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THE O U T L O O K FOR THE GENERAL E C O N O M Y IN T H E METROPOLITAN ST. LOUIS A R E A By Delos C. Johns P r e s i d e n t , F e d e r a l R e s e r v e Bank of St. Louis Before the St. Louis Real E s t a t e B o a r d DeSoto Hotel, St. L o u i s , M i s s o u r i T h u r s d a y evening, April 22, 1954 THE OUTLOOK FOR THE GENERAL ECONOMY IN THE METROPOLITAN ST. LOUIS AREA Though I always a p p r o a c h with t r e p i d a t i o n such e x c u r s i o n s as I undertake into the domain of the after dinner s p e a k e r s , and this one i s no exception, I n e v e r t h e l e s s find a s o r t of nostalgic p l e a s u r e in again rubbing elbows with, and now facing, an organization of r e a l e s t a t e m e n . In m y younger and, d a r e I say, m o r e v e n t u r e s o m e days as a p r a c t i c i n g l a w y e r , it was m y g r e a t good fortune to count among my m o s t valued friends and clients some of your r e a l e s t a t e colleagues in the W e s t e r n M e t r o p o l i s of M i s s o u r i , K a n s a s City. I hope you will p a r d o n this b r a z e n r e f e r e n c e to Kansas City when I a m h e r e for the purpose of talking about St. L o u i s , Believe m e , I shall not e s s a y a c o m p a r i s o n of the two c i t i e s , a s Life Magazine so b r a s h l y and, as I think, so inadequately did r e c e n t l y . My only p u r p o s e is to i n g r a t i a t e myself a bit with this audience by boasting that in another place and at other t i m e s I was no s t r a n g e r to r e a l e s t a t e m e n . 1 even knew some who were not m y c l i e n t s , and they a l l , clients and o t h e r w i s e , g e n e r a l l y s e e m e d to p r o s p e r and get along right well. It is t r u l y r e m a r k a b l e . What handicaps r e a l e s t a t e m e n can and do o v e r c o m e ! It is e x t r a o r d i n a r i l y difficult for one to make a c c u r a t e g e n e r a l i z a t i o n s about the a r e a in which he l i v e s and w o r k s . One's e n t h u s i a s m for the comnnunity he c a l l s " h o m e " and his a s p i r a t i o n s for its future m a k e it i m p o s s i b l e to speak without sonie b i a s about it. Indeed, if I have any qualification for appearing before you this evening to d i s c u s s the subject a s s i g n e d m e , it is that I a m a - 2 life-long M i s s o u r i a n , that I have always been, so to say, within eyesight and e a r s h o t of St. L o u i s , and yet have actually lived h e r e only a little m o r e than three years. I have thus been able to view, I hope objectively, and from not v e r y far off, the g r e a t p r o g r e s s which t h i s a r e a h a s m a d e and - l e t f s face it - the r i s e of some p r o b l e m s which p r e s s for solution. The e a s i e s t way to gauge the economic future of this m e t r o p o l i t a n a r e a i s to f o r m some notion of the outlook for the United States a s a whole and to a s s u m e that we in the St. Louis a r e a shall s h a r e in the gains which a p p e a r in the offing. Though t h e r e is m e r i t in such an a p p r o a c h , we shall see that this way of looking at the future m u s t be taken with some caution, for St. Louis could conceivably fail to obtain its s h a r e of the g a i n s . Nevertheless, a temper- ate projection of r e c e n t growth r a t e s is c h e e r i n g , to say the l e a s t . Over the half c e n t u r y 1900-1950 the r e a l national product of the United States i n c r e a s e d five fold a s the population doubled, so that p e r capita output of the country i n c r e a s e d two and one-half t i m e s . During this s a m e p e r i o d the total volume of human effort entering into productive activity i n c r e a s e d by 80 p e r cent. T h u s , the g r e a t gain in production was achieved with an i n c r e a s e in l a b o r input well below the i n c r e a s e in population. E c o n o m i s t s unanimously testify to the fact that such r e m a r k a b l e gains w e r e the r e s u l t of g r e a t l y i n c r e a s e d productivity; that i s , in the a v e r a g e physical output p e r m a n - h o u r of work done. As the y e a r s went on, the effectiveness of human effort i n c r e a s e d to such an extent that