The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
F. R. 5 11
TO
Board Members (individually)
FROM
Chairman Secies
REMARKS:
Aug. 31,
The attached report on war housing was
prepared for Mr. Vinson and Mr, Cohen as
the result of a conference I had with then,
at which time I undertook to point out to
them many of the bad features in the war
housing program, particularly that part of
it dealing with the units which were of a
permanent nature and privately financed.
If you have the time to read this report, I am sure you will find it interesting as well as enlightening.
M.5.E.
CHAIRMAN'S OFFICE
©
August 10 f 1943
To*
Mr* Cohen
frmt
% Mm Stark
Subjects
The ~«&r Housing Program
the need for revision asd. redefinition of policy as regards
the war teasing pro-gran, to which Mr. geel*s called attention at ©OT
recast limeheofi dlsou»eiont i s here briefly pr«s#st®d on the basis of
work dori# fey ar # Easss&y Wood of tbe Federal t®aerv» staff («bo gi^ws
a f a l l t r nccoimt of the war housing program in thm atttehed Beooranda}«
1, Alteoiagh the i n i t i a l objectiTe of the war boiwiitg
the hoosing ©f war iK»rk@rs vlth a adnisum of n««r eonatruetioa**'IMUI
to being aet sine® the creation of the Hmtional ioasi»g kgm®$ l a
y , 1942;* two questions of related public poUqr should be promptly
aetiir@2y considered (should in faet have had 0lo®.®r attention from
the s t a r t ) :
a. To what «t©nt
housing inappropriate to the <&a®rg#Rcy eondltions whirls the prograis
I s ii$t*io<l#d to
, with i t s attendant
in ar#a® and uod®r eendltions in nisleh r e a l
ar@ lnh©r@Btly \mcertaiB? (Hental occopanay i s the
.}
2m Abomt l9S2Of0O0 housing Tinits have already hmen
Q£ -which lf31E,CXX> represent new ecusirttatiflw, in the fiacmi j®mt
tits program call® for 330,000 addition^ 'unit®, of mhiisfo 250^000
be pravided by ®m construction.
Thusf the provision of housing tor in^adgrant
i s largely csi^>let®d# I t i s not too l a t e , howwer, £®r
' r@g&r?iiisLg the t«o qa#»tians raised—'partieularly, thomgh not
with the eslsMas of the prograie*
3 . She major part of th© units provided by new eoa«truetlo&
1944 w i l l have &®@fl f^sil Iffif"fjitinitftj and most of i t w i l l be
tesgwrary i a nature.
Cotttesplated In
f i s o a l 1944
Program through
«&m@ 30, 1944
1943
Total BW eonstmstior* 1,318,000
663,000
186,000
477,000
655,000
...
250,003
X f 568,000
160,000
—
16Q,OGQ
90^000
i23,00Q
186,000
637,000
745,000
4* I t I s lner®asingl/ iK^ortaiit that w©
stru©-tism ifeftre «Mtf§SMgr f a c i l i t i e s iyr@ mpproprlat® and postwar
5. I t will b# noted that a l l of th« pitblic coaastnietiois
to b® 4©ne i s to be of * t^EporaFy cfearaet«r Wid t d H b® r®»t®d,
a l l of tb» prifat^ o^nstruetiott i s to be porauuiont mui a l l of i t suap
sold after m%$ two zsonths of required renting»
6. Uwd#r Titl® VI of th« H»tl—tl Housing i e t , Coagress
the P@d*r$l Hknuiing Adainistratiaia to in®m*'t up to $lf2CX)
slUion of aortgsges oa pilTat^ly-fiaanc^d wur hotmirng. Uiwi@ar this t i t l e ,
m budlld#r may obtain a aortgsge for an ssount ^ i c h FH4. J^ig®® to repre-*
@®at his o©st® of eotMitaruetion} wh®afa@s e l l s the taou®.©, he asgr ai4 11
pmr mm% to the origins! assowit of the siortgege to a r r i w at the selliag
This assures the builder a profit of 10 per eent.
