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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 homes 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.


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. However, I would also like to suggest that a well-planned housing program could help keep our economy on an even keel. Conversely an ill-conceived 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.

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. Consequently we must come to the conclusion that a depression in real estate occurs for the normal causes—the existence of a buyer's market—which is caused by overproduction or excessive inventory.

The recession or boom in housing is further accentuated by two important characteristics seldom found in other commodities.

1. Homes cannot follow demand : Build too many homes in one city and you have a real-estate depression in that city regardless of how great the demand might be a hundred miles away. This can be cured only by the natural growth of population or the natural collapse of old houses in the community.

2. Housing is very sensitive to overproduction : Almost every commodity is susceptible to increased consumption except housing. No family can use more than one house in a given community. Consequently too many houses does not mean more use of housing, but rather a vacancy of housing, thus

affecting adversely the value of other housing in the community. I have taken the liberty of considering some of the economic fundamentals of housing in order to emphasize the importance of housing and the ease of overproduction once supply and demand have come into balance. That it would be highly undesirable to undermine the value of the average family's and the Nation's largest asset cannot, I believe, be disputed.


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:

1. That the building boom has continued for over 8 years.

2. That much of this building has been fostered by increasingly liberal credit terms.

3. That we have more housing per capita 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.)

4. 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.)

5. That our marriage rate has been going down for several years.

6. That there will be fewer young people of marriageable age for the next few years than in the past few years.

7. That normal economic conditions will cause a contraction in the use of housing.

8. 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.

(a) The need for rehabilitation is far greater than housing replacement.

(b) We have a larger percentage of good housing in the country than ever before. It will be difficult to determine how much replacement we will

need, and where, pending normal occupancy. We can see there is ample evidence that we may be past the crest of the housing boom and evidence that we may be overbuilt. The provisions of our housing bill must be limited so that the civic benefits may be available without causing a surplus and destroying the value of existing housing.

We would like to discuss the various provisions of S. 2938, 83d Congress, 2d session. We are familiar with housing because housing is our business. More so, we believe, than the builder who builds the housing for sale, the real-estate broker who sells the housing for his commission, and the mortgagor who finances the transaction for his interest return. We are the ones who own and operate housing—it is our responsibility and our problem. We have the following suggestions, by section : 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 hy easy longterm 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 :

1. 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 :

2. That architectural advice he 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.

3. That more rigorous rules he established to protect the homeowner from dishonest builders and unprincipled contractors.

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Examples of Rehabilitation

A little money + know-how transformation

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Most substandard housing doesn't need to be torn down; however people will require help and guidance to do an effective and permanent rehabilitation,

Section 203, title II; home financing

This section increases the amounts which may be loaned on 1 to 4 family dwellings in the following manner: 1 and 2 family, from $16,000 to $20,000; 3 family, from $20,500 to $27,500 ; 4 family, from $25,000 to $35,000.

We object to increasing of these loanable amounts, not so much because this tends to be inflationary, but because this insures mortgages on houses which closely approach the luxury class. A $20,000 mortgage represents a house valued at no less than $24,500, the house of a $10,000 to $12,000 a year executive.

Even if we do agree that this high-income bracket housing classification has a right to Government help, I think we would also agree that easy credit of this kind frequently permits owners to overbuy or purchase a home which their income really doesn't permit. If we owe people a duty of helping them buy homes, we also owe them the duty of keeping them from getting head over heels in debt. Under the present law a house of just over $19,000 can be purchased under FHA insurance. That would seem ample for the ordinary needs of the average citizen.

Home ownership encouraged. For the reasons already mentioned we do not believe that a decrease in downpayments is either advisable or economically sound at the present time. Nevertheless, if this committee finds that there is a need for their further reduction then we have a suggestion which we believe is practical and which will cure the dilemma. This would tend to accomplish both objectives, i. e., be economically sound and reduce the required downpayments.

