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6
Given By
B. S^ 3UPI Oi"- OOCUMEI^TS
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POST-WAR ECONOMIC POLICY AND PLANNING
HEARINGS
BEFORE THE
SUBCOMMITTEE ON HOUSING AND UEBAN
REDEVELOPMENT OF THE
special:committee on post-war economic
policy and planning
united states senate
SEVENTY-NINTH CONGRESS
FIRST SESSION
PURSUANT TO
S. Res. 33
(Extending S. Res. 102, 78th Congress)
A RESOLUTION CREATING A SPECIAL COMMITTEE
ON POST-WAR ECONOMIC POLICY
AND PLANNING
PART 14
HOUSING AND URBAN REDEVELOPMENT
FEBRUARY 6, 1945
Printed for the use of the Special Committee on Post-War
Economic Policy and Planning
UNITED STATES
GOVERNMENT PRINTING OFFICE
9118S WASHINGTON : 1945
MAY 8 1945
SPECIAL COMMITTEE ON POST-WAR ECONOMIC POLICY AND
PLANNING
WALTER F. QEORQE, Georgia, Chairman
ALBEN W. BARKLEY, Kentucky ARTHUR H. VANDENBERO, Michigan
CARL HAYDEN, Aritona WARREN R. AUSTIN. Vermont
JOSEPH C. O'MAHONEY, Wyoming ROBERT A. TAFT, Ohio
CLAUDE PEPPER, Florida ALBERT W. HAWKES, New Jersey
SCOTT W. LUCAS, Illinois
Meyer Jacobstein, Director
Subcommittee on Housing and Urban Redevelopment
ROBERT A. TAFT, Ohio, Chairman
DENNIS CHAVEZ, New Mexico ROBERT M. La FOLLETTE, Jr., Wisconsin
ALLEN J. ELLENDER, Louisiana GEORGE L. RADCLIFFE, Maryland
C. DOUGLASS BUCK, Delaware ROBERT F. WAGNER, New York
II
CONTENTS
Statement of— ^^s*
O'Grad}', IMsgr. John J., secretary, National Conference of Catholic
Charities 1 977
Whitlock, Douglas, president, Producers Council, Inc 1986
Clark, Irving W., chairman, residential committee, Producers' Council. 1997
Northup, H. R., secretary-manager, National Retail Lumber Dealers
Association 2000
Nelson, Herbert U., executive vice president. National Association of
Real Estate Boards 2004
Johnson, Reginald A., field secretary. National Urban League 2021
Note. — There will appear in the final volume an ndex covering the entire
hearings.
POST-WAE ECONOMIC POLICY AND PLANNING
TUESDAY, FEBRUARY 6, 1946
United States Senate,
Subcommittee on Housing and Urban
Redevelopment of the Special Committee on
Post- War Economic Policy and Planning,
Washington, D. C.
The subcommittee met, pursuant to adjournment, at 10:30 a. m.,
in room 312 Senate Office Building, Senator Robert A. Taft (chair-
man), presiding.
Present: Senators Taft (chairman), Radcliffe, Buck, La Follette,
and Chavez.
Senator Taft. The committee will come to order.
Senator Ellender and Senator Radcliffe have stated they will be
here shortly.
The first witness is Rt. Rev. Msgr. John O'Grady, secretary,
National Conference of Catholic Charities.
STATEMENT OF RT. REV. MSGR. JOHN J. O'GRADY, SECRETARY,
NATIONAL CONFERENCE OF CATHOLIC CHARITIES
Monsignor O'Grady. Mr. Chairman, I am secretary of the National
Conference of Catholic Charities.
Now, when it was proposed by certain people that I should appear
before this committee for the first time, I thought that I would appear
in my capacity as an individual because I felt that in that capacity
I could speak from considerable experience, long experience and close
contact with this housing program in various cities of the United
States, and that I could also tell about the contacts of our agencies
with the program all over the country.
I have had very close contact with this movement just as I have had
with other like movements in the United States over a long period of
years.
I thought, however, that it might be more desirable if I could speak
on behalf of a group of people who were interested in housing. There-
fore we discussed this matter among the members of a very repre-
sentative committee of Catholic charities in the United States, and
they felt the same about the program as I did, and I thought it would
be well for me to appear before the committee in their behalf.
