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Full text of "Investigation of concentration of economic power; monograph no. 1[-43]"

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Northeastern University 




School of Law 
Library 



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^%]^ ^iloEf^^^l SENATE COMMITTEE x'RINT 
ou session j 



INVESTIGATION OF CONCENTRATION 
OF ECONOMIC POWER 



TEMPOKAEY NATIONAL ECONOMIC 
COMMITTEE 

A STUDY MADE FOR THE TEMPORARY NATIONAL 

ECONOMIC COMMITTEE, SEVENTY-SIXTH CONGRESS, 

THIRD SESSION, PURSUANT TO PUBLIC RESOLUTION 

NO. 113 (SEVENTY-FIFTH CONGRESS), AUTHORIZING 

AND DIRECTING A SELECT COMMITTEE TO MAKE A 

FULL AND COMPLETE STUDY AND INVESTIGATION 

WITH RESPECT TO THE CONCENTRATION OF ECONOMIC 

POWER IN, AND FINANCIAL CONTROL OVER, 

PRODUCTION AiND DISTRIBUTION 

OF GOODS AND SERVICES 



MONOGRAPH No. 8 
TOWARD MORE HOUSING 



Printed for the use of thv. 
Temporary National Economic Committee 




UNITED STATES 

GOVERNMENT PRINTING OFFICE 

WASHINGTON : 1940 



TEMPORARY JNATIONAL ECONOMIC COMMITTEE 

(Created pursuant to Public Res. 113, 75th Coug.) 

JOSEPH C. O'MA'HONEY, Senator from Wyoming, Chaiiman 

HATTON AV. SUMNERS, Representative from Texas. Vice Chairnuui 

WILLIAM H. KINO, Senatw from Utah 

WALLACE H. WHITE, Jr., Senator from Maine 

CLYDE WILLIAMS, Representative from Missouri 

B. CARROLL REECE, Representative from Tennessee 

THURMAN W. ARNOLD, Assistant Attorney General 

*WENDELL BERGE. Special Assistant to the Attorney General 

Representing the Department of Justice 

JEROME N. FRANK, Chairman 

•SUMNER T. PIKE, Commissioner 

Representing the Securities and E.xchan^e Commissiou 

GARLAND S. FERGUSON, Commissioner 

'EWIN L. DAVIS, Chairman 

Representing the Federal Trade Commission 

ISADOR LUBIN, Commissioner of Labor Statistics 

A. FORD HINRICHS, Chief Economist, Bureau of Labor Stati.sties 

Representing the Department of Labor 

OSEPH J. O'CONNELL, Jr., Special Assistant to the General Co nsei 

♦CHARLES L. KADES, Special Assistant to the General Cotinspl 

Representing the Department of the Treasury 



'Alternates 



Representing the Department of Commerce 

* * * 

LEON HENDERSON, Economic Coordinator 
DEWEY ANDERSON, Executive Secretary 
THEODORE J. KREPS, Economic Adviser 



Monograph No. 8 
TOWARD MORE HOUSING 

PETER A. STONE AND R. HAROLD DENT'^N 

n 



ACKNOWLEDGMENT 

Tliis monograph was written by 
PETER A. STONE 

Coordinator, Construction Studies, Temporary National Economic 

Committee 

Chief, Construction Analysis Unit, Work Projects Administration 

And 

R. HAROLD DENTON 

Economic Analyst in Housing, Department of Commerce 

The Temporary National Economic Committee is greatly indebted 
to these authors for this contribution to the literature of the subject 
under revie\^ . 

The status of the materials in this volume is precisely the same as that 
of other carefully prepared testimony when given by indimdual uvin esses; 
it is information submitted for Committee deliberation . No matter, what 
the official capacity of the witness or author may be, the publication of 
his testimony, report, or monograph by the Committee in no way signifies 
nor implies asse7it to, or approval of, any of the facts, opinions, or recom- 
mendations nor acceptance thereof in whole or in part by the members 
of the Temporary National Economic Committee, individually or 
collectively. Sole and undivided responsibility for every statement in 
such testimony, reports, or monographs rests entirely upon the respective 
authors. 

(Signed) Joseph C. O'Mahoney, 
Cftuirin^n, Temporary National Economic Committee, 

III 



TABLE OF CONT 



PART I 

SOME ECONOMIC ASPECTS OF HOUSING 

Pag* 

Letter of traiisiuittal 5tiil 

Summary and conclusions — -^ XV 

Housin,'? finance -■- . — ^--:- xvi 

Collusive practices — ■ xviii 

Research , xix 

Public housing ^^■^ 

CHAPTER I 

Construction and the general economy . _.__^i_-;vLi- 1 

Volume and emplo.yment '.....- .. ..!.. 2 

Relation to other industries. — -- — .-.-_-^--^ — -_ ■,--r-. 3 

Investment outlets^ .. _...,li_. _ ■^._'.. _ . _ - . — ^ - _ .;_ - _.__^ — - 8 

CHAPTER II 

Trends in nonresidential and public construction ...... ^ -_,... 11 

Private nonresidential builcjing — ... - — H 

Private utilities eonstruction — ... .1 _ ...^ — .-. 14 

Public construction . .._.-' — . _ _ . .'. _ . - - ,; - _•- _ - - - 16 

CHAPTER TTI 

Market factors and needs in residential building. ,.. 19 

Population requirements . 20 

The estimated need versus the current rate of building ... . 21 

Relation of incomes to rents and costs... __ _ — _ — - — 22 

Rent and ownership ..- — -- 27 

CHAPTER IV 

Operation of the building industry ---. -- 31 

Real-estate dealers . .......... 33 

Architects and engineers _ ;-- 34 

Contractors J. _...-_._.^. --...- 35 

Subcon tractors ...z. _ 36 

Material dealers and manufacturers. . _ - — - - 38 

Local building ordinances ^ 39 

Financing and related functions . . , 39 

CHAPTER V 

Housing costs ^ -- 41 

Labor ..-..-- 47 

Materials .-._. 59 

Collusive bidding practices 69 

Fees and ixiisc^llaneous costs '. ^ 72 

CHAPTER VI 

Housing finance 77 

Interest rates 1 • ^0 

Government lending activities -- 83 

V 



VI TABLE OF CONTENTS 

CHAPTER VII Page 

Land, taxes, and building codes 93 

Land 93 

Taxes 97 

Building codes 99 

CHAPTER VIII 

Technical trends 103 

Economy of design _.. 103 

Research in design and materials 105 

Prefabrication 108 

CHAPTER IX 

Public aid to housing 111 

The limited dividend and tax exemption 111 

Subsistence homesteads 112 

P. W. A. housing. 114 

United States Housing Authority 116 

W. P. A. housing . 117 

PART II 

THE RELATION OF PRODUCTIVITY TO LOW-COST HOUSING 

Letter of transmittal 121 

Introduction 123 

Construction in the national economy 125 

Organization of the building industry 126 

Productivity and costs ^ , 130 

Need for scientific industrial research 141 

Recommendations- 145 

Appendix A ■. 149 

Appendix B .. 153 

Appendix C ■ ,.-. 1j65 

Appendix D -173 

Appendix E 1 175 

Index 207 



SCHEDULEJOF TABLES, CHARTS, AND EXHIBITS 



TABLES 

PART I 



Fags 

I. Estimated volume of private nonresidential building, 1925-38-1.- 11 

II. Volume of commercial building- — 37 Eastern States- - - 12 

III. Private utilities construction by tvpes, 1925-38 15 

IV. Public construction in the United' States, 1925-38 : - - - 17 

V. Residential construction and total construction in the United 

States, 1925-38 19 

VI. New nonfarm residential building in the United States, estimated 

volume, 1920-39 23 

VII. Distribution of nonfarm families by income groups, 1935-36 24 

VJII. Number and value of liomes constructed in the United States in" 

1938 relative to income groupings 25 

IX. Building costs per room on rental housing 42 

X. Break-down of costs on a $4,800 house for sale in 1939 43 

XI. Financial statement of basic house 46 

XII. Average annual wage payments and percentage skilled workers of 
all wage earners, bv manufacturing industries and the construc- 
tion industry, 1929- 52 

XIII. Residential building activity and average wage rates of skilled 

workers in 1936 55-50 

XIV. Indexes of costs iu the construction of a standard 6-room frame 

house 60 

XV. Lumber costs at Chicago, 111., code period January to March 1934_ 65 

XVI. Land costs on multifamily residential construction 95 

XVII. Allowance to be added to glass size ordered for finished window 

openings . 104 

XVIII. Maximum cost of constructions for samples submitted for testing 

in National Bureau of Standards research program 106-107 

PART II 

A. Comparison of net earnings and expenditures of the United States 

Steel Corporation, 1904-38 149 

B. Income and operating expense per room per month, and operating and 

capital costs in relation to gross annual income, for 39 New York 
apartment buildings^ — 1937 : 150 

C. Prices of five principal construction materials — 1937 151-152 

CHARTS 

PART I 

I. Value of all construction, 1919-39 3 

II. Manufacturing emplovment, durable and nondurable goods group 

1 923-39 i 4 

III. Emplovment and pav rolls, steam and hot-water heating apparatus 

and 'steam fittings, 1923-39---*- - ^ 

IV. Employment and pay rolls, lumber — sawmills, 1923-39 5 

V. Employment and pay rolls, luinbe*- — millwork, 1923-39 6 

*VI. Emplovment and pav rolls, structural and ornamental metalwork, 

1923-39 -' 6 

VII. Employment and pay rolls, brick, tile, and terra cotta, 1923-39 6 

VII 



VIII SCHEDULE OF TABLES, CPLVIITS, AND EXHU'.ITS 

CHARTS— Continued 

PART I — continued 

VIII. Employment and pay rolls, cement, 1923-39 ■ . 7 

IX. Employment and pay rolls, plumbers' supplies, 1023-39 7 

X. United States Steel Corporation earnings a,ud new construction, 

3-year moving average, 904-38 13 

XI. Effect on monthly carrying charge of a 20-percent reduction in labor, 

materials, and interest and amortization 48 

XII. Comparison between building-materials prices and all commodities 

wholesale prices, 1913-37 , 58 



I. P>ct«il and wliolesale prices of portland dement 153 

II. Retail and wholesale prices of short leat \;ellow pine 154 

III. Eetail and wholesale prices of Douglas fii _\ 155 

IV. Retail and wliolesale prices of common brick__. 156 

V. Retail {ind wliolesale prices of hollow tile 157 

VI. Retail and wholesale prices of steel reinforcing bars 158 

VII. Retail and wliolesale prices of stru'-tural steel 159 

VIII. Retail and wholesale prices of cruslied stone- 160 

IX. Rett! il and wholesale prices of building sand ! 161 

X. Reta 1 and wliolesale prices of hydrated lime 162 

XT. Retai' and wholesale prices of cast-iron soil pipe 163 

XII. Net effect upon housing costs of identical reductions in each. 

component 176 

XIII. Proportion of national income spent for homes and automobiles.- 178 

XIV. Major participants in the construction of a single family house in 

an urban area ^ ■- - - faces 178 

XV. Distribution of employers and employees by size of business con- 
cern, contract construction industry, 1938 .- 181 

XVI. Distribution of work performed, bv location, contract construction 

industry, 1935 '- 183 

XVII. Sales distribution of manufacturers in selected industries, 1935. . . 185 

XVIII. Sales' distribution of wholesalers in selected kinds of business, 1935- 186 
XIX. Sales distribution of manufacturer's wholesale branches in selected 

kinds of business, 1935 187 

XX. Labor processes required in house construction faces 18£ 

XXI. Average inventory value of equipment per employee in the con- 
tract construction industrj^ 1929 193 

EXHIBITS 

PAHT II 

1. Net effect upon housing costs of identical reductions in oacii 

component - 175 

2. Proppftv valuation of new single-familv liomes insured by F. H. A. 

during 1938 , - _ - - - 177 

3. Annual income of F. H. A. mortgage borrowers during 1938 — new 

single-family homes - 177 

4. Family incom.es in the United States, 193.5-36 178 

5. Percent of the national income produced by the contract-construction 

industry 178 

6. Percent of th ir 1929 income produced by major industry groups 179 

7. Same as chart 14--. 179 

8. Number of employers and emplo\'ees in the contract-construction 

industry, 1938 _" -' - - 180 

Distribution of employers and employees in the contract-construction 

industry by size of business concern, 1938 180 

9. Value of work performed by contract-construction establishments, 

1935 182 

10. Same as chart 16 182 



SCHEDULE OF TABLES, CHARTS, AND EXHIBITS IX 

EXHIBITS— Continued 

PART II — continued 

Page 

11. Includes charts 17, 18 and 19 184 

12. Branch offices of contract-constructioy establishments, 1929 188 

13. Membership in trade associations of contract-construction establish- 

ments whose volume of business exceeded $25,000 in 1929 188 

14. Number of national and interstate trade associations in the construc- 

tion field classified by major industrial groups, 1938 188 

Number of national and interstate regional trade associations in the 
construction field classified according to the percent which their 
membership represents of the total number of firms in the industries 
covered bv them 1937-38 189 

15. Same as chart 20 . 189 

16. Productivity in l)last furnaces, 1929 190 

17. Index of i)roductivity in the electric-lamp industry 190 

IS. Index of productivity in the autolnobik-tire industry 190 

19. Index of productivity in leather industry.. ^^ 191 

20. Average inventor^' value of equipment in the construction industry by 

class of establishment, 1929 191 

21. A few examples of union restrictions upon apprentices 194 

22. Full text of the statements referred to in the text regarding Baltimore 

and Pittsbiu'gh plumbers . 195 

23. Full text of the jurisdictional agreement over the installation of 

Acoustone 195 

24. Actual time reductions on various carpenter operations 195 

25. Savings through planning on 30-house project -_. 196 

26. Detailed data regarding several of the cases involving building mate- 

rials dealers before the Federal Trade Commission 196 

27. Number of people engaged in retail distribution of building materials 

and new automobiles, 1935 200 

28. Indictments which have been returned and civil suits which have been 

instituted in the building industry imder the current program of the 
Department of Justice under the antitrust laws . 200 

29. Outlay for research $215,000,000 in 19.39 202 

30. Excerpts from testimony of Ropert L. Davison, director of housing 

research, John B. Pierce Foundation, New York, before the Tem- 
porary National Economic Committee, July 13, 1939 204 



PART I 

SOME ECONOMIC ASPECTS OF HOUSING 

By 

PETER A. STONE 



XI 



LETTER OF TRANSMITTAL 

Hon. Senator Joseph C. O'Mahoney, 

Chairman, Temporary National Economic Committee, 

Washington, D. C. 

My Dear Senator: Idle men and idle money are problems, indus- 
trially and regionally, of greatly varying intensity. ^Iiile the whole 
economy suffers, the malady is one leaving some parts of the economy 
unaffected whUe others are afflicted with unusual severity. To a 
surprising extent the problem of depression is one of inactivity in 
construction and housing. To no small degree the job oi getting idle 
men back to work and of finding an outlet for idle funds is one of 
reviving .home building. 

Accordingly, the Temporary National Economic Committee, after 
holding extensive hearings from June 27 to July 14, 1939 (reproduced 
in Part 11, Hearings Before the Temporaiy National Economic Com- 
mittee) requested that a systematic analysis be made of the factors- 
impeding home building. Such an analysis is presented in this 
monograph . 

The first part — that written by Mr. Peter A. Stone— was done 
directly under committee auspices. It pays particular atte^ilion to 
the factors that cause monthly carrying costs of a house to be high, 
relating these not only to original costs but to financial and sei-vice 
charges, and interest rates. 

The second part — that by Mr. R. Harold Denton of the Department 
of Commerce — analyzes the factors which make the capital outlays 
of housing high, relating them to low productivity. Both studies 
emphasize the need for technical housing research, standardization of 
materials, shnplification of buLlding codes, and enforcement of antitrust 
legi^-^^lation. 

In the preparation of this monograph a particular debt of gratitude 
is due to numerous experts m government and industry who gave it 
the benefit of their experience and knowledge. In addition to special 
assistance on occasions too numerous to mention from officials in all 
departments of government and from manufacturers and builders, 
these studies have been critically reviewed by Air. Corwin D. Edwards, 
Economic Consultant, Antitrust Division, Department of Justice; 
Mr. Thomas C. Blaisdell, Assistant Director, National Resources 
Planning Board; Mr. Miles L. Colean, formerly Assistant Adminis- 
trator, Federal Housmg Administration, and presently Research 
Director, Housing Survey, Twentieth Century Fund; Mr. Morris 
Miller, assistant general counsel. United States Housing Authority; 
Mr. Thomas S. Hold en, vice president, F. W. Dodge Corporation; 
and Mr. Joseph B. Mason, eastern editor, American Builder. Their 
numerous suggestions have been of inestimable benefit. Special 
acknowledgment is likewise due to Miss Marguerite Milnor, editorial 
assistant on the staff of the Temporary National Economic Committee, 
and Mrs. Hannah Esibill upon whom fell the major burden of prepar- 
ing the manuscript for publication. 

RespectfiUly submitted. 

Theodore J. Kreps, 

Economic Adviser. 

September 10, 1940. xm 



SUMMARY AND CONCLUSIONS 

There are four principal -clivisioiis of the construction industry, 
which had the following relative dollar volume in 1930: 

Percent 

Private nonresidential building 16. 8 

Private ^■esidential building. . -. 20. 4 

Private utilities construction ^- 29. 2 

Public construction 33. 6 

Total--- 100.0 

About three-eighths of the total volume was private building, and the 
remainder was utilities and public construction. During the years 
1925 to 1938 the total ranged from, about 3 to nearly 12 billion dollars a 
year. At present the volum.e is halfway between the high and the low 
point, or. about $7,000,000,000 annually. 

Public construction, as a result of Federal grants, is the only 
division of the industry which has recently m.aintained an annual 
expenditure equal to that of the 1920's. Annual expenditures of the 
other divisions of the industry range from, one-fourth to one-half 
of their former levels. Hence the construction industry affords the 
largest single unexploited outlet for investm.ent funds — outlets for 
which are so necessary to maintain a proper balance in our economic 
system.. 

Although nearly all sections of this mdustry could use investm.ent 
funds to advantage, the greatest need lies in the field of residential 
construction. There is a need particularly for the rehousing of 
4,000,000 fam.ilies which cannot be profitably housed in new con- 
struction at present costs but m.ust depend upon the use of second- 
hand houses when they have becotne depreciated to the point where 
they fall into the category of slums. These fam.ilies are in the income 
group eeirning less than $1,000 a year. Manj^ fam.ilies in the group 
above this category— those earning from. $1,000 to $1,500 a year, of 
which there are over 5,000,000 in nonfarm areas — also require new 
houses which are not now bieing constructed, and these fam.ilies m.ust 
also depend upon depreciated houses built for the upJDer-incom.e group, 
although there is an annual need for at least 350,000 to 400,000 m.ore 
units than are now being built in the price class below $4,000. 

In order to prevent a recurrence of conditions which cause so large 
a proportion of the urban population to live in undesirable quarters, 
t is necessar}' that new construction be in groups of houses in con- 
trolled and properly planned neighborhoods to obtain the largest 
possible recreational spaces and other am.enities which our techniques 
now provide. Ideally, the most desirable m.ethod of providing bal- 
anced residential construction is through private enterprise. But the 
present set-up of the industry is geared to build houses prim.arily for the 
incom.e group earning $2,000 or m.ore per year. We build largely for 
this limited group because the hom.e-building industry has followed 
traditional practices and failed to keep up with the progressive 

XV 



XVI SUMMARY AND CONCLUSIONS 

ni.ctliods that have enabled other industries to exten,d their markets to 
low-mcome groups. The provision of homes today .is ' largely de- 
pendent upon a haphazard grouping of sm.all, independent units 
lacking capital, and- upon traditions, custon\s, and restraints of one 
kind or another that are difficult to break. Moreover, many of the 
raw materials of the industry are concentrated in a few hands with a 
controlled and inflexible pricing system. 

The m.ajor elements that go to m.ake up the costs of a finished home 
are land, labor, m.aterials, and financing, to which must be added 
taxes and operating costs. Each of these involves com.plicated 
questions which m.ust be answered before the whole problem, of 
supplying low-cost housing can be solved. Nor can all of the problero.s 
involved be solved by Federal legislation. As m.uch can be done 
locally to remove restrictions and encourage progress in buildmg as 
can be done nationally.^ Im.provements in the factors involving 
local police power — such as proper building and zoning ordinances and 
their intelligent adm.inistration — may be as effective in aiding progress 
in building construction as national laws affecting m.ortgages. Re- 
straints practiced with the connivance of local officials m.ay easily 
offset Federal antitrust laws. Lack of planning of city facilities can 
create new slum.s faster than Federal subsidies can dem.olish them.. 

Another im.portant area for non-Federal attention is the widespread 
divergence of State laws applying to m.ortgages. In those' States 
which require heavy foreclosure fees and long repossession periods the 
margin of equity m.ust of necessity be greater than in States where 
foreclosure costs are low. While Federal agencies have advised and 
proposed uniform title, lien, and foreclosure laws,' the decision to 
adopt them, rests with the States. 

HOUSING FINANCE 

The most serious restraints in the field of housing finance either 
have been eliminated or the machinery has been set up for their 
elimination. Through the Federal Housing Administration the risks 
in lending, at least on single-family houses, have been reduced almost 
to insignificance. There has been a reduction in effective interest 
rates accordingly. Wliether these interest rates can be lowered still 
further depends upon competition with other forms of investment. 
The return on F. H. A. -insured loans compares favorably with any 
other form of investment offering similar security. 

A great deal has been accomplished in making financing easy for 
those who can afford to own homes valued at from $4,000 to $6,000, 
or with incomes of from $2,000 to $3,000. Further, a start has been 
made toward making more money available for homes costing about 
$2,500, which, because of land prices and tax problems, the industry 
can produce only in outlying districts away from the centers of 
population. 

There is one field, however, in which little progress has been made; 
that is low-rental housing by private industry. ^Tiile idle funds are 
abundant, it is still difficult to find private investors willing to assume 
a portion of the risk in providing equity funds. The F. H. A. insures 
75- to 80-percent loans on rental housing on a mortgage cariying a 4 

• Thomas S. Holden, vice president, F. W. Dodge Corporation, comments that much more can be done 
locally to remove restrictions and induce progress in building than can be done nationally. 



SUMMARY AND CONCLUSIONS XVII 

percent interest rate plus 0.5 percent insurance. Apparently there 
is no difficulty in obtaining loans at these terms wherever commit- 
ments to insure are made by the F. H. A. 

The F. H. A. could increase the amount of low-rent housing in much 
the same way that the volume of loans for individual homes was in- 
creased, namely, by increasing the mortgage ratio to 90 or even 95 
percent of the total property value and reducing interest rates. A 
90-percent loan may be just as safe from an insurance point of view 
as a 75-percent loan carrying a higher interest rate, provided the 
interest rate is decreased proportionately. The safety of the loan is 
measured by the ability of the borrower to meet the periodic pay- 
ments; and the size of the periodic payment rather than the ratio of 
i loan to value determines the ability of the borrower to meet his 
"obligation. The amount of the periodic payment depends not only 
upon the size of the lo^m but upon the rate of interest and the period 
ot amortization. For instance, on a project costing $1,000,000 with 
, a 75-percent loan and an interest rate of 4% percent, plus 0.5 percent 
insurance, and starting with a 2-percent amortization, $52,500 is re- 
^quired to meet the initial annual payment. If the loan ratio is raised 
to 90 percent and the interest rate is reduced to 3 percent, the amorti- 
zation and insurance remaining the same, the first annual payment 
amounts to $49,500. Certainly this latter obligation is a safer risk 
than the former. Th theory of mortgage lending is that the se- 
curity of the loan depends upon 'the margin between loan and value, 
because recovery must be had through foreclosure; but for safety 
mortgage insurance depends on the ability of the borrower to meet 
the periodic payment. 

Any question as to whether lenders would be willing to accept l0wer 
interest rates may be discounted, considering the present-day money 
market and the lack of risk involved. It has been pointed out in 
testimony before the Temporary National Economic Committee that 
the risk experience of portfolios containing less than 20 percent of 
F. H. A. insured mortgages is about 0.5 percent; ^ and since the loss 
experience of the F. H. A. is but a small fraction of even this low 
percentage, it would seem that such insured mortgages would be 
highly desirable where safety is an unportant factor. 

The public interest demands certain returns for the use of public 
credit for insurance of mortgage investments. The National Housing 
Act provides these returns by setting a limitation of $1,350 per room 
on the mortgage on rental housing, and regulations of the F. H. A. 
require a dividend limit of 6 percent on the equity (with an additional 
2 percent after reserves). For mortgages on individual homes the 
interest rate is limited to 4}^ percent. There would be no reason for 
a lunitation on the equity earnings on rental housing if rents weire 
limited. The public mterest would be met if there were merely a 
rent limitation combined with minimum physical standards of con- 
struction and mamtenance. The act should be amended accordingly, 
so that reward to the ingenuity which can achieve the low-rent goal 
will not be restricted. 

Rental housing for the lower half of the middle-income group 
($l,000-$2,000) might well be stimulated by further amending the 
National Housing Act so that lower interest rates would be required 

2 Sfe ch. VI below. 

260158— 40— No. 8 2 



XVIII SUMMARY AND CONCLUSIONS 

and loans on a higher proportion of the valuation guaranteed in return 
for lower rentals. Moreover, th^ rentals should be scaled on the' basis 
of the loan-to-value ratio and the rate of interest. 

In short, the principle involved here is that there should be no 
restrictions on the return to that part of the capital which is risked; 
but the return on the capital insured against loss should be limited so 
that public benefit may be derived, and should vary with the limita- 
tions imposed. 

COLLUSIVE PRACTICES 

In" building activities proper, a number of types of control are 
apparent. Por those affecting the price of materials there is already 
sufficient authority under the antitrust laws to take whatever action 
seems necessary. However, there has been a growing practice on the 
part of organized subcontractors to combine with labor to maintain 
local prices of materials and installation work. Some subcontractors, 
through their so-called codes of fair practice, have maintained both 
uneconomic practices and high costs. There is a question whether 
certain State "fair trade- practice acts" have not been conducive to 
this type of restraint, and a reexammation of all State fair trade 
practice acts might reveal an extensive influence in maintaining high 

costs. 

The Department of Justice has proceeded under the antitrust laws 
against a number of organized bid depositories and has obtained 
consent ■ decrees involving the dissolution of these bodies. ^ The 
Department believes that by a widespread attack through hidictments 
it can dissolve all such bid depositories. In cases involving projects 
aided by Federal funds, such as the Pittsburgh housing projects' and 
some P.' W. A. projects, the proceedings are in the form of an indict-- 
ment under title 18, sections 80 and 88, of the Criminal Code, for 
conspiracy to defraud the United States. 

It has also been found that organized labor has in soro.e instances 
prevented the adoption of new and m.ore economic m.ethods adaptable 
to certain items of construction. Because of the set-up of labor by 
trades, wiCh each trade attempting to get as m.uch work as possible 
for itself regardless of workers in other trades, the jurisdictional strike 
has been influential in preventing the adoption of new rn.ethods. 
NVhether jurisdictional strikes can be prevented by law is being tested 
by the Departm.cnt of Justice, which is appealing an adverse decision 
in the first of such cases tried.'* There is also the problem, of sub- 
contractors who are loath to see the introduction of new methods 
which would elim-inat-^ their type of work. Groups of these sub- 
contractors may be influential in preventing the acloption of new 
methods. Of course, if the Departro.ent of Justice is successful in 
finding that the antitrust laws are adaptable for use in the prevention 
of such collusive action, there remains only more vigorous prosecution 
of the laws to obtain the desired results. 

On the whole, however, the restraints that can be reached by 
present antitrust laws probably do not influence costs to the extent 
that is comro.only believed by the public. Perhaps the broadening of 

3 For example, in the case of the Excavators Adnynistrative Association, Inc., et al., Washington, D. C, 
decree of Decemhor 22, 1959. i 

* The case of the Washington local (No. 639) of the International Brotherhood of Teamsters, Chaffeurs, 
Stablemen and Helpers of America, et al. (decision of May G, 1940). See Appendix D for list of pending 
ca«es involve<l in the antitrust building investigation of the Department of Justice. 



SUMMARY AND CONCLUSIONS XIX 

such laws so as to reach local activ^ities which cannot now be reached 
because of lack of intrastate jurisdiction may be sufficient, together 
with the present activities of the Department of Justice in seeking a 
wider interpretation of the antitrust laws, to remove many restraints 
due to collusion. 

RESEARCH 

However effective other restraints m.ay have been, one of the reasons 
for failure to m.ake greater progress in the technique of construction 
has been the lack of experim.entation and research. This is a field in 
which the desirability of aid by the Federal Governro.ent is not 
questioned. Thqre are several thousand cities and towns in the 
United States which have local building laws and codes, most of which 
are based on traditional practices rather than on scientific develop- 
m.ent, and ro.any of which are designed to protect specific groups. 
Since building codes are necessary for the protection of the public 
from hazards of fiie, improper sanitaiy m.easures, and overcrowding, 
it is undoubtedly essential that there be legal limitations imposed 
upon construction. The essential fact, however, is that m.any of these 
legal limitations and restraints add to cost without having a basis in 
scientific knowledge. Certainly the Federal Govermnent ro.ight well 
spend at least as much for housing research as it does for aeronautical 
research. 

Recently there has been set up in the Department of Comm.erce a 
section devoted to housing research. This section is reviewing housing 
standards and, in cooperation with the Bureau of Standards, is de- 
terro.ing which of the present standards are excessive, exploring, all 
possibilities for the use of new and better m.aterials for housing at 
lower cost, and devising new and better construction techniques. 
This research should in tim.e provide a return m.any tim.es greater than 
its cost to the nation as a whole. The fact that the Federal Govern- 
m.ent has either constructed or supervised the construction of approxi- 
m.ately 100,000 dwelling units since 1933, and is com.m.itted to the 
financing of 100,000 m.ore dwelling units, is in itself sufficient justifi- 
cation for the appropriation of a -substantial smn for research in 
finding methods of lowermg costs. 

PUBLIC HOUSING 

With the passage of the act setting up the United States' Housing 
Authoritj'^ the Federal Government assumed the responsibility of 
providing decent sanitary housing for those income groups for which 
private industry does not provide. Unfortunately, however, local 
governmental bodies (with the exception of New York City and the 
State of New Yorlc) have not assumed any such responsibility except 
to the limited extent of granting tax exemption and providing 10 per- 
cent of the capital funds. Since the Federal Goverrjnent has assumed 
this responsibility, it is important to determine whether the aid pro- 
vided is resulting in the greatest possible accomplishment. 

The United States Housing Act provides for (a) the advancing of 
funds to local housing authorities to a maximum of 90 percent of the 
total development cost, to be repaid with interest at not less than the 
going Federal long-term rate plus one-half of 1 percent; and {b) 
annual Federal and local governmental contributions equal to the 
difference between the economic rent and the social rent, with the 



XX SUMMARY AND CONCLUSIONS 

Federal subsidy pledged to apply to payment of the financing charge, 
the latter being approximately one-third of the economic rent.^ 

The total Federal contributions so far authorized amount to 
$28,000,000 per j^ear, which, with loc*il contributions, provides for 
approximately 160,000 families. Under present conditions, however, 
the actual cost to the Government, when the full amount of author- 
ized loans has been exhausted, may not be more than about 
$14,000,000, instead of $28,000,000 per year. This will be due to 
the following factors : 

(1) Annual Federal contributions have been lowered, through re- 
duced costs of operating budgets of projects, from the authorized 
maximum amounting to about 3.5 percent of total development costs 
to approximately 2.8 percent of such costs.® However, funds may 
have to be provided to the extent of the maximum amount since the 
budgets are subject to review after the first 10 years and each 5-year 
period thereafter, and conditions at those times may require that the 
full amount of contributions be utilized. But on the basis of present 
operating budgets this factor alone brings the maximum cost of con- 
tributions down to $22,400,000 per year when the maximum number of 
houses has been tenanted. 

(2) Reduction in cost to the Government is brought about by the 
fact that the provisions of the act result in a usual interest rate of 3 
percent on loans to the local authorities, whereas the cost to the 
U. S. H. A. is only 1% percent.^ But this dift'erence, which in effect 
reduces the cost of the annual contribution per dwelling unit and is 
termed by U. S. H. A. an ''interest profit", cannot be utilized- unless 
lo^ns for development of projects are obtained by local authorities 
from local sources for a greater proportion than the lO percent re- 
quired by law. There is nothing in the act that requires local housing 
authorities to borrow on the U. S. H. A. terms; and to the extent to 
vhich they may borrow funds frpm other sources at a lower rate than 
that charged by the U. S. If . A,, they increase the number of units 
that can be built. 

Within these limitations the U. S. H. A. must choose between two 
possibilities: it can grant the maximum annual contribution and 
reach the lowest-income group possible; or it can reduce the annual 
contribution per unit and spreacl the total funds over a larger number 
of families of a little higher income group. Having funds for only 
about 160,000 units if the maximum contribution is allowed, and a 
tenant pool of between 4 and 5 million families who could qualify as 
slum dwellers, the U. S. H. A. has attempted to provide some housing" 
for nearly all groups within the lowest third income group (under 
$1,000), except the very lowest income class. 

The possibilities of increasing the number of families rehoused under 
the present authorization are through (a) lowering the total d-evelop- 
ment cost — this reduces the economic rent and hence reduces the 
difference between social and economic rent, which the Federal and 
local contributions represent; (6) reducing the interest factor in the 
economic rent by using a greater proportion of local funds, assuming 
that they can be obtained at a lower rate than that charged by the 

» See ch. IX below. 

" What Does the Housing Program Cost? a brochure published by the U. S. Housing Authority, March 
1940. 

See testimony of Nathan Straus, Administrator, U. S. Housing Authority, in Hesrings before the Tem- 
por<»ry National Economic Committee, pt. U, pp. 5413, 5420, 6421. 



SUMMARY AND CONCLUSIONS XXI 

U. S. H. A.; and (c) providing less than the maximum contribution, 
which usually means failing to reach the lowest possible income group. 
Actually the U. S. H. A. is experimenting with all three of these pos- 
sibilities and, as a result, may provide as many as 170,000 dwelling 
units instead of the 160,000 originally estimated. If an increased 
authorization for contributions were provided and the U. S. H. A. were 
permitted to charge an interest rate as low as that which it pays, the 
number of families rehoused with -the $800,000,000 of loans already 
authorized would be increased still further. 

Throughout this monograph no attempt has been made to evaluate 
the social benefits to be derived from rehousing a substantial portion 
of the population, or to estimate the social costs of allowing a large 
portion of our housing plant to disintegrate and permitting millions 
of slum dwellings to exist. The attempt has been confined to a study 
of the economic behavior of the housing industry and the part that 
it might take in revitalizmg the entire economy. In substance we 
have found that, with the correction of certain features of the private 
housing industry and its financing, and some modifications in the pro- 
visions for public aid to housing, increased activities in both fields 
would provide an economic gain; and any social benefits will be clear 
profit. 



CHAPTER I 
CONSTRUCTION AND THE GENERAL ECONOMY 

The scope of the construction industry is so vast and of such far- 
reaching significance that its exact inclusions have not been clearly 
defined. Altl^ough in the minds of most people there is a general 
understanding of what is included in the term "construction," there 
arc differences as to the meanings which appear in statistical measure- 
ments. It may be well, therefore, at the beginning of this report, to 
give some definitions of our subject. 

The definition provided by the United States Department of Com- 
merce is as follows: "Construction activity is considered here to in- 
clude the design, production, and maintenance of fixed works and 
structures." ^ While this definition clearly encompasses the construc- 
tion activit}'', it is perhaps a little wider than the general concept of 
the industr}^. For instance, the term "maintenance of fixed works 
and structures" may bo interpreted to include activities which are 
clearly beyond the construction industry as such. In certain types 
of fixed structures, it is commonly understood that maintenance may 
include such things as janitor service, operation of heating plant, 
street cleaning and sprinkling, and other minor items which are con- 
tinuous operations rather than a part of the activities requiring new 
capital expenditures. It is also true that some maintenance activities, 
such as painting, which jnust be repeated periodically, employ the 
same materials as thofee used in the construction of new fixed works. 

On the other hand, the statistics published by the Department of 
Comm(6rce include separate figures for new construction; they exclude 
equipment "costs in public utilities; work-relief figures are shown 
separately. The two items last mentioned are included in estimates 
of volume published by the Works Progress Administration (now 
Work Projects Administration of the Federal Works Agency).' It 
has been suggested by some students of the problem that the drilling 
of oil wells and sinking of mine shafts might also be included in con- 
struction, yet both estimates of volume mentioned above omit such 
items. The problem is further complicated by the fact that the 
Bureau of the Census, in compiling business statistics, includes only 
that part of construction done by contractors, all other construction 
work being included in the particular industry for which the work is 
done. 

It is difficult to draw the line precisely; consequently it must be 
borne in mind that figures quoted herein may differ, due to the 
varying definitions used in difJFerent estimates. On the whole, how- 
ever, these differences are not of sufficient magnitude to influence any 
conclusions derived from them. With these differences in mind we 

' Bureau of Foreign and Domestic Commerce, Construction Activity in the United States, 1915-37 
Washington, 1938, p. 3. 

' Construction Expenditures and Employment, 1925-36, and Construction Expenditures and Employ 
ment, 1936-38, Works Progress Administration, Washington, June 1, 1937, April 1939. 

1 



2 CONCENTRATION OF ECjONOMIC POWER 

may consider that the construction industry includes the design, pro- 
duction and alteration of fixed works and structures. For the most 
part the specific figures which have been taken as measurements 
of the industry have been compiled with a view to eliminating, as far 
as possible, items about which there may be some doubt as to their 
applicability to the durable goods industries. 

On the above basis, then, this report will attempt to survey the 
important factors in the construction industry, placing particular 
emphasis on that section of the industry which we will call "housing." 
It will attempt to probe, as far as por.sible, the essential data that will 
throw some light on the problems affecting this industry and the 
manner in which this industry affects our economy. 

VOLUME AND EMPLOYMENT 

The construction industry itself shows a volume of activity ranging 
from nearly $12,000,000,000 a year during the peak of the last cycle 
to about $3,000,000,000 at the low point of the depression, as shown 
by chart I.^ At the peak of employment, in the month of August 
1928, approximatel}'' 2,400,000 workers were employed, while in the 
peak month (seasonally) of 1933, only T, 000, 000 were employed — a 
drop of 5S percent,^ 

In 1929 the industry accounted for approximately 5K percent of the 
total nonagricultural labor forces of the United States.^ This figure 
does not include the large number of workers in industries supplying 
products to the construction industry. The latter has been variously 
estimated from a number equal to Iji times those directly employed 
in construction to a much larger figure. We may safely say that con- 
struction activity at its peak of the last cycle was responsible for the 
employment of between 4 and 5 million nonagricultural workers. 

Chart I (giving the value of construction) shows that there are three 
principal divisions of the industiy which had varying lines of fluctua- 
tion — residential, private nonresidential, and public. Of great im- 
portance is the fact, shown in the chart, that the most violent fluctua- 
tion as between the peak and the low point occurs in residential and 
private nonresidential rather than in the public construction section 
of the industry. 

Let us now shift the classification slightly and divide the industry 
into private building excluding utilities, on the one hand, and all 
public constriaction and private utilities, on the other. Employment 
figures compiI\ed for the Works Progress Administration show that 
private building (excluding utilities) reached a low point of only 
116,000 persons directly ero,ployed in January and February of 1933 
(or an average of 201,000 for the year), as compared with a high of 
1,654,000 in November of 1925, and that even in the recovery the 
highest point reached was 768,000 in October 1936.* Public con- 
struction and utilities, on the other hand, showed employment of 
approximately 1,100,000 at the peak month, as compared with an 
average of 800,000 during 1932, after which there was a considerable 
increase due to the activities of Federal, State, and local govenmients 

3 From exhibit No. 837, Hearings before the Temporary National Economic Committee, pt. 11, Con- 
struction Industry, p. 4944. 

* Isador Lubin, Testimony, Hearings before the Temporary National Economic Committee, pt. 11, 
pp. 49,'V8 and 5461. 

' Ibid., p. 4942. 

' Construction Expenditures and Employment, 1925-36, table V, p. 43, and Construction Expenditures 
and Employment, 1936-38, table VII, p. 13, Works Progress Administration, June 1, 1937, April 1939 



CONCENTRATION OF ECONOMIC POWER ^ 

ill praviding work relief. The exact measurement of recovery m this 
field is com.plicated by the extent to which pUHic works have been 
constructed as relief program.s. 

Thus, it is the private buildirig industry that has been the principal 
sufferer from the depression. It is for this reason that all eyes have 
turned hopefully, toward th^i building industry for recovery". 



CHART I 
VALUE OF ALL CONSTRUCTION 



BitLlOMG or M>LL*ff« 
PCR iWtlUM 





y^ 


"NvJOTAL 




1 




/ 










J 




\ 


y^^ 








\y 










\ — y 

















\ 








y^ \ 










^^^ ^^ 











— -^^ 






--^ 


^^^^-^^ 


\ 


Private Noi<-Hesioenti»l 


X\ 






\ -^-^ 






RELATION TO OTHER INDUSTRIES- 

It is not only the direct expenditures and employm.ent of the con- 
struction industry that have fluctuated so violently, but a large part 
of the m.anufacturing industry is also involved in the volum.e of con- 
struction activity. For instance, total expenditures on projects of 
the Public Works Adm.inistration from July 1933 to March 1939 in- 
volved in placing of m.aterial orders, including 99 principal item.s. 
having a value of $2,205,601,611.^ These include such varying item.s 
as m.attresses and bed springs, tents and awnings, m.achine tools, ex- 
plosives, carpets and rugs, as well as cement, brick, and lum.ber. 

The principal industries affected are lum.ber^ brick and clay prod- 
ucts, cem.ent, structural and ornam.cntal m.etal, heating apparatus, and 
plumbers' supplies. , Pay rolls of practically all of these dropped from 

' Bureau of Labor Statistics, Value of Material Orders Placed for Projects Financed by Public Works 
Administration Funds, from July 1, 1933, to March 15, 1939 (subject to revision). 



CONCENTRATION OF ECONOMIC POWEK 



CHART II 



Manufacturing Employment 
durable ff nondurable goods group 

1923-25 = wo 


UM8£«5 

140 
120 

" 

80 
60 
40 
20 


140 
120 
100 
80 
60 
40 
20 






































f\ 


^ 


^ 


^ 


^ 


'JP? 


P\ 


M 

s. 


mdui 


able 


Goods Gr 


oup^ 

a/ 


^ 


^ 




^ ■ 




r 


\ 


^ 


-A 


\ A 


/ 


1^ 
















^ 


\ 


V 


t 


^ 


r 






V 














Dur 


ihle 


Good 


sCro 


up^ 


N. 


J 



























































































1923 1924 1925 1926 1927 1928 1929 1930 1931 1932 1933 1934 1935 1936 1937 1938 1939 1940 

%/f^AU or LABOR STATISTICS 





CHART III 



140 
ISO 
lOO 
BO 
60 


EMPLOYMENT AND PAY ROLLS 
STEAM a HOT-WATER HEATING APPARATUS S STEAM FITTINGS 

SumbefS lnd€* Numbtrs 






































120 
100 
80 
60 
40 
20 



rtoi 


PL. 


fj 


^ 


t9f\ 




























v\ 


^ 


V 


1 


n 


f*\ 


U\ 


^ 












/" 
























^ 


tS 


EMPL 


OYMI 


NT 


,/ 


•^^ 




ly^ 


p 




















\ 


V 


/ 


_/vj» 


1/ 


/ 


\ 


1/ 


*- 




80 














PI 


IT RO 




\j\ 


/ 


/VN 
















































v s 


/923 1924 1925 1926 1927 1928 1929 1930 1931 1932 1933 1934 1935 1936 1937 1938 1939 I940 

eUttCAU Of LaeOR STAIrSTtCS 



CONCENTRATION OF ECONOMIC POWER 



















CHAKT IV 


















EMPLOYMENT AND PAY ROLLS 1 
LUMBER-SAWMILLS 

MexNumt>en 1923-25 -100 fnOcxf^umtw^] 


ISO 

100 
80 
























- 














/20 
100 
80 
60 
40 
20 



f 


<V 


Aa 
































r^ 


f\ 


l^ 


^ 


^ 


































\ 












-/^Si. 


J\ 








40 
20 
















1 


-EMf 


'LOY^ 


lENT 


n 


i 


^\ 


^ 


J 

p 
















PAY 


ROLL 


P^/> 


f^ 


y 
































■^ 
















° 1923 1924 1925 1926 1927 1928 1929 1930 1931 1932 /933 1934 /935 1936 1937 1938 1939 1940 

U S.BUREAU Of LABOfl STATISTICS 



CHART V 



EMPLOYMENT AND PAY ROLLS 
LUMBER - MILLWORK 


120 
100 
80 
60 
40 
20 



us e 






































120 
lOO 
80 
60 
40 
20 


r 


^ 


/ 


^ 






























T 


^ 


\ 


f> 


f\ 


































1 


\ 


\ 














(^^ 






















\ 


.EMP 


LOYK 


ENT 


/ 


^ 


A 




to 
















PAY 


ROLl 


sV 


^ 


/^ 


i/ 


/ 


] 


r 
































M/ 
















i923 1924 1925 1926 1927 1926 1929 1930 1931 1932 1933 1934 1935 1936 1937 1938 1939 1940 

UREfcU Of LABOR STATISTICS 





CONCENTRATION OF ECONOMIC POWER 



















CHART VI 


















EMPLOYMENT AND PAY ROLLS 

STRUCTURAL AND ORNAMENTAL METALWORK 

Mil Numbers I923-25'I00 Index Numbers 










































100 

so 

60 
40 

so 


p 


^ 


^Vd 


f^ 


\h 


^ 


A 


^ 






















100 
80 
60 
40 
20 



f* 


\ 


- - 






\ 


V 












/\ 






















1 


^ 


-EMF 

\ 


LOY^ 


ENT 




r(\ 


K^^ 
















PAY 


ROLL 


S-\ \ 


r 


r 


v^ 


f 




K^ 






















\ 


J 


r- 


^* 
































\/ 
















us 


1923 1924 1925 1926 1927 1928 1929 1930 1931 1932 1933 1934 1935 1936 193? 1938 1939 1940 

euHEAU OF LH80B STATISTICS 



CHART VII 



EMPLOYMENT AND PAY ROLLS 

BRICK. TILE. AND TERRA COTTA 

/niitM Nimttn 1923 -25 "100 matt Numitrs 


120 
100 
SO 
60 
40 
20 







































120 

too 

80 
60 
40 
20 



A 


K 


t\ 


A 


i\ 


























V 


l) 


V 


^1 


r\ 


A 


























1 










7 1 












1 




















'} 


/V-EMP 


LOYM 


ENT 


./^ 


f 


n 


^ 


/ 














PAY ROL 


US- 


1 *r 




/ 


T 


V 


^ 


















1 






___ 1 






1923 1924 1925 1926 1927 1928 1929 1930 1931 1932 1933 1934 1935 1936 1937 1938 1939 1940 

% BURIAO OF LABOR STATISTICS 



CONCENTRATION OF ECONOMIC POWEJi 



CHART VIII 



InOex Numbers 
140 



EMPLOYMENT AND PAY ROLLS 

CEMENT 

I923-25>I00 




1923 1924 1925 1926 1927 1928 1929 1930 1931 1932 1933 1934 1935 1936 1937 1933 1939 

eiJREAU OF LABOR STATISTICS 



CHART IX 



i Me. 


EMPLOYMENT AND PAY ROLLS 
PLUMBERS' SUPPLIES 

ftainbers 1923" 25 "100 li,de^ Numbtrs 


120 

m 
eo 

60 
40 
20 






















120 
100 
BO 
60 
40 
20 



































-^'^ 








■^ 




E 

A 


^UPLOYME 




^#«^Af 


[M 


j^t 






K-v 


^l 


fW 


pV^ 




\ 


,/W 






1 


N. 


{h 


r^ 
















v 
















L- ^1 


1931 1932 1933 1934 1935 1936 1937 1938 1939 1940 

E.JBEAU OF LABOR STATIST.CS 



g CONCENTRATION OF ECONOMIC POWER 

an index of approximately 110 (1923-25 average equals 100) during 
the height of activity in the last cycle to a low point of around 20 
or less during 1933, as shown by charts II to IX.* In terms of 
employment, the drop' was from about the same peak to around 30 
to 40. The effect on all durable-goods manufacture is also shown 
in chart II. The index of emplovm.ent for durable goods dropped 
from. 110 in 1929 (1923-25 equals 100) to 50 in 1932, while the index 
for nondurable goods dropped from 110 to about 75 during the same 
period. 

The f|,bove shows only the effect on manufacturing. Transporta- 
tion is likewise aflfected. It has been estimated that 19.5 percent of 
all revenue freight originating in 1929 was classified as construction 
materials; approximately one out of every five cars carried raw or 
finished construction materials. Approximately 1 1 percent of railroad 
employment and 12 percent of pay rolls could be attributed to con- 
struction in 1929.* 

In addition to the industry itself and that part of manufacturing 
and transportation concerned with construction materials, there is 
the effect upon the production of consumer goods and services. 
While there have been some attempts to measure the mdirect effects 
of construction activity, such attempts have been too limited to 
warrant a conclusion capable of expression in terms of statistical 
measurement. Nevertheless, it is obvious that the difference between 
1^2 million '*^ and 4 million persons engaged in a given activity must 
have serious repercussions on the whole economic scene. 

INVESTMENT OUTLETS 

The cost of a structure or fixed works varies with the type, ranging 
from single-family residential buildings with an average cost of 
$4,000 up to many millions of dollars for large hydroeleotric -power 
plants. During the N. R. A., the lower limit coming within the 
purview of the Construction Industry Code was $2,000. The F. W. 
Dodge Corporation, which compiles commercial construction statis- 
tics, includes $2,000 projects as its minimum. Thus it may be seen 
that the construction industry produces a commodity with a high 
minimum value, the funds for which must come from accumulations 
of savings or credit. 

Without going into an extended discussion of the functioning of the 
economic system, we may point out here that if the nation's savings 
are to result in employment and purchasing power they must find 
investment outlets. Testimony before the Temporary National 
Economic Committee has indicated that in 1936 and 1937 capital 
outlays made in industi'ial plant and equipment were on a scale quite 
comparable with those of 1927-29.'^ Railroads and utilities, how- 
ever, have lagged considerably, failing to plaj'^ their full part in 
recovery. Special conditions surround railroads and the entire 

> From exhibits Nos. 829-836, Hearings before the Temporary National Economic Committee, Part U, 
pp. 4938-4942. 

» Lawrence Mehren, Employment and Values in Construction, Engineering News-Record, September 
21, 1933, vol. 3, tables IV, V, pp. 355; 356. 

10 This figure includes an estimated half million workers supplying products to the construction industry. 
It is based on the conservative estimate of 1,600,000 such workers which is included in the above estimate 
of 4,000,000 workers for whom construction activity at the 1928 peak of employment was responsible. 

" \. H. riansen. Hearings before the Temporary National Economic Committee, Part 9, Savings and 
Investment, p. 3514. 



CONOEXTRATION OF EiCONOMIC POWER 9 

transportation field, pointing to the possibility that little can be 
expected in this field in the immediate future, at least. As for utili- 
ties, there is a possibility that a considerable volume of investment 
expenditures will develop. This factor will be explored more iully in 
a later chapter. 

The point to be emphasized here is that for a proper functioning 
of the economy it is necessary that construction be expanded, not 
only to the high point reached in the past, but to a point which will 
maintain an expanding economy and an increasing population with a 
continuously expanding standard of living. For these reasons, 
because unemployment persists and a remedy is urgently needed, it 
is important to analyze the construction industry and its problems 
to find, if possible, the deterrants to expansion, and to consider 
remedies which may suggest themselves as a result of such analysis. 

BIBLIOGRAPHY 

Gill, Corrington, Construction Statistics, Journal of the American Statistical 
Association, March 1933, vol. 28, No. 181, pp. 31-54. 

Mehren, Lawrence, Employment and Values in Construction, Engineering News- 
Record, September 21, 1933, vol. 3, pp. 353-357. 

Temporary National Elconomic Committee, Hearings; Pt. 9, Savings and Invest- 
ment, Washington, 1940; testimony of A. H. Hansen. Pt. 11, Construction 

I Industry, Washington, 1940; testimony of Isador Lubin. 

U. S. Department of Commerce, Bureau of Foreign and Domestic Commerce, 
Construction Activity in the United States, 1915-37 (Domestic Commerce 
Series, No. 99), Washington, 1938. 

Wclman, Leo, Planning and Control of Public Works, National Bureau of Eco- 
nomic Research, New York, 1930. 

tVorks Progress Administration, Construction Expenditures and Employment 
1925-36, and Construction Expenditures and Employment, 1936-38, Washing-" 
ton, June 1, 1937, April 1939. 



CHAPTER II 

TRENDS IN NONRESIDENTIAL AND PUBLIC CONSTRUCTION 

The most common division of the construction industry is between 
building, whether private or public, and engineering works. The 
reasons for this are apparent. The building industry requires a 
greater amount of specialization, with its corollaries of a large amcuit. 
of skilled labor and generally higher wages; its location is principally 
in cities; and, except for public buUdings and recent aid through 
public agencies, it is financed from private funds. Engineering works, 
on the other hand, require a greater proportion of unskilled labor and, 
except for private utilities, are financed from public funds. 

PRIVATE NONRESIDENTIAL BUILliiNG 

Private nonresidential building is of vaiying types, each of which is 
influenced by different factors. The most important of these types 
are commercial and industrial buildings. Other types include 
churches, theaters, lodges, etc., all of which r act to general business 
conditions. 

The total volume of nonresidential building over a period of years 
is shown in table I. It may be noted from this table that for the 
period covered commercial buildings represent the largest group of 
nonresidential buildings. Commercial buildmg during the 1920's av- 
eraged around $900,000,000 a year, reached a low point of $118,000,000 
in 1933, and recovered to $336,000,000 in 1937. 

Table ^.—Estimated volume of private nonresidential building, 1925-38 
[Millions of dollars] 



Year 


Total 


Commer- 
cial 


Industrial 


other 


1925...,.- J-... -- 

192G r 


1, 934 

2,340 

2,191 

2,222 

2,304 

1,358 

732 

279 

309 

392 

430 

639 

840 

612 


793 
959 
920 
911 
945 
611 
315 
137 
118 
153 
189 
275 
336 
257 


329 
491 
438 
489 
599 
299 
124 
47 
111 
149 
138 
224 
337 
226 


812 
890 


1927 .- ..w - 


.833 


1928..... 4 

1929...., 

:930...... 

1931 w ,- 

1932 , 

1933 . .' . 


822 

• 760 

448 

293 

95 

80 


1934 1 - ^ -- 


90 


1935 r 


103 


1936 ... ,.. 


140 


1937 . , 


167 


1938 .- 


129 







Source:'! )ata utilized m Construction Expenditures and Employment, 1925-36, p. 39, and Construction 
Expenditures and Employment, 1936-38, p. 10, Works Progress Administration, Washington, June 1, 1937, 
April 1939. 

Of great importance is the changing composition of the com- 
mercial buUdings group. Table II shows the composition of this 
group for 4 periods: 1929, 1933, 1937, and 1939. During the first 



260158-40— No 8- 



11 



12 



CONCENTRATION OF ECONOMIC POWER 



period, which was representative of the 1920's, office buildings com- 
prised nearly 47 percent of the total commercial, dropping to less 
than 12 percent in 1933; in early 1939 this group represented 21.8 
percent. Existing vacancies in office buildings determine to a great 
extent needed construction and are a factor in all commercial build- 
ing needs. However, the figures shown in table II indicate that 
store building (including restaurants) is the most important factor, 
recently constituting more than one-half the total commercial. This 
rise in the ratio of store buildings, which in 1937 represented 64 per- 
cent of their 1929 total, as compared with office buildings, which 
amounted to only 12 percent of their 1929 total, indicates that store 
building is becoming more closely related to residential building, 
due to the fact that the growth in residential areas has been away 
from the large city center and has called for more suburban shopping 
centers. 

Vacancies in office buildings, however, are stili the determining 
factor in new construction of this type, and figures reported in 1938 
by the National Association of Building Owners and Managers indi- 
cate that existing vacancies were not being absorbed at a rate com- 
parable with business improvement. The high point in vacancies 
occurred in 1934 with 28 percent, compared with an average of 10 
percent during the latter 1920's. In the first part of 1938 they were 
still 18 percent.* 

Table II.- — Volume of commercial building — 37 Eastern States 
[Thousands of dollars] 



Year 



Bank 
build- 
ings 



Garages 

and 
service 
stations 



Offices 
and loft 
buildings 



Stores and 
and res- 
taurants 



Ware- 
houses 



Total 



1928: 

Value 

Percent ot total- 

1933: 

Value ■-- 

Percent of total - 

1937: 

Value 

Percent ot total . 

1939 (first 6 months) 

Value 

Percent of total. 



35, 188. 90 
3.79 

3, 419. 70 
3.44 

7, 364. 20 
2.48 

2, 755. 00 
2.38 



157, 776. 70 
16.98 

16, 428. 90 
16.53 

47, 910. 60 
16.13 

19, 490. 00 
16.83 



435, 288. 50 
46.85 

11, 683. 60 
11.75 

52, 811. 90 
17.78 

25, 257. 00 
21.81 



211, 130. 60 
22.72 

46, 943. 80 
47.24 

135, 076. 80 
45.47 

59, 388. 00 
51. 29 



89, 803. 70 
9.66 

20, 895. 20 
- 21. 04 

53, 879. 90 
18.14 

8, 907. 00 
7.69 



929, 188. 4a 
100.00 

99, 371. 20 
100. OO 

297, 043. 40 
100. 00 

115,797.00 
100. 00 



Source: F. W. Dodge Corporation, New York. 



Industrial building appears to be influenced more by industrial 
earnings than by any other factor. This is illustrated in chart X, 
which shows the earning^ before depreciation compared with new 
construction expenditures of the United States Steel Corporation 
covering a period of 33 years (1904-38). Apparently, so far as the 
United States Steel Corporation is concerned at least, investment in 
new construction follows by about one year the net earnings, and is 
not the result of either anticipated earnings or production, although 
it seems logical to assume that the anticipation of continued earnings 
would be an important factor in any decision to invest new funds. 
Approximately the same results are shown in comparing total indus- 
trial earnings with total industrial construction.^ 

1 Real Estate Analyst. St. Louis, July 27, 1938, vol. 7, p. 1006. 

•■Lowell J. Chawnei, Basic Factors in the TtcpA t' Construction, Construction Costs, 1937 edition,, 
blishea DV Engineering News-Recoid pp. 10. 11. 



CONCENTRATION OP ECONOMIC POWER 



13 



CHART X 



UNITED STATES STEEL CORPORATION 
EARNINGS AND NEW CONSTRUCTION 

3 YEAR MOVING AVERAGE. 1904-1938 



INDEX 
NUMBERS 

(t»2S'IOOI 

180 



160 



140 



120 



100 



80 



60 



40 



20 



20 







A 












EARNINC 


.A'\ 


NEW CONSTRUCTION 






N l\ \ 


^ 








'^ 


>■ 


/N, 


/» 








■■ 


\ P\ / \ 




/\ 


1 


ff \ 


\ h 

I \ h 


V 


\i 




/> 

/ \_ 

/ 

1 




1 


W' 






f 


1 

1 

1 

1 

1 

1 


\ 

N 
\ 

\ 
\ 

\ i 


/ 

r 






j 

■ 
1 




1 
1 


^.J 








1 / 


I 












V 



















-20 



1905 1910 1915 1920 1925 1930 1935 



1939 



y^flCe- WALL STREET JOURNAL, "TABULATED HISTORY OF U, S STEEL CORPORATION", OCT 4, 1937 



14 CONCENTRATION OF ECONOMIC POWER 

PRIVATE UTILITIES CONSTRUCTION 

Privately owned utilities include railroads, telephone and telegraph 
systems, gas plants, and the electric power and light industry. 
Although the last-mentioned segment has normally constituted from 
one-third to nearly one-half the total volume properly included under 
utilities, other items such as railroads and electric railways have 
shown about as great a decline in new construction as have electric 
power and light plants. 

Table III shows the various categories of pr'vately owned utilities 
and the estunated volume of expenditures horn 1925 to 1938, in- 
clusive. According to this table, railroad construction averaged 
$484,000,000 million ayear for the years 1925-30, and only $157,000,000 
a year for the years 1936-38. Little, if any, improvement can be ex- 
pected in the near future — certainly not for new-lme extensions. Pos- 
sible improvements such as double tracking and electrification may 
increase this rate somewhat in more prosperous times, but with more 
miles of road being abandoned each year, plus the increased volume of 
truck haulmg there seems to be little hope that railroad expenditures for 
new improvements can ever be stepped up much beyond the present 
rate. There is even a likelihood of reduction in this rate, which 
includes a considerable amount for the railroads' share of the cost of 
grade-crossing elimination. As the amoimt of public appropriation 
for this activity is reduced, tlie railroads' expenditure will be reduced 
proportionately. 

Electric railway construction, although averaging ir. 1936-38, 57 
percent of the 1925-30 annual average, shows little possibility of 
recovery to its former levels. That buses are replacing electric 
railways for city and suburban transportation is generally well known. 
The extent to which this has taken place is shown by the fact that the 
mileage of surface railway rapid transit, and suburban railroad track 
in the United States was reduced from 44,985 miles m 1923 to 30,612 
in 1936.^ On the other hand, the number of cities where busses 
(including trolley busses) provide all local transit service rose from 
only two cities of more than 25,000 population in 1923 to 125 such 
cities in 1936.^ New subway construction now being proposed, 
including that for Chicago already under way, might indicate an 
increase in tliis category; however, such construction is for the most 
part under municipal ownership and not under privately owned 
utilities. 

Construction of power and hght plants, commonly considered the 
major portion of privately owned utilities, had an average volume of 
$751,000,000 for the years 1925-30, and dropped to an average of 
$330,000,000 for the years 1936-38.^ These figures represent con- 
struction by privately owned utility companies only. The difference 
between the 1925-30 and the 1936-38 average volume is $421,000,000. 
Only a small part of this decline has been made up by public expendi- 
tures for power and light facilities. Such expenditures averaged 
$72,000,000 per year for the 1925-30 period as compared with about 

5 Transit Journal, January 1936, vol. 80, No. 1, p. 15. John A. Miller, Motorization Progress shown by 
Rail and Bus Route Changes. 

* Ibid., p. 17. 

' The^e figures exclude land, but include power-plant equipment, estimated by the Department of Com- 
merce to be from 45 to 57 percent of the total cost between 1925 and 1936. See U. S. Department of Com- 
merce, Construction Activity in the United States, 1915-37, table 30, p. 66. 



CONCENTRATION OF ECONOMIC POWER 



15 



$109,000,000 for the years 1936-38.'* In the meantime the use of 
electric power has shown a phenomenal growth. From 1926 to 1937 
electric power sales increased from slightly more than 56 billion 
kilowatt-hours to 99.4 biUion kilowatt-hours sold — an increase of 
77 percent. During the same period generating capacity increased 
from 23.1 miUion to nearly 35 million Mlowatts — an increase of only 
51 percent.^ The increased use of electric power has far outrun the 
increase in generating facilities and apparently offers a possibility of 
a return to the construction volume of the 1920's, 



Table III.— Private utilities construction by types, 1925-38 
[Millions of dollars] 



Year 


Total 


Rail- 
roads 


Electric 
railroads 


Power 
and 
light 


Telephone 

and 
telegraph 


Water- 
works 


Pipe 
lines 


Gas 
plants 


1925 


1,791 

1,864 

2,128 

2,016 

2,349 

2,367 

1,468 

700 

468 

655 

788 

870 

1,217 

873 


396 
444 
550 
427 
562 
528 
242 
108 
112 
141 
278 
145 
197 
128 


52 
51 
77 
90 
82 
85 
69 
29 
21 
30 
40 
45 
39 
41 


761 
704 
716 
681 
800 
844 
539 
211 
104 
126 
170 
277 
429 
285 


341 
363 
360 
412 
553 
550 
373 
241 
164 
178 
192 
257 
357 
319 


14 
13 
13 
11 
12 
20 
16 
10 
5 
6 
8 
12 
11 
14 


23 

42 
104 

65 
108 
119 

84 

II 
21 
45 
44 
87 
40 


204 


1926 


247 


1927 .— 


308 


1928... 


330 


1929 


232 


1930 


221 


1931 


145 


1932 


84 


1933 


44 


1934 


53 


1935 


55 


1936 


90 


1937 


97 


1938 


46 







Source: Construction Expenditures and Employment, 1925-36, p. 40, and Construction Expenditures 
and Employment, 1936-38, p. 10, Works Progress Administration, Washington, June 1, 1937, April 1939. 

New construction expenditm-cs for telephone and telegraph show 
a much smaller decline than any other important type of private 
utihties construction, and for the 1936-38 period were approximately 
75 percent of the 1925-30 period, or $31 1,000,000 per year, as compared 
with an average of $430,000,000 per year durmg the 1925-30 period. 
Thess figures do not mclude buildings, which constitute a considerable 
part of the total construction for this utility. The greater part of 
such construction is done through the operating companies' own forces 
and consists of new lines and extensions, placing lines under ground, 
etc. Since tliis utility is practically under unified control, its con- 
struction is more uniform than that of the other important types of 
utilities and reacts to general business conditions with less fluctuation. 
The general growth in the future will undoubtedly be proportionate 
to the growth in the general volume of business. 

Waterworks are (and for years have been) a declining factor in 
private utilities construction and warrant little consideration in this 
categdy. However, they occupy an important place in public con- 
struction and will be more fully considered under that heading. 

The last two groups under the classification "private utilities," pipe 
lines and gas plants, may well be combined. Data on gas sales 
indicate, although there was a drop from 365 b. c. f . (billion cubic feet) 
in 1929 to 350.6 b. c. f. in 1937 in total sales of gas, there was an 
increase from 1.3 b. c. f. to 50.4 b. c. f. in sales of natural gas over the 

« See Construction Expenditures and Employment, 1925-36, p. 41, and Construction Expenditures and 
Employment, 1936-1938, p. 10, Works Progress Administration, June 1, 1937, April 1939. The 109 millions 
include an estimated average of 50 millions of Federal construction (T. V. A., etc.). 

' The Electric Light and Power Industry in the United States, 1937 (Statistical Bulletin No. 5), Edison 
Electric Institute, New York, April 1938, table 1, pp. 2, 3. 



jg CONCENTRATION OF ECONOMIC POWER 

same period.^ Construction of pipe lines and gas plants shows a 
volume of only $135,000,000 average for the years 1936-38, as com- 
pared with an annual average of $334,000,000 for the years 1925-30. 
Thus, gas was utilized in 1937 at about 96 percent of the 1929 volume, 
wliUe construction of new facilities has recently been at a rate equal 
to only about 40 percent of the 1929 rate. This would seem to promise 
a possibility of recovery. 

PUBTTC CONSTRUCTION 

Public construction covers facilities constructed by the Federal 
Government and State and locu] governments. About one-fourth 
of the total in the past has been for buildings, and approximately 
one-half for roads and streets. The balance consists of waterworks, 
sewers, recreation facilities, river and harbor im^provements, flood 
control, reclamation, power and light plants, and, in more recent years, 
housmg. 

The total value of public construction for the years 1926-30 averaged 
$2,386,000,000 per year. Of this amount construction by the Federal 
Government, including grants for Federal-aid highways, averaged 
$284,000,000 a year, or about 12 percent. Total public construction 
for the years 1936-38 amounted to an average of $3,224,000,000 a year, 
of which the Federal Government provided $2,i98,000,000 a year, 
including grants, or about 68 percent. This is derived from table IV, 
which shows expenditures for public construction for each year from 
1925 to 1938. The large amount of grants in the latter years includes 
construction work done through emergency agencies such as C. W. A., 
P. W. A., W. P. A., etc. It may be seen in table IV that the total 
annual volume of public construction for the years 1936-38 not only 
is equal to the average 1925-30 volume but exceeds it by nearly a 
bUlion dollars a year. It may also be noted that average expenditures 
by State and local bodies during the 1936-38 period amounted to less 
than one-half the amount spent annually during the years 1925-30. 
Thus it may be seen that the increase in Federal expenditures for 
construction amounted to approximately $2,000,000,000 a year. 
Included in this $2,000,000,000 are the following W. P. A. construction 
expenditures: 

Millions of 

dolltiTS ' 

1936 - -, ^-- 1.222 

1937 -- 994 

1938 - -- -- --- 1,206 

an average of $1,141,000,000 a year for the 3 years. This represents 
expenditures prunarily for work relief, which, considering the general 
financial condition of States and cities, would not have been done 
otherwise The amounts spent by State and local bodies as sponsors' 
funds, in conjunction with W. P. A., have been included in the total 
expenditures by State and local bodies. 

» Annual Statistics of the Manufactured Gas Industry in 1937 (Bulletin No. 32), American Oa." Associa- 
tion, New York, October 1938. Total gas sqles from p. 6; natural gas, from p. 10. 



CONCENTRATION OF ECONOMIC POWER 

Table IV. — Public construction in the United States, 1925-S8 
[Millions of dollars] 



17 



Year 


Total 


State and 
local con- 
struction 1 


Construc- 
tion from 
Federal 
grants 


Direct Fed- 
eral con- 
struction 


1925 


2,181 
?, 137 
2,373 
2,484 
2, 415 
2,726 
2,512 
1,878 
1,827 
2,619 
2,579 
3,261 
3,034 
3.376 


1,936 
1,909 
2,128 
2,206 
2,100 
2,335 
1,997 
J, 417 
1,163 
1,021 
1,282 
825 
1,012 
1,240 


90 

78 

80 

81 

77 

96 

163 

93 

324 

1,047 

744 

1,834 

1,460 

1,559 


155 


1926 


150 


1927... 


166 


1928 


197 


1929- 


238 


1930. 


295 


1931.. 


353 


1932 


368 


1933 


340 


1934 


551 


1935 


653 


1936 


602 


1937 


562 


1938 


577 







' Includes Federal loans. 

Source: Construction'Expenditures and Employment, 1925-36, pp. 41, 42, and Construction Expenditures 
and Employment, 1936-38, p. 12, Works Progress Administration, Washington, June 1, 1937, April 1939 ' 

On the whole, about one-half of the Federal increase represents a 
transfer of obligation from the States, cities, and counties to the 
Federal Government, and the increase in total volume represents 
partly an expansion in expenditures on functions that have normally 
been considered a Federal obligation, such as flood control, reclama- 
tion, defense, etc., and partly an exercise of new functions such as 
■construction of power plants (about $50,000,000 per year) and pro- 
viding work relief. However, in amount the latter w^as sufficient 
■only to make up the deficiency in State and local public construction.® 

It may well be accepted that the normal Federal needs of public 
construction, considering the functions already assumed, should 
average in the neighborhood of $500,000,000 a year, and that State 
and local needs represent a normal expenditure of $2,500,000,000, 
making a total of $3,000,000,000 a year for pubhc construction. 
Whether States and cities can resume the responsibility for that por- 
tion of the expenditures for public construction in which they are now 
deficient depends on such questions as the relative abihty to raise 
funds either from taxation or bond sales as between the Federal and 
local governments, the additional financial responsibiUties of States 
<lue to both relief and social security needs, and constitutional limi- 
tations on debt. These questions, while germane to the volume of 
public construction, are not the primary concern of this report. A 
later chapter will deal with one particular phase, namely, the relation 
•of municipal services and housing. 

BIBLIOGRAPHY 

Ohawner, Lowell J., Basic Factors in the Trend of Construction, Construction 
Costs, 1937 Edition, Engineering News-Record, New York, pp. 9-13. 

Dodge, F. W., Corporation, Construction Contracts Awarded, 37 Eastern Staties, 
New York, monthly issues, 1925-1939. 

Edison Electric Institute, The Electric Light and Power Industry in the United 
States, 1937 (Statistical Bulletin No. 5), New York, April 1938, pp. 2-4, 8. 

» Compare A. H. Hansen, Hearings before the Temporaiy National Economic Committee, Part 9, 
•Savings and Investment, pp. 3517, 3547. Compare also exhibit No. 614 in Part 9, p. 3779, and data in 
Appendix, p. 4064; however, the basic figures used here are somewhat different from the above and are 
classified differently. 



CHAPTER III 
MARKET FACTORS AND NEEDS IN RESIDENTIAL BUILDING 

So far we have analyzed three important segments of the construc- 
tion industry and the factors relating to their expansion. We have 
seen that in private nonresidential buUdmg the important factors 
are industrial and commercial building; that the latter, for the near 
future, must depend upon an increase in store buUding, which follows 
the residential market to a large extent, and that industrial buUding 
is the result of increased industrial earnings. We have seen that in 
private utilities the greatest hope Ues in new electric power and light 
facilities and gas plants; and that in public construction the total 
volume has increased above normal durmg the depression, but that 
the greatest chi'nge has been a transference of financing from State 
and local bodies to the Federal Government. 

