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November 19, 1937,


In my message to the Congress on November 15th I indicated
that I would address you shortly in regard to proposals to stimulate housing construction. I do so now.
For the great bulk of our people housing accommodation is one
of the most important items in the standard of living. In general,
the smaller a familyf& income the larger the percentage of it that
goes for rent. To raise the standard of living, which is our common
goal, our people must be provided with more and better housing
accoiranodation. Advances in money wages and salaries cannot be translated into a higher standard of living if they are absorbed in steadily rising rents for the existing inadequate housing accommodations.
From 1930 to 1937, inclusive, our total stock of houses suffered
a serious depreciation, while at the same time population increased.
The small average annual addition of 180,000 new housing units in
this period has not begun to offset demolition and the depreciation
of existing hcmes. It is true that some cities and some regions
are better off than the average, but this means that in others the
accumulating shortage is even worse. In terms of adequate housing
accommodation per family unit we are far less well off than in 1930.
The largest single contribution to a rise in the standard of
living lies in reversing this state of affairs.


Building statisticians inform me that in the next five years
some 4 million housing units, or an average of 800,000 a year,
should be built to make up for the accumulated shortage, to offset
demolition, and to meet the noimal growth in families*

In other

words, we could build during the next five years 4 million units,
which at an average cost of $4,500 would amount to $18 billion,
without creating a surplus of housing accomiodation, and hence
without impairing the value of existing properties.
This potential demand, if released, would give continuous
emplo;yment to all the workers at present in the building field
and to many additional; it would tax the capacity of the materials
and equipment producers; it would ensure the continuance of recovery and the maintenance of prosperity for a long period; and it
would make possible a marked rise in the standard of living of
the American people*
The potential demand will materialize only on one condition.
The cost of acquiring a new home must be reduced and the profitability of building for the purpose of renting must be increased.
In short, building costs and carrying costs must be lowered; it
must become profitable to build*

The responsibility and the opportunity rests on the building
industry. The Government has done much already, and I urge that
it do more at this time, to facilitate building. The building


industry itself, however, mast recognize its responsibility for
the disappointing record in recent years and especially this
year, and must seize the present opportunity to release the enormous potential demand that waits on reduction in building costs*
Governmental assistance to municipal housing made available at
the last session of the Congress will provide for but a fractional
part of the total housing need for those in the lowest income groups*
The legislative proposals I am suggesting at this time are
designed to evoke the decentralized and simultaneous activity of
hundreds of thousands of private individuals and will depend for
their effectiveness on the cooperation of all the elements in the
building industry ~

on the workers, on the operators and contractors,

on the material end equipment producers and dealers, and on the
For the industry to seize this opportunity and at the same
time discharge its public responsibility, it must, in the characteristically American way, aim at profitable operations through large
volume at low unit costs. The difficulties of the building industry
up to now have centered around high unit costs, small volume and
low annual returns over a period of years*
Let me make it perfectly clear that I am not expecting any
group to make a sacrifice. I am merely asking all groups in the


building industry to adopt the industrial foimila of large volume
at low-unit costs which has worked with such marked success in
other industries* We have always regarded mass production at low
cost as the key to industrial prosperity and a high standard of
To set the stage for a building revival of large dimensions
in the coming building season. I urge that the Congress adopt at
this time measures to facilitate the financing of every type of
dwelling, whether built for ownership or for rent, and ranging from
the very smallest of individual properties to the very largest
multiple dwellings. This should be done by utilising the existing
machinery and accumulated experience of the Federal Housing Adminstration.
For low-cost new homes appraised at $6,000 or less I suggest
that the Federal Housing Administrator be empowered to insure loans
up to 90 percent. I also suggest for this type of new building
that the present one-half of one percent annual insurance premium
on the face value of the mortgage, which amounts to a rate of threefourths of one percent to the borrower, be reduced to one-fourth of
one percent on the outstanding balance. Low-cost homes have proved
to be the best risk in the whole housing field*
For new homes costing more than #6,000 I suggest that the insurance premium be reduced to a maximum of one-half of one percent on


the outstanding balance when the ratio of the loan to the propertyvalue is 80 percent, with lower rates of premiums for lower ratios.
In order to meet the requirements of that large portion of
city dwellers who live in low-rent apartment houses, I suggest
that the benefits of insurance be extended to mortgages on apartments up to $200,000 but not exceeding #1,000 per roonu