in the decade of the 1940 ! s output p e r m a n - h o u r of labor input was U n e a r l y t h r e e t i m e s what it had been fifty y e a r s b e f o r e . This i n c r e a s e in productivity, l a r g e l y the consequence of technological innovation and i m p r o v e m e n t s in m a n a g e r i a l control, shows no sign of slackening and m a y well continue indefinitely. More output for r e l a t i v e l y l e s s effort h a s meant a s h a r p r i s e in the r e a l p e r capita income of the people of the country. Between the boom year 1929 and the boom year 1950 the p e r capita income of our people, after t a x e s and m e a s u r e d in d o l l a r s of constant p u r c h a s i n g p o w e r , r o s e by something over 40 p e r cent. Again, t h e r e s e e m s no f o r e s e e a b l e end to i n c r e a s e s in i n c o m e . During the past t h r e e y e a r s the people of the United States have achieved a level of m a t e r i a l p r o s p e r i t y which a few y e a r s ago was no m o r e than d r e a m stuff. In 1951 the g r o s s national product, i . e . , the sum total of the value of goods and • 1 11 MI ii 1 11 1 1 . A , i i i 1 — F r o m F r e d e r i c k C. M i l l s , P r o d u c t i v i t y and Economic P r o g r e s s , National B u r e a of Economic R e s e a r c h , Inc. Occasional P a p e r 38, 1952. T h e s e data a r e s u m m e up in the following t a b l e found on page 2; Real G r o s s National P r o d u c t , Population, Labor Input, and P r o d u c t i v i t y United S t a t e s , by D e c a d e s , 1891-1950 Decade 1891-1900 1901-1910 1911-1920 1921-1930 1931-1940 1941-1950 G r o s s national product (billions of 1929 dollars) (relative) 294 100.0 455 154.8 603 205. 1 838 285.0 843 286.7 1,493 507.8 Population (relative) 100.0 120.6 143.4 165.4 181.9 201.4 Total m a n h o u r s of l a b o r input (relative) 100.0 126. 1 140.5 145. 1 122.8 180.5 Output p e r manhour (relative) 100.0 122.8 146.0 196.4 233.5 281. 3 - 4 - s e r v i c e s produced by the people of t h i s country, e x c e e d e d $300 billion for the first time. This figure r o s e by about $20 billion in each of the next two y e a r s 0 P r e l i m i n a r y e s t i m a t e s indicate that the g r o s s product for the p a s t year was $367 billion, v e r y close to the m a g i c a l $400 billion m a r k which in the 1940's we thought might be achieved by 1975, It should be r e m a r k e d , too, that since 1951 c o n s u m e r p r i c e s have r e m a i n e d v e r y n e a r l y s t a b l e , so that the r e a l gains to the people of the country in this r e c e n t p e r i o d have continued s u b s t a n t i a l . I do not m e a n to tell you this evening that A m e r i c a n economic growth will f o r e v e r continue u n i n t e r r u p t e d . It is to be expected that the national economy will e x p e r i e n c e some setbacks 0 T h e r e will inevitably be p e r i o d s of economic slackening and even r e c e s s i o n , of b u s i n e s s r e a d j u s t m e n t such a s we have been going through for the p a s t y e a r ; but t h e r e is r e a s o n to believe that we a r e developing the m e a n s of successfully preventing the wide and violent swings in economic activity which u s e d to b e s e t u s , C o n s i d e r i n g , then, the probable o v e r - a l l t r e n d s in the economy, we in A m e r i c a look f o r w a r d confidently to future growth. The question before us this evening, however, is t h i s : Shall we in the m e t r o p o l i t a n a r e a of St. Louis r e a p the fruits which an expanding economy with i t s s p e c t a c u l a r i n c r e a s e s in productivity will p r o v i d e ? At the r i s k of going over some ground that is f a m i l i a r to many of you, I suggest that we r e v i e w briefly the h i s t o r i c a l position of St. Louis in the national economy. - b - A century ago t h e r e was no question in the minds of h e r citizens that St. Louis would be the f i r s t city of the Midwest, if not of the e n t i r e country. P r o v i d e n t i a l l y situated at a point where the t r a d e of the upper M i s s i s s i p p i River t e r m i n a t e d and that of the lower r i v e r began, St, Louis held a controlling y position. It was at St. Louis that the r i v e r traffic