We have not discussed residential construction, which is one of the 
most important categories. Of the total volume of construction, 
which ranged up to slightly more than $11,000,000,000 in 1928, and 
averaged $10,130,000,000 from 1925 to 1930, inclusive, the volume 
of residential building was $4,338,000,000 in 1928, and averaged 
$3,600,000,000 for the years 1925 to 1930. This is shown in table V. 
Residential construction was as high as 42 percent of the total in 1925 
and averaged 35.5 percent for the years 1925 to 1930. In the years 
1936 to 1938 the average of all construction was $6,460,000,000, after 
going as low as $3,002,000,000 in 1933, while the average of residential 
building was $1,552,000,000, or 24 percent of the 1936 to 1938 total. 
This drop in residential construction from an average of $3,600,000,000 
to $1,552,000,000 represents the greatest smgle area of possibilities for 
increase. 



Table V. — Residential construction and total construction in the United States, 

1925-88 


Year 


Total con- 
struction 
(mOlions of 
dollars) 


Residential 

construction 

(millions of 

dollars) 


Ratio of resi- 
dential to total 
construction 
(percent) 


1926 


10. 1S9 

10, 397 

10,896 

11,060 

10, 166 

8,105 

5. 934 

3,289 

3,002 

3,982 

4,661 

6,266 

6,623 

6,490 


4,253 

4,056 

4,204 

4,338 

3,098 

1,654 

1,222 

432 

398 

416 

764 

1,496 

1,532 

1,629 


41.86 


1926 .. 


39.01 


1927 


38.68 


1928 


39.22 


1929 


30.47 


1930 


20.41 


1931 


20.59 


1932 


13.13 


1933 


13.26 


1934 


10.45 


1935 


16.75 


1936 


■ 23.87 


1937 


23.13 


1938 


25.10 







Source; Construction Expenditures and Employment, 1925-36, pp. 14, 39, and Construction Expenditures 
and Employment, 1936-38, p. 10, Works Progress Administration, Washington, June 1, 1937, April 1939. 

19 



20 CONCENTRAIION OF ECONOMIC POWER 

Residential construction is affected by a number of factors. Among 
them are increases in pop ilation, formation of new families, incomes 
of families, housing replacement, and an increase in the standard 
of housing . 

POPULATION REQUIREMENTS 

The relation of population to housing appears in the change in 
number of nonfarm families each year caused by the migration of farm 
families to cities, and in the formation of new families brought about 
by marriages. The net addition to the total number of families has 
been estimated by the National Resources Committee as averaging 
412,000 families per year for the 5-year period beginning in 1930, 
479,000 per year for the period beginning in 1935, and 474,000 per 
year for the period beginning in 1940.^ By subtracting the increase 
in farm families from these figures, we arrive at the following: 5-year 
period beginning in 1930, 288.000 per year (assimiing the same in- 
crease in farm families from 1935 to 1945 as occurred between 1930 
and 1935); period beginning in 1935, 355,000 per yo'ar; and period 
beginning in 1940, 350,000 new nonfarm families per year. 

That part of the total increase which may be apportioned to farm 
families as against nonfarm families depends in a large measure upon 
the relative conditions of prosperity and employment. Generally 
speaking, an increased volume of industiial activity brings increased 
migration from farm to city. According to estimates given in the 
testimony of Dr. Isador Lubin an average of 280,000 new nonfarm 
families per year are to be provided for in the next 10 years.^ It is 
probable that this is a minimum estimate. 

However, Lowell J. Chawner's estimates (above mentioned) provide 
an average annual increase of 474,000 per year, including fann fam- 
ilies, for the period beginning in 1940, and 452,000 for the period 
beginning in 1945, or an average of approximately 463,000 families 
over the 10-year period. If we take Dr. Lubin's figure and substract 
it from Mr. Chawner's estimate, we find an allowance of an annual 
average increase in farm families of 183,000, This is an exceedingly 
high allowance when we consider that during the depression years the 
average increase in farm families was 124,000 families per year. If we 
assume the same proportionate increase as between farm and nonfarm 
families over the next 10 years as occurred in 1930-35 — and this is 
likely to be a maximum for farm families — we would, arrive at a figure 
of an average of 340,000 new nonfarm families over the next 10 years. 
However, as already stated, changes in industrial activity may bring 
a larger net migration to cities, which would substantially increase 
this figure. In addition, as indicated by testimony at the hearings, the 
distribution of age groupings most conducive to the formation of new 
families will occur in the period 1943-50, during which period there 
will be a considerable increase in the number of persons in the 25-to 
30-year age group. ^ Apparently, however, the Chawner estimates 
must have taken this factor into consideration.* 

' Lowell J. Chawner, Residential Building, Hoiising Monograph Series, No. 1, National Resources 
Committee, Washington, 1939, p. 17. 

1 Hearings before the Temporary National Economic Committee, Part 11, p. 4966. (The fact that Dr. 
Lubin is referring to nonfarm families is indicated on p. 4967.) 

« Theodore J. Kreps, hearings before the Temporary National Economic Committee, Part 11, p. 5433 

* Residential Building, Housing Monograph Series, No. 1, p. 17. 



CONCENTRATION OP ECONOMIC POWER 21 

THE ESTIftiATED NEED VERSUS THE CURRENT RATE OF BUILDING 

We have estimated that durmg the next 10 years there will be an 
increase of at least 340,000 nonfarm families per year, and since this is 
approximately at the rate at which we are now building, it may be 
said that we are now providing only for the general increase in non- 
farm families. Let us look at the condition of our existing housing 
plant. In the first place, according to the 1930 census there were 
23,236,000 nonfarm "families in the United States.^ But according 
to the census- definition, a family includes "a group of persons, related 
either by blood or by marriage or adoption, who live together as one 
household, usually sharing the same table." ^ Thus, two families in 
the ordinary sense which share the same table, if they are related by 
blood or marriage, would be considered as one family. Actually what 
the census is defining here are households. 

Nonfarm families are estimated by Mr. Chawneras 23,028,000 
in 1930, a difference of 208,000 compared with the census. The same 
source shows that in spite of an estimated 2 percent vacancy, the 
ratio of families to available units in 1938 was i00.21.^ Consequently 
we may assume that in addition to the increase in number of families^ 
there are a considerable number of doubled-up faniilies which pre- 
sumably would be prospective occupants for new construction under 
proper economic conditions. 

Further, there is a more or less continuous demolition of struc- 
tures, which has been estimated by the Bureau of Labor Statistics 
to average around 45,000 units a year.* It may be pointed out in 
this connection that these 40 to 50 thousand units a year in the past 
have usually been demolished in order to make room for some non- 
residential activity. Rarely has it been found that houses have been 
demolished simply because they have depreciated or become obsoles- 
cent. The fact that the United States Housing Act requires demoli- 
tion or effective repair of an obsolete unit for each new unit built will 
hardly affect the amount of demolition due to the former cause, 
namely, demolition to make room for some activity other than hous- 
ing; and it is this cause that is responsible for the 45,000 units per 
year. This, incidentally ,^ does not include destruction by fire, wind, 
etc.9 

Thus we can account for a need of approximately 385,000 new units 
a year merely to maint "-in the status quo in housing. What present 
housing conditions are has been demonstrated by the real property 
inventories made by W. P. A. in 1934-36. For example, out of 
over 5,000,000 residential structures (representing a larger niunber 
of dwelling units) it was found that 16.2 percent were either unfit 
for use or in need of major repairs. ^° This percentage, if applied to 
the available dwelling units in 1938, estimated by Mr. Chawner 
as 25,779,000 '^ would indicate that over 4,176,000 were in need of 
major repairs or entirely unfit for use. In either case this number 
is in need of replacement, whether by complete modernization, effec- 

' Fifteenth Census of the United States, 1930, Population, vol. 6, table 17, p. 12. 

• Ibid., p. 5. 

' Residential Building, Housing Monograph Series, No. 1, p. 16. 

' Isador Lubin, testimony, hearings before the Temporary National Economic Committee, Part 11, p 4966 

> Ibid. 

'0 Urban Housing, Works Progress Administration, 1938, table E, p. 17 

» Residential Building, Hdusing Monograph Series, No. 1, p. 16. 



22 CONCENTRATION OP ECONOMIC POWl R 

tive repair or new construction. If 16 percent of our housing plant 
was in need of replacement in 1938, how many units are needed each 
year to prevent our entire housing plant from becoming obsolete? 
Without replacement the housing plant of the Nation will undoubtedly 
get worse. 

If we assume a 1 percent replacement of suitable dwelling units 
existing in 1938 — considering 100 years as the life of the average 
dwelling unit in good condition we would require an average of 
216,000 units a year for this purpose without improving our housing 
plant. Thus, after 100 years, if we replace our present suitable 
housing at the rate of 1 percent a year, we would still have over 
4,000,000 units unfit for habitation or in need of major repairs. Con- 
sequently, upon the determination of how fast we wish to replace our 
existing housing units will depend the rate of the desired new con- 
struction. We have already calculated approximately 385,000 units 
needed just to cover the increase in families and demolitions for other 
than replacement with other dwelling units. Further, we can add 
the above-mentioned 216,000 units a year needed for replacement in 
order to keep our present housing plant up to its present standard. 
Dr. Lubin has estimated an additional replacement requirement of 
200,000 units per year for the next 20 years in order to eliminate the 
4,000,000 substandard dwelling units. '^ Thus, we have our choice 
of estimates for these 3 categories — new families, demolitions, and 
replacements — ranging from a minimum, estimated by Dr. Lubin, 
of 525,000 per year (280,000 for new families, 200,000 for replacement, 
and 45,000 for demolition) to 600,000 without taking into account an 
improvement in the general standard. 

Table VI shows the number of new nonfarm units estimated to 
have been built annually from 1920 to 1939. For the 10-year period 
1920-29 we averaged about 700,000 units per year and for the period 
1930-39 only 220,000 units per year. Vacancies during the early 
thirties indicate that perhaps the 700,000-a-year rate was too high 
for complete absorption, although it must be remembered that slums 
existed in 1920 and also in 1930, perhaps in the same proportion. 
This means that if the 700,000 units a year had been built to rent or 
sell at the proper price levels in keeping with the incomes we might 
have effectively increased the standard of housing and reduced sliuns. 
Obviously, the rate of only 220,000 units a year built in the decade 
1930 to 1939 means that standards have been getting much worse, 
since provision has been lacking even for the normal increase in number 
of lamilies plus demolition requirements, to say nothing of any re- 
placement whatsoever. 

RELATIOi; OF INCOMES TO RENTS AND COSTS 

We have seen that to meet the needs of an expanding population 
approximately 385,000 new dwelling units are required each year, 
and that an added number is needed for replacement, as determined 
by the desired housing standards. Tli^, question may well be asked 
why, if our needs are only 385,000 a year for expansion, and we have 
built an average of 700,000 a year throughout the twenties, we have 
as many as 4,000,000 units which by all criteria must be classed as 
undesirable. In order to answer this question it is first necessary to 
examine the distribution of incomes in the United States and the 

"Hearings before the Temporary National Economic Committee, Part 11, pp. 4961, 4967. 



CONCENTRATION OF ECONOMIC POWER 



23 



ability of families receiving those incomes to meet the costs of new 
housing. 

Table VI. — New nonfarm residential building, in the United States 

[Estimated volume, 1920-39] 

Number of 
new dwell- 
ing units 
Year : constructed 

1920 247,000 

1921 449, 000 

1922 716,000 

1923 871,000 

1924 893,000 

1925 937,000 

1926 849,000 

1927 810,000 

1928 753,000 

1929 509,000 



Number ol 
new dwell- 
ing units 
Year — Continued : constructed 

1930 2W, 000 

1931 212,000 

1932 73,000 

1933 54,000 

1934 55,000 

1935 144,000 

1936 280,000 

1937 300,000 

1938 .. 3470,00 

1939 465,000 

• Source: 1920-35: David L. Wickens and Ray R. Foster, Nonfarm Residential Construction, 1920-36, 
Bulletin 65, National Bureau of Economic Research, table 1, p. 2. 
1936-39: Bureau of Labor Statistics. 

First, as to incomes, table VII shows, briefly, that 8K million 
families out of a total of 22}^ million nonfarm families earn less .than 
$1,000 a year; another 8K million earn between $1,000 and $2,000 
a year; approximately 3% million earn between $2,000 and $3,000 a 
year; and the remaming 2 million have incomes of $3,000 or more. 
In terms of percentages this means that some 90 percent of our 
nonfarm families have incomes of less than $3,000 a year; 78 percent 
earn less than $2,000 a year; and 37 percent earn less than $1,000 a 
year. This, of course, includes relief as well as nonrelief famihes. 

Now the question arises as to the proper proportion of a family's 
income which should go for housing. There have been a number of 
rules of thumb which have been found faii-ly accurate in the pasi for 
certain income classes: One of these rules is that the amount to be 
spent for a home should be not more than twice the amiual income. ^^ 
Since the majority of people do not pay the full cost of the home m 
cash, but rather on a monthly or quarterly cost basis in interest 
charges, amortization, as well as the necessary costs of upkeep, and 
since another large portion do not own homes at all but must rent 
their houses, this must be converted into the question of what part of 
the monthly or weekly income should go for rent. Here we find a 
rule of thumb which says that a reasonable proportion would be not 
more than 1 week's salary for 1 month's rent or housing charge, 
whether that be in the form of actual rent or monthly cost for acquiring 
and niaintaining a home, the latter of which includes interest and 
amortization charges." 

" Compare Isador Lubin, hearings before the Technical National Economic Committee, Part 11, p 4965 
See also testimony of R. L. Davison, p. 4978. 

" This factor of 1 week's salary for 1 month's rent is borne out by a recent study by the National Industrial 
Conference Board coverLug the period 1909 to 1937, reported by Leigh S. Plummer, in the Wall Street 
Journal of August 28, 1939. in an article on "Spending Habits of Nation Swinging to Larger Ratio of Durable 
Goods." This study indicates that the amount spent for home maintenance, including furnishings, in 1909 
represented 27.9 percent of the total household's^nnual income, and in 1937 represented 27.5 percent, indi- 
cating that the 1 week's salary for a month's rent is about average, according to experience: it also suggests 
that there has been little change in this percentage over a long period of years. 

This is a generous perceitage as compared witii the average percentages of incomes spent for housing by 
lower-income families in 1935-36 reported by Dr. Lubin; namely, a range of 16.2 percent for families with 
incomes of $l,500-$2,500, to 22.5 percent for families with incomes under $1,000. (Hearings before the Tempo 
rary National EconomicJCommittee, Part 11, p. 4954; appendix, p. 5478). However, the Plummer figures 
represent home maintenance, including furnishings. (Compare also Hearings, Part 11, p. 4978.) 



24 CONCENTRATION OF ECONOMIC POWER 

Table VII. — Distribution of nonfarm families by income groups, 1935-36 



Income groups 
(1) 



Total 

number of 

families 



(2) 



Number 
of farm 
families 



(3) 



Number 

of nonfarm 

families 



(4) 



Percentage 

of nonfarm 
families 

by income 
groups 

(5) 



Cumulative 
percentage 



(6) 



Number 
of nonfarm 
families 
(cumula- 
tive) 

07) 



Under $250 

$250 to $500 

$500 to $750 

$750 to $1,000-... 
$1,000 to $1,250-. 
$1,250 to $1,500.. 
$1,500 to $1,750.. 
$1,750 to $2,000.. 
$2,000 to $2,250.. 
$2,250 to $2,500.. 
$2,600 to $3,000.. 
$3,000 to $3,500.. 
$3,500 to $4,000.. 
$4,000 to $4.500.. 
$4,500 to $5,000.. 
$5,000 and over. 



1, 162. 

3,015, 

3, 799, 

4, 277, 

3, 882, 

2,865, 

2, 343, 

1, 897, 

1,420, 

1,043, 

1,314, 

743, 

438, 

249, 

152, 

793, 



890 

394 

215 

048 

444 

472 

358 

037 

883 

977 

199 

559 

428 

948 

647 t 

801 



832, 686 

858,963 

1,108,400 

1,027,044 

793,250 

601, 571 

433, 590 

297, 221 

188, 336 

152, 309 

177,927 

100, 746 

59, 883 

31,395 

17,032 

86, 852 



330,204 

2,156,431 

2, 690, 815 

3, 250, 004 

3, 089, 194 

2, 263, 901 

1, 909, 768 

1, 699, 816 

1, 232, 547 

891,668 

1, 1.36, 272 

642, 814 

378, 545 

218, 553 

135, 615 

706,949 



1.46 

9.53 

11.89 

14.36 

13. 65 

10.00 

8.44 

7.07 

5.44 

3.94 

5.02 

2.84 

1.67 

.97 

.60 

3.12 



1.46 
10.99 
22.88 
37.24 
50.89 
60.89 
69.33 
76.40 
81.84 
8,5.78 
90.80 
93.64 
95.31 
96.28 
96.88 
100.00 



330,204 
2,486,635 
5, 177, 450 
8, 427, 454 
11,516,648 
13, 780, 549 
15, 690, 317 
17,290,133 
18, 522, 680 
19,414,348 
20, 550, 620 
21, 193, 434 
21,571,979 
21, 790, 532 
21,926,147 
22, 633, 096 



Total 29,400,300 6,767,204 



22, 633, 096 



100.00 



Source: Consumer Incomes in the United States, National Eesources Committee, 1938. 

Column (2). Table 3, page 18, number of families. 

Column (3). Total from table lOA, p. 75, total farm familias in the United States: Individual items from 
table 9B. Appendix B. p. 97, except the classification "Under $250," which was obtained by adding to the 
fi-Tire in table 9B the total number of relief farm families (total farm families in table lOA less total nonrelief 
i&rm families in table 9B). (This assumes that all relief farm families were in the lowest-income group. 
Since some were probably in the next group, the number of nonfarm families in the lowest-income group is 
probably understated and the number in the next group overstated.) 

Column (4) . Column (2) mjnus coliunn (3) . 

Column (5). Percentage each item in column (4) is of total. 

Column (6). Column (5) expressed cumulatively. 

Column (7). Column (4) expressed cumulatively. 

In table VIII we have shown that on this basis the first 37 percent, 
or 8/^ milHon, of our nonfarm families could pay not more than $20 a 
month for rent. Of course, a great many families who pay this 
amount must pay more than 1 week's salary, since a $1,000 income is 
the top limit of this group, and by referring to table VII, column (7), 
we note that approximately five-eighths of the families are below the 
top quarter of the group. It Has been found that some of our lower- 
income families pay from as high as 60 percent to more than 100 
percent of their incomes. Actually, the latter means the rent charge 
is irot paid because the income is lacking. ^^ 

The next group earning between $1,000 and $1,500 which is com- 
posed of 5,353,000 families, slightly more than 3,000,000 of which are 
in the lower half of the bracket, can pay up to $30 a month for rent, 
ancl so on until we arrive at the group having incomes of $3,000 or 
more. This group comprises only 9.2 percent of our nonfarm families, 
who can pay more than $60 a month for rent or more than $6,000 for a 
heme. 

Let us compare this with the prices of dwelling units actually erected. 
Dsia on this point are meager and hard to obtain. However, we may 
rtfer to analyses made by the Federal Housing Administration. In 
1938 this agency provided insurance for mortgages on 97,645 new 
homes out oi the grand total of 350,000 already noted in table VIII.'* 
The mortgages on over 94 percent of these new dwelling units, or 

'5 Isador L'lbin, hearings before the Temporary National Economic Committee, Part 11, p. 4955; Exhibit 
No. 843, p. 4966. 
'• Fiftt Annual Report of the F. H. A., for the year ending December 31, 1938, p. 68. 



CONCENTRATION OP ECONOMIC POWER 25 

rather the property valuation on which the mortgages were insured, 
wlien applied to the total number of new homes built according to our 
estimate (see table VI), indicate that only about one-tenth of 1 
percent of the new homes built in 1938 were available for those earning 
less than $1,000 per annum; that only 3.7 percent, or 12,950 homes, 
were available for those earning $1,000 to $1,500, or who could pay 
$30 per month; and that about 15 percent were homes costing $3,000 
to $4,000, available to those earning $1,500 to $2,000. This makes a 
total of 19 percent, which were homes costing less than $4,000 (prac- 
tically all of which were in the range $2,000-$4,000), available to the 
7G percent of nonfarm families having incomes of less than $2,000, 
while more than 80 percent cost more than $4,000 and were thus avail- 
able only to the 24 percent having incomes of $2,000 or morc.'^ 

Table VIII. — Number and value of homes constructed in the United States in 1938. 
relative to income groupings 



Family income per annum 



(1) 



Less than $1,000.. - 

$1,000 to .f-1, 500 

*I,5CX) to $2,000 

S2.000 to $2,500 

S2,5'.)0 to $3,000 

.*3,000 or more 

Total 



Number of 
nonfarm 
families 
(1935-36) 



(2) 




22, 633, 096 



Monthly 
payment 
in dollars 
(not ex- 
ceeding) 

(3) 



Maximum 
value of 
unit at 1 

percent per 
month 
(dollars) 

(4) 



20 
30 
40 I 

50 I 
CO I 



2,000 
3,000 
4,000 
5,000 
6,000 



Approxi- 
mate num- 
ber of units 
built in 1938 



(5) 



12,950 
53,200 
82, 250 
79, 800 
121, 800 



Percentage 

of families 

provided 

for 



(6) 



350,000 



0.24 
1.52 
3.87 
7.02 
5.85 



Life span 
per unit 
(years) 



(7) 



417 
66 



Source: 

Column (2). See table VII. 

Tolumn (3). 1 percent of column (4). 

Column (4). Top of income group multiplied by 2. 

Column (5). P'ercent distribution of property valuation of new .single-family homes on which mortgages 
were insured by the F. U. A. in 1938, applied to the estimated number of units buiit in 1938 (see table VI 
above) ; former data from Fifth .\nnual Report of the Federal Housing Administration, for the year ending 
Pec. 31, 1938, tabic 37, p. 101. The F. H. A. distribution (single-family homes) represents 94^^ percent of 
the total number of new dwelling units involved (derived from table 36, p. 100, of the same report). While 
valuations per dwelling unit averas;ed less for the 5^^^ percetit which were 2- to 4-family dwellings, the result- 
ing distribution in column (5) above does not understate seriously the number of units built at valuations 
below $5,000. 

This assumes that the entire 350,000 nonfarm units buiit in 1938 were single-family dwellings, whereas 
only about 80 T>erceat were 1-family units (see the same report, p. 6;. However, average valuations per 
unit were probably higher on multiple-family dwellings with their usually more expensive equipment and 
their reiluiremeut of more highly skilled labor for construction, which is also more extensively uni(>nized 
labor. If average valuations per dwelling unit were any hirber on multiple-family dwellings than on 1- 
fp.miiy homes, the distribution in eol-imn (5) above does not thereby understate the number of units built 
at valuations below S5,000 or overstate the number at valuations above $6,000 (the average valuation of single- 
familv F. H. A. units being $5,530). 

Ci.luran (6). Column (5) divided by column (2). 

Column (7). 100 divided by column (6). 

Estimates by the Bureau of Labor Statistics, based on an mcomplete 
study of building permits and building prices, show that approxi- 
ni.ately 15 percent of the houses erected in 1938 were available for 
$2,000 to $4,000.'^ Thus we are using here the m.ore conservative 
estimates based on the valuations of the F. H. A. It is obvious, 
according to these figures, that new housing is not available to those 
earning less than $1,000 a year, and is available only to a very limited 
extent to those earning between $1,000 and $2,000 a year. 

"Ibid table 37, p. 101. Note source of column (5) in table VIII. Compare hearings of the Temporary 
National' Economic Committee, Part 11, Exhibit No. 847, p. 4977, and appendir, p. 5479 ( in part from- difler. 
ent sourc*;S than the above) . . ,„ . ^ .^^ -^ ^ ,. .„„. .„»« 

1' Isador Lubin, hearings before the Temporary National Economic Committee, Part 11, pp. 4961, 4962, 
The 15 percent is the unadjusted figure shown in exhibit No. 846. 



26 CONCENTRATION OF ECONOMIC POWER 

We have attempted in table VIII to translate the rate of building 
in each income group into a turn-over rate showing-what the life span 
of the dwelling unit must be in each price group at the 1938 rate of 
building in order to provide aU fam.ilies with first-hand housing at a 
cost in line with their incomes. We find thai those earning less than 
$1,000 per year have* no new building whatsoever and must depend 
entu'ely on the second-hand houses left over from the turn-over in the 
upper groups. In the group earning between $1,000 and $1,500, or 
with homes valued at between $2,000 and $3,000, the rate is 0.24 
percent or a 417-year life. In the group between $1,500 and 
$2,000, or those who could afford $30 to $40 per month or a $3,000- 
$4,000 house, the rate is 1.52 percent or a life span of 66 years for 
complete replacement. Perhaps the history of our country is too ''hort 
to determ.ine the actual life span or the average aimual replacem.ent 
that will eventually be necessary. When that time does com.e there 
may be a com.plete change in the num:ber of units found necessary 
for new families. 

Nevertheless, we have tangible evidence of the result of our lack of 
present building. The fact that in 1935 we had more than 4,000,000 
dwelling units that were undesirable by local standards indicates for 
a certainty that our replacem.ent has not been rapid enough, and the 
reason why it has not been rapid enough is that we have been depend- 
ing too much upon the turn-over in the upper income groups. In 1929 
those earning $3,000 or more constituted 25.5 percent of the total 
nonfarm families.'^ In 1935-36 this group constituted 9.2 percent 
of the total. (See table VII.) By referring to table VIII again, we ro.ay 
note that at the 1938 rate of building the life span for houses in this 
group was 17 years. As a m.atter of fact, even for houses for the group 
earnhig $2,500 to $3,000, or for houses costing between $5,000 and 
$6,000, the life span has been only 14 years. That is, it would be 
necessary for the fam.ilies in those incom.e groups to purchase or rent 
a new house every 14 to 17 years, respectively, even to m.aintain the 
1938 rate of building. These houses then are passed on to lower- 
income groups, but in order to be passed on m.ust be depreciated to 
m.eet the renting or purchasing ability of such groups. During the 
depression years depreciation was m.uch greater than in norm.al times, 
due to devaluations through foreclosure. But with our present 
incom.e distribution, in order to maintain a higher rate of construction 
at present prices, it would be necessary to have a rate of depreciation 
that could occur only through depressions and panics and the resul ting- 
higher rate of foreclosure. 

On the other hand, it would be possible to build at a more even rate 
to replace dwelling units for Iji percent per year (which would mean 
a 66-year life per unit) of the 76 percent of our nonfarm families 
having incomes of less than $2,000, or at the rate of 260,000 units a 
year for replacement, making a total of 610,000 units a year, if at 
least the 260,000 units were built at a cost that would make them 
available to 75-percent of the nonfarm population. It is quite certain 
that at the present rate of 350,000 per year at prevailing prices we 
will continue to increase our load of undesirable houses rather than 
reduce them. It may also be pointed out that 260,000 units a year 
at $3,000 per unit means $780,000,000 per year additional volume of 
constructioj 

'« Maurice Le\ "u, Harold O. Moulton, and Clark Warbilrton, Urookings Institution, Washington, 
1934, appendix A, p. 231. America's Capao'ty to Consume. 



CONCENTRATION OF ECONOMIC POWER 27 

It may be noted in these conclusions that even with this 260,000 
additional units, no attempt is made to take care of the deficit repre- 
sented by the 4,000,000 undesirable units now existing. 

When we speak of $3,000 and $4,000 units, we must take into account 
the fact that in large cities and metropolitan areas prices are much 
liigher than in the smaller towns and the possibility of low-cost 
housing is much less than it is for the country as a whole For 
instance, while only 19 percent of the F. H. A. single-family properties 
were valued at less than $4,000 for the country as a whole, in the 
vState of Arkansas 59 percent were valued at less than $4,000, and in 
Arizona 40 percent. On the other hand, in Maryland and Massa- 
chusetts only 4 percent were valued at less than $4,000, and in 
Michigan only 2 percent. As for the large cities, in the New York 
metropolitan area only 1 percent was valued at less than $4,000; in 
Washington, D. C, 1 percent was in this class. Los Angeles, Calif. ^ 
on the other hand,' had 22 percent in this group, and New Orleans 
had 11 percent. Fort Worth, Tex., had the highest percentage, 62^ 
in the group valued at less than $4,000. But these are southern and 
southwestern cities. Data for northern cities — such as Toledo, Ohio, 
with 1 percent, Springfield, Mass., with 2 percent, Trenton, N. J., 
with 2 percent, Harrisburg, Pa., with 3 percent, and Racine, Wis., with 
4 percent valued at less than $4,000 — together with the foregoing 
figures, indicate that only in southern and southwestern (and a few 
far western) cities do we have a relatively large proportion of units 
built to sell for less than $4,000, whereas in most of the northern and 
eastern cities the number! of homes provided at a price under $4,000 
is almost insignificant,^" i 

RENT AND OWNERSHIP 

Much has been made of, the fact, and advertisements have appeared 
quite often to indicate, that the monthly payments for homes costing 
around $4,000 are less than $40, and even as low as $30 in some 
instances, which would make it appear that the present possibilities 
of meeting the need through lower cost have already been accomplished. 
But not all the costs of hom.e ownership are included in advertised 
monthly pajanents. We shall not at this point enter in detail into 
the matter of costs, which is reserved for a later chapter, but we may 
say briefly that the usual items included in the advertised monthly 
payment represent only the financial items such as interest, amortiza- 
tion, and taxes. Items omitted, which would be included if quarters 
were rented, are heat and maintenance. Studies of apartment-house 
costs show that on the average from one-third to one-half of the total 
cost covers heat, maintenance, and other operating expenses.^' Thus, 
if such costs were included with the financial costs, it would be apparent 
that $4,000 homes could not be purchased and maintained for less than 
$40 per month. 

" Fifth Annual Report of the Federal Housing Administration, for the year ending December 31, 1938, 
pp. 102. 103. 
" See appendix A, table B. 



260158 — 40— No. 



28 CONCENTRATION OF ECONOMIC POWER 

The census indicates that slightly more than one-half of the nou- 
farm homes are rented. The figures for the 1930 census were: 

Percent 

Owned 45.2 

Rented 53.2 

Tenure unknown 1. 6 

and in 1920 they were: 

Percent 

Owned 40.0 

Rented ■- 57. 9 

Tenure unknown '^2. 1 

It is quite likely that 1940 figures will be closer to the distribution 
of 1920 than 1930 because of the large number of foreclosures during 
the depression. 

At any rate something more than one-half of our nonfarm families 
are renters and there are very good reasons for this. One important 
fact is that ownership, even if the monthly payments do come within 
the incom.e abilities of the purchasing families, requires a down pay- 
ment, which means that there must be savings equal to this down 
payment. The average amount of savings in the hands of renting 
families is not known. The initial payment on-a $4,000 home, if on 
the 10 percent basis, requires $400 cash, and in addition another $100 
to* $150 for settlement fees such as title fees, brokerage, fees, etc. 
Thus the possibility of families becoming owners is limited by the 
number who have at least $500 in cash for the initial payment. 

Even those who may have the cash requirement are further limited 
by the migration requirements of their employment. As an e: ample, 
in 1936 it was found that in Lakewood, a suburb of the city of Cleve- 
land having a population of 70,509 in 1930, out of about 26.2 per- 
cent of the population that had moved during that year, 1 1 percent, 
or nearly 3 percent of the total families in Lakewood, had moved to 
another city.^^ If 3 percent of the nonfarm families in the United 
States moved each year to a different city, assuming that the fam- 
ilies that move to another city at all are limited to 21 percent of the 
total families, this 21 percent would not be able to maintain a resi- 
dence, on the average, for longer tiian 7 years."* Undoubtedly the 
ownership of a home reduces to a considerable extent the incidence 
of moving, but certainly during the past 9 years of scarce employ- 
ment, home owners have felt restrained in job opportunities through 
inability to leave their present homes except at a great loss. 

These considerations point to the following conclusions: 

(1) There is an annual need of at least 350,000 to 400,000 more 
units than are now being built in the price class below $4,000.^* 

(2) At least half of such units must be available for rent until such 
time as annual incomes are greater. 

" Fifteenth Census of the United States. 1930, Population, vol. f>. table 16, p. 11. 

2' Arthur M. Weiraer and Homer Hoyt, Principles cf Urban Real upstate, Ronald Press Co., New York, 
1939, p. 8G. Since a .slightly larger averajre percentage of the total population of metropolitan Cleveland 
has moved in recent years than the 26.2 percent that moved in Lakewood in 1936, the 3 percent that moved 
from Lak«v.ood to another city appears to furnish a fair estimate of the percentage moving from metro- 
politan Cleveland to another city. 

2< If the movers were limited to 30 percent of the total their average residence in one place would be 10 
years; if 15 percent of the total, 5 years. 

2» This estimate is arrived at by applying the perceniasje of nonfarm families in this price class (76.4) to 
the total estimates on p. 48 above (525,000 to 600,000), and deducting the 66,000 units built in this price 
class ,u 1938. 



OONCENTRATION OF EOONOMIO POWER 29 

BIBLIOGRAPHY 

Chawner, Lowell J., Residential Building, Housing Monograph Series, Nb. 1, 
prepared for the Industrial Committee of the National Resources Committee, 
Washington, 1939. 

Federal Housing Administration, Fifth Annual Report, for the Year Ending 
Dec. 31, 1938, Washington, 1939. 

Leven, Maurice; Moulton, Harold G., and Warburton, Clark, America's Capac- 
ity to Consume, Brookings Institute, Washington, 1934. 

National Housing Committee, The Housing Market, Washington, December 
1937. 

National Resources Committee, Consumer Incomes in the United States, Wash- 
ington, August 1938. 

Temporary National Economic Committee, Hearings, part 11, Washington, 
1940; testimony of Theodore J. Kreps. 

United States Department of Labor, Bureau of Labor Statistics, Statistics of 
Building Construction, 1920-37 (Bulletin No. 650), Washington, 1938. 

Weimer, Arthur M., and Hoyt, Homer, Principles of Urban Real Estate, Ronald 
Press Co., New York, 1939. 

Wickens, David L., and Foster, Ray R., Non-Farm Residential Construction, 
1920-36, Bulletin 65, National Bureau of Economic Research, New York, 
September 1937. 

Works Progress Administration Division of Social Research, Urban Housing, 
Washington, 1938. 



CHAPTER IV 
OPERATION OF THE BUILDING INDUSTRY 

Since the crux of the problem hes in obtaining lower-priced homes 
in order to meet the needs and the incomes of the majority of nonfarm 
families, it may be well to examine the product and the industry which 
produces it. 

An important division of the industry appears between single- 
family and apartment housing. Home ownership is concerned almcst 
entirely with one- and two-family houses, the latter being on the 
decline to a point of relative insignificance at present, so far as new 
construction is concerned. Rental housing includes all types: 
single-family, two-family, and multiple-family houses. It goes -wdth- 
out saying that different considerations apply to apartment-house 
buildings and to single-family residences. There are sections of the 
industry which are concerned only with the single-famdy type, and 
other sections which are concerned only with the large, apartment 

In single-family residences we liave numerous variations which 
may afi'ect the owner and the industry as well, such as whether the 
house is built in a large city or in a small town, whether it is built by 
union labor or nonunion labor, whether or not it is subject to building 
code regulations, and a host of other details. 

In order to obtain a background of the various elements that per- 
form some function in building construction, let us first consider the 
possible methods of acquiring a new single-family home. Our 
prospective purchaser (1) may acquire a piece of land from a real- 
estate dealer, have an architect prepare plf^ns, and award a contract 
to a builder or to a group of subcontractors who supervise the con- 
struQtion themselves or alloM^ the architect to supervise it; (2) may 
purchase a new house built by a real estate operator who, in order to 
dispose of the Iffnd^ -engages a contractor to build a sample house from 
which the real estate operator makes sales, and who also mu^es the 
necessary arrangements for financing and acquiring title; or (3) may 
purchase from a speculative builder who has built a group of houses 
ready for sale and also takes care of arranging for financing and 
acquiring title. The difference between the two latter groups, which 
wOl be explained in more detail later, is that one is primarily in the 
real-estate business and the other is primarily in the building business. 
Overlapping of the two occurs very frequently, and in many cases 
they are interchangeable. 

Another initiator of single-family houses, particularl}'' in periods of 
relative prosperity, is the individual contract-builder who, in order 
to obtain work during periods when he has no contracts for others, 
may build a single-family house for sale. This type of building is not 
limited to those engaged in contracting, ^ut is often undertaken by 
building craftsmen who have a small amount of capital and find it 

31 '' 



32 CONCENTRATION OF ECONOMIC POWER 

profitable to utilize such capital in the erection of speculative property 
for sale. 

In the apartment-house field we also have innumerable variations. 
First, there is the investor-type building: An investor arranges with 
an architect and a contractor to construct a .building, placing the 
management of it in the hands of a real estate dealer engaged in the 
practice of management. Second, there is the speculative type, 
usually initiated by a promoter. The promoter approaches the archi- 
tect, having obtained an option on a given site, and the architect is 
expected to develop plans, which are taken to a financing house for a 
loan. When the loan is obtained the contract is awarded and the 
property constructed, with the intention of selling it to an investor 
upon its completion.' During the boom period the amount of the 
loan was usually sufficient to provide a neat profit to all parties engaged 
in the promotion and construction of the speculative property, regard- 
less of the fact that the earnings of the completed project might fail 
to meet the loan obligations. These properties were the first to go 
through foreclosure proceedings when the collapse came. A third type 
of building is the real estate speculative type, originated by those 
engaged in buying and selling real estate. These properties may be 
constructed for the piirpose of enabling the dealer to sell a parcel of 
ground which otherwise might not be disposed of. 

These are but a few of the types of initiators in the industry, which 
at the two extremes include the promoter type and the owner-par- 
ticipant type. They vary with location and traditional practices in 
different regions. For instance, in Chicago and in the Middle West 
generally the real estate dealer of one kind or another is the predomi- 
nant type, while in the East and the far West it is the speculative 
builder who supplies most of the housing for sale. In small towns one 
is more apt to find the house built to the owner's order by a contractor, 
which, of course, also predominates for the more costly residences in 
all parts of the country. 

With such a variance in the initiators of dwellings it may be readily 
seen that the method of operation of the housing industry is also likely 
to vary according to location and type. Generally speaking, the 
active participants in the housing industry may be classified under the 
following headings : 

Real estate dealers. 

Architects and engineers. 

Contractors. 

Subcontractors. 

Material dealers and manufacturers. 

Local building officials. 

Financing agencies. 

Labor.^ 

It is only through a more complete analysis of each of the above 
participating groups that we can arrive at an understanding of the 
inunense complexities and diverse interests that have come together 
in what is generally termed "the building industry." The following 
discussion covers in large part nonresidential as well as residential 
buildlag. Where it applies only to housing, that fact will usually be 
obvious. 

1 Oon.^are Charles H. Lench/The PromoMon of Commproial Buildings, Arcbitectural Fcononiici Press. 
New VorK, 1932, chs. 1, IIl-V, XV. 
« Labor is discussed more fully In ch. V, under "Housing costs." 



CONCENTRATION OF ECONOMIC POWBIl 33 

REAL-ESTATE DEALERS 

We have already indicated that real-estate dealers are of different 
types. The National Association of Real Estate Boards has divided 
its membership into the following classes: 

(1) Brokers. — Those who negotiate real-estate transactions for a fee. 
Such transactions may be the purchase or sale of land or completed 
properties, either new or old. Brokers may also obtain tenants and 
negotiate leases for either lessee or lessor, likewise for a fee. In 1933 
the broker members of the National Association of Real Estate Boards 
comprised approximately 80 percent of the total. ^ Some of these 
broker members engage in other types of real-estate activity as well 
as that of mere brokerage. In a large number of States real-estate 
brokers are licensed and only such licensed brokers may engage in 
real-estate activities. 

(2) Land subdividers. — The land subdivider purchases raw land, 
subdivides it into lots^ and sells the lots to the individual home owner, 
who then makes his own arrangement with the architect and con- 
tractor for the building of a home ; or, as many such subdividers have 
done in the past, he builds homes to the purchaser's order, arranging 
for the necessary contracts and financing. The report referred to 
above states that about 12 percent of the association's membership 
engages in this type of activity. 

(3) Home builders.— The third type deals specifically with home 
ownership and is classified as the home-building division. This divi- 
sion comprises 10 percent of the 10,641 members of the national 
association. These real-estate dealers are comparable with the spec- 
ulative builders of the East in that they purchase their own land — 
usually raw land — subdivide it into lots, build homes thereon, and 
sell the homes. 

(4) Mortgage brokers, etc. — Other types of real-estate dealers are 
mortgage brokers, who, for a fee, will find a, lender and arrange for 
the .financing of prospective builders or j)urchasers, including the 
financing agencies for both first and second mortgages; and real-estate 
appraisal d, who act as experts in valuations of real property. 

It must be understood that there is an overlapping of the different 
types of real-estate activities all the way from those who engage in 
all such activities to those who engstge in only one particular kind. 
In general, very little home building can be found in which the real- 
estate business does not enter in one way or another, but the relation- 
ships among the real-estate dealer, the purchaser, and the other ele- 
ments concerned with buildmg vary with the size and type of project, 
the region, etc. For instance, there may be real-estate dealers con- 
nected with houses built by speculative builders. Aside from the 
real-estate dealer's participation in the purchase of the land, he may 
also act as broker in the sale of the house. 

The fees for real-estate activity vary with'tbe type of the activity. 
In most communities the average broker's fee for selling residential 
properties (either land or dv/ellings) ranges from 2}^ to 5 percent of 
the selling price.* This seems to be a standard and fixed percentage, 
since it is common in a great many places. A builder may employ 

* Estimated from Survey of Real Estate Business, presented by the National Association of Heal Estate 
Boards, CTjicago, to the National Recoverj- Administration, August 1933. 

' On sales of over $100,000 the rate is reduced in the Borough of Manhattan, N. Y., and perhaps in 
Other large cities- 



34 CONCENTRATION OF ECONOMIC POWER 

licensed real estate salesmen on a weekly salary basis or on a fee basis 
at less than 5 percent, but broker members of real estate boards have 
fixed the fee at 5 percent of the value. Nevertheless, in the trans- 
actions connected with one final sale a real estate broker may obtain 
even more than this share of the value. For instance, he may negotiate 
the sale of the land, for which he receives a 5-percent fee, and later, 
when the houses are built, he may negotiate their sale, for which he 
receives another 5-percent fee. Moreover, he may act as mortgage 
broker in obtaining the financing and receive three-fourths of 1 
percent on the amount of the mortgage. Thus the real-estate business 
obtains a fairly large share of the total housing price. This is not to 
say that adequate services are not rendered for these fees but it is 
intended tt) show the type of activity which has become a very large 
factor in the housing industry and the proportion of the cost paid for 
such services. 

ARCHITECTS AND ENGINEERS 

There are approximately 22,000 architects connected with the 
buildmg industry who are responsible for the designing of our homes. ^ 
Generally the architect has functioned in such a manner as to take the 
responsibility for the full design of the individual house and also to 
act as the agent for the owner in dealing with contractors, subcon- 
tractors and others who provided the materials and labor. But with 
the reduction in volume in the industry there have been numerous 
changes. The general fee for an architect has been, ordinarily, 6 per- 
cent of the total cost of the project. In view of the work involved in 
the planning and providing of complete drawings for a small single- 
family house, very few architects can afford to provide a complete set 
of plans and furnish the necessary supervision for a house costing less 
than $5,000. This led to the establishment of a small house service 
bureau by the American Institute of Architects. The service bureau 
provides plans for a small house at a cost much below the usual fee 
required, by providing stock plans, that is, plans not drawn to an in- 
dividual site but suitable for a large number of sites and adaptable to 
changes which could be made by the builder. 

The small house service bureau, while still active, has dimmished in 
importance as a design factor — first, because plans for small-house 
construction can be obtained at a much lower cost from material 
groups such as retail lumber dealers, the American Face Brick Asso- 
ciation, etc.; and second, because the plans produced by the small 
house service bureau involved housing in a much higher cost range 
than could be afforded by the majority of urban families. In the 
majority of cases a local developer will retain an architect to provide 
a plan which, with minor changes, miay be suitable for another develop- 
ment. Such plans are paid for on the basis of so much a house, 
ranging from $50 to $150 for each house built from them. 

The situation with respect to the engineering involved in the aver- 
age single-family residence is sim.ilar. Plum.bing contractors and 
dealers provide free engineering to m.eet the needs of the average 
single-fam.ily residence. 

It has been claim.ed that one of the failures of the architectural 
profession has been its lack of ability to industrialize the housing 
industry. This is understandable in view of the fact that any such 

« Fifteenth Census of the United States, 1930, population, vol. 5, table 3, p. 47. 



CONCENTRATION OF EOONOMIC POWER 35 

industrialization would tend to disturb the professional relationship 
of the architect to the project. Nevertheless, individual architects 
are giving more and more thought to the possibilities that lie in such 
industrialization. 

CONTRACTORS 

The next participant in the housing industry is the contractor. 
Here, again, we have different types and different scales of activity. 
The Census of Business, 1935, reported 8,337 general building con- 
tractors, who engaged, of course, in nonresidential as well as residen- 
tial building.* These were contractors i-egularly in business during 
the year, who had established places for conducting such business. 
This does not take into account the thousands of small enterprisers 
who engage in building when such activity is profitable during boom 
periods; nor does it include a large group of those engaged in the 
building industry who have some other major activity, since the rules 
of the census provide that each establishhient be classed according to 
its major type of business.^ For instance, consider the real-estate 
subdivider and builder. If his major activity is real-estate sales he 
is classifiod in the real-estate business rather than in the contracting 
business. Likewise, retail material dealers who engage in building 
activity are classed as material dealers if their building activity is 
less than their material business. 

In 1938 a special study by the Social Securitj'- Board reported 
22,000 general building contractors.^ Since the total increase in the 
volume of business from 1935 to 1938 was not sufficient to account 
for such an increase in the number of contractors, it is evident that 
the difference between these two figures, nam.ely, the 8,337 reported 
in the census and the 22,000 reported by the Social Security Board, 
represents a large num.ber of small contractors who have no regular 
place of business and, therefore, were not included in the census, those 
engaged in building as a secondary activity, etc. 

The method of operation of the general building contractor depends 
to a large extent upon the size of the jobs he engages in. In the con- 
struction of single-family houses, say of $5,000 or less in value, the 
small contractor buys in sm.all quantities such items as he needs from 
^ay to day alm.ost exclusively from local retail-material dealers and 
local hardware stores. These operators have little capital and depend 
upon credit from, both their subcontractors and m.aterial dealers until 
they receive paym.ent for completed work. Since these contractors 
are dependent upon their sources of materials, they are also obligated 
through credit and cannot take advantage of lower prices from, other 
sources. 

On the other hand we have the larger contractor who engages in the 
construction of houses of, say, $10,000 or more in value at the owner's 
order.® Such projects are supervised by architects, and the contractor 
who can engage in this type of work generally has a larger amount of 
capital and consequently greater purchasing ability, which gives him 
a bargaining leverage in purchasing materials. Thus, it is often en- 
tirely possible to obtain greater value for the amount that goes into 
the high-cost residence than is the case with the lower-cost house. 

« Construction Industry, vol. 1, p. 1. 

' Ibid., pp. VII-XI. 

' Hearings before the Temporary National Economic Committee, Part 11, p. 5181; exhibit Ko. 874, p. 5504. 

• This type of contractor may also '■'uild apartment houses and nonresidential buildings. 



36 CONCENTRATION OF ECONOMIC POWER 

SUBCONTRACTORS 

A further indication of the large number of small contractors is the 
fact that, in March 1938, 53 percent of all establishments had 3 em- 
ployees or less, and 11 percent of all employees were employed by 
these small concerns.'" These employee figures, however, are based 
on emploj^ment by general contractors for both building and other 
construction and also by subcontractors; that is, employment by all 
contracting groups reporting to the Social Security Board. These 
figures indicate that a large number of builders probably are themselves 
craftsmen, who engage in the erection of one or two buildings a year. 
They are small local operators, chiefly in small communities, although 
the craftsmen-contractors may also be found in large cities. Obviouslj'- 
the small number of employees in the majority of establishments is 
due to the fact that much of the work is split up among subcontractors, 
the general contractor doing only a portion of the work.'' However, 
this division of work is not as definite as this statement might indicate. 
The construction of the average house includes, in practically all cases, 
excavating and concreting, masonry, the principal brickwork, car- 
pentry, plumbing and heating, electrical work, roofing and sheet-metal 
work, painting and .decorating, plastering and lathing, and tiling. (3n 
the larger multiple-family buildings and on the higher-cost single- 
family residences steel and iron work might be added, as well as stone 
work, elevator work, ornamental iron work, and in many cases a host 
of other parts which appear on some types of buildings but not on 
others. The work usually done by the general contractor is carpentry, 
masonry, roofing, and excavation.'^ In some areas the general con- 
tractor is just a carpenter-contractor who sublets all other trades, 
including masonry. In others he maj^ be a mason-contractor who 
sublets all other trades, including carpentry. Perhaps the majority 
of our small-home builders are carpenter-contractors. But even such 
carpenter-contractors at times hire masons to do the necessary ma- 
sonry, and may even have small equipment to take care of their own 
excavation; but in t^^e majority of cases the excavation and masonry 
on a project handled by a contractor whose basic work is carpentry 
will be subcontracted. 

Out of the total of 88,833 building contractors reported by the 
Social wSecurity Board in the data referred to above, 66,690, or about 
three-fourths, are classed as special trade contractors, or subcon- 
tractors. Moreover, as pointed out by Dr. W. I., Thorp at the 
T. N. E. C. hearings, there may be as many as 50,000 more operators 
to be added who are journeymen at times when the volume is low, 
but who, during periods of increased activity, assume the responsi- 
bility of a subcontract.'^ 

It is this variety of types of enterprisers that has brought about 
many of the competitive problems in the building industry, which in 
turn have led to organized attempts to control various sections of it. 
As an example let us take the tile contractor. The tile work on a 

'» Hearings before the Temporary National Economic Committee, Pert 11, pp. 5182, 5183; exhibit No. 875, 
p. 5S04. 

" Of the contracting work reported in the Census of 1935, only $356,512,000 worth, or 23.8 percent, was done 
by RenerAl building contractors, and $623,319,000 wori,.i, or 42.8 percent , was done by special trade contractors; 
the balance was done by heavy engineering and highway contractors. Ilearings before the Temporary 
National Economic Committee, Part 11. p. 5503. 

" This i<« only generally true; the practice varies in different communities and by size of job. 

'» Hearings, Part 11, p. 5181. 



CONCENTRATION OF ECONOMIC POWER 37 

residential building may range from merely a tile floor in a bathroom 
to a completely tiled kitchen and a number of bathrooms. Some of 
the larger enterprisers maintain showrooms where prospective owners 
are brought to make selections of tiles and where special designs are 
made up to suit the owner's taste. Obviously, such larger enter- 
prisers have capital invested in the maintenance of a stock and a 
warehouse. This added overhead must, of course, be charged to the 
job. These contractors must compete with the craftsmen who may 
purchase only the necessary amount of tile for a single job and do all 
of the installation themselves, requiring no showroom, warehouse, or 
any other overhead, since craftsmen must furnish their own tools 
anyway. 

On the other hand, the larger subcontractor is in a position to take 
subcontracts on multiple-family dwellings as well as on the more 
expensive single-family dwellings which may not be entrusted to the 
single-craftsman type of subcontractor. The larger subcontractor 
claims that if he is limited to the large subcontracts, such business 
restricts him and necessitates a larger overhead charge per project, 
making costs on the multiple-family jobs much higher than they 
ordinarily would be if he had sufficient business from the smaller jobs 
to maintain his overhead. Undoubtedly such claims are motivated 
by the desire to reduce competition and price cutting. This had led 
some of the local unions to provide rules prohibiting any of their 
members from taking a contract with an owner. 

The situation has led to a great many jurisdictional difficulties. 
For instance a carpenter-contractor building a small house in some 
communities must sublet certain trades regardless of his ability to do 
the work himself. In some cities, such as Chicago and St. Louis, 
although the average carpenter can do all the necessary glazing on a' 
single-family job, he would find himself in extreme difficulties with 
the union unless he called in a glazing subcontractor to do this work. 
We shall examine this type of restrictions in greater detail in chapter V. 

There is another type of subcontracting which involves subcon- 
tractmg only the labor. This is frowned upon in many places, par- 
ticularly by unions which term this "lumping," although in some of 
the most notable instances of low-cost housing the greatest economies 
were brought about by subcontracting the labor. ^^ This type of sub- 
contracting usually increases durmg periods of depression and is 
another method of reducing wages, since the contract price is set at 
such a point that the worker can earn the union rate only by keeping 
up a pace which could not be attained if he were working at the day 
or hourly rate. It is analogous to the gang piece-rate common in 
some manufacturing industries. 

Thus we see that subcontracting in the building industry, which 
represents more than half the cost in most instances, may be inter- 
changeable with general contracting, and may be conducted by 
anyone from a journeyman to a material dealer. It is the entering 
wedge whereby craftsmen become enterprisers in the industry. 

'< Robert L. Davison, in discussing low-cost housing (hearings before the Temporary National Economic 
Committee, Part 11, p. 4987) cites the construction ot 4-room houses in 1936 on Long Island which sold lor 
$2,500 each. A further inv.estigation, which, however, was not mentioned in Mr. Davison's testimony 
but in a confidential report, shows that all of the labor on these houses was subcontracted to specific groups 
who did the labor only, while the developer furnished the materials. 



38 CONCENTRATION OF ECONOMIC POWER 

MATERIAL DEALERS AND MANUFACTURERS 

Material dealers may generally be divided into two groups, namely, 
lumber dealers and mason material dealers. The majority are lumber 
dealers, that is, the greatest quantity of materials is sold through 
lumber,yards, since lumber yards are not confined to lumber, but usu- 
ally include most of the principal items of hardware needed in build- 
ing, as well as paints, glass, roofing materials, etc. In the 1935 
Census of Business there were reported 21,149 lumber and building 
material dealers. This is exclusive of hardware stores, paint, glass 
and wallpaper stores, and electrical supply stores, which also sell 
materials to contractors. Altogether there are approximately 73,000 
retail dealers selling materials to contractors.^*^ However, the term 
"retail dealer" may be confusing because contractors purchasing 
materials for a specific construction job obtain a lower price, of 
course, than the average lay purchaser or consumer buying material 
at the same places. About 8,000"^^ of the 21,000 full -line material 
dealers may be classed as "hard-material dealers," that is, those 
whose principal volume of sales is in plaster and masonry materials, 
practically all of whom handle lumber and other products as well. 

We have already mentioned the fact that building material dealers 
also may act as contractors and assume responsibility for the complete 
erection of small residences. Thi& is especially true of materials yards 
in small cities. Such contractor-dealers may also engage in selling 
coal, farm implements, and other things as well. This, of course, takes 
place usually in the smaller towns which, in general, do not provide 
enough business to warrant any substantial number of fulltime con- 
tractors. 

On the other hand, there are those yards which engage in sales to 
contractors and to industrial plants only. The 1935 census also 
reports approximately 11,500 wholesalers having to do with the 
building industry, including agents and brokers, manufacturers' sales 
offices and sales branches. ^^ There are very few such enterprisers 
connected with building materials who are limited strictly to a single 
function such as wholesaling. For instance, a wholesaler may sell to a 
retail yard, but he may also sell to contractors ; some sell only to con- 
tractors. Some manufacturers sell only through wholesalers or 
brokers; others may even sell to the consumer. TL's is further com- 
plicated by the fact that industrial plants, governmental bodies, and 
railroads are considered in the same class of purchaser as the retailer, 
and may often buy materials at a price lower than that quoted to 
contractors. 

This complex system has considerable influence on the differences 
in contractors and their costs. We have already mentioned the fact 
that many of the smaller builders are limited in their bargaining ability 
and purchasing power due to the fact that they must depend upon the 
local retailer for credit. On the other hand, some contractors, even 
small ones, may be in such financial position that they can purchase 
direct from the manufacturer. In some cases the wholesaler or the 
manufacturer may act as subcontractor. Generally this is not true 
of the plumbing and heating mdustry, where strict lines of movement 

» Hearings before the Temporary National Economic Committee, Part 11, exhibit No. 879, p. 6506, 

'• Estimated in 1934 by members of the Code Authority for the Builders' Supplies Industry. 

" Hearings before the Temporary National Economic Committee, Part 11, exhibit No. 880, pp. 5507, 5190. 



CONCENTRATION OF EOONOMIC POWER 39 

have been adhered to. However, even here there is a variation by 
regions. In some regions the contractor may purchase plumbing and 
heating suppHes direct from the manufacturer, and in other regions 
he is limited to purchasing through the jobber or wholesaler. This 
situation has led to attempts to control such movements by dealer 
organizations, in order to protect their interests by directing the lines 
of purchase and sale and preventing wholesalers and manufacturers 
from acting as subcontractor? 

LOCAL BUILDING ORDINANCES 

The erection of residential buildings (as well as other buildings; is 
hedged about by local laws and ordinances which in a large measure 
affect the operation of the entire industry. First there are zoning 
ordinances which prescribe the types of building on the basis of loca- 
tion. Certain kinds of residences may be built in certain zones and 
on certam portions of the lot. The most important local ordinances 
that affect the industry are building codes. These vary from city to 
city, although in many basic elements they are becoming standard- 
ized.^^ Building codes control the type of materials used, the rela- 
tionship of the materials to the design of the house as to its load- 
bearing and fireproofing qualities, the sanitary arrangements, and the 
provisions for light and air. Many of the features of local building 
codes havmg to do with materials and arrangement have been influ- 
enced by one after another particular building-material, subcontractor 
or labor interest, which has brought about a confusion and has local- 
ized the buUding industry to a large extent. These codes bring the 
builder and the owner into contact with local officials, since permits 
and mspections are required tliroughout the construction. 

Licensing ordinances, particularly for mechanical trades such as 
electrical and plumbing contractors, are in effect in the majority of 
large cities, which tends to localize these branches of the industry 
and to maintain the prerogatives and jurisdiction of the licensed 
trades. 

FINANCING AND RELATED FUNCTIONS 

In view of the fact that the average house costs more than $4,000 
(only 19 percent being below that amount), it is obvious that few 
houses are built to sell for cash. This means that the financing of 
houses engages a large section of the American financing business. 
Financing is done thi'ough mortgages. A mortgage is an mstrument 
which pledges the house as security for the loan required to build 
or purchase it. The mortgage has brought with it a whole train of 
laws which differ in the various States — laws determining the method 
of recordmg, the method of foreclosure, and limitations on interest. 

Practically all financial institutions deal in mortgages. The prin- 
cipal ones are (a) building and loan associations, (6) savings banks, 
(c) insurance companies, and (d) commercial banks. In addition, 
there is a considerable amount of private lending on mortga,ges. Since 
the mortgage instrument is hedged about with State laws, it brings 
with it a number of functions engaged in, by, or connected with, the 
buildmg industry. 

" In ch. VII below it is pointed out that more than 100 municipalities have adopted as their basic code 
the Uniform Building Code promulgated by the Pacific Coast Building Officials' Conference. 



4Q CONCENTRATION OF ECONOMIC POWER 

Our real-estate laws are such that there are different types of title, 
governed by different laws in the different States. The relationship 
of the house to the land varies in different States. This brings about 
the necessity for an examination of the title as related to the laws of 
the State, which means another fee or added cost related to the 
financing. Moreover, there are property liens which take precedence 
over the mortgage, such as taxes and assessments. These have to be 
examined in connection with the safety of the loan. 

Thus, the building industry is surrounded by a large number of 
functions, due to its nature, its high cost per unitj and the laws of 
title, all of which add cost and act as a brake upon industrialization. 
They are responsible for making each project more or less mdividual- 
istic, and they influence all the processes in the erection of dwellings. 

BIBLIOGRAPHY 

Davison, Robert L., Traditional, Prefabricated, and Mobile Housing, unpublished 
report to the trustees of the John B. Pierce Foundation, New York, October 
1936. 

Lench, Charles H., The Promotion of Commercial Buildings, Architectural Eco- 
nomics Press, New York, 1932. 

National Association of Real Estate Boards, Survey of Real Estate Business 
(unpublished report presented to the National Recovery Administration), 
Chicago, August 1933. 

Starrett, W. A., Skyscrapers, Chas. Scribner's Sons, New York, 1928. 

Temporary National Economic Committee, hearings, pt. 11, Construction Indus- 
try, Washington, 1940; testimony of Davison, Robert L., Thorp, Willard L. 

U. S. Department of Commerce, Bureau of the Census, Census of Business, 1935, 
Construction Industry, vols. 1, 2, Washington, December 1936, February 1937. 

U. S. Department of Commerce, Bureau of the Census, Fifteenth Census' of the 
•United States, 1930, Population, vol. 5, General Report on Occupations^ 
Washington, 1933. 



CHAPTER V 

HOUSING COSTS 

No phase of housing has been subject to more cenfusion than has 
"cost." This is due to the fact that those engaged in construction 
are concerned chiefly with construction cost. Those in the real-estate 
business have a broader view and consider cost to inchide not only 
the const^'uction but the total property; while the consumer, whether 
he be renter or buyer, is chiefly concerned with the cost that is paid 
through his monthly rent or monthly payment for ownership. Hence, 
for purposes of clarification, we may use three terms to define the 
different types of cost: 

(1) Over-all cost, which consists of all factors of cost entering into 
the finished property ready for occupancy, including the land, the 
house, and a host of fees connected with the purchase, construction, 
and sale. 

(2) Construction cost includes the actual labor, materials, and 
builder's profit and overhead in the construction of the house. 

(3) Annual cost, which is the important cost to the consumer 
(unless he purchases outright). Annual cost is paid either in rent or 
montlily pa3aiient, and consists chiefly of the financing charges, taxes, 
and insurance, and in certain cases, maintenance and operating costs. 

The relationship of these costs differs in different types of property, 
table IX, following, shows the various relationsliips between the differ- 
ent elements of cost on six apartment buildings.^ It may be noticed 
that the over-all cost in all six cases consists of labor, material, and 
contractor's overhead as construction cost, and land and fees to make 
up the total over-all cost. The construction cost in the examples 
shown ranges from 61.6 percent of the over-all cost on Knickerbocker 
Village to 86.2 percent on Hillside Housing. This variation repre- 
sents one of the reasons why much confusion exists in the use of the 
term "cost" without any qualifying factors. 

Knickerbocker Village was constructed in the heart of New York 
City on fully developed property where all city facilities such as 
sewers, water lines, etc., were already in existence. Consequently, 
land costs in the area where Knickerbocker Village was built were 
extraordinarily high, being 34 percent of the total. Hillside Housing 
was built on raw land, which necessitated the building of practically 
all of the usual city facilities at the time of construction of the houses. 
Consequently these costs were included in construction cost rather 
than in that of the land. Thus the time when the land improvements 
are made determines whether they are included in construction cost 
or land cost. 



1 Illustrated b" charts in hearings before the Temporary National Economic Committee, Part 11, pp. 
5018, .«)28. 

41 



42 



CONCENTRATION OP ECON IMIC POWER 



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CONCENTRATION OF EiOONOMIO POWER 43 

A break-down on a single-family house constructed for sale is shown 
in table X. Here we have an over-all cost of $4,800, but it may be 
noted that only $3,750 is the cost of the house and even here we have 
at least two items which are not construction costs, namely, adver- 
tising, which is a sales expense, and the architect's plans^and specifi- 
cations, which represent a fee. Actually we must subtract* $225 from 
the $3,750 in order to obtain the construction cost, which leaves 
$3,525 (out of $4,800 over-all cost to the consumer) that might be 
ascribed to construction cost. However, this does not include all 
construction work, since in the $350 shown as cost of lot there is some 
construction of roads and streets, the actual figures for which were 
not obtainable. But even without this we have a construction cost 
amounting to 73.4 percent of the over-all cost on a single-family house. 
In general, construction costs average between 70 and 80 percent of 
the complete,over-all costs. 

Table X. — Break-doivn of costs on a $4,800 house for sale in 1939 

Architect (plans and specifications) $50. 00 

Hand e»cavating and rough grading, back fill and landscaping 52. 00 

Concrete work — footing and porch material and labor 14 L 00 

Mason rv: 

1. Material $294.60 

2. Labor 219.40 

514. 00 

Lumber -,--_: 530. 00 

Steel — beams and lintels 30. 00 

Plaster and lathing 310. 00 

Millwork: Doors, sash, flooring, frames 210. 00 

Glazing !-_ 43. 00 

Floor sanding 10. 00 

Linoleum 25. 00 

Plumbing: 

Labor and material 445. 00 

Septic tank cesspool 90. 00 

Well and pump 174. 00 

Electrical work: Wiring and fixtures 105. 00 

Heating: Gas with air conditioner (includes labor and installation) _ _ 265. 00 

Gutters and sheet metal work 61. 00 

Weather stripping 10. 00 

Carpenter labor . 370. 00 

Workmen's compensation, State unemployment tax, and social-se- 
curity expense 80. 00 

Finished hardware 35. 00 

Drain tile (for gutter drains) 25. 00 

Advertising expense _ 175. 00 

Total cost 3, 750. 00 

Selling price of house 4, 100. 00 

SeUing price of land 700. 00 

Total selling price 4, 800. 00 

Selling price of above house $4, 100. 00 

Cost 3, 750. 00 

Profit on house 350. 00 

SeUing price of lot $700. 00 

Cost of lot - 350. 00 

Profit on lot 350. 00 

Combined profit 700. 00 

Source: Hearings before the Temporary National Economic Committee, Part II, exhibit No. 854, pp. 
5480, 5481 . 

2601.58 — 40 — No. 8 — —5 



44 CONCENTRATION OF ECONOMIC POWER 

Construction costs, as above stated, consist of labor, materials, and 
overhead. Referring again to table IX on rental housing, it may be 
noted in the three examples which break down construction cost that 
labor cost ranges from 34.5 to 42.6 percent of construction cost, but 
only 21.3 to 36.3 percent of the total cost, while materials range from 

45 to 55 percent of the construction cost, and 27.8 to 46.7 percent 
of the over-all cost. Two of the three projects were constructed on 
raw land, meaning that city facilities such as streets, side walks,. sewers, 
and waterworks are included in the construction cost and not in the 
land cost, so in these cases both material and labor costs were higher 
as a percentage of the total cost than on the third project, but the 
variation was much less as a percentage of the construction cost. 

On single-family residence construction there have been few surveys 
made showing the break-down of labor and material cost. From an 
example that is available — a study made by Purdue University — we 
find that labor represents about 30 percent of the construction cost 
with union wage scales paid, materials 60 percent, and overhead and 
profit about 10 percent." If we take the above 73.4 percent (derived 
from table X) as representing the portion that construction costfis 
of the total, we find that labor represents only 22 percent of the total 
cost of a single-family house. The examples obtainable are insuffi- 
cient to warrant a definite conclusion on this point, but from the 
evidence examined these figures appear to be typical. 

Material costs on rental housing, as already cited, range from 27.8 
to 46.7 percent of the total cost. Again referring to our Purdue 
housing project for single-family residences, we find that material 
costs (60 percent of construction cost, with the latter 73.4 percent 
of the total) represents approximately the upper end of this range, 
on the average, or 44 percent of the total cost. Overhead and profit 
range from 7 to 10 percent of the over-all (about 7 percent in the 
above case). Figures for the Purdue single-family project, adjusted 
to the actual cost (instead of using the 73.4 percent), are as follows: 

PcTcent 

Operating overhead and profit 7. 78 

Materials 46. 73 

Labor 23. 37 

Land . - 14.07 

Fees - 8. 05 

The consumer is interested first, if he is a renter, in the amount of 
rent he 7nust pay; if he is an owner or'landlord, in the least amount 
of rent he can charge and still make a profit; if he is a home owner, in 
what his monthly payments will amount to. Examples in table IX 
show a break-down of monthly housing costs per room on the six 
rental housing projects. The first item is interest, which ranges from 
21.8 to 37.9 percent of the total cost per room. However, this varies 
with the total amount of mortgage as related to the total cost, both 
of which are given in the above-mentioned table, as well as with the 
rate of interest. The mortgage ranges from 77.7 percent of the total 
cost in the case of Falkland Properties, to 94.2 percent in the Carl 
Mackley Homes. Regardls.^s of the percentage of mortgage, the rent 
must bring a return on the total amount invested. Consequently 
rent should actually be calculated on the total cost, both mortgage 
and equity, rather than on the mortgage alone, since interest and 

! From a special report by F '• ■ L. Davison on the Purduf University experimental housing project, 
House No. 1. See hearings Oi x'emporary National Economic Committee, Part II, p. 4995. 



CONCENTRATION OF ECONOMIC POWER 45 

income on the equity, that is, interest and gain or loss, represent the 
return on the amount invested. In the case of Knickerbocker Village 
this return represents 47.7 percent of the total rent, and in Hillside 
Housing, 31.1 percent. In terms of percentage of rent rather than 
f'f cost, an analysis of 39 apartments in New York City ^ for the year 
1937 shows the average interest on mortgages to be 28.7 percent of 
total rent. This group represents all types of apartment houses, 
ranging in monthly room rental from $6.24 up to as high as $42.32, 
By ind large, 30 percent appears to be a fair average of the percentage 
of total monthly cost of rental housing that goes for interest. 

The next item in rental housing is depreciation. This usually is 
greater than amortization, since it requires the setting aside of funds 
for the replacement of such items as stoves, refrigerators, and other 
mechanical equipment which wear out sooner than the building as a 
whole. Therefore we must consider that depreciation includes 
amortization. In these projects it ranges fro.m 12.8 to 22.1 percent 
of costs. If we assume that 20 percent is a fair average, we find that 
interest and amortization and/or depreciation together represent 
one-half of the cost of rental housing. 

Operating costs on the 6 projects shown in table IX range from 21 
to 38 percent of total costs. However, in the record of the 39 New 
York apartment buildings (table B, appendix A) the average operating 
expense was 40.6 percent of the rental doUar. Operating expenses 
here include such items as fuel for heating, janitor service, painting, 
' repairs, supplies, electricity for public spaces, advertising, insurance, 
and such miscellaneous items as "are necessary in the operation of a 
rental-housing project. If we take 35 percent of costs as our average, 
we have 15 percent remaining as the average representing taxes and 
assess.ments, with no allowance for vacancies. Thus the cost of rental 
housing is divided approximately as follows: 

Percent 

Interest 30 

Depreciation 20 

Operation and maintenance 35 

Taxes and assessments 15 

Total . 100 

A somewhat similar division applies to the single-family bouse. 
Taking the example cited in table X, and using the F. H. A. mortgage 
on the 25-year plan as shown in table XI, we find that on the $4,800 
selling price (house and lot) with a $4,300 mortgage, we have a dowTij 
payment of $675, that is, $500 down plus loan expense of $175; an J 
that the monthly payment, including amortization of principal, 
interest, taxes, and insurance, amounts to about $30.78. What are 
not included but nevertheless represent monthly expense to the home 
owner, are such items as heat, maintenance and repairs, water charges, 
and so forth, which may be estimated at $8 to $12 per month, depend- 
ing upon the area and the type of building. An examination of the 
operating costs of the apartment houses already referred to shows that 
painting and redecoration, repairs, and fuel alone take 20 percent of 
the total rent. This is exclusive of janitor service and includes only 
such costs as might occur on the individually owned home. 

3 See table B, appendix A. 



46 CONCENTRATION OF ECONOMIC POWER 

Table XI. — Financial statement of basic ho~ se 

Selling price of house and lot (purchaser pays $500 down, plus loan ex- 
pense of approximately $175), and secures an F. H. A. insured loan 
of $4,300) $4,800 

F. H. A. 25-year-payment plan on $4,300 loan: 

Payment to principal and interest 25. 15 

Mutual mortgage' insurance premium . 88 

Fire and tornado insurance .. 1. 25 

Taxes (estimated) 3.50 

Total (per month) 30. 78 

F. H. A. 20-year plan: 

Payment to principal and interest 28. 38 

Mutual mortgage insurance premium .88 

Fire and tornado insurance 1. 25 

Taxes (estimated) (per month) _ 3. 50 

F. H. A. financing cost based on a $4,300 mortgage: 

Insurance 15. 00 

Commission 107. 50 

One-fourth of 1 percent mortgage insurance premium 14. 04 

First month mortgage insurance . 88 

Abstract posting 10. 00 

Abstract examination ^ 4. 98 

Application fee - 12. 90 

Interest during construction 6. 20 

Taxes - 3.50 

Total 175.00 

Souroe: Heawngs before the Temporary National Economic Committee, part 11, exhibit No. 854, p. 5481. 