And then, I also have discussed the matter with a bishop, who
represents the administrative committee of the Catholic hierarchy in
dealing with these problems, and I am appearing with his approval
also. So I am not appearing in my individual capacity.
1977
1978 POST-WAR ECONOMIC POLICY AND PLANNING
Now, those of us who are interested in the work of the Catholic
charities all over the country, and in Catholic social service, are
naturally very much interested in this program. Quite a number of
our executives in Catholic charities have been members of housing
authorities. Quite a number have been members of committees and
served as chairmen of committees that promoted this low-cost housing
program in various communities in the United States.
We are interested from the standpoint of areas in American cities
affected by those programs, because we are concerned about develop-
ing conditions that may make decent family life possible.
We are interested in the type of thinking that enters into the type
of program, because in the beginning we were somewhat critical of
some of the projects developed under the W. P. A. because we felt
they represented too much of an apartment-house mentality which
catered to very small families and we did not feel that they could serve
the needs completely of the people they were designed to serve.
But we find recently that many of our objections in that matter
have been met.
We are interested, of course, in the process of deterioration that
has been going on in the slum areas all over the country because our
church and our agencies have developed a great many institutions in
those areas.
A student of mine a few years ago examined the whole central
area in Cleveland and made an analysis of all the institutions and
organizations in that area.
Now, we find the areas deteriorating more and more, so that we
are naturally concerned about the future of those areas just as other
groups in the United States are.
And we would like to join with other groups in thinking out tnis
program. We feel that it is a very complicated problem and we feel
that we still have a limited body of experience and that we need to
approach it honestly and objectively.
Now, I wanted to say in passing that in dealing with the size of
the unit we have been very much concerned, and I want to say this
for the record on behalf of our group in the United States. We
believe that the present limitation of $4,000 a unit is too small. I
think it is all right to have a limit on the cost of rooms but we feel
that these units should serve the need that they are designed to serve
and not just some ideas of people who frequently live outside those
areas and have not had very much contact with the slums.
Senator Taft. All of the laws passed have dealt with limited cost
of units and it seems to me one of the things we should do in future
legislation is to change the cost to the room cost or the room rent.
There might also be some over-all total limitation on unit cost.
Monsignor O'Grady. I think that is sound. I just didn't want
to run the risk of overlooking that because I know it is a matter on
which our people all over the country have very keen feelings.
I have read a good deal of the testimony that has been presented
here and I didn't want to overlap or duplicate and I didn't want to
enter into too many of the problems, but I want to base my testi-
mony on my own personal observations throughout the country.
I have i ad a good many contacts with this housing program
throughoii the country. In the short time I have had to prepare
for this healing before the committee I did not have a chance to get
POST-WAR ECONOMIC POLICY AND PLANNING 1979
together all the notes in my diary, but I thought that I would base
my testimony on observations of four housing projects in Cleveland,
Ohio, namely, Cedar Apartments, Valleyview Homes, Lakeview
Terrace, and Woodhill Plomes; three housing projects in New York;
namely, Williamsburg Houses and Red Hook Houses in Brooklyn,
N. Y., and the East River Houses on the upper East Side in New
York City; Laurel Homes in Cincinnati, Ohio; the Jane Adams
Homes and the Cabrini Homes in Chicago ; Yamacraw Village in Savan-
nah, Ga.; Ramona Houses in Los Angeles, Calif.; St. Thomas Street,
Magnolia Street and Lafitte Avenue projects in New Orleans, La.;
the Alazan Courts in San Antonio, Tex.; the Old Harbor Village
and Old Colony Homes in South Boston, Mass.; the Yellow Mill
Village and Marina Village in Bridgeport, Corn.; Clinton-Peabody
Terrace and Carr Square housing projects in St. Louis, Mo.; and
Brand Whitlock Homes in Toledo, Ohio.
I visited a number of those projects several times and I just wanted
to bring out some of the points that came to my attention in visiting
the projects, in talking to people in the areas, talking to social workers,
talking to our pastors, because I have had many conferences with
our pastors in those various areas.