b r o k e and c a r g o e s w e r e unloaded, r e c l a s s i f i e d , and r e l o a d e d for further shipment. St. Louis was the n o r t h e r n t e r m i n u s for the l a r g e s t e a m b o a t s of the lower r i v e r and the s o u t h e r n t e r m i n u s for the s m a l l e r s t e a m b o a t s of the upper r i v e r . T h e r e s e e m e d little doubt that the c o m m e r c e of the M i s s i s s i p p i Valley would continue in a p r e dominantly n o r t h - s o u t h d i r e c t i o n and that it would hinge on St, L o u i s , Further, it a p p e a r e d that the f u t u r e physical expansion of the country would take place with St s L o u i s , a natural gateway to the West and Southwest, a s the base of o p e r a t i o n s . What happened to the p r i m a c y of St0 Louis is well known to you a l l . The advent of the r a i l r o a d m e a n t that Chicago, with its m o r e favorable geographical location for e a s t - w e s t traffic, could b r e a k the c o m m e r c i a l monopoly of St, Louis in the upper M i s s i s s i p p i Valley, Itself p o s s e s s e d of facilities for water t r a n s - p o r t a t i o n , Chicago's chief p r o b l e m had been to tap the r i c h h i n t e r l a n d . Yet despite the economic l o s s e s sustained by St» Louis and the impetus given to the growth of Chicago as a r e s u l t of the Civil W a r , St. Louis by a n a r r o w m a r g i n r e m a i n e d the t h i r d city of the country in the c e n s u s of 1870, In the 1870 ! s, how< e v e r , Chicago achieved t r a d e s u p r e m a c y in the upper M i s s i s s i p p i Valley, and St. Louis was forced to look to the a r e a lying roughly in the quadrant See Wyatt Winton B e l c h e r , "The Economic R i v a l r y Between St, Louis and Chicago, 1850-1880, n New York: Columbia U n i v e r s i t y P r e s s , 1947, e s p e c i a l l y pp, 11-54 and 193-206. - 6 to the southwest for h e r future m a r k e t s „ T h i s "new" a r e a , to which the p r o s p e r i t y of St. Louis w a s henceforth t i e d , grew l e s s rapidly than did the r i c h Northwest, and St e Louis could only fall behind h e r e r s t w h i l e r i v e l , Chicago. The point I wish to make is t h i s c Even thus r e s t r i c t e d , StD Louis for m o r e than t h r e e decades enjoyed a kind of golden age« Her financial institutions provided much of the capital n e c e s s a r y to the growth of the young cities of the Southwest such a s Kansas City, Oklahoma City, and D a l l a s . B e c a u s e of h e r c e n t r a l location St» Louis was an ideal spot for many of the g r e a t w h o l e s a l e r s , and even a s the e r a of the s t e a m b o a t m e r g e d into the r a i l r o a d a g e , St. Louis r e m a i n e d a p r i m a r y t r a n s p o r t a t i o n c e n t e r . That h e r growth was m o r e than m e r e l y s a t i s f a c t o r y is evidenced by the fact that St. Louis a p p r o x i m a t e l y doubled in population between 1880 and 1910 (to a l m o s t 700, 000) and during t h e s e t h i r t y y e a r s r e m a i n e d the fourth city of the country. At about the t i m e of the f i r s t World War St e Louis a p p e a r e d to have l o s t something of her f o r w a r d m o m e n t u m , In l a r g e p a r t this can be accounted for by the r i s e to p r o m i n e n c e of other cities of the Southwesto As these cities g r e w , f i r m s located in t h e m took over much h i t h e r t o regional b u s i n e s s , and St a Louis 1 a r e a of dominance, h e r i m m e d i a t e t r a d e a r e a , was c o n s i d e r a b l y restricted. This a r e a , it might be added, h a s been one of r a t h e r l i m i t e d economic advantages with a p e r capita income well below the national a v e r a g e . T h i s factual situation l e a d s to the conclusion that Sto L o u i s . r e c e n t growth - 7 l a r g e l y r e f l e c t s h e r r e t a i n e d and r e m a i n i n g significance as a national industrial and c o m m e r c i a l c e n t e r . How s a t i s f a c t o r y has this growth b e e n ? A r e c e n t study by the Metropolitan P l a n A s s o c i a t i o n gives us at l e a s t a p a r t i a l a n s w e r . Over the p a s t t h r e e decades the population of the a r e a h a s i n c r e a s e d by 48 per cent, substantially