"Social welfare programs," he said, "are basically designed to save money rather than to save people. And the tragedy is that all too often they end by doing neither." "There are no inexpensive solutions," he concluded. NUMBER ON CITY WELFARE Welfare is a story also told in numbers-$2.63 allowed for a man to buy three restaurant meals a day and $653,802,165 in the current New York City budget. The welfare family includes 585,696 people in New York City. Its members: ¶ 395,566 children—almost all in fatherless homes-helped by Aid to Dependent Children (A.D.C. in the welfare jargon). ¶ 43,828 children receiving Temporary Aid to Dependent Children (which, despite its name, is often permanent) when a working parent loses a job. 181,868 persons in the catch-all category of Home Relief-people working at wages that cannot support them, people not old enough to receive Social Security payments, the chronically unemployed. ¶ 40,295 receiving Old Age Assistance. ¶ 22,066 who are physically or mentally disabled and cannot work. 2,073 blind persons. There were an additional 70,287 who receive some kind of medical aid, children's day care or a place in shelters for the homeless. The welfare family lives harshly. The average income for a family receiving Aid to Dependent Children is $2,499. City officials define poverty as anything below a $4,000 family income. The Community Council of Greater New York says $6,704 is necessary for "modest but adequate" living. The welfare family includes some 22,645 (or 3.5 per cent of the total) who are considered able to work. It includes 11,619 who hold full-time jobs but earn too little to keep their families above the welfare standards. The welfare family is heavily Negro and Puerto Rican. Some 2.2 per cent of its members have been in the state less than a year, half of that number less than six months. Most of these came from the South or from Puerto Rico, seeking better opportunities. Welfare Department expenditures make up the second largest item in the city's budget, 14.2 per cent, ranking next to schools and colleges, which account for 20.1 per cent of the budget. The Federal, state and city governments each contribute roughly one-third of the Welfare Department's funds. Senator RIBICOFF. The next witnesses will be Mr. Leon Weiner and Mr. Nathaniel Rogg, accompanied by other members of the National Association of Home Builders. Mr. Weiner, would you introduce the other members at the table with you, sir? STATEMENT OF LEON N. WEINER, PRESIDENT, NATIONAL ASSOCIATION OF HOME BUILDERS, ACCOMPANIED BY NATHANIEL H. ROGG, EXECUTIVE VICE PRESIDENT, NAHB Mr. WEINER. On my right is Dr. Nathaniel H. Rogg, executive vice president of the Home Builders Association and on my left Herbert S. Colton, our General Counsel. On Mr. Rogg's right is Mr. Joseph P. McGrath, our staff vice president and legislative counsel, and on my far left Dr. Michael Sumíchrest, our economist. Mr. Ray Niblack, our staff vice president and National Housing Center Director and Mr. Richard Canavan our staff vice president for Business and Technical Services are with us also. Senator RIBICOFF. Why don't you proceed. Did you want to read your entire statement or summarize it? Mr. WEINER. I felt I might summarize it and touch on some of the highlights. Senator RIBICOFF. Why don't you go ahead? Your entire statement will go into the record at the conclusion of your remarks. Mr. WEINER. Thank you. I wish to express, of course, our appreciation for the opportunity to testify in your hearings, particularly in the relationship of the homebuilding industry to the subject matter before your committee. NATIONAL ASSOCIATION OF HOME BUILDERS For a brief understanding of the changing nature of this industry, which has changed, we feel, more rapidly in the last 20 years than in the previous 50, I would like to make one or two comments about our trade association. Incidentally, I am a third generation builder and we are finding that we are now talking and dealing more with people who have also been in the industry for two and three generations, a characteristic which is a change from past years. NAHB has a major research and development laboratory staffed by 20 research engineers and technicians. In the past 15 years about 150 million housing units have been built in the United States and in the past 20 years a total of 32 million units have been built. We estimate that our membership which is currently over 45,000 accounts for the construction of about 70 percent of that housing. We have a staff highly diversified in the matters of design, land planning, economics, zoning, codes, taxation, the ebb and flow of the marketplace and the paramount problem of our times: the total environment of man and how to better it. This includes the subjects of water and air pollution, the problems of suburban growth, new towns, and the other urban problems which we are all concerned with here today. FUTURE HOUSING PROBLEMS IN SUBURBAN AREAS I would like to talk primarily then about some of the specific problems and some of the myths and business conceptions which exist about our industry and about the difficulties in finding solutions to some of the problems facing us. I feel that I can best contribute to the subcommittee and our industry by confining myself to some of these myths and by proposing a few directions in which we feel we can move toward solving some of the problems. A very large population growth is anticipated as we all know. In the last 10 years, 90 percent of that growth took place in the suburban areas beyond the city's limits. In the next 20 years we expect that 80 percent of the total increase will take place in the suburban areas, rather than in the central city. While we are concerned and seriously, with the central cores of our cities, and the need for rebuilding them so that they may be fit places to live, we are also concerned with the immense problem of housing the large mass of the American people in the years ahead. CONSTRUCTION METHODS HAVE CHANGED RADICALLY In dealing with some of the myths that persist there is one especially troublesome; that the industry is a relic of a bygone era, in terms of industrial efficiency and cost savings. This I think needs to be put to rest once and for all. The construction of housing has changed in a radical fashion from the methods which we used only a few years ago. This change has been steady, but it has been remarkable. Unfortunately it is not the kind of dramatic change that takes place such as an outer space breakthrough. We