On the

same basis, the insurance privilege should be extended to blanket
mortgages up to $200,000 covering newly constructed groups of houses
built to rent*
For large multiple dwelling units with a moderate scale of
rentals the character and success of the properties already constructed
and in operation make it evident that the limited dividend mechanism
is susceptible of much more extensive development. It is in this
type of housing that the largest savings in building costs are possible.
The chief retarding element up to now in the limited dividend
housing program has been the difficulty of arranging for the large
individual mortgages required. To meet this difficulty I urge that
the Federal Housing Administration be empowered to organize a national mortgage association, with a capital of $25 million, subscribed
by the Reconstruction Finance Corporation, and with authority to issue
up to $500 million of debentures to the public*

This association,


together with others that may be organized with private capital,
should be authorized to make loans directly to limited dividend
companies. Through this channel private funds will be enabled
to flow into private construction*

Because of the very large

individual mortgages necessary in this type of development, financing through national mortgage associations would not compete
with banks, building and loan associations, and individuals but
would, rather, afford these latter groups a safe outlet for idle
In addition to the measures I have just suggested, the wording
of the present statute relating to limited dividend housing developments should be clarified and ambiguities removed.
In suzamary, I propose that the Government take the initiative
in bringing about a reduction in carrying costs; in bringing about
a reduction in the initial down payment for low-cost houses; and
in facilitating in various ways the construction of multiple dwelling units to rent. I urge, in particular, that changes be made
by statute and administrative regulations that will make it possible
for the financing costs on low-cost homes to be reduced by 20
percent which, with a reduction in the down payment, T i l work out
as the equivalent of a reduction in actual construction costs of
nearly 10 percent*


I expect, and I know I speak for the whole comaunity, that
all the other factors in the industry will, so far as possible,
attempt to match this reduction. I earnestly invite their cooperatioru
I most emphatically am not asking any group in the building
industry to accept lower annual returns*

I am calling for the

cooperation of all groups for their mutual advantage. The profits
of the building industry and the income of building labor have
stiffered because of low volume* For example, the average remuneration of building labor in 1936, according to the Department of
Comaerce, barely exceeded $1*000 a year*

I am suggesting that all

elements in the industry will profit by an increase in the volume
of new building which can be obtained by a reduction in building
^eduction in unit costs should lead not to a decrease but to
an increase in the income of building labor*

Reduction in the costs

of building materials and equipment should add materially to the
volume of business and the net profits of the steel, lumber, cement,
plumbing and other industries that supply building materials and

Reduction in the costs of financing should supply in-

creased outlets for the idle funds of financial institutions.
I know that each group will be tempted to say to itself, *My
prices are a very small proportion of the total cost of a finished


house. A ten percent or a twenty percent reduction in my prices
can affect the total costs by very little, but it means a good
deal to me # w

This line of reasoning, if generally adopted, can

spell only disaster*

There must be no holding back on the part

of any group in the expectation that both large volume and high
unit costs can be obtained*

It was because of such reasoning

that the promising building revival last winter and spring was
killed off by excessive advances in construction costs. It is
because of such reasoning that housing construction is currently
running below last year, despite a growing housing shortage and
despite higher incomes and advancing rents*
I hope that all the elements in the industry will approach
their common problem in an atmosphere of mutual frankness and cooperation*

If all make concessions all will benefit and none will lose*

On the other hand, any group that fcy its unyielding attitude creates
an atmosphere of suspicion, and makes impossible all around reductions in construction costs, will assume in the present juncture
a heavy responsibility indeed*