l e s s than the a v e r a g e of the 21 m e t r o p o l i t a n a r e a s with which Sto Louis was compared,, Significant!y 5 the Sto Louis r a t e of i n c r e a s e was only slightly l e s s than that of the o l d e r , l a r g e r a r e a s , but it was much l e s s than that of the newer cities in the South and Southwest, many of which a r e effective economic c o m p e t i t o r s of St. Louis„ It is well known, of c o u r s e , that the population of the City of St. Louis p r o p e r r o s e by just over 6 per cent in the 1920 , s, actually declined somewhat in the ' 3 0 f s , and r o s e l e s s than 5 per cent in the ^ O ' s . Meantime for t h e s e s a m e t h r e e decades the population of St. Louis County i n c r e a s e d , r e s p e c t i v e l y , 110 p e r cent, 30 p e r cent, and n e a r l y 50 p e r cent. Today the city p r o p e r ' s population constitutes only about half of the population of the m e t r o p o l i t a n a r e a , and at the l a s t c e n s u s the St. Louis m e t r o p o l i t a n a r e a was ninth in the country with those of Washington, Cleveland, and p e r h a p s B a l t i m o r e p r e s s i n g close for that position. I n c o m e - w i s e , r e s i d e n t s of the St« Louis a r e a s e e m to have gotten just about t h e i r s h a r e of the national growth. In 1952 p e r capita income of our r e s i d e n t s was 22 p e r cent m o r e than the national a v e r a g e a s c o m p a r e d with 25 p e r cent above the national a v e r a g e in 1929. On the other hand, a v e r a g e income - 8 of St. Louis household units was somewhat below that of the twenty c o m p a r a b l e m e t r o p o l i t a n a r e a s , and in t e r m s of r e a l income St. Louis was eleventh among nineteen major a r e a s . The r e l a t i v e l y low standing of the St, L o u i s a r e a in this r e s p e c t indicates a substantial amount of employment in l o w - v a l u e - a d d e d i n d u s t r i e s , i . e . , i n d u s t r i e s in which the manufacturing p r o c e s s contributes a r e l a t i v e l y small portion of the final value of the p r o d u c t . In g e n e r a l , wages tend to be low in such i n d u s t r i e s . A hopeful sign for the future, however, is to be found in the fact that the major i n d u s t r y groups in the St, Louis a r e a which have i n c r e a s e d plant capacity at high r a t e s a r e the durable goods and p e t r o c h e m i c a l g r o u p s , which by c o n t r a s t can pay higher w a g e s . T h e s e i n d u s t r i e s include p r i m a r y and f a b r i c a t e d m e t a l s , o r d n a n c e , n o n - e l e c t r i c a l m a c h i n e r y , t r a n s p o r t a t i o n equipment, p e t r o l e u m p r o d u c t s , and c h e m i c a l s . have been m o r e than s a t i s f a c t o r y . Industrial growth in these lines s e e m s to St. Louis r a n k e d well t o w a r d the top among major a r e a s in dollar value of manufacturing building c o n t r a c t s a w a r d e d during the post World War II y e a r s . Employment in the St„ Louis m e t r o p o l i t a n a r e a h a s kept up with the national r a t e of i n c r e a s e since 1940, All in a l l , St, Louis i n d u s t r y h a s grown at a r a t e at l e a s t equal t o , and probably slightly higher than, the r e s t of the nation. We have a l r e a d y noted that the p e r capita income of the i m m e d i a t e r e g i o n s e r v e d by the St. Louis a r e a is c o n s i d e r a b l y below the national a v e r a g e . Like the m e t r o p o l i t a n a r e a , the surrounding region h a s for twenty-five y e a r s just about maintained its position r e l a t i v e to the national a v e r a g e of per capita - 9 - income. The g e n e r a l paucity of r e s o u r c e s in the surrounding region m a k e s it m a n d a t o r y that St. Louis i n c r e a s e its t i e s with the national economy if it is to do m o r e than maintain a m o d e r a t e r a t e of growth. One could spend a long t i m e talking about the way in which St. Louis is i n c r e a s i n g its t i e s with the national economy. or two. Suppose we take just an example Since 1920 p e t r o l e u m refining h a s b e c o m e m o r e and m o r e i m p o r t a n t to this a r e a . Crude oil c o m e s f r o m the Southwest