Although Congress intended to ®seomrmg® the renting of
Titl® VI housing, «»r# than .half of the private war homing wMeh is*
now accupi®4 has h®m bought, or i s la process of being bought* b j i t s
Thus indirLdusls ar« taking tmrnership ef a Xarg® aiaount
of permanent hevoing faeiXities built for energencyr purposes* in
of to^ararilj increased popBlmtioii and ia6«uit*ial i
?. Sine® tea^oraiy, publicl^*flnsnced eu*rg®Rcy housing
b® built aor« ehesply thaa priTat©, persusnent housing (in t#mss of both.
mm? aiid o r i t i c a l s»t®risds) and i s exelusirsly rented* thsvt i s a
g presua^tion that the eont^mplated priTatt building should h®
as rapidly as possible fro® the mar hotting program* end
that ®ort striEgeut r#q^ir@s©ntn SIIQUM b# lidd dmtH to
hold fetf fWi such tsait® a® haT^ b®©n b u i l t ,
The sain prin$Xplm ttxmlmd in Ihs sitimtio» are (1) that
energeney f a c i l i t i e s ought to b® ^sad to Mitt emergenoy
-3-
(2) that individuals ought not to b@ ttioourftgwl to immst nm in the
of «tri§@ji€j housing la temporarily mn$m%®& «r«MM^»b«eau>
postwar valut of sacb hoos«« i t fUjliimitfLii b^casuw p<urUr«r
b® iBT^lvml in sale, i9 a bar to th© mobility of
which will b® required In Urn period ®f postmor
I t i» suggested that th#s# statters b® taken up with Us®
isitrator of the Mstion^I Hoaslsg Agency* and. that h@ b@ r#qu#at«d to
report and to makt appropriate r#eos^#yid&tton® far
BDARD DF GOVERNORS
DF
THE
FEDERAL RESERVE SYSTEM
Office Correspondence
To
Mr. Stark
FrOtT1
HamsayW
' 13, 1943
U J
fleia® m \Sar Hogging Program
The attached memorandvm on the War Housing Program
i s that referred to in your ssemorandum of August 10 to Mr* Cohan*
Some question lias arisen about the isteaning of point
number 6 on page 2 of that siemorandum, whloh I shall attempt t o
clarify her©*
1. Title ¥1 of the national Housing Act permit* the
insurance of a mortgage, for up to §0 per oent of the appraised
value* to the builder of a 1- to 4-family house in an area in
which the President finds that there i s or threatens to be a
shortage of housing which would imped© the war program* The
Guilder mist be acceptable to the FHA, as a soimd and responsible
cone© rn•
Z* The appraised value i s that determined by the Federal
Housing Administration, using the procedures and criteria established
for i t s regular insurance under t i t l e I I .
S* By regulation* the Federal Housing Administration has determined that the 10 per cent equity required of the builder may be
his profit.
4. This means
which eoTers a l l of
value of the lot so
of the value of the
that the builder may obtain an insured mortgage
his material and labor costs plus the appraised
long as these costs are not more than 90 per cent
house at appraised by
5. the builder may sell the house to a buyer who pays him the
difference between the purchase price and the maxinum allowable
mortgage. If the price i s higher than the appraised value* t h i s
difference will, of course, be more than 10 per cent, and, if lower,
less.
6. Under Title Yt the buyer may rent under an arrangement whereby
part of the rent i s applied to build up th® required equity within
SO months.
7. the War Production Board and the National Housing Agency,
under priority, allocation, and quota regulations, determine prices
and rents which may be charged. P a i n t s under leases with option
to buy my not be more than the w&ximm permissible rent
Those are the requirements of law and regulation* In souse
areas, because of poor administration, the system Is not as tight as
was
8* Appraisals (henoe
and specifications, and so
Ineptness ©f the appraiser
they are too low, builders
mortgage amounts) are based on drawings
nay be too high, either through the
or as an inducement to building* If
will not build*
9* la addition to the profits which ray be realised as the
result of inaccurate appraisals, the builder stands to make a
speculative profit in the sale% as lots of land which was bought
as acreage*
10* To the extent that permissible rents are set toe high, the
purchaser under the lease-option arraageaent i s paying more than he
t@ be paying for housing*
11 • there are reports that souse of the builders operating under
t i t l e ¥1 are not sound, responsible concerns*
\%* A provision in Title VI as originally passed requiring that
only mortgages which were economically sound be insured was sub*
sequently replaced with a retirement that the risk merely be acceptable
in rUm cf the emergency, t h i s change has permitted the building of
f i t l e VI houses in many areas which have no postwar tvbvrm*
fhe last five points are difficult to prove without
tensive investigation cf particular cases* There Is l i t t l e doubt that*
at least in SOPS places* Title TX housing I s being Insured for more
than i t I s worth, buyers are paying more than I t i s worth, builders
are making siseable profits (insured by the Government), and there
will be ,gh©«fe tswjis or sections of town* after the war i s over.
THE Kit HOtiSIIG PH0SR4M
The major objectives for & wartime housing policy
differ from those that were pertinent in peacetime. They
includes
1. At least tolerable housing for everyonet particularly
war workers.
2. The most efficient utilisation of existing housing and
the best possible adaptation and distribution of new housing.