Sometimes I have met with some of the groups. In Cleveland I
have met as many as four or five times. I have been all around the
projects and have tried to catch up with some of the gangs in the
areas, but have made about as much progress as most other people
have.
Those who are engaged in the administration of housing programs
were aware that public low-rent houses were designed to improve
the standard of life of families who had lived in the slums. Of course,
they didn't always realize how difficult this problem was in practice.
In the course of time I learned what a housing project really does
in bringing together in one area 200 to 300 or 500, and sometimes
1,100 underprivileged families from the slums,
I don't think any of us has realized what that really means. Some-
times the area is very limited and sometimes one wonders whether
they are not still too congested.
Of course, once in a while you wonder whether the city ordinances
are being observed. I don't think we have anything to conceal on
this program, and I don't want to try to conceal any of my findings,
because I think we must deal with the facts. But I visited a project-
not very many days ago and I think that project which has been built
is violating the ordinances of the city.
I think two or three families frequently live in the same apartment.
That is what happened in the slums. That is poor administration.
That is not the fault of the program.
Now, these families come to these brand-new homes with all modern
facilities. A Cleveland school teacher told me recently this change
did something to them. This is the bright side of it.
Now, the children in the school feel they are all on a basis of equality.
A mother I saw recently in the office of the same project expressed
the same thought. She said, "I never thought we would find our-
selves in such a nice house."
Some of the original promoters of public low-cost housing, and I
was among them, were rather Utopian in our expectations. We
thought we were suddenly going to lift the standard of life of thous-
ands of families. Those of us who have been engaged in other work
1980 POST-WAR ECONOMIC POLICY AND PLANNING
realize that you don't work miracles. That does not mean that we
don't keep up our interest in change and endeavor to improve social
conditions.
Those of us who have been interested in old age pensions and un-
employment compensation realize that we have not yet reached
Utopia, but we have made advances. And the same is true of housing.
We could pick a lot of flaws in the housing program, but I still
think we have made progress.
Some of the homes and apartment houses are still dirty and filthy.
But when you think of the number of families that you brought into
those homes who have been living under the most primitive condi-
tions for years and years, you cannot expect to change those families
all overnight.
Take the Red Hook project in Brooklyn, some 1,100 units. With
that project I think there has been considerable improvement. I
wouldn't say it has reached Utopia, but they took all these families
from the lower east side of New York City and, of course, you can't
expect perfection. Some of them really want to go back and they
return sometimes to the lower east side to do their shopping. I
found that situation in lots of projects thi'oughout the country. It
is a new situation for them.
And there are other things that arise that I shall refer to later.
Of course, there are some administrators in the housing field.
Now, these folks were picked up from here, there, and anywhere,
from other professions, and we didn't have any experts in adminis-
tration in this field. We had to make them. And some have done
a brilliant job. I think that the majority of those with whom I
have been associated have done a brilliant job.
And I am not depending upon their own word. I don't accept
their own word. I move around the community and find what the
community thinks of them and get a pretty good picture of what
they are doing, and I have been impressed by some of the things
they have done.
For instance, I have been very much impressed by the contribu-
tion that the Cedar Apartments project has made in Cleveland to a
very large slum area. That area presents a great many difficult
problems, problems of race relations. We had a thi-eatened riot in
that area a few aionths ago.
I think that anybody who studied the method of handling that
situation, the people in the housing project, what they have really
done in helping in the program of race relations in that area, could
not fail to be impressed by it.
I think they have brought a leadership into many of the slum
areas that they never had before.
I think the same is true of the Valley view project in Cleveland.
I think it is true also of the projects in San Antonio and New Orleans
that I have seen. It is true of the Jane Adams Homes on the west
side of Chicago.
That district has had a new awakening, and I think a new type of
leadership is coming up in that district that is working out their
problems in their own way.
And they have participated in that housing project. And that is
another thing that strikes anybody who studies this situation for the
first time, the participation by the local people in the project itself.
POST-WAR ECONOMIC POLICY AND PLANNING 1981
That is not universal. I could point out projects where the leader-
ship has not done very much.
But I think we have to take the over-all picture just as we do in
appraising any social reform.