and West in g r e a t volume to be p r o c e s s e d h e r e . P a r t of the end p r o d u c t s of the r e f i n e r i e s of Standard, Shell, Socony-Vacuum, and Sinclair a r e sold in the local m a r k e t , but a l a r g e p a r t goes by pipeline and b a r g e to points as far distant as Minneapolis and Cincinnati. Consider another striking example of the way in which the economy of this a r e a m e s h e s with that of the nation. Now under construction at Granite City i s the plant of the A. O. Smith Corporation, which will produce at l e a s t 40 p e r cent of the p a s s e n g e r automobile f r a m e r e q u i r e m e n t s of Chevrolet. The i n t e r - r e l a t i o n s h i p s a r e well i l l u s t r a t e d h e r e . F r o m southeast M i s s o u r i and Minnesota c o m e s i r o n o r e which is reduced with the aid of coal f r o m West Virginia and Illinois. F a b r i c a t e d steel f r o m the Granite City Steel Company will be made into f r a m e s which will then be used in a s s e m b l y plants not only in St. Louis but also in points a s far away as J a n e s v i l l e , Wisconsin, and Van Nuys and Oakland, California. Without prompting, you can think of a l m o s t e n d l e s s s i m i l a r examples of the way in which St. L o u i s , taking advantage of its c e n t r a l geographic location and its f i r s t - r a t e t r a n s p o r t a t i o n f a c i l i t i e s , serves - 10 the nation as m a n u f a c t u r e r and m e r c h a n t . Should the t r e n d s p e r s i s t of which these examples a r e typical, it is a fair g u e s s that St. Louis will continue to show an o v e r - a l l economic development c o m p a r a b l e to that of the nation as a whole. But the future is not indubitably c l e a r , c e r t a i n l y not so much so as we would like to have itB After all, a city m u s t p e r f o r m c e r t a i n functions with a c e r t a i n d e g r e e of efficiency if it is but to m a i n t a i n itself; and it must p e r f o r m t h e s e functions with g r e a t e r efficiency and in addition take on new functions if it is to grow. In g e n e r a l , these functions a r e of two t y p e s , which we may call e x t e r n a l and i n t e r n a l . with some e m p h a s i s this caveat. government alone. Let me i n t e r p o l a t e h e r e I a m not talking about functions of municipal I a m talking about the a g g r e g a t e of all the s e r v i c e s and facilities n e c e s s a r y to the well-being of u r b a n d w e l l e r s , some g o v e r n m e n t a l and some not. The e x t e r n a l functions a r e those which connect the city with the r e s t of the economy. To t h e s e we have r e f e r r e d . The i n t e r n a l functions, on the other hand, a r e those which the city must p e r f o r m simply to enable its people to c a r r y on t h e i r d a y - t o - d a y a c t i v i t i e s . T h e r e m u s t b e , for example, adequate housing for w o r k e r s , a t r a n s i t s y s t e m sufficient for the easy movement of the population to work and to shopping and r e c r e a t i o n a l facilities; t h e r e must be adequate police and fire p r o t e c t i o n , and so on. Up to the p r e s e n t , St. Louis s e e m s to be p e r f o r m i n g v e r y well its e x t e r n a l functions, but one cannot be so s u r e about the i n t e r n a l o n e s . The interdependence of t h e s e two types of functions will be apparent to e v e r y thoughtful o b s e r v e r . the other suffers. If t h e r e is faltering in the one, The r e a l t r a g e d y o c c u r s when external f a c t o r s a r e favorable -11 but growth and development a r e inhibited by failure to p e r f o r m satisfactorily b a s i c and e s s e n t i a l i n t e r n a l functions,, The t r a g e d y l i e s not only in the stunting of economic growth but a l s o , and no l e s s i m p o r t a n t , in the failure to satisfy worthy human wants, I r e c a l l in this connection the r e m a r k s of a friend who for a long t i m e actively p a r t i c i p a t e d in the work of a t t r a c t i n g new b u s i n e s s f i r m s to one of our southern s t a t e s . Time after t i m e , a s he was reciting the advantages of a p a r t i c u l a r city, its s t r a t e g i c location, its t r a n s p o r t a t i o