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• Notes for May 22, 'Maryland Beakers* Association Atlantic City, 8. J. I aa only too well aware that a substitute Is the kind of thing you have been repeatedly warned to beware of and to refuse to accept. You would prefer, I know, to have the genuine article la the person of Governor S^ymciiak, mho does a much better job of this sort of thing than I do. Ris inability to be here today leaves me somewhat in the position of the little girl who had t&uoted another little girl with the reminder that she was an adopted child. This is an old story, and for all I know the two little girls say be grandmother©fcgrthis time. At any rate, when the story wes young the little adopted girl ®&ld rather perkily; *fhat if I &n &o adopted cfatldf My mother and father picked me oat, bat yoar® had to take you jn©t the way jovt cam©!11 Sine® you cannot have the speaker you picked out for this morning, 1 shall ssk yeraf as one laryliaadter to others, to relax yoiarselves into a tolerant* even an indulgent, stood, and take me just the way I come* For saysulft I am grateful for the accidental circymstaace that brings me here* Until a few years ago it was a aor© or less regular thing for ae to be in Atlantic City at the aaiiwl convention of this Association, and 1 mm glad to \m back with you sgsin. Sor is it a n©» ®3^>©rieoce for a® to tmlk with Maryland bankers, and more ©specially with Baltimore bankers, about amtters haviiag to do with their business, and more especially about is&tters having to do with new business* In fact, I did that with a fairly representative part of the membership of this Association over a period of expansion in Baltimore banking and finance which those who survived are not likely to forget* Bome of you gentleaen with whoa I was associated in the development of the guaranteed~aortgage business during that period w i U recall that in the year 1920* when bond prices were making history on the downswing and the banking business was pretty low too, 1 s&de bold to forecast an early revival of the long-arrested realestate and construction business, and argued from our war-time suspension of building activity that this ispending revival would be of huge proportions and would result in an unprecedented demand for mortgage financing. - 4 — Well, as some of you &sk your selves these days where new business and new earnings for b&aks are to eoae froa, I wonder if you have had put before you yet by your economic or statistical advisers the fact that six &ad « half years of depression have left us with & such greater arrears of housing than we accumulated during the war-tia* period? And I wonder if they have put before you the further fact th&t, besides maJEing up whatever part of this deficit we can, we have alao to provide housiag for th© boys and girls who were born during that war-time period and who are now condug of age, marrying, having babies, increasing the eensu& figures h$ ntsarly half ~a~ That is where so&$ of the new business and new for banks are to coae fromj that is where mew orders for limber f brick, cement, paint, eteel, altsaiosai, copper, lime, gypsm, stone, @and, and grav©l are to c<»e from; th&t i s where esployaaat i f to come frost for a«a who work in th# fabrleation, manofactiare, and trmnspertstian of building materials and eqixipBumt; that i s where relief frs»a relief i s to cose Irorn, wli®r« E d i t i o n s ! for federal, state, mad local g«rsrernm©nt# i# t© from, wber© « bslsnc«i budget i s to eosa© from, 1M short, there i s & bigger housing aarlcet backed vtf h«re in the United States tfe&a ao®t of tas j e t h®gm to realise—a far bigger housing market than had duriag the 19^3 »s or a t «zgr other tisws in the hiatoiy. 1 was verj Mttch ptsasled a few weeks ago, some of ay frleois in the lational Association of l e a l - 6 Estate Boards ss&de the curious assertion before a Senate to the effect that there is no urgent need for n&w housing in the United States. They said that the mcaney* in our IS million urban dwelling uslts is *&boi2t 5 per cent* and that this vocaBicy shows that &n acute shortage of housing does not exist. thy, a® long ago &s last simmer, I received froa these stuae gentlemen a report suamarislBg the residts of a surrey m&de l^ the Real Estete Boards in ESI cities. Qsly £ per cent of thes© citie®, according to th&t garrey ®^ie nmrly & yemr ago, had & mirpltas of single-f&sily dwellings-, &M oaJ^ 6 per cent had a &tsrpln# of ap&rte«mt&. In confepast to this, th© report stated that 69 per cent of the cities were *«lre*4y showing a shortage* of single-faaiily dwellings and 29 per cent a ehort&ge of &part®eati?