3. Avoidance of burdening communities and individuals with
permanent housing and excessive real estate indebtedness Where
housing nm®&& are temporary and emergency facilitiesraoreappropriate*
4• the distribution of the ©oats of war housing as equitably
as possible*
5. the avoidance of increases In the price of real estate to
artificial levels that will not be sustained after the war*
Development and shortcomings of the present housing program
Since the national Housing; Agency was created on February 28,
1942, we have come much closer to meeting the first two objectives*
A functioning relationship has been established between the determination of housing needs and their fulfillment* The National Housing
Agency works with the War Manpower Commission and the armed services
in deciding where* when* and in what amounts and kinds housing Is needed
for workers in war productions it works with the War Production Board
in the allocation of materials for construction} It is the llason
organliation with Congress In obtaining the authorisation for the
required programs! and It deals with the building industry in the
execution ©f these programs*
la meeting the other three objectives we have not been as
successful* in part beoause techniques were established for pro*
viding war housing before It was realized how fundamentally housing
policy would have to change If the wartime and postwar economies
are to function smoothly. The controls which have been Imposed on
housing are now functioning better than at any time in the past toward
the meeting of these objectives, but they might still be improved.
1. The large proportion of privately-flnaneed housing which la
being sold instead of rented is a cause for coneera* In fitle ¥1
of the National Housing Aet Congress went to some pains to provide
* 2 •
favorable financing terms to builders In the hop© that private
capital would provide rental housing for war workers. The record*
as is brought out la Appendix D# is not good enough to justify
continuance of a substantial volume of building under this Title
unless more vigoroui steps are taken to see that such housing is
indeed rented* Wot only should the resent relaxation of the
regulation governing sale of new privately-built units be rescinded,
but the regulation should prohibit their sale except where hardship is apparent*
2* lent controls are working well as far as the stabilisation
of rents is concerned. A great deal of pressure has been exerted
on the OJPA for soiae time by real estate groups for the relaxation
of these controls* and especially of that which requires one-third
of the purchase prlee to be paid in ©ash when a rented house is
bought* the plea, in general, Is that* since other prices have
net been completely stabilised, real estate ought to be allowed some
inflation both in rents and in real estate prices. To this pressure
OJPA has so far been practically deaf* However, the Smith Committee
of the House, investigating administrative agencies, has recently
issued a report which practically endorses the appeals of the real
estate people* If this results in either legislative or administrative
relaxation of the present controls, It is likely that rests and real
estate prices will rise, and the stability of tenant occupancy will
be disturbed as rented quarters are bought from under tenants at
increasing prices* Such an event would not only disturb the cost of
housing, but would add to the manpower problem in defense areas as people
now employed look around for new aocoimiodations or even leave the
locality* Such steps as can should be taken to insure that the present
regulations stand, except as machinery should b© set up to ©are for
true hardship eases*
Postwar implications of the housing program
Several serious problems are raised far the future by
the war housing program, the most important of which for the present
purpose arei
1* Will there be a need after the war for the Federally*
financed housing which has been built?
2. 1111 the privately-financed housing which has been built
be needed and wanted after the wart
3* If some of either the publicly* or privately-financed
housing is not needed or wanted after the war and is either torn
down or abandoned, will local communities be left to bear the continuing costs (e.g*, debt charges) on public facilities which have
been providedt
The most recent amendment of the Lanhara Act, under whloh
practically a l l of the public war housing from now on will be built*
provides that a l l public war housing be removed within two years
after the termination of the present emergency* except such as*
in the judpsent of the WJk Administrator* i s needed during the d#»
mobilisation period* Public low-cost housing under construction
early in the war housing program and coaverted to house war workers
will sot b© affected, and the Administrator ought to recommend
the retention of soot* of the other projects which meet peacetime
standards*
So long as th® dens© l i t ion of th© Government1 s war housing
i s not pressed so fast as to create forced housing shortages, t h i s
policy i s good. As Mr. Blandford has testified, *fi"e certainly are
not building houses that represent real community assets, in this
temporary type of housing* ».. w The Federal Government should not
be placed in the position of maintaining blocks ©f substandard housings
The policy now in effect concerning privately-financed war
housing i s not so enlightened, t i t l e ¥1 of the National Housing Act
was written primarily as an induesraent to builders t© build badly
needed housing* largely in areas for which they saw no future• the
feet that more and more of the private housing built has cos*© to be
Insured under t h i s f i t l e , and the dire predlotions in trade papers
when authorisations were about to run out that* unless they were in©reased# private building would stop ©ompletely* suggest the #oon#mlo
unsoundness of Title ft housing. I t is not necessarily tru* that
a l l such housing i s substandard in peacetime terms* That built early
in the program did not suffer from materials shortages, from
the limiting effect ©f the housing standards promulgated by WPB, nor
from the subeequent inflation ©f building costs, there i s l i t t l e
doubt* however, that the later housing has suffered from a l l these
factor•« although some builders have no doubt been iaor® skilful in
eoping with such factors than others. Even the better of the later
structures are apt to suffer in p#asetise oompetitloa since equip*
want and fisrfeures have been stripped to bare essentials, and might
have to be replaced, at some ifttJt* to be attractive to. postwar
oooupants*
Oooasion for concern also arises from the failure of Title ¥1
to induce the anticipated volume of rental housing. The requirements
of WPB and MA assure only that new units will, preponderantly* be
rented at^ first* They do not, however, assure that they will continue
to be rente<
the postwar implications of this are serious* Demobilisation of the war eeonoiay is certain to require migration
of population on a scale almost as great as has been needed for
mobilization. Many areas whioh hare expanded to manufacture war
goods will decline again, and areas which have lost population
will regain it* Workers Who have been forced or induced by circumstances to assume the obligations of ownership will be reluctant
to move if to do so means loss of capital invested in a house* and
suoh loss is likely to occur, not only because of exodus of population
from war centers with a consequent depression of real estate prices,
but also beeaus®, with the freeing of •eononlo resources for pea@#*»
ful uses* better houses will be available in the price-class of the
present war housing.