n f a c i l i t i e s . its low p r o p e r t y tax r a t e , and so on, an executive would i n t e r r u p t h i m with this question: be a good community for our people to live in? M Will this The tax r a t e is not so i m p o r t a n t to us as the kind of s e r v i c e s your community will provide for our w o r k e r s and a d m i n i s t r a t i v e staff „ n In our highly competitive A m e r i c a n economy we have seen that the individual f i r m m u s t employ an i n c r e a s i n g l y productive labor force if it is to keep p a c e . To grow in productivity that labor force must be adequately housed, and it m u s t be able to make i t s way to and f r o m work without g r e a t difficulty; the young m u s t be p r o p e r l y schooled. and the family must have a c c e s s to uncrowded r e c r e a t i o n a l facilities; police and fire p r o t e c t i o n must a s s u r e physical safety. If these and other things making up the whole environment a r e not conducive to g e n e r a l well-being, output p e r w o r k e r will fall and unit c o s t s r i s e . Then existing f i r m s may be forced to leave the community, and p r o s p e c t i v e f i r m s will be r e p e l l e d . Happily, in the City of St0 L o u i s , a s in some of the i n c o r p o r a t e d suburban areas,, many of these i n t e r n a l functions a r e being p e r f o r m e d in a - 12 satisfactory m a n n e r , St, Louis furnishes cultural and r e c r e a t i o n a l facilities renowned for their excellence 0 efficiently and welL Many of its municipal s e r v i c e s a r e provided Yet the l a t e s t c e n s u s figures indicate that among cities of half a million population or over only New O r l e a n s h a s w o r s e housing conditions a s m e a s u r e d on a b a s i s of f a c i l i t i e s , occupancy, and maintenance. The p e r c e n t a g e of the city classified a s blighted or substandard a r e a s is exceptionally high. With over 90 p e r cent of the available land a l r e a d y developed, i n d u s t r i a l and c o m m e r c i a l s i t e s in economic locations in the city p r o p e r a r e s c a r c e , I n c r e a s i n g traffic congestion h a s b e c o m e a daily topic of c o n v e r s a t i o n around luncheon t a b l e s . Nor a r e the suburban c o m m u n i t i e s without major p r o b l e m s which may in time become s e r i o u s d e t e r r e n t s to the economic growth of the m e t r o p o l i t a n area. The proliferation of i n c o r p o r a t e d a r e a s has led to a situation in which a few s t r o n g municipalities furnish satisfactory governmental s e r v i c e s , while many weak ones struggle to keep up with the routine expenses of administration 0 Where the i n c o r p o r a t e d units a r e well below o p t i m u m size for efficient operation even the b a s i c p r o t e c t i v e s e r v i c e s suffer, to say nothing of suburban traffic congestion, lack of adequate r e c r e a t i o n a l f a c i l i t i e s , and failure to maintain effective zoning, building code, and subdivision r e g u l a t i o n s , I do not p r e s u m e this evening to suggest solutions to these p r o b l e m s which have long since b e c o m e f a m i l i a r to you 0 Able men, some of whom have doubtless broken b r e a d with me this evening, have worked long h o u r s to r e s o l v e t h e s e difficulties. The Metropolitan P l a n Association, the Sto Louis City P l a n - 13 C o m m i s s i o n , the St. Louis County Planning C o m m i s s i o n , and other i n t e r e s t e d groups have formulated p r o g r a m s for positive action„ It h a s been my p u r p o s e only to d i s c u s s the broad outlook for the g e n e r a l economy of the m e t r o p o l i t a n St. Louis a r e a . In sum, that outlook is for an expansion which should provide substantially r i s i n g levels of living for an i n c r e a s i n g population, on the a s s u m p t i o n that the productivity of our people is not p e r m i t t e d to fall by r e a s o n of failure to p e r f o r m the i n t e r n a l functions of an urban center. I cannot conclude my r e m a r k s , however, without some r e f e r e n c e to the t r e n d s which you, as r e a l e s t a t e men, may r e a s o n a b l y expect. If St. Louis moves forward in step with the