« And, far fro® 7 - that shortage haying diminished since the survey was a&de, there has not been enough new housing built durisg the past year to take care of more than a small part of the normal year-to-year increase in the ntssbear of families. % purpose in referring to the recent testimony of ay reel estate friend© is not to chide them on their misinterpreta-ion of their own statistics, but merely to caution you against falling into their error of assuming that & housing shortage is not a housing shortage simply because figures can be adduced to show that there is a so-called nation-wide vacancy of about 5 per cent. Whatever may be the condition in any given , or neighborhood, or mortgage portfolio, there - 8 - is unquestionably & nation-wide shortage if there is a shortage of single-f&nily dwellings in 89 per cent of our cities and a shortage of apartments in 29 per cent. And I do not need to tell you that a marginal surplus of 3 per cent for the country as a whole does not begin to take account of the number of properties that are is deplorably bad condition &nd unfit for human habitation. Let me illustrate the matter In local terms, without assuming a knowledge of precise local conditions that I do cot now possess. It does not contribute anything to the solution of the housing problem of a stevedore at Locust Point or Canton that houses are available, let us say, in Guilford or Homeland, ior the availability of houses in Highlandtown or Halethorpe have the slightest influence in seetisg the demand at families tb&t have decided to bi^y or build, wh®n they buy or btiild, in th® Green Sparing ¥all#y or the WortkiEftOB Yalley or th© I availability of choice sites and cheap limber in the hills of G&rrttt have no interest wfa&iever to the newly married tnaek farmer in Que&n innes or f&lbot, or to th* fisheraaa who has taken • wife is Somerset or If we are to grasp the m&gnitode of howling ap©ratio»g that lie ahead of us in the Bnited State® cnrer the n«xt 5 or 10 JPttVS* it i© accessary for «s to reaiad o-ttfselves of the aI«MMUi!f fact that this is a big and growiiag countryi It eowrs • lot of territory aad It has a lot of people in it* It does not take long ft>r a deficit in residential construction to ran i&to large figures, A dowrmard trend of residential construction began in this country in 19158 and contlntaed at a ete&dily accelerating pace until 19S4J 1935 it reached the lowest level since that Irtiich-ye t the esd of the lor Id War. for the three years , 1955, and 1954, it represented only abotat 10 per t cent of the average of 1926. & t began to rise in 1934, and during the past year has steadily increased, but It is even now going on only at the rate of about E0 per cent of the pre-depression figure^ fe. 7** C variety of computations h&ve teen sade and published, some of them placing the estimted requirelaents over the next decade up to 14 or 15 aillion units* If we jmt aside what appear to be the more extreme estimates, and take iittftimfl. those which iipp—p ifcn have the virtue of moderation, we find that even If we assume a surplus of 700,000 dwelling units to have existed at the end of 19E9, we now have a deficit of sot less than £ million units resulting from the discrepancy between the small miafoer of replacements ert±^SSBSSSM during the depression J& N relation to an average yefcrly incre&eei^ of some 475,000 to 500,000 in the number of familiesI r it we project the requirements over the next 10 years, say to the end of 1945 or the middle of 1946, the total provision of new housing called for, in order to take up the accumulated deficit, seet the net increase ia number of fwailies, end replace, say, but 75,000 houses a year that m&j certainly expect to burn dona, or be torn down, or be otherwise withdrawn from use, we shall hare to average approximately Ba£l»&j30 new duelling units per year, or a total for the 10 years of more than 7 1/2 million* Bow this is a large order ©Ten..when you take,, into consideration the fact that it includes all kinds of housing, urban and rural, from the most modest to the most pretentious. We Bight in fact add an additional million to ^he IQyear 0 estimate without straining the probabilities for the P> \ figures that I have given do not take into account such \ factors as the abandonment of a substantial number of houses that Inevitably occurs when communities sufferftnet loss in population, nor do the figures take into account the y j general trend toward earlier marriages that has been proceeding for several