To saddle war workers with this expense is obviously unjust, as well as offering unnecessary obstacles to postwar re*
adjustment* A. way out might be found in the law itself, If the
Sovemiaent were willing to assume the cost of sueh housing as another
cost of war. That is, a procedure might be set up for negotiation
between ¥Bk and the owner-occupant for amicable default on the
mortgage, in which case, FBk would be liable to the financing
institution for the outstanding principal* Here such a course followed (whleh was certainly not contemplated by Congress) the insurance
fund would not be adequate to meet the cost, and the policy would
result in a charge on the treasury. Congressional approval would,
therefore, be necessaryJ/
lot all of the housing involved will be a dead loss*
Some of it has been built where it will be needed, and is soundly
constructed, and some which is not so can be made sound and thus contribute, at relatively little cost, to the housing supply*
objections can be raised to such a policy, suoh as
that it might encourage other "raids* on the treasury, that it reverses a policy already established to the advantage of some, and
that it might encourage dependence on Government bounty by some of
our people* Due weight must, of course, be given to these objections
before action is taken.
Another variant on the above approach sight be for the
Government to offer to buy sueh housing as is judged to be an encumbrance
on the eoonomy either in the open market or for the amount of the
mortgage* If sueh a policy is adopted for other parts of the economy
as a demobilisation measure, this might have practical advantages*
1/ It is likely that the insurance fund will not be adequate in
any case* The policy suggested here, however, would increase
its inadequacy*
4s far as the remaining housing program Is concerned, it
seems advisable to place more and more emphasis 0m temporary or
demountable housing financed by the GovemBtent, and to discourage
still further the sale of such Title ¥1 housing as is now rented
or is to be built.
to a large extent, the cost of facilities (water* gas,
and electric lines, streets, schools* and the like) for public
projects is being met by the Federal Government where they are
needed, and this is true too of some of the facilities for private
projects. Seme such ©osts have, however, bees borae by the locality.
Where this is true, and a marked decline in population takes place,
these costs will be an unwarranted burden* There should be little
difficulty, however, in working out arrangements for the Federal
Government to share such costs. One thing of which w© ought to be
sure, however, is that we make as few mistakes as possible in approving private housing in outlying areas whieh will require sueh facilities,
and which may be deserted at the end of the war* The present poliey
of encouraging building (both public and private) where such facilities
already exist ought to be continued and intensified*
APPEHDIX A - BBfBLOPlfflHTS FEHTIKEKT TO tM PBSS1IT HOUSIIG PROGBAM
insurance of war homing
The first major step which was taken for the provision
of war housing was the amending of the lational Housing Asrfc on
March 88, 1§41 by the addition of Title VI which enabled the
Federal Housing Administration to insure mortgages on houses built
in ^Defense Housing Areas* on terms sufficiently attractive to
induce private eapital to supply the need*
In passing title Tl$ Congress recogai ssed. that builders
are reluctant to build houses to rent. It therefor© afforded terms
which were more favorable then those previously offered for rental
housing and also than those accorded omier-oceupied properties*
The ittortgage might be for an amount up to 00 per cent of the
appraised value of the property (with certain maxim prescribed)*
and it has been ruled that the 10 per cent equity required may be
the builder*a profit* It is thus possible for a builder to obtain an insured mortgage on a property In whioh he has invested
no money.
At the same time, however, it was provided that the
occupant might assume the mortgage and thus become the owner at
any time within thirty months upon acquiring the builder* s 10 p*r
oent equity, This eould be done either through a luiap sum payaent
or in monthly installments.
