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There are several serious dangers in the present housing
market for both the immediate future and the longer periods


of houses and costs of building have risen markedly since the war
began; the production of many building-materials is at a low level,
dealers1 inventories are short, and large numbers of building craftsmen are in the armed forces or in other jobs; there is a large demand
for houses, families have accumulated large savings, and lenders
have large amounts of funds available to lend on mortgages*


situation can have serious consequences if the Government does not
intervene effectively.
Many people have bought houses during the past two or three
years at high prices, and many others, on the strength of increasing
market prices, have increased the mortgage debt on houses they already
owned (although this development has been concealed to some extent in
the over-all figures of mortgage debt outstanding by the fact that
many others have been paying off their debt more rapidly than their
contracts require); these people have undertaken obligations they may
not be able to meet if -their incomes decline, and they will bear
substantial losses if the prices of houses fall. Many lenders have
made mortgage loans on the strength of increasing market prices, and
they too stand to lose if borrowers cannot meet their obligations or
if mortgages have to be foreclosed*
As things stand now, there is great likelihood that the
prices of houses will advance further in the immediate future, and

- 2 -

if this happens, those -who buy, borrow, or lend in the coming months
will run an even greater risk of later trouble than do those who
have already made coinaitments*
One of the most disturbing features of the present situation
is the uncritical faith that is being placed in the proposition that
the way to avoid further inflation in residential prices is to build
more houses• Divorced from considerations of time and circumstances,
this proposition seems deceptively obvious. If we had enough houses,
there would be no inflationary threat. But we cannot accept the
implication that, if the market is left free now, uncontrolled building
in the next year or two will prevent further inflation daring that
period. The fact is that the number of new houses we can add to the
existing supply in the next two years is so small that it will not
come close to meeting the demand.
Mr. John B. Blandford, Administrator of the National Housing
Agency, testified last week before the Senate Banking and Currency
Committee that between October 1, 19^5 a ^ December 31, 19^4-6, there
will be a demand for 4*660,000 units, and that to meet this demand
there will be only 1,1420,000 units available. Of the i|,660,000
units needed, 2,900,000 will be required by veterans; of the
l,i[20,000 units which will be available to meet the need only i+75,OOO
will be provided by newly-built houses, the rest coming from existing
vacancies and vacancies created in one way or another during the

This is surely not the picture of a situation in which new

-3construction, even in larger volume than we have any reason to hope
for, will solve all our immediate problems*

The inflationary housing

shortage will be with us all of next year, and probably for some time
Even the lj.75,OQO new units which are to be available by the
end of 1946 will be available only if we have an orderly market*


some time now, publicity has been given to the fact that there will
be materials to build between ij.00,000 and 500*000 units next year*
We will build even this insufficient number of houses only if the
materials are brought together into complete houses*

If builders

try to start in the next few months all of the houses for -which there
seems to be a market on the basis of the small number of vacancies in
existing houses, the high prices of existing houses, and the amount
of liquid assets "which families have indicated they are ready to
spend for houses, we may obtain a good deal less than ij.00,000 houses
in 19146* We must not try to start more houses than we have
materials to finish, or materials will be tied up in houses that
cannot be completed.
If the housing market is left uncontrolled, we shall not
only run the risk of starting many houses which cannot be finished,
but, perhaps more important, we shall also invite further price and
cost inflation*

In the absence of controls, the new houses built in

coming months will sell, by and large, for the prices that can be
obtained for comparable existing houses, and this, practically everywhere, is above the cost of construction at the present time*

Builders can afford to bid up the prices of materials, labor, and
land, until their costs are close to market prices• At the present
time there are legal ceilings on the prices of building materials, but
if the prices of new houses are left free and there are not enough
materials to go around, it is very doubtful that these ceilings will

It will be truly amazing if suppliers, seeing that demand

cannot be satisfied with available supplies, do not ration the
supplies they have to those customers who will pay higher prices, and
if builders who are anxious to start operating, or to stay in business,
do not pay the higher prices, willingly or unwillingly, in order to get
their share of the materials available.

In any case, whether the

price ceilings on building materials hold or not, the prices of new
houses will be high because speculative builders, who build most of
our houses, will charge what the market will bear whether their
suppliers do or not*
It seems to me that we need the kind of Government
intervention proposed in Mr* Patmanfs bill, H*R* Uj6l% Three elements
of that bill, I think, are particularly important; first, control
of the prices of houses, both new and old; second, provision for the
allocation of building materials if that is necessary or desirable;
and third, provision for taking care of veterans.

I advocate special

help for veterans not in order to establish veterans permanently as
a class apart from the rest of the population, but because the
veteran has a special housing problem*

The rest of the population is

crowded, but at least it has had time and opportunity to find some
housing; the veteran has not had that opportunity, and he is entitled
at least to help of the kind we extended to war-workers while the
war was on*

-5 Peiiiaps a sound case can be made for changing the bill
in some of its particulars*

It may be that the powers of the

Director of Housing Stabilization should be given to an existing
agency; that subsidies should be authorized in more general terms,
to be used as necessary; or that the Executive branch of Government
has all of the powers needed to allocate building materials effectively*
These, I think, are minor questions which can be settled fairly quickly
if Congress agrees that the important powers in the bill must be
granted to an executive agency*
It is most important for the long-run stability of the
housing market that we. build the largest volume of new housing
possible during the next two years, and at the same time prevent
further substantial inflation in prices and costs, for if prices and
costs continue to rise, we run a serious risk of repeating the
experience of 1919-1920 when costs rapidly rose so far that building
was stopped before it was well under way*

If we let this happen,

the housing shortage will be with us for a long time to come*