NAHB STATEMENT OF POLICY 1970 The Challenge to Us All For home building, the 70's pose the greatest challenge in our history-we must double production of homes and apartments as the primary step toward the cure of America's urban ills. We can do this job, but we cannot get on with it hampered by mistaken national economic policies and the current incredible failure of government to establish proper priorities. Rather, these constitute a prescription for early disaster. The capacity of this industry to cope with the nation's housing problems will be seriously crippled if the attempt to contain inflation solely by "tight money" is continued. The crucial question today is whether a major national resource-the home building industry-can survive to continue its job of housing the American people. The Scope of Housing Needs America's housing needs are enormous. No matter how described-whether measured against the staggering statistics of the population explosion or against the imperative social necessity that slums and ghettos be eliminated— the need is of a magnitude fantastically beyond anything this country has yet experienced on any sustained basis. In the 1968 Housing Act, the Congress recognized that in ten years, by 1979, we must build at least 26 million units. There is no doubt of the capacity of the home building industry or of our national resources to meet this vast challenge. What is doubtful is the national wisdom to make the right decisions about using our national resources of credit and materials and the national will to take required action for their appropriate use. To house the American people does not require a new industry. It needs only restoration of balance in our credit market, a more rational government policy in fighting inflation to distribute more evenly the burden of tight credit, and the better realization (by government at all levels and by the public) of the fundamental problems of providing shelter and of the delicate, complex industrial mechanism which produces it. The Current Housing Crisis Against this critical need and the congressional expression of a national determination to meet it, actual national performance stands in bitter contrast: • Housing starts in 1969 one-half million below the need for the year. • Housing starts in early 1970 at a disastrously low rate with the prospect of falling further below the 1.4 million 1969 level. • Interest rates and discounts at an unconscionably high level, disqualifying more thousands of families from improving their housing conditions or owning homes. Builders throughout the country forced to reduce operations, further depleting the already short supply of skilled labor and management. • Housing production at one of the lowest rates of any advanced nation and barely equal to the production rates of some of the poorest countries in the world-a mere 6.5 per 1,000 population, less than the rate of 20 years ago. • Housing production particularly crippled in the middleincome range-good homes and apartments becoming less and less available for policemen, firemen, teachers, and many others in the modest income categories. • Vacancy rates at their lowest in post-war history. • A housing deficit estimated at 2 million units and growing rapidly. Although the Congress of the United States and the Administration have expressed and demonstrated concern, the home building industry has been forced to bear, nearly alone, the major burden of the fight against inflation. Still lacking is a full appreciation of the damage done by causing one major industry to suffer deeply from economic restraints I while the rest of the economy goes virtually unrestrained. What America does in housing should bear some relation to what it says it wants to do. We are hopeful that the President's statement that "housing must be a top national priority," following his emergency conference with the leadership of NAHB on January 20, 1970, will be a first step in this direction. What is happening and ap Millions of Units 1970 parently will continue to happen to the members of our industry is not the issue. Rather the issue is what is happening to our housing supply and to the way American families are being housed. Federal Fiscal and Monetary Policies The time has come for government to acknowledge that economic history affords no proof that tight money alone can effectively control inflation unless this policy is so drastic and so prolonged as to precipitate a severe depression. The almost limitless demand for long-term credit-much of it for uses which further spur inflation cannot be effectively controlled except at its source. The highest interest rates in history have not prevented a shocking 11 percent increase in the plans of American corporations for new plant expansion in 1970 and have, in fact, stimulated those very banks which can find no money for housing into frenzied promotions of "bank credit cards" and other stimulants to encourage even greater consumer credit buying at up to 18 percent annual interest charge. An insufficient money supply is being auctioned to the highest bidder. The 1966 Annual Report of the Council of Economic Advisers stated that the housing industry bore 90 percent of the burden of that year's credit restraint. In effect, housing is being dangerously reduced to subsidize exploration of the moon, development of the supersonic transport, commercial plant expansion, and Vietnam. Permitting such distortion is not desirable public policy, and, we submit, runs the risk of serious economic dislocation. The home building industry, among the first to advocate a balanced budget and credit restraints to prevent inflation, can no longer support economic policies which rely exclusively upon “tight money" and which, unless immediately altered, clearly point the way to our demise as a going industry. It is absolutely imperative (a) that the President of the United States immediately and fully employ the credit controls provided by the Congress to