Now, as I pointed out, we expected too much from these in the
beginning and I want to further emphasize that the problem is
exceedingly difficult. The bringing together of so many families
into one area creates serious social problems.
In this whole program it is important to emphasize the social point
of view.
This is not just a matter of building houses. I think if you just
take these families that come into these housing projects and just
build houses for them, the houses would become new slums within a
short period of time without a social program.
And that is happening in a great many projects constructed under
title yi.
I tried to make a comparison between one of the projects erected
under low-cost housing, and erected under title VI, and at least one
of the projects erected with a practically 100 percent loan will be the
worst slums in Bridgeport.
You have to have a social program in connection with these houses
because you get all the problem families and sometimes the problems
are new problems.
But the fact that you bring them together into one group brings
those problems out into the light, as it were, so that everyone can
look on and see.
In many cases one would get the impression that these housing
projects have become centers of gang activity. You have had gang
activity in those districts for years and years, and it has been accen-
tuated in recent years.
And then if one gang makes a raid on another gang that is occupy-
ing the housing recreation center at the time, that creates lots of
publicity. You have had that for several years past, but the housing
project seems to bring it out in the open. That is all to the good,
because the community will face the problem.
One of the troubles in dealing with gang life in American cities at
the present time is that nobody catches up with them. Of course,
when they feel the police are after them they keep under cover for a
while, but that doesn't mean that they catch up with them.
I think the housing projects have helped to at least give us a
measure of confidence in catching up with the gangs.
Now, when I had my first contacts with these housing projects I
wondered whether they were not making a mistake in having too
much of too specialized social programs of their own. I found them
having their own recreation programs, their own service programs,
and then I remember one project had a community organizer.
I kept on raising the question as to why they had to have a specia-
lized program in those areas. And I was not entirely satisfied why
they needed a specialized program and the more I have seen of them
the more I am convinced that they do need some sort of specialized
program because of the character of the people and the character of
the projects. Otherwise I don't think they are going to attain their
objective.
91183 — 45— pt. 14 2
1982 POST-WAR ECONOMIC POLICY AND PLANNING
That is the reason, I think, why so much of the discussion of just
subsidizing private initiative is beside the question. I think if you
have a social group that takes this up as a social program, that is one
thing. But if you want to do the thing that we have done under
title II of the Housing Act, to have a guaranteed loan or subsidy, that
is a different story. Then you are dealing with people who are just
building houses.
It seems to me that is not sufficient. Just building houses, even
with rent at a rate that the lowest income groups can pay, I don't
think meets the problem. You have to have a social program in
dealing with these people.
You are not dealing with the type of person in that group who is
capable of paying an economic rent. That person can usually work
things out for himself. He doesn't need so much guidance, so much
help, so much leadership as the people that I find in the housing
projects.
Now, one of the questions constantly coming up in the projects, a
question that so many of our pastors in our churches keep on raising
all the time, is the question of the turn-over of the people.
For instance, a pastor in the area of Lakeview project in Cleveland
the other day said to me, "We have been turning over about 25
percent a year."
"Now," he said, "it is very difficult to do much with people who
regard themselves as transients. Now, all these folks of this project
of which 250 families belong to my church, regard themselves as
transients. They don't feel that they have any stake down here.
They are moving out pretty steadily, some because they don't want
to pay the grade of rents."
You know, it takes time to get people to understand that they can
afford to pay the rents. It is not sufficient simply to give them a
little more money. If they have been paying $18 a month for a slum
house in which they lived with another family in one room, it is not
easy to get them to realize that they should pay $36 or $40 even after
ihej can afford it.
So some of them are moving out of that project and I found the
same thing in the two projects in St. Louis the other day, and in
Cincinnati and in New^ Orleans. They move out.
Of course, some move out to buy their own homes and I want|to
bring that point up in a moment.
You have to deal with these 250 families as though they wereTso
many separate individuals. And I have heard that all over^the
country.
In some places the project managers tell me they have made some
headway with the children, but I think probably they are a little
optimistic. I don't find that attitude universal.
Of course, whether or not that situation will continue after the war
is another story. After all, the high wages now may make a difference.