We have already noted that our home owner must pay $675 as a 
down payment. Allowing the same interest for his own money that 
he pays for the borrowed money (5 percent), we have $2.81 per month 
which should be allowable as interest. Including this item as well as 
taxes and insurance, the monthly charges amount to $33.59. But, 
as above pointed out, these costs may represent only 75 to 80 per- 
cent of the owner's total cost per month including operation and 
maintenance. If they nepresent 80 percent, the total including 
operating costs would be $4 1 .99 or nearly 1 percent of the mortgage 
loan. This, it must be remembered, is on a 25-year plan. For single- 
family home ownership the monthly cost is therefcfre divided some- 
what as follows: 



Percent 




Financin?; (interest and amortization, which takes the place of depreciation) 

Taxes and insurance 

Heat, maintenance and repairs 

Total _... 

Com.paring these relative values of the various item.s of cost with 
those for rental housing (above), the higher percentages for interest 
and am.ortization in the case of the single-fam.ily hom.e of course reflects 
the fact that ownership is being acquired; and ti'C lower percentage for 
the maintenance item, reflects the fact that service, elevators, etc., are 
not included. 



CONCENTRATION OF ElOONOMIC POWER 47 

The amount of the monthly fin^-ncing cost on the single-family 
house is determined principally by three factors: (1) The size of thp 
loan, wliich in turn depends in large part upon the actual construction 
and outlay cost; (2) the rate of interest; and (3) the period of amortiza- 
tion. The amount of interest is-perhaps the most important factor of 
all to the home buyers since this is a direct charge on the loan. 

A given percentage reduction in financing costs, as shown by the 
testimony of Robert L. Davison, probably has the greatest effect on 
the monthly fixed payment as between three items — labor, materials, 
and financing costs.* Thus chart XI, based on the Purdue single- 
family project, shows that a 20-percent reduction in cost of materials 
would bring about a 9.3-percent reduction in monthly carrying charges; 
a 20-percent reduction in labor costs would bring about a 4.7-percent 
reduction in monthly charges ; while a similar reduction in interest and 
amortization charges combined, would bring about a 16.7-percent re- 
duction in the monthly charges. 

The influence of the period of amortization alone is shown in table 
XI. A change from a 20-year to a 25-year payment plan brings 
about approximately a 9.5-percent reduction in monthly charges, 
which is slightly more than would be brought about by a 20-percent 
reduction in materials cost, and twice as much as would be brought 
about by a 20-percent reduction in labor cost. Or it may be put 
another way: the reduction in the monthly payment that would be 
achieved by expansion of the amortization period from 20 to 25 years 
would be equal to a 40-percent reduction in labor cost. While this is 
true of our example, these ratios change as the amounts change and as 
the rates of interest change ; consequently it cannot be stated as a rule 
that works at all times. Nevertheless, it does indicate the large part 
played by financmg charges and the possibility of a reduction in 
monthly cost, which is the eventual cost of importance to the consumer. 
To be sure, the extension of the amortization period for this purpose 
does not reduce the total amount to be paid in the whole period of 
liquidation; it even increases the total amount of interest paid. 

If the amount of the monthly payment as compared with monthly 
income is an important determinant of the effective demand for new 
housing, then it follows that the reductions most affecting the monthly 
pajT^ment are also most influential in increasing effective demand. It 
is also true that the amount of montlily payment is largely influenced 
by the original cost, since the monthly interest payment is determined 
by both the rate of interest and the amount of loan, while the amorti- 
zation payment is influenced by the amount of loan and period of 
amortization. Hence, any reduction in one or all of the elements of 
original cost will, with the same interest rate, reduce the monthly 
payment. The essential point here is that it is not only the cost of 
materials, land, labor, etc., that affect the demand, but also the method 
of paying this cost. 

LABOR 

It has been shown that the part that labor represents in total cost 
will depend upon a number of factors entering into the determination 
of total cost. The percentage represented by the on-site labor cost 
may be affected by such factors as whether public facilities are 

* Hearings before the Temporary National Economic Committee, pt. II, pp. 4992-4994. Forlurther dis- 
cussion of the example illustrated in ch. V, sec Hearings, Part II, pp. 5058-5063. 



48 



CONCENTRATION OF ECONOMIC POWER 




CONCENTRATION OF ECONOMIC POWER 49 

included in the general construction or whether they have already 
been installed and are purchased with the land, and whether the 
relationship is to construction cost or to over-all cost. 

As a percentage of construction cost, labor cost probably ranges 
between 25 and 45 percent of the total.* In the majority of residential 
buildings, at least single-family ones, it amounts to about 30 percent. 
This percentage is more specifically determined by factors such as the 
degree of mechanization, the efficiency of labor, the season of con- 
struction, wage rates, and the limitations determined by jurisdictional 
coverage on ur.ionized jobs. This latter does not affect the individual 
efficiency as much as it does the efficiency of the organization doing the 
.construction and the coordination of its activities. 

Management may also influence the relative costs, determining to 
a large extent the amount of work done with the least effort. As an 
example of variable factors affecting labor costs, compensation in- 
surance represents an important item in total labor cost, ranging from 
2 to 5 percent of the total pay roll, and for some items of work it is a 
great deal higher. The compensation rates are fixed in many States 
according to the accident experience of the contractor. Moreover, 
different States have different basic accident rates. Carpentry, for 
instance, has a compensation rate of only $1.80 per hundred dollars of 
pay roll in Delaware, as compared with $1 1.50 in Mississippi. Struc- 
tural iron and steel erection has a basic rate of $30.61 in Arkansas, as 
compared with $13.19 in Georgia.^ These are basic rates and are 
reduced in accordance with the accident experience of the contractor; 
bence a contractor exercising considerable care in accident prevention 
may have a lower labor cost than one failing to do so. The mere 
location of equipment in its proper relationship to the job may have an 
enormous influence on the total labor cost.^ 

Wage rates, of course, are important as a factor affecting labor 
costs. However, there is no direct relationship between wage rates 
and the labor-cost ratio. Examples taken from data of the Bureau of 
Labor Statistics in 13 cities are as follows: In Boston, with an average 
hourly wage payment of $1,062 the labor-cost ratio (to construction 
cost) was 43.1 ; in Chicago, with an average wage payment of $1 .234 the 
labor-cost ratio was only 34.9 ; in Indianapolis, with a wage payment of 
$0,874 the ratio was 40.3; in New York, with a wage payment of 
$1,199 the labor-cost ratio was 40.4; in Trenton, N. J., with a wage 
payment of $0,833 the labor cost ratio was 41.0.^ 

Thus in discussing wage rates and their trend it must be realized 
that wage rates constitute only one of- the factors in the labor-cost 
ratios. Therefore, indexes of wage rates can show only trends within 
the area to which they apply. And, keeping in mind what we have 
said regarding the effect of management and efficiency, indexes of 
wage rates may not be indicative of labor-cost trends even within a 
given area. 

» The above-mentioned range of 34 to 43 percent (based on table IX) was on large-city projects. Note 
above-mentioned Purdue University study. 

' ConstriKtion Posts, 1937 edition, Engineering News-Record, p. 36. 

^ On two buildings erected on opposite corners in New York City, although identical in design, there was 
a difference of 1 cent per cubic foot on the total building cost because materials for one had to be delivered 
to an inconvenient location due to the position of a fire pump at the site. 

' Mercer O. Evans, in Land, Materials, and I-nbor Costs, Housing Monograph Series, No. 3, National 
Resources Committee. Washington, 1939, table H. p. 79. While labor-cost ratios are from ,1932 data and 
average wage payments are as of ]9.3fi-37. it is believed that the proportionate change inwage^afesibetween 
1932 and 1936-37 was very similar in the various cities. 



50 CONCENTRATION OF ECONOMIC POWER 

There are a number of indexes wliicli are reported regularly showing 
the trend of hourly rates. Most important of these is the B. L. S. 
index, v^iiich- represents union wage rates only for all building trades, 
and wliich now covers 72 cities. Based on 1929 as 100, this index 
dropped to a low of 86.8 in 1933, antJ in 1938 was 106.7, which was 
above 1929.'* Incidentally, the B. L. S. 'ndex of union rates rose 
from 91.6 m 1936 to 106.7 in 1938— an inciease of 16^ percent. The 
Federal Home Loan Bank Board, which reports building costs (labor, 
materials, etc.) based on actual quotations to agents of that Board 
on a standard set of specifications, with 1936 as 100, has an average 
index of 111.6 for labor cost in 1938 — an increase of less than 12 
percent. ^"^ Undoubtedly this difference is due in part to the fact that 
union rates prevail on only a limited amount of residential construc- 
tion. 

Actual rates in the building industry vary, and in 1936 ranged from 
less than $0,225 up to more than $1,775, according to a study by the 
Bureau of Labor Statistics." This study, covering 13,267 projects 
in 105 cities, showed an average hourly wage rate of $0,918.'^ In 
February 1939, according to the contractors regularly reporting to 
the Bureau of Labor Statistics but not covermg the same sample as 
heretofore quoted, the average wage rate for all workers in private 
building construction was $0,943.^' 

This difference between the average union rate and the average 
rate of all workers in the industry, as well as the difference between 
the B. L. S. index and the Home Loan Bank index, is due to the differ- 
ence between union wage rates, and nonunion wage rates; and the 
latter index as well as the average rate for all workers, is also affected 
by the percentage of union workers compared with nonunion workers. 
This percentage varies with the type of work and the size of city. 
According to the study just quoted, the break-down between union 
and nonunion workers in the sample, wliich, incidentally, covered 
186,145 workers, shows that 67.7 percent were union. The 13,267 
projects cost approximately $338,829,331, or something over $25,000 
per project, indicating that some large projects were included. 

It is claimed by union officials, and observers seem to agree, that 
the percentage of union men on small residential projects is rather 
insignificant. According to D. W. Tracy, president of the Inter- 
national Brotherhood of Electrical Workers, in his testimony before 
the committee, as much as 90 percent of the mechanical work on 
single-family dwefiings costing between $3,000 and $15,000 is done 
by nonunion workers.'^ Of those engaged in residential building in 
the B. L. S. study of 1936 (covering only cities of more than 10,000), 
about 57 percent were union members; of those in nonresidential 
building about 72 percent were union members. ^^ The effect of 
imionization on the wage rate is suggested by the difference in the 
average wage rates on residential and nonresidential work found in 
this study, as follows: 

« Monthly Labor Review, November 1938, vol. 47, pp. ]093, J097. 
>" Federal Home Loan Bank Review, September 1939, vol. 5, p. 380. 
" Monthly Labor Review, August 1937, vol. 4.";, p. 29(). 
" The same, pp. 283, 284, 

'3 The corresponding figure for other months is b;.sed on reports from a varying 'lumber of contractors not 
identical reporters. Afonthly Labor Review, May 1939, vol. 48, pp. 12!5. 1219. 
i< Hearings before the Temoprary National Economic Committee, Part 11, pp. 5264, 5266, 5267. 
'» Monthly Labor Review, vol. 45, p. 297. 



CONCENTRATION OF EiCONOMIC POWER 51 



SkUled. . 
Unskilled - 



Residen- 
tial 



$1. 098 
.503 



Nonresi- 
dential 



$1. 179 
.521 



For semiskilled workers there was no difference betw^een the resi- 
dential and nonresidential wage rates. ^^ Thus the greatest difference 
was in the skilled group, reflecting a smaller percentage of unionization 
on residential than on nonresidential building even in urban districts 
where the average cost of residential projects was relatively high as 
they included, no doubt, a large proportion of apartm.ent-house con- 
struction (which carries perhaps as great a percentage of unionization 
as nonresidential building). 

Another factor bringing about the high average .wage rate in the 
building industry is the high percentage of skilled as com.pared with 
unskilled and semiskilled workers. The same B. L. S. study shows 
that on residential work skilled workers represented 61 percent of the 
total, semiskilled 22.3 percent, and unskilled 16.8 percent; on non- 
residential work skilled workers represented 54.6 percent, semiskilled 
23.4 percent, and unskilled 22 percent; for the total, both resi- 
dential and nonresidential, the division was skilled 56.7 percent, 
semiskilled 23 percent, and unskilled 20.3 percent." According to 
the census of 1930, skilled workers represented 78.6 percent of total 
wage earners in the construction industry. (See table XII.) 

These variations in the proportion of skilled to imskilled are in a 
large measure due to the classification of certain items of work, the 
tendency on the part of contractors being generally to attempt to 
place as many trades as possible in the semiskilled group, while the 
tendency of the unions is just the opposite — to place as large a portion 
as possible in the skilled group. This also varies b}^ custom, which, 
of course, is subject to change in different cities. As an example, the 
placing of reinforcing rods for concrete work is under the jurisdiction 
of the structural iron workers union in Chicago, and workers placing 
reinforcing steel in that area are classified as skilled structural-iron 
workers. In Newark, N. J., the same work is under the jurisdiction 
of the metal lathers union and those engaged in this work are classified 
as lathers. On the other hand, in San Francisco the term applied to 
•workers placing reinforcing rods is that of "housesmith," and they are 
classed as semiskilled workers. In general, where the placing of re- 
inforcing rods ir, "open shop," that is, nonunion, it is classed as a semi- 
skilled rather than a skilled operation. 

Nevertheless the percentage of skilled operations for building con- 
struction is probi'bly higher than in any other industry, and the 
average hourly wage rate, considering the high percentage of skilled 
workers as compared with the percentage in most other industries, is 
no higher than that of other industries, as shown in table XII. 

'« Hearings before the Temporary National Economic Committee, Part 11, exhibit No. 943, p. 5574. 
" Derived from the same exhii>it. 



52 



CONCENTRATION OF ECONOMIC POWER 



Table XII. — Average annual iraye payments and percentage skilled workers of all 
wage earners, by manufncCuring industries and the construction industry, 1929 



Industrial group 



Printing, publishing, and allied products 

Construction 

Transportation equipment- _ - 

Railroad repair shops 

Iron and steel and their products, not Including machinery- 
Products of petroleum and coal 

Machinery, not including transportation equipment 

JJonferrous metals and their products - 

Rubber products _. 

Stone, clay, and glass products 

Chemicals and allied products.- - -_-. -_. 

Paper and allied products 

Food and kindred products 

I^eather and its manufacture , 

Forest products. . --., 

Textiles and their products ^--. 



Average an- 
nual wage 
payments ' 



$1, 77.5 
1,770 
1,617 
1,600 
1,568 
1, 5,56 
1,497 
1,409 
1,389 
1,317 
1,261 
1,231 
1,198 
1, 129 
1,072 
1,016 



Percent skilled 

workers of 

all wage 

earners ' 



69.2 
78.6 
37.7 
45.1 
25.8 
27.^ 
47.6 
29.5 
8.9 
15.2 
20.2 
1.3.4 
7.5 
2.4 
23.8 
13.3 



' Based on Census of Manufactures. 

» Based on Iiidustrial Census of Occupations, 19.30. 

Source: Mercer C. Evans, in Land, Materials, and Labor Costs, Housing Monograph Series, No. 3, 
National Re.sources Committee, Washington, 1939, table VII, p. 82. 

There is a considerable difference between the actual annual 
earnings of building workers and the earnings indicated by the average 
hourly rate. Material on annual earnings of building workers is 
extremely hard to find because of the intermittent nature of the 
operations. The average annual wage payments shown in table XII 
do not take into account the large factor of turn-over in the building 
industry as compared with other industries, since they are based on 
the average number employed throughout the year rather than ca 
the total number so employed. 

To obtain a proper background respecting the intermittent nature 
and the turn-over of the building industry, let us examine some of 
the statistics of employment. Figures for 1925, which was one of 
our best building years, indicate that during the peak month (Novem- 
ber) there were 2,762,000 workers, as compared with only 1,190,000 
during the low month of the year, employed an construction work, 
including highway and engineering work. On private building, 
November of that yeax shows an employment of 1,654,000 as com- 
pared with only 780,000 during the low month of January.'^ 

To obtain a proper annual wage one must assume that the workers 
during the peak month were available throughout the year, and the 
total annual wage should be divided by the number working during 
the peak month rather than by the average number working through- 
out the year. According to the construction census of 1935, the 
average amount of salary and wage payments per person employed 
on all construction work let by contract was $1,149.^® However, 
when we divide the total pay roll by the number employed at the 
peak, this annual wage payment falls to an average of about $940 
for the year 1935.20 

Even this adjustment does not allow for the turn-over among differ- 
ent occupations on different jobs, since the peak for all trades is not 

'* Construction Expenditures and Employment, 1925-36, Works Progress Administration, June 1, 1937, 
p. 43. 

'« Census of Business, 1935, Constniction Industry, vol. 1, p. XXX. 

'0 Derived from Census of Business, 1935, Construction Industry, vol. 2, p. 8. August was the peak 
month; and the percentage of value of work performed that pay roll represented (32.8) is shown on p. 4. 



CONCENTRATION OF ECONOMIC POWER 53 

necessarily reached at the sitme time. The addition of those not 
employed at the peak would give a still lower average annual wage 
payment. This turn-over is considerable when we realize that the 
average period for some of the occupations in building construction 
on a given job may be as low as 1 week on a project that m.ay take as 
long as 6 months to complete. An exam.ple is afforded by a large 
project covering the erection of a number of school buildings in 
Augusta, Ga., in 1933-34.^^ This project involved the construction 
of schoolhouses having a total valuation of nearly $700,000. The 
project started in December 1933 and ran tlirough November 1934 — 
a period of 50 weeks, 48 weeks of which were spent in actual labor 
operations. During the peak week, the 26th week of operation, 127 
skilled carpenters were employed. This number was employed only 
1 week. The next highest week listed the em.ploym.ent of 123 car- 
penters. Therefore, 4 carpenters obtained work for only 1 week. 

\Mien worked out on a number-of-weeks basis for each employee, 
it is found that 37 carpenters received from 1 to 12 weeks' work, 41 
received from 13 to 24 weeks' work, 36 received from 25 to 37 weeks' 
work, and only 12 carpenters received from 38 to 46 weeks' work out 
of the year's job. Of the 280 laborers at the peak of the job, 67 
received from 1 to 12 weeks' work, 62 received from 13 to 24 weeks' 
work, 117 received from 25 to 36 weeks' work, and 33 received from 
37 to 48 weeks' work. 

Thus, about 30 percent of the carpenters, in order to work a full 
year, would have had tr work on four different jobs of the sam.e size, 
and about 25 percent of the laborers would have had to find four . 
different jobs of the same size operating a full year in order to get a 
full year's work. This project was much above the average in size 
for a city as small as Augusta, Ga. Actually, the building-trades 
worker who has a year's work on only four jobs may consider him.self 
fortunate. This is particularly true of the mechanical trades such as 
electricians, plasterers, plumbers, and steamfitters. 

On sm.all residential work the turn-over is much greater than the 
above, but here the building craftsm.en in a good ro.any instances 
may work for a subcontractor quite steadily on a large num.ber of 
jobs. However, even should he find himself so fortunate, there is 
still the factor of the seasonality of the industry, which, as already 
shown, may result in only about half of the workers being ero.ployed 
during the winter months. 

All this has led to general acceptance of the fact that the building- 
trades worker must earn enough in a few summer months to live on 
during an entire year, and has been largely responsible for an ever- 
increasing hourly rate. There have been some attempts to promote 
the idea of a guaranteed annual wage but a lower hourly rate. The 
very nature of the industry, as above-described, operates against 
this, smce few contractors can guarantee annual work. The fact that 
a contractor must bid on each job separately, and that the job itself 
usually operates only during a portion of the year, makes it impossible 
for contractors generally to assume any guaranty for a given period 
of work. 2^ Such a guaranty could apply only to the period for which 
an individual contractor had commitments. 

Efforts have been made by a numbcn- of unions to arrange for a 
lower rate on low-cost resideritia) work than the contract rate in union 

""^1 Public Works A(Jniinistration, Avliti. EdDf-nMon. Washington. 1937. pp. 23-33. 

uCompare neaiinps before the Temporary Natioual Economic Committee, Part 11, pp. 5276, 5277. 



54 CONCENTRATION OF ECONOMIC POWER 

cities — this in an endeavor to increase the jurisdiction of unions 
on smaller residential work. For the most part this effort is not 
primarily altruistic on the part of the unions, since it represents an 
, attempt to iiicroast their membership in a class of building work over 
which they have liotle control at present." But it also represents an 
effort on the part of the unions to increase building activity by lowering 
the wage rates of their members. These efforts have been spasmodic 
and uncoordinated, and no evidence has been adduced to show that 
they have resulted in the hoped-for increase in activity. 

The intermittent nature of the work has also brought about many 
situations relative to union labor that have caused inconvenience and 
perhaps added cost to jobs. The fact that one trade may obtain 
only a very few weeks' work on a project has led to efforts on the part 
of unions to maintain as much of the work as possible under their 
particular jurisdictions in spite of changes that have come about in 
the use of materials. On union jobs the jurisdictional strike is per- 
haps one of the most uneconomical and costly to the builder, although 
this rarely affects single-family construction or smaller apartment- 
house work. It is quite understandable that every trade should 
attempt to get as much work as possible on every job that comes up, 
even at the expense of fellow union workers in other trades. This has 
led to a conception on the part of the public, caused chiefly by rumors 
but with some substance in fact, that restrictions prevail as to the 
amount of output allowed by the union per worker. Actually there 
has been no evidence of restrictions in output found in the investiga- 
tions made in connection with the Temporary National Economic Com- 
mittee hearings.^* It is to be expected that the average union worker 
will attempt to get as many hours as possible out of a single job, knowing 
that his opportunities on each job are limited. As one writer puts it, 
the fear of unemployment is the most important factor in causing a 
worker to spread out the work over a greater length of time than 
necessary: 

Seasonal unemployment has a very direct effect upon the efficiency of the 
building trades. It is fairly evident that a man will automatically restrict his 
production per day if he sees himself without a job when the structure is com- 
pleted. He is more likely to do a normal day's work if he sees plenty of employ- 
men; ahead.25 

Actually there have been instances where rumors as to restrictions 
have been investigated and found to be entirely erroneous. As an 
example, the Cleveland Chamber of Commerce made an investiga- 
tion of home-building conditions in that city. The investigators made 
a special effort to discover whether there were any labor restrictions. 
Especially did they attempt to trace down a rumor that there was a 
restriction on the daily output of journeyman plumbers so that at 
least 2 days per fixture, or 8 days for a one-bathroom job, were 
required. Actually it was found that the union had put a system 
into operation whereby a guaranty had been given employers that' 
the time used in installing plumbing fixtures would not exceed these 
amounts. According to an examination of pay rolls on a number of 
jobs by several different plumbers it was found that in no instance 
had the time consumed boen as much as that allowed in the guaranty.^^ 

" Compare the same, pp. 5265. 6266. 
'■■ Compare the same, p. 5273. 

25 WilHiim Ilabcr, Industrial Relations iu the Building Industry. Har\ ard University Press, 1930, p. 117. 
'0 Unpublished report to the board of directors of the Cleveland Chamber of Commerce, by George B. 
Buckley, manager of the construcliou industries department, September 1958, p. 5, and exhibit II. 



CONCENTRATION OF ECONOMIC POWER 



55 



On the other hand, there have been a number of attempts on the 
part of local unions to preverit the introduction of methods and ma- 
terials that would reduce the volume of their portion of the work. In 
New York an instance was found where the electrical workers indicated 
that they would refuse to allow the installation of switchboards already 
wired at the factory. On one contemplated project the difference in 
cost between wiring the switchboard on the job and installing one 
wired at the factory was approximately $3,000. Other instances 
were found where prospective builders contemplated the elimination 
of plastered ceilings by painting over concrete. They were notified 
by the union that no plastering at all would be allowed on the build- 
ings unless the ceilings were plastered as well." Painted concrete 
ceilings have been allowed in Chicago, a strong union city, for a good 
many years without opposition from the plasterers' union. 

Table XIII represents an attempt to discover whether there is any 
correlation between the level of wage rates of skilled workers and 
volume of activity in residential building. All cities having a popula- 
tion of over 500,000 (estimated 1933-35) are included, and also 2 
samples of cities from smaller, population groups. The table shows 
average union and nonunion hourly rates for skilled workers in resi- 
dential building in 1936, together with the percent unionized, along 
with residential building activity in 1936 as compared with 1933 
expressed in terms of the ratio of the percentage increase in each city 
to the percentage increase in 257 identical cities between 1933 and 
1936. 

Table XIII. — Residential building activity and average wage rates of skilled uorkers 

in 19S6 



Cities of over 1,000,000 (estimated 1933-3?): 

C hicago 

Detroit 

Philadelphia. _ .. 

Los Angeles 

New York 

Cities of MCOOO to 1,000,000 (estimated 1933-35): 

Buffalo _. 

Milwaukee 

Baltimore. 

Washington .-__ 

Boston 

Cleveland '_ 

St. Louis.. 

San Francisco 

Pittsburgh 



Ratio of 
percent- 
age in- 
crease in 
residen- 
tial build- 
ing to in- 
crease in 

257 

identical 

cities, 

1933 to 

1936' 



7.42 

4.57 

1.13 

.97 



4.60 
4.05 
1.67 
1.58 
.81 
.74 
..58 
.55 
.44 



Average hourly 
rates of skilled 
workers in resi- 
dential build- 
ing 2 (dollars) 



Union 



1.50 
1.14 
1.06 
1.03 
1.46 

1.26 
1.12 
1.12 
1.41 
1.28 
1.34 
1.25 
1.14 
1.30 



Non- 
union 



Percent 
of these 
workers 
union- 
ized a 



0.79 

.85 
.83 
.81 
.92 

.78 
3 1.38 
.67 
.84 
.87 
.81 
.81 
i.06 
.85 



99.2 
33.7 
65.5 
29.7 
80.5 

95.5 
99.3 
11.0 
24.3 
93.2 
94.6 
73.0 
91.9 
36.8 



' Derived from data of U. S. Bureau of Labor Statistics on permit valuation of residential buildin" in. 
(1) all cities having a population of over. WO.fKX) (p.stimated 1933-35); (2) geographically repr-sentative sam 
pies of cities in the 2 groups, 100,000 to 200,000 and 2,i.0()0 to 50.000 (estirnate'i l<)3;j-.3.5) Csolfci.-d from cities 
for which both permit data and waae rai-< were available) ; and (.3) a total of 257 identical cities having an ag- 
gregate population of 44,908,:TO0 in J9:'.0 and including all cities over .=00.000. " 

2 Kr,-}m 19.^6 study of Bureau ot Laiior Statistics quoted in hearings of the Temporary National Economic 
Committee, pt. ll, appendi.x, exhibit No. 943, pp. 5574-5586. 

3 Only 7 workers represented. 



2" Report of Feb. 4, 1939, from Bernard Topkis, in\estigator for the Temporary National Econoawt 
Committee, to Peter A. Stone, in files of the Temporary National Economic Committee. 



56 



CONCENTRATION OF ECONOMIC POWER 



Table XIII. — Residential building activity and average wage rates of skilled loorhers 

in 1936 — Continued 





Ratio of 








percent- 








age in- 


Average hourly 






crease in 


rates of skilled 






residen- 


workers in resi- 


Percent 




tial build- 


dential build- 


of these 




ing to in- 


ing (dollars) 


workers 




crease in 




union- 




257 




ized 




identical 
cities, 
















1933 to 
4936 


Union 


Non- 
union 




Cities of 100,000 to 200,000 (estimated 1933-35): 










Wichita, Kans -- 


10.80 


0.91 


0.71 


30.0 


Miami, Fla,. 


9.87 


1.18 


.91 


89.2 




3.64 


.91 


.64 


82.7 




2.03 


1.05 


.88 


37.3 




1.17 


.93 


.57 


22.0 




.87 


1.06 


.87 


30.0 




.50 


1.19 


u.oo 


89.8 




.39 


1.04 


.82 


33.1 




Decline 


.96 


.83 


29.7 


Cities of'25,000 to fiO.Ood (ostimated 1933-35): 






5.58 


1.10 


.98 


68.9 




3.31 


.93 




43.4 




2.36 


.96 


.77 


46.2 


Zanesvill'^, Ohio 

Sioux Fa '^s S Dak -- 


1.28 




1.17 





.97 


LOO 


.69 


34.9 


Fargo, N. Dak 


73 




.74 


38.6 




.70 


.81 


.72 


16.2 




.42 


1. 20 1 s 1. 05 


78.9 




.01 


.94 1 .85 


80.4 











< C:)': >• 6 workers reprssentpd. 
» Ou'.y 4 workers t.;pres€iited. 

The first group, Chicago, had the most nearly complete unionization 
and the higliest average rate for skilled union workers on residential 
building in 1930 ($1 .50), also the highest ratio of percentage increase in 
activity (]93t) over 1933) to the increase in 257 cities (7,4). Los 
Angeles, with the least unionization (30 percent) and the lowest 
effective nonunion rate ($0.81 — the rate in Chicago being ineffective), 
had the next-to-lowest ratio of increased activity to the increase in 257 
cities — or a percentage increase slightly less than that of the 257 
cities. On the other hand. New York, with 80.5 percent unionized 
and an average union rate for skilled workers nearly as high as that of 
Chicago ($1.46), made the poorest showing in its increase over 1933 
activity — 0.64 of the percentage increase in 257 cities. One should 
note, however, that the dollar volume of residential building in both 
Los Angeles and New York was very high on a population basis in 
both 1933 and 1936 relative to the other cities of this group, so that 
actual activity in these two cities was greater in 1936 than is indicated 
bv these ratios. Thus wage rates in sharp contrast in Los Angeles 
and New York accompany activity that in both cases represented a 
relatively large dollar volume. Similarly, the relatively low rates in 
Detroit ($0.85 nonunion, with 34 percent unionized) arc in contrast 
with the high average rate in nearby Chicago, but both had a high 
ratio of increased activity. 

In the second group, among the cities in which skilled craftsmen in 
residential building were strongly unioriized, Cleveland had the highest 
rate ($1.34) with a relatively poor showing in increased residential 
building activity (ratio of 0.7), while Buffalo had a high wage rate 
<"$1.26)"with the best ratio of increased activity in the group (4.6). 



CONCENTRATION^ OF ECONOMIC POWER 57. 

Baltimore, with the smallest percentage miionized (11) and the lowest 
nonunion rate ($0.67), had a better-than-averageiji crease in activity 
(ratio of 1.7'). Pittsburgh, with effective wage rates below the 
average for the group considering that only 37 percent of the workers 
were unionized, had the lowest ratio of increased activity in the group. 
In the third group (cities from 100,000 to 200,000) the highest union 
rates arc associated with the highest percent unionized in Miami and 
Tacoma; but in the former the ratio of increased activity was excep- 
tionally high (9.9 times the average increase for 257 cities), while in 
the latter it was exceptionally low (half the average increase). The 
lowest nonunion rate in the group ($0.57) is associated with the lowest 
percent unionized (22) in Grand Rapids, and the increase in activity 
is close to the average increase (ratio of 1.2). The largest increase in 
activity in the group (j;/tio of 10.8), that of Wichita, accompanies 
moderately low effective wage rates (nonunion $0.71, with 30 percent 
unionized). The red'uced level of residential building in Erie in 1936 
compared with 1933 is associated with wage rates in the middle range 
(nonunion $0.83, with 30 percent unionized). 

In the cities of 25,000 to 50,000, similarly, among the strongly 
unionized (owns the highest union rate ($1.20), in Bloomington, 111., 
is associated with a very low ratio of increase (0.4), while the high 
rate of $1.10 in Albuquerque, N. Mex., is associated with the highest 
ratio of increase in the group (5.6). The lowest nonunion rates 
($0.69 and $0.72), in Sioux Falls, S. Dak. (35 percent unionized) and 
Eau Claire, Wis. (16 percent unionized), accompany increases in 
residential activity a little below the average. 

In a few instances in the several groups of cities, very high hourly 
rates appear to have resulted from a local scarcity of certain craftsmen 
— notably in Zanesville, Ohio, where the average rate for a total of 
19 skilled workers in residential building, with no union members, was 
$1.17 in 1936. While the percentage increase in activity in Zanesville 
was 1.3 times the average for 257 cities, the dollar volume in this city 
in 1936 was very small compared with that of most of the towns of 
comparable size, so that the high rate in this case is really associated 
with relatively low activity and presumably a rather limited number 
of skilled workers. 

Thus no correlation whatever can le traced between 1936 wage rates 
of skilled workers and activity in residential building in 1936 com- 
pared with 1933 in these representative cities. On the whole there is 
no indication that high wage rates tend to discourage residential 
building or that low rates tend to stimulate it. Nor do high rates 
tend to accompany increased activity in any consistent way. Cor- 
relation of any kind is lacking. 

Other obvious generalizations that may be made from this table are 
that union rates are consistently higher than nonunion (probably 
representing correspondingly greater skills in very many instances) ; 
that unionization tends to be stronger in the north than in the south, 
and in the larger cities than in the smaller; and that there is wide 
geographical variance in average rates, which appears erratic but 
presuma))ly reflects local conditions and no doubt also the particular 
crafts and grades of skills represented in these averages. Needless to 
sa}', these statements are applicable only to residential building. 

Altogether it seems that, while building labor has high hourly rates, 
these rates do not result in annual earnings any greater than h. other 



58 



CONCENTRATION OF ECONOMIC POWER 











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CONCENTRATION OF ECONOMIC Pf VER 59 

more steady industries, and in quite a number of cases annual earnings 
are much lower in the case of the building trades; that the intermittent 
nature of the work has brought about activities on the part of the 
unions which have been interpreted as restrictions but which chiefly 
represent efl^'orts to get more steady work ; and that because our build- 
ing industry is localized and intermittent, there has been little prog- 
ress in its industrialization. The effect of this lack of industrializa- 
tion, along with the intermittent character of employment, has been 
to maintain to a large extent the high hourly rates. But, according 
to the above study of 32 representative cities, there is no evidence 
that wage rates have been so high as to restrict residential building 
activity, or that they constitute an important factor in determining 
ihe level of such activity. 

MATERIALS 

The part that materials play in the total cost of housing varies 
according to type of building, location, method of buying, and kind 
of materials. The examples cited above indicate that about 45 per- 
cent of the total cost is probably the most prevalent percentage for 
materials. In the study by Purdue University, materials represented 
60 percent of the construction cost. Just as labor costs may be influ- 
enced by the managerial ability of the contractor, so may material 
costs be influenced by the purchasing ability of the contractor. The 
small contractor who builds single-family residences, as above stated, 
often purchases his day-to-day needs from, local hardware and retail 
lumber dealers. His lack of capital prevents him from obtaining the 
benefits of quantity purchases, even though he may require materials 
in quantities. 

Most indexes of material prices vary as to the weightings of the 
several items entering into them. The Bureau of Labor Statistics 
publishes wholesale price indexes which represent the factory price 
level of building materials for each month. The movement of build- 
ing materials, relative to all commodities, shows that since 1929 they 
have been substantially above the general level of all commodities, 
in spite of the fact that construction volume has been below the gen- 
eral level of total industrial production over the same period. This 
is shown in chart XII. The reasons for this will be suggested below, 
with consideration of specific items. 

Another form of index is that of delivered material prices based on 
quotations to contractors, as illustrated by the Home Loan Bank 
Board index. The divergence of movement between the two types 
of index is clearly illustrated by the following table. The Bureau of 
Labor Statistics index ^^ has been converted to the 1936 base to cor- 
respond with the Home Loan Bank Board index figures from table XIV. 

Bureau of 

Labor Sta- 

tistirs 




July 1936 - 100.0 100.0 

July 1937 — - 110.5 111.5 

July 1938 -- 104.2 102.9 

July 1939. — - — - 102.4 103.4 

«* From Hearings of the Temporary National Economic Committee, Part 11, pp. 6657, 5558. 
260158 — 40 — No. b 6 



60 



CONCENTRATION OF ECONOMIC POWER 



Note the difference between the movements from 1938 to 1939. Ac- 
cording to the Home Loan Bank Board index the delivered prices to 
contractors moved down from 104.2 to 102.4, whereas the wholesale 
factory index of the Bureau of Labor Statistics moved up from 102.9 
to 103.4 in the period July 1938 to July 1939. 

There is also a considerable difference in the movement between 
localities and between different materials. This is apparent from a 
study of prices actually paid by the Work Projects Administration, 
which represent perhaps as low cost as it is possible for contractors to 
obtain. Prices are illustrated below for the five most important items 
used in building construction, namely, lumber, cement, crushed stone 
or gravel, steel, and brick. ^^ While others are of considerable impor- 
tanc those named represent the great bulk of the materials used. 
Although the price quoted for steel is based on that of reinforcing 
steel, it also represents the trend for the numerous steel items that 
enter into residential construction chiefly in the form of rough hard- 
ware, metal windows, etc. 

Table XIV. — Indexes of costs in the construction of a standard 6-room frame house 

[Averagft month of 1936=100] 



Month 


Total costs 




Material cost 




Labor cost 


1936 


1937 


1938 


1939 


1936 


1937 


1938 


1939 


1936 


1937 


1938 


1939 


January. 

February...,. 

March ._ 

April 


98.5 
98.7 
98.8 
99.1 
99.4 
99.7 
100.1 
100.4 
100.6 
101.0 
101.6 
102.4 


103.6 
104. 9 
106.7 
108.3 
109.? 
110.0 
110.5 
110.7 
110.5 
110.2 
109.9 
109.1 


108.4 
108.0 
107.6 
107.2 
106.9 
106.9 
106.8 
106.4 
106.4 
106.2 
106.1 
106.1 


106.0 
106.0 
106.1 
105.9 
105.6 
105.4 
105. 3 


98.7 
99.0 
99.1 
99.2 
99.4 
99.5 
99.9 
100.3 
100.4 
100.7 
101.4 
102.5 


104.0 
105.6 
107.7 
109.1 
110.0 
110.2 
110.5 
110.6 
110.3 
109.8 
109.2 
108.1 


107.2 

106.5 
105. 7 
105. 2 
104.8 
104.6 
104.2 
103.4 
103.4 
103.3 
103.2 
103.1 


103.0 
103.0 
103.0 
102.9 

102.7 
102.5 
102.4 


98.1 
98.1 
98. 2 
98.8 
99.4 
99.9 
100.3 
100.5 
101.0 
101.5 
102.0 
102.2 


102.7 
103.4 
104.7 
10R.7 
in7.7 
109.5 
110.6 
110.9 
111.0 
111.2 
111.2 
111.0 


110.9 
110.0 
111.4 
111.4 
111.3 
111.5 
112.0 
112.3 
112.4 
112.1 
112.1 
112.1 


111.9 
112.2 
112.4 
111.9 


May. 

June .- 


111.5 
111.3 


July... 


111.3 


August 

September 

October 

November 

December 





Source: Federal Home Loan Bank Review, September 1939, p 380. 

It may be noted that during the same month 440 board feet of 
lumber of the same kind and quality ranged in cost from $10.56 in the 
State of» Washington to $21.34 in Utah. This range indicates that 
the cost of lumber delivered to the job in some States may be as high 
as twice the cost in others. 

Cement, which is a product with relatively fewer fluctuations, shows 
a range of from $10.50 for six barrels in California to as high as 
$22.08 for the same quantity in Wyoming. 

Crushed stone or gravel ranged from $9.05 for 10 cubic yards in 
Massachusetts to $30.75 in South Carolina. 

Twa hundred and eighty pounds of steel reinforcing bars cost as 
little as $6.58 in New Jersey, and as much as $12.4(f m Idaho. 

Six hundred common bricks cost $6.04 in Texas, and as much as 
$15.90 in Montana. In each case the two items compared were 
purchased in the same month. 

Considering the range over a time series, we note that while lumber 
was $11 in Alabama in April 1937, on June 15 it was only $9.24 for 
the same quantity, while in Wisconsin during the same period lumber 

2» See table C, appendix A. 



CONCENTRATION OP ECONOMIC POWER Ql 

went up from $17.16 to $19.36. Thus there is no even movement 
among materials as a whole. Some materials moved up while others 
moved down (in table C, appendix A); and upon the method of 
weighting will depend the movement of the index representing the 
total. 

Another important factor m the movement of material prices and 
material costs is the variety in grades and kinds of materials used, 
much of which is influenced by building codes, although perhaps as 
great an amount is influenced by custom. In turn,, many of the 
customs are influenced by climatic conditions. Obviously in large 
cities where fire hazards are great it is necessary to use a large amount 
of fireproofing materials. Where there are high land costs the attempt 
is generally made to construct very substantial buildings to cover a 
long period of amortization. On the other hand, there is no account- 
ing for the fact that structural steel is allowed a bearing capacity of 
16,000 pounds per square inch in some cities, and 20,000 pounds in 
others; nor for the fact that practicaUy all contractors in Kansas 
City will use grade 3 and 4 common southern pine for rough lumber, 
while in northern cities no grade poorer than number 2 common of 
this species will be used for the same purpose. 

An important recent development wliich ehminates some of the 
factors related to quantity purchase is the practice of using ready- 
mixed concrete trucked to the job rather than mixed on the job. 
Since prices to contractors do not always closely follow the wholesale 
prices of materials (see appendix B) , the elimination of fabrication on 
the site, such as the mixing of concrete, introduces a stabilization 
in the cost of materials not otherwise provided. 

A factor that probably has considerable effect on prices of materials 
is the large number of different sizes and designs which must be kept 
in stock by dealers. On 16 projects constructed through loans of the 
United States Housing Authority, no less than 56 different sizes of 
casement windows were used. There are 200 to 300 different sizes and 
varieties of interior doors. There are several hundred different varieties 
of molding. There are several million ways of trimming a door opening. 
There are 8 different combinations of wood and steel doorjambs 
and frames. Each one of these eight combinations may be set for 
different ways of opening; that is, right-hand, left-hand, right-hand 
reverse, or left-hand reverse. Each of these may be flat or beveled. 
These may again be multiplied by three different thicknesses of 
doors. There are at least 20 different types of locks that may be used 
on these 192 conditions of door and jamb. Each of these is subject 
to any one of 50 different types of finish.^^ Thus each different 
condition multiplies the total number of items that must be kept in 
stock. Most of this is taken care of by fabricators who manufacture 
only parts and assemble the finished product to order. This means 
an intermittent factory production modified, of course, by the fact 
that parts can be manufactured for stock, but it also adds considerably 
to the price. 

Prices on some items used in residential construction show evidences 
of attempts at control. A few of these may be noted. It is well 
known that the price of steel is generally subject to basing-point 
control. Although structural steel does not enter to any extent into 
single-family residential construction, it is an important factor in 

30 General Building Contractor (F. W. Dodge Corporation), September 1931, vol. 2, Ko. 9, p. 58. 



g2 CONCENTRATION OF ECONOMIC POWER 

apartment-house construction. Structural steel in quantities pur- 
chased for a large building job is all sold by the fabricator, who quotes 
the price for completely fabricated steel, sometimes including erection. 
Kolled shapes are purchased from the rollmg mills, fabricated in the 
fabricating shops, and delivered to the job. The price* quoted is for 
delivery at the site, but the price is always quoted from the basing 
point plus delivery charges, although delivery may involve only a 
short t.ruck haul from a mill not at a basing point. Undoubtedly this 
method of setting prices results in reducing price competition, as most 
economists agree. '^ 

Generally speaking, the prices of steel show relatively little fluctua- 
tion. Not only is this true of structural steel, but also of reinforcing 
steel. In this connection it may be relevant to note that 60.6 percent 
of concrete reinforcmg bars are produced by the four leading com- 
panies, and at least 65 percent of all structural shapes are produced by 
the four leading companies.^- More than one-half of the contracts for 
fabricated steel in the first 9 months of 1933 were booked by com- 
panies subsidiary to or owned by the two largest steel companies, 
namely, the U. S. Steel Corporation and the Bethlehem Steel 
Corporation.^' 

Cement represents a considerable portion of the total volume of 
buildhig hiaterials. While there is a larger number of companies 
manufacturing cement than steel, the practice of pricing at basing 
points also prevails. Cement has shown rather a small degree of 
fluctuation over a long period. For instance, during the year 1934 
there were only three changes in the average wholesale price, ranging 
from $1.57 to $1.65 per barrel. In 1935 there were only two 
changes, the price ranging from $1.65 to $1.67 per barrel. The 
average price for the year 1934 was $1,637, and for 1935, $1,663. 
During the years 1936, 1937, and 1938 not a single change in the 
average price per month was recorded.^'' This is not to say that price 
changes did not take place, but the changes were limited to competi- 
tion between distributors rather .than in the price at the plant. This 
in spite of the fact that only 28.6 percent of the production of 79 
companies is controlled by the four leading companies.** 

Another material influenced by basing-point prices is gypsum. 
This item affects perhaps as large a part of the cost of residential 
construction as does cement, in view of the fact that it controls the 
price of plaster. Of the 18 to 23 companies producing important 
gypsum plasters, the 4 leading companies control 81.8 percent of 
prepared finish plaster, 91.5 percent of molding and gaging plaster, 
83.4 percent of neat plaster, and 71.3 percent of sanded plasters.** 
Of the 4 companies mentioned, it is believed that each of the 2 smaller 
companijs controls less than 10 percent of the output of these products, 
leaving the greater percentage (which represents well over half of the 
production) controlled by 2 leading companies. 

Not only is the price of plaster controlled directly, but products 
which might be substituted apparently are also controlled by the same 

31 See Frank A. Fetter, hearings before the Temporary National Economic Committee, Part 5, 
MonoDolistif^ Practices in Industries, pp. 1939-1942; 1947-1949. 

'■ Hearings before the Temporary National Economic Committee, Part 11, p. 5529. 

^3 Structural Steel and Iron Fabricating Industry, unpublished report prepartd by Peter A. Stone for the 
National Recovery Administration, December 1933, p. 1. 

31 See Commodity No. 509 in Average Wholesale Prices and Index Numbers of Individual Commodities, 
published monthly by the Division of Wholesale Prices. B. L. S. 

M Hearings before the Temporary National Economic Comnntee, Part 11, p. ,5526. 

3« Ibid, p. 5519. 



CONCENTRATION OF ElOONOMIC POWER g3 

companies through special patent Kcense agreements. ^^ The evidence 
indicates that the gypsum industry, through the leading producer, 
uses its patents on gypsum board and gypsum lath to control the 
price of gypsum plaster, at least to the extent of enforcing a basing- 
point system in that industry. For quite a period only one basing 
point for the Southern States (Plasterco, Va.) prevailed in the industry 
in spite of the fact that deposits of gypsum were worked in more than 
eight southern States. Recently upon the bailding of new plants by 
the National Gypsum Co. and the U. S. Gypsum Co. at Savannah, 
Ga., and Jacksonville, Fla., another basing point was created at 
Savannah. 

Closely tied up with the gypsum industry is the asphalt shingle and 
insulation board industry. While there are a number of companies 
in this business, there appears to be a growing tendency toward con- 
centration, in part in the form of an attempt by the gypsum companies 
to control a large part of the insulation business. This in turn is 
being fought by insulation board makers through their entrance into 
the gypsum business. 

Common brick, unlike cement, steel, and gypsum, is purely a local 
product — at least it is a regional product — and is hardly subject to 
national control, although regional control is effective in a number of 
areas. This localization is du_e to tlie fact that brick is a bulk product 
and is limited in its movement from the producing plant b}^ its weight 
and freight rates. It may be noted from the chart in appendix B 
that there has been considerable fluctuation in retail brick prices 
over a long period. The limitation on movement accounts for tiie 
great variation in prices between States (as shown in table C, appendix 
A). In Chicago, for instance, through the control of patents on briclv- 
making machineiy the price of brick has been maintained at $11 
per thousand over a great many years, regardless of conditions 
or volume. While this price generally has been considered by builders 
a reasonable one, and control cannot be said to have added to the cost 
of brick in the Chicago area dining its enforcement, nevertheless 
there has been an indirect effect through the influence of the Chicago 
Brick Manufacturers Association in that for a number of years the 
industry prevented the use of back-up tile instead of brick by pre- 
venting a change in the building code. 

Some attempt at control was made during the N. R. A. period, 
when efforts were made to fix prices in all areas, based on the average 
cost of doing business. This met with failure and control was unen- 
forceable in a number of areas, chiefly due to the fact that because of 
the variations in methods of brick manufacturers, which have a large 
bearing on costs, those with lower costs refused to give up their 
competitive advantage during the period of low volume. Since the 
cost of making brick is dependent upon the type and accessibility of 
fuel and the method of production, and the marketing area of the 
product is limited by freight rates, it is easil}^ understandable why 
there should be such wide variation in costs and prices. 

Face brick, on the other hand, comes nearer to being made for the 
national market, except for the more simple types. Special colorings 
and finishes may be highly desirable and may enable the brickmaker 
to ship relatively long distances, since such types of brick come 
within the realm of luxury products. 

" Unpublished report by George Haddock, of the Federal Trade Commission, on Patent License Agree- 
ments in the Qypsum Industry, in files of the Temporary National Economic Committee. 



g^ CONCENTRATION OF ECONOMIC POWER 

Lumber is a most important item in rcidential building and is 
most influential on the total cost of materials. There is no concentra- 
tion of ownersliip in the lumber industry, the largest operator con- 
trolling less than 6 percent of the total volume, the four leading com- 
panies in the Douglas fir region producing 22.6 percent, hi the Western 
pine 15.6 percent, and in Southern pine 7 percent.^* The small per- 
centage controlled by the four leading companies in Southern pine 
indicates that in this species a great majority of the production is by 
small producers, many of who.m are farmers for a part of the year and 
lumber producers during the favorable season for cutting timber. 
Moreover, the production from these small mills affects the prices of 
the larger producers in other species as well, because the lumber is 
competitive. In spite of these factors the larger producers, through 
their better distributing facilities^ exercise a price leadership in the 
metropolitan markets, which in turn influences the output of the 
smaller mills. 

The variation in sizes and species in the lumber industry, as in 
brick, is in line with the variation in production cost, which is further 
influenced by differences in the size of standing timber in the various 
regions. However, lumber, unlike brick, moves in the national 
market, and since freight rates are a considerable factor, due to the 
bulk of the product, the price variations due to location may be great; 
that is, purchasers close to timber-producing areas have an advantage 
due to elimination of the item of freight. 

The items that go to make up the elements of price to the consumer 
for the four principal types of wood used in residential construction are 
shown in table XV. This table shows that for Douglas fir, in 1 934, mill 
costs-were $18.80, while freight to Chicago was $20.16. For Southern 
pine, which is the principal item used in Chicago, the cost at the mill 
was $25.25, while the freight cost was $ 1 1 .40. It may be noted that all 
three competitive items of softwood, although having different freight 
rates and being produced at varying distances from Chicago, are 
within a competitive range when it comes to the cost to the retailer, 
the difference in freight cost between Southern pine and Douglas fir 
being largely taken up by the total mill costs of the former, which, of 
course, include stumpage, that is, the price of the standing tree, and 
overhead and profit. 

^¥hile what we have said about lumber applies, in general, to both 
rough and finished hmiber, it does not include one of the important 
items in residential construction, namely, millwork. This may in- 
clude items such as windows, window frames, doorframes, stairs, 
banisters, cabinets, and ornamental woodwork. In the prices of such 
materials we find one of the most important instances of association 
influence. Both tlie Eastern Millwork Association and the Chicago 
Millwork Association have developed methods of estimating which are 
used to a great extent by the majority of millwork producers. Base 
prices are given for practically every item of millwork. Variations 
may occur, depending upon the price and kind of lumber, but generally 
speaking, Cost Book A, issued by the Chicago Millwork Associa- 
tion, is the basis of estimating the costs and bid prices of millwork in 
the Midwest area, and the accounting system developed by the Eastern 
Millwork Association is generally used as a basis of making bids in the 
East. 

^* Hearings before the Temporary National Economic Committee, Part li, p. 5524. 



CONCENTRATION OF ECONOMIC POWER g5 

Table XV. — Lumber cost at Chicago, code period, January to March 1934 



Douglas 
fir 



South- 
ern pine 



Western 
pine 



Oak 



Shipping weight per M feet pounds 

Freight rate per 100 pounds 

Costs per M board measure 

Stumpage 

Logging and milling: 

Labor 

Other costs 

Shipping and selling: 

Labor 

Other costs 

Overhead and administrative: 

Officers' and owners' pay... 

Other costs 

Total mill costs - - , 

Freight 

Cost to retailer ^ - - 

Retail costs: 

Labor -- 

Officers' and owners' pay 

Other costs 

Total cost to consumer - 



2,800 
$0.72 



8,000 
$0.38 



2,300 
$0.51 



4,300 
$0,295 



$2.42 



5.11 
6.58 



1.06 
1.21 



.62 
1.80 



$4.31 



7.58 
6.13 



1.61 
1.07 



1.05 
3.50 



$2.11 



6.35 
7.77 



1.90 
1.95 



.76 
2.60 



$6.31 



9.27 
6.91 



2.35 
1.53 



18.80 
20.16 



25.25 
11.40 



23.44 
11.73 



30.48 
12.75 



38.96 

6.89 
2.71 
8.13 



36.65 

6.48 
2.55 
7.65 



S-l 17 

6.22 
2.44 
7.34 



43.23 

7.64 
3.01 
9.03 



51.17 



Source: Economic Problems of the Lumber and Timber Products Industry (Work Materials No. 79) 
National Recovery Administration, March 1936, p. 322. 

The plumbing industry has developed a variation of its own, and 
evidence seems to indicate that the exceptionally close control enforced 
on the movement of plumbing materials is a result of the ^act that 75 
percent or more of the output of a number of important products is 
manufactured by the four leading producers of each.^^ 

Prices are quoted only to plumbing contractors, and sales are made 
through the regular channels, namely, manufacturer to jobber to 
plumbing contractor. The prices of plumbing fixtures have been com- 
petitively influenced only by the sales of mail-order houses, which fur- 
nish the only outlet other than plumbing contractors. The price to 
the consumer as quoted by mail-order houses is relfltively unimpor- 
tant in urban areas, in view of the fact that plumbing contractors in- 
crease their charges for installation sufficiently to overcome any differ- 
ential that may result from this method of purchase. Since the price 
quoted to the builder is for a completely mstalled plumbing job, any 
competitive variation comes chiefly in the amount of profit the plumb- 
ing contractor will include. 

Attempts are occasional!}^ made by dealers or jobbers to sell direct 
to the job, but such endeavors have usually resulted in disciplinary 
measures being taken against the offender so that he is soon brought 
back into line. Evidence at hand seems to show that at least the large 
plumbing-fixture manufacturers readily comply in refusing to sell at 
the ordinarv^ trade discounts to any jobber who is reported by the 
jobbers association to have sold direct to the consumer. This control 
over the jobbing outlets has required, of course, the support of the 
plumbing contractor, w^hich has readily been given, according to all 
indications, since it protects him in the competitive field. 

Perhaps one of the best examples of this control is provided by 
what is known as the Briggs bathtub case.*" Briggs Manufacturing 

" Hearings before the Temporary National Economic Committee, Part II, pp. 5209, 5210, 5542, 5513. 
*" From reports and affidavits on file with the Antitrust Division of the Department of Justice. 



56 CONCENTRATION OF ECONOMIC POWER 

Co., makers of automobile bodies, had developed a method of pro- 
ducing colored bathtubs at a much lower cost than usual, through 
use of the same methods developed in making automobile bodies. 
Ordinarily the regular line manufacturers required a price 20 percent 
higher for colored fixtures than for all-white fixtures. Briggs offered 
to put colored fixtures on the market at the same price the regular-line 
manufacturers were charging for white fixtures. This was possible 
because of the improved method used by Briggs. The company 
succeeded in obtaining two or three outlets — regular distributors to the 
trade. However, no sooner had the Briggs product appeared on the 
market than its distributors suddenly found themselves faced with 
the impossibility of obtaining regular trade discounts on other products 
not manufactured by Briggs but necessary to installation. Moreover, 
these distributors also found themselves in difficulty with some of 
their customers, despite the fact that a lower price was available on 
the Briggs product than on the old-line products. This situation is 
still under investigation and subject to action by the Department of 
Justice, although recent indications are that the industry has agreed 
to let Briggs come in to a limited extent. However, except for such 
massive projects as the Parkchester Apartments now being built by 
the Metropolitan Life Insurance Co., and perhaps projects not quite 
so large, but larger than the ordinary run of apartment houses, the 
consumer can expect little in lowered prices through quantity pur- 
chases or competitive activity, since control of the price to the con- 
sumer is largely in the hands of the plumbing contractor. 

Since the major portion of single-family residential building is 
done by small contractors and builders who, because of lack of capital 
and limited scope of operations, deal chiefly through retail materials 
dealers, the prices paid for materials to retail dealers are more impor- 
tant in this type of construction than are wholesale prices. The retail 
building materials business, however, is not comparable with ordinary 
retail business. The average single-family frame residence requires 
between 8,000 and It), 000 feet of lumber; and a $5,000 house as much 
as $2,000 worth of materials may be purchased from a single dealer. 

To differentiate between the contractor and the occupant of a 
small house who may buy a few boards for shelving, there is generally 
allowed a contractor's discount, wliich may range from 10 to 20 
percent below the list price. But, as already stated, the small 
contractor usually lacks sufficient capital to pay cash for his purchases 
and hence is often tied up creditwise with a particular retail dealer. 

According to investigations during N. R. A. days the average letail 
mark-up in the United States as a whole, based on reports from 3,554 
dealers, was 38.39 percent.^^ On builders' supplies, that is, hard 
materials such as cement, sand, and gravel, etc., the mai'k-up (on 
less-than-carload lots) was approximately 50 percent, as an average 
for the country as a whole. *^ This, of course, is not a flat rate, since, 
as will be explained further, certain prerogatives on bulk sales of hard 
materials have been enforced in the industry, requiring commissions 
on such volume sales to be paid whether or not handled through a 
retail dealer. The retail dealer is faced with the fact that on desirable 
orders in many cases, and particularly to contractors who are good 

*' Economic Problems of the Lumber and Timber Products Industry, National Recovery Administra- 
tion, p. 320. 

" Testimony in hearing on Code of Fair Competition for Builders' Supplies Trade Industry, N, R. A., 
Feb. 8, 1934. 



CONCENTRATION OF ECONOMIC POWER 67 

credit risks, direct sales are made by wholesalers and manufacturers, 
thus avoiding the retailers' mark-up. Attempts to secure for them- 
selves all desirable business within their territories and to eliminato 
direct competition of manufacturers and wholesalers have led to 
intermittent attempts at blacklisting by retail materials dealers, 
particularly through their trade associations, to prevent manufac- 
turers and wholesalers from making direct sales. More than that, 
it frequently happens, especially in metropolitan centers, that a retail 
dealer will attempt to get an especially desirable order by increasing 
the contractor's discount considerably above the average discount 
generally in use in that territory. This is another method of making 
price concessions, and has also been opposed by organizational activi- 
ties of competitors. 

During the N. R. A. period most of the efforts of both the builders' 
supplies and retail lumber dealers associations were concentrated 
upon setting in the codes a specific mark-up below which no member 
of the industry might sell. These efforts m.crely attempted to give 
legality to practices that had been in effect intermittently over a 
long period prior to the N. R. A. The Iowa Retail Lumber Dealers 
Association, for instance, was formed in June 1876, and at that time 
a measure was adopted requiring that — 

If any wholesaler shipped a carload of lumber to anyone other tlian a dealer, in 
any town where there was a member of the association, that member would notify 
the secretary and the latter would draw upon the wholesaler who shipped the 
lumber, a sight draft for $10. The secretary was to send the money to the member 
whose business was being cut. If the draft was not honored, the association was 
pledged to a man to buy no more lumber from the offending wholesaler.''^ 

Activity of this type has been a feature of a number of associations 
ever since that time. It is not surprising, then, that the retail lumber- 
men attempted to write into the N. R. A. codes specific areas of 
operation and the application of a mark-up to all sales within the areas. 
An important controversy, which never was settled during the period 
of the N. R. A., revolved around what constituted wholesalers' sales, 
the retailers, of course, attempting to limit wholesaling to sales to 
retailers only, although concessions were later made to class as 
wholesale sales to governments, sales for .large bridges, dams, and 
other such engiiiHering projects requiring large quantities. On the 
other hand, certain tj'^pes of wholesalers attempted to define whole- 
saling as anything consisting of more than carload lots. 

In considering the activity of the Iowa Retail Lumber Dealers 
Association quoted above, there is considerable sim.Uarity to the more 
recent activity described in complaints by the Federal Trade dockets. 
The Florida Building Material Institute, Inc., in a complaint issued 
by the Federal Trade Commission in 1936 (and subsequent supporting 
brief) wan charged with the following practices: 

1. The establishment and recognition of a class of dealers to whom manu- 
facturers, producers, <ind wholesalers should confine their sales. 

2. The establisliment and recognition of a class of manufacturers, producers, 
and wholesalers from whom dealers should confine their purchases. 

3. The names of those concerns which were not considered as dealers under the 
institute's definition were published and distributed. 

4. Price lists of dealer members were filed with the secretary of a district, and 
violators of the price list experienced considerable difficulty in securing material 
from the sources of supplj'. 

" M. G. Truman, statement, hearing on Code of Fair Competition for Retail Lumber, Lumber Products, 
Building Material and Building Specialties Industry, National Recovery Administration, November IS,-' 
1933, pp. 36, 37. Mr. Truman quotes R. C. Bryant, "in Lumber. 



g§ CONCENTRATION OF ECONOMIC POWER 

5. The manufacturer who was found to be selling to a nonmember or a non- 
cooperative dealer was placed on a boycott list and no member of the institute 
would purchase materials from him. 

6. Before shipments could be made, manufacturers found it necessary to com- 
municate with the institute in order to find out whether such shipments were 
compatible with the institute's policies." 

In builders' supplies the principal problem has revolved around 
cement sales. The cement industry usually follows the policy of 
distribution through dealer outlets. Howe-"^"'-, on large sales, par- 
ticularly for large dams and even in some instances for large buildings 
requiring great quantities of cement, the manufacturer deals directly 
with the contractor. On such sales as these difficulty usually arises, 
the local dealer claiming that since the sale is in his territory he is 
entitled to what amounts to a commission on the entire sale, although 
he may have had nothing to do with it. Through the organizations 
of the builders' supplies dealers in the days prior to the N. R. A. code, 
these dealers were generally successful in maintaining a per-barrel 
allowance through threats of boycott. This was brought out in testi- 
mony during discussions on the N. R.' A. code, one witness stating 
that' when building supplies were bought in carload lots directly from 
the manufacturer, the contractor (or the manufacturer) often made 
goodwill payments to the dealer.*^ These payments were in the 
following forms: 

(1) The contractor paid over a lump sum of cash acceptable to the dealer. 

(2) The compensation was made directlj^ by the manufacturer, the fee being 
charged to the manufacturer's sales cost. 

A complaint initiated before the N. R. A. period against the Building 
Material Dealers Alliance and a number of other building material 
organizations, named the following prevalent practices :*^ 

1. The establishment of a class of dealers in building materials knowr as 
recognized dealers. 

2. The confinement of sales to, or tnrough the medium of, "recognized dealers" 
upon terms of sale which would result in a commission or profit to such dealers, 
by: 

(a) Obtaining written pledges under threat of boycott from each manufacturer 
of building materials to the effect that he would support the association's program. 

(6) Mailing lists of "recognized dealers" to manufacturers, with a statement 
of poHcy enclosed with each such list, which would indicate that the "recognized 
dealers" would sell only those brands which were marketed exclusively through 
such dealers. 

(c) Using price lists to which "recognized dealers" would adhere, with failure 
to adhere resulting in removal of the designatiou "recognized dealers." 

The principles and programs of these associations were expanded 
to a national scale with the formation of the National Federation of 
Builders Supply Associations in June 1933. ' As an example of policies 
of dealer distribution for particular major commodities of the industry, 
the following recommendations of the federation's cement committee 
wer6 adopted at its convention in January 1936: 

1. A cement manufacturer should not ship to dealer members outside their 
particular dealer territory. 

2. The organized united should determine the selling territory of each dealer. 

3. Cement manufacturers should stop all warehouse operations. 

4. All trucking of cement should be stopped. 

5. .\ minimum jft'erential of 15 cents per barrel on sales of portland cement in 
carload lots should be maintained by dealers. 

** Federal Trade Comrnis.sion, Docket No. 2857. Florida Building Material Institute, Inc. 
*'B. L. Knowles (of Aspc.ciated General Contractors of America), Statement, Hearing on Code of Fair 
Competition for Buiifiers Supplies Trade Industry, N. R. A., February 8, 1934, pp. 35-39. 
*FederaI 'I'rude Commission, Docket No. 2191, including findings and cease and desist order of December 



CONCENTRATION OF ECONOMIC POWER 69 

6. The federated units should revise lists of established dealers and furnish 
same to all manufacturers shipping into their territoiy. 

7. All etbical manufacturers of cement should be given recognition in all metro- 
politan markets." 

A slight variation of such retail dealer activity is found in the 
California Lumbermen's Council/^ This council distributed, from 
time to time, rosters of its membership and its affiliates to those 
manufacturers, producers, and wholesalers who serviced the markets 
within the territorial jurisdiction of the affiliates. If a wholesaler or 
manufacturer sold to anyone in that territory not on the member- 
ship list, he was required to pay a penalty to the secretary; and if 
such penalty was not paid, the members would cease to buy from 
that wholesaler or manufacturei". More than that, the council fixed 
quotas of sales of manufacturers and wholesalers in the territory and 
notified its members that certain wholesalers and manufacturers 
were below or above their monthly quotas. This quota system also 
was intended to apportion business among the council's own retail 
members. When one of the members exceeded a given quota, the 
seller was instructed to raise his price in order to divert his business 
to some other dealer-member in the territory. 

It may at once be questioned, in view of the fact that the above 
cases are cited from Federal Trade Commission dockets, whether 
these are not clear violations of the law and only spasmodic occur- 
rences. While it is true that the instances cited did come within the 
purview of the Federal Trade Commission, in many intrastate cases 
where equally restrictive practices occurred no action could be taken 
because of lack of jurisdiction. In other cases where such practices 
may prevail, documentary evidence to that effect is not easUy avail- 
able, since these activities may be through verbal understandings 
rather than through written agreements. 

In most cases such activity does not seriously affect the larger 
contractor — the builder of apartment houses and nonresidential 
buildings — but does aft'ect to a considerable extent the small builder 
of single-family residences. And it is through his credit obligations 
to the retail dealer that the collusive action of retail material dealers 
may be most effective. Perhaps the chief reason why the large 
builder is not so easily affected by such material-dealer activities is 
because of the practice of a number of large wholesalers in selling 
direct to that type of trade, which leaves the large builder independ- 
ent of the local retail dealer. Moreover, he may deal directly (in 
lumber, for instance) with one of the many small mills located in the 
lumber-producing areas. 

COLLUSIVE BIDDING PRACTICES 

The large builder, however, is affected by still another type of col- 
lusive activity to which the small builder is not subject. This is 
known as the Code of Fair Practices, recently organized and main- 
tained among subcontractor groups. Undoubtedly the code of fair 
practices, with its bid depositories, is an outgrowth of the N. R. A. 
codes, although evidence is available to indicate that such codes of 
fair-trade practices have been in effect since 1921.*^ 

" Ibid. 

<5 Federal Trade Commission Docket No. 2898, includine cease and desist order of July 23, 1938. 

*» F. J. Fee, president, Reliable Automatic Sprinkler Co., testimony, hearing on Automatic Sprinkler 
Industry, Amendments to Code of Fair Competition, National Recovery Administration, Feb. 18, 1935, 
vol. 1, pt. I, pp. 236-238. See also pp. 249 fl. 



70 CONGENTRATION OP ECONOMIC POWER 

The bid depository itself is the outgrowth of practices by general 
contractors known as bid shopping. It is said that bid shopping is 
merely the application of purchasing-agent buying methods to the 
contracting industry. The practice complained of concerns the gen- 
eral contractor, who, upon receiving a subbid, calls in other subcon- 
tractors and notifies them that he has arranged for a bid of a given 
amount (which is much lower than the bid he actually received) but 
that he would be willing to give the others an opportunity to meet it 
or cut it. This is merely a method of bargaining as ancient as trade 
itself. 

In order to meet this practice, subcontractor organizations set up 
bid depositories, requiring all members to file their sealed bids with 
the depository. The secretary of the association, either before or 
after the time for awarding the contract, would notify all the mem- 
bers as to the amounts of each bid deposited. The depository might 
be a bank or some other noninterested agency. There were innu- 
merable variations. However, it occurred to some of the associations 
that, since the bid depository was used in checking each member's 
bid, such bids might be examined to see that they were sufficiently 
high to include a profit for the bidder. - 

In view of the fact that, as already shown, man^ of the subcon- 
tractors, particularly on the smaller jobs, are either mtermittent con- 
tractors or journeymen (depending upon the amount of available 
business) the methods of estimating the cost of doing work vary with 
the ability of the estimator. Further, as explained ^bove, some sub- 
contractors in the same line, particularly the larger ones, may main- 
tain showrooms and have a larger overhead. Such overhead would 
not be included in the estimates and bids proposed by the small 
journejnnen contractors. It was then but a step to influence the 
smaller contractor to include a fixed sum for overhead. This might 
place the larger subcontractor on a par with the smaller one in his 
bidding. This was particularly important to the larger subcontrac- 
tor in depression days when business was scarce and he tried to get 
some of the smaller work to meet his expenses but was faced with 
the competition of smaller contractors who themselves might not have 
the necessary capital and were accustomed to obtaining such work 
without the inclusion of any fixed amount of overhead. While most 
of the subcontractor codes were so written during the period of the 
N. R. A., there was difficulty in their enforcement, and during the 
latter days of code writino; the setting up of accounting systems with 
mandatory overhead was strictly prohibited. 

Wlien and how the more recent wave of bid depositories and codes 
of fair competition came into existence seems to be in doubt. It ap- 
pears that following the passage of a fair trades act ui California a 
group of plumbing codes was set up in California cities in 1936. At 
least evidence adduced by investigators of the P. W. A. shows such 
codes of fair competition have existed. Throughout 1936, 1937, and 
1938 there were more of these bid depositories in other trades, with 
codes providing for mandatory overhead, but now they were supported 
by agreements with the building trades union of that particular trade, 
as a means of enforcing such codes. The unions agreed to refuse to 
supply labor to any subcontractor not certified or failing to cooperate 
with such bid depository or code of fair practice. That this has 
affected the large contractors only is adduced from the fact that in 



CUJNUENTRATION OF ECONOMIC POWER 71 

practically all of the code activities uncovered recently an exemption 
of a fixed amount ranging from $100 to $300 has been allowed sub- 
contractors. 

Usually the explanation given by labor for policing such codes is 
to the effect that if a contractor fails to include a sufficient amount in 
his bid to cover his overhead he may be forced to resort to the prac- 
tice of "kick-backs" from his labor in order to come out ahead, and 
it is protection agamst ^'kick-backs" that the unions seek in this 
policing. 

An example of the way this support operates is shown in the case of 
Portland, Oreg. Agreements were signed between the plumbing and 
steamfitters unions and what was set up as an "industries service" 
bureau, composed of all plumbing and heating contractors in Port- 
land. The agreement stipulated — 

The local reserves the right to withdraw their membership from any person or 
firm who resorts to unfair practice or unfair competition. * * * Members 
will be permitted to work only for persons having a legitimate place of business 
as master plumbers or steamfitteis, who agree to these working rules, with the 
exception of special lines such as ice machines, pneumatic tubes, sprinkling, 
marine work, and thermostatic work. A legitimate place of business means a 
storeroom, business telephone, material and tools of a value of at least $1,000. 
And again in section 23 of the agreement — 

Local No. * * * reserves the right to cancel this agreement with any person 
or firm who resorts to unfair practice or unfair competition with other first parties 
to similar agreements.*" 

In actual operation summary sheets of each bidder were submitted 
to the industries service. These sheets were checked for errors and 
omissions and to see that they included the required minimum of 
20-percent overhead, as well as a minimum 5-percent charge made by 
the industries service. The agreement also contained a clause which 
waived all conditions on projects of the Public Works Administration 
or other Federal Government work. However, it appears that this 
waiver was placed in effect after many of the Federal agencies added 
a clause to their specifications requiring all bidders to submit an 
affidavit stating that they had arrived at their bids without collusion 
or agreement with other contractors or bidders. 

Altogether the P. W. A. investigated and found, from 1936 through 
1938, such bid depositories covering 22 different trade groups in 14 
cities. In most cases there was an exemption covering small resi- 
dential projects on which the subcontractor's estimate was limited, as 
above stated, to $100 to $300; and since 1937 exemptions have been 
made on Federal work or on projects where Federal funds were 
mvolved. 

