THE HOME BUILDING MYTHS Probably one of the most pernicious myths about home building, Phoenix-like in its recurrences, is that the industry-as it produces houses today—is a relic of a bygone era in terms of industrial efficiency and cost savings. I'd like to put that one in the attic-attics, incidentally, which we don't build any more. The fact is that the construction of housing has changed in a radical fashion from the methods used but only a few years ago. This change has been steady and it has been remarkable. But unfortunately, it has not been the kind of dramatic progress and change which accompanies a break-through to outer space. The table which I am inserting in the text at this point illustrates the changes in the last generation. Source: National Housing Agency, "Housing Costs" (Washington, D.C., Superintendent of Documents, 1944), pp. 24-25. U.S. Department of Labor, Bureau of Labor Statistics, "Labor and Material Requirements for Private One-Family House Construction," Bulletin No. 1404, 1964, pp. 4-7, chart 2. National Association of Home Builders, "The 1964 NAHB Builder Membership Survey," special tabulation and pp. 22-23. Note: The 1962 data contained in BLS study was updated by using special survey of NAHB membership conducted in 1964, reflecting changes in techniques and housing characteristics in this period. The other category in 1944 National Housing Agency Housing Costs" study included contractor and subcontractor overhead, and profit. The 1964 data, however, was broader and included sales expenses, equipment expenses, profit, financing costs and services. The table dramatically reflects the increasing efficiency of the industry, the use of labor, materials and new tools and design systems. In short, in the putting together of the structure it now uses substantially less of the total dollars going into the final product than it did twenty years ago—a drop from 74% in 1944 to 56% today. We believe that the techniques of construction will continue to progress and change, perhaps at an accelerated pace in the years ahead. Let me give you a few illustrations on this point. They are pertinent to your inquiry, whether you are concerned with the inner-city slum or the open-space new town. The invention of power tools and equipment-and now their complete and extensive use has speeded construction at an astonishing rate. Many of these pieces of equipment and tools were unknown twenty years ago. The use of pre-cut, carefully packaged and sized building materials avoids an immeasurable waste of time, money, materials, and efforts on today's construction site. I said "immeasurable," but that may be the wrong choice of word, except in its totality. Because this Association has "measured" and evaluated to a great degree the elements of direct and indirect construction costs. Several years ago we undertook Project TAMAP, which is an abbreviation for Time and Methods Analysis Program which identified means by which management could institute cost reduction through better planning, scheduling, purchasing, labor utilization, shop and site work methods, and materials control. New materials, easier to handle, erect or put in place and, in many cases more durable, are being created and coming into common daily use at construction sites. It is simply not true that housing costs have been skyrocketing if compared to other consumer prices. The further truth is that the cost of building a house relative to all other consumer prices, has risen less rapidly during the 1960s. According to the Department of Labor, using the 1957-59 base period as the 100 level, the housing cost index for 1966 was 111.1. On the other hand, the consumer price index as a whole had risen to the 113.1 level. Further, and even more impressive, the cost of building the structure itself has actually declined in the last five years. I would like to introduce at this point a special report of our Economics Department issued September 1, 1964. Housing prices have, of course, risen during the post-war period but we are not building in the 1960s the same kind of a house we were building in the earlier years of this period. During the 1940s and 1950s the houses were much smaller situated on smaller lots and offered few amenities. Today's house is larger, situated on a larger lot. A large share of the change in that housing price thus is attributed to the fact that we are building a different product. But a very large share of the change in price reflects the simple fact that the portion of sales price allocated for land cost in the last twenty years had doubled, apart from the fact that consumer tastes have changed sharply during this period of time. It is clear that a major villain in the rising price trend has been the land factor. Our Economics Department has done studies on these aspects of construction costs which dramatically illustrate the fact that, even in a period of rising prices such as the first half of this decade, construction costs have remained reasonably stable. These are some of the factors which are ignored when criticism is voiced of housing's lack of industrial efficiency. Ignored, too, are other impediments to large-scale application of industrial techniques-inpediments such as financing, as zoning, as codes, and as the nature of the housing market itself. In the matter of financing alone, how can the industry lend itself sensibly to long-range planning when it is subjected to the on-again, off-again money markets? When the peaks and valleys do not permit of development of good middlemanagement levels? When the nation itself has no specific housing goals? To a large extent the home builders of this country are truly small businessmen. The typical member of this Association, for example, builds 17 houses per year. Less than one percent of all builders build more than 500 houses per year. This situation is very likely to continue. It is a reflection of the type of product and the nature of the marketplace in which we operate. It is not one market. It is many markets in many localities with varying tastes at all income levels. THE FOCUS ON CONSTRUCTION RESEARCH I would be naive, I know, to suppose that the myths will sink into unregenerative ashes, no matter how often the facts are stated. So I will move on to more reality. This Committee's hearings have demonstrated the urgent and continuing need for larger and more realistic research in construction and rehabilitation. The Association already has built six Research Houses to attempt to focus at the