And I noticed in one of the vSt. Louis projects last week, the majority
of the people on that project now are from out of town. There has
been a shift in the past few months and that created a good deal of
feeling in St. Louis. Why is it that all these outside families should
profit by these homes and the families of St. Louis who are living in
the slums did not have a like opportunity?
POST-WAR ECONOMIC POLICY AND PLANNING 1983
Senator Taft. Was that because they were war workers and had
priority?
Monsignor O'Grady. Yes; war workers. You see, the Vv-nr workers
have first choice, as I understand it. At least, I find them i'i there.
I should not answer the question about the rules, but I "am telling
you what I find. And then the wives of servicemen; there are some
of those in there. Not as many as I found in other projects. There
are a great number in Laurel Homes in Cincinnati and a great number
in all projects in Cleveland, and in the New York City projects and
in New Orleans. Not so many in some other places.
But that turn-over is a question. It is a problem that needs to be
studied.
Of course, I have explained to the people — I had to expl.^iin to this
pastor in Cleveland — why that was. I told him that it was pretty
much the attitude of Congress, that these homes were designed for
those who could not pay economic rents and that after all the real
estate groups and the builders all over the country were very much
concerned about interfering unduly with private enterprise.
We are all concerned about the same thing, of course. We believe
in democratic institutions. And after all if they get to a point where
they could pay an economic rent they should move out.
That is a good principle, but you see what it means in the adminis-
tration of a project.
Now, I found this in various conferences I had with pastors of our
churches all over the country. Quite a number of them emphasized
the fact that their experience in these projects was that large numbers
of families were encouraged to go out and acquire their own homes, and
quite a few of them felt that was the proper thing to do; that is what
our families want. They want to own their own homes and they
ought to be encouraged to own them.
That is another side of the picture, but this matter of turn-over
needs a great deal more attention from the standpoint of upbuilding
the families. After all, the basic problem we are concerned with here
is what this rehousing program does to these families and I think that
is a very important consideration. It is probably more important
than a lot of these other things to which more attention has been given.
I think that is one of the points that has been coming up constantly
in the projects.
Now, there is another point that stands out all the time. People
ask mc what is going to become of the slums all around us, I re-
member in Savannah right across the street from this beautiful project
in the downtown area to which I have reference in my notes, they
have some of the worst slums I have ever seen. And they keep on
asking, '"Are they going to stand here, deteriorating and becoming
worse and worse all the time?"
You have got that situation in New Orleans, although a large part
of the center section of the city has been improved very greatly by this
housing program and everyone in New Orleans feels a great contribu-
tion has been made not only to family life in New Orleans but to the
whole city,
I happened to be interested recently in some delinquent boys in
what is still a slum area on the edge of the low-cost area, and really
we had to talk the families into moving out because you couldn't send
the boys back to the families living under the conditions in which they
were living.
1984 POST-WAR ECONOMIC POLICY AND PLANNING
People in New Orleans ask, "What is going to become of these
■slums?"
A few weeks ago one of our pastors in the central area of Cleveland
said, "This project has done pretty well. What is going to become
of this entire area around here?"
They keep on asking the question because sometimes the slum is all
around and the housing project is like an oasis in the desert.
But that is not a question for me to answer. That is a question for
the Congress of the United States. I may have some notions about
it, but I think you are endeavoring to get together all the ideas you
can possibly find, and I hope these ideas will be based on reality.
Now, these housing people, of course, as I have pointed out already,
find themselves in a new situation. They find themselves with all
these problem families. They find themselves with a very tough law-
enforcement problem. That is one of the toughest problems that I
have run into in housing.
You have a considerable destruction of property. I was rather dis-
turbed about that first when I saw evidences of it, but again I have
to keep in mind the previous condition of the families, and I don't
think anybody can expect too much. But the problems of law enforce-
ment have been quite serious. Sometimes the police department does
not feel any too great a responsibility for policing the project.
Senator Taft. What kind of crime do you mean?
Monsignor O'Gradt. Destruction of property, a lot of destruction
in some of the projects. I mean destruction of property.
Senator Taft. You mean destruction of the equipment?
Monsignor O'Grady. The equipment of the project; yes. I have
already referred to gang fights.
I visited one project in New York City one evening last summer — •
this is not universal by any means — and I found the beautiful center
was closed up, nobody there, and here were these young men all over
the place tearing up the benches.