Subsequent amendment of Title TI has made it still more
attraotive as an indueenssnt to the building of housing for rent *•*
by increasing the maximum amount of the mortgage, reducing the
insurance premium on mortgages on rented houses, and increasing the
possible maturity of the mortgage from 80 to 25 years*
In spite of these indueements to building for rent, a
survey of defense-housing unit® ®-@©upied on January Slf It4t showed
that only tt per cent were rented, and 78 per eent had been sold,
either for ©ash or on terns* A similar survey of units occupied on
May Sl# 1941 showed that only 46 per sent were rented or ooeupied
on lease with option to buy*
Priorities and materials Qcmtrola
When the Offiee of Production Management applied the
priorities laeohanlam to housing in Oetober 1941, it inoorporated
in the priority application of the builder a loosely«*worded agreement that units built with th© aid of preference ratings would* where
possible* be rented to defense workers*
• t •
As the need for ©octroi over the use of materials become
greater, and AS the National Housing Ageney perfeoted i t s progrsjsmlng
polioy* this requirement has been tightened. In Beeember 1942 i t
was required that a l l housing built for war workers (whieh i s
virtually a l l new housing) must be rented for at least four isonths
before i t nay be sold to the oomipant* and thle requirement was
applied to eaoh sueoessi^e tenant. At the sase tlmrn, WA aad
the right to determine rents and selling priees*
ZB iluly 1943 the polioj on renting wat i»odified to pro*
that a builder might sell one-third of the •units i s anj deprovided he did so within 1§ days of ooapXetlen of the
building, aad the rest might be sold after two Months oeevpaney by
the buyer*
Rent- control
fhe Offioe of Friee A<fesinistrationt through i t s rent
oontrol program* has reduee-d the cost of housing in those areas where
marked increases in rents had taken place, and has kept rents generally
at t h i s reduced level• By an amendment to i t s rent regulation* the
OPAf on October 19* 1942 required that where rent regulations are in
effeot* sales of residential property which require for ©ompletion
the involuntary dispossession of a tenant may not be made unless onethird of the purchase prioe i s paid down and the tenant i s given
three months in which to move, t h i s requirement has had the ©fleet
of reduelag markedly the sale of rested properties, and as a result*
has kept down real estate prioes f as well as safeguarding the position
of tenants*
A strong and continuous attack on these regulations has
been under way for some time and may aow be about to suoceed. fhe
Smith Oom&ttee has issued a report agreeing with OPA's orltles
whieh may lead to relaxation of the oontrols at either the iegiilative
or the admin!strati-re level.
The policy now governing the provision of housing has
been stated recently by Mr* John B. Blandford, J r . , Administrator
of the national Housing Ageney*
"Because of the great wartime demands upon the available
supplies of critioal materials* the national Housing
Ageney authorises new housing only where i t i s urgently
required for war production, t h i s policy means that
we have scheduled ©onstruction only to house essential
in*migraat war workers and then only to the extent that
those workers cannot be adequately housed in existing
dwellings or through ©onversions of existing structures**
0on©eraij&g the division of construction between public*
agencies and private builders, Mr. Blandford goes on to say that
under the ISA's programming policies, privately*finan©ed oonstruetion
i s scheduled wherever a postwar demand for the housing i s reasonably
likely and wherever private builders can meet wartime requirements*
In addition to the authorisation of new housing aooomodations, the HM has sponsored the conversion of existing buildings
(both residential and nonresidential) to add t o the housing supply*
Additions to the housing supply in any gives locality
are programmed for a given period after consideration oft (!)
estisiates by the War Manpower Commission of in-^igration during the
periodf {%) the family-status composition of the ia-salgrantsf and
(3) existing unutilised or under-utilised housing in the area. If
the supply of housing i s inadequate to serve the in&nlgration foreseen, attempts are made to eomvert existing buildings to house workers*
If the housing supply i s s t i l l inadequate, new construction i s scheduled*
the attached table compares the program which was scheduled
for completion by June 30* 1943 and that whieh i s proposed for the
fiscal year 1944* Mr* Blandford has made clear that, because, of
the many uncertainties involved In the migration forecasts on which
I t rests, t h i s program can be only tentative* Comparison does in*
dlcate, however, the changes which BHA contemplates*
I t i s hoped that relatively more of the housing needed
will be found in structures already standing ~- 05 per ©ent in 1944
against 50 p*r ©ent in the earlier period — through boarding war
workers with private families, doubling them, up in rooming houses*
and the l i k e . Of the additional units needed, one-fourth are to be
provided by the cheap method (In both money and materials) of oonversion* compared with about one-eighth earlier*
lew construction will be predominantly publioly-finanoed,
and all of this will be temporary or demountable In character. Provision for single persons Is to increase relatively, largely in
anticipation of the increased drafting of married men. Something
over one-third of all new units will* however* be provided by private
oapital, and be of permanent rather than temporary character.
the cost of this program for the fiscal year 1944 has been
estiioated by HHA as $400 million* Before its recent adjournment.