These activities have had little effect, if any, on small single-family 
residential building, not only because of the above-mentioned exemp- 
tion but because the major portion of this work is not affected by 
union agreements. However, these practices have been the principal 
factor recently in raising costs on apartment-house construction and 
on nonresidential building. Two examples may suffice to show the 
degree of effect in such instances. 

One bid depository in New York City, not included in the P. W. A. 
investigations, was that of the general contractors engaged in plaster- 
ing through the establishment, in June 1937, of a plasterers' code 

M Public Works Administration, Division of Investigation, Report No. Misc. 16342, August 30. 1938. 



72 CONCENTRATION OF ECONOMIC POWER 

committee. This committee had the usual rules applying to bid 
depositories, with amendments from time to time. (See copy of code 
in appendix C.) About this time a new building code allowed for the 
first time the use of painted concrete ceilings, without plaster, in 
residential buildings. Immediately the plasterers' code committee 
issued a ruling that no contractor was to bid on a project unless 
ceilings were plastered, as well as the walls. One exception to this has 
been the use of metal ceilings, which have long been used in place of 
plaster. It is understood that since the T. N, E. C. hearings started 
the code committee has revoked this ruling. 

Another instance in New York is that of the electricians' code body, 
which refused to install a factory-wired switchboard and insisted that 
it be wired on the site.^^ It is claimed by one prospective builder 
in New York that these code activities have been responsible for 
raising the estimated cost of residential building in New York City 
above the 1926 cost.^^ 

Altogether, it appears that the small builder is handicapped by lack 
of capital and by the activities of material dealers' associations which 
restrict him in his purchases to the extent that he is unable to get 
materials at lower prices; but on the other hand, the larger contractor 
who may obtain lower prices by purchases of materials in greater 
volume direct from the wholesaler or manufacturer, is faced with higher 
costs from subcontractors through their organizational activities in 
connection with union agreements. Between the two, costs of 
materials in place on residential buildings have been maintained at a 
level above the average of all other commodities. 

FEES AND MISCELLANEOUS COSTS 

The various fees involved in producing housing and getting it into 
the hands of the user fall into three different classes. First are those 
fees relating to the construction of the house itself (including purchase 
of the land). They include such items as architects' fees, builders' 
fees or profit, surveys and permits, surety bonds, and other forms of 
insurance necessary to the job. 

The builders' fee and architects' fee, depending on the point of view, 
may be considered as part of the construction co&t, the same as that 
of labor. An indication as to their part of the total cost of single- 
family housing is arrived at by examination of various examples of 
small-house construction. In some cases the builder's fee may come in 
the 'form of profit, where a builder of the speculative type builds and 
sells. In the example given in the earlier part oi this chapter (table 
X) , the builder's profit is clearly divided as between profit on the lot 
and profit on the cost of the house. It may be noted that exclusive 
of advertisino- expense the cost of this house was $3,575. A builder's 
profit was allowed am.ounting to $350, whde the architect's fee m this 
case was $50. Clearly the architect's fee, considering the amount of 
work involved, does not cover individual plans and specifications for 
this house, but is for a basic design for a large group of houses which 
have been rppeated If individual plans and specifications hi d been 
provided for the Konse, the fee would be nearer $300 or approx mately 
equal to the builder's fee. 

, . looQ frnm Bernard Topkis, investigator for the Temporary National Economic 

M Report^ of^F^ebmai^y |Y^?,|°'/^°fi?es of the Temporary National Economic Committee. 

'j2Ibid. 



CONCENTRATION OF EiCONOMIC POWER 73 

There are usually other fees involved in construction. Permits and 
surveys amount to between $40 and $50 per house, depending on the 
size. One example reported shows that in Racine, Wis., on a house 
selling for $4,645 the permits and insurance amounted to $40, the 
surety bond $20, and fire insurance $5, or a total of $65. For a house 
on the outskirts of Milwaukee costing $4,465, permits and insurance 
were $50, surety bond $20, fire insurance $20, or a total of $90.*^ 
Insurance aird surety bonds, of coui'se, cover only the period of con- 
struction. In the latter case (the Milwaukee house) the builder's 
fee was $300 and the architect's fee $200, while in Racine the builder's 
fee was listed at $300 and the architect's fee at $75. Altogether, in 
the Racine house costing $4,645 the fees applicable to the heading of 
"Construction" were as follows: 

Permits and insurance $40 

Builier's fee 30a 

Architect's fee 75 

Surety bond 20 

Fire insurance 6 

Total 440 

or slightly less than 10 percent of the selling cost. (This does not 
include $10 interest on the construction loan, which will be taken up 
under another heading.) 

The second kind of fee relates to title and conveyance. These 
fees are applicable to parts of the transaction for which the service 
rendered is not so clearly defined. The necessity for such fees is 
chiefly the result of different types of State laws relating to title and 
conveyance. Many of these laws are enforced through [traditional 
loan practices. Titles are examined and guaranteed in different 
manners in different States. 

There are four principal types of title procedure and examination. 
Two of these are: The making of abstracts of title by professional 
abstracters; and attorney's opinion. The latter is a system whereby 
an opinion on the validity of the title by an attorney is accepted by 
the lending agency as sufficient guaranty for its loan. Abstracts 
of title are also examined by an attorney. The third type is title 
insurance, which is provided by insurance companies engaged in that 
type of activity. The insurance company, of course, makes its own 
examination of title and provides regular insurance against any fault 
in such title. In many cases, principally in New York, lending 
agencies insist upon title insurance as a guaranty of title where their 
loans are involved. 

The fourth type of title procedure is known as the Torrens system. 
This is a method of title registration which, after the initial registra- 
tion cost, requires no further abstract or title search but merely 
examination of title by an attorney. A report by Wallace H. Walker 
and Spurgeon Bell, covering title procedure in 10 States, showed that 
the average total costs, including attorney's fees, of original registra- 
tion of title to a home property where Torrens titles were legal, was 
$150." However, the average cost of conveyance of such title after 
original registration was only about $8.06 per $1,000 of loan.^^ It was 

53 Keports of RicbJrd F. Jones, Jr., dated February 2 and February 5, ]939, in flies of the Temporary- 
National Economio Cnn^mittee. 

5< Central housing cf.mrQittee, subcommittee on law and legislation, Land Title Procedure with Particular 
Reference to the Legal Costs of Home Mortgage Loans, Washington, August 1936, p. 3. 

" A weighted average representing 1,395 loans in 3 States; based on the same, pp. 6 ff. 



y^ CONCENTRATION OF ECCNOiXfU: PO^■•^'■:i• 

found that Torrens or similar land-tide regr-i^-af-'cd existed in 17 
States and the Territory of Hawaii, but were u til;?-' .< i» any extent in 
only 3 or 4 States and Hawaii.^*^ In a number ol Sta. -s, ir, spite of the 
Torrens law, title insurance companies are active and title policies 
are insisted upon by some mortgage lenders." 

The findings of the Walker-Bell report indicate that th-^ average 
cost of transferring title without the TorrcuG law ranges ironi us high 
as $19.89 to as low as $9.42 per thousand dollars oj! l<>^ut. With the 
Torrens law, the low was an average of $G.02 in Massachusetts, and 
the high $10.38 per thousand dollars of loan in Minnesota. Hence on 
a house costing $5,000 (assuming a 90-percent loan) the title fees mav 
run from $27 to $90, depending upon the practice in the State, the 
title laws, and the type of title guaranty demanded by the lending 

agency. 

Other fees involved in transferring property include such iteins as 
recording of deed, tax-search fees, release fees, escrow fees, and others 
depending upon tlie State and the practices within the State. On the 
whole the closing cosr.s and fees related to conveyance on a small house 
will average between $55 and $120. 

The third kind of fee relates to loans. While it is true that some of 
the necessary fees involved in title procedure are due to the demands of 
lending agencies, they are not strictlj'- fees relating to the loan, since 
they relate primarily to title and may be demanded even where no 
loan is involved. Loan fees constitute a special group in themselves. 
Referring to table XI, the example presented at the hearings, it may 
be noted that the abstract posting and abstract examination, which 
are distinctly title fees, are mcluded in the $175 financing cost on a 
$4,800 house. The loan items involved are mortgage insurance, 
mortgage comnnssion, application fee, interest during construction, 
and taxes during construction. In the Racine case above mentioned 
we find interest during construction, mortgage insurance, examination 
fee, financini; expense (which is comparable with the item of com- 
mission in 'he other statement noted) and probably some expenses 
listed under ''miscellaneous." ^^ Outstanding factors in this set of 
fees, whicn are always present are the application fee — or the examina- 
tion fee which is sometimes termed "appraisal" — and the mortgage 
commission. ^^ 

The application fee ranges from $5 to $15, depending upon the size 
of the job and on whether it is an F. H. A. mortgage or some other 
type of mortgage. The examination fee in one case above-m.entioned 
was $10, and in another $5. Perhaps $5 is the most frequent charge 
for this item on the small house costing $5,000 or less. 

The broker's commission was $107.50 on the $4,800 house in Cook 
County, 111. (table XI), and it was $100 on the $4,645 house in Racine, 
Wis. The usual broker's charge is three-fourths of 1 percent of the 
mortgage, the charge varying with the size of the loan, on the theory 
that the larger loans are more difficult of placement than are the 

5e Ibid, p. 2. 
„J'l^^''i' H^i' ^% ^^'. 68- Apparently the Torrens system does not provide the service desired by many 
?v T§ 'wl^.Vr'l'"*^ •'°"'1"V°"'V For explanation of the systems of title examination and proof. se"al°o 
^^^^. Walker hearings before the Temporary National Economic Committee, Part II, pp. sW'siTO 
ConSee. ''" "''"' ' '^^^'"^ February 2, 1939, in files of the Temporary National Economic 

H^r" R^!*"!?'""^"'"'''''-*,'"" ^"'twsses, notably Henry Bruere, president of the Bowerv Savings Bank and 



OUNCENIHATION OF ECONOMIC POWER 75 

small ones. There is, however, an attempt to maintain a basic 
minimum of $100, which, of course, is not always enforced. 

Thus we find that on a house costing slightly under $5,000, all 
three types of fees (construction, title conveyance, and loan fees). 
may amount to as much as $650. 

On rental house construction the examples shown in table IX 
indicate that combined fees may range from 4 percent to as high as 9 
percent of the total cost.^° Usmg our $650, on the basis of a $5,000 
. house, the combined fees may average 13 percent of the selling price. 
This 13 percent docs not include advertising expense or selling cost, 
except where the builder's profit includes the selling cost. It may 
be noted also that this amount ($650) is equivalent, or nearly so, to 
the average cost of the land for small residences; ^^ and in two of the 
six rental-housing projects shown in table IX the fees are almost 
equivalent to the cost of the land. 

BIBLIOGRAPHY 

Buckley, George B., Home Building CoDclitions in Cleveland; unpublished report 
to the Board of Directors of the Cleveland Chamber of Commerce, September 
1938. 

Building Contractors Employers Association, Inc., and Operative Plasterers' and 
C'iment Finishers' International Assocition, Local No. 60, Voluntary Code of 
lair Competition Governing the Employment of Plasterers by General Building 
Contractors in the Boroughs of Manhattan and the Bronx in the City nf New 
York, June 24, 1937. (See appendix C, below.) 

Central Housing Committee, Subcommittee on La\A' and Legislation, Land Title 
Procedure with Particular Reference to the Legal Costs of Home Mortgage 
Loans. (Special Rept. No. 3.) Washington, August 1936. 

Evans, Mercer G., "Labor and the Cost of Housing," Land, Materials, and Labor 
Costs, Housing Monograph Series, No. 3, prepared for the Industrial Com- 
mittee ot the ^ "tional Resources Committee, Washington, 1939. 

Federal Homo L , Bank Board, Federal Home Loan Bank Review, September 
1939, vol. 5, pp. 380-394. 

Federal Trade Commission, Docket No. 2857 (Florida Building Material In- 
stitute, Inc.); Docket No. 2191 (Building Material Dealers Alliance); Docket 
No. 2898 (California Lumbermen's Council). 

"Finish Hardware for Buildings," General Building Contractor (F. W. Dodge 
Corporation), September 1931, vol. 2, No. 9, pp. 58-63. 

Haber, William, Industrial Relations in the Building Industry, Harvard Uni- 
versity Press, Cambridge, 1930. 

Haddock, George, Patent License Agreements in the Gypsum Industry, un- 
published report based on data of Federal Trade Commission, 1939, in files of 
the Temporary National Economic Committee, Washington. 

Kreps, Theodore J., "Building Materials and the Cost of. Housing," Land, Ma- 
terials, and Labor Costs, Housing Monograph Series, No. 3, National Resources 
Committee, 1939. 

McElrov, F. S., "Union Scales of Wages and Hours in the Building Trades, June 
1, 1938," Monthly Labor Review, November 1938, vol. 47, pp. 1093-1113. 

National Recovery Administration, Division of Review, Economic Problems of 
the Lumber and Timber Products Industry (Work Materials No. 79), Wash- 
ington, March 1936. 

National Recovery Administration, Hearing on Administrative Order No. 37-3 
Re Code of Fair Competition for Builders Supplies Trade Industry, Wash- 
ington, February 8, 1934. 

National Recovery Administration, Hearing on Proposed Modification of Code 
of Fair Competition for Retail Lumber, Lumber Products, Building Material 
and Specialties Industry, Washington, November 13, 1933. 

«" Here some of the items are probably classified differently; e. g., the builder's profit would probably 
appear in the "Contractor overhead" instead of in "Fees and miscellaneous." 

9' Note percentage break-dov.n for Purdue single-family project above (p. 44); the percentage for fees 
plus operating overhead and profit exceeds that for land. 



260158— 40— No. 8- 



76 CONCENTRATION / ECONOMIC POWER 

Public Works Administration, Division of Investigation, Report No. Misc. 16342, 

August 30, 1938. 
Public Works Administration, Research Section of the Projects Division, Aids to 

Education, Washington, 1937, pp. 17-33. 
"Rates on Compensation Insurance for Construction," Construction Costs, 1937 

edition, Engineering News-Record, pp. 36-37. 
Real Estate Board of Kew York, Accounting and Exchange Committee, Manage- 
ment Division, Operating Costs for Elevator Apartment Houses, 1937, New 

York, 1938. 
Sanford, E. P., "Wage Rates and Hours of Labor in the Building Trades," Mcthly 

Labor Review, August 1937, vol. 45, pp. 281-300. 
Temporavj' National Economic Committee, Hearings, Part 11, Construction 

Industry', Washington, 1940, testimonv of Dawson, Allen H.; Smith, Cajleton 

A.; Tracy, D. W. 
Works Progress Administration, unpublished field reports of prices of construction 

materials, 1937. (See appendix A, table C, .below.) 



CHAPTER VI 
HOUSING FINANCE 

As stated in the preceding chapter, the important cost to the renter 
is the monthly rent, and since interest takes from 28 to fO cents of 
each rental dollar,' the financial factors are important m rental 
housing In home ownership the montlily cost is composed chiefly 
of mterest and amortization of the loan. . Of the home-ownership 
monthly payment plus cost of operation and maintenance, the 
financing charges amount to as much as 69 percent.^ This is im- 
portant because the amount of funds involved m the outright acquisi- 
tion of residential facilities is beyond the average amount of savings 
of the individual. The 1930 census shows that 45.2 percent of all 
nonfarm homes are owned .^ Of these o^\med nonfarm homes, about 
58 percent were mortgaged m 1934 * leaving only 19 percent of the 
total nonfarm homes ownsd free and clear by the occupant. 

Figures on total funds invested in residential nonfarm mortgages 
have been estimated for various years, ranging from a peak of 
$22,300,000,000 in 1930 to $17,300,000,000 in 1937.^ This comparison 
probably is not altogether valid in view of the fact that the 1937 
figures are estimates of the Federal Home Loan Bank Board and 
include mortgages on only one to four family nonfarm homes, while 
the 1930 figures are estimates of all residential nonfarm mortgages. 
At any rate, there was a considerable decrease during this period in 
the volume of mortgages outstanding. This was due, principally, 
first, to the lack of new mortgages written since 1930, because resi- 
dential construction has been at such a comparatively low level in 
recent years, and, second, to the fact that during the period 1930 to 
1937 there was a vast increase in foreclosures, which placed many 
properties in the hands of the mortgagee.* For instance, real estate 
owned by hfe-msurance companies alone increased from $462 000 600 
in 1930 to $2,096,000,000 in 1937.^ Not all, but the greater part of 
ttus increase represents residential properties taken over bv fore- 
closure:. Thus we have a large block of mortgage money transferred 
frora mortgage to equity from this source alone BuilLrandToan 
associations have repossessed another $1,500,000,000 in residential 
properties since 1930.* ' resiaentiai 

I See table B, appendix A, and p. 45 above 
* See p. 46 above. 
' See p. 28 above. 

aittee, Part II, pp. 5042, 



• aee p. v» aoove. 

F;S1n'd°^o'^eTuc''JSe1'ifVasS r^rf ^'^*''^' Survey of Urb 

J Oscar L. Altman, Hearings 'b^forfthe^TPni 3 '* k^ J"' ^,- ^"^ ^"I- 
6(M3 The revised figure for il3^ir?7V(seebS^^^^"°''^ Economic Committee, Part 

t f onipare detailed explanation bv nr ai.,^ ^' .^ 

Temporary National Economic Committee, Part II, p. 5092. 



77 



yg CONCENTRATION OF ECONOMIC POWER 

The principal mortgage lenders on nonfarm one- to four-family 
dwellings in 1929 are estimated to have been:® 

Billions of 
dollars 

Individuals (and others).. - 7. 2 

Savings and loan associations 7. 

Mutual savings banks -- 3. 2 

Commercial banks 2. 5 

Insurance companies , 1. 7 

Total.- 21. 7 

By 1934 a new element had entered, of which more will be said 
later, namely, the Home Owners' Loan CorporatioD. By 1937 this 
corporation had taken over $2,400,000,000 worth of mortgages. 
Actually, then nonfarm home mortgages held by private and Lustitu- 
tional lenders were reduced from $21,700,000,000 to $15,100,000,000 
between 1929 and 1937. The greatest single drop in home mortgages 
held was that of the "^avmgs and loan associations, whose total hold- 
ings were cut in half, namely, from $7,000,000,000 to $3,500,000,000. 

The estimated jHortgage loans on nonfarm one- to four-family 
homes in 1937 we"e:^° 

Billions of 
dollars 

Individuals (and oth(^rs) 6. 2 

Savings and loan associations 3. 5 

Mutual savings banks 2. 7 

Commercial banks 1. 4 

Insurance companies 1. 3 

Total 15. 1 

with $2,400,000,000 held by the Home Owners' Loan Corporation. 

^Vhile these figures represent for the most part recorded mortgages, 
not all of them are first mortgages, particularly those in the group 
under the heading '%dividuals." These represent, in large part, 
second and even third mortgages. Mortgages are in a constant state 
of liquidation and the figures are constantly changing. 

To understand the situation more clearly, let us look at some of 
the processes of acquiring a home and the methods through which 
residential construction is brought about. Prior to the advent of 
governmental activity in the mortgage field, v/hich is to say prior to 
1933, practically all States had laws limiting the percentage of loan 
(to total value) on a single project by institutional lenders within the 
State. This varied, of course, from State to State, but in the majority 
of cases represented a limitation amounting to two-thirds of the 
appraised value of the property. Consider, then, the position of the 
speculative builder and others who wished to build or acquire indi- 
vidual homes, being able to borrow on the first mortgage only two- 
thirds of the amount necessary for the acquisition. The cost of the 
average one-family home lq 1929 was around $7,375," which meant 
that the prospective home owner needed $2,460, of his own in order 
to acquire a home. This, of course, placed great limitations upon the 
available purchasers, restricting the market to the few who might 
have considerable savings. Actually, however, homes were sold on 

« Federal Home Loan Bank Board, Seventh Annual Report (July 1, 1938-JuBe 30, 1939), exhibit II, p. 170. 

" Ibid. Slight revisions have been made in these figures as compared with those shown in hearings before 
the Temporary National Economic Committee, Part 9, exhibit No. 626, p. 4094. 

1' Average permit valuation of one-family dwellings in 1929 (Bureau of Labor Statistics, Statistics of 
Building Construction, 1920 to 1937, table A2, p. 8) increased by 60 percent, representing the approximate 
difference. between average permit valuation and selling price. This increase is based on preliminary data 
from a recent study of 75 cities by the Bureau of Labor Statistics. 



Colorado 10. 5 

Oklahoma 10. 2 

Oregon 10. 3 

Arizona 10. 



'CU>' "Ey CKATION OF ECONOMIC POAVER 79 

as low as a lO-perceiU; down payment even in the 1920's, the difference 
being taken 'jp by a second mortgage. It was this second mortgage, 
which represer-ted between 25 and 30 percent of the total cost, that 
added materiaily to the interest payments in the monthly cost. 

A few records are available to indicate that, in addition to carrying 
interest rates as high as 10 percent, a substantial commission was 
necessary to obtain such second-mortgage money. The majority of 
these, mortgages were on a montlily amortizhig basis, and failure to 
meet the regular payments subjected the property to foreclosure in 
order to wipe out the equity. It was found in some cases that, includ- 
ing the original commissions, fees and interest charges as high as 20 
percent were paid.'^ The effective interest rate on all mortgages 
held by building and loan associations in 1931, for the entire United 
States, was 8 percent. ^^ However, a number of States showed aver- 
ages above 10 percent for these associations:^* 

Percent \ Percent 

West Virginia 10. 2 

Alabama 12. 5 

Tennessee 15. 3 

New Mexico 11.6 

Texas 10. 5 

In many cases, particularly those involving speculative builders 
and contractors, in order to keep the monthly payment within the 
range of the possiDle market the buUder himself assumed the second 
mortgage, which was later discounted wherever possible. 

Toward the latter part of the 1920's, when prospects were harder 
to find, dowii payments were reduced to as low as 5 percent. The 
additional mortgages necessary to make up the differences between 
the down payment and the first mortgage, were taken up by the builder 
and were later discounted by sometimes as much as 50 percent. This 
led to the practice of so pricing building as to take account of the possi- 
ble discount on the second mortgage, in order that the builder could 
emerge with a profit, and in 1929 and 1930 this practice resulted in a 
race between the discount rate, which kept climbing higher and higher, 
and the price placed upon the dwelling unit in order to cover the dis- 
count. This vicious circle, by increasing the price, reduced the num- 
ber of prospects, which made necessary a higher discount for second 
mortgages, which in turn required an increasirtg price, ad infinitum. 

Another feature of the type of financing prevailing in the 1920's 
was that first mortgages were term mortgages. Usually first mort- 
ages were wTitten for 3- or 5-year periods, and only the second mort- 
gage was a monthly amortizing one. One exception to this feature 
was the practice introduced by building and loan associations of 
monthly amortizing of first mortgages. The term mortgage called 
for a quarterly interest payment, with a reduction of the loan some- 
times required only at renewal periods, at which time a commission 
for renewal was also charged. The building and loan associations re- 
quired a monthly interest and principal payment, which, in the major- 
ity of cases, covered an amortization period of approximately twelve 
years. '^ Although the percentage of loan to valuation of property 

■2 Department of Commerce, Xational Bureau of Standards, unpublished report by Robinson Ncweomb, 
entitled "Home Financing in Cleveland," October 1931, pp. 87, 170. 

'3 Federal Home Loan Bank Review, December 1937, vol. 4, p. 76, table 2, p. 80. 

1' Ibid., table 2, p. 80. 

" Morton Bodfish, testimony and statement hearings before the Temporary National Economic Com- 
mittee, Part II, pp. 5106, 5487. 



gQ CONCENTRATION OP ECONOMIC POWER 

for building and loan associations was generally higher than that of 
other institutions, running from 60 to 75 percent of valuation, never- 
theless second mortgages were required, with all of the costly commis- 
sions attendant upon them. 

In the rental-housing field the system of the 1920's was slightly 
different but had the same results. Institutional lenders made term 
mortgages for rental properties on the same basis as for individual 
homes, and with the same limitations. The second mortgage was 
also a factor, except that in this field dependence was not placed upon 
the individual buyer of a home, but upon a capitalization of the pros- 
pective income of the property. If it could be shown that rental 
property could earn a substantial margin above the necessary fixed 
charges, taking into account the necessary loans, the capitalization of j 
such earnings was considered a fair valuation for appraisal purposes. 
In the large cities the valuation of such properties was often too large 
for a single mortgage, and it was divided through bond issues andj 
backed by a trust indenture. Even second mortgages, at one period, 
were used as security for the issuance of real-estate bonds. While 
this practice prevailed primarily on commercial and other nonresiden-' 
tial buildings, it also extended to the larger apartment houses. This 
form of financing was one of the earliest to collapse when the proper- 
ties on which the bond issues were based were found to lack the antici- 
pated earning capacity, 

INTEREST RATES 

rhe various types of lenders may be divided into three classes. 
First is that type of institution which has for it^ principal purpose 
the promotion of savings. This type of institution, which is repre- 
sented by mutual savings banks and building and loan associations, 
invests the savings of its depositors or shareholders and returns to 
them a portion of its earnings in the form of interest or dividends on 
the accounts. The second type is represented by the insurance 
companies. Although these companies have certain fixed obliga- 
tions as to earnings, their earnings are not the important feature in 
attracting funds. The third type is that cJass of lender which has 
neither a legal obligation with respect to earnings nor a competitive 
situation to meet in obtaining money from the public; that is, the 
extent to which funds* are entrusted to their care is not particularly 
dependent upon the rate of return. The primary considerations in. 
placing funds in their care are safety and liquidity. This class 
consists of such lenders as trust companies and commercial banks. 
Individuals constitute a group closely approximating this third type 
of lender. 

The £rst class, namely, those who are engaged in attracting money 
for deposit or investment on the basis of paying a return on such funds, 
has a different consideration in the matter of the return they must get 
on their invested funds than have the other two classes. In other 
words, savings banks and building and loan associations, which are 
vying with one another as outlets for the general public's savings, 
must consider the necessity of paying their depositors or shareholders 
as high a rate of return as possible. ^^ The insurance companies, on 
the other hand, have a more limited obligation, to meet the legal 

i« In answfir to questioning, Mr. Bodfish. of the U. S. Building and Loan League, refused to state categori- 
cally that the emphasis was placed nn the depositor (except' to say that there were five or six depositors for 
every borrower). Hearings before the Temporary National Economic Committee, Part 11, pp. 5088, 5089. 



CX)NCENTRATION OF ECONOMIC POWER 81 

requirements that have been set up to safeguard their insurance 
funds; therefore, the safety of the loan is the prime consideration." 

In all cases there are two principal factors entering into interest 
rates. They are (a) the risk element involved and (6) the cost of 
doing business. But for the institutions obtaining savings funds 
there is a third element — the necessity of a return to investors or 
depositors that will enable such institutions to remain in business. It 
was claimed by the building and loan associations, through their 
spokesman, that in the performance of their dual service to investors 
and home owners, they aim to promote thrift and attract investments 
as well as to provide economic home ownership. ^^ On the other hand, 
although it might be expected that the savings banks would concur in 
this, it was admitted by the spokesman for the savings banks that 
there is a large proportion of people who habitually save if they are 
employed; that although they hope for the highest interest rates, they 
are prudent and save regardless of the rate of return. ^^ It is to be 
expected that, competitively, savings funds, particularly in the long 
run, will be attracted to the outlet where they will obtain the highest 
return consistent with the degree of safety demanded by the average 
saver. However, this has not been a problem during the last few 
years, as witness the growth of savings funds at reduced rates of 
return and the large amount invested in Government bonds by 
practically all types of lending institutions.^*^ Consequently it cannot 
be said, at lea"st for the time being, that a stated return is necessary 
to attract funds to any particular type of investment which is equiv- 
alent to mortgages. 

The element 'of risk is highly irnportant. Just what part of the in- 
terest rate must be set aside to cover risk depends on a number of 
factors, chief among them being the cost of foreclosure, the loan-to- 
value ratio, and the amoimt of losses. Foreclosure costs are deter- 
mined by the various State laws dealing with that procedure. They 
may range from an average of more than $300 (in New York and 
Illinois) to as low as $5 (in Texas). ^' Moreover, some States, par- 
ticularly since jthe depression, have enacted moratorium laws; others 
provide^ redemption periods between the date of foreclosure and the 
date of taking complete title by the mortgagee. There are, of course, 
attorney's fees in all cases. All of these factors add to the cost of 
taking over the security if the obligations are not met. 

It is possible to make a profit on a foreclosed property if the value of 
the property is greater than the mortgage plus the foreclosure cost. 
This is not a common occurrence but it indicates the importance of the 
loau'-to-value ratio as a factor in the risk element, a low ratio reducing 
the risk. Thus, if the loan-to-value ratio is high, it is particulary 
important that foreclosure costs should be low, in order that both the 
mortgage and foreclosure costs may be covered if the obligations are 
not met. 

Exactly what the element of risk comes to as a part of the interest 
rate is found in the testimony of an important insurance executive. 

" Compare R. R. Rogers, Vice President, Prudential Insurance Co., Hearings before th^ Temporary 
National Economic Committee, Pan 11, pp 5065, 5070, 6071. 

" Morton Bodfish, testimonj' hearings before the Temporar;- National Economic Committee, Part 
11. p. 5487. 

" Henry Bruere, president o Bowery Sa^'ings Bank, testimony, hearings before the Temporary Nat'onal 
Economic Committee, Part U, i;. 5126. 

'« Compare John H. Faliey, CbHi.raan, Federal Home Loan Bank Board, statement, hearings before the 
Temporary National Economic Co^^Mnittee, Part 11, pp. 5300, 5391. 

'• Horace Russell, in Legal Problems >n the Housing Field, Housing MonoRraph Series, No. 2, National 
Resources Committee, table 1, p. 7. 



82 CONCENTRATION OF ECONOMIC POWER 

For the year 1938 this particular company had an actual cost of 
' about one-half of 1 percent for all mortgage losses; that was the 
differerce between the actual gross return to the company per $100 
loaned and the nominal interest charge. ^^ The function of this 
difference, as above indicated, is to cover the total risk element in the 
interest rate. In general the experience of the large insurance 
company seems to place the risk element at a very low point. 

The next element in the interest rate is that of servicing cost; 
that is, the cost of doing business. It is, of course, necessary to 
keep accounts, to collect the regular payments, and to look after the 
mortgage in general. This element is not so easy to evaluate as the 
lisk element. It may well be assumed that the experience of a large 
concern such as the Prudential Insurance Co. furnishes a good 
example of the cost of doing business on a large scale. This com- 
pany's servici^ig cost for 1938 was reported to be about one-half of 
1 percent.^^ In other words, the total of risk element plus cost of 
doing business on a large scale is only approximater> 1 percent. The 
difference between 1 percent and the nominal interest rate on the 
mortgage-lending operation represents the return to the company. 
However, the cost per $100 loaned? is very different for the sihaller 
type of lender.' Just what part overhead represents in the cost of 
servicing mortgages has not been determined to any extent for aU 
types of lenders. Common sense would indicate that a concern 
haying a relatively small number of loans and operating on a local 
basis would have a much greater cost per $100 loaned than would a 
large concern with a billion or more invested in ifeis type of security, 
including, perhaps, many mortgages on large structures. Therein 
lies another essential difference between the typical 'build ing-and-loan 
association and the insurance company. 

In 1937 there were 9,662 building-and-loan associations in the 
country, with average assets of $591,147 each.^* A lender having 
only about $600,000 to invest must of necessity have a greater per- 
dollar cost in handling small items and spreading losses than would 
one having several hundred millions. Thus, testimony concerning 
building-and-loan associations indicates that their servicing cost is 
2 percent, as against one-half of 1 percent for a large insurance 
company. ^^ 

There is contradictory evidence as to whether the interest rate 
offered to the depositor is the prime consideration either in encourag- 
ing tlirift or in directing the placement of such savings as deposits. 
For the building and loan associations the testimony indicates that 3 
percent is the amount needed by that type of institution to attract 
funds.^^ On the other hand, the testimony concerning mutual savibgs 
banks indicates that even at 2 percent more funds are offered than 
are acceptable to such institutions. In fact it was indicated that if a 
higher rate were offered depositors of savings banks, true savings 
would probably not be increased. ^^ The difference between the two 

" R. R. Rogors, in hearings before the Temporary NationBl Economic Committee, Part 11, pp. 5067, 6068. 
This measurement is of course based on the entire mortgage portfolio, not merely residential mortgages. 

" R. R. Rogers, ibid., pp. 5066-5058. Mr. Fahey conEidc... i.icJialf of 1 percent too low a figure to cover 
overhead costs of servicing, even by a large-scale biisiness (testimony, p. 5398). Probably insurance com- 
panies can allocate some of the overhead elsewhere. See M. Bodfish, testimony, p. 5098. 

'< Morton Bodfish, ibid, table 1, p. 5496. 

»« Ibid, pu. .WOS, 5099. 

3« Ibid, pp. 5097, 5098. 

>" Henry Bruere, ibid, p. 5125. 



CONCENTRATION OF ECONOMIC POWER gg 

types of institutions is, of course, that savings banks now offer facilities 
that attract short-term money. 

To sum up, the evidence seems to indicate that the actual percent- 
age returns on funds invested in mortgages under present conditions 
are as follows: (1) Risk element, one-half of 1 percent; (2) cost of 
doing business, one-half of 1 percent to 2 percent; (3) return to savers, 
2 percent; or a total of from 3 to 4K percent. 

This is in contrast with the rates actually charged. As already 
noted, the effective interest rate in 1931, for the country as a whole, 
for one type of lender, namely, the building and loan associations, 
was 8 percent. Primarily home-owner mortgages are represented in 
the loans of th,ese associations. Of course, the 8-percent rate reflects 
the inclusion of fees and commissions as well as som« second mort- 
gages. By 1936 the rate, for Federal savijigs and loan associations 
only, had been reduced to an average of 6.3 percent.^^ However, 
most of the risk element in a large part of the mortgages is now being 
taken care of by Federal Housing Administration insurance. ^^ 

Interest rates on rental housing have averaged somewhat less than 
those indicated for individual home owners' loans. In the Borough 
of Afanhattan, N. Y., the rates on mortgage loans, which are prin- 
cipally on rental housing, represent perhaps the lowest in this line, 
but even here the average rate at the peak of 1929 was 5.95 precent, 
and in 1936 was down to 4.87 percent.^° These, however, are nominal 
interest rates and do not represent the effective interest paid, since 
they take no account of commissions, fees, etc. 

Large single loans are generally preferred by large lending institu- 
tions and banks and usually carry a lower rate than the single-fanuly 
nome ow^ler's loan, wliich requires a greater amount of servicing. We 
have already seen that the servicing cost on single-family loans ranges 
from one-half of 1 percent to 2 percent, depending upon the type of 
institution and the total amount of such loans serviced by a single 
institution. 

TJie effective first-mortgage interest rate on rented property in 1934 
(based on data covering 52 cities) was 6.76 percent, and approxi- 
mately 43 percent of nonfarm rented properties were mortgaged.'^ 
However, rental housuig is a commercial venture and the return should 
be calculated on the equity, as well as the mortgage, as explained in a, 
pre\ious chapter. If this were done it would be found that the 
average return on the total investment in rental property is more 
nearly equivalent to the figure first mentioned, namely, 4.87 percent. 
Most observers agree that there has hardly ever been a time, except 
during limited periods of housing shortages, when returns on equity 
have equaled the rate paid in mortgage interest. 

GOVERNMENT LENDING ACTIVITIES 

The substantial decline in effective interest rates between 1931 and 
the present time has been largeljjf the result of various types of Federal 
intervention. Government actils^ities influencing the return on invest- 

n Federal Home Loan Bank Review, December 1937, vol. 4, table 2, p. 80. 

" F. H. A. mortgages represent approximately 16, percent of the total of building-and-loan association 
loans. Morton Bodflsh, testimony, hearings before the Temporary National Eionomic Committee, 
Part 11, p. 5099. 

MReal^Estate Analyst St. Louis, November 26, 1938, vol. 7, p. 1106. 
,Ao, . I, TTT vA7^?T ^^t^^lLSurvey of Urban Housing, Bureau of Foreign and Domestic Commerce. 
I2£;,if^f^o nW'^;i^nt»in3i n„1l * ' (13 percent) would no doubt be higher if it were not for the fact that the 
sample of 62 cities contamed only 1 (Cleveland) with a population'over 500.000. 



34 CONCENTRATION OF ECONOMIC POWER 

ment in rental housing probably date back to the Housing Act in 
New York which set up the limited dividend corporation. The New 
York State housing law was enacted in 1926 and authorized municipal 
tax exemption (for 20 years) on residential buildings constructed by 
&nj corporation wliich met certain requirements, one of them being 
that the project should conform to certain physical standards and that 
the return should be limited to 6 percent of the equity. Up to 
August 1936 some 14 projects involving 5,896 dwelling units had 
been constructed under tliis law.'^ 

Federal activities began with the setting up of the Federal Home 
Loan Bank Board in 1932. The Home Loan Bank System as set up 
in the act of July 22, 1932, provided in effect a central reserve bank 
whereby home mortgages held by building and loan associations could 
be used as security for loans to provide them with cash for immediate 
needs. Advances to member institutions could be made up to 50 
percent of the value of the mortgages serving as collateral. Although 
the purpose of the act was to provide assistance to building and loan 
associations, membersliip in the bank system is open to all institutions 
making long-term loans on urban homes, and as of May 31, 1939, it 
comprised 3,900 building and loan associations, 9 mutual savings 
banks, and 40 insurance companies, or a total of 3,949 institutions. '^ 

Prior to this time the small institutions typical of bijiiding and loan 
associations ordinarily found that borrowing from commercial banks 
met their cash needs when borrowing had to be resorted to, but with 
the 'inancial difficulties following the collapse of values in 1929 this 
source was cut off, and the resulting agitation brought forth the home 
loan bank system. The system placed no obligations on members 
except the ordinary requirements of soundness. It made no attempt 
to influence the interest charges and, according to the Chairman of 
the Board, "the bank system was unable to contribute in any important 
way toward relief" of conditions in the home-mortgage field in 1932.^* 
As a matter of fact, by the time the home loan bank system actually 
began operations, the wave of foreclosures had engulfed the building 
industry, and lending on new home building was practically at a 
standstill. The problem then was not to find money for new con- 
struction, but how to stem the rising tide of foreclosures of homes 
already owned. 

The solution to this problem was found in the creation of the Home 
Owners' Loan Corporation. This Corporation was created by an 
amendment to the Home Loan Bank Act for the purpose of making 
direct loans to home owners who were in danger of losing their prop- 
erty through foreclosure. 

The essential features of the operation of the Home Owners' Loan 
Corporation were, first, the issuance of home-loan bonds to holders of 
mortgages which were subject to foreclosure, in lieu of such mortgages. 
The indebtedness represented by the mortgages surrendered to the 
Corporation was then recast in the form of a 15-year amortizing 
mortgage at an interest rate of 5 percent. This is the first instance 
in which the home-loan activity of the Federal Government exerted 
any influence on the interest rate. 

32 Report of the State board of housing to the secretary of state of the State of New York. Legislative 
Document No. 41, 1937. Table LXVH, p. 88. 

" John H. Fahey, chairman. Feiieral Home Loan Bank Board, hearings before the Temporary National 
Economic Committee, Fart II, p. 5381. 

« Ibid., p. 5382. 



CONCENTRATION OF ElCONOMIC POWEK oe 

From its creation in 1933 until June 12, 1936, when lending was 
suspended, the Corporation had made 1,017,948 loans having a 
principal value of $3,093,450,641.35 It may be interesting to note 
here that up to M&y 31, 1939, 138,640 properties were involved in 
foreclosures and 52,827 accounts had been paid off in full. 

Properties taken over in foreclosure by the Home Owners' Loan 
Corporation are remodeled and repaired and placed on the market 
at the going price. Again as of May 31, 1939, total sales numbered 
50,665, or over 36 percent of acquired properties. Of these, 39,231 
were sold at a loss, the average loss amounting to $766.52. This, of 
course, is offset somewhat by the 10,000 or more properties which 
were sold at a slight gain.^^ The method of selling is to place the 
properties in the hands of local brokers so as not to disrupt the 
market. 

The second step taken by the home loan bank system which 
influenced construction finance was the setting up of the Federal 
savmgs and loan system. This system provided for an investment 
by the Home Loan Bank Board in such local building and loan asso- 
ciations as wished to come under the Federal system, providing 
additional capital to these associations. This was simply a. means of 
making public funds available as capital to building and loan asso- 
ciations for the purpose of making home loans and the creation of 
savings and loan institutions in areas which were not adequately 
served by private lending institutions. The home loan bank 
system does not influence the interest rates charged by local insti- 
tutions through any legal requirements, although in practice repre- 
sentatives of the home loan bank system sit on the boards of 
Federal savings and loan associations and have a great deal to say 
regarding their lending policies. 

The third factor introduced under the Federal Home Loan Bank 
System is the Federal Savings and Loan Insurance Corporation, 
This is an insurance activity designed to insure against loss the 
accounts of individual investors in such institutions as are mem.bers 
of the Hom.e Loan Bank System. Its functions are similar to those 
of the Federal Deposit Insurance Corporation for com.mercial banks 
in that both insure the funds of the depositor or investor up to $5,000 
each. The principal difference is that the Federal Deposit Insurance 
Corporation, in the event of the closing of the institution, pa5^s the 
depositor in cash, while the Federal Savings and Loan Insurance 
Corporation merel}^ assumes the obligation and may liquidate it 
over a much longer period. 

The activities of the Home Loan Bank System have resulted in 
providing a safe source of mortgage money for home buildmg. As 
of August 31, 1939, the Federal Government had $2.50,853,000 
invested in the savings and loan institutions withm the Home Loan 
Bank System." Also, as of August 31, 1939, 2,282,900 investors 
accounts were insured in 2,177 savings and loan institutions. 

Consequently, so far as building and loan associations are con- 
cerned, the Home Loan Bank Svstem, with its subsidiary organiza- 
tions, has made an abundance of funds available in all parts ot the 
country. The influence exerted through the Federal Savings and 

«n)'d.,P-5386. 

M Ibid , pp. 5387, 5388. , „ 

»' FederaJ Home Loan Bank Review, October 1939, table 9, p. 30. 

'« Ibid, tabu 7, p. 29. 



gg CONCENTRATION OF ECONOMIC POWER 

Loan Associations, together with other factors which we shall describe, 
had some effect in bringing rates of interest to a point below those 
prevailing during the twenties. The mortgage lending system is so 
set up as to prevent a recurrence of the old second-mortgage evils 
which brought about the high wave of foreclosures during the early- 
days of the depression. 

Perhaps the most influential agency affecting interest rates has 
been" the Federal Housing Administration. The F. H. A. was set 
up by the National Housing Act (1934) under two titles, title I 
covering the insurance of loans for modernization and repair, and 
title II providing for insurance of first mortgages on amortized loans 
up to $16,000 on terms up to 20 years and amounts up to 80 percent 
of the appraised value.^^ An insurance charge of one-half of 1 percent 
was made. The act set a maximum of 5 percent (6 percent in special 
circumstances) on the outstanding obligation as the interest rate on 
such loans. Subsequent amendments changed some of these terms 
and also broadened the field of activity. The insurance feature of 
the F. H. A. was designed to cut the risk involved in lending, thus mak- 
ing more funds available and reducing the risk element in the interest 
charges. 

Loans to cover home mortgages in default are authorized by the 
provisions of title II (sec. 204), This title provides for issuance of 
debenture bonds fully Government-guaranteed in all cases where an 
insured mortgage would be foreclosed. The debenture covers the full 
amount of the loan outstanding at the time of foreclosure, excluding 
the cost of foreclosure. Average costs have amounted, as above 
indicated, to approximately $300 each. This is the only risk to the 
mortgagee in an insured loan. This insurance is a factor in the small 
portion of the interest rate attributable to risk as noted in the above- 
mentioned analysis of interest rates charged by insurance companies. 
The debentures run for 3 years beyond the term of the mortgage. 
This provides sufficient time to liquidate properties taken over by the 
insurance fund. That the insurance rate of one-half of 1 percent is 
more than adequate to cover the risk involved under normal condi- 
tions is indicated by the report of the F. H. A. for 1938, which shows 
that of the $20,051,186 in receipts of mortgage insurance premiums 
andfees, 1935-38,'^ only $160, 708 hasbeenloston defaulted properties." 

The original operation of the F. H. A. system required an insurance 
payment of one-half of 1 percent per year on the face value of the 
mortgage. However, a 1938 amendment to the Housing Act made 
the insurance premium rate on all loans under title II applicable only 
to outstanding balances." This provision was retroactive, i. e., 
applicable to loans already insured. Undoubtedly even thesereduced 
collections are adequate, under present conditions, to set up a sufficient 
reserve fund to provide for all eventualities. 

The funds derived from the insurance premiums are used to pay the 
operating expenses of the F. H. A. as well as to maintain a reserve to 
cover losses. An amendment to the Housing Act in 1938 placed a 
limit of $3,000,000,000 ($2,000,000,000 except with the President's 
approval) on the aggregate principal obligations of insured mortgages.'*^ 

'» 48 Stat. 1246. 

<» Fifth annual report, statement 14, p. 169. 

*' Ibid, statement 11, p. 168. 

41 62 Stat. 8, sec. 3 (amending sec. 20.3 (c)). 

« The same (amending sec. 203 (a)). 



CONCENTRATION OF ECONOMIC POWER §7 

In 1939 it was estimated that $6,000,000,000 in mortgages was 
necessary to make the F. H. A. effective in the market in influencing 
interest rates and terms of home-mortgage financing, as well as to 
maintain an eflficient organization and make the agency self-sustaining 
on a perpetual basis under both adverse and normal conditions/* 
Nevertheless the Congress increased the limit only to $4,000,000 000 
($3,000,000,000 except with the President's approval) /^ 

The insured loan is generallj^ acceptable now to all institutional 
lenders. However, it is of interest to note that, according to the above 
figures on the volume of loans on nonfarm one- to four-family homes 
in 1929 and 1937, individuals (and others) have maintained their rela- 
tive position as lenders over this period without the benefit of F. H. A. 
insurance and membership in the Home Loan Bank System, much 
better than savings and loan associations with sucli assistance, and 
much better than commercial banks. For the year 1938 approxi- 
mately 35 percent of all new one-family nonfarm homes were financed 
by F. H. A. insured mortgages.*^ 

'VMiile the original 5K-percent insured loan contributed considerable 
impetus to home-mortgage lending during the years 1935 and 1936, 
there was a falling off in such activity in the latter part of 1937 and 
the early part of 1938. As a result of this, amendments to the Housing 
Act were passed in 1938*which reduced the minimum do\yn pa5^ment 
on new housing costing not more than $6,000 from 20 to 10 per- 
cent (or, conversely, increased the maximum loan from 80 to 90 
percent), and extended the period of amortization on the same loans 
from 20 years to a maximum of 25 years.*^ In addition, the insurance 
premium on the new type of small loans only, was reduced to one- 
fourth of 1 percent on loans insured prior to July 1, 1939.*^ Further- 
more, the changed basis, noted above, of insurance charges on all title 
II loans, in accordance with the 1938 amendment, meant a reduction 
in such charges. 

As already shown in the early part of the preceding chapter (see 
table XI), the change in the amortization period from 20 to 25 years 
on a $4,300 loan decreases the monthly payment by more than 9 per- 
cent. But more important is the iact that the reduction from a 20 
percent to a 10 percent down paytnent increased the possible market. 
Obviously, there are more prospects with $600 in savings (the amount 
necessary for a 10 percent down payment on a $6,000 house) than there 
are with $1,200 (the amount necessary for a 20 percent down payment). 

The effect of the liberalization of the Housing Act by the 1938 
amendments may be noted in the fact that for the week ending May 
21, 1937, prior to the effectiveness of the new amendments, the totrl 
amount of home mortgages accepted for insurance was $10,618,660, 
as compared with the week ending May 27, 1939, when mortgages 
accepted for insurance amounted to $18,185,800.^® This ratio of in- 
crease over 1937 has been maintained, on the average, throughout the 
year 1939. 

" Testimonv of Dr. Ernest M. Fisher, hearings before the (House) Committee on Banking and Currencv, 
76th Cong., 1st sess., on H. R. 3232, 1939, pp. 119, 120, 124. 

« 53 Stat. 804, sec 6. 

« Of the 97,&45 r. H. A. mortgages on new homes in 1938, 97.6 percent were on single-family dwellings 
(Fifth Annual Report, pp. 66, 100): and about 270,000 1-fsmily houses were built in 1CJ8 (same report, p. 6). 

«' 52 Stat. 8, sec. 3 (amending sec. 203 (b)). The limitation of the maturity extension to loans inswed prior 
to July 1, 1939, was removed by a 1939 amendment (53 Stat. 804, sec. 7). 

«« 52 Siat. S, sec 3 (ameidiiig sec. 203 (0)1. 

i» - ^ ral Housing Administration, Weekly Reports of the Division -if Economics and Statistics, Operat- 
atistics Section, for the weeks ending May 21, 1937, and May 27, 1939. 



gg CONCENTRATION OF ECONOMIC POWER 

The largest marKet, or at least the market where the largest share 
of the funds for F. H. A. -insured mortgages goes is for homes of a 
value between $4,000 and $6,000 (46.3 percent of the F- H. A. new 
single-family homes in 1938).*" Taking the lower figure, $4,000, a 
10-percent down payment still 'requires $400, and it also requires 
approximately a $2,000 annual income for montlily payments on a 
reasonable basis. Consequently, even with the liberalization noted 
and the resulting expansion of the income-area reached, F. H. A. 
insured properties are still beyond the reach of about three-fourths of 
our nonfarm families (table VII). This, however, cannot be, laid 
primarily at the door of the F. H. A., since $4,000 is perhaps the 
lowest-priced home that can profitably be produced in the large 
cities under present conditions and methods, considering the set-up 
of the industry. 

In September 1939 the interest rate on home-mortgage loans was 
reduced from 5 to 4}i percent. This change, of course, modifies some 
of the above statements and comparisons to a limited degree. The 
fact that such a large institutional lender as the Bowery Savings Bank 
of New York had made F. H. A. -insured loans at an interest rate of 
4}^-percent and, according to the testimony of its president, con- 
sidered the business profitable at that figure,®^ may have had some 
influence in bringing about the reduction. 

Although, as indicated in the annual report'-of the F. H. A. referred 
to above, the majority of properties which have been covered by 
F. H. A. insurance cost more than $4,000. there have been many at- 
tempts, especially in small communities, to build houses at a lower 
cost. In small towns the matter of equipment of the land with munic- 
ipal facilities is not so important in locating houses, and raw land 
suitable for habitation is more easily available close to the working 
centers than is the case in larger cities. On such property houses may 
be built at a much lower cost than in large cities, even under present 
methods. Actually a great majority of such houses are supplied by 
lumber yards which engage in both the sale of materials and the erec- 
tion of houses. In a great many of these cases the cost of the house 
alone might easily be below $2,500. To cover this class of dwellings, 
title I of the National Housing Act, which was originally designed to 
provide ipsurance up to 20 percent of the value of sm^all modernization 
and repair loans of any authorized institution, was broadened in 1938 
to include the financing of new dwellings such as seasonal homes, with 
a $2,500 limit on the mortgage." This class of loans carried only 10 
percent insurance, however, and was not attractive to lenders as 
compared with the more fully insured loans available on homes 
coming under title II. 

In-prder to facilitate this type of loan the F. H. A. allowed a 6-percent 
interest rate, with an additional discouiit of $2 per $100 of loan, mak- 
ing the effective interest rate approximately 9 percent. When applied 
to a $2,500 loan under title I, this rate made the monthly interest 
and servicing cost about the same as that of a $4,000 loan made in 
1938 under conditions of title II. Moreover, the amortization period 
on the title I loan was limited to 7 years. 

«> Fifth Annual Report, for the year ending December 31, 1938, table 37, p. 101. 

•'Henry Bruere, testimony, hearings before the Temporary National Economic Committee, Part 11. p 
„ fl . Economies of servicing through volume, presumably in a more or less concentrated area, constituted 
a factor in making this rate satisfactory. 

" 52 Stat. 8, sec. 2. ' 



CONCENTRATION OF ECONOMIC POWER gg 

The effect of these terms and the vast difference between the two 
types of loans brought about considerable dissatisfaction, on the one 
hand, from lumber-dealer builders whose biggest market lay in the 
$1,500 to $2,500 class, and, on the other ha.nd, from the wage earner 
who lacked the necessarv" savings to make tlie down payment on a 
title II home, which would probably cost $4,000 or more, or in the 
case of a title I loan would have to meet a monthly cost^ which, with 
amortization payments, would be greater than that of a $4,000 home 
under title II conditions. 

As a result of many complaints on this score, new regulations have 
recently been issued which provide that title I loans of $2,500 or less 
for the erection of now homes may be had under conditions almost 
equaling those of title 11.^-^ The down payment is only 5 percent. 
The peiiod of amortization is only 15 years, but the interest (and 
insurance) charge is represented by either a discount of $3.50 per 
$100 of value each year (which amounts to a rate of 6.7 percent), or 
a stated rate of 5K percent, including insurance, provided more strin- 
gent conditions concerning the construction are accepted.^* Alto- 
gether, on a property valued at $2,500, with a $2,375 loan and a $125 
down payment, the monthly payment, including the items applicable 
to financing, amounts to $19.86. This might be compared with the 
$30.78 monthly payment on the $4,300 loan shown in table XI, which 
indicates that a loan amounting to slightly less than $2,000 more 
involves a monthly payment of only $11 more. The difference, of 
course, is due largely to the difference of 10 years in the duration of 
the payments. 

Aside from the activity of the State of New York under its houshig 
act of 1926 providing for limited dividend corporations and tax 
exemption, the first attempt to encourage rental housing after the 
depression started, was a section of the National Industrial Recovery 
Act (4une 1933) which permitted loans to limited dividend corpora- 
tions with no provisions for tax exemption. The act provided for 
loans for low-cost housing Anthout setting up any definition of low 
cost.^^ After 1 year's operation only 7 projects had been approved 
and initiated under this provision of the act, having an approxunate 
total valuation of $10,000,000,^^ in spite of the fact that $100,000,000 
is reported by P. W. A. to have been set aside on the expectation 
that this amol^mt would be used. 

To understand the failure of this type of public activity it must be 
recalled that during the 1920's the principal m.ethod of initiation of 
large-scale rental housing had been through speculation. Promoters 
had high valuations on land and the amount of mortgage would more 
than cover all the necessary costs in producing an apartment house, 
leaving a profit to the promoters. Kno^ving these facts, those in 
charge of housing under the National Industrial Recovery Act made 
particularly rigid rules to avoid promotional profits, and since there 
was no substantial amount of funds seekhig investment in this ac- 
ti\'ity, actual cash equities were scarce. There was little to attract 
cash equity either as to return or as to safety in the set-up proposed 
under the N. I. R. A. 

i' Federal Housing Admiuistration release 28063, title I home ownership loans. 
»< Only the 5V2-percent loans aie eligible tor resale to the Reconstruction Finance Corporation. 
" 48 Stat. 19.=;,"sec. 202. 

" Annual Report of the United States Housing Authority for the Fiscal Year 1938, p. 42; appendix VII, 
p. 58. Does not include Puerto Rico, Virgin Islands, nor loans made on a project involving homes for sale. 



90 CONCENTRATION OF ECONOMIC POWER 

Also, the atteiript to obtain the lowest rent possible further dis- 
couraged those investors wlio might seek a profit consistent with the 
risk involved. At that time they found little to attract them in the 
only feature that was offered under this Act, namely, an interest 
rate of 5 percent, since the Federal Government could offer no local 
tax exemptions. The offer was less attractive than even ordinary 
limited dividend corporation building under the New York State law. 
It was expected, fif)wcver, that corporations under the New York 
law would thus lind a source of money and continue operations which 
had come to a standstill under that law. due to the depression. As a 
matter of fact, more than half of the funds provided under this act 
did go into the city of New York. 

xVt the same time, unemployment was rife and even at the rents 
charged by limited dividend corporations in New York City vacancies 
increased, and for the majority of families even the $12 per room 
permitted by the New York State law w^as higher than many families 
of the city could afford. 

■ In 1934 whei), the National Housing Act was passed setting up the 
Federal Housing Adrninistration a provision was written into the act 
for insurance of loans to limited-dividend corporations as well as 
certain public instrumentalities for low-cost housing.^^ Bv this time 
other States had passed laws which permitted limited-dividend cor- 
porations to come under State supervision, and it was expected that 
the insurance features of the Federal Housing Administration would 
encourage the investment of funds in this type of housing. 

Wliile the term "rental housing" was later amended so as to limit 
the mortgage obligation allocated. to dwelling use to $] ,350 per room,^* 
and the rules of valuation were much less rigid than prevailed under 
the old N. I. R. A., still this type of housing has gone forward at a 
much slower pace than was originally expected. The insurance of 
the mortgage, which was limited to 80 percent and averaged 77 
percent of valuation,^^ of course took care of practically all the risk 
element involved in this type of housing. Yet through the entire 
period up to the end of 1938 there were only 138 such projects, 
providing 16,299 dwelling units, on which insured mortgages amounted 
to $62,498,150.^° 

The interest rate first set was 5 percent. The limitation on the 
mortgage of $1,350 per room has resulted in rents averaging $14.40 
per room per month, ^^ or $57.60 for a 4-room unit. Considering the 
break-down of incomes shown in table VII, chapter III, this amount 
is beyond the reach of nearly 90 percent of the nonfarm families. 
Consequently actual building under this section of the National 
Housing Act has been competitive with existing private construction, 
although this activity cannot be called public housing and is purely 
an aid to private building. Attempts have been made in 1939 to 
reach a lower income group by reduction of the mortgage interest 
rate, first from 5 to 4}^ percent and then to 4 percent. 

An outstanding factor brought out b^ F. H. A. operations in rental 
housing is that this activity is not considered a profitable one for the 
investment of equity funds, although it might become so if a proper 
attitude were developed among investors. On the other hand, rigid 

"48 Stat. 1246, see. 207. 

»8 National Housing Act amendments of 1938, 52 Stat. 8, sec. 3 (amending see. 207 (c)). 

»' Federal Housing Administration. Fifth Annual Report, for the Year Ending December 31, 1938, p. 122. 

60 Ibid, table 50, p. 120, table 53, p. 127. 

81 Ibid, table 57, p. 131. 



CONCENTRATION OF ECONO:\iIC POWER Q]^ 

inspection of construction and aids to proper planning have placed 
the type, of accommodations offered on F. H. A. -insured properties 
on a higher plane tlian can usually be obtained in properties costing 
similar amounts not under the direction of the F. H. A. These facts 
further indicate tliat private industry has not reached the point where 
it can build really low-rent housing to come within the needs of 60 
percent of the nonfarm families, in spite of the fact that the risk 
element in financing is largely eliminated. So far as financing is 
concerned, the principal reason for this failure on the part of private 
enterprise appears to be that equity funds usually require a larger 
margin of profit than is allowed to the limited-dividend corporations, 
(1) because of the nonUquidity of this form of equity, and (2) because 
of an errant speculative concept embodied in land trading, particu- 
larly when apartment-house construction enters into the picture. 
Aside from financing, the failure, of course, is due also to the fact that 
actual physical construction methods and designs have normally 
prevented the greatest economies possible in such construction. 

Another Government agency having to do with large-scale building 
construction is the subsidiary of the Reconstruction Finance Corpora- 
tion known as the RFC Mortgage Company. The RFC Mortgage 
Company was set up purely as a banking agency for the purpose of 
providing funds for commercial ventures where funds from private 
sources were unobtainable. Being a banking institution, the RFC 
Mortgage Company's regulations concerning loans were similar to 
those of any ordinary banking company. Interest rates were normally 
5 percent. It may be said that the total effect of the RFC Mortgage 
Company's operations was. of little practical consequence in encourag- 
ing low-cost residential construction. 

BIBLIOGRAPHY 

Federal Home Loan Bank Board, Seventh Annual Report (for the period July 
1, 1938, to June 30, 1939), Washington, 1939. 

Federal Housing Administration, Title I Home Ownership Loans, release 28063, 
Washington. 

National Housing Act, June 27, 1934 (48 Stat. 1246). 

National Housing Act amendments of 1938, February 3, 1938 (52 Stat. 8). 

National Housing Act amendments, June 3, 1939 (53 Stat. 804). 

New York State Board of Housing, Report to the Secretary of State of the State 
of New York, Legislative Document No. 41, Albanv, 1937. 

Real Estate Analyst, St. Louis, November 26, 1938; June 23, 1939. 

Russell, Horace, Private Housing Legal Problems, Legal Problems in the Housing 
Field, Housing Monograph Series, No. 2, prepared for the Industrial Committee 
of the National Resources Committee, Washington, 1939. 

Temporary National Economic Committee, hearings, part 11, Construction In- 
dustry, Washington, 1940; testimony of Oscar L. Altman, Morton Bodfish, 
Henry Bruere, John H. Fahey, R. R. Rogers. 

L'nited States Congress, Hou.se, Hearings Before the Committee on Banking and 
Currency (76th Cong., 1st sess.), on H. R. 3232 (a bill to amend the National 
Housing Act), Washington, 1939; testimony of Ernest M. Fisher. 

United States Department of Commerce, National Bureau of Standards, Home 
Financing in Cleveland, unpublished report by Robinson Newcomb, Washing- 
ton, October 1931. 

United States Housing Authority, Annual Report for the Fiscal lear 1938, 
Washington, 1939. tt • . ^ .tt . • s 

Wlckens, David W., Financial Survey of Urban Housmg (a C. W. A. project), 
Bureau of Foreign and Domestic Commerce, Washington, 1937. 



260158 — 40 — Xo. 8 8 



CHAPTER VII 
LAND, TAXES, AND BUILDING CODES 

LAND 

One of the most influential elements in housing cost has been the 
part played by land. Unlike buildings, which depreciate WTth time 
and become obsolete with changed conditions, the principle of land 
values has been that of constant increase paralleling the growth of 
cities. Lots selling at one time for $10 have been known to increase 
to as high as $120,000 within a period of 60 years.^ This is no doubt 
a principal reason for the trend toward apartment houses, since all 
city lots are potential commercial sites except when restricted by 
zoning regulations. The historical development of neighborhoods 
starts with single-family residences which are soon encroached upon 
by apartment houses and with the infiltration of apartment houses 
com^e commercial and industrial developments for the sites. 

In more recent years with the development of suburban areas, 
due to new and more rapid forms of mass transporlation , suitable 
residential sites are no longer confined to the city limits proper, or 
what were formerly the boundaries of incorporated communities. 
Since the newer areas are developed through new construction they 
are not available to the large part of the population that can afford 
only the monthly payment or rent on second-hand houses, which 
includes the return on a capitalized value based on the speculative 
increase in city land values. 

On the whole, for new single-family houses, land represents about 
one-seventh of the value of the property. With an average property 
valuation of $5,530 for all new one-family homes on which mortgages 
were accepted for insurance during 1938 under title II of the National 
Housing Act, the average land value was $785, or 14.2 pencent, 
ranging from a high of 16.1 percent ($1,020) in cities of 500,000 to 
1,000,000 in population to 13.1 percent ($688) in cities of between 
2,500 and 5,000.^ As already noted, new single-family residences 
for the most part are being built on the periphery of cities and in 
suburban areas within metropolitan centers. 

Oh the other hand, for existing single-family homes on which 
mortgages were accepted for insurance by F. H. A. on refinancing, 
land values were approximately one-fifth of the property value, or 
$1,010 as compared with an average total property valuation of 
$5,069. The range for land values on existing homes was from 22.8 
percent in cities of 500,000 or more (with an average land valuation 
of $1,246 to $1,310), down to 18.2 ^iercent (land valuation $851) in 
cities of 100,000 to 250, 000. ^ 

' Richard M. Hurd, Principles of City Land Values, Record and Guide, New York, 1924, p. 76. 
' Federal Housing ' '''"'pistration, Fifth Annual Report, for the year ending December 31, 1938, table 
A7, p. 113. 

93 



94 



CONCENTRATION OF ECONOMIC POWER 



It may not be fair to state that the difference between the $785 
average land value for new homes and the $1,010 value for existing 
homes is due primarily to speculative increase or fictitious value.' 
There may be, and quite likely is, a considerable difference as to what 
is included in ths actual valuation of the land. In suburban areas, 
streets, sewers, and other municipal facilities are not fully developed 
and therefore may not be included in the land value, whereas in the 
older parts of the city such facilities have reached their full develop- 
ment. This means that the difference in value is in some part a 
matter of the actual cost of providing those facilities. 

The elements entering into land cost as a part of residential cost 
are certainly more than raw land. The difference between raw land 
which may be used as a base for urban residential property, and fully 
developed land with complete facilities necessary for fire protection 
and sanitation, represents an amoimt which in many instances is 
considerably greater than the cost of the raw land itself. A study 
by Robert Whitten and Thomas Adams concludes that the cost of 
street improvements on the average type of city layout about $10.46 
per front foot.* Their study of a large number of lot costs for typical 
single-family houses in 24 cities ranging from 50,000 to 1,000,000 in 
population shows the following results.^ 



Cities of- 



600,000 to 1,000,000-.. 

300,000 to 500,000 

100,000 to 300,000 

50,000 to 100,000 

Average for all 



Raw land 
lot cost 



$437 
274 
244 
233 



2i}'d 



Cost of 
street 
improve- 
ments 



497 
402 
420 



437 



Improved 
lot cost 



Cost of 
improve- 
ments, 
per front 
foot 



771 
646 
653 



736 



$1-2. 68 
i2. 12 
8.74 
9.77 



9.93 



One outstanding feature of street improvement is its uniformity of 
cost, regardless of the size of the city. As a matter of fact, improve- 
ment costs per front foot were greater in cities of 50,000 to 100,000 
than in cities qf 100,000 to 300,000. 

The average land valuation of new properties insured by the 
F. H. A. in 1938 was $785, and the average cost of improvements is 
about $437 according to the above table; this would make average 
raw land cost $348 per lot. It may be assumed that the average size 
of the lot for tlje F. H. A. -insured home was the same as that of the 
lots represented in the above table, namely 40 by 100 feet, or nearly 
11 lots to the acrc.^ Thus the cost per square foot for land utilized 
in lots (i. e., excluding street areas) would be 8.7 cents. Perhaps 10 
cents per square foot would be nearer the average raw-land cost for 
single-family residences in urban areas. If an equal amount is al- 
lowed for improvements and municipal facilities, \vc would have a 
land cost of approxunately 20 cents per square foot for single-family 
residences. 

It seems to be customary to calculate land cost for apartment-house 
construction on a per-foot basis also. Hov/ev*er, since municipal 
improvements cost about the same per front foot whether for construc- 

» Nvflghborhoods of Small Homes, Harvard University Press, Cambridge, 1931, p. 76. 

» With street areas taken oft this usually is reduced to 8 lots to the acre, ma.;ing the cost of an average acre 
of raw land $2,784. 



CONCENTRATION OF ECONOMIC POWER 



95 



tion of an apartment house or a single-family residence, there should 
be some savings in the ratio of land cost to the total cost of construc- 
tion of an apartment house. On the contrary, as will be illustrated 
below, the average land valuations in apartment house areas are 
actually about as high on a per-dwelling-unit basis as those of singlo- 
family residences, and hence much higher on a per-foot basis. This 
indicates that even with the construction of apartment houses away 
from the center of cities, the increment of increased land values is 
carried with them when such areas are turned into apartment-house 
areas. 

While figures on land cost for apartment-house construction are 
not so readily available as for single-family residences, a few such 
projects which are under public regulation have been anal3-zed, as 
shown in table XVI. By a curious coincidence the average land cost 
per dwelling unit for the 14 limited-dividend projects in New York 
City is just $1 more than the average land valuation of existing single- 
family homes on which mortgages were insured in 1938 by the F. H. A. 
($1,011 as' compared with $1,010), this in spite of the fact that the 
cost of the New York land per square foot ranged from a low of 50 
certs to as much as $18. Thus the land cost per dwelling unit for 
apartment houses is about equal, apparently to that of single-family 
dwellings in spite of the increase in number of families per given plot 
of ground. This is due to the fact thf. t such valuations are based on 
capitalized income, the difference between such valuation and the 
actual cost, representing an increment in land value. On the newer 
multifamily properties shown in the last three items of table XVI, 
the average land cost was only $608 a unit, but this is explained by the 
fact 'that all three of these properties are suburban and required the 
construction of some or all public facilities. 



Table XVI. — Land costs on vndtifaviily 


residential coi 


strudion 






Number 
of dwell- 
ing units 


Land cost 


Land cost 
per unit 


14 NEW YORK CITY LIMITED-DIVIDEND PROJECTS 

Academy Housing 


476 
232 

308 
202 
115 
958 

165 
140 
129 
1,405 
1,585 
44 
44 
93 


1 $196,000 
336, 560 

300,000 

195, 500 

80, 000 

1 550, 200 

100, 904 
90, 047 
82, 500 

1 447, 874 
2 3. 247, 090 

58, 250 

2 lOO.OOO 
2 ISO, 024 


*412 


Amalgamated Dwellings .. . 


1, 450 


Amalgamated Housing: 

First 6 units 


974 


Units 7 and 8 --. 


968 


Unit9... 


C96 


Boulevard Gardens .-. -. 


1574 


Brooklyn Garden; 

Fourth Avenue - 


012 


Navy Yard 


643 


Farband Housing 


C40 


HOlside Housing- 


'319 


Knickerbocker Village 


2,049 


Manhattan Housing . 


1.324 


Stanton Homes 


2 2, 273 


Stuvvesant Housing 


2 1,936 








Total. . . 


5,896 

426 
178 
43 


.5, 904, 949 

230,418 

166. 320 

14. 940 


1,011 


3 F. H. A. PROJECTS 


o41 


Falkland Properties, Silver Spring, Md 


934 


Elm Terrace, York, Pa 


348 








• Unimproved land. 
' Slum-district sites. 

Source; First 14 projects from 1937 Report of the New York State Board of Housing (pp. 88, 8^1; last 3 
projects computed from table IX, chapter V. 



9g CONCENTRATION OF ECONOMIC POWER 

The! fact that municipal facilities represent approximately one-half 
the labd values on single-family homes indicates that the provision 
of these utilities may be quite a factor in obtaining low-cost residential 
construction. Prior to the present depression improvements were 
paid fo" by assessment against the abuttmg properties on a front-foot 
basis. More recently, however, with the advent of the P. W. A. 
and |,he W. P. A., such improvements have been made at no cost to 
abutting property owners, although there is no evidence that such 
projjerty owners have failed "to tftke advantage of the increment in 
value thus acquired, for example, in setting rents. 

Not all of our new dwelling construction, as already shown, is built 
on improved sites. A considerable part is built on raw land lacking^ 
city facilities. Water and sewerage are provided by drilled wells and 
septic tanks, although the cost of an individual water supply may be 
equal to the lot owner's share of the public water supply without the 
advantages of the safeguards usually provided in public water supply. 
On the outskirts of many of our smaller cities, and even of metro- 
politan areas, the lowest cost housing is being built on raw acreage, 
subdivided but without provisions for adequate facilities. 

The common practice is for a promoter to purchase raw land and 
subdivide the area into acre, half-acre, or quarter-acre plots. Many 
of these are sold on the basis of $5 down and $5 a month. A worker 
may make a $5 down payment for a plot, move onto it and start 
building immediately. Since such areas are usually outside the 
jurisdiction of the municipal government there are no zoning or 
building regulations and the purchaser may put up any sort of shelter 
he desires. Purchasers often move onto the land in trailers, tents, or 
other temporary shelters, and build their houses in their spare time.^ 
Eventually the a,reas become incorporated into the city, and when 
improvements come along and municipal facilities are built the land 
values are increased in accordance witli the cost of such improve- 
ments. In time, as the area becomes crowded, apartment houses are 
built and new unimproved sites are developed. The periphery is 
moved farther and farther from the center of the city, commercial 
developments move toward the outskirts, and as commercial develop- 
ments enter and residential structures deteriorate, the value of the 
neighborhood as a residential area declines. As the dwellings depre- 
ciate in value and commercial elements such as gas stations and retail 
stores enter the area, the neighborhood becomes obsolescent. With 
its obsolescence as a residential neighborhood, various means are used 
to maintain an income on the high valuauion of tlie land. In spite 
of neighborhood obsolescence and building depreciation, real-estate 
owners seldom depreciate the value of the land. It is the attempt to 
maintain the former income on this high valuation that causes more 
and more crowding and eventually brings about slums. 

City planners have studied this problem and have come to the 
conclusion that instead of haphazard developments in city building, 
sucli as those described above, it is better to have planned neighbor- 
hood units controlled through city regulation and intelligent owner- 
ship SO that such obsolescence can be prevented. For instance, the 
gridiron pattern of the average city subdivision layout is more 
expensive, when it comes to the c(5st of constructing necessary city 
facilities, than almost any other type of layout that could be designed. 