the end that credit be rationed more sanely in relation to long-range social and economic uses, (b) that the federal budget be balanced, and (c) that the Administration use its broad inherent powers of leadership to restrict the dangerous upward price-wage spiral. Mortgage Credit The drastic increase of 26 percent in FHA-VA interest rates during the past year is the wrong way to attack the problem of scarce mortgage credit. Time and again moves of this kind have proven self-defeating. Higher interest rates serve only to push monthly housing costs further beyond the reach of the average family. The answer to our money crisis is not a continual upward adjustment in interest rates. The answer lies in coming to grips with the conditions and outdated institutional devices that actually produce runaway inflation in money. The creators of the Federal Reserve Board in 1913 could not have envisioned the current situation in which we have a housing industry that did not then exist and a standard of housing to which people have grown accustomed and to which they are entitled. The time is long past for the Federal Reserve Board, controller of the nation's credit, to immediately revise its thinking and its operations so as to buttress evenly the entire credit structure of the nation rather than to devote itself to aiding commercial banks at the expense of thrift institutions on which housing must rely. The Federal Reserve Board's action lifting Regulation "Q" ceilings moves in the opposite direction. It will NATIONAL HOUSING GOALS The housing industry has built, since the end of World War II, more than 35 million new homes and apartment units. But even this staggering production record has not met the needs and demands of a growing nation. None has realized this more than the housing industry itself. But its peculiar vulnerability to the shifts in economic winds has made it an orphan of the storms, a beggar in the money markets. In the five credit squeezes of the postwar period it has been the first and major victim. Each time production plunged before slow, painful recovery set in. Obviously, industry leaders reasoned, some better method of production stability must be achieved. Equally obvious was the need to define the scope of the problem-in order to overcome it-and the need to establish quantitative and qualitative goals to achieve the objective of the 1949 Housing Act: a decent home in a suitable environment for every American family. Thus, at the outset of 1966—as the industry encountered the fourth severe period of credit restraint the NAHB initiated an intensive study. In the spring of 1966, the Association issued a concise and pertinent report on that study. Entitled A National Housing Program, it said, in part: "The nation's basic housing needs today are enormously higher than what is actually being produced. These needs will grow in the years ahead. ". . . . In the first five years of the next decade (1970-1975), these needs will increase to over 2.6 million housing units annually. "These housing needs are derived basically from analyses of our factors: (1) household formations, (2) replacement needs, (3) vacancy requirements as a result of changes in population mobility, and (4) removal of substandard housing." draw funds away from housing and further impede our efforts to provide homes for the American people. As a first step toward an overhaul of our financial institutions the Federal Reserve Board must exercise the authority granted it in 1966 to purchase the obligations of the Federal Home Loan Bank Board and/or the Federal National Mortgage Association. Similar authority granted to the Treasury must also be exercised. The Administration is to be commended for the high level of vital support provided to housing in 1969 through the Federal National Mortgage Association. However, developments following the increase of the FHA-VA interest rates to 81⁄2 percent at the start of the year reveal the necessity for adjustment in its operations. The aution system, while serving well as a means of supporting the housing market in this time of of crisis, must be perfected to assure some stabilization of pricing and to ward off adverse results of panic bidding. In light of the apparent early transition of FNMA to full -Their Evolution Most serious impediment to the achievement of housing goals, the study found, was the short fall in available mortgage credit for the years ahead. In 1967 the NAHB sponsored a series of housing goals conferences. These involved the heads of trade associations and public interest groups and organizations, members of Congress, and Administration officials. In these sessions the concept of formalized housing goals for the nation was analyzed and debated . . . and the concept caught on. Congressman Richard Ottinger of New York first advanced the concept to the Congress in August of 1967. It gained broad support in the House of Representatives and the U.S. Senate and among both parties. In 1968 it was recognized in the landmark Housing and Urban Development Act of that year. The introduction to Title XVI of that Act states: "The Congress finds that the supply of the nation's housing is not increasing rapidly enough to meet the national housing goal, established in the Housing Act of 1949, of the realization as soon as feasible of the goal of a decent home and a suitable living environment for every American family. The Congress reaffirms this national housing goal and determines that it can be substantially achieved within the next decade by the construction or rehabilitation of 26 million housing units, 6 million of these for low- and moderate-income families. Title XVI calls for both a detailed annual assessment by the Administration of progress towards achieving the housing goals and the means necessary to reach them. Now, it is a question of the national will to direct the proper order of priorities and allocation of national resources to accomplish what the Congress has directed. |