Congress authorised #$00 million* but appropriated only $100 million*
Unless* therefore* further action is taken by Congress to supplement
the funds now available for public war housing* the program — which
is a minimum — will not be carried out.
COMPARISON OF '
USING PROO
SCHEDULED THROUGH JURE
30~
AND TH.A:f SCHEDULED FOR nSCAL
1943
1'E.A.R 1944
Through fi.oal 1941
o
,..
Pl. . .1 1944
0....
B:umber t.lcmal uait. oon.truotloD
fotal housillg to be provided
blatlDg .tructure.
A4ditional units
OoII:verdons
hift,"
Pu'bl1o
. . . OQJ1.atl'QotiOD
"
0
S.067.JM'1
9f.O.000
1.525.000
101.94-7
100.0
1S.s
610.000
UO.OOO
80.000
115.000
11.5
~.ooo
1.. 522."1
a.o
29.9011 ,
0
"''bn tlODal tmlt.
11ft
GOD_ruction
100.0
24.2
12.1
<10.000
a.l
250.000
90.000
160_000
1'5.8
27.1
48.5
1.117.700
86 .5
665.000
41.0
662.100
.u.912
41..5
11.1
50.1
90.000
21,.&
,'1'eapol'U'Y
100.159
19.1'
90.000
21.1
M.O
Pe~
182.161
12.0
9.6
22.8
11.8
10.000
'2 1.a
21.2
• .0
9.4
.2
11.1
10.8
.1
2.2
2.6
hi.,..t. (permanent tamily unit.)
Publio
r-tly \Udt.
Slngle-person unlt.
fempo ral7
P4J~
Trailers
148.91&
142.460
1.t86
35.8'12
•
100.0
49.7
M •.e
-
--
10.000
-
--
100.0
M.O
".0
16.0
--
28.0
APFKWDIX G - COMPARATIVE COST OF PRIVATE AW PUBLIC TOUTS
On July SI* 1943, the national Housing Agency announced
t h e r e s u l t s of a study of the consumption of c r i t i c a l metals in
the privately-financed housing now being b u i l t and in the various
types of publicly~flnaneed housing* Consumption (in pounds per
unit) ist
Private
t
Public
Permanent family units 2*717
temporary family units 1*
Temporary dormitories
All of the public housing scheduled to be built in fiscal
1944 (exeept conversions) i s taiaporary ** either family units or
dormitories*
In explanation of the relatively high consumption
of c r i t i c a l metals in privatelyfinaseed units, sayst *As privately*
financed war housing Is • *• intended for long-term use, substitutions
for metal items cannot be made on the sans 11scale as in, temporary
structures intended only for wartime use*.*
fhe average consumption of eritioal metals per unit in
prewar private building was 8,9S0 pounds*
In general, as the attached comparison shows* th© money
©ost of building those publi© units whi©h are scheduled for oonstruct ion in fiscal 1944 i s lower than that for the primte u n i t s ,
fhe average contract ©ost of Federallyfinaneed temporary family
units contracted for between April I and June 30* 1943 Is $2*66?*
and of dormitory units* $1*055* fhe average amount of mortgage
for which MA-lnsuranoe has been applied in the same three months
is* for small structures* |3*T65* and for large-scale rental projects*
#4*455. If account i s taken of the fact that the mortgage generally
covers §0 per cent of the cost* these figures become #4*181 and |
respectively*
Average contract cost per unit for
public housing contracted for,
April 1 • <Jtme SO, 1943
Family dwellings
Temporary
Permanent
Dormitories
f 2*729
2,667
4*599
1*035
Average amount of acrtgage per
unit submitted for insurance to
I* April 1 - June 30, 1943 —
Private H*r housing
All units
1IS*§30
!• to 4-fasily
S*76S
houses
Large-seal® r@atal
4*455
projects
AFPEfDIX D - OPERATIC!S M
fgf$l TX OP THE IAHQIAL HOUSIIG ACT
Insuring operations
Wn&er f i t l e ¥1 of the Wational Housing Act* the Federal
Housing Administration i s authorised to insure mort gates on
privately-financed war housing up to fl*£OG million* By June 30*
1043, as the attached table shows, applications for insurance
had beea received on #1,320 million of mortgages* commitments to
insure had been issued for #1*088 million, and fl,G21 million
of the author!sation to insure had been obligated, either in
actual insurance, or in definite commitments to insure. Unless
the authorisation to insure i s increased by Congress in the meantime, WBA*a power to reeelT© further applications will cease in
a few month** when- the total of mortgage* insured &n& out standing
oowtitnents reaches 11*200 million*
Disposition of housing built under Title TI
Mo comprehensive data on the occupancy of housing built
under Title ¥1 are a-sralla'ble. Information from the Federal Housing
Administration indicates, however* that the disposition of housing
built under Title ¥1 has not differed materially from that built
under priority and other materials-control regulations.