' See Archer's Suberhan Life, a brochure distributefi by the Archer Development Cc, Houston, Tex., 
1939. This brochure gives case histories of the development of the company's sites. 



CONCENTRATION OJb ECONOMIC POWER 97 

'WTiitten and Adams show that, as compared with $11.92 per front 
foot for the usual street improvements on the gridiron pattern, the 
same facilities ma}^ be had at a cost of $7.85 on a hexagonal pattern 
of a size large enough to make the neighborhood a self-contained unit, 
or at a cost of $8.02 per front foot on the cul-de-sac pattern of the 
Radburn Village type.* Similar savings • in the cost of municipal 
facilities are available for water and sewerag"e lines as a whole if the 
pattern of the layout is taken into consideration. 

By far the most important factor in preserving the neighborhood 
scheme and preventing obsolescence, wdiich brings with it the tendency 
toward crowding and slums, is an initial neighborhood unit under a 
single control and large enough to prevent (1) the encroachment of 
nonresidential elements (which destroy the desirability of the section 
as a residential neighborhood), and (2) an undue speculative increase 
in the real-estate value. In small towns, of course, this factor is not 
so important, since plenty of space is available and there is not the 
tendency to add a speculative increase to the land value. 

TAXES 

Local taxes are an important element in the monthly cost to the 
consumer. More than 60 percent of the average municipality's 
revenue in 1928 came from real-estate taxes. ^ Real-estate taxes are 
based on a fixed, rate applied to assessed valuation. In amount this 
tax ranges from 20 to 30 percent of the rental dollar where there has 
been no tax e* ^mption. For New York City, which has a rate of 
approximately. 3 percent on a 100-percent valuation assessment, the 
tax averaged 21.6 percent of the rental dollar for 39 apartment 
buildings in 1937.^° The North Carolina Tax Commission reported, 
for 1928, that 34.5 percent of net rent on 584 urban residential prop- 
erties was taken in taxes." In general, tax rates on real estate range 
froni lYi percent to as high as 10 percent of the assessed value. This 
includes State and county taxes in a great many cases. ^^ The rate 
in itself is inconclusive, depending upon the assessment practices of 
each municipality. 

However, it appears to be generally true that nearly one-quarter 
of the rental dollar may go to taxes. 

. The Administrator of the United States Housing Authoritj m 
estimating the local contributions (equivalent to tax remissions) to 
the subsidy on U. S. H. A. projects, arrivett at 16^3 percent as the 
average portion of the economic rent that local real-estate taxes would 
represent.'^ State taxes would perhaps increase this percentage. 
This portion of the rental dollar is in payment for the facilities and 
services which the city must provide. Streets must be maintained, 
and education, police, and fire protection must be provided. 

Although information is not available from many source^, two 
studies on the subject have indicated that even this high percentage 
of the monthly rental dollar is insufficient to pay for all the services 
provided by the municipality. In a study of the city of Boston, it 

* Neighborhood of Small Homes, table VI, p. 26. 

» The Pre.<!idont's Conference on Home Building and Home Ownership, Home Finance, and Taxation 
AVashington, 1932, p. 103. 

"' Table B, appendix A. 

" Home Finance and Taxation, pp. 104, 105. 

" Compare the same, p. 104. This report estimates that the general average rate was in excess of 3 percent 
in 1931. 

'3 Nathan Straus, hearings before the Temporary Nai.cnal Economic Committee, Part 11, pp. 5416, 5420. 



98 



CONCENTRATION OF ECONOMIC POWER 



was found that 78 percent of the total acreage failed to pay in taxes 
of all forms the amount that the services provided cost the city.'* 
A similar study was made by Howard Whipple Green of one slum 
area in Cleveland, Ohio, where it was found that it cost the city 
$1,250,000 to pay for the services provided in that area, while only 
$250,000 was collected in taxes from the same area.'^ In the city of 
Boston the costs and income by types of areas — ^business, industrial, 
and residential — are shown in the following table: 

Percentage of cost and income of the city of Boston by eight groups ^ 
[The tax-exempt tracts have been combineij with the unclassified tracts] 



Cost 



Percent 
of cost 



Income 



Percent 
of incoma 



Business 

Industry 

High-rent residential 

Miscellaneous residential 

Suburban residential 

3-decker residential 

Low-rent residential 



765, 121 
967, 908 
709, 466 
268, 294 
999, 656 
474, 326 
704, 824 
Not classified (including tax-exempt) -.1 12,027,759 



13.50 
9.19 
2.63 
8.12 

16.94 

22.30 
8.79 

18. 53 



$20, 170, 689 
5, 399, 727 
3,915,191 
7, 541, 720 
8,196,541 
7, 652, 774 
2, 370, 742 
9, 853, 265 



30.98 
8.29 
6.01 
11.58 
12.59 
11.76 
3.64 
15.15 



Total - ...-I 64,917,354 100.00 



65, 100, 649 



100.00 



• See text footnote 16. 

Note. — The tax nbatoments on real estate and personal property of $487,9 
the "Income" scheduled above. 



;.42 were not deducted from 



The report from which the abov6 table was taken indicates that 
both on a per-capita and on a per-acre basis the highest costs in pro- 
portion to tax-income, and therefore, the largest deficits, were incurred 
in the low- and medium-rental areas. '"^ One important factor of 
municipal services is the cost of educational facilities. It is the edu- 
cational item in most budgets which presents the greatest problem to 
municipal governments. Obviously, to reduce the amount of taxes 
assessed it is necessary either to reduce the cost of the services pro- 
vided or to reduce the services themselves. It seems, further, that 
it is highly impracticable for municipal officials to advocate reduction 
in the services provided. On the contrary, the tendency seems to be 
to increase the services. 

As a matter of fact, with the depression came added obligations for 
municipalities in the form of relief requirements. Much of the revenue 
formerly going to public works, such as street repair, extensions and 
repairs of sewers and waterworks, etc., has been replaced by grants 
fromthe W. P. A. and the P. ^y. A. Probably the grants-in-aid for 
public works have about balanced the /extra obligations caused by 
local relief needs. As recovery continues and local relief needs 
diminish, most municipalities will be in a better financial position to 
reduce local taxes, provided the grants-in-aid for public works con- 
tinue. If, however, such grants-in-aid do not continue and the obliga- 
tion for public worlvs must be resumed once more by the municipali- 
ties, one obligation- will merely be substituted for another. As a 
consequence it appears that the only possibility of reducing the tax 



JNiUiani S. Parker, heaririRs before the Temporary NaMonal Economic Committee, Part 11, p. 5242, 
i Lity J lannihg Hoard, Keport on the Income and Cost Survey of the City of Boston, 1935, p. 8. 
'1 Keport on the Income and Cost Survey of the Citv of Boston, 19.35. p. 6. This report was i 

into ttij record of the Temporary National Economic Committee Hearings, Part 11 p 5245- see ]M 

explanation of it, pp. 5242-5244. 



ntroduced 
J*Ir. Parker's 



CONCENTRATION OF ECONOMIC POWER 99 

element in the rental or home-ownership cost lies in some form of 
grants from the Federal Government or in shifting part of the tax 
from real estate to some other form of revenue. 

The form of taxation represented by real estate taxes is in itself 
highly conducive to maintaining speculative land values, because of 
the fixed assessed valuations which are seldom revised downward. 
These valuations create a tendency to attempt to earn a return on 
such capital values. This causes crowding and brings into residential 
districts factors which tend to depreciate residential real-estate 
values, thus starting neighborhood obsolescence. 

Tliere is a factor of cost which ultimately may increase without 
compensating benefit the real-estate taxes assessed: that is, the cost 
of the physical improvements in city development. As already shown, 
most cities grow haphazardly outward from their centers, which brings 
an extension of municipal facilities in many cases far beyond the 
immediate needs of the city. Some savings are possible by more 
scientific j)lanning and laying out of the additions to cities. This is 
now recognized in many of the newer projects under both the F. H. A. 
and the U. S. H. A.^'' While this will be of aid through lower taxation 
of new housing developments, it does not help in solving the problem 
of obtaining lower housing costs in existing municipalities, but merely 
indicates that, if aiw saving in the element of monthly rent attributable 
to taxes is to be had, it probably must come through projects built in 
areas outside the boundaries of present municipalities. This solution, 
however, is difficult for existing cities and makes their taxation 
problem more acute. 

BUILDING CODES 

Much criticism has been voiced from time to time concerning the 
effects of building codes and zoning regulations on the cost of con- 
struction. It is claimed by some that a considerable part of the excess 
cost is due to code regulation, and that the failure to keep abreast of 
scientific developments by changes in building codes prevents the 
possibility of lower-cost construction.'® Building codes are primarily 
regulations designed to safeguard inhabitants of a given area from 
dangers to health which may be caused by improper sanitary measures 
in building, and from fire hazards caused by the crowding of non- 
fireproof construction. Also, it is assumed that every building must 
be strong enough to withstand the stresses and strains occasioned by 
the uses to which it is put, and that it is the duty of the local officials 
to see that no dangers arise from failure to provide sufficient strength 
to withstand such stresses and strains. 

Since building is a complex operation and new information con- 
cerning the scientific properties of building materials is being acquired 
nearly every da}'', it may be seen that a fixed set of proA isions over a 
period of time tends to prevent the adoption of new materials and 
processes which may be more economical and yet may provide all the 
necessary safeguards intended to be achieved by the code. In most 
instances the authorities have realized this situation and have made 
provisions which leave considerable discretion to building inspectors 

'■ An example of ohlaininp the Icwost maint(>nance cost as well as initial cost in municipal facilities is 
shown in the laying out and planning of Oreonbclt and Greendalc developments by the Hesottlement 
Administration." ?ee Frederick Bipccr, "Site Planning", in Housing Monograph Series, No. 3, National 
Resources Committee, 1939, pp. 19-39. 

:^ Compare Robert L. Davison, Hearings before the Temporary National Economic Committee, Part 
H,pp5327 5334-5336, 



IQQ CONCENTRATION OF ECONOMIC POWER 

and local officials. It is tlii'oiigh these discretionary provisions that 
many abuses have arisen. Consequently, any failure to take ad- 
vantage of scientific improvements in most cases can be charged to 
unintelligent administration of obsolete codes rather than to specific 
provisions.'^ 

For example, the majority of building codes provide that any 
material may be used if satisfactory evidence is presented to the proper 
officials that the material will accomplish its purpose in a satisfactory 
manner.^*' This, it would seem, is sufficient to permit the use of any 
new scientific development if it is demonstrated and proven to be a sat- 
isfactory material for its purpose. In actual operation, however, it is 
necessary for the proponent of the new method or material to conduct 
a test before the designated officials, which, to begin with, is verj'' 
expensive. This would not be prohibitive if a single test were suffi- 
cient to make the material acceptable for all future construction. 
Many officials, however, have abused this clause by requiring an 
expensive test each time the material is to be used. Under such cir- 
cumstances it is much cheaper to use the old method than to introduce 
the new material. 

Another deficiency in most building codes is that the requirements 
are based on methods applicable to materials knov/n at the time the 
code was written, at which time such provisions were considered fair 
and adequate. But with- the development of new designs and new 
types of materials these requirements work a hardship. As an 
example, the building code for Washington, D. C.,,and a good many 
other cities for that matter, provides that the minimum thickness of 
walls for dwellings shall be 8 inches, and where the building is three 
stories high the lowest floor must be 12 inches thick, etc. These 
dimensions are reasonable when one conside's their application to 
ordinary materials of construction, such as lumber and masonry. 
However, the provisions are certainly uneconomic when applied to 
steel and glass. As a consequence, for instance, a prefabricated steel 
building could not be erected in the city of Washington or any other 
city having such a code provision; nor could a fireproofed plywood- 
panel construction meet such requirements, in spite of the fact that 
either of the above constructions has sufficient strength to meet all 
stress requirements. 

In plumbing codes the situation is even worse. New knowledge is 
being gained daily as to the action of drainage and methods of carrying 
off drainage. Practically all recent tests have indicated that our 
plumbing requirements are far beyond those ac-tually necessary for 
the proper safeguarding of health. On the other hand, those engaged 
in the plumbing business resist any attempt to decrease these require- 
ments if it means a reduction in the amount of materials or labor. 
Plumbing interests have a powerful weapon in the form of publicity 
that rriight indicate danger to the public health, and therefore any 
acceptance of change in plumbing requirements has been very slow. 

Another factor in building codes that adds cost is the diversity of 
requirements in different cities, which in eft'ect means that the manu- 

i» A report by an investigating eommitteo in Cleveland, Ohio (Home Building Conditions in Cleveland 
by George B. Buckley, manager of the construction industries department, Cleveland Chamber of Com- 
merce, September 1938, p. 9) states that "The lif me building industry is not penalized by the requirements 
of the locnl code largely because of sympathetic enforceui'nt by the Cleveland Commissioner of Buildinp?" 
The point here is that although the code is restrictive the fact that it has not operated restrictively is due 
entirely to the discretion of a single official. 

•« Robert L. Davison, hearings before the Temporary National Economic Committee, Part 11, p. 5336. 



CONCENTRATION OF ECONOMIC POWER 101 

facturcr of materials must meet the code provision calling for the 
highest standard in order to be sure that he meets all standards. This 
has long been realized as an important deterrent to progress in the 
reiuction of cost and is partially being met by movements to write 
uaiform standards in building codes. The greatest success has been 
achieved by the building-code officials of the Pacific coast in their 
cesign of a Uniform Building Code which has been adopted by mo'.e 
;han 100 cities.^' 

It has been recommended, and it seems entirely logical, that build- 
ing codes should be written in terms of requirements consisting of 
basic principles only, in terms of accomplishment rather than in 
terms of specification, and that methods and materials should be 
illustrative only. The danger in this type of provision is that it leaves 
riaximum discretion to individuals, and is particularly subject to 
faulty administration, which is the source of, many present-day 
abuses. The fact that there is continued exertion of pressure by 
various material interests, subcontractor groups and labor unions, 
which maintains uneconomic provisions, indicates that such pressure 
would also be exerted on officials with discretionary powers. 

1J1U1.1UGRAPHY 

Archer Development Co., Archer's Suburban Life, Houston, Tex., 1939. 

Bigger, Frederick, "Site Planning," Land, Materials, and Labor Costs, Housing 

Monograph Series, No. 3, National Resources Committee, Washington, 1939. 
Bo.ston City Planning Board, Report on the Income and Cost Survey of the City 

of Bo.ston, Boston, 1935. 
Ford, .James, Slums and Housing, Harvard University Press, Cambridge, 1936. 
Hurd, Richard M., Principles of Citv Land Values (4th ed.), Record and Guid° 

New York, 1924. 
Pacific Coast Building OfhciaTs' Conference, Uniform Building Code, Los Angeles, 

1937. 
President's Conference on Home Building and Home Ownership, Home Finance 

and Taxation (reports of committees), Washington, 1932. 
President's Conference on Home Building and Home Ownership, Planning for 

Residential Districts (reports of committees), Washington, 1931 (Copyright 

1932). 
Temporary National Economic Committee, hearings, pt. 11, Construction In- 
dustry, "Washington, 1940, testimony of Parker, William Stanley; Straus, 

Nathan. 
Thompson, George N., "Building Regulations and the Housing Problem," Land. 

Materials, and Labor Costs, National Resources Committee, 1939. 
Whitten, Rc^bert, and Adams, Thomas, Neighborhoods of Small Houses, Harvaio. 

City Planning Studies III, Harvard University Press, Cambridge, 1931. 

" Letter from Pacific Coast BuUding OfiBcials' Conference. 



CHAPTER VIII 
TECHNICAL TRENDS 

ECONOMY OF DESIGN 

Wlule the influence of labor and materials on building costs has 
come m lor a large share of public consideration, too little attention 
Jias been paid to the mfluence of design on costs. The architectural 
profession, within whose province all design considerations lie, has 
regarded the field of low-cost housing an incidental one and certainly 
not a profitable one. This may be due to the type of architectural 
training that has been prevalent, patterned after the Beaux Arts 
system, winch lays greater stress on moiiumentalism than on econ- 
omy.' Wliere architecture has played a part in housing it has been 
in tlie interest primarily of appearance and esthetics. 

The result of the architect's neglect of the low-cost field has been a 
notable lack of progress in both the method of production and the 
article produced. Whatever progress has come about has been 
chiefly the result of commercial developments by materials producers. 
However, developments of building materials manufacturers cannot 
take the place of proper location of rooms and facilities of the house so 
as to obtain a maximum of comfort and convenience at the lowest cost. 

One of the important features of economy in design is the standard- 
ization of space arrangement. The National Small Homes Demon- 
stration Committee has made a start in this direction. This com- 
mittee is composed of representatives of leading manufacturers and 
others ujuler the sponsorship of the National Lumber Manufacturers 
Association. Its stated purpose, according to its letterhead, is "to 
foster improved design and to promote local demonstration of economy 
in building and financing of small low-cost homes." After considera- 
tion of the various types of heating systems, bathroom fixtures, and 
kitchen facilities, a standard size for bathrooms, kitchens, and utility 
spaces was recommended for the design of homes costing $3,000 or 
less.^ The principal effect will be the influence on manufacturers of 
equipment to standardize their over-all dimensions to fit such spaces. 
The committee also promulgated a series of room arrangements so 
that the greatest economy in partitions, piping, and other materials 
might be obtained. The fact that a committee of manufacturers has 
taken the initiative in finding economies through design indicates the 
possibilities in that field and emphasizes the neglect by the archi- 
tectural profession. 

That there are many other possibilities in the field of standardization 
is indicated by the great variety in size and design of doors and window 
openings, as described in chapter V, under "Materials." It is not 
necessary to eliminate entirely the possibility of obtaining variety 

' Charles H. Lench. The Promotion of Commercial Buildings, Architectural Economics Press, 1932, p. 43. 
' Compare Robert L. Davison, hearings before the Temporary National Economic Committee, Part U, 
pp. 6318-5320. 

108 



1Q4 COMc TRATION OF ECONOMIC POWER 

in appearance through iii '^nuity in fenestration. The small varia- 
tions in sizes of window opei^ings between one district and another, 
as shown in table XVII, add nothing to appearance, yet are responsible 
for the failure to bring mill work costs doAvn to reasonable levels 
despite the fact that doors and windows, with their frames, constitute 
a field for mass production methods. 

Table XVII. — Allowances to be added to glass size ordered for finished windoiv 

openings . 

[Inches] 





Lay-out 


City 


IJiand is4 21ight 
windows 


1^ and 1^4 light 
windows 


U6 and 1^8 light 
windows 




Width 


Length 


Width 


Length 


Width 


Length 




3^ 
4 

4 

4H 
4H 

i'A 

45/8 
5 
5 
5 


5 
6 
6 

m 

6 
6 


3^ 

4 

5 

6 
5 
5 


5 
6 
6 

m 

6 
6 
6 


^^ 

4 

S 

iVi 

4J^ 

4^ 

45-8 

5 
5 
5 


5 




6 




6 


Ohio - 


6^ 


Washington . - 


6M 




f)M 


Philadelphia 


6H 




6 




6 




6 








Lay-out 


City 


IJi and IH 12 
light windows 


V/i 8 light win- 
dows 


V/s 12 light win- 
dows 




Width 


Length 


Width 


Length 


Width 


Length 




m 

4 
4H 

4H 

4>^ 

4H 


5 
6 
6 

6^ 

6^ 
6 


4 

4>2 

iH 
4H 


5 
6 
6 

eVs 

en 

6 


35/8 

4 

4 

4H 

^y% 

4 

5 


5 




6 




6 


Ohio - 


6' 8' 




ty^ 




Wi 




6H 




6 




6 












6 















Source: National Door Manufacturers Association, Chicago. 

An important factor in economy of design is elimination of the many 
items classed as "gadgets." Usually this term is apphed to elements 
which are momentary fads and fancies and may be classed as orna- 
mentation but add little or nothing to hvability. It has been shown 
that builders -make double the profit on extras that they make on the 
basic elements of the house.^ 

The United States Housing Authority has been forced by necessity 
to make some studies in design in order to obtain the lowest possible 
costs, Amjng the economies developed so far are the following: * 

(a) Utilize straight walls with unbroken lines. 

(6) Design utilities in a straight line to ehminate bends in the 
plumbing as far as possible. 

3 Robert L. Davison, hearings before the Temporary National Economic Committee, Part II, p. 4988. 
♦ Nathan Straus, hearings before the Temporary National Economic Committee, Part II, p. 5430. Also 
see U. S. Housing Authority, Policy and Procedure Bulletin No. 12, Dwelling Unit Planning, pp. 7-13. 



CONCENTRATION OF ECONOMIC POWER 1Q5 

(c) Provide the greatest possible flexibility in rooms so that they 
may be conveniently used for multiple or substitute purposes. 

(d) Provide dining space in kitchen, which makes possible the elim- 
ination of dining room. 

(e) Utilize dimensions that stock sizes will fit. 

(/) Avoid hilly or broken sites, but if such sites are necessary, de- 
sign buildings, so that the length runs parallel to contours and not 
across them. 

(g) Place equipment against inside or partition walls rather than 
outside walls. This allows the attachment of equipment for two 
rooms to the same service line. 

These are but a few of the methods by which the designer may 
contribute economies equal to, if not exceeding, the possibilities of 
reductions in wage rates and material prices. A full list of such possi- 
bilities would run to more than a hundred items. 

RESEARCH IN DESIGN AND MATERIALS 

Some studies have been made, particularly since the depression, to 
determine the savings that can be achieved by simplification and 
standardization of design. Many manufacturers, as well as their 
associations, have conducted researches looking to a wider and more 
profitable use of their particular materials. The work of the American 
Concrete Institute in concrete construction, of the Forest Products 
Laboratory in lumber and new uses of wood, and of many others has 
contributed to the making of better products used in the construction 
of houses; but it must be emphasized that very few agencies have 
tackled a thorough study of all elements entering into the production 
of homes at a cost which can be met by the majority of urban families. 

One of the private agencies engaged in research on a broad scale 
was Bemis Industries, Inc., whose work in housing started in 1923 in 
Massachusetts.^ The F»emis research experimented with dift'erent 
materials and combinations of materials with the objective of finding 
a low-:Cost house that could be produced at a profit. The purpose 
was to develop construction schemes and principles rather than a 
single plan or building material. The research activities of Bemis 
Industries have no'.v been transferred to the Albert Farwell Bemis 
Foundation of the Massachusetts Institute of Technology. Although 
a number of experimental houses were built by Bemis Industries, Inc., 
its most noted contribution is the use of the module in design. This 
is merely a step toward standardization of dimension, principally by 
using multiples of 4 inches or 4 feet in all dimensions. 

The module has been put to practical use as a basis for a system of 
semiprefabricated construction by the Homasote Co., of Trenton, 
N. J., in their "precision built homes." ^ The Homasote Co. equips 
local lumber dealers with the proper gigs, tables, design systems, and 
methods of operation, to enable the dealers to precut many parts of a 
house built with regular materials, including Homasote for insulation. 
The prefabrication consists of complete wall and floor sections which 
are erected in tiie field but, being designed on the modular plan, are 
applicable to any ordinary tj^pe of single-family residence built of 
wood frame, brick %''eneer, or stucco. 

» John Burchard 2d, "Research Findings of Bemis Industries, Inc.," Architectural Record, January 1934, 
vol. 75, pp. 3-8. 

« F. Vaux Wilson. Jr., Tomorrow's Homes, published by the Homasote Co., Trenton, 1939. See also 
R. L. Davison, hearings before the Temporary National Economic- Committee, Part 11, p. 5337 



jQg CONCENTRATIOiN OF. ECONOMIC POWER 

Another private research activity is that of the John B. Pierce 
Foundation of New York. Tliis foundation has as its primary 
objective research in the field of heating, ventilation, and house com- 
fort/ The Pierce Foundation does not publicize its findings and 
therefore little is known of its actual accomplishments. Some work 
has been done on the physiological and psychological effects of heating 
and ventilating systems, but the findings of this research are not as 
yet sufficiently conclusive to justify any change in heating systems. 
^he Piefce Foundation has made some studies in the economies of low- 
cost housing and has made numerous contributions in this field. 

Manufacturing companies have made useful studies which were 
primarily designed to m crease the companies' ax:'tivities in "their par- 
ticular fields, such as the research of General Electric and Westing- 
house Electric & Manufacturing Cos., and that of building ma- 
terial manufacturers such as Johns-Jvlanville Corporation. Some 
years ago the A. O. vStnith Co., of Milwaukee, conducted studies of the 
possibility of a prefabricated house market. This work started in 
1930 but the results were not published and the company never 
followed up Avitli any activities in the housing field. It is presumed 
that their studies indicated that conditions were such, considering the 
market, that a prefabricated house was impracticable at that time.^ 

Public research activities in the housing field are com}:)aratively 
recent. The National Bureau of Standards, of he Department of 
Commerce, has been engaged in testing materials over a considerable 
period of time. It makes determinations as ta the qaalities .of 
various materials. While such a function is very important in any 
research activity in low-cost housing, the essential need is more than 
mere measuring and testing. This was recognized in 1937 when 
an appropriation was made at the instigation of the Central Housing 
Committee to "study the properties and suitability of building ma- 
terials, with particular reference to their use in low-cost housing, 
including the constructioTi of such experimental structures as may be 
necessary for this purpose, provided that no part of this program shall 
duplicate any v/ork now being performed by the Forest Products 
Laboratory of the Department of Agriculture." ^ The appropriation 
for this purpose was $198,000 with- additional appropriations of a 
similar amount for the fiscal years 1939 and 194Q. 

With the first appropriation the Advisory Committee of the 
Bureau set up a series of maximum costs for the types of constructions 
and materials to be tested under this program. These costs are 
shown in table XVIII. 

Table 'KYIll.— Maximum cost of const ruction for samples suhiniited for testing in 
National Bureau of Standards Research program 

[Costs as of July 1937 in Washington, D. C.) 

jMaximum 
cost per 
Element: square foot 

Bearing walls $0. 60 

■Partitions and nonbearihg walls . 35 

P'loors, structural, finish, and ceiling below . 7n 

Roof, structural, covering above, and ceiling below .60 

' P. L. Davison, licarings before the Toinporary Kational Econoniic Commiftop, Part U, p. 497PI 
' Peter A. Stone, "Experiments with Low-cost notnes," General Building Contractor, April W62, vol. 3, 
Ko. 4, p. 24. 
• Letter Circular LC-.'in2 of the Xational Biire;tu of Standards, Jiilv 30, 19.37. 



CONCENTRATION OF ECONOMIC POWER 1Q7 

Table XVIII. — Maximum cost of consiruclion for samples submitted for testing in 
National Bureau of Standards Research program — Continued 

[Costs as of July 1937 in Washington, D. C] 

Maximum 
cost per 
Element : family o) 4 

Heating plant $400 

Lighting 180 

Kitchen equipment, including plumbing, refrigeration, and storage 

equipment 320 

Bathroom equipment, including special finish walls and floor, plumbing 

and fixtures V 400 

Source: Research Program on Building Materials and Structures, 1937-38 (LC-502), National Bureau of 
Standards, July 30, 1937, p. 5. 

From this table it may be seen that the limiting costs are approxi- 
mately the costs of present-day ordinary construction. Manufac- 
turers may submit samples of materials and constructions that come 
within the cost limits noted. These materials and units are put to a 
number of tests designed to measure their strength and durability 
under varj^ing conditions. Some 22 types of w^alls, floors, boards, and 
construction systems have been tested, and the outstanding feature 
common to them all is that they approach the maximum costs in the 
table and show no tendency toward the development of lower cost 
materials. Further, the tests have shown that in practically all cases 
there is vastly more strength built into the construction systems 
than is necessary for actual use.'" 

The Forest Products Laboratory of the Department of Agriculture 
.has been in existence for a good many years. Designed principally to 
conduct studies in lumber and timber products with a view to improv- 
ing the processes of manufacturing such products, the laboratory has 
done notable work in discovering methods of producing and fabricating 
better lumber and lumber products. When the program for research 
in low-cost housing was prom.i ' ited by the Central Housing Com- 
mittee, the Forest Products Labi^^atory undertook a number of studies 
contributing to this research, among them being studies of glues and 
methods of gluing plywood, methods of panel construction, and 
standardization of millwork sizes. 

Another public agency making studies of housing which, by neces- 
sity, must be low in cost, is the Bureau of Agricultural Engineering of 
the Department of Agriculture. This agency, as its name implies, 
studies farm construction and has made tests calculated to show the 
miOst essential factors of faiTnhouse design. These tests include 
methods of vendlation, painting, room arrangement, etc. 

An important field for much needed research is determination of 
minimum actual strength or other quality needed to meet the require- 
ments of livability. As an example, the building code of the city of 
Washington requires a ceiling height of 8 feet for residential buildings; 
the old Housing Division of the Public Works Administration in its 
housing standards fixed a minimum ceiling height of 8 feet 6 inches; " 
the T Jilted States Housing Authority set a minimum height of 7 feet 
10 inches.'- In none of these cases was the story height based on any 
scientific determination of need or on any fundamental physical fact; 

"> See Building Materials and Structures Reports 1-24, National Bureau of Standards, June IQS^'-August, 
1939. 
!i Unit Plans, May 1935, p. 7. 
'2 Policy and Procedure Bulletin No. 12, Dwelling Unit Planning, p. 9. 

260158— 40— No. 8 9 



■^Qg CONCENTRATION OF ECONOMIC POWER 

it was based merely on the individual ^deas of the writer of the pro- 
visions. The variations in the requirements for strength of building 
sections according to different codes, certainly indicates the need of 
some scientific facts as to the actual strength required to meet the 
needs of ordinary living conditions, with of course an adequate factor 
of safety. 

PREFABRICATION 

Perhaps the question most often asked by the average layman is 
why mass production has not been applied to the housing field in order 
to bring down cost as it has been in automobiles, tractors, and other 
products. Actually a large number of the parts entering into. a house 
are prefabricated on a mass production basis — doors and windows 
(where stock sizes are used and glazing is allowed off the job), fur- 
naces, lighting fixtures, etc. For a number of years attempts have 
been made to increase the amount of prefabrication in order to reduce 
the volume of field assemblage. 

Various forms of resistance have been met such as lack of acceptance 
by the building public, lack of cooperation on the part of labor, which 
fears loss of work through prefabrication, mflexible requirements of 
building codes, as well as the tendency on the part of many large 
manufacturers already entrenched in the field to promote their estab- 
lished products in order to protect their investment; hence little 
progress has been made in the last 10 years. 

Some of the earliest efforts along this line were attempts to popular- 
ize precut houses; that is, all lumber and parts were precut, to be 
fitted on the job, as exemplified by the Sears Roebuck precut houses. 
Although this company sold a large number of houses, the evidence 
indicates that very little saving resulted from this method. 

During the depression, steel companies, in their endeavor to find 
a new market, also turned to this industry; but here again, no appre- 
ciable result could be obtained in reducing the cost below that of 
houses built by ordinary site assembh^. Altogether there have been 
perhaps 50 efl'orts to produce a prefabricated house, none of which, 
apparently, has been successful in producing the saving that one has 
come to expect from mass production, the principal reason, of course, 
being that in none of these efforts has mass production actually been 
accomplished. Mass production implies a mass market. A mass 
market cannot be obtained until the cost has been reduced consider- 
ably, and the cost cannot be reduced very much until mass production 
on a prefabricated basis has been accomplished. Thus we have a 
vicious circle which has produced a stalemate. 

Those companies which are still in business in the production of 
prefabricated houses, using more or less traditional materials, have 
been able to accomplish economies, so far, of about 10 percent as 
compared with ordinary methods. These savings are due in large 
part to their quantity purchases.'^ On the other hand, some progress 
has been made in the production of prefabricated plywood wall panels- 
but more research in the production of glues that will withstand a 
variety of weather conditions and in systems of fireproofing sucli 
panels is needed. 

13 R. L. Davison, Hearings before the Temporary National Economic Committee. Part 11, pp. 5337, 5338. 



CONCENTRATION OF ECONOMIC POWER 109 

The shop fabrication of wood panels in sizes 4 feet square and 8 
feet square for frame houses seems to be making the greatest progress, 
and one manufacturer has been meeting with some success in the 
apceptance of a steel sheet and wood frame combination panel.** 
Another producer has sold several hundred low-cost frame houses 
Wl^ich are manufactured in two sections, each section capable of being 
transported by trailer truck. ^^ The market area is limited, however, 
by transportation difiiculties. On the whole, prefabrication is going 
through an evolutionary process, and the period of such evolution 
has been too short for an evaluation of the true significance of present 
progress. 

BIBLIOGRAPHY 

Blouke, Pierre, The Siginficance of Small-House Design, Land, Materials, and 
Labor Costs, Housing Monograph Series, No. 3, National Resources Committee, 
Washington, 1939. 

Burchard, John, 2d, Research Findings of Bemis Industries, Inc., Architectural 
Record, January 1934, vol. 75, pp. 3-8. 

Public Works Administration, Housing Division, Unit Plans, Washington, May 
1935. 

Stone, Peter A., Experiments with Low-Cost Homes, General Building Con- 
tractor (F. W. Dodge Corporation), April 1932, vol. 3, No. 4, pp. 18-25. 

U. S. Department of Commerce, National Bureau of Standards, Building Mate 
rials ai.d Structures, Reports 1-24, Washington, June 1938-August 1939. 

U. S. Department of Commerce, National Buieau of Standards, Research Pro- 
gram on Building Materials and Structures, 1937-38 (Letter Circular LC-502), 
Washington, July 30, 1937. 

United States Housing Authority, Dwelling Unit Planning, Policy and Procedure 
Bulletin No. 12, Washington, "August 1938. 

Wilson, F. Vaux, Jr., Tomorrow's Homes, Homasote Company, Trenton, 1939. 

'■* The Harnischfeger Corporation, Milwaukee, Wis. 
" Qcncral Hou.sing Corporation, Seattle, Wash. 



CHAPTER IX 
PUBLIC AID TO HOUSING 

The term "public housing" has often been confused with public 
aid to housing. Actually, ownership of houses by public bodies in this 
country has had few precedents prior to the ^rst World War, but 
public aid to private housing in various forms has a substantial history 
dating back to 1871 with the organization of a limited-dividend 
corporation in Boston, under public regulation, to provide low-rental 
homes. ^ 

There has also been confusion between the terms "low-rent housing" 
and "slum clearance" and between their objectives. The proponents 
of slum clearance usually include the elimination of slum dwellings 
and their replacement, within the same area, with housing suitable 
for the former slum dwellers at rents comparable with those paid for 
the slum dwellings. In chapter VII it was pointed out that an impor- 
tant factor in the creation of slums is the. crowding of city land in 
order to maintain a high speculative or assessment value for it. The 
fact that land costs are excessive immediately rules out the possibility 
of obtaining the economies that are necessary in order to provide 
low-rent housing. This fact has led proponents of low-rent housing 
schemes to divorce slum clearance from the construction of new 
housing. Raw land has been considered more suitable for the new 
housing cost factor and the fact that it affords greater planiung 
possibilities. 

The building of low-rent housing on raw land, however, as explained 
in chapter VII, has brought out the fact that the construction of city 
facilities in new areas makes more acute the problem of maintaining 
municipal revenues and balancing local budgets, for the older facili- 
ties must also be maintained.^ Of course, the most practical solution 
would be, if it were possible, to erect new dwellings at low rent on the 
slum sites, but housing authorities in most cities have not found this 
feasible with land values at the levels that have prevailed. 

THE LIMITED DIVIDEND AND TAX EXEMPTION 

The chief form of aid given to limited-dividend corporations has 
been tax exemption, either limited or unlimited. This tax exemption 
may take several forms. The New York law of 1926 authorized 
municipalities to exempt from taxation for 20 years the residential 
buildings constructed by these corporations.^ Actually the first act 
that led to tax exemption in New York in return for low rentS; under 
public regulation, was an amendment to the O'Brien Act, passed in 
1922, which permitted insurance companies, for a limited time, to 

1 Architectural Forum, January 1935, vol. 62, p. nis. , 

2 Compare Alfred Rheinstein and Henry F. Pringle, "Why Slum Clearance May Fail,'' Harper's Maga- 
"'ne, October 1939, pp. 523-24. 

* The tax -exemption provisions by the city of New York expired In 1936. 



112 CONCENTRATION OF ECONOMIC POWER 

invest in low-cost housing enterprises renting at $9 per month pei 
room. WliUe the O'Brien Act itself did not grant any tax exemption, 
the city of New York passed a statute which gave such exemption on 
the buildings for a period of 10 years.* 

A similar act covering limited-dividend corporations was passed in 
New Jersey in 1933, which, however, placed the regulation of such 
corporations under the supervision of the State board of public util- 
ities. New Jersey exempted such corporations from all State and 
local taxes except a fee for incorporation and a tax of 10 percent on 
their gross inconxe.^ By special statute New Jersey insurance com- 
panies have also been permitted in specific instances to investa limited 
portion of their assets in construction of low-rent housing.^ 

These were forms of public aid to low-rent housing in which, in 
return for tax exemption and in some cases the right of eminent 
domain, corporations submitted themselves to public regulation as 
to their maximum rate of earnings and maximum rental charges. 

Another form of aid to low-cost housing (i. e., low cost to the 
owner-occupant) was homestead-tax exemption. The States of Texas 
and West Virginia initiated this form of tax exemption in 1933. By 
the end of 1938, 13 States had passed laws which exempted from real- 
estate taxes to a more or less limited extent, owner-occupied residen- 
tial and farm properties, usually from $1,000 to $5,000 of assessed 
value. Some of these acts exempted homesteads from both State 
and local taxation, while others, notably Alabama, Ariiansas, Minne- 
sota, South Dakota, and Texas, exempted homesteads from State 
taxation only.^ 

Another form of aid was proposed at the Temporary National Eco- 
nomic Committee hearings based on an experiment in Princeton, N. J., 
called the Lambert plan.^ The essence of the Lambert plan was to 
provide tax exemption for limited-dividend corporations but to permit 
such corporations to amortize only the value of the buildings and 
developments, the land reverting to the city in return for tax exemp- 
tion. Actually, however, tlie Lambert plan operated much more 
simply than that. The Princeton project was constructed with pri- 
vate funds and then sold to the city housing authority at cost, in 
payment for which the builder accepted 4-percent tax-exempt bonds 
from the authority, these bonds to be amortized over a period of 28 
years. This is a method of eliminating the speculative equity and at 
the same time attracting private capital to public housing, which is 
being more fully developed at present by the United States Housing 
Authority, as will be shown later. Low rents were achieved through 
(1) elimination of the speculative equity, and (2) tax exemption. 

SUBSISTENCE HOMESTEADS 

Actual construction of publicly owned houses for rental purposes 
was started by the United States Housing Corporation during the first 
World War, for the purpose of providing adequate dwellings for work- 
ers in Avar industries in localities where such dwellings were not avail- 

* F. W. Ecker, vice president, Metropolitan Life Insurance Co., hearings before the Temporary National 
Economic Committee, Part U, pp. 5129ff, 5134. 

' Central housing committee, subcommittee on law and legislation. Housing Legal Digest, September 
1939, supplement (New Jersey). 

« R. R. Rogers, hearings before the Temporary National Economic Committee, Part 11, p. 5C81. 

' Architectural Forum, September 1939, vol. 71, pp. 206-207. 

« Gerard B. Lambert, Part 11, pp. 5304-5310. 



CONCENTRATION OF ECONOMIC POWER 113 

able. During its existence the corporation constructed with Federal 
funds $42,0(X),000 worth of apartments and single-family dwellings.' 
However, after the war ended the corporation made every effort to 
liquidate its holdings and cease its activities. 

It was not until the passage of the National Industrial Recovery 
Act in 1933 that another effort was made by the Federal Government 
to construct low-cost housing. Under section 208, $25,000,000 was 
made available for "making loaiis for and otherwise aiding in the pur- 
chase of subsistence homesteads." ^° The plan of subsistence-home- 
stead operation was to establish small somif arming communities on 
the outskirts of industrial areas to take care of part-time and seasonal 
workers. The theory was that, by owning a house, together with a 
few acres of land, the industrial worker could raise enough agricultural 
products to maintain himself during periods of industrial inactivity. 
Homesteads were constructed and ^old to workers with no down 
payment, to be amortized over a 30-year period. 

The Division of Subsistence Homesteads of the Public Works 
Administration initiated 36 projects involving 3,498 dwelling units. 
Up to the time that this division was merged with the Resettlement 
Administration the total expenditure amounted to $26,395,400." The 
subsistence homesteads provided an average of 23.4 acres each, with 
a substantial house and outbuildings, at an average cost of approxi- 
mately $7,500 per unit.^^ 

Following the passage of the Emergency Relief Appropriation Act 
of 1935 these subsistence homesteads, together with cooperative home- 
steads started by the Federal Emergency Relief Administration, were 
merged with the Resettlement Admmistration, which aimed to pro- 
vide regidar farms, part-time farms, and some suburban dwelling units 
in model communities. In the meantime the F. E. R. A. had estab- 
lished 29 cooperative communities, some of which were farmsteads 
and part-time farms, some garden communities, and some were simple 
migratory camps. A total of 3,643 dwelling units had been established 
by the F. E. R. A. before they were taken over by Resettlement 
Administration.^^ 

The Resettlement Administration merged all these groups having 
to do v/ith the resettlement of rural and suburban communities, and 
by the end of 1936 had started work on 6,425 additional units, making 
a total of 13,566 units initiated by the Resettlement Administration 
and the groups consolidated with it, at a total cost of approximately 
$105,000,000.^" 

Of the 6,425 units mentioned above, 2,750 were in the 3 suburban- 
type projects, namely, Greenbelt, Greenliills, and Greendale. These 
3 were the first attempts at the actual relocation of city dwellers 
in model communities in the suburbs of metropolitan centers. Also, 
these 3 projects were the first in which dwelling units were rented 
and not sold on a rental basis. 

In 1938 the Resettlement Administration was merged with the 
Farm Security Administration of the Department of Agriculture, 

» Bureau of Foreign and Domestic Connmerw, U. S. Department of Commerce, Construction Activity 
in the United States, 1915-37, table 50, p. 87. 

i» 48 Stat. 195. 

" Hearings before a subcommittee of the (House) Committee on Appropriations, V5th Con?., 1st sess. 
on first deficiency appropriation bill for 1937, p. 252. 

'2 Ibid. 

13 Ibid., p. 253. 

>' Ibid., pp. 253-255. 



1 14 CONCENTRATION OF ECONOMIC POWER 

having first been transferred to that Department. During the fiscal 
year 1938-39, under the Farm Security program, a total of 2,784 dwell- 
ing units were started, of which 240 were in multifamily houses and 
the balance were farmstead- and tenant houses. ^^ 

Except for the three suburban community projects, Greenbelt, 
Greenhills, and Greendale, the operations of the Farm Security 
Administration comprise two types of activity. The first, its princi- 
pal activity, is construction of farmstead homes and provision of new 
farms under long-term amortization to former tenant-farm operators. 
Land is purchased, buildings are erected, and money is loaned for 
farm machinery and supplies to enable worthy tenant farmers to 
become owners. It is this type of activity that accounted for 1,985 
of the 2,784 units mentioned above. ^^ 

The second type of operation of the F. S. A. is a contmuance, more 
ot less, of the old subsistence-homestead plan which provides homes 
in rural communities for both farm laborers and industrial workers 
and is operated through a cooperative group. The cooperative is 
incorporated, and although the Farm Security Administration builds 
the houses and whatever out-buildings are necessary, the cooperative 
collects the monthly payments in the form of rent and pays the inter- 
est and amortization to the F. S. A. Thus the Administration does 
not deal directly with the subsistence homestead group as it does with 
the farmstead group. This type of activity was designed chiefly for 
stranded areas in the hope of enabling the inhabitants of those areas 
to make a livmg through the creation of minor industries and part- 
time farmmg. 

The 2,784 dwelling units started in the fiscal year 1938-39 included 
800 fully modernized houses with bathrooms, at a construction cost 
of slightly over $1,500 each. In the North fully plastered houses with 
central hot-air heating plants cost a maximum of $2,635. The farm- 
houses were built for less than $1,400 in the South and less 
than $2,500 in the North. Of those in the South, 1,645 were frame 
buildings without bathrooms, costing an average of $1,350.^^ These 
have neither runnmg water nor sewerage and hence are without plumb- 
ing. Nor have they heating plants, but most of them are supplied 
with stoves. 

Thus aside from the 2,750 suburban units, approximately 13,600 
dwelling units have been constructed for rural and semirural families, 
ib«\lftajorffcj of which have been built for sale to prospective farm 
ONvHers. ' 

p. W, A. HOUSING 

The Emergen6y Relief Appropriation Act of 1935 authorized as a 
relief expenditure the sum of $450,000,000 for housing.i^ Of this, 
$100,000 boo Was allotted to the Public Works Administration to 
build low-cost urban housing. Since funds for rural and suburban 
housing were allocated to the Resettlement Administration, which 
activities have been described, the funds allocated to the Housing 
Division of the F- W. A. represented the first attempt to provide 
low-rent housing under Federal ownership for slum dwellers. 

The Public Works Administration set up a Housing Division ta 
erect federally owned low-cost housing and to rent it to slum dwellers. 

" Monthly Labor Rs^view, September 1939, vol. 49, p. 637. 

"Ibid. 

" Ibid., p. 636. 

"49 Stat. 115. 



CONCENTRATION OF ECONOMIC POWER J 15 

However, an act passed in 1936 authorized the P. W. A. Housmg 
Division to set the rents on a basis which contemplated repayment to 
the Government of 55 percent of the initial cost of the project over a 
60-year period, plus interest. ^^ From its creation under the act of 
1935 up to December 31, 1938, 49 projects with a total of 21,447 
dwelling imits had been constructed (excluding two projects in 
Puerto Rico). 20 

The construction of houses by the P. W. A. Housing Division was 
intended to be a low-rent housing scheme rather than one of slum 
clearance. It is argued by some that the erection of low-rent housing, 
regardless of location, if within the same part of the city, will tend to 
reduce the rentals in slum areas to the vanishmg points, so that it 
will be impossible to maintain the slum areas, and owners themselves 
will naturally clear the slums. Unfortunately, this has turned out 
to be a very slow process and is far from having proved to be true. 
In many cases the result is a lowering of rents in the slum district 
below the rents for the new housing, and since new low-rent homes 
have never been available to the very lowest income groups (say those 
receiving under $250 a year, of which there are about 330,000 nonfarm 
families) the slum areas stUl have a sufficiently large portion of the 
population to draw on. 

The rents in the P. W. A. Housing Division projects average $25.58 
per dwelling unit, as the monthly total occupancy cost.^' This is for 
41 of the occupied projects as of June 30, 1938. Since, on the basis 
of a rental of one-fourth of the income, to reach the lowest-income 
group (under $500) it would be necessary to have rentals at $10 per 
month or less, it niay be seen that the P. W. A. Housing Division 
did not touch this group at all. On the basis of one-fourth of the 
income for housing, $25 a month rent requires a family income of 
$1,200 a year. And since private industry constructs some, although 
not enough, housing for this group, there have been numerous com- 
plaints that the P. W. A. Housing Division projects competed with 
private industry rather than reaching the income group that was not 
being serviced by industry. 

The P. W. A. projects cost approximately $4,000 per dwelling 
unit, and with rentals set at a point that would amortize 55 percent 
of the project's cost, it is apparent that the tenants were required 
to maintain the economic rent on a unit value of approximately 
$2,200. This high cost may have been due to several factors, among 
them the high cost' of constructing a large amount of public services 
and amenities which woidd usually be obtained with privately owned 
housing costing considerably more than this public housing. Con- 
struction technique had not advanced so far as it has today; nor 
was every advantage taken of possible economies that were available 
at ^hat time. But one of the principal objectives of the P. W. A. 
activity in housing was to put men to work; hence economies were 
often sacrificed to speed in getting men to work. 

However, regardless of the reasons for the lack of economies, the 
P. W. A. experience was sufficient to indicate that, whatever the 

'» Slum-Clearance Housing Act, June 29, 1936, 49 Stat. 2025, sec. 4. - 

'» Annual Report of the U. S. Housing Authority for the Fiscal Year, 1938, appendix I, pp. 49-50. By 
-authority given the President by the United States Housing Act of 19.37 (50 Stat. 888, sec. 4 (d)), all projects 
constructed by this division of P. W. A. were turned over to the U.S. Housing Authority withthe provision 
that 3uch projects were to be leased to local housing authorities as soon as leases oould conveniently be 
arranged. 

" Ibid., appendix II, p. 51. 



llg CTONCBNTRATION O*^ ECONOMIC POWER 

scheme to provide low-rent housing, it must have local cooperation 
to be successful. 

UNITED STATES HOU'S^NG AUTHORITY 

As an answer to the varied problems involved in getting a com- 
bination of low-rent housing and slum clearance, Congress passed 
the United States Housing Act of 1937. A review of the problem 
may help to furnish miderstandmg of the objectives sought by the 
act. First, about 37 percent of all the nonfarm families of the United 
States earn less than $1,000 a year, about 11 percent, or 2,487,000 
nonfarm families earn less than $500 a year.^^ Second, real-property 
surveys have indicated that approximately 4,000,000 nonfarm dwell- 
ing units lack the muiimum standards of decency in housing.^^ Third, 
an average of about 50 percent of the rent goes to meet financial 
obligations on rental housing, and 15 percent to pay taxes and assess- 
ments.^* Fourth, as stated above, slums are brought about by the 
attempt — by owners, speculators, or tax assessment — to maintain 
land values far above those warranted by the actual land use. Fi- 
nally, a solution of the low-cost and low-rent housing problem requires 
local cooperation. 

The theory behind the new features of the United States Housing 
Act was that, since it was impossible for the lowest-income groups to 
pay economic rents on new housing, it was a proper function of the 
Federal Government in cooperation with local governments to make 
up, in the form of regular subsidy, the difference between the amount 
that could be afforded, using a fair portion of their income, and the 
economic rent necessary to provide decent standards of housing. The 
amount of the annual Federal subsidy was to be based on the circum- 
stances of the particular project and was not to exceed the equivalent 
of the going interest paid, at the time the contributions were con- 
tracted for, by the Federal Government (on bonds of 10 or more years' 
duration) plus 1 percent on the total development cost.^^ In order 
to obtain local cooperation the political subdivision concerned was 
required to make annual contributions, in cash or tax exemptions, 
equal to at least 20 percent of the Federal subsidy. 

The act further provided that the housing was to be built and man- 
aged by local housing authorities and that a maximum of 90 percent 
of the funds for the development cost should be loaned by the United 
States Housing Authority. ^^ Since the lowest-cost housing cannot 
be built on high-cost land, the act aimed to obtain slum clearance 
without having the new housing necessarily built on slum areas. 
Thus, the act specifies that, for each new dwelling unit provided the 
local authority must require the demolition or efi^ective repair of a 
slum unit.^^ Construction of new units on vacant land was thereby 
made possible. 

The capital originally provided for the United States Housing 
Authority was increased by an amendment to the act in 1938 which 
theoretically permitted a total of $800,000,000 of loans to be made on 

" Table VII, ch. Ill above. 

" Isador Lubin, hearings before the Temporary National Econo;mie Comroittee, Part 11, p. 4958. See 
also p. 22 above. 

" See p. 45 above. 

" 50 Stat. 888, sec. 10, See also Nathan Straus, testimony, hearings before the Temporary National 
Economic roramittee, Part 11, pp. 5419 ft. 

M 50 Stat. 888, sec. 9. 

"Ibid., sees. 10(a), 11 (a). 



CONCENTRATION OF ECONOMIC POWER Jjy 

the basis above stated. ^^ The authorization for subsidies was also 
increased to a total of $28,000,000 per year.^^ This $28,000,000, 
however, is insufficient to pay subsidies on the total construction that 
coidd be produced by the $800,000,000 in loans; hence the authoriza- 
tion for subsidies limits the Housing Authority's activity to a maximum 
of about $693,000,000.'° 

Up to December 31, 1939, loan contracts amounting to $581,776,000 
had been signed, and 64,575 units in 163 projects had been placed under 
construction. '' The average over-all cost per unit of those under 
construction was $4,486, with an average net construction cost per 
unit of $2,821.^2 The estimated shelter rent per dwelling unit, that 
is, rent for shelter, exclusive of heat, light, gas, etc., ranges from $6.59 
per month in Austin, Tex., to $16.64 in New York City with an 
average of $14.28 for the entire group.'^ 

It may be seen that the average rents are substantially below those 
of the P. W. A. Housing Division, due of course to the subsidy and to 
the fact that in the case of P. W. A. housing rents must be high 
enough to liquidate 55 percent of the cost within 60 years. Thus far 
the lowest-income group reached by completed U. S, H. A. projects 
is between $400 and $500, and occupants are limited to -families witli. 
initial maximum incomes ranging from $612 per annum for the 
smallest-size families in Austin, Tex., to $1,399 per annum for the 
largest-size families in New York City.'* 

The fact that ultimately its authorization will enable the Authority 
to produce some 160,000 to 170,000 units for the $400-to-$l,400-per- 
year income class, wUl have a substantial effect in reducing slum 
areas. 

W. p. / . HOUSING 

The Work Projects Administration has contributed to experiments 
in low-cost housing, although some of its experience in direct con- 
struction of housing has been unsatisfactory. The most successful 
W. P. A. activity in providmg low-cost housuig was in Fort Wayne, 
Ind. The Fort Wa.jTie Housing Authority built 50 units at an actual 
cost of approxunately $900 per unit. This w^as achieved because 
first, W. P. A. furnished, ^\dthout cost, all the labor, and second, 
no expenditure for land (except $1 per lot) was necessary.'^ The 
local authority borrowed the money for materials and incidental 
services from the Federal Housing Administration, to be repaid on a 
20-year mortgage. W. P. A. labor both fabricated (in a specially 
built factory) and assembled the houses. The city exempted these 
houses from all taxes, hence the total cost to be included in the rent 
was limited to capital charges of about $6 per month per unit (repre- 
senting interest at 4)^ percent, amortization and insurance on the loan 

«' 52 Stat. 809, title VI, sec. 602. 

»» Ibid., sec. 601. 

" This is a later estimate than that of Mr. Straus in the Temporary X^tional Economic Committee hear- 
ings, Part 11, pp. 5409, 5410. 

31 U. S. Housing Authority, Public Housing, January 16, 1940, p. 4. 

'- Annual Report of V. S. Housing Authority for the Fiscal Year 1939, table IV, p. 7. 

" Data from the L". S. Housing Authority, November 27, 1939; final rents set on 13 completed projects. 

" Compare Nathan Straus, hearings before Temporary National Economic Committee, Part 11, p. 5426. 

" Land was turned over to the city on a lease basis of $1 per lot and tax exemption, but could be reclaimed 
on a sliding scale basis (within 1 year upon payment of the cost of removal of the improvement to another 
site). This method allowed the owners of land about to beco/me tax delinquent an opportunity to retain 
ownership at no cost to them. / 



22§ CONCENTRATION OF E<X>NOMIC POWER 

of $900), and less than $5 for maintenance and operation, or a total 
of less than $11 per month.^^ 

The complaints about the Fort Wayne project fall chiefly into three 
classes. One type of complaint comes from labor unions because the 
project was accomplished with relief labor, and the houses do not 
meet the ideals of middle-class comfort and lack many facilities 
ordinarily expected in public housing. Much of this, however, is 
window-dressing. The principal complaint is that relief labor con- 
structed the houses at relief wages; and the labor unions argued, 
that if this principle is extended it will have the effect of putting more 
ajjd more regularly employed building labor on the relief rolls by 
competing with the other types of public housing which are built 
by contractors. The answer, of course, is that other types of public 
housing cannot meet the rentals of this class of occupancy and there- 
fore do not compete. The second type of complaint comes from 
material manufacturers and contractors, for much the same reasons, 
that they did not get the full share of the work and material sales from 
this project that they have come to expect from public housing 
projects. A third type of objection has been voiced by city planners 
who rightly point to the fact that the project contams no special 
nondwelling facilities and the houses are located haphazardly in slum 
areas. This is, of course, true. Since the authority does not take 
title to the land, no permament improvements could be made; and the 
locations were dependent upon special conditions of availability. 

An earlier experiment in the use of the W. P. A. for public housing 
was not so successful. This was an attempted remodeling project 
for the New York Housing Authority .^^ In spite of the use of relief 
labor on tliis project the cost was equal to that of any of the new hous- 
ing projects of that Authority. This seems to indicate that Jthe use 
of relief labor in itself will not insure low costs, but that economies 
must be found in all elements of housing cost in order to reach the 
lowest-income group. 

BIBLIOGRAPHY 

Central Plousing Committee, Subcommittee on Law and Legislation, Housing 

Legal Digest, Washington, September 1939. Supplement. 
First Aid for the Home Owner, Architectural Form, September 1939, vol. 71, 

pp. 205-208, 34, 36. 
Housing Under Jarm Security Administration, Monthly. Labor Review, Bureau 

of Labor Statistics, September 1939, vol. 49, pp. 636-637. 
Limited Dividend Roll Call, Architectural Forum, January 1935, vol. 62, pp. 

98-103. 
Rheinstein, Alfred and Pringle, Henry F., Why Slum Clearance May Fail, 

Harper's Magazine, October 1939, pp. 520-526. 
Temporary National Economic Committee, Hearings, pt. 11, Construction 

industry, Washington, 1940; testimony of Ecker, F. W., and Lambert, Gerard 

B. 
U. S. Congress, House, Hearings before a Subcommittee of the Committee on 

■Appropriations, 75th Cong., 1st sess., on First Deficiency Appropriation Bill 
."tor 1937, Washington 1937, pp. 248-257. 

United States Housing Act of 1937, September 1, 1937, 50 Stat. 888. 
United States Housing Act Amendments of 1938, June 21, 1938, 52 Stat. 809, 

title VI. 
United States Housing Authority, Annual Report for the Fiscal Year, 1939, 

Washington, 1940. 

>« The Fort Wayne Housing Plan, a brochure published by the F. H. A. Described also by Philip Wagner 
in the Baltimore Evening Sun, Jan. 25, 1939, p. 15. 
" First Houses, New York City. 



PART II 

THE RELATION OF PRODUCTIVITY TO 
LOW-COST HOUSING 

By 
R. HAROLD DENTON 



119 



LETTER OF TRANSMITTAL 

Hon. Senator Joseph C. O'Mahoney, 

Chairman, Temporary National Economic Committee, 

Washington, D. C. 

My Dear Senator: The housing problem, hke the industry itself, 
consists of many parts. This study is focused upon the reasons Why 
we have not successfully achieved low-cost housing. It is concerned 
with the initial cost of construction and not with those costs and 
rates which are so important in determining the continuing cost to 
the occupier. 

The problem is defined as one of low productivity. Dollars spent 
for construction are wastefuUy spent. They not only fail to take 
advantage of new technology and management techniques, but are 
aggravated by the belief that a limited amount of work is available, 
the resistance to standardization, and the lack of any coordinated 
eff'ort. 

Positive restrictions appear in such forms as restrictive labor 
policies, inflexible price policies, and "special interest" building codes. 

The Federal Government is already attacking this situation at 
various points, notably through the Department of Justice. Much 
more can and should be done by the several agencies in the housing 
field. The outstanding gap discussed in the study is in the area of 
research. Contractors are too small to be able to carry on research. 
Manufacturers of building materials have their interest focused on 
their own products. No agency exists which is concerned with the 
whole problem of the best processes and materials for low-cost hous- 
ing. The recommxcndations by the author deserve careful consider- 
ation by all who are concerned with the problem of providing decent 
houses for families with low incomes. 

WiLLARD L. Thorp. 

Washington, D. C, March 1, 1940. 

121 ^ 



THE RELATION OF PRODUCTIVITY TO LOW-COST HOUSING 

INTRODUCTION 

In the search for a method by which unemployment might be 
reheved and general recovery brought aoout. it has come to be 
generally accepted that the building industry offers probably greater 
opportunities for expansion than any other industry. Since the be- 
ginning of 1938 building activity has increased rapidly, although it is 
still far below pre-depression levels. Despite this current activity, 
however, the potential market for better houses has barely been 
touched. 

The problem of inadequate housing is not a depression problem. 
Millions of families were poorly housed in America even before 1929. 
It is not a problem peculiar only to the United States. Prior to the 
outbreak of the war Great Britain had made far greater progress 
toward providing decent houses for the working classes than had the 
United States yet conditions were far from satisfactory. 

Inadequate housing in this and other countries is largely a result of 
the excessive cost of building; Other charges which add to the 
ultimate costs of ownership or renting, such as interest,, fees, commis- 
sions, and real-estate taxes, are, with a few minor exceptions, simply 
percentage charges which are directly related to the original cost of 
the house. Each is automatically reduced as the capital cost of the 
house is lowered. 

For example, costs of financing may be reduced in either of two 
ways — by lowering the interest rate or by reducing the amount 
borrowed. A 50 percent reduction in building costs will cut the costs 
of financing almost in half without any reduction in the interest rate. 
Likewise, a reduction in buUding costs will reflect itself in a reduction 
in property taxes, since the tax rate is a percentage charge upon the 
value of the property, of which the cost of the house represents 
perhaps 85 percent and the cost of land the remaining 15 percent. 
The reduction in taxes may not be exactly proportionate to the reduc- 
tion in building costs, since if property values should generally decline 
as a result of lower building costs, the tax rate or the assessment ratio 
might be iricreased. 

Much has been done in the last 7 years to reduce financing costs 
upon home mortgages through the Federal Housing Administration 
and the Federal Home Loan Bank Board system. Also, the Federal 
Government, has in the last few years embarked upon an extensive 
program of slum clearance through partial subsidy. Each of these 
programs was highly desirable when enacted and has generally proven 
effective for its particular purpose. I^ow interest rates and a plentiful 
supply of mortgage money, low property taxes and a shift of some of 
the burden of local taxes away from residential properties, low main- 
tenance costs— all are essential to a complete solution of the housing 
problem. For some time to come also the lowest-income families 

123 

26015&— 40— No. 8 10 



124. CONCENTRATION OF ECONOMIC POWER 

must'be assisted by subsid}^ if they are to live in decent accommodations. 
But by far the most effective way to provide adequate housing for all 
income groups, and without which it cannot be provided, is through 
the substantial reduction of building costs. 

For example, comparing the effect upon monthly or annual charges 
for housing of identical reductions in the interest rate and in building 
costs, a 50 percent reduction in the interest rate would result in a 
17.6 percent reduction in total monthly or annual charges for housing, 
whereas a 50 percent reduction in the original cost of the house would 
cut the monthly or annual cost by 42.5 percent.^ 

It shoidd be noted that the price of land is not directly related 
to the cost of building, as are most of the charges mentioned above. 
Land price, however, is a subject for special study and has not been 
given consideration in this report. Its importance should not be 
minimized. Unless land prices and land speculation are controlled, 
a part of any savings which may be achieved in the cost of building 
houses is likely to be offset by increases in the price of land. 

The effects of high building costs are clear from the following 
figures. The average appraised value of new single-family houses 
financed with loans insured by the Federal Housing Administration 
during 1938 was $5,530. Only 4 percent of the new houses were 
valued at less than $3,000 and only 19 percent at less than $4,000. 
The annual income of mortgage borrowers during 1938 averaged 
$2,968. Only 21 percent of the families earned less than $2,000. 
Comparable figures of cost and income were even higher during 1936 
and 193.7.^ Yet a study of family income conducted by the National 
Resources Committee showed that 79 percent of all families in the 
United States had incomes of less than $2,000 during 1935 and 1936, 
and that approximately 92 percent earned less than the average 
F. H. A. borrower.^ In other words, building costs are so high that 
new houses are being built for only a very small percentage of the 
highest-income families. 

It is not necessary, of course, that low-income families should live 
in new houses, just as it is not necessary that they should have new 
automobiles. Good second-hand or third-hand houses may be far 
more desirable than cheap new ones. When only a very small per- 
centage of the population can afford to build new houses, however, 
the process of filtering requires that low-income families live in tenth- 
or eleventh-hand houses which are not fit for human habitation. 

Building houses exclusively for the richest 10 or 15 percent of the 
population is like manufa,cturing only Cadillacs, Packards, and Rolls 
Royces. If the automobile industry manufactured cars for only the 
richest 10 percent, it is easy to imagine the condition of used cars 
which the lower income groups could afford, if they could afford any 
at all.* Houses must be built for the middle-income groups as well 
as the upper, if the lower-income families are to be taken care of in 
used houses that are still fit to live in. 

The solution to high building costs does not lie solely in the elimina- 
tion of exploitation through high wages, prices, commissions, and fees. 
It requires primarily the more fundamental approach to cost reduc- 

' See "Exhibit No. 1," appendix E, p. 175. 

■ Fifth Annual Report of the Federal Housing Administration lor the year ending December 31, 1938, 
pp. 91 and 101. See "Exhibit No. 2" and "Exhibit No. 3," appendix E, p. 177. 

3 Consumer Incomes in the United States, National Resources Committee. August 1938, p. 18. See 
"Exhibit Is'o. 4," appendix E, p. 178. 

* See "Exhibit No. 5." appendix E, p. 178. 



CONCENTRATION OP ECONOMIC POWER 



125 



tion through the elimination of obsolete methods, materials, and 
restrictive practices employed in the building industry. The pro- 
duction of houses has lagged far behind other industries in technologi- 
cal improvement, and a superficial treatment of the problem will not 
bring results. 

The handicraft methods employed in the building industry are 
detrimental to labor, to management, and especially to the consumer 
in need of housing at a reasonable price. Under these methods 
bricklayers, carpenters, plasterers, plumbers, and other workers 
cannot usually afford to live in new houses which they help to build, 
and many building craftsmen are compelled to occupy substandard 
dwellings. Moreover, by restricting demand, technological back- 
wardness in the building industry is responsible to a very large degree 
for the serious unemployment which exists among building workers 
even in normal times. 

Unless productivity is increased in the building oj houses to balance 
the steady increases in efficiency in other industries, standards of housing 
will steadily decline in relation to the general standard oj living, or rents 
will consume a larger and larger proportion oj the family budget. 

It is the purpose of this report to study certain fundamental char- 
acteristics of the construction industry, particularly of the building 
industry, in an endeavor to suggest several specific steps which might 
1)6 taken toward the substantial lowering of building costs, either by 
private enterprise acting alone or in cooperation with the Federal 
Government. A sound solution to this problem offers important 
opportunities not only for sustained economic recovery in all lines of 
business activity but for an expanded prosperity. 

The report is not intended to single out any one group in the build- 
ing industry for special criticism, because no single group is responsible 
for excessive building costs. Restrictive practices are employed by 
labor, contractor, materials suppliers and manufacturers, architects, 
political bodies, and even the general public in its resistance to change. 
The procedure followed in the report is briefly to consider the place 
of the construction industry in the national economy and its impor- 
tance to business recovery, to describe the existing organization of the 
building industry and the process by which houses are produced, to 
analyze certain fundamental principles regarding productivity and 
costs and their relation to the building of houses, to discuss the need 
for scientific technological research, and, finally to suggest certain 
recommendations for desirable action. 

CONSTRUCTION IN THE NATIONAL ECONOMY 

In terms of workers employed, the construction industry is one of 
our major industries. In 1930 an estimated average of over 3,000,000 
workers were directly dependent upon construction for emplojTnent, 
or more than were employed in the group of industries manufacturing 
iron and steel products, machinery, and transportation equipment, 
including automobiles.^ In addition, nearly twice as many workers 
were employed in industries engaged in supplying the construction 
industry ^vith materials. Altogether, the construction industry, 
directly and indirectly through consumption of materials, accounted 

' Construction Activity in the United States, 1916-37, Bureau of Foreign and Domestic Commerce, 1938, 
p. 27. 



126 CONCENTRATION OF ECONOMIC POWER 

for about 15 percent of all commodities that were produced in the 
United States from 1919 to 1935.2 

Construction work varies from the dredging of streams and harbors 
to the painting of kitchen cabinets. It includes the building and 
repairing of houses, stores, office, factory, and public buildings, high- 
ways, canals, railroads, airports, bridges, dams, pipe lines^ power plants, 
communication lines, waterworks, and levees. 

After 1929, construction activity fell to much lower levels than 
other business, and. has failed to regain its relative position in the 
national economy. In that year, the income created by the contract- 
construction branch of the construction industry accounted for 4.5 
percent of the total national income. By 1933 tliis proportion had 
fallen to 1.3 percent, and in 1938 had risen to only 2.7 percent. 
Moreover, the contract-construction industry produced less from 1932 
through 1938 in relation to its 1929 volume of income than did any 
other major group of industries, reacliing only half its 1929 volume 
in 1937.^ This index brings out clearly the importance of a revival- 
in building to general business recovery. During the entire decade 
of the depression, the construction industry has been further depressed 
than any other major industry. A disproportionate share of the 
unemployed have been building-trades workers. Likewise, a more 
than proper proportion of the idle plant capacity has been in those 
industries which supply the construction industry with materials, 
which include the key industries of the country. 

This report is primarily concerned with housing for several reasons. 
Residential building normally represents a larger part of construction 
activity than any other type of work, accounting for over half of all 
private construction from 1915 to 1936.^ It is therefore of special 
importance in relation to general business recovery. Residential 
building also fluctuates more violently than other types of con- 
struction activity, dropping from a peak of nearly 900,000 new units, 
bui t in 1925, to about 60,000 in 1934.^ It has lagged far behiiid 
recovery in other major fields of business activity . Housing is of 
prime importance to everj- individual, consuming a greater proportion 
of family income than any other single item except, food. Finally, 
the demand for houses is highly flexible and is primarily determined by 
costs. The potential market is great. Opportunities not only for 
general business recovery but for an expanded prosperity through 
sound reduction of housing costs are exceptionally good. 

ORGANIZATION OF THE BUILDING INDUSTRY 

The building industry is chiefly characterized by its lack of uni- 
formity in organization or type of work. It is comprised of small, 
local enterprises, each of which operates almost entirely independently 
of every other, and no one of which predominates in determining the 
ultimate cost of a house. Labor is its own production manager, per- 
forming both planning and physical operations. There is little coop- 
eration between various groups in the industry either locally or 
nationally. Each is concerned only with its own immediate ad- 

' Testimony of Dr. Isadur Lubia, Commissioner, Bureau of Labor Statistics, before the Temporary 
National Economic Committee, Hearings, Part XI. 

3 Survey of Current Business, Bureau of Foreign ind Domestic Commerce, June 1939, p. 11. See 
"Exhibit No. 6," appendix E, p. 179. 

« Construction Activity in the United States, 1915-37, Bureau of Foreign and Domestic Commerce, 1938,. 
p. 11. 

« Ibid, p. 41. 



CONCEN'HIATION OF ECONOMIC POWER 127 

vantage, and no one has any effective control over total production 
costs. 

Houses are built principally by the contract-construction branch 
•of the construction industry, as distinguished from concerns perform-' 
ing construction for their own use with their own employees. The 
contract-construction industry is in turn divided into two groups of 
concerns; namely, those whose principal or sole activity is construc- 
tion work, and those primarily engaged in other lines of activitj but 
participating in construction in connection with the sale of their 
products. A manufacturer of furnaces or a dealer in electrical sup- 
plies who installs his own products falls into the latter classification. 
The contract-construction industry may also be divided into two 
types of operators, general contractors and special-trade~contractors. 
The first assume the contract for an entire construction job, and n^ay 
act as a^ent for the owner; the second restrict their activities to a 
specialized part of the job. 

Beyond this broad grouping, there is no fixed pattern of organiza- ' 
tion in that part of the contract-construction industry engaged in 
residential building. The prospective home owner may, for example, 
build a cabin entirely with his own labor, from materials supplied by 
himself. On the other hand, he may purchase his house ready for 
occupancy from a speculative builder, just as he would buy a radio 
or automobile from a dealer. He may or may not have an architect. 
He may hire a carpenter to sketch out the plans and act as contrac- 
tor, or he may engage a specialized general contractor. The general 
contractor may use his own men for the entire job; or he may act 
merely as broker, subletting all or a major part of the work to spe- 
cial-trade contractors. The general contractor may purchase all the 
materials used or only thos6 not involved in the subcontract work. 
Building contractors ordinarily purchase their materials at retail from 
the local lumberyard or hardware store. In some cases, howeverj 
they may buy direct from the wholesaler or from the manufacturer. 

This lack of uniformity "in the building industry raises the presump- 
tion that one type of organization has not proved itself ijredominately 
more efficient than another. Small operators, building only a few 
houses a year, are able to com.pete successfully with large contractors 
or speculative builders. 

The answer to the problem of wide diversity in organization of ne 
building industry is the same as to the problem of high building costs, 
and lies in the nature* of the production process itself, which is little 
different on a large project or small, or whether the builder is a small 
operator or a large corporation. 