construction site the vast amount of research into new methods of design, new systems of construction, new tools and materials which constantly are being conducted by building materials suppliers. In addition, our annual ConventionExposition is a major national sounding board and display of new materials and products one of the largest in the nation. Of immediate interest is the fact that this Committee will be able to watch closely our current research house project. It will consist of six new town houses to be built nearby in the Northwest Renewal Area No. 1, near K and North Capitol Streets. They are intended for sale to low income families. This will be our first effort as an industry to do a practical, down-to-earth research-to-reality job on new housing in the inner city area. The construction will be of a new system of precast concrete. Aside from the "nuts and bolts" of the project, we are attempting to design the buildings and surrounding space and grounds for living with dignity. To do this, our architects have been working with the people in the area who, it is to be hoped, will remain there after the redevelopment of the area. These houses, within sight of the Capitol, will be only the latest in our continuing effort to experiment in a practical way with new construction techniques, design, and materials. In other projects, we have field tested sprayed-on plastic roofing, new venting systems, concrete construction in freezing weather, plastic hardware and substitutes for wood products, tilt-up walls, core plumbing and electrical circuits. The list is a lengthy one. Manufacturers and the government make use of our laboratory in Rockville. We have spent a great deal of money and effort in the lengthy TAMAP Study which has produced more efficient methods of building procedures— results which have been distributed to our builder members. We have been engaged over a period of five years in conjunction with the Urban Land Institute in effective land use research. I have touched on a number of the aspects of research in construction which may not be generally known. I would not want to leave this Committee with the impression that I think the research that has taken place so far is anywhere near adequate and I would also like to assure you of my conviction that a considerably greater amount of attention must be paid to these problems through public policy directed toward housing research and cost reduction. At the same time, in light of all this, we are convinced that there is no simple, single answer to technological break-throughs. We do think that some real help for both the inner and outer city urban growth will come from a progressive series of what at the time may appear to be minor changes in methods or materials. Cumulatively, they will have their impact. There is no question, however, that the funds now being spent on research and development in the $30 to $40 billion residential building industry is an insignificant proportion of what is needed. An effective effort by both government and private enterprise in this area is a necessity. There are, of course, other problems in utilizing the results of research. We are deeply disturbed by the Supreme Court decision in the case of the Philadelphia Carpenters Union case decided on Monday of this week. In that decision the Court upheld, by a 5 to 4 vote, the right of the Carpenters Union under their contract to bar the use of pre-hung doors on the grounds that this might upset a labor relations contract which permitted the Union to preserve the traditional work practices of that Union. While we believe that legislative remedy may be necessary, we point this out now because of the dangers inherent in this decision to the development of new materials, component parts and new techniques in residential construction. We accept at face value the testimony before you Tuesday by Mr. Haggerty that the International Labor Unions are cognizant of the need for the acceptance of innovations in this industry. We hope he conveys this feeling to the local level at which the bargaining takes place. HOME BUILDING AND THE FEDERAL ROLE Last year's White House Conference "To Fulfill These Rights", clearly recog nized that any improvement in the housing supply and housing conditions of the economically and socially disadvantaged would be dependent upon a major increase in the early additions to the housing supply. In fact, at the conference itself reference was made to the immediate need to increase the supply to 2,225,000 units a year in order to make any major in-roads upon the critical problem of providing better housing for minority groups and low income families. Yet, despite the capacity of the industry to increase production considerably above its then level, housing starts were permitted to drop by 300,000 units from one and one-half million units for the previous several years. Last year's large decline in volume is the direct result of the failure of Federal credit policies to provide for an adequate flow of mortgage money. It further reflected the problems arising from a mix of monetary and fiscal policies which at the outset, at least, ignored the credit needs of the American home buyer and the building industry and, thus, severely disrupted the contribution the industry could make to an increased housing supply. The effects of this interruption have not yet worn off and will be with us for a long period of time. It will be evident not only in the decreased volume now shown in 1966 and early 1967 statistics but in the impact upon the building industry itself which will continue to show the long term effects of a policy which does not permit it to operate with any degree of stability and with the consequent improvements in efficiency which could result from such stability. A relatively simple analysis will show the cost to the consumers, builder, and to the general public now and in the future. We can only regard this as misguided treatment of national and private resources. This is not a legislative committee, as I understand this hearing. Therefore, I will only mention that legislation which we suggested has already been introduced that could be very helpful in remedying such situations as that of the past year. The proposal is S. 1492-and I hope that these numbers are symbolic of a bright, new discovery. The bill would expand the authority of the Federal National Mortgage Association to issue securities designed to attract investment funds not ordinarily in the mortgage market. The bill