national economy, the R e a l t o r s of this a r e a may anticipate a m o r e than p r o p o r t i o n a l expansion in r e a l e s t a t e activity. Your g u e s s i s as good as mine r e g a r d i n g the probable population of the St. Louis m e t r o p o l i t a n a r e a in, say, 1975. It will a l m o s t surely be well over two million. This in itself m e a n s a p e r s i s t e n t growth in r e s i d e n t i a l construction and in the shopping c e n t e r s and c o m m e r c i a l buildings which this i m p l i e s . Your attention to another factor is invitedo T h e r e a r e r e a s o n s for believing that the housing m a r k e t may grow f a s t e r than the economy as a whole. The r e a s o n for thinking so l i e s in the fact that over the p a s t twenty-five y e a r s t h e r e have been two strong t r e n d s in the A m e r i c a n housing m a r k e t , neither of which shows any m a r k e d signs of r e v e r s a l : (1) astonishing as it may s e e m in - 14 the light of the building boom of the l a s t eight y e a r s , the standard of housing h a s not kept up with i n c r e a s e s in r e a l income, and (Z) t h e r e has been a pronounced shift f r o m r e n t a l of n o n - f a r m dwellings to owner occupancy. The f i r s t of t h e s e t r e n d s is the m o r e difficult to m e a s u r e , but such evidence as we have is convincing. A r e c e n t study by F o r t u n e Magazine concluded that, although the n u m b e r of high-income families has i n c r e a s e d since the 1920 J s, the number of high-value h o u s e s h a s actually d e c r e a s e d . On the other hand, a s the number of f a m i l i e s in the l o w e s t - i n c o m e b r a c k e t has d e c r e a s e d , the number of housing units in which, by 1929 s t a n d a r d s , this group should have been lodged has i n c r e a s e d considerably „ The g r e a t m i d d l e - i n c o m e group of f a m i l i e s ($4, 000 to $7, 500 of annual income m e a s u r e d in 1953 d o l l a r s ) h a s t r e b l e d since 1929, but h o u s e s of the value in which this group lived in the 3/ e a r l i e r y e a r have i n c r e a s e d by l e s s than a t h i r d . Nor is this all. The a v e r a g e age of h o u s e s has tended to r i s e . The n u m b e r of h o u s e s ten y e a r s old and l e s s was g r e a t e r in 1953 by 3 l / 2 million units than it was in 1930, but the n u m b e r of h o u s e s thirty y e a r s old and over was g r e a t e r by 13 million u n i t s . An old house is not n e c e s s a r i l y a bad house ? but the p r e s u m p t i o n is against it in favor of a new one so far as most of the a m e n i t i e s except space (inside and out) a r e concernedo T h e r e is yet another way of looking at the m a t t e r . The total number of units s t a r t e d (and p r e s u m a b l y built) in the t h i r t y - t w o y e a r s f r o m 1920 to Gilbert B u r c k and Sanford S. P a r k e r , "The Insatiable Market for Housing 1 ', F o r t u n e , ( F e b r u a r y , 1954), pp. 103-104. - 15 1951, inclusive, was about eighteen million. On the other hand, the n u m b e r of households a p p e a r s to have i n c r e a s e d by twenty-one million, or t h r e e million m o r e than the n u m b e r of new p e r m a n e n t units built,, d e s t r u c t i o n of r e s i d e n t i a l u n i t s . ) (Meantime t h e r e was some The difference can be accounted for in some p a r t by the addition of t r a i l e r s and t e m p o r a r y u n i t s , in l a r g e p a r t by net c o n v e r s i o n s and a l t e r a t i o n s of existing s t r u c t u r e s , and also in p a r t by differences in the data, since the data on housing s t a r t s r e f e r to nonfarm units only w h e r e a s the household data include both nonfarm and f a r m h o u s e h o l d s . How may we account for this a p p a r e n t failure of A m e r i c a n s to maintain housing s t a n d a r d s of t h i r t y y e a r s ago? T h e r e may be a developing p r e f e r e n c e for s m a l l e r 9 e a s i e r - t o - k e e p h o u s e s which, in combination with e l e c t r i c a l g a d g e t s , m a k e s m o r e free t i m e available to the housewife and h e r spouse., But h e r e we come up against the d e m o n s t r a b l e fact that m o r e and m o r e f a m