Before considering further the organization of the building industry 
and the question of costs, several factors should be emphasized which 
distinguish construction from other types of economic activity. In 
manufacturing, the factory can be located where production is most 
efficient because the final product is usually comparatively sm^oll in 
size or mobile. Construction, on the other hand, involves some 
physical change in or addition to land at a particular location, and the 
greater part of the operations have traditionally been performed at the 
site. The problem of most efl&cient location for production has not 
been considered a matter of choice. Obviously, a dam must be built 
where it is needed. Even a house is larger than most products of the 
manufacturing industries. 



128 CONCENTRATION OF ECONOMIC POWER 

Despite the limitations imposed by their weight and size, many 
construction works have been related to their site to far too great an 
extent. This is particularly true of houses. Admitting that it is not 
feasible with existing transportation facilities to manufacture a 
complete house in a central plant and ship it to the site, although a 
few companies have done it, great economies could be gained by 
manufacturing larger units of. the house than a brick or bag of cement. 

Under the present system, each new construction job becomes a 
factory in itself. "WTien the project is a dam or skyscraper there is as 
much opportunity for efficiency as in any factory, because of the size of 
the job. When, however, a factory must be set up to build a small 
house which will cost but a few thousand dollars, inefficiency and waste 
are inescapable. Even upon large housing projects, essentially the 
same building methods are used, although some economies are gained 
through central purchase and distribution of materials. Labor 
performs its task very little differently, and no single contractor 
handles more than a relatively small part of the work. On both large 
and small projects the building process is largely one of brokerage, 
with countless separate and independent concerns and individuals 
brought together, each performing its own particular operation as a 
separate and distinct business, charging a retailer's commission for 
every service rendered.^ 

As an indication of the large number of small concerns engaged in 
construction work, the records of the Social Security Board phow that 
there were almost 97,000 employers in the contract-construction 
industry during the first 3 months of 1938 who employed at least 1 
man at some time durmg that period. Most of these contractors were 
engaged in residential building, operating upon a very small scale. 
Eighty-three percent had fewer than 10 employees on their pay roll 
, at the end of March 1938, including both clerks and manual laborers. 
Over half had fewer than 4 employees.'' In addition to this large 
number of contractors there were probably some 50,000 or more 
operating without employees during the first 3 months of 1938, as well 
as a large number of materials suppliers engaged in construction work 
as a minor activity. 

The amount of business done during any one year by the average 
contractor is also exceedingly small. Almost 70 percent of the estab- 
lishments engaged in all types of construction work covered by the 
1935 Census of Construction performed less than $10,000 worth of 
work during that year.' Many contractors do not- maintain a regular 
place of business, but operate from their homes. Relatively few 
maintain a continuous grQ^p of employees, hiring labor as they need 
it on an hour-to-hour basis. 

Houses are built almost entirely by local enterprises which operate 
only in their own city or its suburbs.* Materials are bought from 
local retail stores.^ Labor is usually local. Few contractors main- 
tain branch offices in other cities, except in the case of certain large 
materials manufacturers who install their own products, and the 
participation of the latter in the building of any particular house is 

1 See "Exhibit No. 7," appendix E, p. 179. 

» Preliminary data secured from the Social Security Board for use in public hearings before the Temporary 
National Economic Committee, Hearings, Part 11. See "Exhibit No. 8," appendix E, p. 180. 

3 Census of Construction, 1935, Bureau of the Census, vol. Ill, p. 30. See "Exhibit No. 9," pppend'xE, 
p. 182. 

* See "Exhibit No. 10," appendix E, p. 182. 

« See "Exhibit No. 11," appendix E, p. 181. 



CONCENTRATION OF ECONOMIC POWER 129 

small. ^ Very few contractors are members of a national trade 
association.^ 

Not only are houses built by local enterprises, but the viewpoint 
throughout the building industry is distinctly local, although housing 
is a national problem affecting the national economy in many import- 
ant ways. The narrowness of this viewpoint has resulted in a variety 
of restrictive devices which have been set up in each locality to 
maintain the traditional system and the traditional relationships. 
Innovations of any nature are fought v gorously. Use of new 
materials, methods, or labor-saving devices is seriously restricted. 

No single element of the industry is responsible for its lack of 
effective organization, because none is of itself predominantly import- 
ant as a determining factor in the cost of the finished house. The 
electrical supply dealer, for example, specializes in selling and in- 
stalling electrical wiring and equipment in the house. The manner 
in which houses are wk'ed may be technically obsolete. Yet electrical 
work represents only about 3 percent of the final cost of the house. 
The dealer therefore has little interest in the house as a completed 
unit, and any savings which he alone might effect would only slightly 
alter the ultimate cost. The same is true with every other element 
in the industry, whether it be to the carpenter, plumber, mason, supply 
dealer, or manufacturer. Each participant operates independently 
of every other, except through a brokerage arrangement, and no one 
has effective control over or great interest in the total cost of 
production. 

Production management as it is linderstood in modern manufac- 
turing industries is practically unknown in the building industry. 
The general contractor would appear to correspond to the plant 
superintendent. His functions, however, are not at all similar. He 
has very little control over production methods. His control over 
labor is almost entirely limited to his power to hire and fire, and even 
that is restricted. Tradition in the building industry has ruled that 
each tradesman should be sufficiently well trained in his craft to 
assume the management functions of planning and supervision. 
Each worker is given almost complete independence in his use of 
methods and tools. A foreman may act as his immediate supervisor, 
but in most cases the foreman is not an agent of the contractor. He' 
usually represents the workers, and, in fact, is one of them. 

Not only does labor operate independently in the building industry, 
but every other group performs its own specialized operation as though 
it were in fact a separate industry. Each acts as its own manager, 
with no more coordination than the general contractor is able to exer- 
cise through his powers as broker. 

Attempts have been made in recent years, in several of the larger 
cities, to increase cooperation in the industry through the establish- 
ment of code authorities. Their expressed purpose is to prevent 
so-called unfair competition in bidding and other practices. Bid 
depositories have been set up to prisvent bid shopping and bid peddling. 
As they have been organized, the authorities merely serve to accentu- 
ate the independence of the separate groups within the industry. 
The master plumbers, for example, have their own separate and dis- 
tinct code authority to protect the interests of their own specialized 
business. The contracting plasterers have their own code. 

« See "Exhibit No. 12," appendix E, p. Ih'. 
' See "Exhibit No. 13," appendix Ei, p. 188. • 



130 CONCENTRATION OF ECONOMIC POWER 

A more encouraging development in the larger cities has been the 
organization of building congresses aimed at the promotion of the 
building industry as a whole. Their influence in coordinating the 
separate elements into which the industry is divided, however, has not 
been great, although they contain the germ of a movement which may 
become important. 

There is not even an effective national trade association to bring the 
independent groups together.. The contractors have separate and 
distinct associations for each type of contracting. Architects are 
organized separately. Materials manufacturers and suppliers have 
their own trade associations.* Every cooperative effort is designed 
to protect the interests of a special group, which, by itself, is relatively 
unimportant in the production of a house. 

Effort was made in 1923 and again in 1931 to organize a national 
association for the construction industry which would coordinate the 
separate elements. The first of these, the American Construction 
Council, was almost completely ineffective. The second attempt, 
resulting in the organization of the Construction League of America, 
was somewhat more successful. Its principal activities were in con- 
nection with the preparation of the N. R. A. Code for the Construction 
Industry. Since that time, its activities have been greatly restricted. 

PRODUCTIVITY AND COSTS 

The extremely small size of enterprises, the local nature of opera- 
,tions, the lack of coordination between the various independent groups 
in the building industry, all are contributing factors to the problem 
of excessive building costs. It is necessary, however, to look deeper 
into the building industry to discover a fundamental basis for attack. 
It is not simply a question of larger concerns, or cooperation through 
trade associations. The real problem is that of low productivity.^ 

Low productivity in the building industry may be traced to many 
causes, the most important of which are lack of coordination and 
systematic organization, failure of the industry to keep pace with 
other industries in technological improvement, prevalence of restrictive 
practices throughout the industry which deliberately limit output 
and prevent the introduction of cost-saving materials and methods, 
backwardness of design and lack of standardization in measurements 
which prevent mass production of larger units of materials, and the 
retarding influence of tradition. 

There are many ways of increasing productivity in the building of 
houses. It is possible through this approach to cost reduction to 
maintain wages and profits at a reasonably high level and at the same 
time greatly reduce the cost of housing to the consumer, without 
lowering the standards of construction. The same fundamental 
economic principle that costs depend primarily upon productivity 
applies in the case of housing as in the production of any other com- 
modity. The most progressive manufacturing industries, paying the 
highest wages, gaining the largest profits, and selling their products 
at the lowest prices, are those in which productivity is greatest. To 
secure the substantial reductions in housing costs which are needed 
m\\, by any other approach, necessarily require either greatly reduced 

' See "Exhibit No. 14," appendix E, p. 188. 
' See "Exhibit No. 15," appendix E, p. 189. 



CONCENTRATION OF ECONOMIC POWER 131 

wages, uneconomic prices for materials, or a substantial reduction 
in standards of construction. 

This does not mean that wages for certain crafts in the building 
industry are not too high, nor that prices of materials are reasonable. 
Some reductions in these money charges on the industry should be 
made. But wage and price reductions will not alone solve the housing 
problem. The building industry is a customing industry, producing 
a product to individual measurement by wasteful handicraft methods. 
Until system and efficient methods of production are introduced, 
housing costs will remain, beyond the reach of most famihes. 

Certain general principles will serve to emphasize the importance 
of productivity not only in the building of houses but in every indus- 
try. Productivity is defined as the output of goods or services per 
unit of time and per unit of energy. It is usually measured in terms 
of the physical amount of a commodity wliich one man can produce 
in an hour. It can, however, be measured in terms of output of a 
crew of workers per hour, or of a plant, or of an industry, or even of 
the Nation as a whole. The unit of time may be an hour, a week, 
a month, or any definite period. 

Ordinarily the cost of any commodity, whether it be a house or an 
automobile, is measured in terms of money. It is not dependent upon 
money, however. Cost was involved long before money came to be 
used as a means of exchange. The cabin which the pioneer built 
with his own labor from logs which he cut himself, represented a cost 
to him even though no money was involved. If through greater 
skill he could build the cabin in half the time which it took his neigh- 
bor, the cost to him was just half as much. That much more of his 
time and l^bor was available for another purpose, for hunting food, 
making his own clothing, or simply enjoying himself. 

Fundamentally, then, .costs of houses or other commodities are 
reduced not by cutting wages or other money charges, but by increas- 
ing the efficiency of the production process so that men can produce 
more of the product in a given unit of time. In a great many indus- 
tries, wages have been raised to high levels, while at the same time 
costs have been greatly reduced and prices lowered by the more 
efficient utilization of the factors of production. Further increases 
in wages and reductions in prices in these industries will be brought 
about when the philosophy of volume production is accepted in. 
American industry, and the benefits of increased productivity dis- 
tributed more widely. 

In a study of blast furnaces made by the Bureau of Labor Statistics 
and the Bureau of Census in connection with the 1929 census, it was 
found that the plants havmg the lowest output per man-hour were 
those paying the lowest hourly wage, while the plants w^th the highest 
man-hour output were those paymg the highest wages. In the 
highest-wage plants man-hour production was more than 11 times as 
great as in the lowest-wage plants. In the highest-wage plants, labor 
costs per unit of product were less than half as much.^ A study of the 
lumber industry showed similar results.^ 

In the manufacture of electric lamps, productivity increased 229 
percent from 1920 to 1931 for the industry as a whole." In tire manu- 

» Monthly Labor Review, Bureau of Labor Statistics, August 1932, p. 26* See "Exhibit No. le," 
^appendix E, p. 190. 

» Monthly Labor Review. Bureau of Labor Statistics, October 1932, p. 818. 

* Handbook of Labor Statistics (1936 edition), Buieau of Labor Statistics, p, 719. See "Exhibit No. IV," 
appendix E, p. 190. 



J32 CONCENTRATION OF ECONOMIC POWER 

facture, man-hour output increased nearly six times from 1914 to 
1931, despite outstanding improvements in quality.® In the production 
of leather, productivity increased 300 percent from 1849 to 1935.^ 
Low-priced automobiles, radios, washing macliines, and other com- 
modities would not be on the market today except for the remarkable 
increases in productive efficiency which have been achieved in manu- 
facturing. 

In addition to the manufacturing industries, productivity has 
increased rapidly in mining, in railroad tran?;^ortation, in the tele- 
phone and telegraph industries, and even in agriculture.^ 

It is true that the consumer has not always benefited from increases 
in productivity. According to the National Bureau of Economic 
Research, the benefits from increased productivity in the manufac- 
turing industries since 1914 have gone principally to the producers in 
the form of higher wages and profits, instead of to the consumer in the 
form of lower prices.^ 

The solution to technological unemployment and" inadequate pur- 
chasing power, however, does not lie in the restriction of output, the 
too great shortening* of hours, or m the return to hand methods of 
production. A high standard of living is not possible in a nation 
where productivity is low. It may not exist in a nation where pro- 
ductivity is high. In the one case it cannot possibly be achieved; in 
the other it may or may not, depending upon the adequacy of the 
system of distributing the benefits of increased productivity in the 
form of lower prices, thereby increasing demand for the product, or 
releasing purchasing power for expenditure upon other commodities. 

In the building of houses, certain technological improvements have 
been introduced since 1900. ' The concrete mixer is now used instead 
of the old hand methods of mixing. Power saws and pipe-cutting 
machines are in use on some construction jobs. Portable belt conveyors 
are available for the distribution of materials, and power shovels save 
many hours of labor time. Paint sprays, the cement gun, plaster 
gun, electric welding machines, and other power-driven tools are avail- 
able for the building contractor. With very few exceptions, however, 
houses in America are still built by handicraft methods and increases 
in productivity throughout the building industry have been very 
slight. In fact, there is evidence to indicate that in some localities 
productivity has actually declined because of deliberate restrictions 
imposed upon output. 

It should be observed that productivity has increased in many in- 
dustries engaged in the manufacture of building materials, and in this 
respect there has been technological progress in the building industry. 
Although building materials are produced by modern mass production 
methods, however, they are merely the raw materials from which a 
finished product is to be made. The efficient production of building 
materials may not necessarily result in the efficient production of 
houses. A house is assembled from many thousands of small indi- 
vidual pieces. A four-room brick-veneer house, for example, will 
require over 18,000 bricks, each of which must be bandied many times 
before it becomes a part of the house. The roof alone will contain 

» Bulletin No. 585, Bureau of Labor Statistics, July 1933. See "Exhibit No. 18," appendix E, p. 190. 

« Monthly Labor Review, Bureau of Labor Statistics, July 1937, p. 73. See "Exhibit No. 19," appendix E, 
p. 191. 

' Summary of Findings to Date, March 1938, National Research Project on Reemployment Opportunities 
and Recent Changes in Industrial Techniques, Works Progro.ss Administration. 

« Prices in Recession and Recovery, Frederick C. Mills, National Bureau of Economic Research, 1936, p. 
454. 



CONCENTRATION OF ECOIStOMIC POWER J 33 

some 9,000 shingles, each of which requires separate handHng. Besides" 
bricks and shingles, there are thousands of other units of lumber, 
cement, sand, plumbing, electrical equipment, etc., which must be 
manufactured, shipped to the warehouse, trucked to the site, mea? 1 
and cut or mixed, and finally installed in the house piece by piece. 
The units of material are so small, and the methods of assembly so 
inefficient that increases in productivity in the manufacture of building 
materials have had little efi'ect upon the ultimate cost of the house, 
either its real cost or its money cost. 

The building industry has not kept pace with other major industries 
in many important respects. It is only slightly mechanized; each 
group in the industry operates upon the unsound doctrine that there 
is only a limited amount of work to be done, and each has imposed a 
variety of restrictions designed to protect its share of the work; the 
industry has refused to recognize methods of production management 
which have greatly increased productivity and reduced costs in the 
manufacturing industries; there is httle standardization even of essen- 
tial elements; each specialized group in the production of a house has 
set itself up as an independent business with practically no coordina-. 
tion or over-all management; the attitude of the public, of governing 
bodies, of architects, of labor, of real estate boards, contractors, and 
materials manufacturers alike toward the production of housing has 
been rigidly bound to tradition ; there has been practically no scientific 
laboratory research upon the house as a complete unit. 

Considering each of these points separately, it will be sipparent 
what steps must be taken before housing costs can be greatly reduced. 
All of the limitations in the building industry mentioned above very 
seriously restrict productivity, are basically responsible for the ha.p- 
hazard organization of the industry, and result in exorbitant costs of 
building. 

Mechanization. — The tools used in the building of "houses are mainly 
hand tools. Very little power machinery has been introduced. The 
carpenter, bricklayer, and plumber use essentially 'the same tools 
which they used many years ago. The workers usually furnish their 
own kits, and the investment is relatively small. A bricklayer's kit, 
for example, will cost about $20, a carpenter's kit about $90, and a 
painter's kit consists of a putty knife and a pair of overalls. In recent 
years the contractor has furnished certain power tools and other equip- 
ment for use on the job, such as excavating equipment, concrete 
mixers, paint brushes, etc. In 1929, however, the average residential- 
building contractor had a total investment in equipment of less than 
$2,000, or only $175 per employee upon the basis of the average number 
of employees on his pay roll during the year. The average investment 
in equipment per employee was considerably lower for building con- 
tractors than for those engaged in any other type of construction work. 
For example, highway contractors owned more than a thousand dollars 
worth of equipment per employee as compared with less than $200 for 
those engaged in residential building. The only building subcon- 
tractors who showed a relatively high degree of mechanization ^vere 
those engaged in steel erection, stone wo rk^ excavating, wrecking,- and 
ornamental iron work. Masonry, painting, and plastering con- 
tractors were especially low.^ 

• Fifteenth Censns of the United States, 1930, Construction Industry, p. 96. See "Exhibit No. 20," ap- . 
pendix E, p. 191. 



J34 CONCENTRATION OF ECONOMIC POWER 

The significance of mechanization is clearly indicated in the case 
of highway construction, which, as noted above, was more than five 
times as highly mechanized as. were contractors in the housing field. 
Where formerly horses and wagons were used to move eartt in high- 
way construction, steam shovels and mechanically driven scrapers 
are now employed. Tractors and huge concrete mixers have further 
contributed to cost reductions. Mechanization in highway construc- 
tion has advanced so far that the same expenditure which in 1923 would 
have built 100 miles of highway would have built 146 miles of the same 
type in 1935, and 162 miles in 1938,'° despite general increases in wages 
for highway workers. 

In the wrecking of buildings also mechanization has produced 
remarkable results. A S-ton crane equipped with a 1,500-poimd 
"skull cracker" will accomplish the work of 100 men at one-eighth the 
cost, doing the same work with one blow that 2 men could formerly 
do in an hour and a half." 

Lack of mechanization in the building industry may be attributed 
to several causes. Contractors usually operate upon too small a 
scale to justify a large investment in equipment. Entirely satis- 
factor}'^ machinery for all building operations has not been developed, 
partly because many of the operations are by their nature hand 
operations, such as bricklaying. Furthermore, building-trades-unions 
have vigorously opposed introduction of labor-saving machinery and 
devices.^ For example, an agreement between the painters and 
contractors of Wilkes-Barre. Pa., states that "the use of the spray gun 
is absolutely prohibited, and no member shall be permitted to work on 
any job wher^ a spray gun is being used. The party of the first part 
agrees to use paint brushes not to exceed 4 inches in width on work of 
any kind except when applying water paint." '^ Plumbers, in many 
localities, are required to cut and thread pipe by hand power on the 
job. Plasterers are restricted in the use of the plaster gun; carpenters 
in the use of power-saws, mortisers, and power planers. 

Some of these union restrictions are specifically written into agree- 
ments with the contractors, as in the case noted above for Wilkes- 
Barre, Pa. In other cases, unions prohibit their members from 
using the devices or specify the conditions imder which they may be 
used, penalizing the members for violation either by fine or expulsion 
trom the union. 

Belief in limited amount of available work. — The belief that there is 
only a limited amount of work to be done prevails throughout the 
building industry. It serves both to raise money charges in the 
industry to uneconomic levels and to restrict productivity. Manu- 
facturers of building materials maintain prices at sufficiently high 
levels to insure a profit at comparatively low rates of operation. 
Labor sets its rates of wages at high levels upon the assumption that 
there is only a certain amount of work to be done. Both labor and 
manufacturers are sufficiently well organized to enforce their demands. 
These excessive money charges, although they do not yield their 
recipients a necessarily large return, at least in the case of labor, add 
to the money cost of each house that is built, restrict demand, reduce 
employment, and encourage further efforts toward wage and price 
increases. 

'• Price Trend in Highway Construction, Bureau of Public Roads. 
" American Builder, August 1328, p. 92. 

'2 Agreement between Brotherhood of Painters, Decorators, and Paperhangers, Local 41, and Employing 
Painters of the City of Wilkes-Barre and Vicinity, Pennsylvania, In effect October 31, 1939. 



CONCENTRATION OF ECONOMIC POWER 135 

Even more serious than its effects upon money charges in the indus- 
try, however, are the effects imposed by this doctrine upon produc- 
tivity. Uncertainty and fear arising from the behef that there is only 
so much work to be done have resulted in the imposition of a wide 
variety of harmful restrictions upon efficiency, particularly on the 
part of labor. Each worker nurses his ipji, whether he be a union 
man or -nonunion. In the case of union members, restrictions to 
spread the work or to maintain traditional methods take tangible 
form and are written into agreements or working rules of the unions. 
There are rules which limit the supply of labor by imposing rigid 
apprenticeship regulations and entrance requirements; '^ rules which 
require that skilled tradesmen do unskilled work, such as carrying 
materials from truck to place of use. In Memphis, an agreement 
between the contractors and painters requires that no contractor shall 
employ laborers to wipe up paint on any job.'* 

Other union rujes prohibit or restrict the installation of shop fabric 
cated materials. In Butte, Mont., for example, carpenters are 
not allowed to install doOr jamjjs that are mortised for locks or hinges 
ftfmills or shops, nor to install window or door frames that have been 
previously assembled, unless the fabrication was done in a local shop.'* 
In Baltimore and Pittsburgh, agreements between the plumbers and 
contractors state that plumbers will not install any fixture on the job 
if trimmings are already in place until the trimmings have been re- 
moved and replaced by members of the union.'® In Houston, the' 
1938 working rules of the plumbers stated that "no piping which is 
prefabricated for installation in a particular place in any certain job 
wiU be installed by members of Local Union No. 68, unless thread 
is cut off of one end of pipe and new thread is cut by members of 
Local Union No. 68." " 

Rigid jurisdictional distinctions in the building trades are in general 
also traceable to this beUef that there is only a limited amount of work 
to be done. Each trade regards the right to perform a particular 
type of work as a property right, and carefully protects the methods 
and tools of its trade. Division of work among the trades in the 
building industry is not determined upon the basis of efficiency, as ill 
manufacturing, but according to ^superior bargaining position. If 
two unions claim, a particular type of work, the stronger will usually 
get it. If they are approximately equal in strength they may com- 
promise and divide the work between them, as was done in the case of 
Acoustone, where "the Operative Plasterers and Cement Finishers 
International Association, and the Bricklayers, Masons, and Plasterers 
International Union agreed to install the material on a "50-50 basis," 
equally divided between the members of the two unions.'^ 

Unions are almost unanimous in prohibiting piece work, or the 
introduction into the building industry of any other techniques of 
scientific management which have greatly increased productivity 
and lowered costs in m^ny of the leading manufacturing industries. 
Members are, in many cases, riot permitted to make daily reports 

" See "Exhibit No. 21," appendix E, p. 194. 
^ " Agreement between Brotherhood of Painters. Decorators, and Paperhangers, Local 49 and the Con- 
tracting Painters of Memphis. 

" Working rules of the ITnited Brotherhood of Carpenters and Joiners, Local 112, Butte, Mont. 

'« See "Exhibit No. 22," appendix E, p. 195. 

I' Working rules of the United Association of Jomneymea Plumbers and Steamfitters Local No. 68, 
adopted September 1937., 

" Report of Proceedings of the Thirty-Third Annual Convention. Building and Construction Trades 
Department, American Federation of Labor, 1939, p. 46. See "Exhibit No. 23," appendLt E, p. 195. 



136 ' CONCENTRATION OF ECONOMIC POWER 

showing the amount of work done in a day. In Los Angeles, the 1937 
working rules for the carpenters required that "any member found to 
be excessively rushing shall be reported by the steward, and if found 
guilty, be ruled off the job." '' 

Whether or not the above and similar rules are rigidly enforced is 
not known. The fact that such rules exist at all, and that they are in 
many cases written into contract agreements, indicates that they have 
considerable significance as restricting factors in the industry. They 
are expressions of a doctrine which has kept the building industry in an 
obsolete, disorganized condition. 

Management. — Throughout its operations the building industry has 
failed to adopt efficient methods of management. In many manu- 
facturing industries it has been clearly demonstrated that scientific 
management can more than double productivity, permitting at the 
same time greatly increased wages and lower total costs. In fact, 
scientific management has probably exercised as much influence in 
reducing costs in the manufacturing industries since 1900 as has 
increased mechanization. Yet, with very few exceptions-, its tech- 
niques have never been applied to the building of houses. 

The possibilities for cost reduction through scientific management 
are illustrated by results obtained from its application upon a large 
housing project in France. From 1920 to 1937, the Michelin Low- 
Cost Dwelling Corporation built houses for more than 3,000 employee- 
families of the Michelin Tire Factories at Clermont-Ferrand. In 1920, 
11,643 working hours were required to build a house. In 1937, only 
5,548 were required, or less than half. In 1920, the construction fore- 
man and labor supervisors were responsible for preparing and organiz- 
ing the work, such as building up working gangs,, providing them with 
material, selecting the tools to be used, choosing the labor methods to 
be utilized^ and determining the time to be allowed for each job. 
After 1920, a planning department was set up, and all the functions 
•of preparation and organization of the work were turned over to its 
engineers.^" 

In America, the few experiments which have been tried in the appli- 
cation of scientific management to the building of houses have shown 
remarkable savings. In a housing project near Baltimore, built under 
the engineering direction of the Thompson & Lichtner Co. of Boston, a 
planning department was set up to plan the details of measuring, most 
economical spacing, scheduling materials, and interlacing of the various 
trades. Actual time reductions on carpenter operations were achieved 
on this project ranging from 25 to 36 percent. ^^ Also, in a project of 
30 houses built by the Southwest Portland Cement Co. in California 
for its employees, production time was greatly reduced through 
adequate planning and production standards. Electric wiring, for 
example, required only one-fourth as much time on the last house as 
on the first. Excavating required 27 percent as much time on the 
last as on the first. To build the entire basic structure of the house 
required less than half as many man-hours on the thirtieth house as 

i« Working rules of the Los Angeles District Council, United Brotherhood of Carpenters and Joiners of 
America, adopted March 30, 1937. 

20 Special Report No. 185 to Department of Commerce, by Lestrade Brown, Assistant Ujiltod States 
Trade Commissioner, Paris, France, February 2, 1937. - 

»' System. Can Cut Building CJoets, Sanford E. Thompson and W. K. Curley, Nation's Business,- January 
1939. 8«e "Exhibit No. 24." anpendJx.E, p. 195i. • ' '-" 



CONCENTRATION OP ECONOMIC POWER 137 

on the first. These savings were achieved by planning each element 
of the work in advance, dividing the workmen into small crews, giving 
each crew limited and repetitive operations to perform, and maintain- 
ing a constant check upon the time required to-complete each part of 
the house. No time was wasted by the workmen in making, decisions. 
Their functions were limited to the actual performance of the work.^^ 

On the ordinary building job, it has been estimated that more than 
25 percent of the average craftsman's time is spent in .making decisions 
as to his next move. Each operation offers a new problem to be 
solved. Its proper solution depends very largely upon the skill and 
training of the individual craftsman. There are no production 
standards. Although time studies were .made for many of the building 
operations as early as 1900, following the principles of scientific 
management, they have had praciically no influence in the industry. 
In 1923 the Bureau of Labor Statistics conducted a survey cf labor 
productivity and costs in several of the building trades. In this report 
it was stated that the Bureau was unable to find a single contractor 
in the 15 cities visited who had a record of work done per man-hour 
on any job in progress, or upon any former job, and that the men 
co.ming in direct contact with building work had very little interest in 
the time costs by occupations or trades in the building industry .^^ 
Since 1923, scattered time estimates have been published in various 
building estimators' handbooks, but they are based largely upon 
guesswork. 

The above study developed several significant facts concerning the 
wide differences in output in different localities which sei-ve to empha- 
size the need for accurate production standards in the building indus- 
tiy. For example, the number of bricks laid per hour upon similar 
jobs varied from 96 in Indianapolis to 241 in Birmingham. The cost 
of laying 1,000 bricks in Birmingham was slightly less than $5 and in 
Indianapolis was almost $15. The average wage rate in Birmingham 
was $1.16 and in Indianapolis $1.37, but the greater part of the differ- 
ence in cost was caused by the difference in productivity. In plaster- 
ing, square yards plastered ranged from. 4}^ in Boston to almost 8 in 
Philadelphia. Unit costs of plastering were even .more striking than 
in the case of bricklaying. Despite an hourly wage of $1.64 in Phila- 
delphia, as compared with a wage of $1.44 in Boston, the cost of 
plastering a square yard was 21 cents in Philadelphia and 33 cents in 
Boston. 

Early in the century, Frank B. Gilbreth, a former bricklayer by 
trade, showed clearly what can be gained through the use of scientific 
methods in the building trades. After a careful analysis of all brick- 
laying operations and motions, and by proper placement of equipment 
and elimination of useless motions, he was able to reduce the necessary 
motions in laying bricks under standard conditions from 18 to 5. On 
a large brick building, men using his new methods averaged 350 bricks 
per man per hour, whereas the average speed in that section of the 
countiy was 120 bricks per hour.^^ 

Both management and labor are responsible fqr the obsolete man- 
agement methods which persist in the building industry. Contractors 
cling to the traditional viewpoint that bricklaying and carpentering, 

" Architectural Forum, March 1939. See "Exhibit- No. 25," appendix E, p. 196. 

" Productivity in Certain Building Trades, 1923, Elhelbert Stewart, Monthly Labor Review, Bureau of 
Labor Statistics, Xovember 1924, pp. 1-15. 
'* Principles of Scientific Management, Frederick W. Taylor. 



238 CONCENTRATION OF ECONOMIC POWER 

for example, are such old occupations that their methods camiot be 
improved upon. Even upon large scale housing projects, management 
consists principally in bringing the various elements together, under a 
brokerage arrangement, permitting each to plan, supervise, and perform 
its own particular operation. Modern engineering science has only 
rarely been applied to the production of houses. 

Labor has generally opposed the use of scientific management in the 
building trades, just as it opposed its introduction into the manufactur- 
ing industries early in the century. In the manufacturing industries, 
labor has come to recognize that increased productivity holds the key 
to higher wages and lower prices, but in the building trades the old 
philosophy of limitation of output prevails. 

Scientific management is as necessary for cost reduction in the build- 
ing of houses as in the manufacturing of automobiles, radios, steel, 
or any other commodity. Its practicability, and cost-saving advant- 
ages, have been clearly proven on the building projects where it has 
been tried. There are limitations to its use in the building of isolated 
houses. Its principal savings can be gained upon larger housing 
projects. It offers a method of handling either existing or entirely 
new materials more efhciently on the job, with substantial savings in 
time and cost. 

Standardization. — A further important reason for excessive building 
costs is the fact that houses are built to individual specifications, 
even in the essential elements. There is little standardization of 
materials or dimensions. Room heights, wall thiclaiesses, window and 
door openings, room lengths and widths vary sometimes by fractions 
of an inch, and almost every item of material used in the production 
of a house can be purchased in several sizes. The wide variation in 
sizes and use of fractional dimensions does not add to the individuality 
of houses, but very seriously limits the possibilities for mass production 
of materials, requires the carrying of large inv^entories, results in 
confusion, and seriously interferes with the introduction of mass pro- 
duction methods in the building industry. 

One manufacturer lists as stock, ready for delivery in its regional 
warehouses, 82 different kinds and sizes of double-hung windows 
alone. Even bricks come in different sizes, although the National 
Bureau of Standards has greatly reduced their number in recent yeare. 
Before sunplification by the Bureau, for example, there were 75 
different varieties of brick. The Bureau recommended that these be 
reduced to two. Before simplification there were 1,114 different 
varieties of brass lavatory and sink traps. These were reduced to 76. 
There were more than 1 ,200 sizes of slate roofing. After simplification, 
there remained more than 300, despite a 75-percent reduction in 
number of sizes. In the case of wooden window frames, the Bureau 
of Standards found several years ago that it was virtually impossible 
to effect any reduction at all in the large number of sizes because of 
the wide regional differences in architectural styles.^^ 

As an indication of the savings which might be achieved through 
standardization of dimensions and sizes, steel stairs bought in quanti- 
ties for the Clairton Colonial Village project near Pittsburgh cost $22 
per flight in contrast with the estimate made by the manufacturer of 
$75 for one individual flight. ^^ This type of standardization has no 

» Letter Circular LC-504, National Bureau of Standards, September 3, 1937, 

'« Industrinl Standardization and Commercial Standards Monthly, American Standards Association, 
August 1939, p. 210. 



CONCENTRATION OF ECONOMIC POWER J 39 

eflfect whatsoever upon appearance or utility. It has been clearly 
demonstrated by the Modular Service Association and by the Homa- 
sote Co. that any number of house plans and styles can be designed 
upon modular dimensions, using 4 inches as the smallest unit of 
measurement instead of fractions as at present. From actual experi- 
ence in directing the construction of a large number of houses, the 
Homasote Co. estimates that modular design has resulted in a net 
saving of approximately 10 percent. ^^ The ultimate savings through 
standardization would undoubtedly be considerably greater upon its 
application throughout the building industry to both materials and 
architectural dimensions. Room heights, for example, could be 
standardized, permitting mass production of stairways and wall 
panels. Room lengths and widths could be in multiples of a standard 
unit, permitting the use of larger units of material than bricks. 

The American Standards Association, representing some 75 national 
trade associations, technical associations, and the Federal Government, 
has recently adopted a broad program directed at the standardization 
of building dimensions and sizes of building materials. As a result 
of a request made by the Modular Service Association early in 1938, 
the American Standards Association established the Committee on 
Coordination of Dimensions of Building Materials and Equipment. 
This is the first time an industry-wide approach has been made to the 
problem of standardization in the building industry, and it offers con- 
siderable possibilities for success. The committee represents almost 
every group interested in building, including manufacturers, archi- 
tects, contractors, dealers, Government agencies, and architectural 
schools. Subcommittees have already begun studies of masonry, 
wood doors and windows", metal windows, and a committee has 
been authorized to undertake studies of structural wood and lumber 
construction . 

Coordination. — As has previously been indicated, the building in- 
dustry is made up of many separate and independent groups. Each 
group is organized as a business in itself. Each performs its special 
function with little relation to the others. There is no over-all man- 
agement, and no effective coordination of the various elements par- 
ticipating in the production of houses. 

Every effort at simplification or improvement of the production 
process meets with vigorous opposition on the part of one or more of 
these independent groups into which the industry is divided. One of 
the more common types of opposition may be illustrated by several 
cases which have come before the Federal Trade Commission in recent 
years in which retail dealers have organized to force all building 
materials through the established retail channels. In such a case, for 
which a cease and desist order was issued late in 1937, retail dealers 
controlling a large part of the sales of building materials and supplies 
in more than 30 States had organized specifically to force the distribu- 
tion of building materials exclusively through the recognized retail 
dealers.^* Similar organizations were found to control a large part of 
the market in California and Florida, and cease and desist orders were" 
issued by the Commission in 1938.^ All of these dealer associations 

" Ihid 

" In the Matter of nuildinp Material Dealers' Alliarn-e et al., before the Federal Trade Commission, 
December 30, 1P37. See "Exhibit No. 26," appendix K, p. 196. 

" In the Matter of California Lumbermen's Council et al , July 23, 1938; and In the Matter of Florid" 
Building Material Institute, Inc , September '0, 1938, before the Federal Trade Commission. 

260158— 40— No. 8 11 



J40 CONCENTRATION OF ECONOMIC POWER 

had as their primary purpose the prevention of direct sales of building 
materials by manufacturers or wholesalers to consumers, nonrecog- 
nized dealers, contractors, and Government agencies. Boycotts or 
threats of boycott were employed successfully against manufacturers 
who refused to cooperate. 

Special-trade contractors often practice similar restraints upon dis- 
tribution by requiring that their contract include both installation 
and furnishing of materials. Labor sometimes cooperates by refusing 
to work for contractors who do not furnish their own materials. 

It is little wonder, with such restrictions prevailing, that building 
materials are for the most part purchased in small quantities from the 
local hardware store or lumber yard.. The mere fact that such restric- 
tions exist would indicate that considerable pressure has been exerted 
from time to tim(^ by contractors and other groups to simplify the dis- 
tribution process. 

The effects of the present roundabout distribution system are per- 
haps best illustrated by comparison with the automobile industry. 
Costs of producing automobiles would be tremendously increased if all 
materials from which cars are made were purchased through local re- 
tail dealers. The local dealer has not been eliminated in the auto- 
mobile industry; in fact, in 1935 more people were engaged in the local 
distribution of new automobiles than in the retail distiibution of build- 
ing materials.^^ But the automobile dealer performs an entirely differ- 
ent function than does the building materials dealer. He is engaged in 
distributing a finished product ready to be driven away. Carburetors, 
glass, motors, sheet metal, and the other parts and materials from 
which automobiles are made are distributed in the most direct manner 
possible, from manufacturer to manufacturer. 

Similar opposition to change or improvement persists among almost 
every group connected with the building industry. Manufacturers 
often refuse to sell their products to groups representing new methods 
of sale or new price policies. Sometimes they exercise their patent 
privileges to control unpatented products also. Contractors combine 
to keep all work for member contractors, and secure agreements 
whereby labor refuses to work for contractors who are not members 
of the association. Contractors also combine to prevent competition 
from out-of-town contractors, and to prevent the use of prefabricated 
materials. Legislative bodies, both State and local, assist in many of 
these restraints by requiring licenses for contractors, by prohibiting 
the use of out-of-State materials, and by inserting rigid and unneces- 
sary requirements in local building codes. 

An encouraging development has occurred in the last year which 
offers considerable promise for removal of many of the more wasteful 
of these restrictions. Under the antitrust laws, the Department of 
Justice has undertaken a broad program of investigation and prosecu- 
tion covering all groups in the building industry in selected cities 
throughout the country. Indictments have already been returned in 
a number of these cities involving such restrictions as the fixing of 
prices by materials suppliers, control of bids by contractors, sale of 
materials only to selected companies, jurisdictional (|lisputes between 
labor unions, and so forth. ^^ 

'' Census of Business, 1935, Retail Distribution, vol. 1, p. 2-04, Bureau of the Oensus. See "Exhibit No. 
27," appendix E, p. 200. 
" See "Exhibit No. 28," appendix E, p. 200. 



CONCENTRATION OF ECONOMIC POWER 141 

Some effect upon building costs has already been noted by the De- 
partment as a result of this program. Other immediate savings will 
undoubtedly come as the program progresses. More important than 
the immediate savings, however, is the effect which the program can 
have in removing many of the hazards to experimentation into new 
methods and new materials for building low-cost houses. Such a 
program, if continued on a permanent basis, is also one of the most 
effective ways to insure that the savings from improved techniques 
will Ke rapidly passed on to the consumer in the form of lower housing 
costs. 

Organization of the building industry into many separate businesses 
has created a condition in which no single group acting alone is able to 
exercis much influence over costs, either in lowering or raising them. 
Removal of restrictive practices, lowering of prices, or reduction in 
wages of any single group would have little effect upon costs, and would 
serve only to place that particular group in a disadvantageous position. 
No single element in the industry is strong enough to assume leadership. 
Tradiiion. — Tradition has played a much more important part in 
the building of houses than in the production of other commodities. 
The public has demanded complete individuality in design, not only 
in general appearance and plan, but in small details such as window 
and door sizes, room heights, and many others which have little effect 
upon appearance or utility. Moreover, contractors, laborers, real- 
estate men, manufacturers, architects, and the general public alike 
have refused to believe that the age-old methods of building houses 
on the site, piecing small units of material together, layer on layer by 
hand, can be improved upon. The importance of this psychological 
influence should not be minimized, because it has bound the house 
rigidly to its site and discouraged experimentation. It has seriously 
interfered with the introduction of new materials, and has taken 
tangible form in the restrictions upon new methods and materials 
imposed by building codes, lending policies, and so forth. 

Industrial research.— Finally, and most important, the building in- 
dustry has fallen far behind other industries in respect to scientiflc 
industrial research. There has been little effort to develop in the 
research laboratory methods of building or improved materials for the 
house as a complete unit. As will be developed in the following sec- 
tion, scientific research directed at the development of entirely new 
building materials and methods, the improvement of existing mate- 
rials, and the perfection of scientific production management tech- 
niques offers the greatest immediate promise for substantially increas- 
ing productivity throughout the building industry, thereby reducing 
costs to the levels necessary for adequate housing in America and sound 
expansion in the building industry. 

NFED FOR SCIENTIFIC INDUSTRIAL RESEARCH 

In the building industry, industrial research aimed at the develop- 
ment of low-cost houses has been almost entirely neglected. Con- 
tractors operate upon too small a scale to carry on research. Manu- 
facturers of building materials often maintain research laboratories 
but are interested only in the development of their ownproducts, and 
no single manufacturer produces a very large proportion of the mate- 
rials used in a house. Gypsum companies, for example, Pianufacture 



142 CONCENTRATION OF ECONOMIC POWER 

only such things as plaster boards and plaster. Brick companies 
specialize in brick. No single manufactui'or is interested in the house 
as a whole, and none of them has been willing to spend money upon 
industrial research of a comprehensive nature. 

In recent years a few companies, commonly referred to as prefabri- 
cation companies, have attempted to develop processes by which com- 
plete houses or their component parts might be manufactured by one 
company in a central plant and shipped to the site. A considerable 
number of houses have been produced and sold by these companies. 
For the most part, however, the prefabricators have merely trans- 
ferred traditional methods of layer and piece construction into a cen- 
tral factory upon the theory that the same building operations could 
be more efficiently performed at a central location. Direct labor has 
simply been changed to indirect. Little effort has been made to re- 
duce substantially the number of handling operations through the 
development of entirely new materials or methods. Because of the 
tremendous weight and size of houses, the cost of transportation from 
factory to site has very largely offset any savings achieved by this 
method of centralized production, and the market area has been 
greatly restricted. Moreover, traditional materials do not lend them- 
selves well to factory assembly, and the appearance of prefabricated 
houses has not met with public approval. The prefabrication com- 
panies have, however, made valuable contributions by considering 
the house as a complete unit and by developing a panel system of 
construction. The panels are usually room height and wall thick- 
ness, and are composed of various materials such as steel or wood 
frame faced with plywo"od or asbestos board. The companies have 
not had extensive funds for research into new materials, and their 
efforts will serve principally as the starting point for further efforts 
in this direction. 

Several Federal agencies have engaged in housing research from time 
to time, but on a relatively insignificant scale. The Forest Products 
Laboratory, for example, has conducted a limited amount of research 
upon the development of new uses for wood in low-cost housing, and 
through a small program has achieved remarkable results in the 
development of an improved plywood and system of panel construc- 
tion. The National Bureau of Standards is at the present time 
engaged in testing various construction systems developed by private . 
companies. The Farm Security Administration has developed cost- 
saving systems of panel construction for farm buildings. But, with 
these few exceptions, Federal agencies have not conducted research 
into new methods and materials for building low-cost, quality houses. 

In contrast with the almost complete disregard for the importance 
of industrial research in the building industry, the leading manu- 
facturing industries have long recognized that cost reductions and 
quality improvements are usually a direct result of laboratory 
investigation. Among the industries which maintain the important 
laboratories are the leading industries in America, such as the chemical, 
petroleum, automobile, rubber, iron and steel, machinery, agricultural 
implements, electrical and radio industries. Largely as a result of 
this type of research, low-priced automobiles, radios, refrigerators, 
food, and other commodities have been made available. Estimates 
of the total amount spent each year by private companies for industrial 



CONCENTRATION OF ECONOMIC POWER 143 

research range from $100,000,000 to as high as $200,000,000 or more.^ 
The possibiUties for rapid progress in the direction of reduced 
building costs through an adequate program of industrial research are 
extremely favorable. Several authorities have estimated that it may 
be possible by this method to reduce costs by as much as .50 percent 
without lowering standards of quality.^ Ne\y machinery can be 
developed to displace many of the handicraft methods of assembly, 
Engineering studies can be made to establish reliable production 
standards for each craft and to determine the most efficient method 
of performing each operation, Suitable schedules and planning 
techniques can be worked out for application by the contractor or 
building concern. Structural dimensions and sizes of building 
materials can be standardized. Perhaps the greatest opportunities, 
however, are in the investigation of entirely new materials and 
methods of building. 

Traditional site construction and lack of standardization have ruled 
that houses should be built of countless small units of material, which 
do not lend themselves readily to efficient assembly, either on the site 
or in a central prefabrication plant. Wood requires measuring, 
cutting and fitting. Bricks are exceedingly small and must be placed 
by hand. 

Moreover, existing materials must be assembled layer upon layer, 
because no single material has been developed which will fulfill more 
than a few of the functions required of a cofnposite structural part, 
such as a wall or floor. For example, the outside wall of an ordinary 
frame house is made up of some 10 or more individual layers of 
material, such as framing, sheathing, water-proof paper, siding, 
insulation, lath, three coats of plaster, interior finish, and several 
coats of paint on the outside. Each layer performs a distinct function 
and requires separate and costly handling. 

It should be possible within a reasonably short period of time under 
an adequate program of laboratory research to develop a building 
material which would greatly reduce the necessity for layer and piece 
construction. The required research is largely that of the application 
of principles and jnaterials which have been developed in other 
industries. For example, in the field of plastics, complete wings and 
fuselages for aeroplanes have been produced using synthetic resins, 
both in this country and abroad. Although still in the experimental 
stage, several companies have already organized for production. 
Automobile manufacturers are said to be interested in the possibilities 
of molding complete automobile bodies by a similar process. 

Production in plastics is based upon the principle that one fabricat- 
ing operation produces a finished part. Wliether plastics can be 
adapted to the manufacture of large panels or sections for use in low- 
cost housing is not known. That is a problem for the laboratory. 
The production principle upon which use of plastics is based, how- 
ever, illustrates the approach which should be followed in developing 
a more satisfactory building material. The aim should be to reduce 
handling and tooling operations, and to combine multiple functions 

' Research— A National Resource, National Resources Committee, December 1938; Maurice Holland, 
Dun's Review, December 1938; Christian Science Monitor, January 1, 1940, reporting estimate by William 
A. Hamor. See "Exhibit No. 29." appendix E, p. 202. 

2 Robert L. Davison, Director of Housing Research, John B. Pierce Foundation, Hearings before the 
Temporary jNational Economic Committee, Part 11. Report of the Correlating Committee on Tech- 
nological Developments, President's Conference on Home Building and Home Ownership, 1931. See 
"Exhibit No. 30," appendix E, p. 204. 



J 44 CONCENTRATION OF ECONOMIC POWER 

into a single material. Development of such a material would do 
much to accomplish the purpose of reducing man-hour requirements 
in the production of houses, which, as previously stated, is the only 
effective way of substantially lowering building costs. 

The ideal material for gi-eatest efficiency in the building of houses 
should possess the following qualities: 

1. It should be light in weight. 

2. It should be structurally strong. 

3. It should be durable. 

4. It should be fire resistant. 

5. It should be moisture, weather, and sound proof, and should 
have a low rate of expansion. 

6. It should lend itself readily to molding in large panels or 
sections. 

7. It should be easily bonded together to present either a smooth 
or broken finish. 

8. It should have permanent exterior and interior finishes iu 
a variety of colors molded into the units as integral parts of the 
material. 

9. It should be adaptable to assembly in either traditional or 
modern design. 

10. It should be inexpensive to produce in large quantities, 
and available throughout the country. 

Regardless of whether or not it is possible through research to 
develop a single material which will fulfiU all of the above requirements, 
it is certain that materials could soon be developed which would 
appreciably reduce the necessity for costly layer and piece construc- 
tion. 

Methods of assembly could also be greatly improved by laboratory 
investigations. Careful engineering analysis of the most efficient 
methods, took, and machinery for each building operation, the estab- 
lishment of scientific production standards, and the development of 
new systems offer considerable possibilities for reduced costs either 
with existing or new materials. Systems of panel construction have 
been developed by several prefabrication companies which offet an 
important basis for further research. They effectively demonstrate 
that it is possible to buUd houses of larger units of material than bricks 
or shingles. Although the necessity for layer and piece construction 
has not been overcome in these systems, they have done much to point 
the way to an efficient method by which houses of many designs can 
be assembled from large panels which are prepared in a central plant. 
The principal requirement again is for the development of a satis- 
factory material for molding which will have the multiple character- 
istics enumerated above. 

Comprehensive industrial research in housing is closely related to 
the restrictive practices which prevail throughout the budding 
industry, some of which have been discussed in this report. Many of 
these practices will require direct attack by methods such as are now 
being employed by the Department of Justice. The wide prevalence 
of restrictions, however, suggests the possibility that in general they 
are results rather than causes of the technological backwardness 
of the building industry, and could in large part be most successfully 
overcome through the type of industrial research referred to above. 



CONCENTRATION OF ECONOMIC POWER 145 

For example, if materials and methods were developed in the labora- 
tory by which quality houses could be produced and offered for sale 
at approximately half their present cost, a great majority of the 
restrictive practices would disappear through pressure of public 
demand. This cannot be accomplished by the improvement of 
details such as wallboard, roofing, or furnaces. It can only be done 
through comprehensive research upon the house as a unit. Restric- 
tions imposed against the automobile by the carriage and wagon 
makers, for example, could not have been overcome simply by the 
development of a better carburetor; they became completely ineffec- 
tive, however, when Ford developed a complete low-priced car. 

Because of the organization of the building industry into many 
small and independent concerns, and because of the traditional view- 
point which prevails, there is little likelihood that the type of research 
which is needed will be undertaken by private companies, unless a 
large concern, disassociated from the industry, should interest itself 
in the problem of low-cost housing and should be willing to set aside 
several million dollars for the necessary laboratory work. 

In its capacities for comprehensive research into new methods and 
materials, the building industry is similar to agriculture. It is organ- 
ized into many small and independent enterprises, no one of which is 
in a position to spend money for research or to take a broad view of the 
technological problems of the industiy as a whole. In agriculture the 
Federal Government has for many years conducted the essential 
laboratory work. A total of more than $20,000,000 was appropriated 
annually by Congress for this purpose during 1937 and 1938. In the 
building industry neither the Government nor private industry has 
assumed responsibility for industrial research, and to this fact may 
be attributed, more than to any other single thing, the present 
inefficiency of the building process, the disorganization of the building 
industry, and the excessive cost of housing. 

RECOMMENDATIONS 

It has been pointed out that some reductions in housmg costs could 
be effected through the lowering of such money charges as wages of 
building craftsmen and prices of building materials. The first is made 
difficult because no one is in a position to guarantee labor steady em- 
ployment, since employment is almost as uncertain for the contractor 
as for labor. The second is complicated by the fact that the materials 
which are manufactured or supplied by any one company represent 
but a relatively small proportion of the materials used in a house, and 
price reductions by a single manufacturer or group of similar manufac- 
turers would simply place them in a disadvantageous position and 
have little effect upon the cost of building. Moreover, when new 
houses can be built for but a very small percentage of the highest 
income families in America, more substantial reductions in costs are 
necessary than can be achieved through the adjustment of prices, 
wages, and fees. 

It has been emphasized that the philosophy of limitation of output 
prevails throughout the building industry. Manufacturers restrict 
output to keep prices high, just as labor restricts it by limiting, either 
directly or indirectly, the amount of work done. The conclusion has 
been drawn that until productivity throughout the industry is greatly 



146 ' ^^ >NCENTRATION OF ECONOMIC POWER 

increased Dy the development of more efficient methods and materials 
through scientific industrial research, housing costs will remain high. 
Also, that unless productivity is increased in the production of houses 
to halance the steady increases in efficiency in other industries, stand- 
ards of housing will steadily decline in relation to the general standard 
of living, or rents will consume a larger and larger proportion of the 
family budget. 

Labor is particularly injured by the inefficiency of the building in- 
dustry-, not only because the resulting high costs limit demand and 
cause serious unemployment, but because labor is the principal con- 
sumer and most affected by liigh rents. 

Because of the importance of low-cost housing, both to national 
recovery and to i.mprovod living conditions, it is highly important that 
several specific steps should be taken by the Federal Government to 
secure the immediate reduction of building costs. Each of these steps 
is based upon tlie principle that the provision of adequate housing is 
an tmdertakiug for private enterprise, but that the Federal Govern- 
ment should assume responsibilit}'^ for actively assisting in every way 
possible to develop methods and procedures by which building costs 
may be reduced to levels which will insure adequate shelter for ever}'- 
family in America. 

It is recognized as extremely important that in such a program of 
active assistance by the Federal Government, guarantees should be 
provided whereby any reductions in cost resulting from increased 
efficiency through technological improvement will be immediately 
passed to the consumer in the form of lower ownership costs rather 
than accumulated as higher dividends, profits, or wage rates which 
tend to increase purchasing power of l)ut a relatively small group of 
consumers. 

It is recoD mended : 

1. Irulastrial research. — That adequate fvuids should be pro- 
vided by Congress to a specially designated group for the initia- 
tion and coordination of comprehensive laboratoiy research 
directed at the immediate development of materials and methods 
for low-cost housing. 

The central group might be organized similarly to the National 
Advisory Committee for Aeronautics. It should be given com- 
plete freedom in its search for improved materials and methods. 
Subjects for investigation should include standardization of 
materials and dimensions, scientific production management, 
mechanization of building operations, and new materials. 

Existing facilities of the National Bureau of Standards, the 
Forest Products Laboratory, and the Agricultural Experiment 
Stations should be utiHzed for actual laboratory work where 
possible. 

The Federal Government should assume responsibility for 
technological research ir the building industry as it has done in 
agriculture and aviaiiion. Only through such a program of in- 
tensive laboratory research can the costs of housing be sub- 
stantially reduced within a reasonable period of time. 

2. Scientific management. — That every effort should be made 
by the Federal Housing Administration, the United States 
Housing Authority, the Department of Commerce, and the 
Department of Labor to encourage the introduction and use of 



CONCENTRATION OF ECONOMIC POWER 147 

scientific management metiiods upon housing projects, both 
pubUc and private. That the detailed study of building opera- 
tions and the preparation of production standards for each craft 
and type of work in the residential building field in representative 
localities should be included as an essential part of the compre- 
hensive research program recommended above. 

3. Standardization. — That until an adequate program of 
industrial research is provided, active encouragement should be 
given to the "National Bureau of Standards and the American 
Standards Association in the standardization of building materials 
and structural dimensions. That this activity should be in- 
cluded as an essential part of the comprehensive research program 
recommended above. 

4. Restrictive practices. — That the investigation and prosecu- 
tion of restrictive practices should be continued upon the present 
basis by the Department of Justice, with effort made in each 
instance not only to prosecute but to point out to the parties 
involved legitimate and efficient methods of performing their 
respective fimctions in the building industry. That such 
affirmative assistance should be provided through close cooper- 
ation between the Department of Justice and the several Federal 
housing agencies. 

5. Building codes. — That, under the leadership of the Depart- 
ment of Commerce acting through the National Bureau of 
Standards, standard building codes should be formulated for 
residential construction in the various regions into which the 
United States is naturally divided. That until such ideal codes 
have been devised, methods of direct attack should be adopted 
by the Federal Works Administration, the Department of 
Justice, the Federal Housing Administration and the Office of the 
Defense Housing Coordinator to secure revisions of the most 
serious restrictions contained in existing codes in the larger cities. 

It is recognized that many other steps might be taken by the Federal 
Government toward promoting expansion in the building industry 
■through reductions in costs, but the five recommendations listed above, 
if carried out actively, would bring rapid reductions in housing costs 
without subsidization or the lowering of building standards. Tech- 
nological backwardness and low productivity are basically responsible 
for excessive building costs, and the most important single approach to 
the problem is through the immediate expansion upon an adequate scale _ 
of scientific industrial research under the leadership of the Federal 
povernment. 

. Industrial research in this field is especially important in view of 
the present war emergency. When the United States entered the war 
in 1917, one of the more serious problems was that of inadequate 
housing in the industrial centers where new workers were drawn in 
large numbers to provide essential war materials. Serious labor turn- 
over and threat of skilled labor shortages in these industrial areas were 
directly traceable to the lack of housing facilities. In many places 
skilled workers could not be retained even with high wages because of 
unsatisfactory living conditions. Labor turn-over mount-^d to as 
high as 360 percent a month in some plants. Efficiency was seriously 
affected. In 1918 the United States Housing Corporation was formed 
to alleviate the condition by building houses directly for the Federal 



J48 CONCENTRATION OF ECe)NOMIC POWER 

Government where the shortage was most serious. The Corporation 
had just begun to function effectively when the armistice was signed. 
A similar housing emergency has already become apparent in 
many localities as a result of defense preparations. A Defense Hous- 
ing Coordinator has recently been appointed to deal with the situation. 
It is important that concerted effort be made to reduce the money 
cost of housing and especially the time required to build, unless hous- 
ing is to become a serious bottleneck in the production of defense 
essentials. Both the time cost and the money cost of housing can be 
reduced through the immediate e;xpansion of industrial research aimed 
at the reduction of housing costs through increased productivity. 



APPENDIX A 

Table A. Comparison of net earnings and construction expenditures of the United 
States Steel Corporation— 1904-38. 

B. Income and operating expense per room per month, and operating and 

capital costs in relation to gross annual income, for 39 New York 
apartment buildings — 1937. 

C. Prices of five principal construction materials — 1937. 



Table A. — Comparison o/ net earnings and construction expenditures of the United 
States Steel Corporation— 1904.-S8 

[1925=100] 



Year 


Index of 
net earn- 
ings 
before 
deprecia- 
tion 


Index of 
new con- 
struction 
expendi- 
tures 


Year 


Index of 
net earn- 
ings 

before 
deprecia- 

- tion 


Index of 
new con- 
struction 
expendi- 
tures 


1904 


44 

72 

94 

97 

55 

79 

86 

63 

65 

82 

59 

78 

201 

178 

112 

87 

106 

56 


25 

34 

45 

95 

70 

53 

75 

70 

20 

60 

33 

22 

84 

167 

183 

123 

145 

99 


1922 _ 


61 

108 

92 

100 

120 

99 

116 

156 

91 

25 

—11 

7 

18 

32 

71 

95 

34 


33 


T905 


1923 - 


77 


1906 


1924 : 


101 


1907 


1925 


100 


1908 


1926 - 


107 


1909 


1927 


138 


1910 


1928 


73 


1911 


1929 -. 


84 


1912 


1930 


204 


1913 


1931 


84 


1914 


1932. 


11 


1915 


1933 - 


14 


1916 


1934 


14 


1917 


1935 - 


60 


1918 


1936 - --- 


108 


1919 


1937 - 


Ci 


1920 


1938 


1921 ._. 







> No data available. 

Source: "Tabulated History of the United States Steel Corporation," Wall Street Journal, Oct. 4, J937. 

149 



150 



CONCENTRATION OF ECONOMIC POWER 



Table B.^^ — Income and operating expense per room per month, and operating and 
capital costs in relation to gross annual income, for 39 New York aparttnent 
buildings — 1937 





Rent per 

room per 

month 


Operating 

expense 

per room 

per 

month 


Percent of gross 


annual income 


Percent 
profit 
or loss 


Height of apirtment buildins 
(in number of stories} 


Operating 
expenses ' 


Taxes and 
assess- 
ments 


Interest 

on 

mortgages 


Vacancies 

3.1 
2.8 
9.0 
1.3 
.4 


5 - 


$7.13 
10.69 
11.53 
8.80 
11.33 
^ 6. 24 
10.29 
17.22 
14.14 
21.70 
22.07 
27.18 
28.43 
28.86 
40.95 
15.16 
26.84 
15.79 
21.15 
21.53 
21.69 
23.10 
30.29 
31.28 
30.29 
31.28 
22.71 
28.87 
22.71 
23.75 
23. 93 
23.63 
24.72 
25.73 
26.44 
21.73 
28.41 
36.52 
42.32 


$2.42 
4.59 
3.87 
2.88 
4.25 
2.83 
4.77 
7.36 
6.02 
10.80 
10.32 
11.26 
11.47 
13.13 
15.93 
6.70 
9.13 
8.42 
12.05 
8.80 
10.87 
11.53 
12.22 
11.11 
12.46 
11.35 
8.76 
10.43 
10.43 
9.50 
8.74 
10.73 
10.09 
8.95 
8.85 
8.83 
11.17 
12.81 
6.61 


33.9 
43.0 
33.6 
32.7 
.37.5 
45.3 


15.7 
17.6 
10.2 
15.8 
15.1 
10.7 


16.4 
25.9 
15.2 
18.4 
21.5 
17.6 
27.4 
57.4 
31.3 
20.8 
38.7 
27 1 
27.3 
30.9 
15.3 
28.4 
29.1 
28.0 
43.9 
24.5 
40.5 
18.9 
29.0 
33.0 
29.2 
33.1 
22.6 
37.8 
34.6 
G.2 
22.4 
26.4 
45.1 
62.8 
34.0 
23.3 
10.0 
27.1 
38.5 
28.7 


+30.9 


5 


+ 10.7 


5-. 


+32.0 


6 .._..-. 

6 ^^r-^r..,^.- 


+31.8 
+25.5 


6 


+26.4 


6 . ' 


46.4 1 25.5 
42. 7 1 24. 7 
42. 5 i 19. 5 
49.7 1 27.2 
46. 7 ! 24. 8 
41.4 1 21.7 
40. 3 22. 5 
45. 5 21. 6 
38. 9 19. 8 
44. 2 17. 1 
34. 1 16. 9 


813.6 
5.5 
6.4 
9.0 

10.9 
1.? 
6.5 
6.4 

26.9 

10.9 
.5 

10.6 
5.7 
9.4 
9.9 
9.3 
5.2 
6.3 
5.2 
6.3 
7.9 

15.8 
7.6 
6.5 

10.1 
4.7 
2.1 
7.6 
6.6 

10.8 

4.8 

.9 

12.0 


-12.9 


8... 


-30.3 


8 


+.3 


9... 


-6.7 


9 


-21.1 


9 . 


+8.5 


9. 

9 


+3.4 
-4.4 


9....:... 

10 

10 


-.9 

-.6 

+ 19.4 


12 


53.3 
57.0 
40.9 
50.1 
49.9 
40.3 
35.5 
41.1 
36.3 
38.6 
36.1 
45.9 
40.0 
36.5 
45.4 
40.8 
34.8 
32.7 


26.6 
24.9 
19.4 
25.1 
22.8 
22.9 
20.7 
23.0 
20.7 
20.3 
27.1 
26.5 
24.5 
19.0 
22.9 
27.0 
24.3 
24.4 


-18.5 


12 


-31.5 


12 .- 


+5.8 


12 


-25.6 


12 ..- 

12 ...- 

12 


-.9 

+2.6 
+4.5 


13-- . . . .... 


+1.5 


13 


+3.6 




+10.6 


14 


-16.8 


15 ... 


-14.6 


15 


+22.8 


15 


+12.0 


15- 

15-. : 

15 

15... 


+1.6 
-15.0 
-25.7 

+2.3 


16 


40. 6 28. 6 
39. 3 21. 8 
35.1 1 20.7 
15.6 23.3 
40.6 i 21.6 


-3.2 


16 


+24.1 


17 . . . 


+16.2 


17 , 


+10.6 


Average (39 buildings) 












^ 







' Operating expenses include fuel, electricity, gas, pay roll, painting, repairs, supplies, telephone, adver- 
tising, legal, maintenance, insurance, management, water, brokerage, miscellaneous. 
' Includes stores and apartments. 

Source: Accoimting and exchange committee, managfmpnt division, the Real Kstate Board of New 
York, Inc. 



CONCENTRATION OF ECONOMIC POWER 



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APPENDIX C 

VOLUNTARY CODE OF FAIR COMPETITION GOVERNING THE 
EMPLOYMENT OF PLASTERERS BY GENERAL BUILDING 
CONTRACTORS IN THE BOROUGHS OF MANHATTAN AND 
THE BRONX IN THE CITY OF NEW YORK 

I. PURPOSE 

(a) Heretofore and on or about the 7th day of April 1937 a volun- 
tary code of fair competition was adopted for subcontractors engaged 
exclusively in plastering work in the Boroughs of Manhattan and the 
Bronx in the city and State of New York. The purpose of that code 
is set forth in the voluntary code adopted by such plastering contrac- 
tors. In addition, however, to subcontractors, general contractors also 
in many instances perform their own plastering and do not subcontract 
such work. With the adoption of this code all contractors employing 
plasterers will be afforded an opportunity to become participants in 
codes of fair competition for the plastering industry. 

Thus the purpose of this code is to establish fair trade practice 
regulations for general contractors engaged in plastering in the 
Boroughs of Manhattan and the Bronx; to provide for a bid depository 
and registration of contracts for general contractors. It has been the 
experience of this industry^ that work taken below cost results in lower 
wage scales creating conditions inimicable to the best interests of 
employer and employee. It is the opinion of the parties that the 
adoption of this code Avill go far toward insuring the payment of the 
wage scale to all plasterers and that unless this code of fair competition 
is adopted Local No. 60, O. P. & C. F. I. A. will be obliged to adopt 
other methods to insure the payment of the wage scale. It is believed 
that improvement and correction can best be accomplished by estab- 
hshing definite wage scales to be agreed upon between truly representa- 
tive associations of employers and employees as a result of bona fide 
collective bargaining and the adoption of proper rules and standards 
for the guidance of the industry. 

(b) For the purposes of this Code an Jiimployer as used herein means 
any person, firm, or corporation who by formal contract or otherwise 
directs and/or superintends and /or coordinates and /or executes sub- 
stantially in its entirety the work of constructing any fixed structure 
or physical improvement or modification thereof or addition or repair 
thereto, inclusive of partition walls or any other repairs or changes 
major or minor in any structure, provided that in such construction 
work is included labor and materials required to execute plain plaster- 
ing, ornamental plastering or any work relating thereto usually per- 
formed by the craftsmen enumerated in Section I of Article III of the 
agreement. An Employer shall maintain a permanent place of busi- 
ness, with a business telephone, and open to the public during normal 

165 



IQQ CONCENTRATION OF ECONOMIC POWER 

business hours. Tliis place of business shall not be connected with 
or be part of a domestic establishment. He shall carry Workmen's 
Compensation Insurance and such other insurance as may be re- 
quired by City, State, or Federal Laws; and also maiiitain proper 
records normally required in the conduct of business. 

(c) For the purpose of this Code, Local No. 60, O. P. & C. F. L A. 
is hereinafter designated as the "Union." 

(d) This agreement is recognized by the Employers and by the 
union as the Code. 

II. TERM OF AGREEMENT 

This voluntary Code shall become effective July 1st, 1937, and re- 
main in full force and effect until May 31st, 1939, unless the agreement 
between the Union, and the Building Contractors Employers Associa- 
tion, dated June 24th, 1937, is terminated prior thereto, in which 
event this Code shall end with the termination of said agreement. 
The Administrative Committee hereinafter designated, however, shall 
have the power to alter, amend, revise, or eliminate any portion of 
these regulations, consistent with the best interests of the industry, 
and shall give due notice of same in writing to all interested parties. 

III. CONDITIONS OF EMPLOYMENT 

All parties to this Code shall maintain the hours, wages, and working 
conditions as provided in the agreement between the Building Con- 
tractors Employers Association, Inc., and Local No. 60 of the O. P. 
& C. F. I. A., dated J\me 24th, 1937, and no employer is eligible to sign 
this Voluntary Code unless he has become a party to the agreement. 

IV. ADMINISTRATION 

(a) The Administration of this Code shall be under the direction 
of a Code Committee consisting of six members and of a Managing 
Director, if one is designated as hereinbefore set forth. 

(6) The six members of the Code Committee shall not receive 
compensation from Committee funds other than for any direct 
expense incurred by them in the performance of their duties as 
committee members. They shall be appointed as follows: 

Three (3) members of the Building Contractors Association; and 

Thi-ee (3) members of the Union, one of whom shall be the President 
of Local No. 60, O. P. & C. F. LA. 

(c) No member shall be permitted to sit as a member of a Committee 
or Board on a case in which he is involved. 

(d) Alternates shall be named by the Association and the Union. 
They shall sit and vote only when taking the place of an absent 
member or when a case before the Committee or Board involves a 
member of the Committee or Board. 

(e) The Code Committee shall be divided into two branches : one 
branch to be known as the Administrative Committee and the other 
branch as the Industrial Board. 

(f) The Administrative Committee shall be comprised as follows: 
Three (3) members of the Building Contractors Employers Asso- 
ciation, Inc.; and 

One (1) member of the Union, who shall be the President of Local 
No. 60, 0. P. & C. F. I. A. 



CONCENTRATION OF ECONOMIC POWER Jg-T 

V. ADMINISTRATIVE COMMITTEE 

(a) The Administrative Committee may, by unanimous vote, 
appoint a Managing Director whose duties shall be to direct the 
activities ^of the Committee and investigate reports and complaints 
of violations. 

(b) The Administrative Committee shall select one of its members 
to act as treasurer of the Committee, who shall keep all funds on 
deposit in the name of the Building Contractors Plastering Code 
Committee, in a bank selected by the Committee, He shall disburse 
the funds as directed by check which shall be countersigned as directed 
by the Administrative Committee. 

(c) The Administrative Committee shall have the power to create 
such organization as may be necessary to properly carry on the 
administrative work under the Code. 

(d) Except where a larger vote is expressly provided, the Adminis- 
trative Committee shall act by majority only. Each member of the 
Committee shall cast one vote, except the representative of the 
Union, who shall cast tlu'ee votes, and in case of a tie vote the 
Managing Director, if one is designated, shall cast the deciding vote. 
The decision of the Administrative Committee shall be binding on 
all parties to this agreement. 

(e) The Administrative Committee shall hold a regular meeting 
once each week. It shall hold special meetings at the call of the 
Chairman or of any two members thereof. It shall formulate and 
jH'cscribe its own rules of procedure. 

( /) To defray the expenses of administering the Code, the Admin- 
istrative Committee shall have the power to — 

1. Assess each employer the sum of One Hundred ($100) Dollars 
at the time of signing this code. One-half of this assessment or the 
sum of Fifty ($50) Dollars shall be applied to registration fees on 
contracts registered by the employer within six (6) months from the 
date of signing this code. At the end of the six-months period, the 
full $50.00, if no contracts have been registered; or the balance of 
$50.00, if any, after having applied registration fees on contracts 
registered within the six months, shall accrue to the funds of the 
Code Committee. 

2. Charge a fee not in excess of twenty-five (25^) cents for each bid 
filed by the employer. 

3. Charge a fee not in excess of one and one-half percent (1K%) of 
the price allocated for plastering work on each general contract or 
order filed as provided herein. The total fee shall be paid at the time 
of the registration of the contract or order. 

(g) The Administrative Committee shall collect and disseminate 
all data currently affecting the industry, and to this end it is in- 
cumbent upon the employers and the Union to give their fullest 
cooperation. 

(h) The Administrative Committee shall have the power to collect 
dues of the Building Contractors Employers Association, Inc., at the 
time an employer registers a contract provided that the Building 
Contractors Employers Association, Inc., confers this power on the 
Committee. 

(?) Upon the written complaint of any of the parties to this agree- 
ment, the Administrative Commitiee shall, or on its own initiative 



IQg CONCENTRATION OF PX'ONOMIC POWER 

may, make such investigations as will enable it to determine whether 
or not there has been any violation in respect of this Code of Fair 
Competition or of any of the regulations promulgated by the Code 
Committee. 

In making an investigation the Administrative Committee may 
direct an employer to appear before it by giving him forty-eight (48) 
hours' notice by registered mail addressed to his last known business 
address. Should the employer being investigated be found in viola- 
tion of this Code or the regulations in connection with same, it shall 
have the power to impose any or all of the following penalties: 

1. Censure of the employer. 

2. Assess the employer not in excess of ten percent (10%) of the 
amount allocated for plastering on the contract involved, and in no 
event shall this amount exceed the sum of Nine Hundred ($900) 
Dollars. 

3. Require the employer to have the foreman and all of the plaster- 
ers on a specific job sent to him by the Union. 

4. Suspend the employer from participation in this Code and the 
Agreement of which this Code is a part. The Code and agreement, 
however, shall continue in full force and effect as between the other 
parties thereto. 