Reports on the i n i t i a l disposition of housing units
completed from builders operating under priority certificates and
ISA quota* indicate* as the table shows* that the proportion of
units whose i n i t i a l occupancy was obtained by purchase has declined
from 64 per cent as of September 50* 1942 to S4 per cent as of
May SI* 1943.
A shortcoming of the data which tends to understate the
extent to which occupants are assuming ownership cf privately~buiIt
war housing i s to be noteds information on I n i t i a l occupancy only
i s obtained* Since* during the past eighteen months* some restriction
has been in effect on the promptness with which privately-finanoed
housing might be sold, i t i s natural that in this period the pro*
portion of sales in i n i t i a l disposition should decline- Once the
i n i t i a l renting requirement has been met, however, sales say take
place which do not appear in the data on i n i t i a l occupancy*
The regulations have permitted arrangements In which rent
payments are applied in whole or in part toward tht down*paya©nt to
be counted as rental arrangements, and the fragmentary figures shown
for leases with the option to buy suggest that t h i s has been increasing.
II I
*
Indeed, if these arrangements are counted as semi*binding purchase
agreessents, the proportion of sales in i n i t i a l occupancy has been
rising* or at least* not declining markedly.
If account is taken of the fact that units which are
i n i t i a l l y rented may lat«r be sold or placed on a l«a»#-*oftion or
sales contract basis* I t seems likely that the proportion of a l l
war housing units sold i s rising, possibly at a fairly rapid r a t e .
the purchasers there saay be* of @ourse# some in*
dividuals or business concerns •who buy the units to rent* fnere
i s no indication* either in s t a t i s t i c s available or in eorriments
in trade journals to indicate that t h i s in happening to any material
degree • War housing \mits purchased are purchased ©wrwhelaingly
for
fable D - 1
STATUS Of OPERATIONS T3VOBR TITUS ?I
OF THE IATIOML HOUSIIQ ACT
JUKI 30, 1943
(la millions of dollars)
See
(1- to 4~fa®lly $eo. 003 Total
R#ntftl Title 71
houses fur
sale or rent) Proieets
ill!
#1,209
1,025
Goiamltments issued
519
439
958
Mortgages insured
Cosimitm©nts outstanding
Authorisation obligated
41
n
63
11,320
1,088
560
461
1,021
JfATtmi OP ISIflAL OCCUPAIOt OP PSIVAfBLY-PIHABOSD WAS HOUSII0
30
194$
Occupied
Sold
-
122,299
80,323
41,971
6,288
¥
100*0
195,357
100*0
85•7 109,70S
34.3 85,594
5.1 ia,064
§8*2
43.8
6.2
Include a those rented leader i#fts®-opBloii
Data not
221,441 100.0
118,332
103,059
V
S3.5
46.5
APPBIDIX I m SOME DIFFICULTIES IK70L7SD 11 SFFECfllG
THB CH4KG2 IK POLICY E1COMM1ID1D
Deterrents to a ©hang© in policy for the war housing
program along the lines suggested in this memorandum are to be
found at two levelas
1* la obtaining the necessary agreement among policymakers on the desirability of the proposed policy*
E. In formulating legally binding and administratively
workable techniques to implement the policy.
The sources from which these difficulties stem and
possible ways of overcasting them are dismissed below.
Agreement on jK>liey
Two groups are certain to disagree that the policy here
suggested Is the desirable one — the Congressional committees eon*
oerned with approving legislation for public housing* and the private
builders and real estate operators, speaking through their organisations.
The Lanham Act, under which most public housing still to
be built is authorised contains the express provision that funds
appropriated under it are to be used only to provide housing "in
those areas where it cannot otherwise be provided by private enterprise
when needed.11 This provision reflects a widespread antipathy In
Congress to the "public housing boys* as they ar® frequently called,
an antipathy which can be traced in part to th© unfortunate legislative
history of the United States Housing Authority and in greater part
to th© close contacts which customarily prevail between local real
©state operators and legislators*
To the naturally close relation between real estate operators
and political organisations, with the resultant blending of attitudes*
there is added suspicion of the designs of "new deallsm* on th© "free
enterprise system*" Any encroachment of Government on the economic
preserves of private enterprise are to be denounced as unsound and
subversivecf the foundations of our civilisation*
The end result of all this* as far as the present war housing
program is concerned, is that those advocating publicly*finan©ed war
housing were required to prove that private builders could not build
and dispose of the required housing in th© traditional manner before
Congress would make available funds for public war housing*
It has also been assumed that mo builder would put up
housing* and no individual would buy it, in areas in which there
would not fee a continuing demand mm an expression of faith in the
shrewd ability of self-interest to prevent the waste of economic
resourcea.