also would authorize FNMA to make a start in dealing in conventional mortgages. Further, and pertinent to your committee jurisdiction, the bill would reorganize the Board of Directors of Fannie Mae and authorize a new Assistant Secretary for mortgage credit and policies. To some extent, Mr. Chairman and Committee members, this bill indicates the deeper feelings which we have about home building and the Federal role in urban affairs. Frankly, we are concerned about whether there really are any national housing goals of real meaning for the future. We wonder if a top-level, high priority commitment will be made on the part of the Federal government for a consistent improvement and enlargement of our total housing supply and inventory. There should be some effective mechanism within the Federal government to correlate and coordinate all other Federal policies which have their impact upon the supply of mortgage funds and housing production. The Chairman of this Committee has proclaimed an admirable five-point program to transform cancerous communities into competent cities peopled by competent citizens. For this we applaud him. I would respectfully suggest that to his second point-a home in a decent environment-that this Committee consider the development of specific yearto-year private housing goals as well as long-range objectives. HOME OWNERSHIP AND REHABILITATION We certainly endorse the proposal embodied in S. 1434 to assist low and moderate income persons to realize the goal of home ownership. We do not deceive ourselves about how difficult it is for poor families to become home owners. Nor do we think that it is possible for home builders, in the usual situation, to build single family houses within central cities and in slum or former slum areas. Surprisingly, however, it often is possible for enterprising families-given the chance to accummulate an equity with which they can become property owners. One of the early HHFA demonstration programs in Tulsa, Oklahoma-in which our Tulsa Home Builders Association cooperated-stemmed from our convictions on this point. It produced a whole new theory of lease-purchase areas for low income families. And homes became a reality for them. Anyone experienced in our industry in any capacity knows many from actual experience that the problems of producing good moderate or low cost accommodations through rehabilitation are even more complicated and frustrating than those that beset construction of new homes. Our membership includes builders who are remodelers and we have made a constant effort to attract more builders into this market and to expand their operations. As a matter of fact, in our educational program we are this week conducting one of our schools on this subject. I have here with me and I would like to furnish for the record a copy of the agenda for this program. Let me read to you a few of the topics which are being discussed. We also have a home study course which is carefully thought out and is aimed at bringing more builders into this field. While maintaining this effort in this field, we want to completely associate ourselves with the remarks of Mr. Hagerty on this subject in his appearance before you on Tuesday. In suggesting that government provide a clear incentive to builders and contractors who would in turn “develop practical technology and highly efficient procedures" he drew the analogy to this industry's tremendous effort in overcoming the post World War II housing shortage. We believe that a most hopeful incentive for stimulating rehabilitation can be in the realm of Federal and State income tax relief or tax deductions for rehabilitation. In fact, the whole gamut of real estate taxation needs study and reform. There is one more matter on the federal involvement in the provision of housing the share of new housing production represented by the FHA-VA programs a scant dozen years ago was two and one-half times greater than it is today. This is not happenstance but the result of many factors, not the least of which has been the constant harassment of the major federal housing agencyFHA. We realize members of Congress must take a watch-dog role over Federal agencies, to be sure. But in this case, the watchdog may have bitten FHA too severely. As the Chairman so aptly put it: "We are not going to rebuild America if our eye is constantly on FHA's reserve strength." In general, we think that a major immediate future concern should be the effective implementation and administration of the extensive housing and urban affairs legislation enacted during the last Congress. The Model Cities Program, or as the Chairman has called it, "the Model Neighborhood Program" and the Rent Supplement Program need to be given the appropriations and the green light to develop into full-fledged operations. This Association is in full support of the objectives of the Committee. Senator RIBICOFF. Tomorrow we will meet at 10 o'clock and our witness will be Lewis Mumford. Mr. WEINER. Thank you very much, Senator. (Whereupon, at 12:20 p.m., the committee adjourned until Friday, April 21, 1966, at 10 a.m.) (The following information relating to housing costs and research and innovation in the housing industry was subsequently received for the record from the Department of Housing and Urban Development :) EXHIBIT 238 HOUSING CONSTRUCTION COSTS APRIL 12, 1967. Attached are construction cost data for single and multifamily housing. These data lists a breakdown of the elements of construction, a percentage relationship of each to total construction cost, and a percentage ratio of labor and material. The costs are a selection of the median for the country. Between the low and high cost areas of the country there is a difference of 40% in construction costs on single family dwellings, and 35% on walk-up apartments. Major items of materials such as lumber-construction grade D.F.-varies from: West Coast___ East Coast (Boston-water transportation). Per MBM $102 123 135-150 Cement products are produced in all areas of the country and consequently there is a better uniformity in price. The price of certain grades of brick, however, varies as much as 100%. Location of raw material, kind of transportation and handling are key factors in delivered price of the finished product. Savings on large volume buying varies considerably, depending upon the product, financing arrangements etc. Lumber purchased for one hundred dwelling units my be discounted an extra 15% per MBM as compared to a purchase for one to five units. |