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Memorandum on Obstacles to Revival of Building in Chicago 1. Chicago has almost two billions of dollars of property in process of liquidation. A great deal of this is residential property. Liquidating trusts whichare acting on behalf of the bondholders, on the whole, are not taking any steps to dispose of the properties. Such properties are generally rented at low rentals. This situation hangs like a cloud over the future of the building industry, because it depresses the rental market and consequently there is no great incentive to build new properties which would have to show considerably higher rents than those now generally obtaining. Some way must be found to speed up the liquidation process and get this two billions of property into the hands of equity holders who will have a direct interest in seeing that the properties are made profitable and are operated in a business-like way. 2. Chicago real estate men are still vitally interested in the idea of a central mortgage bank. I think they are well aware how much Mr. Eocles has done along the line of making mortgages somewhat more liquid in the Federal Reserve System. They also feel that both the Home Loan Bank System and the F.H.A.* especially Title III, constitute long steps towards the creation of a central mortgage bank. Perhaps the day will come when all of these factors can be put together and a broad mortgage bank created which will serve the long term credit field. Anything that Mr. Eccles can say on this matter in forecasting the evolution which may be expected in the future will I know be of the keenest interest. 3. Chicago has a building code which was adopted in 1911. During the past ten years a committee of architects and engineers has been v/orking on revisions which would permit the use of mddern methods and materials. The new code is having hard sledding in the City Council and some of the most important parts of it are being deleted. The new code is important because it would reduce the costs of building considerably. I enclose herewith an editorial from the Chicago Daily News which comments on what is happending here this week in this matter. 4. Chicago, like Hew York, has during recent years suffered a great deal from monopoly practices in the construction field. These monopoly practices begin with the manufacturers and end with the trade unions. The Federal Trade Commission has recently issued cease and desist orders in the case of the glass manufacturers and the building supply dealers. I believe the cement manufacturers are also before the Jrade commission at this time. The manufacturers engage in activities looking to price maintenance and in general impose such restrictions on the delivery and sale of their materials as will tend to sustain the price structure. irr. Ickes' department of investigation has recently gone into this matter and I think there will soon be some prosecution undertaken in Chicago, New York and possibly one or two other cities. I am enclosing a brief statement describing some of these practices, which you may have seen before, collier's Weekly will shortly have a series of articles on the subject, it isnTt too much to say that these monopolistic practices fiave increased the cost of building in Chicago and some of the other large cities as much as one-fourth. 5. in city planning and zoning Chicago is very backward. Only about three per cent (3^ of the 212 square miles of the city is zoned for single-family dwellings. The rest of it is zoned either for multiple dwellings or for business, commerce, or industry. As a consequence, homes are not protected within the city to any great extent. Also as a consequence, lot values are much too high for the kind of building vhich should be done. A rezoning of the entire city so as to have a rational amount of land available for inexpensive housing and for detached dwellings nust take place before Chicago itself can have much of a home building program. - 6. 2 - Some of the members of the Chicago Board tell me that while the lending institutions in the city give a great deal of lip service to the idea of starting building, they will not, as a matter of fact, actually make loans. No doubt much of this reluctance has a political basis. This is something that it is difficult to prove but there is no question about the fact that it exists and that it is a very vital factor in holding back new activity. 5/14/38
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