We suggest that a special provision be made in the case of homes between the $8,000 and $15,000 price range. That these homes be sold under trusteed mortgages or land contracts as follows:

1. Reduction of the original downpayment to one-half of schedule but in no event less than 5 percent.

2. Providing for enlarged or special amortization payments for the next 3 years.

3. At the end of the special amortization period the owner will obtain a deed to the property subject to normal financing. We offer this as a possible solution to the pressure for lower downpayments but do not believe the insurable amounts should be increased nor the downpayments reduced.

Section 213: Cooperatire housing

This section provides for loans used for the construction of cooperative housing.

We believe it rather unfortunate that this section has been expanded to encourage families, especially veterans, to enter into this form of home ownership. When housing is scarce this may appear a desirable way of procuring a home.

Unfortunately the cooperative fails to do this on many counts. Except in a very few places and under unusual circumstances it has proved itself a poor investment. Its resalability is poor both as to facility and price. Neither physically nor psychologically does it give the feeling of home or home ownership. We think it poor judgment to encourage people to invest money in what has proven to be something of a white elephant in the past and what may well be one again in the future.

Are the cooperatives farored ?–We fail to understand why the cooperative has the most liberal financing provisions in the bill. The housing provided seems to be the least desirable if past experience is any criterion. Actually this bill provides far more liberal financing to the cooperative than to the individual homeowner or private apartment operator.

Section 203: Single- to 4-family--95 percent of first $8,000, then 75 percent, 30 years financing.

Section 207: Private multifamily-80 percent loan, 30 years financing.

Section 213: Cooperative multifamily-90 percent and 95 percent, 40 years financing.

It is difficult to see who can gain from this admittedly questionable promotion with the exception of the builders. Section 220: Rehabilitation and urban renewal

This section provides for financial assistance in the rehabilitation of existing dwelling accommodations and the construction of new dwelling accommodations as an aid in the elimination of blight and slum conditions, and in the prevention of the deterioration of property located in an urban renewal area.

We believe that every reasonable means should be given cities not only to rebuild their slum areas, but to prevent the deterioration now in or closely approaching the twilight zone. We subscribe with all the conditions set forth in section 220 of the contemplated bill. We would like to suggest 1 or 2 others which we believe would be of great help.

Erpert advice necessary.I do not believe that I am maligning people when I say that most people do not know how to redecorate, rehabilitate or remodel a home on a sound economic basis. They frequently know what they like, but invariably do not know how to achieve it. Consequently, a great deal of money is wasted through poor rehabilitation, poor planning, useless construction, which, once the newness wears off, causes worse looking slums than we had before.

Therefore, we suggest : 1. That every city certifying under section 220, hire or provide for the services of at least one architect, whose duty it will be: (a) to furnish examples of modernized facades of the types of homes indigenous to the city, and (b) to provide architectural advice to prospective rehabilitators at moderate cost.

The importance of this I believe cannot be overemphasized.

Simple slum prerention. We have discussed the elimination and the prevention of slums for many years. We have discussed the so-called causes of slumsbut we have failed to do the one thing which will do more to prevent slums than any other one thing provided for to date.

Slums are blamed on many things, but a fundamental analysis shows that these are not the basic causes but rather contributing factors or symptoms of slums. It would be foolish to say that aged buildings cause slums, or that locations cause slums, or that foreigners or colored people cause slums, or that a dense occupancy causes slums. The Housing Committee mentioned neglect by city governments as a cause for slums.

Reduced to its lowest common denominator the cause of slums is a loss in the desirability of a house, a location, or a district. It is wrong for us to think it is age. Are the New England towns to be considered as slums?

Save the exterior and you save all.I have already mentioned the cause of slums as a loss of desirability which in turn is caused by a loss of eye appeal. What is the first thing that happens to start neighborhood deterioration? Do the roofs leak, does the plumbing give out, do porches sag, are windows broken, are lawns overgrown? The first move toward deterioration starts when

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