i l i e s have taken on the t i m e - c o n s u m i n g obligations of home o w n e r s h i p . A better a n s w e r i s probably to be found in the g r e a t e r p e r c e n t a g e r i s e , since the 1920 f s, in the p r i c e of h o u s e s than in the p r i c e s of other things which the c o n s u m e r b u y s . Too, a house r e p r e s e n t s the l a r g e s t single outlay which a family o r d i n a r i l y makes. Financing thus b e c o m e s a major c o n s i d e r a t i o n , and if institutional a r r a n g e m e n t s a r e such that financing of l o w - c o s t h o m e s i s favored, l o w - c o s t h o m e s will be built. F e d e r a l influence on the u r b a n r e s i d e n t i a l m o r t g a g e m a r k e t h a s encouraged building of the "cheap 11 h o u s e . - 16 This b r i n g s us to the second of the continuing t r e n d s mentioned above. In 1900 only a little over o n e - t h i r d of n o n - f a r m r e s i d e n t s owned the dwellings in which they lived; the nation was definitely a nation of r e n t e r s . By 1920 something like two -fifths of the urban f a m i l i e s owned t h e i r h o m e s , and during the nex.t twenty y e a r s this p r o p o r t i o n did not change much. In the decade of the 1940 , s the number of owner-occupied urban units r o s e by over 70 p e r cent, and since the y e a r s i m m e d i a t e l y preceding World War II the p r o p o r t i o n of total c o n s u m e r spending for the acquisition of h o m e s h a s roughly doubled. The i n c r e a s e in owner occupancy took a substantial jump in 1950, though since e a r l y 1951 the p r o p o r t i o n owning h o m e s h a s r e m a i n e d at about 54 p e r cent. The r i s e in owner occupancy is the r e s u l t of many f o r c e s of which two are predominant. A major factor h a s been the long period of sustained high l e v e l s of income with accompanying l a r g e i n c r e a s e s in liquid a s s e t holdings and d i s t r i b u t i o n changes in favor of l o w e r - i n c o m e g r o u p s . No l e s s i m p o r t a n t h a s been the availability for u r b a n r e a l - e s t a t e financing of continuing supplies of c r e d i t on m o d e r a t e t e r m s . Urban m o r t g a g e debt h a s m o r e than t r e b l e d since the end of 1945 and today stands at a p p r o x i m a t e l y $65 billion. It is a r e a s o n a b l e conviction, I think, that the people of the United States will, in the l o n g - r u n , r a i s e t h e i r standard of housing to the extent that they have r a i s e d their other living s t a n d a r d s . b e c o m e no h a r d e r . building activity. It s e e m s likely that m o r t g a g e t e r m s will In short, we may expect a continuing high level of r e s i d e n t i a l As some f a m i l i e s move into new h o u s e s , o t h e r s will move to b e t t e r existing p r o p e r t i e s . This all m e a n s that a s s u m i n g the growth and development of this m e t r o p o l i t a n a r e a , b u s i n e s s will be good indeed for St. Louis - 17 R e a l t o r s in the f o r e s e e a b l e future. With a smile I e x p r e s s the hope that p r o s p e r i t y and expectations of its continuance will not c a u s e you to lose sight of the role which groups like y o u r s m u s t play in the growth and advancement of this a r e a . We shall look to you in a r e a l and substantial sense for l e a d e r s h i p in revitalizing an i n t e g r a t e d p r o g r a m of i m p r o v e m e n t in the m e t r o p o l i t a n a r e a , do no good until brought to fruition. lead only to d i s i l l u s i o n m e n t . P l a n s on drawing b o a r d s Hopes for the future, unimplemented, The t r a n s l a t i o n of plans into action will m e a n a r e i n f o r c e m e n t of our i n t e r n a l s t r u c t u r e , to the end that, as a high-productivity, l o w - c o s t community we can a t t r a c t and keep b u s i n e s s e n t e r p r i s e s which s t r e n g t h e n and expand our t i e s with the national economy. Our outlook will then be not for m e r e m o d e r a t e growth but for a g r e a t s u r g e f o r w a r d in a national economy which h a s l i m i t l e s s p o s s i b i l i t i e s for expansion. 000OOO000
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