It must be added that th© policy of encouraging private
capital to build war housing was not laid down without the support
of the Federal Housing Administration which endorsed and sponsored
the addition of title 71 to the national Housing Act in the belief
that war housing ought to b® provided with private funds and the
equally strong belief that the postwar prospects for such housing
were such that unusually generous terms must be offered to achieve
this
It is sot too surprising that the only opposition originally
to the policy of building permanent housing for sale to ooeupants
in areas of uncertain future should have come from those who were
suspeot as "public housing boys** It is a little more surprising
that* as tiffis went on and the program worked Itself out* a© opposition
was raised by those who might be regarded as more disinterested•
If It is a fact that individual ownership of war housing
will be a hindrance to postwar adjustment and will distribute unjustly the oosts of war housing as between the Federal Government
and localities and as among individuals* it should be possible to
convince the Federal Bousing Administration and those legislators
who are particularly concerned about the conversion of the economy
to peace. It is unlikely that the private builders and real estate
dealers can be convinced, no matter how decisive the facts which
can be adduced*
The Federal Housing Administration seems to be the logical
agency through which to try to convince Congress of the desirability
of a change in policy toward both private construction and individual
ownership of defense housing. FHA is generally well regarded by
Congressj it has a stake in avoiding Ices on its operations* not
only in the good ©pinion of Congress* but also la that ®f financing
institutions and builders who have yet to test its ability to weather
a real estate depression.
The National Association of Eeal Estate Boards* which has
consistently advocated and lobbied for increased use of fitle VI for
war housing* and the sale of such housing to the occupants* has recently
reported that "Much of the trimmed-down housing being built in
war centers under FHA1 s title 11 will be substandard when peace
comes* FHA is exploring plans for dealing with the situation* •••*
It suggests Government foreclosure on that housing which has been
sold and liberal refinancing for that which has not* so that the
builder-owner might bring it up to standard* "Otherwise* the
Government might have to take back virtually every fitle It house
that had not been sold outright before the cessation of hostilities
and do its own reconditioning**
If this report adequately reflects the present attitude
of FHA* it might be possible to convince the Coiaiaissloaer* Mr* Ferguson*
of the desirability of not adding to the problems whieh have already
been Incurred •*- i.e.* to ©omplete the balance of the program with
public funds* FHA could more successfully appeal to Congress for
the assumption of the remaining construction program by the Federal
Government than could any other body concerned with housing*
Administrative techniques
As to the housing already provided* the present restrictions
on the sale of private war housing are conditions agreed to in consideration of the Government*s uaking available critical materials
whieh are controlled under various war powers. It is likely that
these conditions would be interpreted by the courts as part of a
contract and could not* therefore* be Bade more onerous by unilateral
action by the Government• While relaxation of requirements may be
(and have been) made retroactive* it is doubtful that more stringent
conditions #ould be applied to housing started under more favorable
terms*
It is the policy of both the latlonal Housing Agency and the
War Produotion Board to observe this prinelple*
This being the case* it is probable that little ©an be done
by regulation to compel builders to hold for rent those houses started
on condition that they might be sold* the sale of war housing might
be slowed down or stopped, for example by having FHA raise its standards
of eligibility for the purchaser so as practically to make war workers
unacceptable* Such a device* while it might be legal* would probably
so jeopardise PHA1s reputation as to be politically undesirable*
Other techniques whieh might be used, although again* with
politioal dangers* aret (!) publicising of the feeling of the Goveraxaent that war housing is not a *good buy,* and (2) the extention of
OPA1s requirement of a down-payment of one-third of the purchase price
to be paid In cash to all sales of residential real estate*
A tightening of the regulations now, how#T©r» say "by
requiring that a l l units built har«aft#r mast be k®pt available
for raafe for tins duration of the ®»irg#mey ®tm^ six month® th«r*»
aft#r# fouW 8@nr<9 two purposes! (1) i t nould prevent the sal©
of siaoh units as may he built from now ant ansdl (2) i t would probably
atop priwfc® building @xo#pt th&t whioh saened to b® a fairly good
eoosiosic risk t o the toul]4«r*
@FedFRASER