Should an employer faU to appear after having been given due 
notice, the Administrative Committee may proceed with the case and 
its decision shall be final and binding upon all parties to the agreement. 

(j) The Administrative Committee shall refer to the Tndustriid 
Board any and all questions and disputes between employers and 
their Union employees. 

VI. INDUSTRIAL BOARD 

(a) The Industrial Board shall be composed as follows: 
Three (3) members of the Building Contractors Employers Associa- 
tion, Inc., and 
■ Three (3) members of the Union. 

(6) The Industrial Board shall act by a majority only, except as 
otherwise provided in the agreement. Each member shall be entitled 
to one vote, and in case of a tie vote the Managing Director, if one 
has been/designated, shall cast the deciding vote. 

(c) The Industrial Board shall consider and act upon all matters 
that may come before them. 

(d) The Industrial Board shall formulate and prescribe its own 
rules of procedure. 

GENERAL RULES 

The following rules of conduct are appHcable in all cases where an 
employer does not subcontract the plastering work on a general con- 
tract and are applicable to all general contracts in which the employer 
intends to perform the plastering work directly. These rules are not 
applicable to any contract which includes only plastering. These 
rules must be observed by each emploj'er signing tliis voluntary code: 

(a) Upon being invited to submit an estimate on a job in which 
plastering constitutes an item of work, each employer shall notify 
the Administrative Committee, or the Managing Director, if one is 
designated, of his intention to submit a bid. Cards, will be provided; 
for this purpose. 



CONCENTRATION OF ECONOMIC POWER IgQ 

(b) The Administrative Committee shall establish a depository for 
the filing of data with respect to such bid hereinafter set forth. Each 
employer shall, within 24 hours after the submission of a bid on a 
job on which the amoun^t allocated for plastering is $300 or more, file 
a true statement of the aggregate amount of such bid, as well as a 
statement of the portion of such bid allocated for plastering work. 
There shall also be filed any revisions of such statement, whether 
caused by changes in plans or specifications, or merely by change in 
price, v\dth the designated depository. Special envelopes shall be 
used for this purpose. The bids will be opened by the Managing 
Director, if one is designated, or such person or persons as shall be 
appointed by the Administrative Committee, and held in confidence 
unMl such time as the contract of which the plastering work is a part 
is awarded, and then a tabulation of the figures may, in the discretion 
of the Administrative Committee, be sent to each bidder who has 
filed such statements with the bid depository as hereinabove outlined. 

(c) There shall be filed with each copy of such proposal a break- 
down of that part of the work allocated to plastering into the following 
items: 

1. Price of work all located for plastering; 

2. Total amount included for models; for furnishing and erection 
of plaster ornaments; including job expense; 

3. Total amount included for furnishing and erection of furring,, 
lathing, and beads, including job expense; 

4. Total amount included for all other work, including job expense; 

5. Total amoAint included for overhead and profit. 

((/) The break-down of the price of the work allocated to plastering 
shall carry a notation excluding temporary light, heat, and enclosures,-^ 
water; cleaning, gathering and removal of rubbish; removal of old 
work, patching of completed plastered surfaces after other trades;, 
any scaft'old where the height of same is more than fourteen feet. 

(e) If the plastering work contemplated by the bid does not include 
furring, or latliing, a notation shall be made in the same excluding 
the furnishing or erection of scaft'olding or scaffold materials to the- 
lather. 

(J) Each bid shall carry a notation that a copy of same has been 
filed with the Building Contractors' Plastering Code Committee. 

(g) Job expense shall include all items the amounts of which are 
dependent upon other items of job costs, such as trucldng, hoisting, 
sales tax, tools, mixing machines, equiplnent or the loss of, or wear- 
and tear of same. 

(A) A building contractor shall not submit a bid or accept a contract 
which does not include all direct and indirect costs, and shall maintain 
and keep on file his original estimate supporting his bid, and/or 
contract. A building contractor who accepts a contract which does 
not include all direct and indirect costs shall be conclusively presumed 
to be paying the plasterers to be employed on such contract less than 
the scale of wages established and prevailing for plasterers that are 
members of the Union. The labor costs on any contract shall be- 
computed upon the basis of prevailing scales of wages established by 
unions affiliated with the American Federation of Labor. Every 
bid submitted by a building contractor and every contract accepted' 
by a building contractor shall include therein the true cost of material, 
labor, job expense, and general overhead on each contract. In the 



J^Q (CONCENTRATION OF E(JONOMIC POWER 

price allocated for plastering on each general contract, each building 
contractor shall figure the true cost of material, labor, and job expense 
to which he shall add an item of overhead expense which shall be not 
less than twenty-two percent (22%) of the labor costs of the plastering 
(the labor cost is the total amount of wages to be paid to employees 
as enumerated in Article III of the agreement, plus wages to be paid 
to plasterers' helpers, plus Workmen's Compensation Insurance, 
Public Liability Insurance, Unemployment Insurance, and Old Age 
Security Insurance). In order that the Administrative Committee 
may determine that the wages as set forth in the agreement are being 
paid, or that it is conclusively deemed will be paid, it may set up 
schedules setting forth maximum productions of labor and maximum 
coverage of materials based on the actual experience of the industry 
and based on good workmanship and the use of proper materials. 
With respect to plastering work, the schedules to be adopted shall be 
those provided for imder the Voluntary Code of Fair Competition for 
the Plastering Contracting Industry in the Boroughs of Manhattan 
and the Bronx, pursuant to agreement between the Contracting 
Plastering Association of Greater New York, the Greater New York 
Employing Plasterers Association, Inc., and Local No. 60 of the 
Operative Plasterers and Cement Finishers International Association, 
dated April 7th, 1937. 

(i) Overtime work in which plasterers are employed shall only be 
performed by permission of the Administrative Committee. 

(j) Revisions in estimates due to changes in regular wage rates or 
material prices, or changes in the original plans or specifications, shall 
be made only to an extent consistent with previous quotations. 

(k) Should an employer wish to reduce an estimate that he has 
already submitted, for reasons other than noted in paragraph (j), 
such reduction shall not be more than five (5%) percent, and the 
reduced price should still comply with the requirements of paragraph 
(h). 

(I) Within twenty-four (24) hours of the actual closing of a contract 
or order upon which the plastering work to be performed as allocated, 
is estimated to amount to Fifty Dollars ($50.00) or more, a statement 
describing such order or contract, together with a statement of the 
amount allocated for plastering work on such contract or order shall 
be filed with the Administrative Committee, or the Managing Director, 
if one is designated, or such other person or persons as may be ap- 
pointed by the Administrative Committee, on forms to be supplied 
for this purpose, and a fee not in excess of one and one-half percent 
(1/2%) of the price allocated for plastering work is to be paid. The 
total fee shall be paid at the time of the registration of the contract 
or order. At the time of such payment, a registration certificate of 
the same is to be posted in a conspicuous place on the job. 

(m) On or before Tuesday of each week, a statement or pay-roll 
record of the amount paid to plasterers for each job for the preceding 
pay-roll week shall be filed with the Managing Director, if one is 
designated, or such other person as may be appointed for such purpose 
by the Administrative Committee. 

(n) An employer or his agent shall accept no rebates, directly or 
indirectly, on such wages as are prescribed in the agreement of whi<"h 
this Code is a part or give anything of value, or extend favors to any 
person for the purpose of influenciTig rates or wages or the working 
conditions of his employees. 



CONCENTRATION OF ECONOMIC POWER J7J 

(o) No employer shall make any secret agreement with any award- 
ing authority, or with a purchaser concerning any terms of payment, 
rebate, or special conditions not included in his original bid. 

{j)) Should any employer charge another with a violation of any 
of the principles of these rules of conduct, such charges shall be filed in 
writing with the Administrative Committee, or with the Managing 
Director, if one is designated, or with such other person or persons as 
shall be appointed by the Administrative Committee. 

{g) T/he Managi)ig Director, if one is designated, or such other pfer- ' 
son as shall be appointed for such purpose by the Administrative 
Committee, shall have full power to investigate all complaints, and 
shall be given every opportunity when requested, to check the recorda 
of emploj^ers for the purpose of obtaining assurance that these Rides 
of Conduct are being complied with. 

Employers against whom complaints are filed shall, upon demany?. 
of the Alanaging Director, if one is d^'signated, or such other person 
as appointed by the Administrative Committee, furnish a break -down 
of the bid made, and the true cost of performance of the contract, 
inclusive of the bid and cost of all material, labor, job, and overhead 
expense constituting part of the contract to be performed. 

(r) In cases where the charges involve unfair bidding, the Manag- 
ing Director, if one is designated, or such person as may be designated 
by the Administrative Committee shall have the right to check the 
estimates of any of the bidders on the work; require the submission 
of all data m possession of any of the bidders; and to call on any em- 
ployer, whether or not he is interested in the particular case for any 
information deemed helpful in reaching a fair and just decision. 

CONCLUSION 

Every employer who is a party to this agreement agrees jointly 
.and severally (with a right' to contribution as among themselves) to 
hold the Managing Director, if one is designated, and the representa- 
tives on the Industrial Board or the Administrative Committee of the 
Code Committee or on any other Committee or Subcommittee under 
this agreement selected by the building contractors employers 
ASSOCIATION, INC., free jRud harmless from any liability imposed upon 
them and arising out of the proper performance of their duties under 
this agreement. 

The Union and its members agree jointly and severally (with a right 
to contribution as among themselves) to hold the Managing Director, 
if one is designated, and the representatives on the Industrial Board of 
the Administrative Committee of the Code Committee or on any 
other Committee or Subcommittee under this agreement selected by 
the Union free and harndess from, any liability imposed upon them 
and arising out of the proper performance of their duties under this 
agreement. 

Neither any party to this agreement, nor the Managing Director, 
if one is designatcfl, nor any representative on tiie Industrial Board 
of the Administrative Coxnmittee of the Code Committee or on any v 
other Committee or Subcommittee under this agreement (exercising 
reasonable dUigence hi the conduct 'of his duties hereunder, sJ.all be 
liable to any party hereto or to an3''onc else for any action or failure 
to act undCT this^ agreement except for his willful misfeasance Dr 
nonfeasance. 

28015S — 40— No. 8 13 



272 CONCENTRATION OF ECONOMIC POWEK 

Should any part- of this agreement be held to be illegal by the State 
or Federal authorities, such portion shall immediately be eliminated, 
but this shall not void the agreement as to such eliminated portions. 

Each employer or party signing this Voluntary Code shall and 
does agree to abide by and carry out the rules and regulations as set 
forth, and further agrees that if found guilty of any violation by the 
Administrative Committee or Industrial Board, that he will comply 
with and carry out, or pay such penalty as may be assessed against 
him, and that he waives any right to appeal from such findings of the 
Committee or Board. 

This Voluntar}^ Code forms an agreement and contract between 
each of the parties signatory hereto to c&rTj out the provisions as 
set forth. 

Signed this 24tli day of June, Nineteen Hundred and Thirty-seven. 

Building Contractors Employers Association, Inc., 
By James S. O'Connell, President. 

Operative Plasterers' and Cement Finishers' 
International Association, Local No. 60, 
By John E. Gallagher, President. 

FORM of- ratification 

We, the undersigned, hereby expressly ratify and approve the 
execution of this Code on our behalf and agree to be bound hereby as 
parties hereto. 



APPENDIX D 

CASES INVOLVED IN BUILDING INVESTIGATION OF THE 
ANTITRUST DIVISION OF THE DEPARTMENT OF JUSTICE 
AS OF JUNE 13, 1940 

ATLANTA, GA. 

Iiulidments. — United States v. Hiram Evans, et al (asphalt). 

CHICAGO, ILL. 

Indictments. — United States v. Mosaic Tile Co., et al.; United States 
V. United Brotherhood of Carpenters cfc Joiners (plywood); United 
States V. Chicago cfc Cook County Building cfc Construction Trades 
Council, et al. (cut stone); United States v. Beardslee Chandelier Mfg. 
Co., et al. (electrical); United States v. Glass Contractors Ass'n., et al. 

CLEVELAND, OHIO 

Indictments. — United States v. Glaze-Rite Co., et al (glazing); United 
States V. Central Supply Ass'n. et al. (plumbing). 

DETROIT, MICH. 

Indictments. — United States v. Wheeling Tile Company, et al.; 
United States v. Cadillac Electric Supply Co., et al.; United States v. 
Brooker Engineering Co., et al (electrical contractors). 

LOS ANGELES, CALIF. 

Indictments. — United States v. Heating, Piping cfc Air Conditioning 
Contractors Association of Southern California, et al.; United States v. 
Southern California Marble Dealers Ass'n.; United States v. Contracting 
Plasterers' Association of Long Beach, Inc., et al.; United States v. 
Harbor District Chapter, NaVl Electrical Contractors Association, et 
al; United States v. Santa Barbara County Division Electrical Con- 
tractors Exchange, Inc.; United States v. Harbor District Lumber 
Dealers' Association. 

NEW ORLEANS, LA. 

Indictments.- — United States v. New Orleans Chapter, Associated 
General Contractors of America, Inc., et al.; United States v. New 
Orleans Sheet Metal Association, Inc.; United States v. Engineering 
Survey cfc Audit Co., et al (electrical); United States v. Building & 
Construction Trades Council of New Orleans, et al.; United States v. 
Southern Pine Association, et al. 

Equity.- — United States v. A^ew Orleans Chapter, Associated General 
Contractors of America; United States v. New Orleans Sheet Metal 
Association, Inc., United States v. Engineering Survey & Audit Co.^ 
et al. (electrical); United States v. Southern Pine Association, et al. 

173 



174 CONCENTRATION OF ECONOMIC POWER 

NEW YORK CITY 

Indictments. — United States v. Long Island Sand & Gravel Pro- 
ducers' Association et al.; United States v. The Simes Co., Inc., ef al. 
(one of 8 similar indictments) (electrical ); United States v. Inter- 
national Longshoremen's Association (trucking) ; United States ■ v. 
Local Union No. 3, International Brotherhood of Electrical Workers, 
et al. (three cases) ; United States v. A^. '}''. Electrical Contracting 
Association Local Union No. 3, etc. United States v. Local 138 
International Brotherhood oj Teamsters (Nat Hoffman) ; United States 
V. Local 46, Wood, Wire <& Metal Lathers International Union (three 
cases). 

Equity. — United States v. Masonite Corporation, et al.; United 
States V. Long Island Sand cfc Gravel Producers' Association, et al. 

PITTSBURGH, PA, 

Indictments. — United States v. Franklin Electric & Construction Co. 
(one of 35 similar indictments) ; United States v. Williayn F. Hess et al. 
(electrical contractors) ; United States v. Lumber Institute of Allegheny 
County et al. 

Equity. — United States v. Voluntary Code of the Heating, Piping and 
Air Conditioning Industry for Allegheny County et al.; United States v, 
Pittsburgh Tile & Mantel Contractors Ass'n; United States v. Marble 
Contractors Ass'n et al.; United States v. Westerri Penn. Sand & Gravel 
Ass'n; United States v. Employing Plasterers' Ass'n et al. 

ST. LOUIS, MO. 

Indictments. — United States v, William L. Hutcheson et al. (carpen- 
ters' union); United States v. Arthur Morgan Trucking Co.; United 
States V. St. Louis Tile Contractors' Ass'n et al. 

SAN FRANCISCO, CALIF. 

Indictments. — United States v. E. L. Bruce Company, Inc. et all 
(hardwood floor dealer); United States v. San Francisco Electrica 
Contractors Ass'n Inc., et al; United States v. San Francisco Hard- 
wood Floor Contractors' Ass'n, et al.; United States v. Master Plasterers' 
Ass'n of San Francisco et al.; United States v. IF. P. Fuller c& Co. " 
(glass). 

SEATTLE, WASH. 

Indictments.— United States v. Associated. Plumbing cfc Heating Mer- 
chants et al.; United States v. Local 99, Sheet Metal Workers Int. 
Ass'n et al.; United States v. Kelley-Goodwin Hardwood Co., Inc., et al. 

WASHINGTON, D. C. 

Indictments. — United States v. Drivers, Chauffeurs & Helpers Local 
No. 639, Int. Br. Teamsters, Chauffeurs, Stablemen <& Helpers of 
America et al. 

Equity. — United States v. Excavators Administrative Ass'n, Inc., et al.; 
United States v. Plumbing cfc Heating Industries Administrative Ass'n, 
Inc., et al.; United States v. Union Painters Administrative Ass'n, Inc., 
etal.; United States v. Mason Contractors' Ass'n. 



APPENDIX E 

Exhibit No. 1 

N^et effect upon housing costs of identical reductions in each component 



Components 


Percent reduction in annual housing costs resulting 
from reduction in respective component of— 


5 percent 


10 per- 
cent 


25 per- 
cent 


50 per- 
cent 


100 per- 
cent 


Cost of house. 


4.2 
.8 


8..T 

J. 5 


21.2 
3.8 


42.5 

7.6 


85 


Cost of land -.- - -. 


15.0 










Cost of property.- 


5.0 
1.9 
1.2 

.4 
1.0 

.1 


10.0 
3.S 
2.4 

. ■"< 

i.<; 

.2 


25 


50 


100.0 


Interest -.. 


9.1 
6.0 
1.9 
4.8 
.5 


17.6 
11.9 
3.8 
9.5 
1.0 


31.6 


Taxes 

Depreciation 


23.8 
7.6 


Maintenance . .. 


19.0 


Insurance - 


1.9 







Tiie percentages shown for each component represent the net reduc- 
tion in the total annual charge for housing (owner-occupancy) which 
would result from a reduction in the respective component of the 
size indicated at the top of each column, all other components remain- 
ing unchanged. For example, a 50 percent reduction in the interest 
rate (from 5 percent to 2K percent), with no reduction in any other 
item, would result in a 17.6 percent reduction in the total annual 
charge for housing. 

The assumptions upon which this table is calculated are: House 
represents 85 percent of the total property cost; land represents 15 
percent. This corresponds to the average for all properties insured 
by the Federal Housing Administration under title II during 1938. 
Life of house is assumed to be 40 j^ears. Present economic rent dis- 
tribution is assumed to be as follows: Interest, 5 percent; taxes, 2.5 
percent, which closely approximates the average effective rate for 
274 cities in 1938; depreciation, 0.83 percent, which wiir write off 
the investment in 40 years at 5 percent interest (sinking-fund basis) ; 
maintenance, 2 percent a year; and fire insurance, 0.2 percent; or a 
total economic rent of 10.53 percent of the total property value (origi- 
nal cost) annually. Tliis rate applies only to owner-occupied proper- 
ties. Tenant families must pay in addition a small charge for manage- 
ment of the property. 

It is assumed further that reductions in the interest rate upon the 
loan would be accompanied by corresponding reductions in the interest 
rate upon the depreciation fund. 

In calculating the reductions in the annual charge which would result 
from reduced building costs, it is assumed that the interest rate^ tax 
rate, depreciation rate, maintenance rcite, and insurance rate would 
remain unchanged as the cost of the house is lowered, and that the total 
percentage charge for housing per year would remain at 10.53 percent 

175 



176 



CONCENTRATION OF ECONOMJr r< )WER 



U) 






H 






cn 






o 






p 






iD 


o 


8- 






— 


h- 






3 


UJ 

o 


«>< 


ul 


a. 


t^ Z 


C£ 


2E 


s2 


-J 


8 


a ^ 


< 






o 


T* 


1- 


1- 


Q 


o 




< 


UJ 


nJ 


UJ 




O 


z 


UJ 


u. 




H 


O 




UJ 








iJ/iV7^ Su/S'/70l/ U/ l/0/^:>np3U ^U90JdJ 



CONCENTRATION OF. ECONOMIC POWER 



177 



of tlie original property value (la^nd and house). Of course, it might 
be true that if housing costs (capital costs.) should generally decline, 
the tax rate or assessment ratio might be increased. That is a debat- 
able point, however, and there seems to be equal justification for 
assuming that the rate on residential properties would remain un- 
changed or would be increased only slightly, and that a part of the 
tax burden would be shifted to income taxes or some other form of 
taxation, or away fromx residential properties to commercial and indus- 
trial properties; or that costs of local government would be decreased 
by the elimination of slum conditions through low-cost housing. 



Exhibit No. 2 

Property valuation of new single-family homes insured by F. H. A. during 1938 





Percent of homes 


Property valuation i 


Percent of homes 


Property valuation ' 


a;,^,,!,, Cumula- 


Simple 


Cumula- 
tive 


Less than $2,000 


0. 1 0. 1 


$7,000 to $7,999- . 


7.5 
5.7 
3.6 


00.7 


$2,000 to $2,999 


3. 7 3. 8 
16.2 19.0 


$8,000 to $9,999 .. 


96.4 


$3,000 to $3,999 .,. 


$10,000 and over..- 




$4 000 to $4 999 


23.5 
22.8 
17.9 


42.5 
65.3 
83.2 


Total-.. .. .- -. 




$5,0(X) to $5',999.,'.'.y.y.'.'.'.'.'.'.'.\ 


100.0 


100.0 


$6,000 to $6,999 - 











Average valuation: 

1938 -- . $5,530 

1937: - --- 5,978 

1936 :. :.. 6,255 

1935- - - --. - 6,450 

1 F. n. A. valuation includes valjie of house, all other physical improvements, and land. Average valua- 
tion for land was 14.2 percent of the total property valuation in 1938, 15.3 percent in 1937, 16.4 percent in 
1936, and 17.5 percent in 1935. 

Source: Fifth Annual Report of the Federal Housing Admfnistration for the Year Ending Dec. 31, 1938, 
p. 101. Land valuation, p. 110. 



Exhibit No. 3 

Annual income of F. H. A. mortgage borrowers during 1938 — Neio single-family 

homes 



Borrower's annual income ' 


Percent of 1938 
homes 


Borrower's annual income ' 


Percent of 19.38 
homes 


Simple 


Cumula- 
tive 


Simple 


Cumula- 
tive 


Less than $1,000 


1 

0. 2 0. 2 
3. 3 3. 5 


$3,500 to $3,999 


8.1 
7.3 
7.8 


84.9 


$1,000 to $1,499 . 


$4,000 to $4,999 


92.2 


$1,500 to $1,999 . 


17.3 
25.8 
16.2 
14.0 


20.8 
46.6 
62.8 

76.8 


$5,000 and over . 




$2 000 to $2 499 


! Total 




$2,'500 to $2i999" ' 


100.0 


100.0 


$3,000 to $3,499 








1 







Average income: 

1938 $2,968 

1937 •■ '. 3,133 

1936 3,387 

' Includes family income of owner-occupants and individual piirchasers only; excludes operative builders, 
absentee landlords, and others. 

Source: Fifth Annual Report of the Federal Housing Administration for the Year Ending Dec. 31, 1938, 
p. 91. 



178 



CONCENTRATION OF ECONOMIC POWER 

Exhibit No. 4 

Family incomes in the United States, 1935-36 





Percent of families 


Annual income 


Percent of families 


Annr.ai income 


Simple 


Cumula- 
tive 


Simple 


Cumula- 
tive 


Less than $500 


14.2 
27.5 
22.9 
14.4 
8.4 


14.2 
41.7 
64.6 
79.0 
87.4 


$2,500 to .$2,999 


4.5 
8.1 


91.9 


$500 to $999 


$3,000 and over 






Total 




$1,500 to $1,999 


100.0 


100.0 


$2,000 to $2,499 











Source: Consumer Incomes in the United States, National Resources Committee, August 1938, p. 18. 



Exhibit No. 5 

A significant point in connection with the reference to the market 
for higher-priced automobiles as compared to the market for low-priced 
cars is shown on the following chart. Beginning in 1924, the propor- 
tion of national income which was spent for higher-priced automobiles 
fell sharply to a low in 1934, and had risen only slightly by 1938; while 
the proportion spent for low-priced cars rose sharply beyond the higher- 
priced cars in 1928 and 1929, and after a decline from 1929 to 1932, 
rose rapidly to exceed even its 1929 peak by 1935. It is significant t<[> 
note that the proportion of national income spent for houses has 
followed almost exactly the curve for higher-priced automobiles. ]i\ 
automobile manufacturers concentrated upon the manufacture of 
higher-priced cars, not only would there be only a fraction of the 
present number of cars in use today, but the automobile industry 
would have suffered far more seriously in the depression than it has. 

CHART XIII 

PROPORTION OF NATIONAL INCOME SPENT FOR HOMES 
AND AUTOMOBILES 

UNITED STATES. 1921-1937 



INDEX NUMBERS 




































INDEX NUMBERS 




• 


A 










i 


ENGER CARS $750 AND UNDER 






/ 








160 












160 






\ 






- 


PRIVATE RESIDENTIAL CONSTRUCTION 






/ 






140 










1 










140 
120 
100 






\ 


\ 








/ 


\ 










/ 






100 


/ 




/A 


< 




s, 




/ 


\ 








/ 


/ 






7^1- 1/^ 




- 


s\ 


'^■^r 


^ / 




\ 


^ 






/ 








80 
60 
40 
20 



-/' '"^ 






S 




/ 


80 
60 
40 
20 



/ 


/ 








\ 




v.. 


\ 




\ 


/ 










/ 

/ 
















\ 


■^ 


\ 


/ 




























N,\ 










y 


^-^ 
























^ 


■M'-^ 


y, 






1921 1922 1923 1924 1925 1926 1927 1928 1929 1930 1931 1932 1933 1934 I93S 1936 1937 



CHART XIV 



MAJOR PARTICIPANTS IN THE CONSTRUCTION 
OF A SINGLE-FAMILY HOUSE IN AN URBAN AREA 



TRANSFER OF PROPERTY 



HOUSE READY FOR OCCUPANCY 



REAL tSTATf BROKER 



TITLE EXAMINER 



TITLE INSURANCE COMPANY 



COUNTY RECORDER OF DEEDS 



LAND AND tAND 
DEVELOPMENT 



I LAND DEVELOPMeWT COMPANY | 
lOWNER OF UNIMPROVED LAND I 



' I SURVEYOR 



I CITY PLANWINittMtlKHRim, MHCl] - 

ICITY Z0NIII6 AGENCY | - 

|CITY WATER OtPAHTMEWT [ - 

I CITY SEWER CEPARTMENT \ - 

I ELECTRIC COMPANY | - 

I 6AS COMPANY | - 

I TELEPHONE COMPANY | - 

I coiremucTiod material dealers I 

I (STREET CONSTRUCTION) |~ 

ICONSTRUCTION [gUIPMEUT DEALERS |— I 



PUNNfNG AND SUPERVISION 
OF CONSTRUCTION 

I A RCHI TE.CT | - 



|CITY PERMIT-»yiNG ASENCY| - 



FINANCING 



n 



MORTGACC LOAN MOKI (INDIVIDUAL, 
SAVINGS AND LOAN ASSOCIATION, lAVIKI 
BANK, LIFE INSURANCE COMPANT,ETC 



^ FEDERAL HOUSING ADNINISTRATIOn] 



CONSTRUCTION 
GENERAL CONTRACTOR~|-, 



INSURANCE, ETC. 
(APPLICABLE TO ALL 
BUSINESS IHTERPRISES) 

I INSURANCE AGENCIES (WORKMENSl 
ICOMPtKSHTI ON, FIRE, OTHER HAZA»OS)| 

I TAX COLLECTING AGENCIES (SOCIAL I 
I SECURITY TAXES, OTHERS) | 



SUBCONTRACTORS 



i CARPENTERING 



'J- 



— I PLASTERING 



SHEET METAL 



> 



TILE -SETTING 



PAPERHANGING 



FLOOR- FINISHING 



^LANDSCAPING AND SODDING 



SUPPLY OF MATERIALS 
AND EQUIPMENT 

H'-U'^BERANDMiaWORK DEALER [ — ■ 
- ] BUILDING SUPPLY HOUSE ] — 



J BRICK SUPPLIER 



— i structural steel oeaur [ - 

i hardware store 
h heating equipment dealer 
- ] plumbing equipment dealer 
- | paint and glass dealer "[ - 
■ [wallpaper dealer | — 

■ i electrical supply store \ - 

— |eLECT. « GAS APPLIANCE STORE~] — 
- jCONSTRUCnON EQUIPWCMT DEAUR ^ 
T HER |- 



OTHER 



\1 



^ UTILITY COMPANIES 



WHOLESALE 
DISTRIBUTION 



MANUFACTURING 



260158 — 10— No. 8 (Face p. 179) 



178 



Less 
$500 
$1,00 

$i;50 

$2,00 



Bo 



for 
ca] 
tio 
fel 
th( 
pri 
ro£ 
no 
fol 
au 
hi| 
pr 

W( 



CONCENTRATION OF ECONOMIC POWER 



179 



Exhibit No. 6 
Percent of the national income -produced by the contract-construction industry 



Year: Percent Year— Continued. 

1929 4.5 1934 •_ . 

1930 4.3 1935 

1931 3.4 1936 . 

1932 2. 1 1937 

1933 1.3 1938 

Source: Computed from Survey of Current Business, Bureau of Foreign and Domestic Commerce, 
June 1939, p. 11. 



Percent 
.- 1.6 
.- 1. 6 
.. 2.5 
.- 2.6 
.. 2.7 



Percent of their 1929 income -produced by major industry groups 



Industry group 


1929 


1930 


1931 


1932 


1933 


1934 


1935 


1936 


1937 


1938 


Total national income.- 


100.0 


83.6 


65.6 


48.5 


51.4 


61.2 


67.5 


78.9 


86.9 


77.4 


Agriculture 


100.0 
100.0 

100.0 
100.0 
100.0 
100.0 
100.0 
100.0 
100.0 
100.0 


77.6 
69.1 

94.2 
'73.8 
78.6 
86.5 
96.7 
83.3 
88.6 
90.8 


51.4 
38.4 

89.8 
50.2 
49.0 
69.6 
86.9 
67.2 
72.4 
76.4 


35.1 
26.7 

79.7 
29.6 
22.0 
51.1 
69.1 
47.7 
58.1 
57.8 


47.1 
29.8 

74.2 
40.2 
14.5 
50.8 
61.1 
53.3 
51.5 
55.1 


62.7 
51.4 

81.5 
51.8 
21.6 
53.8 
64.7 
62.2 
55.6 
63.8 


72.7 
53.3 

82.2 
61.1 
24.5 
58.3 
69.1 
67.1 
60.3 
70.2 


82.3 
68.7 

88.0 
73.6 
43.4 
67.6 
73.4 
74.9 
68.3 
78.6 


87.9 
79.8- 

94.7 
86.8 
49.5 
72.5 
78.1 
81.3 
74.3 
88.1 


74.8 


Mining 


58.7 


Electric light and power and manu- 
factured gas 


90.1 


Manufacturing ... 


63.1 


Contract -construction 

Transportf^tinn . , , . 


46.8 
62.1 


Cnmmnnici^trio'i 


76.9 


Trade 


77.6 


Finance 


69.1 


Service - 


84.1 







Source: Survey of Current Business, Bureau of Foreign and Domestic Commerce, June 1939, p. 11. 



Exhibit No. 7 

The chart XIV illustrates roughly the large number and variety 
of separate and for the most part independent enterprises which par- 
ticipate in the construction of a typical single-family house in an 
urban area. There is no fixed pattern of organization. In probably 
most cases, the pattern would differ in some particular from that 
indicated by the cha.rt. In many cases, there would be a fewer par- 
ticipants than are indicated; in many there would be more. The 
chart, however, illustrates effectively the complexity of organization 
in the building industry, and the difficulty of the problem of 
coordination. 



180 CONCENTRATION OF ECONOMIC POWER 

Exhibit No. 8 

Nvmher of employers and employees in the contract-construction industry, 1938 



"Classification 



Number of 
employers ' 



Number of 
employees ' 



General contractors, building 

General contractors, other 

Special-trade contractors 

Contractors, not classifiable.. 

Total 



22, 003 

8,040 

66, 690 

40 



248,063 

219, 770 

350, 185 

8,209 



96,773 



826, 227 



' The number of employers is the number of business enterprises having employees, and in operation 
during the first 3 months of 1938. The number of employers includes about 4,000 who had no employees 
at the end of March, but excludes perhaps 50,000 or more enterprises which have no employees at any time. 

' The number of employees is the number on the pay roll at the end of March including both office and 
field workers. 

Source: Social Security Board (preliminary data). 

Distribution of employers and employees in the contract-construction industry by size 
of business concern, 1938 



Size of concern 


Percent of total 
number of— 


Size of concern 


Percent of total 
number of— 


Employ- 
ers 1 


Employ- 
ees 2 


Employ- 
ers ' 


Employ- 
ees' 


1 employee..; 


21.77 

18.11 

13.48 

9.39 

6.85 

4.91 

3.90 

2.57 

2.08 

9.31 

2.98 

1.39 

.78 

.61 

.35 


2.44 
4.05 
4.54 
4.21 
3.83 
3.30 
3.06 
2.30 
2.09 
13.95 
7.94 
5.25 
3.87 
3.11 
2.63 


70 to 79 employees 


0.26 
. .18 
.16 
.65 
.17 
.08 
.03 
.03 
.02 
.01 
.01 
.00 
.02 


2.17 


2 employees ' 


80 to 89 employees 

90 to 99 employees 


i.71 


3 employees . 


1.65 


4 employees 


100 to 199 emplovees 


9.85 


6 employees -. 


200 to 299 employees 


4.77 


6 employees -- 


300 to 399 employees... 


3.16 


7 employees . . . . . 


400 to 499 employees 


1.65 


8 employees . , - . 


500 to 599 employees 


1.86 


9 employees ..- . ..... .. 


600 to 699 employees. 

7oO to 799 employees 


1.27 


10 to 19 employees 


.83 


20 to 29 employees 


800 to 899 employees 


.67 


30 to 39 employees 

40 to 49 employees 


900 to 999 employees . .. 


.35 


1,000 employees or more 

Total 


3.59 






60 to 69 employees 


100.0 


100.0 









I The number of employers excludes 4,278 enterprises which had no employees at the end of March 1938 
and which are included in the previous table. The total number of employers represented in this table 
therefore is 92 495 

» The number of employees is the number on the pay roll at the end of March 1938 (eitl: ir last pay roll 
period or last day), including both office and field workers. 

Source: Preliminary data secured from Social Security Board for use in public hearings before the Tem- 
porary National Economic Committee, June 1939. 



CONCENTRATION OF ECONOMIC POWER 



181 




132 CONCENTRATION OF ECONOMIC POWER 

Exhibit No. 9 

Value of work performed by contract-construction establishments, 1935 

Percent of all 
reporting 
Value of work: establishments 

Less than $10,000 69. 5 

$10,000 to $24,999 l 1 5. 4 

$25,000 to $49,999 1 . 7. 2 

$50,000 to $99,999 4. 2 

$100,000 to $199,999 . 2. 1 

$200,000 to $499,999 1. 2 

$500,000 to $999,999 . 3 

$1,000,000 or more . . 1 

Total 100. 

Source: Census of Construction, 1936, Bureau of the Census, vol. Ill, p. 30. 



Exhibit No, 10 

The following chart illustrates the local nature of the construction 
industry. In 1935, contracting establisliments of all types reported 
that 57.5 percent of their work was done in the city in which the 
establishment was located (or in the immediate environs of that city); 
27.4 percent was in the home State, outside the home city or its envi- 
rons; and 15.1 percent was done outside the home State. It will be 
noted that many special-trade contractors, who work primarily upon 
residential construction, did practically all of their work in the home 
city or its envhons. 



CONCENTRATION OF ECONOMIC POWER 



183 



CHART XVI 



PISTRIBUTION OF WORK 

BY LOCATION, CONTRACT CON- 
STRUCTION INDUSTRY, 
1935 



GENERAL 
CONTRACTORS 

BUILDING 

HEAVY CONSTRUCTION 

HIGHWAY 

SPECIAL TRADE 
CONTRACTORS 

CARPENTERING 

PAINTING, PAPERHANGING 
AND DECORATING 

ROOFING AND SHEET METAL 

HEATING AND PLUMBING 

MASONRY 

PLASTERING 

CONCRETING 

ELECTRICAL 

TILE AND MANTEL 

STONE SETTING 

STEEL ERECTION 

EXCAVATING AND/oR 
FOUNDATION 

ALL OTHER 



PERCENT 
40 60 



100 




HB Percent of icorA- performed in home c//y. 

Vii-x-<<-\ Percent of tvorh performed m home state outs/de home c/'ty. 

C553 Percent of worA: performed outs/de home state. 



Source:- Bureau of the Cersus 



134 CONCENTRATION OF ECONOMIC POWER 

Exhibit No. U 

The following three charts show clearly the nature of the channels 
through which building materials and supplies pass from manufac- 
turer to consumer. It will be observed that such things as hardware, 
wallpaper, plumbing and heating equipment, lumber, paints, and so 
forth, are distributed generally through retailers — the local lumber 
yard or hardware store. A comparatively small proportion of total 
sales of manufacturers or wholesalers are made directly to industrial 
and household consumers. Manufacturers of wallpaper, for example, 
show no direct sales at all to industrial and household consumers or 
contractors, and only a very small proportion of roofing and plumbmg 
sales to such groups. 

In studying these charts it is important to keep in mind that all 
of the items shown are materials which must go through further 
manufacture before they are useable in the form of .a completed 
house. In no other comparable industry do we distribute the .material 
necessary for production through retail channels. 

Systematic organization of the building industry would by no 
means eliminate the local retail dealer. In "Exhibit No. 27," it is 
shown that in 1935 there were more people engaged in the retail 
distribution of new automobiles than in the retail distribution of all 
building materials and supplies. With systematic organization and 
improved techniques in the building industry, the local dealer would 
be engaged in distributing a more nearly completed or an entirely 
completed product in the form of a house ready for occupancy. 
Materials and supplies would be distributed in the most direct manner 
possible. 



CONCENTRATION OF EGOlVOMIC POWER 



185 



CHART XVII 



SALES DISTRIBUTION OF 

MANUFACTURERS IN 
SELECTED INDUSTRIES 
1935 



INDUSTRY 



STRUCTURAL &> ORNA- 
MENTAL METAL WORK 



CONCRETE PRODUCTS 



CLAY PRODUCTS 



SHEET METAL WORK 



PLANING MILL PRODUCTS 



LUMBER AND 
TIMBER PRODUCTS 



PAINTS PIGMENTS 
AND VARNISHES 



CEMENT 



STEAM AND HOT WATER 
HEATING APPARATUS 



STOVES, RANGES 
AND FURNACES 



PLUMBERS SUPPLIES 

ROOriNO. 

WALL PAPER 



PERCENT 
40 60 



TOTAL 

DISTRIBUTED 

SALES 

MILLIONS 
•00 0OLUAR6 




—I Sa/es to /ndustr/a/ and househo/d consumers, and contractors 

E??^^ Sa/es to reto//ers 

i^-^NNN^ Sa/es to own wfio/esa/e brarycties 

I . i .'?^/i?<; to who/esa/ers and jobbers 



Source- Bureau of ttie Census 



186 



CONCENTRATION OF ECONOMIC POWER 



CHART XVIII 



SALES DISTHIBUTION OF WHOLE- 
SALERS IN SELECTED KINDS 
OF BUSINESS 
1935 



KIND 
OF 
BUSINESS O 



STRUCTURAL STEEL 



SHEET METAL 
PRODUCTS 



ELECTRICAL CONSTRUC- 
TION MATERIALS 



BUILDERS SUP- . 
PLIES (full Line) 



PAINTS AND 
VARNISHES 



LUMBER AND 
MILLWORK 



PLUMBING i. HEAT- 
ING EQUIPMENT 



WALL PAPER 



HARDWARE 



OTHER SELECTED 

CONSTRUCTION 

MATERIALS 



AMOUNT NUMBER 

PERCENT OF SALES OF 

40 60 SO 100 (MILLIONS) ESTABLISHMENTS 




19 



40 



26 I 



76 



66 



339 



24 3 



17 



428 



77 



93 
179 

1,153 
504 
772 

1,597 

1,743 
262 

1.129 
7f 6 



Sales to contractors, and indusiriat and household consumers 

Sales to refai/ers 

Sales to wholesalers and for exports 



Source:- Bureau of the Census 



CONCENTRATION OF ECONOMIC POWER 



187 



CHART XIX 



SALES DISTRIBUTION OF MANUFACTUBEU'S 
WHOLESALE BRANCHES IN SELECTED 
KINDS OF BUSINESS 
1935 



MANUFACTURERS 
SALES BRANCHES 

(mTHsrocHS) o 



STRUCTURAL STEEL 



PAINTS 6? VARNISHES 



PLUMBING E^HEATING 
EQUIPMENT 



SHEET METAL 
PRODUCTS 



LUMBER £>MiaWORX 



BUILDERS SUPPLIES 
(FUU Line) 



OTHER SELECTED 

CONSTRUCTION 

MATERIALS 



MANUFACTURERS 
SALES OFFICES 
(W/THOC/T STOCHS) 

PLUMBING 6? HEATING 
EQUIPMENT 



LUMBER ^CON- 
STRUCTION 
MATERIALS 



PERCENT 
40 60 




AMOUNT OF NUMBER 

SALES OF 

80 100 (MILLIONS) ESTA8LI5HMENT5 



* 22 
< 66 
I 02 
I 9 
I 3 
33 
I 8 
67 




43 

265 

36 T 

2 3 

38 

45 

62 

I 7Q 



I 7 8 

3 I 

27 7 



Sales to contractors, and /ndustr/a/ and househo/d consumers 

Sa/ea to reta//ers 

Sales to who/esa/ers and for export 



Source - Bureau of the Census 



2G0158— 40— Xo. 8- 



Igg CONCExNTRATION OF ECONOMIC POWER 

Exhibit No. 12 

Branch offices of contract-construction establishments, 1929 ' 

Establishments with no branches ■ _ 28, 660 

Establishments reporting branches . 1, 369 

I or 2 branches 1, 189 

3 to 5 branches 136 

6 to 10 branches - 22 

II to 20 branches 17 

21 branches or more ^ 5 

Establishments reporting themselves as branches 568 

Total establishments 30, 597 

1 Includes only establishments doing more than $25,000 worth of business during 1929. 

- These 5 establishments averaged 140 branches each. Most establishments reporting a large number of 
branches were manufacturers or distributors of specialized products or building equipment which thoy also 
installed. 

Source: Fifteenth Census of the United States, 1930, Construction Industry, p. 1.5. 



Exhibit No. 13 

Monbership in trade associations of contract-construction establishments whose 
volume of business exceeded $25,000 in 1929 

Percent of all 

reporting 

establishments 

No menih-rdhip . 53. 8 

Membership in national association only : 5. 5 

Membership in local association only 23. 8 

Membership in both local and national associations 16. 9 

Total - 100.0 

Source: Fifteenth Census of the United States, 1930, Construction Industry, p. 17. 



Exhibit No. 14 

The followmg table shows the wide variety of trade associations 
operating directly or indirectly in the construction industry. Each 
group in the industry has its own separate trade associations, with 
little coordination among them. Most of the contractors' asso- 
ciations have less than a 40-percent coverage of their particular group 
in the industry, as indicated by the second table following. 

Number of national and interstate trade assdcialions in the con(,t ruction field classified 
by major industrial groups, 19S8 

Industrial group: 

Building construction — general contractors 1 

General contractors — other than building 2 

Special trade contractors 11 

Nonmetallic mining and quarrying 2 

Textile products 3 

Lumber and timber basic products 1 31 

Finished lumber products 3 

Paper and allied products 1 

Chemicals and allied products 3 

Products of coal, petroleum and natural gas 3 

Stone, clay and glass products 28 



CUAKT XX 



LA(t)OG. PK.OCLS&t5 R.EQ^UIC.F_D IN MOUSL C O N 5 T R.U CT I O N 



CULTUEAL-tXmACTIVt 



MANUrACTUdNQ INDUSTR.ILS 



E-tQUIEMtNTS 
HUMAN OH, 
CONSUMPTIVE. 




BLfcOL i,LQU12,tO IN TtANSPOLT. POW C 
A r H I » L t-r * L IC, c o t 5 I II TO L A c H A u C 
'aocI-SS SnoWM THIS IS INDIC 

III40 Trll.SLLF 



FSV O I Sr-_ s AT r? 



260158— 40— No. S (Face p 1S9) 



CONCENTRATION OF ECONOMIC POWER |§g 

Number of national and interstate trade associations in the construction field classified 
by major industrial groups, 1938 — Continued 

Industrial group — Continued. 

Iron and steel and their products *. 1 42 

Transportation equipment 1 

Nonferrous metals and their products 1 

Electrical apparatus and supplies 5 

Machinery except electrical 9 

Miscellaneous manufacturing 1 

Wholesale trade . 23 

Retail hardware ■.. 8 

Retail lumber and building supplies 7 

Total 185 

Source: Bureau of Foreign and Domestic Commerce. 

X umber of national and interstate regional trade associations in the construction field 
classified according to the percent which their membership represents of the total 
number of firms in the industries covered by them, 1937-38 ^ 



Percent of industry firms 


All a<!<!opiafion<5 '■ Associations : .Associations 
AH associations , of producers : of distributors 

' 1 


Associations 
of contractors 


represented '' 


Num- 
ber 


Percent Num- p^^^^^^ Num- 


Percent 


Num- 
ber 


Percent 


All associations 


169 


100.0 


121 100 


36 


100.0 


12 


100 










Less than 20 


30 
29 


17.8 
17.2 


21 
23 
. 21 
34 
22 


17.4 
19.0 
17.4 
28.0 
18.2 


3 
3 
10 
15 
5 


8.3 

8.3 

27.8 

41.7 

13.9 


6 
3 

1 
1 
1 


50 1 


^-3P ^ .. .. 


25 


40-69 - - 


32 18.9 
50 29.7 
28 16.4 


8 3 


00-79..- 


8 3 


80-100 


8 3 















1 Based on returns from 169 of 185 national and regional intecrtate trade associations defined within the con- 
struction field. ' In some cases the data cover the year igs/, in others, 1938. 
' Industry means the group defined bj the association for voting membership purposes. 

Source: Bureau of Foreign and Domestic Commerce. 



Exhibit No. 15 



By * lo,w productivity" in the building industry is not meant simply 
low productivity at the site of construction. Final costs are deter- 
mined by the entire production process, of which site construction 
represents approximately one-third. Throughout the entire process, 
from the original source of materials in forests, mines, and quarries, 
labor represents (in terms of dollars) from 72 to 89 percent of the cost 
of a house. Productivity must be increased throughout the entire 
process before costs of housmg can be substantially lowered. 

The extent and complexity of the labor processes which enter into 
the building of a house are clearly illustrated on chart XX. To re- 
duce costs, labor operations cannot simply be shifted from direct on- 
the-site work to factory work without reducing the total per unit of 
product. It should be emphasized also that mcreased productivity 
in the building industry will bring more work and not less, because 
of the expanded market which will result from lower costs. But the 
labor per housing unit will be lower. 



190 



CONCENTRATION OF ECONOMIC POWER 

Exhibit No. 16 

Productivity in blast funnaces, 1929 





Number of 
establish- 
ments 


Average 
output per 
man-hour 


Wages 


Item 


Per ton 


Per man- 
hour 


Output per man-hour: 

Under 0.200 tons. 


9 
22 
18 
17 
13 

7 

5 
8 

15 
31 
14 
9 
4 


Tons 

0.145 

.341 

.504 

■ .665 

.869 

1.313 

.091 
.309 
.512 
,611 
.591 
.743 
1.026 


$2.55 
].44 
1.28 
.87 
.67 
.58 

2.18 
1.15 
.87 
.90 
1.08 
.99 
.99 


0.37 


0.200 to 0.399 tons - 


49 


0.400 to 0.599 tons.. 


.64 


0.600 to 0.799 tons 


.58 


0.800 to 0.999 tons . . 


.68 




.77 


Wages per man-hour: 

Under 30cents . . . 


.20 


30 to 39.9oentT - .- 


.36 


40 to 49. 9 cents 


.45 




.56 


60 to 69.9cents . . . . - 


.64 


70 to 79.9 cents - 


.74 


80 cents and over - . -- - 


1.02 







Source: Monthly Labor Review, Bureau of Labor Statistics, August 1932, p. 264. 



Exhibit No. 17 

Index of productivity in the electric-lam]) industry 
[1920=100] 



Classification 



1920 



All classes of the industry 

Lamp assembly plants 

Manufacturing of parts 

Equipment divisions 

Nonmanufacturing divisions 



100 



340 



100 


448 


100 


349 


100 


166 


100 


192 



457 
324 

167 
175 



Source: Handbook of Labor Statistics (1936 ed.). Bureau of Labor Statistics, p. 719. 



Exhibit No. 18 
Index of productivity in the automobile-tire industry 

[1914 = 100] 



Year 


Output per man- 
hour 


Year 


Output per man- 
hour 




Tires 


Pounds 


Tires 


Pounds 


1914 


100.0 
279.4 
311.7 
328. 5 
317.7 
366.0 


100.0 
250.6 
272.7 
282.2 
305.8 
366.0 


1927 


392.4 
417.1 
428.7 
455.4 
547.2 


417.9 


1922 


1928 


465. 6 


1923 


1929 ., 


506.3 


1924 


1930 - 


581.0 


1925 


1931 


681.1 


1926 --- 











Source: Biilletin No. 585, Bureau of Labor Statistics, July 1933. 



Year: 



1849. 
1859. 
1869_ 
1879- 
1889. 
1899. 
1904. 
1909- 
191 L 



CONCENTRATION OF ECONOMIC POWER 

Exhibit No. 19 

Index of produciiviiy in leather industry 

[1935 = 100] 

Production 
per man- 
hour 

25 

26 

35 

52 

55 

53 

52 

54 

62 



191 



I'car— Continued. 

1919 


Production 

per mnn- 

hour 

56 


1921 .. 


76 


1923 . 


78 


1925- . . 


75 


1927 . _ -_. 


81 


1929 


79 


1931 


84 


1933 


88 


1935 


100 



300 percent increase since 1849; 89 percent increase since 1899, 
Source: Monthly Labor Review, Bureau of Labor Statistics, July iJ37, p. 73. 



Exhibit No. 20 

It is extremely difficult to measure the degree of mechanization in 
the construction industry. One effort to do so is reported by Harry 
Jerome in Mechanization in Industry, which was published by the 
National Bureau of Economic Research in 1934. The following 
statement smnmarizes his experience and results: 

To obtain data concerning changes over a specific period of time is unusually 
difHcult in the caseof contracting operations. The scene ard type of o])i'riitions 
shift, the staff personnel changes, records are negligible, the memories of fuiemen 
and other executives are none too certain. * * * However, our inspectors did 
obtain slateraents from 49 contractors on the 100 construction operations sur- 
veyed, giving the labor-saving changes, if any, made in their methods of operation 
-between 1920 and the time of inquiry in 1925 -i= * * 27, or over half of the 
group reporting, disclaimed having made any labor-saving changes ii. this period, 
1 remarking, "I have not bought a new machine for 10 years." 

The following table and chart give a fair indication of the relative 
degree of mechanization among the difTerent types of contractors in 
the construction industry, in terms of dollar value of equipment 
owned by them at the end of 1929. The table shows both the average 
value per establishment and the average value per employee (average 
for the year), while the chart shows only the average per employee. 
By either measure, establishment or employee, the building branch 
of construction industry operates with much less equipment than 
other Jbranches. 



J92 CONCENTRATION OF ECONOMIC POWER 

Average inventory value oj equipment in the construction industry by class of 
establishment, 1929 ' 



Class of establishment 



BUILDING CON- 
STRUCTION 

Operative builders 

General contractors: 

•— ^ Nonspecialized-- ..- 

Commercial only 

Manufacturing only 

Residential only 

Subcontractors: 

Carpentering 

Concreting 

Electrical . 

Elevator 

Heating and plumbing.. 

Masonry 

Painting and decorating- 
Glass and.glazing 

Plastering and lathing... 
RooOug and sheet-metal 

work 

Steel erection 

Stonework , - 

Marble and tiling 

Wrecking 

Excavating 

Ornamental iron 

HIGHWAY CONSTRUC- 
TION 

General contractors: 

Highway 

Bridge and culvert 

Grading 

Street paving 



Value of 
equip- 
ment per 
establish- 
ment 



$1, 008 

8.117 
5,164 
13,397 

1,726 

4.516 
10, 271 
2,879 
11,848 
3,338 
4,063 
2,860 
4,740 
3,386 

4,408 
32, 136 
21, 917 

5,663 
14, 400 
42, 696 

9,154 



68, 974 
38,809 
44, 898 
44,011 



Value of 
equip- 
ment per 
employee 



229 
2U 
115 
175 

341 
358 
209 
285 
254 
169 
161 
609 
126 

347 
788 
861 
316 
579 
1,491 
722 



1,091 

760 

1,473 

1,005 



Class of establishment 



HIGHWAY CONSTRUC- 
TION— Continued 

Subcontractors: 

Highway 

Bridge and culvert 

G rading 

Street paving 

HEAVY CONSTRUC- 
TION 

General contractors: 

Sewer, gas, and water 
conduit 

Dam, reservoir, and 
waterworks 

Dredging, river, harbor 

Levee.. 

Railroad. 

Foundation 

Power plant 

Air transport work 

Oil and natural gas pipe- 
line 

Subway. 

Miscellaneous 

Subcontractors: 

Dam, reservoir, water- 
works 

Dredging, river, harbor.. 

Foundation _ 

Miscellaneous 



Value of 
equip- 
ment per 
establish- 
ment 



Value of 
equip- 
ment per 
employee 



$26, 480 
22,692 ; 
31,196 I 
22, 313 



38,546 

63,917 1 
278,630 
117,929 
110,333 I 

18,981 i 
61,950 , 
67, 000 

86. 850 
186, 923 
58,834 



17, 500 
41,833 
60, 400 
16, 124 



$1, 098 

747 

1,263 

742 



307 

862 
2,665 
3,263 
621 
729 
191 
790 

321 
464 
765 



1,029 

1,569 

431 



' Figures represent the average inventory value of equipment as reported by construction establisliments 
doing more than $25,000 worth of business during 1929. Value per employee is calculated on the basis of thij 
average of employees in all reporting establishments during the year divided by the total value of equipment 
for those establishments. 

Source: Fifteenth Census of the United States, 19.30, Construction Industry, pp. 96 and 101. 



rOXCENTRATION OF ECONOMIC POWER 



193 



CHART XXI 



AVERAGE INVENTOmr VALUE OP 

EQUIPMENT PER EMPLOYEE IN 

lUE CONTRACT CONSIRUCHON 

INDUSTRY 

1929 



DOLLARS 
3^00 



3,000 



2fiOO 



2.000 



1,500 



I poo 



500 



































.Nil lllllii il 1 






ll 






I... 









i i 

S T S 

■ * 53 



I 

11 II 






sill 



Sl/BCOAfr/fACTO^y 



BUILDING 
CONSTRUCTION 



HIGHWAY 
CONSTRUCTION 






\\ 

s ll 

« ia S S 
MB- I 



HE AW 
CONSTRUCTION 



194 



CONCENTRATION OF ECONOMIC POWER 

Percent of equipment used which is owned, 1929 



Number of establish- 
ments 



Percent owned 



None -- 

1 to 25 percent 

26 to 50 percent -- -- 

51 tJ 75 percent 

76 to 99 percent. 

100 percent 

Not reported 

Total... - 

\ ^ ^ C 

Source: Fifteenth Census of the United States, 1930, Construction Industry, p 




Exhibit No. 21 

A few examples of union restrictions upon apprentices are listed 
below. There are many such cases, and these are listed only to indi- 
cate their nature. 

Agreement Between International Brotherhood of Electrical Workers 
AND the Electrical Contractors Association of New York City. In 
Effect December 31, 1938 

There shall not be more than one apprentice to each three journeymen em- 
ployed. There shall not be more than five apprentices on any job. 

Working Rules op the United Brotherhood op Carpenters and Joiners 
Local 1207, Charleston and Vicinity, W. Va. In Effect April 30, 1939 

The number of apprentices to be employed at any time shall be one to five men, 
but not over two shall be allowed to any one employer. 

Working Rules of the United Brotherhood of Carpenters and Joiners, 
District Council of New York City 

Only 1 apprentice shall be allowed to 10 men, and the age of such apprentice 
at beginning of apprenticeship shall be between the ages of 17 and 22 years. 

Working Rules of the United Brotherhood op Carpenters and Joiners, 
■Los Angeles County District Council 

The term "apprentice" means a young man learning the trade between the age 
of 17 and 22. Employers will be allowed 1 apprentice for the first 4 journeymen 
on the job and 1 apprentice for each 10 additional journeymen. Apprentices 
shall serve 4 years at the trsde. 

Working Rules of the United Brotherhood of Carpenters and Joiners, 
Local 183, Peoria, III. 

If a contractor employs 10 men or more at all times, he shall be allowed 2 
apprentices. 



CONCENTRATION OF ECONOMIC POWER J 95 

Exhibit No. 22 

The full text of the statements referred to in the text regarding 
Baltimore and Pittsburgh plumbers are as follows: 

Agreement Between Journeyman Plumbers Local Union No. 27 of 
Pittsburgh and Vicinity and the Plumbing Contractors' Association 
OF Pittsburgh. In Effect to May 31, 1910 

Any fixture coming ot' the job with trimmings already in place on the fixture 
shall not be iistailed by the members of Local Union No. 27 until said trimmings 
haye been removed and replaced by the members of Local Union No. 27. 

Agreement Between Plumbers and Gasfitters Local No. 48 and the 
Plumbing Contractors' Association of Baltimore. In Effect to May 
1, 1940 

No fixtures coming on the job with trimmings already in place shall be installed 
by members of Local No. 48 imtil said trimmings have been removed and replaced 
by members of Local Union No. 48. This does not include dental units or other 
types of fixtures in which the trimmings are an integral part of same. 



Exhibit No. 23 

The full text of the jurisdictional agreement over the installation 
of Acoustone, as it appears in the Report of Proceedings of the Thirty- 
Third Annual Convention of the Building and Construction Trades 
Department, American Federation of Labor, September 1939, is as 
foUows: 

At a meeting of the joint conference between the executive boards of the Brick- 
layers, Masons and Plasterers' International Union of America and the Operative 
Plasterers and Cement Finishers' International Association of the United States 
and Canada, held in Atlantic City, February 27, 1930, it was agreed that the 
above-named material (Acoustone) and those of a similar character shall be 
installed on a 50-50 b.asis equally divided between the membership of the Oper- 
ative Plasterers and Cement Finishers' International Association of the United 
States and Canada and the Bricklayers, Masons and Plasterers' International 
Union of America, irrespective of thickness. 



JiiXHIBIT. No. 24 

Actual time reductions on various carpenter operations -w^hich were 
achieved through application of adequate planning and production 
standards to a housing project near Baltimore, built under the engi- 
neering direction of the Thompson & Lichtner Co., were as follows: 

Percent 

Finish flooring 36 

Framing 29 

Setting floor joists 34 



Percent 

Erect nonbearing partition 25 

Diagonal wall sheathing 32 

Wail furring 30 



Source: System Can Cut Building Costs, Sanford E. Thompson and W. E. Curley, Nation's Business, 
January 1939. . 



196 



CONCENTRATION OF ECONOMIC POWER 

Exhibit No. 25 



Through application of production planning to the Southwest 
Portland Cement Co. project of 30 houses at Victorville, Calif., 
production time was cut in the amounts shown below for the various 
operations. Three basic methods of planning "sv?re used: (1) Com- 
plete rationalization of the product and its parts before work was 
started; (2) smooth flowing assembly involving a minimum of waste 
effort and stops; (3) tab-keeping of work as a continuous check on 
efficiency. 

Savhigs through planning on 30-house project 



Percent 
time 
on last 
house 
was of 
first 
Item: house 

Excavations 27 

Foundations 51 

Floors 44 

Walls 60 

Fireplaces ._. 35 

Window and door frames 48 

I Does not include finish except electric wiring. 
Source: Architectural Forum, March 1939, p. 231. 



Percent 

time 

on last 

house 

was of 

first 

Item — Continued. house 

Ceiling framing, 93 

Roof framing 57 

Electric wiring 25 

Garages 46 

Complete house structure '. 47 



Exhibit No. 26 

The detailed data regarding several of the cases involving building 
materials dealers before the Federal Trade Commission as set forth 
below were taken from the official records of the Commission and are 
available to the public. 

In the Matter of Building Material Dealers' Alliance, Pitts- 
burgh Builders' Supply Club, Building Material Institute, 
Western Pennsylvania Builders' Supply Alliance, Allied 
Construction Industries of Cleveland, Inc., Lime & Cement 
Exchange of Baltimore City, Middle x\tlantic Council of 
Builders' Supply Associations, Maryland Builders' Supply 
Association, National Federation of Builders' Supply Asso- 
ciations, respondents 

Cease and desist order issued by Federal Trade Commission, Decem- 
ber 30, 1937, Docket No. 2191. 

Building Material Dealers' Alliance was organized in 1931 as a 
voluntary trade association. Its membership consisted of (a) over 
150 dealers in building materials and builders' supplies, doing business 
in the Cleveland-Pittsburgh tiade area; and (b) organized local asso- 
ciations or units of such dealers. The Cleveland-Pittsburgh area is 
one of the largest markets in the coimtry for the sale of building ma- 
terials and supplies, and the business of the dealer members of the 
Alliance represented the preponderance of business in building 
materials in this market. 

Pittsburgh Builders' Supply Club was a corporation whose members 
were, with few exceptions, also members of the Building Material 



CONCENTRATION OF ECONOMIC POWER ^97 

Dealers' Alliance. Said members were the largest business firms in 
the building and material industry in Pittsburgh, and sold over 75 
percent of the builders' supplies sold in Pittsburgh and the metro- 
politan area. 

Building Material Institute was an unincorporated trade association 
with headquarters in Cleveland. Its members were, with few excep- 
tions, also members of the Building Material Dealers' Alliance. 

Western Pennsylvania Builders' Supply Alliance was organized in 
1932, and was affiliated with the Building Material Dealers' Alliance 
and the National Federation of Builders' Supply Associations. Its 
members sold the preponderance of building materials and supplies in 
Western Pennsylvania. 

Allied Construction Industries of Cleveland, Iiic, was a corporation 
whose members inchided dealers in building materials and supplies in 
Cleveland who were also members of the Building Material Dealers' 
Alliance. 

Lime <& Cement Exchange of Baltimore pity was organized in 1898 as 
a Maryland corporation. Its members were dealers in building 
materials and supphes in the Baltimore trade area. It was affiliated 
with the National Federation of Builders' Supply Associations and the 
Middle Atlantic Council of Builders' Supply Associations. 

Middle Atlantic Council of Builders' Supply Associations was an 
imincorporated trade association organized in 1934, and consisted of 
^ight builders' supply associations whose members were engaged in 
business as dealers of building materials and supplies in the Middle 
Atlantic States, including Pennsylvania, Delaware, Maryland, New 
Jersey, Virginia, and the District of Columbia. 

Maryland Builders' Supply Association was organized in 1934. Its 
members were dealers in building materials and supplies in Western 
Maryland. It was afiiliated with the Middle Atlantic Council of 
Builders' Supply Associations, and the National Federation of 
Builders' Supply Associations. 

National Federation of Builders' Supply Associations was a corpora- 
tion organized in 1933 whose membership consisted of forty-one units 
located in approximately thirty-two States throughout the United 
States. 

BASIC OBJECT AND PURPOSE 

The basic object and purpose of the Building Material Dealers' 
AlHance program, which aU the respondents actively cooperated in 
maintaining, was to control and confine the retail distribution of 
building materials and builders' supplies exclusively through recog- 
nized dealers, and to prevent the direct sale of materials and supplies 
by manufacturers to all others: consumers, nonrecognized dealers, 
vendors, contractors, and State Governments and other political sub- 
divisions: and to require all such purchasers to purchase their ma- 
terials and supplies through recognized dealer channels upon terms or 
conditions of sale which afforded a commission' or profit to the recog- 
nized dealers. 

The National Federation of Builders' Supply Associations was 
formed to apply on a national scale the above program of the Alliance 
under the same leadership with . headquarters at Pittsburgh. Its 
<lirectors in 1934 adopted the following resolution to enforce their 



293 CONCENTRATION OF ECONOMIC POWER 

program, and dealer-members were requested to hang the declaration 
in their offices: 

We resolve, therefore, that whenever possible, we will hereafter purchase 
builders supplies from those manufacturers or producers of builders supplies who 
merchandise their products to dealers in builders supplies, when sold for use 
within a recognized marketing area which is constantly and regularly served by 
• dealers or from those manufacturers who comph' with the provisions of the Code 
of Fair Competition for the Builders Supply Trade. 

In practice, manufacturers who sold to other than recognized dealers 
were effectively boycotted by members of the various associations 
named above. The Federal Trade Commission stated in its Findings 
of Fact: 

Manufacturers and producers of building material and builders' supplies in the 
various States who sell and distribute their products in the markets where respond- 
ent dealers have their places of business have quite generally confined such sale 
and distribution to the recognized dealers. Said manufacturers and producers 
i;eceived from respondents membership lists, together with official letters contain- 
ing implied boycotts and threats of boycotts against the products of said manu- 
facturers and producers unless their distribution was confined to the dealers 
recognized by respondents. 

Manufacturers and producers were injured in their business by restriction of 
demand for their products and of freedom to sell same direct by confining their 
sales to the lists of dealers published and distributed by the respondents; in order 
not to incur "pressure" and "combined" or "concerted" action of respondents 
against them, they would not sell to many to whom they wanted to sell and con- 
sidered as dealers; neither would they sell direct to consumers, contractors, vendors, 
Government and its political subdivisions, but had to limit their sales through 
"recognized dealer distribution." 

Order to cease and desist from the above and other enumerated 
practices was issued by the Federal Trade Commission on December 
30, 1937. 

In the Matter of California Lumbermen's Council, Coast 
Counties Lumbermen's Club, Central Valley Lumbermen's 
Club,' Northern Counties Lumbermen's Club, Peninsula 
Lumbermen's Club, San Joaquin Lumbermen's Club, re- 
spondents 

Cease and desist order issued by Federal Trade Commission, July 
23, 1938, Docket No. 2898. 

Members of the above organizations constituted a large and import- 
ant part of the dealers in lumber and building materials In California, 
and were sufficiently influential in the trade as to substantially in- 
fluence and affect the flow of lumber and building materials within 
and to the various trade areas in the territories where they operated. 

basic object and purpose 
As stated by the Commission 

The primary objective of the respondents which they actively cooperated in 
maintaining, was to control and confine the retail distribution of lumber and 
building materials exclusively through the members of the respondent organiza- 
tions and to prevent the direct sale of lumber and building materials by manu- 
facturers, producers, or wholesalers to all others, namely nonmember dealers, 
vendors, contractors, consumers, and other purchasers, including state and 
political subdivisions. 

Further objectives of the respondents were (a) to limit the sale and cjistribution 
of lumber and building materials by the dealer members to districts in which the 
said dealer members have their places of business; (b) to prevent other dealers 



CONCENTRATION OF ECONOMIC POWER 299 

from selling lumber and building materials in the trading area where a dealer mem- 
ber is located; (c) at least two of said respondent org^-nizations, to wit, Coast 
Counties Lumbermen's Club and the Northern Counties Lumbermen's Club, 
through their officers or representatives, fixed and prepared price lists to be ob- 
served by their members in the respective territories of the said two respondent 
organizations. 

The respondent. Coast Counties Lumbermen's Club, fixed and determined 
the quota of sales which a manufacturer, producer, or wholesaler could make 
monthly in the territory of said respondent organization, and also fixed and 
determined the quota of business which a dealer member of said organization 
could do. 

To enforce their program, manufacturers, producers, and whole- 
salers who sold to nonmembers were boycotted by the members of 
the associations. 

The Commission found that: 

Manufacturers, producers, and wholesalers were injured in their business by 
restriction of demand for their products and of freedom to sell same direct, by the 
pressure and concerted action of the respondents to have sales confined to the 
respondent members of the respondent organizations. In many instances, manu- 
facturers and wholesalers, in response to the demand of certain of the respondent 
organizations, paid penalties or commissions to respondents on direct sales made 
by said manufacturers and wholesalers .to purchasers whose names did not appear 
on respondents' roster. 

Costs to the consuming public were increased in certain territories by the 
issuance of price lists and by respondents' policy of exclusive dealer member 
distribution, because the consuming public was thereby denied the advantages 
in price which it otherwise would have obtained in the natural flow of commerce 
under conditions of free competition. 

Order to cease and desist from the above and other enumerated 
practices was issued by the Federal Trade Commission on July 23, 
1938. 

In the Matter of Florida Building Material Institute, 
Inc. (Its Officers and Directors), Respondents 

Cease and desist order issued by Federal Trade Commission, 
September 10, 1938, Docket No. 2857. 

The Florida Building Material Institute, Inc., was a corporation 
organized in 1934 with headquarters in Orlando, Florida. Its members 
included approximately 280 retail dealers who were engaged in the 
distribution of lumber, lumber products, building materials, builders' 
supphes and millwork in Florida. Its members controlled approxi- 
mately 70 percent of the market for such materials in Florida. Its 
membership included also "associate members" consisting of about 
47 manufacturers, producers, and wholesalers in the building-supply 
industry, most of whom had their places of business outside the State 
of Florida. In addition to these active and associate members there 
were approximately 288 cooperating manufacturers, producers, and 
wholesalers who conformed to the pohcies of the Institute. 

Basic Objective and Purpose 

The Institute, was organized — 

(a) To establish the active members of the said Institute and the cooperating 
dealers as a class of recognized dealers in lumber products, biiilding materials and 
builders' supphes in the State of Florida, and to control and confine the sale and 
distribution of said products by manufacturers and producers thereof to or through 
the medium of such respondent memV ers and cooperating dealers exclusively. 



200 



CONCENTRATION OF ECONOMIC POWER 



(6) To require the associate members of said Institute and other manufacturers^ 
producers and wholesalers of lumber, lumber products, building materials and 
builders' supplies, to refrain from selling or distributing said products to dealers 
or other purchasers who were not recognized by the Institute as cooperating with 
its policies, but who were in competition in the retail sale and distribution of said 
products with the active members of said Institute and the cooperating dealers. 

(c) To prevent the nonrecognized and noncooperating dealers from purchasing 
or securing lumber, lumber products, building materials and builders' supplier 
direct from manufacturers, producers and wholesalers. 

(d) To interfere with the business and trade of nonrecognizea and noncooperat- 
ing dealers for the purpose of enabling or assisting the dealer members of said 
Institute and the cooperating dealers to appropriate and acquire said business 
and trade and to obstruct the competition of such nonrecognized and non- 
cooperating dealers. 

(e) To monopolize the business and trade in lumber, lumber products, building 
materials and builders' supplies in the State of Florida in the members of said . 
Institute and those who were cooperating with the Institute in maintaining its 
policies. 

The Institute effectively enforced its program by boycotting and 
threatening to boycott manufacturers, producers, and wholesalers 
unless their distribution was confined to active and cooperating mem- 
bers of the Institute. The Commission found that — 

Manufacturers, producers, and wholesalers, located in various states of the 
United States, have refused to sell, or have discontinued seling, to dealers or 
other purchasers who were found and reported by the Institute to be nencooperat- 
ing with the Institute's policies. Shipments to noncooperating dealers or other 
purchasers whiclj manufacturers wanted to make were refused and cancelled 
because of intimidation and coercion by the Institute and its officials. 

Order to cease and desist from the above and other enumerated 
practices was issued by the Federal Trade Commission on September 
10, 1938. 

Exhibit No. 27 

Number of people engaged in retail distribution of building materials and new 

automobiles y 19S5 



Kind of business 



Building materials ''-... 
Motor veliicles (new)'. 



Total 



253, 829 
282, 638 



Number of 
active pro- 
prietors and 
firm 
members 



60; 157 
25, 4S4 



Number of 
employees » 



193. 672- 
257, loi 



' Includes both full-time and part-time employees, average for the year. 

' Includes census classifications: lumber and building material dealers; hardware stores; hardware and 
farm-implement dealers; heating and plumbing equipment dealers; paint, glass, and wallpaper stores; and 
electrical supply stores. 

3 In addition to new-car dealers, there are many used-car dealers, garages, and dealers m accessories which 
are not included in the new-car figures. 

Source: Census of Business, 1935. Retail Distribution, vol. 1, p. 2-04. 



Exhibit No. 28 

Listed below are the indictments which were returned and the civil 
suits which were instituted from October 12, 1939, to February 23, 
1940, in the building industry under the current program of the 
Department of Justice under the antitrust laws:, 



1 »ACENTRATION OF ECONOMIC POWER 

INDICTMENTS 



201 



Title of case 



Court 



Cause 



U. S. V. E. L. Brute Company. Inc., 

etai. 
U. S. V. Buildiriy and Construction 

Trades Council of New Orleans, 

La., et al. 



U. S. V. Cadillac Electric Supply Co., 

et al. 
U. S. V. Engineering Survey & Audit 

Company, Inc., et al. 

