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Form b\ It. 131


Office Correspondence
Mr. Eccles



September £5.^ 1937
. ..

Mr, Clayton

On the evening of September 24 I attended an informal
dinner at the Shoreham given by Allie S. Freed in honor of Mr. John
Laing? of London, England, head of the J. L. Laing & Son, Ltd., said
to be the largest and best building firm in England. First of all
I noted from the discussion that Mr. Freed is himself now actively
engaged in a low-cost project namely, Buckingham, on the Virginia
side just west of Colonial Village. Mr. Freed1s interest in housing
therefore is personal as well as social.
There was a fairly representative gathering including
Mr. Holden, head of F. W. Dodge Co., also the head of the Alley Dwelling
Authority of Washington, and several officials from the Housing Administration including of course, Daiger. There was a very generous representation of the building and loan fraternity including Mr. Fahey,
Horace Russell, the president of the Chicago Home Loan Bank, and Morton
Mr. Laing outlined in very clear fashion the development
of the British housing program explaining that the fundamental conception of the British program is that the home is not only a desirable
property for a person to own but that it is actually valuable in the
social sense. Thus the subsidy part of the program is justified as a
national investment rather than as a national extravagance. People in
healthy homes as a rule require less police, health, fire and other
protection which is furnished by taxation than do people in slums where
both crime and disease breed rapidly. As to the line between the subsidy housing and the private housing, he thought it important that the
subsidy be given only to provide housing for those of the really low
income group. In England it is limited to those families! whose weekly
income is about |25.90 per week or less, the housing cost being 25% of
the income as a maximum, in other words about $6.00 per week for the
housing. Below that line is subsidy housing and above thc.t line is
private housing. Mr. Laing expressed surprise that in this country
we expect the investor or mortgagor to receive 5% on a loan guaranteed
by the government whereas in England the bulk of the private housing
is done on a 4 5 twenty year basis with the mortgage initially carrying
90$ of the total cost. It was his feeling that the cost of the money
should be about 5% plus f$ for management and -j for the government
guarantee, making a total of about 4$. In England the subsidy housing



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carries only 3-7/8$. Even with this spread many prospective home
owners prefer to pay 4 ^ and deal with a private builder.
Mr. Laing brought out the fact that the housing program
could not have been successful if building costs had been permitted to
rise along with the general recovery movement. Through collaboration
on the part of the government, the principal building firms, and representatives of the labor organizations, the continuity of construction was pledged, as a result of which the unit labor cost in England
was reduced 3SJ6. I asked Mr. Laing whether this was brought about
through a contract between individual builders and labor and he advised
no, it was simply a pledge to use the utmost efforts to provide steady
work. It was his offhand estimate that the average workman in their
employ was not off work more than two or three weeks out of the year
and they kept the construction work going through the entire winter
even though at times it was difficult to carry on, particularly on account of the wet. It seems that there is little trouble from snow and
severe low temperatures.
Referring again to the importance of the low interest
cost to the prospective home o?/ner, Mr. Laing stated that in 1954 when
construction was in a slump, the building societies dropped their interest rates from 5g# to 5% and after a few months down to 4§#, the
present rate. According to Mr. Laing this lowering of the interest
load made an immediate resumption in the building trades.
When Mr. Freed called upon several of the Americans
present for discussion of the problem there was a succession of excuses
or alibis for the failure of the American program. Bodfish claimed that
the interest rate here was properly 1% or more higher than in England
because under the laws of the various States the mortgagor had an additional risk in connection with repossession. In case of default it
usually takes at least a year to get possession of the property and a
legal expense of from $300 to $500. In England the time is much shorter
and the legal expense much less. Mr. Holden pointed out that the
American builder has not really specialized in housing the way he has
in other types of outdoor construction. He pointed to the efficient
handling of many outdoor projects such as dams, factories, etc. He
admitted that there were no real builders of homes in the country,
particularly in the low-cost field where the biggest potential volume
lies. He stressed the fact that temperatures in this country were
more severe than in England and that even with the best of effort it
would be difficult to keep workers busy on outside construction more
than eight or nine months out of the year. He admitted however, that
the best of the American home builders did not keep their workmen busy
more than 180 days out of the year.

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One important fact brought out in the discussion was
that the percentage of home ownership as against rental tenancy in
this country had, prior to the British building boom, been considerably higher* Britain now approaches the American ratio and it was
questionable whether the British program from here on would not encompass more rental buildings than heretofore and that the American
program, if it gets under way, must likely encompass a great deal of
rental housing whereas the program thus far has been aimed at individual home ownership. This, of course, substantiates what you have
tried to get over in this entire problem, namely that capital will not
flow rapidly into the construction field unless the entrepreneur is
encouraged to build rental housings
After listening to Mr* Laing!s many interesting descriptions of the British building industry, it is very apparent that
they have a tremendous advantage in having a relatively small and
close knit country where the people habitually settle in one place
for a long time, where the average home owner clings tenaciously to
his property by avoiding default, and where the builders are large and
old established firms of great experience and integrity. Mr. Laing
said that there were at least fifteen or twenty firms whose actual
capital investment was in excess of LI,000,000 and there were several firms
whose capital was L2,000,000 or more. His own organization is set up
with himself and two directors as a board. Under this board there are
five regional managers located in various parts of the country, each
with about 500 men under him. Thus the company has a crew of about
2,500 workmen who are steadily employed the year round. He described
their personnel relations which were certainly well conceived and it
was very easy to understand why they had little or no labor difficulties
and a very small turnover.
After it was all over I wondered whether with our political
and temperamental characteristics we can hope to follow the British example
or whether we are going to limp along until our industrialists figure out
a way to construct homes and factories as we do automobiles and deliver
them on short order with only an assembly job to be done at the actual
home site.