have included a table indicating that in the last 20 years, or in the years 1944 to 1964, the amount of labor cost which went into the building of a house has dropped from 29 percent to 18 percent. This, even though the cost of the individual wage to the individual worker and mechanic has increased dramatically during the same period of time. This has been explained by the increased efficiency, the use of new tools, the use of new techniques, and the use of larger component parts, some of which are produced in the factory and brought to the site. The cost of materials, for example, has shrunk from 45 to 38 percent during the same period. It is significant to note that land almost doubled, and that other costs went from 13 to 19 percent, an increase of 6 percent, and most of this in the cost of money. Senator RIBICOFF. Mr. Weiner, do you mind if I interrupt? Mr. WEINER. Don't mind at all, sir. STUDIES OF CONSTRUCTION COST DIFFERENCES Senator RIBICOFF. I am just curious. I have this table in front of me and the table doesn't tell us very much. Do your economists have any indication of the difference in cost of the same size of housing unit from 1944 to 1964 in actual dollars? Mr. WEINER. Yes, we do. We have a study here that we will include for your information of construction cost comparisons in 23 metropolitan areas done in a 4-year spread from 1960 to 1964. The study shows the cost for the same house during that 4-year period. We have also done some selected studies, and while not adequate for full documentation, they are certainly indicative, that there was a drop of 2.2 percent, an actual drop of 2.2 percent in the actual cost, the construction cost of the house alone, during that period of time. We have some additional studies we have done that we are glad to offer the subcommittee showing that there has been no sharp increase in the past 10 years in the cost of what we call the shell of the house. The increases have mainly occurred in land, land improvements, and the associated costs that go with the structure. (A report showing the relationship between rising land prices and the rising cost of homes, by Dr. Michael Sumichrast, follows:) [Economic News Notes from the National Association of Home Builders September 1, 1964] EXHIBIT 232 (Special Report 64-8) RISING LAND COSTS ARE BOOSTING SALE PRICE OF HOMES (By Dr. Michael Sumichrast) A new cost study serves to dispel a common belief; it shows that the construction cost of home building has actually declined in the last five years. The drastic increases in land costs, however, have kept upward pressure on the sale price of homes. During this period, while the consumer prixe index increased 7.1 points, the construction cost of home building in 23 major cities, the study shows, declined 2.2%. It costs 20¢ less per square foot to build the same house than was the case five years ago. Much of this decline is due to greater efficiency of builders. (Previous NAHB research has shown that the increased cost of land, not construction has resulted in higher prices.) From 1960 to 1964, the consumer price index (1967-59-100) increased to 107.8 and the purchasing power of the dollar decreased to 92.9.1 During the same period, the consumer price index of housing increased to 107.1. The construction cost index, as measured by Engineering News-Record based on 100 in 1913, reached 477 in 1949; 824 in 1960 and 924 in April, 1964. The building cost index showed an increase to 352 in 1949; 559 in 1960, and 607 in April, 1964. (See comparison of construction cost index in Chart I.) The question frequently has been asked: What happened to the construction cost of home building? While it is known that the average price of homes has been increasing (reaching $19,100 in March, 1964,3 it is not accurately known how much of this was due to the average increase in the space provided, different specifications, increase in the price of land, etc. From the construction cost index presented in Chart I, one would conclude that the cost of home-building construction has been creeping constantly upwards. Previously, because of lack of data, it was impossible to prove that this was not so. But, now for the first time, an NAHB comparison of the construction cost in the last five years is available. The results of this inquiry into what happened to home-building construction cost in 23 major Metropolitan Areas throughout the country in the period studied in enlightening." The comparison of 1960 and 1964 cost data is adjusted for variations in type and size of house, materials used, and different specifications. Of the 23 cities, 15 registered a decline in cost-as much as 11.3%; while 8 cities showed an increase in cost-as much as 2.5%. The summary of change and the construction cost for each city is presented in Table 1. 1 U.S. Department of Commerce, Survey of Current Business. 2 Engineering News Record, June 18, 1964, p. 100. 3 Bureau of the Census, Housing Sales, C-25. Cost data is based on FHA unpublished Construction Cost Comparison for each city, FHA Form 2528. These data, for two time periods, were adjusted to a comparable basis. Each cost item was separately evaluated and priced at April, 1964, cost. The differential for variation in types (such as exterior walls, basement versus slab, or one-story versus twostories, etc. was reconciled by using FHA cost-data books for each city. Where no comparison was possible, the city was left out of the analysis. NOTE: Cities cannot be compared to each other. Cost data should be used only in determining a trend in a given city rather than as a yardstick of city-to-city measurement. TABLE 1.-CONSTRUCTION COST COMPARISON IN 23 METROPOLITAN AREAS, 1960-64 Note: Cost based on purchasing and production of not a single house, but more houses as usually built in subdivisions. Cost does not include builder's overhead and profit. Source: Federal Housing Administration and National Association of Home Builders. The study shows that on the average it cost from $7.35 to $9.27 per square foot to build a frame, one-story, detached house on slab, and from $8.72 to $10.86 to build a frame, one-story, detached, full-basement house. The average cost per square foot for all slab houses studied was $7.79. The average cost for all basement houses (including split-level and 2-stories) was $9.66. Table 2 shows the average cost in all 23 cities. TABLE 2. AVERAGE COST PER SQUARE FOOT IN 23 METROPOLITAN AREAS, 1964 Note: Average with slab: $7.79 per square foot. Average with basement: $9.66 per square foot. |