U. S. V. Glaze-Rite, et al. (including 

union representatives). 
U. S. V. Williaii) L. HutcheSon, et al. 



U. S. V. Long Island Sand & Graoel 
Producers' Association, et al. | 

17. S. V. Master Plasterers' Associa- \ 
tion of San Francisco, et al. (includ- 
ing labor union). 

U. S. V. Mosaic Tile Company, et al. 
(including labor union). 



Northern district, Cali- 
fornia. 

Eastern district, Louisi- 
ana. 



Eastern district, Mich- 
igan. 

Eastern district, Louisi- 
ana. 

Northern district, Ohio. 

Eastern district, Mis- 
souri. 



Southern district. New 
York. 

Northern district, Cali- 
fornia. 

Northern district, Illi- 
nois. 



Northern district, Cali- 
fornia. 



17. S. V. San Francisco Electrical Con 

tractors' Association, Inc., et al. 

(including labor union) . 
U. S. V. San Francisco Hardwood | do 

Floor Contractors' Association, et al. \ 
U. S. V. Sheet Metal Association, Inc. Eastern district, Louis!' 

ana. 



U. S. V. Wheeling Tile Company, 
et al. (including labor unions). 

U. S. V. Drivers, Chauffeurs, and 
Helpers Local Union No. 6S9 of the 
International Brotherhood of Team- 
sters, Chauffeurs, Stablemen & 
Helpers of America, et al. 

U. S. V. International Longshoremen's 
Association, et al. 



U. S. V. Arthur Morgan Trucking 
Co., et al. (including labor union). 



17. S. V. Chicago and Cook CourUy 
Building and Construction Trades 
Council, et al. 

U. S. V. William F. Hess, et al. (in- 
cluding union members) . 

U. S. V. New Orleans Chapter, Asso- 
ciated General Contractors of Amer- 
ica, Inc., et al. 

U. S. V. The Simes Co. Inc., et al 

U. S. V. McPhilben Manufacturing 
Co., Inc., et al. 

U. S. V. Weiss Be Veau Company, 
Inc., et al. 

U. S. V. Shapiro & Aronson, Inc., 
etal. 



Eastern district, Mich- 
igan. 
District of Columbia 



U o. V. United Brotherhood of Car- 
penters and Joiners of America, 
aal. 



Southern district. New 
York. 



Eastern district, Mis- 
souri. 



Northern district, Illi- 
nois. 



Eastern district, Penn- 
sylvania. 

Eastern district, Louis- 
iana. 

Southern district. New 
York. 



Northern district, Illi- 
nois. 



17. S. V. Beardslee Chandelier Mfg. ; do. 

Co., et al. (including 5 electrical j 
companies, and International i 
P'otherhood of Electrical Work- I 
ets, Local No. 134). ': 



Fixing of prices on hardwood flooring. 

Refusal to accept shipments of building 
materials and fixtures on projects wtiere 
members of defendant unions are em- 
ployed, when such shipments are trans- 
ferred by members of United Transport 
Workers, Local Industrial Union No. 
806. 

Fixing of prices on electrical supplies and 
dictating terms for sale thereof. 

Maintenance of noncompetitive prices on 
electrical materials through collusive 
bidding. 

Monopoly over glazing in Cleveland. 

Jurisdictional dispute between carpen- 
ters' and machinists' unions over in- 
stallation and removal of machinery in 
plant of Anheuser-Busch, Inc. 

Fixing prices and establishing uniform 
terms for the sale of sand and gravel. 

Regulation and control of bids on plaster 
and gypsum. 

Prevention of companies in Chicago area 
other than those selected from pur- 
chasing tile. 

Regulation and control of bids on elec- 
trical equipment. 

Fixing prices on installation and repair 
of hardwood flooring. 

Fixing prices for sheet-metal work, roof- 
ing, and air conditioning and adjusting 
bids thereon. 

Monopoly on purchase of tile in Detroit 
area. 

Interference with various companies 
operating "mixer" concrete trucks by 
strikes, boycotts, and violence to com- 
pel employment as drivers and oper- 
ators only members of defendant 
union. 

Interference with interstate shipments of 
lumber to retailers whose employees 
were members of C. I. O., to induce 
them to coerce their employees to join 
defendant union. 

Interference with hauling of building and 
construction materials, supplies and 
equipment to eliminate certain haulers 
from competition with defendant com- 
pany, and maintaining artificially high 
and noncompetitive prices. 

Prevention of organization located in the 
Chicago area from purchasing lime- 
stone fabricated in the Bedford-Bloom- 
ington, Ind., distiict. 

Conspiracy to defraud United States in 
connection with bids on contracts for 
public works. 

Conspiracy to defraud United States in 
connection with the building of the 
Charity Hospital, New Orleans, La. 

8 indictments were returned against these 
4 companies engaged in manufacturing 
or assembling and supplying electrical 
equipment in New York City. 6 
indictments jharged diverting P. W. A. 
funds; 2 charged conspiracy to defraud 
United States on numerous . W. A. 
building projects. 

Refusal of members to work on products 
of the Harbor Plywood Corporation 
(plywood) which employed members 
of Local 2521 the International Wood- 
workers of America (C. I. C). 

Prevent electrical companies in Chicago 
area from purchasing electrical fljttures 
manufactured outside Illinois by 
refusal of union and members to install 
fixtures not bearing union fabricating 
label. 



202 



CJONCENTRATION OF ECONOMIC POWER 

INDICTMENTS— Continued 



Title of case 


Court 


Cause 




Louisiana 


Abuse of promotion of grade ma'^klng of 


et al. (New Orleans, La.). 


Pennsylvania . 


lumber to exclude nonmembers of as- 
sociation from lumber markets. 
Prevention of use of out-of-State lumber 


gheny County et al. (including. 2 
trade associations, 2 unions, and 21 
lumber dealers). 




products in Pittsburgh by withholding 
union label. 



nVIL SUITS 



U. S. V. Excavators Administrative 
Association, Inc., et al. 

U. S. V. New Orleans Chapter of the 
Associated General Contractors of 
America., Inc. 

U. S. V. Plumbing & Heating Indus- 
tries Administrative Association, 
Inc., et al. (including union mem- 
bers) . 

U. S. V. Vnion Painters Administra- 
tive Association, Inc., et al. 

U. S. V. Voluntary Code of the Heat- 
ing, Piping and Air Conditioning 
Industry for Allegheny County, Pa., 
et al. (including labor union). 

U. S. V. Sheet Metal Association, Inc. 



District of Columbia.-- 

Eastern District, Lou- 
isiana. 

District of Columbia, -- 



-do. 



Western District, Penn- 
sylvania. 



Eastern District, Lou- 
isiana. 



Elimination of competitive bidding by 

excavating contractors. 
Maintaining prices on construction work. 

Elimination of competitive bidding 
among plumbing and heating contrac- 
tors. 

Elimination of competitive bidding 
among painting contractors. 

Operation of bid depository for the pur- 
pose of fixing and maintaining prices of 
heating equipment and installatinno 

Fixing and maintaining prices for sheet- 
metal work, roofing, and air condition- 
ing, and adjusting bids to conform to 

-. such agreed-upon prices. 



Exhibit No. 29 

(Copyright 1-940 by The Christian Science Publishing Society— January 10, 1940) 

Outlay for Research $215,000,000 in 1939 — Some 2,000 Industrtal Con- 
cerns IN LFnited States Spent Huge Sum to Improve Products or Reduce 
THEiR Costs — Much of Expense Will Pour Back Into Tills as Profit 
During 1940 and 1941 

(By the Natural Science Editor of The Christian Science Monitor) 

Pittsburgh. — It cost 2,000 industrial concerns of the United States $215,- 
000,000 during 1939 to learn how to change coal and air into silk-like hosiery; 
how to make tires wear longer; how to take the static out of radio; how to make 
safety glass that is really safe; how to get more miles a gallon and less knocks a 
mile out of gasoline; how to make new perfumes and dyes; and how to cut the 
cost of 99,999 articles everyone buys at the local department store, hardware 
emporium, or five-and-dime. 

Industry paid this bill, according to Dr. William A. Hamor, associate director 
of Mellon "Institute of Industrial Research, who has just completed a world survey 
for the American Chemical Society, but in many cases the entire investment 
will be returned in 1940 or 1941. 

The United States is not a.lone in the employment of apphed research invention, 
and product engineering, the report discloses. Novel synthetics, says Dr. Hamor, 
have opened up a new era throughout the civilized world for solvents, plastics, 
paints, perfumes, and similar products. Hundreds of investigations are under- 
way, his survey shows, in Canada, Great Britain, Germany, France, Italy, India, 
Japan, Hungary, Sweden, Swit/.erland, Soviet Russia, Australia, Austria, Brazil, 
Chile, Denmark, Norway, and several Central and South American countries. 

1939 busy year 

"The year 1939 was one in which applied science increased its usefulness 
almost everywhere," the report stated. 

"In the United States industrial' research has a pleasant thoroughfare, along 
which it has kept advancing. The principal results of its progress in 1939 are 
seen in the field of synthetic organic chemistry, including hydrocarbon deriva- 
tives, fine cnemicals, plastics, and textile fibers. 



CONCENTRATION OF ECONOMIC POWER 203 

"The chemical, petroleum, and electrical laboratories employed nearly half of 
the 32,0D0 scientists and engineers engaged in industrial research, while 16,000 
additional persons served as assistants or clerical workers. 

"The petroleum industry, always science-minded, has kept pace with the re- 
quirements of aviation by speedily making available satisfactory and adequate 
gasoline for airplane use, Metallurgy, glass technology, and btiilding science 
have been helped forward by numerous improvements. In other countries, 
especially Great Britain, France^ Italy, and Germany, the main subjects of re- 
search have been basically similar and, as in the United States, the most impressive 
strides have occurred in plastics technology." 

Among the chemical manufacturing concerns with large investigational expendi- 
tures during 1939 were E. I. du Pont de Nemours & Company, Wilmington, Del., 
with a research budget totaling $7,000,000, and the Dow Chemical Company, 
Midland, Mich., which devoted $1,400,000 to research. 

"About 110 individual companies in the field of chemical industry and 40 tfMo 
associations are making research grants to educational institutions," Dr. Hamor 
reported. "There are approximately 200 college laboratories that are used not 
only for purposes of instruction but also to a considerable extent ^or industrifll 
research work and for commercial testing." 

LONG-RANGE SURVEY 

"About 250 manufacturing corporations are sustaining long-range investigations 
in research foundations. A considerable number of companies, mostly small 
concerns that have no laboratories of.their own, or larger companies that encounter 
few problems or are engaging in research for the first time, are regular or occasional 
clients of consulting laboratories. There are said to be 250 of these commercial 
laboratories in the country, and some are strongly staflFed and excellently equipped 
for scientific investigation, particularly in specific industries." 

"The automobile industry saved more than $10,000,000 last year by salvaging 
waste materials," Dr. Hamor added. The Association of Arnerican Railroads 
predicted that annual savings of $2,000,000 would result from development of a 
chemical to inhibit the corrosive effects of brine from refrigerator cars on equip- 
ment, track, and bridges. The California Fruit Growers' Exchange reported that 
the research department it set up 25 years ago had yielded results that have paid 
more than $8,000,000 in direct profits to growers and have led to two byproduct 
plants. 

Many operating industrial research laboratories were increased in facilities an' 
personnel. About $10,000,000 was spent by the steel industry for -industria 
research. 

"Nearly 2,550 scientists are employed, while close to 1,300 others devote part 
of their time to investigational activities," Dr. Hamor pointed out. "The steel 
industry has invested more than $9,000,000 in providing facilities for research 
■workers. 

"Brilliant triumphs are seen among the achievements of applied organic 
chemists. Their accomplishments are the truest language of synthesis. SeveraJ 
hundred derivatives of the nitroparaffins have been prepared in the laboratory 
Nitromethane and nitroethane are likely to be important because they can be 
converted into explosives. They are said to be good solvents for nitrocellulose 
and a wide range of natural and synthetic resins." 

FRUIT GROWERS BENEFIT 

"Parthenocarpy, the technique of producing fruit from unpollinated flowers, 
was benefited by two new growth substances, naphthalene acetic L',cid,and naph- 
thalene acetamide. Much research was carried out on the synthesis of vitamins. 
More than one-third of the vanillin consumption of the United States is being 
made from calcium ligninsulfonate. A new synthetic musk was disclosed. 
Synthetic camphor made from turpentine has broken the monopoly of Japan. 
Japan herself is producing synthetic camphor on a small scale. 



260158 — 40— No. 



204 CONCENTRATION OF ECONOMIC POWER 

Exhibit No. 30 

Excerpts from testimony of Robert L. Davison, Director of Housing 
Research, John B. Pierce Foundation, New York, before the Tem- 
porary National Economic Committee, July 13, 1939: 

Now, the housing problem is largely a problem because houses cost too much. 
There are various ways of reducing cost, lower interest rate, city planning, sub- 
sidy, and so forth. I don't want to indicate that those things shouldn't be con- 
sidered, but what I want to discuss here this morning, there are three different 
ways of reducing the actual cost of the building, whether it be a single-family 
• house or multipje-family house. As I see it, there are three entirely different 
approaches to this problem. One is the evolutionary approach, gradual im- 
provement of present construction methods and cheapening, reducing costs on 
existing construction methods, 

That will get you part-way down toward the low-income groups. Another 
method of approach is the pure research I will describe in a few minutes, and the 
third would be applied research '* * *, 

* * * there is a tremendous opportunity of pure research in housing 
* * *. The automobile did not evolve from a horse and buggy * * *_ 
There had to be some real, basic research * * *. The most fantastic thing 
you could think of, of what might come out of such research, wouldn't be half as 
fantastic as television * * *. The Government is going to spend hundreds of 
millions and industry is going to spend billions on housing and yet we are not 
doing any fundamental research and the possibilities are tremendous * * *. 

* * * now as to applied research * * * there are a lot of materials 
that are commercially available today, or have been made in pilot plants, which 
could be put into commercial production, that would give you a very much more 
livable house — and I say livable rather than stronger or anything of that sort — 
than we have today; at about half the cost * * *. 

Excerpts of conclusions relative to the need for technical research 
in housing as formulated by the Correlating Committee on Tech- 
nological Developments, President's Conference on Home Building 
and Home Ownership, 1931: 

Members of Committee 

George K. Burgess, chairman; director. National Bureau of Standards. 

Charles F. Kettering; president. General Motors Research Corporation. 

Collins P. Bliss; dean. College of Engineering, New York University. 

Willis R. Whitney; director of research. General Electric Co. 

Dexter S. Kimball; dean. College of Engineering, Cornell University. 

Morris Knowles; president, Morris Knowles, Inc., Pittsburgh, Pa. 

Miss Abby L. Marlatt; director, courses in home economics, University of 
Wisconsin. 

Miss Efffe I. Raitt; head, department of home economics. University of Wash- 
ington. 

H. L. Whittemore, Secretary; National Bureau of Standards. 

The shop fabrication of small houses is one of the most urgent problems which 
confronts us at the present time. Whether it can be solved satisfactorily, only 
the future will tell us but its importance justifies a well-directed effort to find a 
solution. Many of the materials used since time immemorial do not readily lend 
themselves to .shop fabrication and the conservatism of our people as regards 
housing has not been favorable to simplification and standardization * * *. 
1^" Careful consideration of the possibilities of fabricating small houses in the shop 
leads to the conviction that they can be produced at very much lower cost than 
houses of the same si.^e are built at the present, probably at half the cost. The 
very great reduction in cost, due to the shop fabrication of many other structures 
and machines which are wideh^ used, such as the automobile, supports the belief 
that shop fabrication of house aggregates may accomplish a very great rediTction 
in cost of houses. For success, it is essential that under competent management, 
architectural, engineering, and ■ technical e.xperts cooperate to work out the 
problem * * ' *. 



CONCENTKATION OF ECONOMIC POWER 205 

If the satisfactory small house at much less cost is to become available in the 
future, careful research work using both scientific and technical experts and 
equipment must be employed. Lack of satisfactory pr<;Jgress in the past has been 
due to attempts to improve details without sufficient consideration of the broader 
aspects of the problem. Usually these attempts have been undertaken by in- 
dustrial organizations without an adequate scientific or technical staff", progress 
being made by trial and error. 

A satisfactory solution is not to be expected from an industrial organization 
interested in only one kind of building material. It is desirable that an organiza- 
tion provided with ample funds and having no affiliations with the manufacturers 
of materials or with the construction trades attempt to provide small houses at 
low costs. 

There are many other references in this committee's report regard- 
ing the necessity for technological improvement in the building 
industry before houses can be built at low costs. The committee was 
very emphatic in stating that methods of building houses are obsolete, 
and that the only, promise for any considerable reduction in costs Ues 
in more complete shop fabrication, which must be wqrked out through 
technical research. 



INDEX 

p«st 

ACOUSTONE: Union installation, jurisdictional agreement; text 195 

ADAMS, THOMAS, joint avthar. (See Whitten, Robert ) 

AMERICAN CONCRETE INSTITUTE: Research activities 106 

AMERICAN CONSTRUCTION COUNCIL 130 

AMERICAN GAS ASSOCIATION: Annual statistics of manufactured 

gas industry, 1937; cited (n.) , . 16 

AMERICAN INSTITUTE OF ARCHITECTS: Small house service 

bureau ,' 34 

AMERICAN STANDARDS ASSOCIATION: Committee on Coordina- 
tion of Dimensions of Building Materials and Equipment, program of__ 139 
APARTMENT BUILDINGS. (See Rental Housing.) 
ARCHER DEVELOPMENT COMPANY: Archer's suburban life (1939); 

cited (n.) .♦. 96, 101 

ARCHITECT: 

Fees. {See Fees.) 

Function of in home designing _ _ 

Neglect of low-cost housing field, effect of 103 

ARCHITECTURAL FORUM: 

First aid for the home owner . 112, 118 

Limited dividend roll call (1935); cited (n.) : 111, 118 

AUTOMOBILE INDUSTRY: Number of people engaged in retail distri- 
bution of building materials and new automobiles, 1935; exhibit 27 200 

AUTOMOBILE-TIRE INDUSTRY: Productivity. (.See Productivity.) 

BASING-POINT SYSTEM: Building materials . _.._ 61-63 

BELL, SPURGEON, joint author. (See Walker, WaUace H.) 

BEMIS INDUSTRIES, INC.: Activities of 105 

BIGGER, FREDERICK: Site planning (1939); cited (n.) 99, 101 

BLAST FURNACES: Productivity. (See Productivity.) 

BLOUKE, PIERRE: Significance of small-house design (1939) ; cited (n.) , 109 

BOSTON CITY PLANNING BOARD: Report on income and cost 

survey of Boston (1935); cited (n.) 98, 101 

BRENTWOOD VILLAGE, Washington, D. C.: 

Building costs per room ; land, fees, labor,* materials, contractor over- 
head, mortgage, equity; dollars and percent; table 9 _ — 42 

Housing costs per room per month; interest, depreciat^ion, operating, 

taxes vacancy; dollars and percent; table 9 — 42 

Number of dwelling units, land cost total and per unit 96 

BRICK INDUSTRY: Employment: brick, tile, and terra cotta. (See 
Employment.) 

BRIGGS BATHTUB CASE 65-66 

BUCKLEY, GEORGE B.: Report to Cleveland Chamber of Commerce 

on home-building conditions in Cleveland (1938); cited (n.) i 54, 75 

BUILDERS' FEES. (See Fees.) 
BUILDING AND LOAN ASSOCIATIONS: 

Interest rates and 8()-83 

Number and assets in 1937 ' 82 

Servicing cost of 82 

BUILDING CODES: 

Effect of on the building industry — --- 39 

Minimum standards needed to meet requirement of livability; im- 
portant field for" research •- 107 

Revision of, recommended programi. :--;-- ^^^ 

Variety in grades, etc., of building materials influenced by building 

codes -i 61 

BUILDING CONGRESSES: Function of . 130 

207 



208 INDEX 

BUILDING INDUSTRY (.See oZso Construction industry) : 

Antitrust investigation. {See Building Trades, indictments.) "^afw"' 

Department of Justice program of investigation 140 

Employment turn-over 52-53 

Lack of — 

Coordination 139-141 

Efficient management methods 136-138 . 

Mechanization ^ 1 33-134 

Standardization 138-139 

Localization influences: 

Building codes ^__ 39 

Licensing ordinances 39 

Mechanization : 

Average inventory value of equipment in the construction in- 
dustry: building construction, 1929, indication of degree of 

mechanization; exhibit 20, table and chart 21 . 191-193 

Lack of 133-134 

Obsolete characteristics : 

Due to rules of building trades unions 134-136 

Management methods , ; 136-138" 

Organization of 126-130 

1935. „ Number of people engaged in retail distribution of build- 
ing materials and new automobiles; exhibit 27 200 

1935. Sales distribution of manufacturers in 13 selected named 

industries; comment and chart 17 184-185 

1935. Sales distribution of manufacturers' wholesale branches in 

11 selected named kinds of business; chart 19 ^^ 187 

1935. Sales distribution of wholesalers in 10 selected named kinds 

of business ; chart 18 186 

Participating groups ._ 32-42 

Prices. {See Price Structure; Price System.) 

RFC Mortgage Company's operations 91 

References to literature. (.See References to Literature, items 17, 22, 

29, 43.) 
R^earch: 

Federal Government's responsibility for technological research 

in the industry 146- 

Manufacturing companies' activities 106 

Recommended program ^ 146-147 

Status of 141-145 

Restrictive practices, recommended program 147 

Scientific management. {See Management.) 
Standardization. (*See Standardization.) 

Tradition, influence of 141 

Unfair trade practices: 

Building Ma'terial Dealers Alliance, et al. Federal Trade Com- 
mission, Cease and desist order 1937. Docket 2191; cited (n.) 

and text - 139, 196-198 

California Lumbermen's Council, bt al. Federal Trade Com- 
mission, Cease and desist order, 1938. Docket 2898; cited (n.) 

and text 139, 198-199 

Collusive bidding practices 69-72 

Direct sales practice; opposition activities by competitors' or- 
ganizations 67-69 

Florida Building Material Institute. Federal Trade Commis- 
sion, Cease and desist order, 1938. Docket 2857; text 199-200 

Retail dealer restrictive activities - 67-69 

Value and volume: 

1925-38. Estimated value of private nonresidential building; 
total, commercial, industrial, other; dollar amount; comment 

and table 1 11 

1928-39. Volume of commercial buildings, 37 Eastern States; 
bank buildings, garages and service stations, offices and loft 
buildings, stores and restaurants, warehouses, total; dollar 
amount and percent of total, 1928, 1933, 1937, 1939; comment 

and table 2 . 12 

Variety in grades, kinds, sizes, and designs, effect on prices and costs. 61 



INDEX 209 

BUILDING TRADES (see also References to Literature, item 30) : 

Indictments: Pagp' 

Cases involved in building investigation of the Antitrust Division 

of the Department of Justice as of June 13, 1940 173-174 

Indictments returned and civil suits instituted October 12, 
1939-February 23, 1940, in the building industrv; exhibit 

28 r \ 200-202 

Plasterers. (See Plasterers.) 

Skilled versus unskilled workers, proportion of r_. 51 

Wage payment: 

Average annual wage payments and percent skilled workers of all 

wage earners; comment and table 12 51-52 

Guaranteed annual wage proposal 53 

Wage rates. (See Wage Rates.) 
BUILDING TRADES UNIONS: 

Agreements between unions and employer organizations. (See below 

Restrictive practices.) 
Codes of fair competition, plasterers. (See Plasterers.) 

Opposition to labor-saving machinery 134 

Restrictive practices: 

Acoustone installation, jurisdictional agreement, 1939; text 195 

Examples of agreement and working rules of union restrictions 

upon apprentices ; exhibit 21 ;_ 194 

Plumbers' locals and contractors, Baltimore and Pittsburgh, 

agreements, 1940; extracts 19b 

Restrictions in output . - 54 

Rules of, cause of obsolete and disorganized condition of indus- 
try -1- 134-136 

BURCHARD, JOHN, 2d. Research findings of Bemis Industries, Inc. 

(1934);. cited (n.) 105, 109 

BUREAU OF LABOR STATISTICS. (See United States Bureau of 

Labor Statistics.) 
CARL MACKLEY HOMES, Philadelphia: 

Building costs per room; land, fees, labor, materials, contractor over- 
head, mortgage, equity ; dollars and percent; table 9 42 

Housing costs per room per month; interest, depreciation, operating, 

taxes, vacancy; dollars and percent; table 9 42 

CEMENT INDUSTRY: 

Employment. (See Employment.) 
Pay rolls. (See Pav Rolls.) 

CENTRAL HOUSING COMMITTEE 106,107 

Subcommittee on-law and legislation. Land title procedure. Walker 

and Bell report (1936); cited 73, 75 

CHAWNER, LOWELL J.: Basic factois in trend of construction; cited 

(n.) 12,17. 

Residential building (1939); cited (n.) 20, 29 

CLEVELAND CHAMBER OF COMMERCE: Home-building condi- 
tions in Cleveland; Buckley report (1938); cited (n.) 54,75 

CODE AUTHORITIES : 129 

CONSTRUCTION INDUSTRY. (See also Building Industry) : 

Defined -1 

Employment. (See also References to Literature, item 25) : 

1938. Number of employers and employees in the contract- 
construction industry, by classes: exhibit 8 180 

1938. Distribution of' employers and employees in the contract- 
construction industry, by "size of business concern; exhibit 8 

and chart 180-181 

Expansion to a point which will maintain an expanding economy and 

an increasing population, urgently needed 1 9 

Mechanization: 

Average inventory value of equipment in the construction in- 
dustry by class of establishment: building construction, high- 
way construction and heavv construction, 1929; exhibit 20, table 

and chart 21 191-193 

Organization: 

Branch offices of bontract-construction establishments, 1929; ex- 
hibit 12 . 188 



210 INDEX 

CONSTRUCTION INDUSTRY— Continued. 

Organization — Continued. , Page 

Distribution of work performed^ by location, contract-construc- 
tion industry: percent in home city, in homg state outside of 
home city, outside home srtate, 1935; comment and chart 16. _ 182-183 

Place in national economy , . 125-126 

Productivity: 

1929-38. Percent of its 1929 income produced each year by the 

. contract-construction industry; exhibit 6 179 

References to literature. {See References to Literature, items 12, 16, 

49, 52, 62, 63.) 
Residential. {See Hoiiising Construction.) 
. Trade associations: • 

National association, organization efforts 130 

1929. Membership in trade associations of contract-construction 
establishments whose volume of business exceeded $25,000 in 

1929; exhibit 13 188 

1937-38. Number of national and interstate regional trade 
associations in the construction field by percent which their 
membership represents in total number of firms in industries 

covered by them; exhibit 14 189 

1938. Number of national and interstate trade associations in 
the construction field, by major industrial groups; exhibit 14_ 188-189 
Value : 

1919-38. Value of all construction, dollars per annum; total 
residential, private nonresidential, public; comment and 

chart 1 . ^-.-^ 2-8 

1925-38. Expenditure each year by type of utility; total, rail- 
roads, electric railroads, power and light, telephone and tele- 
graph, waterworks, gas plants; dollar amount; comment and 

table 3 21.... 14-16 

1935. Value of work performed by contract-construction estab- 
lishments; exhibit 9 182 

1936-38. W. P. A. expenditures each year; dollar amount 16 

CONSTRUCTION LEAGUE OF AMERICA 130 

CONSUMER INCOME. {See Family Income.) 

CONTRACTORS: Social Security Board study of contract construction 

industry 35 

Types of contractors and scales of activity 35 

COSTS' 

Productivity and . 130-133 

Standardization and., 138-139 

Types of costs defined 41 

COSTS: BUILDING COSTS: 
All costs: 

Federal Home Loan Bank Board index 50 

Fees .. - - 72-75 

Housing Construction: all costs: 

Purdue University single-family residence project. House No. 1_- 44 
Standard 6-room frame house; total costs, material cost, labor 
cost, and index (1936=100), by months, 1936-39; comment 

and table 14 59-61 

Housing construction; financing: 

Percentage reduction in financing costs, effect on monthly carry- 
ing charges ; comment and chart 11 47-48 

Housing construction; labor cost: 

Productivity and housing construction cost; exhibit 15 and 

chart 20 189-190 

Housing construction; rental housing: 44 

Costs per room on rental housing: New York (Knickerbocker' 
Village, Hillside), Philadelphia (Carl Mackley), Washington, 
D. C. (Brentwood Village), Silver Spring, Md. (Falkland), 
York, Pa. (Elm Terrace); dollars and percent; comment and 

table 9 41-42 

Housing maintenance: 

Costs per room per month; interest, depreciation, operating, 
taxes, vacancy; dollars and percent (same properties as Housing 

constraction above) ; table 9. 42 

Income, rents, costs relationship 22-24 



INDEX 211 

COSTS: BUILDING COSTS— Continued. Pago 

Labor costs: 

Bureau of Labor Statistics index 50 

Federal Home Loan Bank Board index 50 

Percentage of construction costs, effect of wage rates 47-59 

Land costs : 93-97 

New York City limited-dividend projects; comment and table 16- 95 
Materials: 

Maximum cost for 'samples of construction elements submitted 
for testing in National Bureau of Standards program; comment 

and table 18 106-107 

Mill work, design variety element in 104 

References to literature. (See References to Literature, items 12, 13) 
COSTS; HOME OWNERSHIP: 

Break-down of costs on a $4,800 house for sale in 1939; comment and 

table 10 43-44 

Cost of maintenance, dwelling units; relation of incomes to rents and 

costs 22-24 

Net effect upon housing costs of identical reductions in each com- 
ponent; cost of house, cost of land, interest, taxes, depreciation, 

maintenance, insurance; comment, table and chart 12 175-177 

COSTS; SERVICE COST, {see also References to Literature, items 5,36): 
Tax-income versus service costs; Boston and Cleveland studies; com- 
ment and table 97-98 

CURLEY, W. E., joint author. {See Thompson, Sanford E.) 
DAVISON, ROBERT L.: 

Excerpts from testimony before Temporary National Economic Com- 
mittee, July 13, 1939; exhibit 30 _. 204 

Report on Purdue University experimental housing project, House 

No. 1; cited (n.) ^ 44 

Testiniony before T. N. E. C, 1939; cited (n.) 99 passim 

Traditional, prefabricated and mobile housing (1936); cited (n.) 10 

DEMOLITION. {See Housing Construction; urban.) 
DENTON, R. HAROLD: Relation of productivity fco low-cost housn.r. 
Part 2, pp. 119-205, T. N. E. C. Monograph No. 8. 

DEPRECIATION: Rental housing 45 

DIMENSION STANDARDIZATION. {See Module.) 

DODGE CORPORATION: Construction contracts awarded, 37 Eastern 

States; monthly; cited (n.) ,_ 17 

EARNINGS. {See Wage Payments.) 

EDISON ELECTRIC INSTITUTE: Electric light and power industry in 

United States, 1937; cited (n.) 15, 17 

ELECTRIC-LAMP INDUSTRY: Productivitv. {See Productivity.), 
ELECTRIC RAILWAYS: Construction expenditure each year, 1925-38, 

dollar amount; comment and table 3 14-16 

ELM TERRACE, York, Pa.: 

Building and housing cost per room: land, fees, labor, materials, con- 
tractor overhead, mortgage, equity; dollars and percent; table 9-. 42 
Housing costs per room per month: interest, depreciation, operating, 

taxest, vacancy ; dollars and percent ; table 9 42 

Number of dwelling units, land cost, land cost per unit 95 

EMPLOYMENT: 

Brick, tile, and terra cotta: 

1923-39. Index (1923-25 = 100); chart 7 6 

Cement: 

1923-39. Index (1923-25=100); chart 8 7 

Construction industry. {See Construction industry.) 
Lumber: 

1923-39. Millwork, index (1923-25 = 100); chart 5 5 

1923-39. Sawmills, index (1923-25=100); chart 4 5 

Manufacturing: 

1923-39. Durable and nondurable goods group index (1923- 

25=100); comment and chart 2 2, 4, 8. 

Plumbers' supplies: 

1931-39. Index (1923-25=100); chart 9 --. 7 

Steam and hot-water heating apparatus and steam fittings: 

1923-39. Index (1923-25=100); chart 3 . 4 

Structural and ornamental metal work: 

1923-39. Index (1923-25 = 100); chart 6 - 6 



212 TNDE^. 

Pase 
ENGINEERING NEWS RECORD: Construction -Costs, 1937 ed.; 

. cited (-n.)'- - - ' . 12 

EVANS, MERCER G.: Land, materials, and labor costs; cited (n.) 52, 75 

FALKLAND PROPERTIES, SILVER SPftW^G, MD.: 

Building costs per room: Land, fees, labor, materials, contractor 

overhead, mortgage, equity; dollars and percent; table 9 42 

Housing costs per room per month: Interest, depreciation, operating, 

taxes, vacancy; dollars and percent; table 9 42 

Number of dwelling units, land cost, land cost per unit 95 

FAMILY: Defined (census)..: ^-_ 21 

FAMILY INCOME: 

Annual income of F. H. 'A. mortgage borrowers, new single-jfamily 

homes, 1938; exhibit 3 177 

Distribution of nonfarm families bv income groups: Total number of ■' 

- families, number of farm and of nonfarm families, percentage non- 
farm families, by income groups, cumulative percentage, number 

of nonfarm families (cumulative), 1935-6; table 7 24 

Percent of families in income classes of from less than $500 to $3,000 

and over, 1935-36; exhibit 4 . 178 

Relation to rents and cost . 22-24 

FARM SECURITY ADMINISTRATION: Activities of..-.. 114 

FEDERAL EMERGENCY RELIEF ADMINISTRATION: Housing , 

activities -.-.l-- 113 

FEDERAL HOME LOAN BANK BOARD: Building costs index 50 

Building materials price index; comment and table 59 

Functions of home loan bank system 84-86 

Lending activities ' 1 84 

FEDERAL HOUSING ADMINISTRATION: 

Annual report, 5th, 1938; cited (n.)---- ^ 24, 27, 29 

Functions and operation . _. 86-89 

Housing projects: 

Silver Spring, Md. {See Falkland Properties.) 
Washington,- D. C {S^e Brentwood Village.) 
York, Pa. (See Liin Terrace.) 

Insured loans under title I and II, resp., of National Housing Act 88t89 

Mortgage borrowers, annual income, 1938, of F. H. A. mortgage bor- 
rowers, new single-family houses; exhibit 3 177 

Rental housing operations 90 

FEDERAL SAVINGS AND LOAN INSURANCE CORPORATION: 

Functions of 85 

FEDERAL TRADE COMMISSION: 
Cease and desist orders: 

Building Material Dealers AUiance et al., docket 2191, 1937; 

cited (n.) and text 139, 196-198'' 

California Lumbermen's Council et al., docket 2898, 1938; cited 

(n.) and text..,.-. 139, 198-199 

Cases of buUding materials retail dealers : 139 

.Florida Building Material Institute, Inc., docket 2857, 1938; 

text ^ 199-200 

FEES: 

Architects 1 .j. 34 

Architects' and builders' C^s 72-73 

Conveyance ^ ■_ 74 

Loans r ^ 74 

Rhsd estate, activity 33 

Title procedure and examination, types of^ 73 

FISHER, ERNEST M.: Testimony before House Banking and Currency 

Committee (1939) ; cited . .. . . . 87,91 

FORD, JAMES: Slums and housing (1936); cited (n.) 101 

FOREST PRODUCTS LABORATORY: Research activities 105,107 

FORT WAYNE HOUSING AUTHORITY (see also References to Litera- 
ture, item 54): Low-cost housing units 117-118 

FOSTER, RAY R., joint author. (See Wickens, David L.) 
GAS PLANTS: Construction expenditure each year, 1925-38, dollar 
^^amount; comment and table 3 14-16 



INDEX 213 

GILBRETH, FRANK B.: Analysis of motion study in t' e bricklaying 

trade ' __ I37 

GILL, CORRINGTON: Construction statistics; cited (n.) ..'_[ 9 

GLOSSARY : Construction industry 1 

Cost V 41 

Family (census) 1 21 

Household (census) ._ 21 

Lumping » ^ 37 

Productivity . 131 

Public aid to housing HI 

Public housing ^ HI 

Slum clearance __ HI 

GOVERNMENT RESPONSIBILITY: 

Research in the building industry, recommended program . 146-147 

GRANTS IN AID : ... 93 

HABEE, WILLIAM: Industrial relations in the building industry (1930); 

cited (n.) : 54, 75 

HADDOCK, GEORGE: Patent license agreements in the gypsum indus- 
try (1939); cited (n.) . 63, 75 

HAMOR, WILLIAM A.: Outlay for research in 1939 (1940); cited (n.) 

and text ^ 143, 202 

HANSEN, A. H.: Testimony before T. N. E. C; cited 9, 12 

HEATING APPARATUS INDUSTRY: 
Employm,ent. (See Employment.) 
Pay rolls. (See Pay Rolls.) 
HILLSIDE HOUSING, NEW YORK: 

Building costs per room; land, fees, labor, materials, contractor over- 
head, mortgage, equity; dollars and percent; comment and table 9-_ 41-42 
Housing costs per room per month: interest, depreciation, operating, 

taxes, vacancy; dollars and percent; comment and table 9 42 

Number of dwelling units, land cost, total and per unit 95 

HOMASOTE COMPANY: Semiprefabricated construction 105 

HOME OWNERS AND OWNERSHIP: 
Costs: 

All costs: 

Net effect upon housing (owner-occupancy) costs of identical 
reductions in each component: cost of house, cost of land, 
interest, taxes, depreciation, maintenance, insurance; com- 
ment table and chart 12 175-177 

Single-family home cost distribution, monthly cost and per- 
cent: financing, taxes and- insurance, heat maintenance, 

and repairs ; comment and table 46-47 

Fees 72-75 

Financing: 

Break-down of costs on a $4,800 house for sale in 1939; com- 
ment and table 10 43-44 

Government lending agencies 83-91 

Lending institutions 80-33 

Mortgages. (See Mortgages.) 

Land .---- 93-94 

Maintenance 22-24 

Taxes - 97 

Possession: 

Methods of acquiring a new single-family house 31 

Ownership and rent 27-28 

Process of acquiring a home, 1920-30 , 78-80 

References to literature. (See References to Literature, items 35, 38). 
HOME OWNERS' LOAN CORPORATION: 

Functions of ^J 

Lending activities 8^ 

HOMESTEAD TAX EXEMPTION: 

Origin and development of.^ 1^2 

HOUSEHOLD: Defined (census) - 21 

HOUSING CONSTRUCTION: 

Apartment buildings. (See Rental Housing.) 



214 INDEX 

HOUSING CONSTRUCTION— Continued. 

Costs; all costs: Page 

Productivity and housing construction costs; exhibit 15 and chart 

20 189-190 

Purdue University single-family residence project, House No. 1_ 44 
Standard six-room fi:ame house; total costs, material cost, labor 
cost index (1936 = 100), by months, 1936-39; comment and 

table 14 _• 59-61 

Costs; financing: 

Percentage reduction in financing costs, effect on monthly carrying 

charges; comnient and chart 11 47-48 

Costs; materials: 

Maximum cost for samples submitted for testing in National 

Bureau of Standards program; comment and table 18 106-107 

Costs; rental housing. (/See Rental Housing.) 

Design economies 103-105 

Labor processes required in house construction; exhibit 15 and 

chart 20-- . - facing 190 

Nodular. {See Nodule.) 

Multifamily housing. (See Rental housing.) 

Operations reduction: 

Thompson & Lichtner Co. system ca project near Baltimore; 

exhibit 24 195 

Southvve.st Portland Cement Co. project in Victorville, Calif.; 
savings in time percent last of 30 houses on first house by 

planned operation; exhibit 25 . 196 

Plastics. {See Plastics.) 

Prefabricated. {See Prefabrication.) 

Productivity. (<See Productivity.) 

References to literature, {See References to Literature, items 4, 7, 

8,9,31,32,45,59-61.) 
Rental housing. {See Rental Housing.) 
Requirements: 

Current rate of building versus need- . 21 

New families, replacement, demolition, number of units, annually 

(Lubin)-_.L -■ 22 

Percent unfit for use, or in need of major repairs (W. P. A.) 21 

Population requirements, various dates up to 1950 20 

Research ir design and materials 1 105-108 

Small house service bureau, American Institute of Architects 34 

Value of construction: 

1919-38. Value of residential, construction, dollars per annum; 

comment and chart 1 2, 4, 8 

1925-38. Residential and total construction in the United 
States; value: total and residential, respectively, dollar amount; 

percent residential to total; comment and table 5 19-20 

1938. Property valuation of new single-family homes insured 

by F. H. A.; exhibit 2 177 

Volume of construction: 

1929-37. Volume of construction index (1926=100); chart 12-. 58 
HOUSING CONSTRUCTION; Pubhc. {See Public Housing.) 
HOUSING CONSTRUCTION; RURAL. 

. Farm Security Admini,stration activities . 114 

Research activities of Bureau of Agricultural Engineering 107 

Resettlement Administration activities 113, 114 

HOUSING CONSTRUCTION: URBAN: 

Demolition, annual average 21 

Fort Wayne plan _-- 117-118 

Major participants in the construction of a single-family house in an 

urban area; comment and chart 14 179 

Multifamily. (<See Rental Housing.) 

Pul)lic Works vVdministration activities 114-115 

Rental housing. ^S^e Rental Housing.) 
Value of construction: 

1920-39. New nonfarm residential building in the United 
States, number of units each year; comment and table 6 22, 23 



INDEX 215 

HOUSING CONSTRUCTION: URBAN— Continued. 

Volume of construction: Page 

1938. Number and value of homes constructed in the United 
States relative to income groupings: number of nonfarm families, 
19?5-6, monthly payment in dollars, maximum value of unit at 
1 percent per month, number of units built in 1938, percentage 
of families provided for, life span per unit; comment and 

table 8 24-27 

HOUSING MAINTENANCE: 
Costs: Owner occupied: 

Relation of incomes to rents and costs 22-24 

Costs: rental housing: . 

Cost per room per month: interest, depreciation, operating, taxes, 
vacancy; dollars and percent: New York, Philadelphia, ' 
Was!iington, D. C, Silver Spring, Md., York, Pa.; dollars 

and percent; comment and table 9 41-42 

Income and operating expense (per room per month), percent of 
gross annual income (operating expense, taxes and assessments, 
interest on mortgages, vacancies), percent profit or loss: 39 

New York apartment buildings in 1937; table B . _ 15Q 

HOYT, BOMER, joint author: (See Weimer, Arthur M.) 

HURD, RICHARD M.: Principles of city land values (1924) ; cited (n.) 93. 101 

INCOME: 

Family incomes. (See Family Income.) 
National income.- (See National Income.) 
INDUSTRIAL ECONOMY: 

1929-38. Percent of their 1929 income produced by 10 named major 

industry groups; exhibit 6 179 

INDUSTRIAL HOUSING: 
Private: 

Michelin Tire Factories, Clermont-Ferrand, France; 3,000 em- 
ployee-families housing project 136 

Southwest Portland Cement Co., Victorville, Calif., 30 em- 
ployee houses - 136, 196 

Public: 

Wartime construction by United States in 1918 and in 1940 147-148 

INSURANCE COMPANIES: Interest rates on mortgage loans 80-83 

Interest Rate 80-83 

Building and loan associations 80-83 

Cost of doing business element 82 

Federal Housing Administration 87-88 

RFC Mortgage Company . 91 

Rental housing versus individual hojne owners' loans 83 

Risk element ^1 "-_ 81 

INVESTMENT: Outlets needed if nation's savings are to result in em- 
ployment and purchasing power 8 

JEROME, HARRY: Mechanization in industry (1934); extract 191 

KNICKERBOCKER VILLAGE, New York: 

Building costs per room; land, fees, labor, materials, contractor over- 
head, mortgage, equity; dollars and percent; comment and table 9. 41-42 
Housing costs per room per month: interest, depreciation, operating, 

taxes, vacancy; dollars and percent; comment and table 9 . 42 

Number of dwelling units, land cost, total and per unit. . 95 

IvREPS, THEODORE J. Letter of transmittal of Monograph No. 8_-- xiii 
LABOR AGREEMENTS: Building trades. (See Building Trades 
Unions.) 

LABOR SUBCONTRACTING....-.: 37 

Lake WOOD, O.: Families moving away from 28 

LAMBERT PLAN 11? 

LAND COSTS: Multi-family housing 95 

References to literature. (See References to Literature, items, 13, 20.) 
LEATHER INDUSTRY: Productivity. (See Productivity.) 

Single-f ami! v homes 93-94 

LAND REGISTRATION: Torrens system 7.S-74 

LENCH, CHARLES H.: Promotion of commercial buildings (1932^; 

cited Cn.) 32.40,103 



216 ^^^EX 

Page 

LENDING- ACTIVITIES: Government . 83-91 

Types of institutions. =. 80 

LEVEN, MAUI. OE, and others: America's, capacity to consume; cited 

■ (n.)---i-----^------ -^ 26,29 

^TJMITED DIVIDEND HOUSING CORPORATIONS. Hillside Hous- 
ng. {See Hillside Housing.) 
Juniata Park Housing Corporation, owner of Carl Mackley Homes. 
{See Carl Mackley Homes.) 

Y.and cost, New York City projects; comment and table I6r 95 

TiOan insurance provision in National Housing Act of 1934 90 

National Industrial Recovery Act (1933) provision 89 

Origin of 84 

Boston in 1871 "- 111 

' New Jersey, 1933. -, -_ 112 

Tax exemption 111 

LOW-RENT HOUSING: Slum clearance versus^ ^.-. 111 

LUBIN, ISADO. E. 

Testimo:,^- ht.^re T. N. E. C; cited 9 

LUMBER r.njSTRY: 

p]mplo^•ment. {See Employment.) . 
Pav rolls. {See Pay Rolls.) 

"LUMPING" DEFINED - 37 

McELROY, F. S. Union scales of wages and hours in the building trades 

(1938): cited (n.) 75 

'MAINTENANCE COST. {See Maintenance Housing.) 
MANAGEMENT {see also References to Literature, item 48): 

Building industry: , . 

Obsolete methods j. 136-1 38 

Recommended program 146-147 

MASS PRODUCTION: 

Design varieties a deterrent 104 

Pr-efabrication and '. 108-109 

MATERIAL DEALERS: Types of : 38-39 

MECHANIZATION: 

Building industry. {See Building Industry.) 
Construction industry. (<See Construction Industry.) 
References to literature. {See References to Literature, items 21, 26.) 
I^IEHREN, LAWRENCE: Employment and values in construction, 

cited (n.) 8, £ 

METAL WORK: 

Emplovment. {See Employment.) 
Pay rolls. {See Pay Rolls.) 
MILLER, JOHTs" A.: Motorization progress shown by rail and bus route 

changes; cited (n.) 14 

MF^'^S, FREDERICK C: Prices in recession and recovery (1936); cited 

(n.) 132 

MODULAR SERVICE ASSOCIATION: Activities 139 

MODULE: Dimension standardization 139 

Use of in design contribution of Bemis Industries, Inc 105 

MORTGAGES: 

Federal Home Loan Bank Board, loan functions of system 84 

Financing procedure, 1920 to 1930 - 78-80 

Funds invested in: 

1929, 1937. Amount of urban nonfarm loans each year, by each 

type of lender in dollars; comm.ent and tables 7S 

1930-37. Funds invested in urban residential m.ortgages, 1930 

and 1937 77 

Home Owners' Loan Corporation, functions of 84 

Insurance: 

Annual income of F. H. A. mortgage borrowers, new single- 
family homes, 1938; exhibit 3 .- — 177 

Federal Housing Adn>.inistration, functions and operation, 86- S9 

Interest rates by types of lending instit\itions 80-83 

Roforen<^'e3 to literature. {See References to Literature, item 55.) 
MULTIFAMTLY HOUSING. {See Rental Housing.) 
^NATIONAL ASSOCIATION OF REAL ESTATE BOARDS: Survey of 

real-estate business (1933); cited 40 



INDEX 217 

Page 
NATIONAL BUREAU OF ECONOMIC RESEARCH: BuUetin 65; 

cited (n.) _• :.._ 23, 29 

NATIONAL BUREAU OF STANDARDS: 

Building materials and structures Reports (1938-39) ; cited 109 

Research activities _ _ 106 

NATIONAL INCOME: 

1921-37. Index of proportion of national income spent for homes 

and automobiles; comment and chart 12 178 

1929-38. Percent of national income produced by the contract- 

constTHjcition industry; exhibit 6 ______ _ 179 

NATIONAL INDUSTRIAL RECOVERY ADMINISTRATION: 

Economic problems of the lumber and timber products industry 

(1936); cited (n.) 66,75 

Hearing on code of fair competition fof builders' supplies trade in- 
dustry (1934); cited (n.) 66, 75 

Rental housing provision under sec. 202, act of June 1933 89 

NATIONAL RESOURCES COMMITTEE: 

Consumer incomes in the United States (1938); cited (n.)^ 24, 29, 178 

Housing Monograph Series No. 1(1939); cited !._ 20, 29 

Housing Monograph Series No. 3 (1939); cited (n.) 62, 75, 101, 109 

Research— a national resource (1938) ; cited (n.) 143 

NATIONAL SMALL HOMES DEMONSTRATION COMMITTEE: 

Function of 103 

NEIGHBORHOODS: 

Obsolescence 96-97, 99 

References to literature. (See References to Literature, item 58.) 
NEW YORK STATE. STATE BOARD OF HOUSING- Report, 1937; 

cited (n.) . 84,91,95 

NEWCOMB, ROBINSON: Home financing in Cleveland (1931); cited.. 79, 91 
PACIFIC COAST BUILDING OFFICIALS' CONFERENCE: Uniform 

building code (1937); cited 101 

PARKER, WILLIAM S.: Report on income and cost survey of city of 

Boston (1935); cited (n.) --..-_..•. 98, 101 

PAY ROI.LS: 

Brick, tile, and terra cotta: 

1923-39. Index (1923-25 = 100); chart 7 6 

Cement: 

1923-39. Index (1923-25=100); chart 8 ^ 7 

Sawmills: 

1923-39. Index (1923-25=100); chart 4 5 

Lumber: 

1923-39. Millwork, index (1923-25 = 100); chart 5 ... 5 

Steam and hot-water heating apparatus and steam fittings: 

1923-39. Index (1923-25=100); chart 3 4 

1923-39. Structural and ornamental; index (1923-25 = 100); 

chart 6 6 

PIERCE FOUNDATION: Research specialty of 106 

PIPE LINES: Construction expenditure each year, 1925-38, dollar 

amount; comment and table 3 14—16 

PLASTERERS: 

Code of fair competition adopted by Building Contractors Employers 
Association and Operative Plasterers' and Cement Finishers' Inter- 
national Association, Local No. 60, 1937, M9,nhattan and Bronx 

Boroughs, New York City; text.... . 165-172 

PLASTICS: Adaptation to low-cost housing 143 

PLUMBERS' SUPPLIES: 

Employment. (See Employment.) 
Pay roils. (See Pay Rolls.) 
PLUMMER, LEIGH S. : Spending habits of nation swinging to larger 

(atio of durable goods; cited (n.) '._ 23 

POWER AND LIGHT PLANTS: Construction expenditure each year, 

1925-38, dollar amount; comment and table 3 14-16 

PREFABRICATION (see also References to Literature, item 10): 

A. 0. Smith Co. studies 106 

Homasote products 105 

Status of -• 108-1C9, 142 



218 INDEX 

Page 
PRESIDENT'S CONFERENCE ON HOME BUILDING AND HOME 
OWNERSHIP: 

Committees on home finance and taxation (1932); cited (n.) 97, 101 

Correlating Committee on Technological Developments. Excerpts 
of conclusions relative to need for technical research in housing 

(1931) . . 204-205 

Planning for residential districts (1931); cited (n.) 101 

PRICE STRUCTURE: BUILDING MATERIALS: 

1910-36. Building materials and all commodities price mdex; com- 
ment and chart 12 5g 

1929-37. Building materials and all commodities prices; ratio of 
• building materials to all commodities; residential construction; inde:^ 

(1926=100), in semi-annual intervals; comment and chart 12 58-59 

1936-39. B. L. S. and Home Loan Bank Board indexes compared; 

comment and table 59 

. 1937. Prices of each of five principal materials (lumber, cernent, 
crushed stone or gravel, reinforcing steel bars, brick), by States, 
District of Columbia, and New York City, April 15 and June 15; 

table C 151-152 

Brick; common brick: 

li921-39. Wholesale and retail price per 1,000 brick; chart 4 156 

Cement: 

1921-39. Wholesale and retail price per barrel; chart 1 153 

Hollovir tile: 

1921-39. Wholesale and retail price per tile; chart 5 157 

.Lime; hydrated lime: 

1921-39. Wholesale and retail price per ton; chart 10 162 

Lumber; Douglas fir: 

1921-39. Wholesale (1922-39) and retail (1921-39) price per 

1,000 board feet; chart 3 155 

Lumber; short-leaf yellow pine: 

1921-39. Wholesale (1926-39) and 'retail (1921-39) ^price per 

1,000 board feet; chart 2 154 

Pipe; cast-iron soil pipe: 

1921-39. Wholesale and retail price per ton; chart 11 1fi3 

Sand; building sand: 

1921-39. Wholesale and retail price per ton; chart 9 161 

Steel reinfo cing bars: 

1921-39. Wholesale and retail price per 100 pounds; chart 6 158 

Steel; structural steel: 

1921-39. Wholesale and retail price per 100 pounds; chart 7 159 

Stone; crushed stone: 

1921-39. Wholesale and retail price per cubic yard; chart 8 160 

PRICE SYSTEM; BUILDING MATERIALS: 

Basing-point system; steel, cement, gypsum 61-63 

Price control: 

Briggs bathtub ca.se 65-66 

Steel, cement, gypsum, brick, lumber, millwork, plumbing sup- 
plies - 61-66 

PRINGLE HENRY F., joint author. (See Rheinstein, Alfred.) 
PRODUCTIVITY (see also References to Literature, item 44): 

Automobile-tire industrv; index of productivity (1914 = 100), 1914, 

1922-31; e.xhibit 18_.l 190 

Blast furnaces: 

Number of estabUshments, average output per man-hour, wages 

per ton and per man-hour, 1929; exhibit 16 190 

Costs and 130-133 

Defined 131 

Electric-lamp industrv: 

1920-31. Index" of productivitv, 1920, i929, 1931 (1920=100); 

exhibit 17 - 190 

Housing construction: 

Cost and productivity; exhibit 15 and chart 20 189-190 

Leather industry: 

1849^-1935. Index of productivitv (1935 = 100), 1849-99 in 
10-vear iatervals, 1904, 1909, 1914, 1919-35 in odd vears only; 
e.xhibit. 19 ~ 191 



INDEX 



219 



Psgb 

PUBLIC AID TO HOUSING: Defined 111 

PUBLIC AID TO LOW-RENT HOUSING: "' 

Homestead tax exemption 112 

Tax exemption . __ _ _ 112" 

PUBLIC CONSTRUCTION: 

1925-38. Expenditure each year: total, State and local construction, 
construction from Federal grants, direct Federal construction; 

dollar amounts; comment and table 4 _ 16-17" 

PUBLIC HOUSING {see also References to Literature, item 14): 

Defined HI 

Fort Wayne, Indiana, Housing Authority : 117-118 

Industrial. (See Industrial Housing.) 

Private capital construction. (See Lambert Plan.) 

Projects and dwelling units constructed by various Federal agencies. 112-114 

United States Housing Corporation ._ 1 12-1 13 

PUBLIC WORKS ADMINISTRATION: Housing activities 114-115 

References to literature. (See References to Literature, item 51.) 
PURDUE UNIVERSITY: 

Experimental housing project. House No. 1; Davison report cited (n.)_ 44 

House No. 1 , single-family residence, costs 44 

RAILROADS: Construction expenditure each year, dollar amount; 1925- 

38, comment and table 3 14-16 

REAL ESTATE ANALYST: Cited (n.) 83 91 

REAL ESTATE BOARD OF NEW YORK: Operative costs for elevator 

apartment houses (1937); cited (n.) 76 

REAL ESTATE DEALERS: Fees for real estate activity ,^. 3$ 

Tvpes of - ,_._ 3S 

REAL PROPERTY INVENTORY, 1934-36 .__ . 21 

RECONSTRUCTION FINANCE CORPORATION MORTGAGE 

COMPANY: Function of 91 

REFERENCES TO LITERATURE: 

(1) American Gas Association: Annual statistics of manufactured-gas 
industry, 1937; cited (n.) 16 

(2) Archer Development Co.; Archer's suburban life (1939); cited 

(n.) -^. 96, 101 

(3) Bigger, F.: Site planning (1939) ; cited (n.) 99,101 

(4) Blouke, Pierre: Significance of small-house design (1939); cited 

■ (n) L 109 

(5) Boston Citv Planning Board: Report on income and cost survey 

of Boston (1935); cited (n.) 98, 101 

(6) Burchard, John 2d: Research findings of Bemis Industries, Inc. 
(1934); cited (n.) ■_ i 105, 109 

(7) Cliavvner, L. J.: Basic factors in trend of construction; cited (n.)_ 12, 17 

(8) Chawner. L. J.: Residential building (1939); cited (n.) -- 20,29 

(9) Cleveland (^hamber of Commerce: Home-building conditions in 
Cleveland; Buckley report (1938); cited (n.).. . 54,75 

(10) Davison, R. L. : Traditional, prefabricated, and mobile housing 
(1936) ; cited (n.) 40 

. (11) Edison Electric Institute: Electric light and power industry ip 

United States, 1937; cited (n.) 15, 17 

(12) Engineering Npws Record: Construction costs, 1937 ed.; cited 

(n.) : 12 

(13) Evans, Mercer G.: Land, materials, and labor costs; cited (n.).. 52, 75 

(14) Federal Housing Administration: Annual report. Fifth, 1938; 

cited (n.) : 24,27,29- 

(15) P'ord, James: Slums and housing (1936); cited (n.) 101 

(16) Gill, C: Construction statistics; cited (n.) 9 

(17) Haber. William: Industrial relations m the building industry 
(1930): cited (n.) : 54,75 

(18) Haddock, G.: Patent license agreements in the gypsum industry 
(1939): cited (n.) 63, 75 

(19) Hamor, W. A.: Outlav for research in 1939 (1940) ; cited (n.) and 

Text " - 143,202 

(20) Hurd, R. M.: Principles of ciiy land values (1924); cited (n.)___ 93, 101 

(21) Jerome, H.: Mechanization in industry (1934); extract ' 191 

(22) Lench, Charles H.: Promotion of comm^'-cial buildings (1932); 

cited (n.) . 32, 40, 103 

260158 — 40— No. 8— —16 



220 INDEX 

REFERENCES TO LITERATURE— Continued. Page 

(23) Leven, N.. and other.s: America's capacity to consume; cited fn.)- 26, 29 

(24) McElrov, F. S. : Union scales of wages and hours in the building 
trades (1938); cited (n.) 75 

(25) Mehren, L. : Emi)loyment and values in construction, cited (n.) _ 8, 9 

(26) Miller, J. A.: Motorization progress shown by rail and bus 
route changes; cited (ii.) . 14 

(27) Mills, F. C: Prices in recession and recovery (1936); cited (n.)- 132 

(28) National Bureau of Economic Research: Bulletin 65; cited (n-)- 23, 29 

(29) National Recovery Administration: Economic problems of the 
lumber and timber products industry (1936); cited (n.) 66, 75 

(30) National Recovery Administration: Hearing on code of fair 
competition for builders' supplies trade industry (1934); cited (n.)- 66, 75 

(31) National Resources Committee: Housing Monograph Series No. 

1 (1939); cited (n.) 20, 29 

(32) National Resources Committee: Housing Monograph Series No. 

3 (1939); cited (n.) 52,75, 101 

(33) National Resources Committee: Research — a national resource 
(1938); cited (n.) 143 

(34) New York State: State Board of Housing. Report, 1937; cited 

(n.) - 84,91,95 

(35) Newcomb, R.: Home financing in Cleveland (1931); cited (n.)__ 79, 91 

(36) Parker, W. S.: Report on income and cost survey of City of 
Boston (1935); cited (n.) 98, 101 

(37) Piummer, Leigh S. : Spending habits of nation swinging to larger 

ratio of durable goods ; cited (n.) ._. 23 

(38) President's Conference on Home Building and Home Ownership 

i (1931-32); cited (n.) 97, 101 

(39) Real Estate Analyst, various dates; cited (n.) 83,91 

(40) Real Estate Board of New York: Operating costs for elevator 
apartment houses (1937) ; cited (n.) 76 

(41) Rheinstein, A., and Pringle H. F.: Why slum clearance mav fail 
(1939); cited (n.) A. Ill, 118 

(42) Sanford, E. P.: Wage rates and hours of labor in the building 
trades (1937); cited (n.) 76 

(43) Starrett, W. A.: Skyscrapers (1928); cited 40 

(44) Stewart, Ethelbert: Productivity in the building trades (1924); 

cited (n.) 137 

(45) Stone, Peter A.: Experiments with low-cost homes (1932); 

cited (n.) 106 

(46) Stone, P. A.: Structural steel and iron fabricating industry, 
report (1933); cited (n.) _• .": . 62 

(47) Temporary National Economic Committee; Hearings, Part 11: 
Construction industry (1939); cited throughout. 

(48) Thompson, S. E., and Curley, W. E.: System can cut building 
costs (1939); cited (n.) 136 

(49) U. S. Bureau of Foreign and Domestic Commerce: Construction 
activity in the United States, 1915-37; 1938; cited (n.) 1, 9, 14 

(50) Bureau of Labor Statistics: Handbook of labor statistics, 1936 

ed. ; cited (n.) 190 

(51) United States Bureau of Labor Statistics: Value of material 
orders placed for projects financed by Public Works Administra- 
tion, 1933-39; cited (n.) 3 

(52) United States Census Bureau: Construction industry (1936-37); 

cited '. ■ 40 

(53) United States Housing Authority: Policy and procedure bulletin 

No. 12 (1938): cited (n.) •__. 104 

(54) Wagner, P.: Fort Wayne plan (1939); cited (n.)__. 118 

(55) Walker, W. A., and Bell, S.: Land title procedure with particular 
reference to legal costs of home mortgage loans (1936); cited (n.)_„ 73, 75 

(56) Wall Street .Journal, Oct. 4, 1937: Tabulated history United 
States Steel Corporation ; cited and extract 149 

(57) Weimer, A. M., and Ilovt, H.: Principles of urban real estate 
(1939); cited (n.) " 28, 29 

(58) Whitten, R., and Adams, T.: Neighborhoods of small homes 
(1931); cited (n.) 94. 101 

(59) Wiclionp, D. L.; i-mancial survey of urban housing; cited Cn.')- — 93,91 



INDEX 221 

REFERENCES TO LITERATURE— Continued. Page 

(60) Wickens, David L. and Foster, Ray R,: Nonfarm residential 
construction, 1920-36; cited (n.) _ 23 29 

(61) Wilson, F. V., Jr.: Tomorrow's homes (1939); cited (u.) '-'.-_. 105, 109 
Works Progress 'Administration: 

(62) Construction expenditxires and employment, 1925-36; June 1, 
1937;cited (n.) 1_ 2, 9, 15 

(63) Construction expenditures and employment, 1936-38; April 
1939; cited (n.) 1 1,2,9,15 

(64) Wolman, Leo: -Planning and control of public works; cited. . . 9 

RENTAL HOUSING: 

Brentwood Village. (See Brentwood Village.) 
Carl Mackley Homes. {See Carl Mackley Homes.) 
Costs: 

Cost distribution: percent interest, depreciation, operation, and 

maintenance, taxes and assessm.ents; table 45 

Costs per room on rental housing: New York, Philadelphia, 
Washington, Silver Springs, Md., and York, Pa.; dollars and 

pqrcent; comment and table 9 ' 41-42 

Fees 75 

Land 94^95 

Operating costs . 45 

Tax costs _. 97 

Depreciation • 45 

Elm. Terrace. (See Elm Terrace.) 
Falkland Properties. (See Falkland Properties.) 

Federal Housing Administration projects. {See Federal Housing Ad- 
ministration.) 
Hillside Housing. {See Hillside Housing.) 

Interest rates 83 

Mortgages. {See Mortgages.) 

National Industrial Recovery Act, June 1933, section 202 provisions 89 

Public Works Administration activities 114-115 

Publicly owned 112 

References to literature. {See References to Literature, item 40.) 

Types of initiators of building of 32 

United States Housing Authority : Origin, functions, and activities 116 

RENTS: 

Dwelling units, relation of incomes to rents and costs 22-24 

Ownership and rent 27-28 

RESEARCH: 

Building industry: 

Federal Government's responsibility for technological research 

in the building industry' . 146 

Recommended program 146-147 

Status of __-_ - 141-145 

Housing construction: 

Design and materials 105-108 

President's Conference on Home Building and Home Ownership, 
Correlating Committee on Technological Developments. Ex- 
cerpts of conclusions relative to need for technical research in 

housing (1931) 204-205 

Minimum standards needed to meet requirements of livability; im- 
portant field for research 107 

Public activities 106 

References to literature. (See References to Literature, items 6, 
19 33 ) 

RESETTLEMENT ADMINISTRATION: Housing activities 113 

RESIDENTIAL CONSTRUCTION. (See Housing Construction.) 
RHEINSTEIN, ALFRED and PRINGLE, HENRY F.: Why slum 

clearance mav ffiil (1939); cited (n.) 111, 118 

RUSSELL, HORACE: Legal problems in the housing field (1939); cited 

(n.) -..-- 81,91 

SANFORD, E. P.: Wage rates and hours of labor in the building trades 

(1937); cited (n.) 76 

SA VI NGS BANKS: Interest rates on mortgage loans 80-83 

SCIENTIFIC MANAGEMENT. (See Management.) 



222 INDEX 

Page 

SEARS ROEBUCK PRECUT HOUSES .. 108 

SLUM CLEARANCE: 

Defined 111 

References to literature. (See References to Literature, items 15, 41.) 

SOCIAL SECURITY BOARD: Contract construction industry study 35 

SOUTHWEST PORTLAND CEMENT CO.: Employee housing con- 
structed at Victorville, Calif ._ 136, 196 

STANDARDIZATION: 
Building industry: 

Activities . 138-139 

Recommended program 147 

Dimension. (See Module.) 

Minimum standards needed to meet requirements of livability; impor- 
tant field of research ; 107 

STARRETT, W. A.: Skyscrapers (1928); cited 40 

STEWART, ETHELBERT: Productivity in the building trades, (1924); 

cited (n.) . .. 137 

STONE, PETER A.: 

Experiments with low-cost homes (1932) ; cited (n.) 106 

Structural steel and iron fabricating industry, report (1933) ; cited 62 

STONE, PETER A. and R. HAROLD DENTON: Toward more housing. 
T. N. E. C. Monograph No. 8. 

STRAUS, NATHAN : Testimony before T. N. E. C. (1939) ; cited (n.) 97 

SUBCONTRACTORS: 

Labor subcontracting 37 

Scales of activitv 36-37 

SUBSISTENCE HOMESTEADS 112-114 

TAX EXEMPTION: 

Homestead tax exemption 112 

Limited dividend corporations and - 111 

TAXF^S: Tax-income v. service costs, Boston and Cleveland Studies; corn- 
men t and table , 97-98 

TECHNOLOGICAL DEVELOPMENT. (-See Research.) 
TELEPHONE AND TELEGRAPH: Construction expenditure each 

vear, 1 925-38, dollar amount; comment and table 3 14-116 

TEMPORARY NATIONAL ECONOMIC COMMITTEE: Hearings, 

Part 11. Construction industry (1939); cited throughout 
TERRA COTTA INDUSTRY: 

Employment. (See Employment, Brick.) 
Pay rolls. (See Pay rolls, Brick.) 
THOMPSON, SANFORD E. and CURLEY, W. E.: System can cut 

building costs (1939); cited (n.) 136 

TILE INDUSTRY: 

Employment; brick, tile, and terra cotta. (^ee Employment, Brick.) 
Pay roils. (See Pav Rolls, Brick.) 

TORRENS SYSTEM: 'Land-title registration system 73-74 

TRADE ASSOCIATIONS: Construction industry. (See Construction 

industry.) 
UNEMPLOYMENT: 

Expansion of construction industry to a point which will maintain an 

expanding economy and an increasing population. _ 9 

Investment outlets needed if nation's savings are to result in employ- 
ment and purchasing power i S 

UNIONIZATION: 

Building trad^. (See Building Trades Unions.) 
UNITED' STATOS. BUREAU OF AGRICULTURAL ENGINEER- 
ING: RuraJ" Housing research activities 107 

UKITED STATES. BUREAU OF FOREIGN AND DOMESTIC 
COMMi,RCE: Construction activity in the U. S., 1915-37, 1938; cited 

(n.)__. • 1,9, 14 

UNITED STATES. BUREAU OF LABOR STATISTICS: 

Building materials price index; comment and table 59 

Handbook of labor statistics, 1936 ed.; cited (n.) 190 

Union wage rate index for building trades 50 

A'^alue of material orders placed for prospects financed by Public 

Works Administration, 1933-39; cited (n.) . ' 3 



INDEX 223 

Page 
UNITED STATES CENSUS BUREAU: Construction industry (1936- 

37); cited 40 

UNITED STATES DEPARTIVIENT OF JUSTICE: 

Antitrust Division, cases involved in building investigation as of June 

13, 1940 .. 173-174 

Antitrust Division, indictments returned and civil suits instituted 
October 12, 1939-Februarv 23, 1940, in the building industry; 

exhibit 28 200-202 

Building industrv investigation, program of 140 

UNITED STATES HOUSING AUTHORITY: 

Origin, functions, and activities 116 

Policy and Procedure Bulletin No. 12. Dwelling unit planning (1938); 

cited (n.) 104 

UNITED STATES HOUSING CORPORATION: Function of 147-148 

UNITED STATES STEEL CORPORATION. (See also References to 
literature, item 56) : 
Earnings: 

1904-38. Comparison of net earnings and construction expendi- 
tures, index; table A 149 

1905-37. Earnings and new construction index (average 1925 = 

100) ; 3-year moving average 1904-38; chart 10 13 

UTILITIES: PRIVATELY OWNED: 

1925-38. Construction expenditure by types of utilities: Total, 
railroads, electric railroads, power and light, telephone and telegraph, 

waterworks, gas plants; dollar amount; comment and table 3 14-16 

WAGE PAYMENTS (EARNINGS): 

Average annual wage payments and percent skilled workers of all 
wage earners, each of 16 industrial groups 1929; comment and 

table 12 • 51-52 

Building trades, guaranteed annual wage proposal 53 

WAGE RATES: BUILDING TRADES: 

Average wage rates of skilled workers and residential building activity 
1936: in each of 5 named cities of over 1,000,000; each of 9 named 
cities of between 500,000 and 1,000,000; each of 9 named cities of 
100,000 to 200,000; each of 9 named cities of 25,000 to 50,000; 

comment and table 13 55-59 

Labor-cost ratio relationship 49 

References to literature. {See References to Literature, items 24, 42.) 
Skilled versus unskilled: 

Residential versus nonresidential building; comment and table.. 50-51 

Union rates, B. L. S. index 50 

Unionization, effect on rat&s 50 

WALKER, WALLACE H. and SPURGEON BELL: Land title pro- 
cedure with particular reference to legal costs of home mortgage loans 

(1936); cited (n.) ■_ 73-75 

WEINER, ARTHUR M. and HOYT, HOMER: Principles of urban real 

estate (1939); cited (n.) 28,29 

WATERWORKS: Construction expenditure each year, 1925-38, dollar 

amount; comment and table 3 14-16 

WHITTEN, ROBERT and ADAMS, THOMAS: Neighborhoods of 

small homes (1931); cited 94, 101 

WICKENS, DAVID L.: Financial survey of urban housing; cited (n.)... 83, 91 
WICKENS, DAVID L. and FOSTER, RAY R.: Nonfarm residential con- 
struction, 1920-36; cited (n.) 23, 29 

WILSON, F. v., JR.: Tomorrow's homes (1939); cited (n.)... .,.-. 105, 109 

WAGNER, PHILIP: Fort Wayne plan (1939); cited (n.) 118 

WOLMAN, LEO: Planning and control of public works; cited 9 

WORKS PROGRESS ADMINISTRATION (1935-39, June 30) : 

Construction expenditures and employment, 1925-36; June 1937; 

cited (n.) .... 1, 2, 9, 15 

Construction expenditures and employment, 1936-38; April 1939; 

cited (n.) 1, 2, 9, lo 

Construction expendituries each vear, 1936-38; dollar amount 16 

WORK PROJECTS ADMITS ISTRATION (1939— ): 

Housing activities , 117-1 18 

ZONING ORDINAKCF^" Function of 39 

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