip to the bottom of the page and discuss the suggestions we have on the present bill.

Section 101, title I, provides for repair and rehabilitation loans. We believe that this section provides for sound and beneficial help to

many homeowners. These loans are designed to encourage repairs and rehabilitation. Easily available, they are made on a short-term basis.

We think that this financing should not only be easily available but easily payable. There is a great deal of sound, well-built housing in substandard areas which cannot be mortgaged because of its location. This prevents the repair or rehabilitation of property which otherwise could be saved. Maintenance and modernization of such property should be encouraged by easy long-term payments. A first mortgage will give ample protection. The increased maturity period will cut down the burdensome payments required by short maturity dates. Consequently, we offer the following proposal:

One, in the case of property without mortgage the maturity date may be increased to 10 years for single dwellings and 15 years for multiple-unit dwellings where such loans may be secured by first mortgage collateral.

Providing money for rehabilitation is excellent but we do not believe it goes far enough. Money is only one of the tools necessary for the repair and rehabilitation of property, but money is worthless without the know-how, ability, and understanding of how it should be spent. To remedy this problem we make the following suggestion: Two, that architectural advice be made available for contemplated improvements. That this be provided for a modest sum and that it be a preliminary requisite for the obtaining of such a loan.

There has been considerable question as to whether or not property can be properly rehabilitated, and if it can be rehabilitated, can it be rehabilitated cheaply enough to make it worthwhile.

We have included two sets of pictures of before and after examples of rehabilitation. I think it would be agreed that in both cases there has been a distinct improvement, so that the property is much more desirable. But more important it can be inexpensive. We can see from the first page that the entire rehabilitation of this property amounted to $849, so that it can be a very inexpensive procedure.

The next page shows a picture of a piece of property that was called outmoded. It was called an old dog. People said "What woman would want it." "It should be torn down and replaced."

All remarks about it were completely unflattering.

For the sum of $680 we made the improvements that you see there. You will see that the result produces a very dependable home at a very modest expenditure of money.

I think it is important, of course, to remember that most people probably would not know how to make this type of improvement and make it as cheaply unless they had architectural help. That is why we included these pictures, and that is why we make the suggestion that architectural advice be available. There has been too much waste of money that has been borrowed under title I which would have been put to good use with sound advice.

Three, that more rigorous rules be established to protect the homeowner from dishonest builders and unprincipled contractors.

Section 202, title II, home financing: This section increases the amounts which may be loaned on 1- to 4-family dwellings in the following manner-and I have given the schedule which is known to all of us.