decades. Furthermore, the figure* do not assume, what slight well be assumed in a coaatry th&t is becoming housing-conscious, & aore rapid deaolition of unf^t housiag then has ordinarily taken place in the I past* If we confine ourselvea simply to a aodefat© estia&te of the requirements for urban housing alone, we find that even here the demand over the next 10 years will 4aillion ox eatsiiy txr^bm-mm, ^ieFeTore, aaple justification f^'^B'tt&t^nerit weeks ago ty the President in MB m&d^-M' >&ou^le of of tfee- AsKsrtran I-BBtitute of Architects at Willi&msburg, Virginia, that here in the field of hotasing there is a business opportunity of the first faagnitude and that It constitutes the next great field of Aaericaa industrial development and expansion* ...... that this ise&as in the way of further industrial recovery and employment can be judged from the British experience of recent years* Tit© relative prosperity that Great Britain has enjoyed during a corresponding period of depression in this country has been attributed in the main to the country's extensive program of small-house construction. During the past 5 years the number of houses built in England and Wales totaled 1,179,£94, The nuaber built in the United States during the snae period is estimated at about 700,000. Had we built at the British rate in proportion to our larger population we should Might *ts&, i*r cimelttfi&m, s^|rhere the funds ««& to coae from to finance the hoae-building that w l U be required for these three-quarters of a million or aore houses that we shall nmd to built each year on the average over the next 10 years. - • • • • • • • • • • ' The answer is that the funds are to cone in the aaia from the banks, unless the banks are to relinquish to other agencies a large proportion of the savings now heldteythe banks. It would appear that at the preseat time the national banks, the State member banks of the Federal. Reserve System, aiKl the non-Member inspired banks hare the authority, under existing law, to make realestate lo&ns up to a total of approximately £9,100,000,GOO« Their outstaying loans on real estate are approximately f5,5O0,0Q0fQO0, Thus there is legally available from this source an additional $5,800,000,000. In addition it is estimated that life insurance companies and smtual savings banks hold something like 4 billion dollars In cash or Onited States Government securities over and above the proportion of their total assets held in these forss from 19£5 to 1931. Frors this it B&y be estimated that, if the portfolios of these institutions were to retara to more normal distributions, they wotild be able to absorb with their present resources, given appropriate conditions, something like $£,900,000,000 of non-f&raa mortgages. An additional £100,000,000 a&y be estimated to be currently available in the idle funds of building and loan associations. This might be increased to some #400,000,000 if the potential borrowing power of these associations were availed of through aeabership in the Federal Home Loan Bank System* that the new-basiness operatione of the b&nke in the years head of us li# chiefly in the field of housing, not only in the making of re&l~e#t£te IGSJSS, but in the coiamereial a^ortianitiea that will become available as this great pote&ti&l market developes for theaselvea asd for their cossaercial borrowers, in fact, all the differeo^, - 18 - of lending institutions which do the financing arising from thisfetedof industrial activity, &nd the different kinds of enterprise which go to make op the housing industry, wo'uld see® to have ahead of them over the next 5 or 10 fmrt £&r acre business froa this source than they have ever bandied during any cosp&ralxl© period in the past. Furthermore, as to the sortg&ge financing that will be involved fa these operations, our lending institu- tions have now available to them the additional facilities and safeguards that were not available in the past—-moat notably those provided te? the Federal fkme Loan Bank Act, the S&tional Housing Act, and the Banking Act of 1955, I would not urge you to explore the possibilities of this approaching housing market if yotir jtidgaent dictates ' a different course, I would siaply point out to you that building is again bj wey of becoming the number One big business in the United States, that none other of comparable magnitude is in prospect as a field of new business for banks, and that it bids fair to be with us for & long time if we deal with it prudently and with a decent regard to our past mistakes• I thank you.
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