Senator Chavez. Were they inmates of the project?
Monsignor O'Grady. Oh, yes. That was true of all agencies also
in the neighborhood.
It is an easy-going attitude we have gotten into with regard to
summer use of our facilities in the cities. We felt everybody could
close up for the summer and the project just fell into the pattern of
the communities.
I won't find too much fault because I think on the whole they have
made fairly good use of the facilities at their disposal. You must not
be too much disturbed when you find a project that has 500 or 600
young people and you go around to the center at night and find only
100.
I happened to visit that project several times, and I find that they
are improving, but I don't expect that they will solve their problems
overnight. That problem of law enforcement, however, is serious.
In some projects there is a rather serious destruction of property,
breaking of shafts in elevators, for instance.
k Agaiu, you have to consider the background. That is not typical.
f I am trying to emphasize the enormous difficulties that these project
administrators face. It is not a simple problem, and it is a problem
that probably was there all the time, but now it is coming out in the
light of day. I don't think the projects have created these problems.
I
POST-WAR ECONOMIC POLICY AND PLANNING 1985
I want to lay my cards on the table and describe the situation be-
cause I feel that is what I should do.
I believe in this program, and those I represent believe in it. In
the United States private enterprise has not been able to reach this
group, and we cannot allow this process of deterioration to go on in
our cities. We cannot allow this break-down of family life to go on.
No one closely identified with these things thinlcs it is perfect, but
when alternatives are presented we have to study them in the light of
actual situations. We cannot be carried away by a lot of interesting
theories.
I have heard it suggested, for instance, by people around this town,
in discussing these families who cannot pay economic rents, "Why not
have a needs test for them?"
I have not found anybody who is interested in welfare who would
want to administer it. The workers with whom I am associated
believe the same thing. They think the best way to evaluate a needs
test is to find out how it affects the attitudes of people who have to go
through a needs test.
Some months ago I visited some old folks who were receiving old-
age assistance in Detroit, and I was warned that I would have to
watch my step, that here were people who had been through a terrific
ordeal, whose property had deteriorated. They were in a slum area
and for the first time in their lives they had to go to a public agency
and admit that they could not work out their own salvation, and they
had to answer questions as to whether or not they had bread in their
cupboard and whether they had a few dollars left. In other words,,
they had to go through all the things that a needs test involved.
I don't believe that is the way to approach a great social problem.
I don't believe you can solve the problem for old age through a needs
test, and I don't believe you can solve the unemployment problem by
applying a needs test.
Senator Taft. In housing, however, you have to find out what the
income is.
Monsignor O'Grady. I think that is true. Anyone will say, *'My
income is a fairly well-known thing." But that isn't what we identify
with the needs test.
When you are taking a needs test you are fitting into the traditions
of the poor law. I have dealt with the poor law all over America
and I think I know something of the needs test as it is applied. The
theory is one thing and the practice is another thing.
That is what I tell all these people who talk about public assistance.
I say, "In New York City where you have articulate groups that is
one thing; but when you get to the ordinary county of the United
States that is different."
Of course, theory is grand.
Senator Chavez. You are talking about the girl going to the kitchen
and looking at the bread box?
Monsignor O'Grady. I am talking about what it means. I have
seen these things even in the States that are supposed to have very
well organized programs.
I remember once in Vermont I tried to find the local selectman and
I went over a good many broken-down bridges and had a fine time
finding him and I said, "Why is it that it is so hard to find you fellows?"
I said, "I have had the same trouble all over the State." He said,.
"That is the reason we were elected."
1986 POST-WAR ECONOMIC POLICY AND PLANNING
Senator Chavez. You believe, then, that pubhc housing should be
extended, that we should go on with the program?
Monsignor O'Grady. For the limited group of people who can't
pay economic rents.
Senator Chavez. And eliminate some of the surrounding slums
while we are doing it?
Monsignor O'Grady. I think they have to be eliminated. I think
a large part of the building has to be done by private enterprise and
effort. I think we have to consider too as to how private initiative
can be stimulated like under title II of the Housing Act, as to whether
or not their rates of interest may be too high for the ordinary wage
earner.
We have got to think about making it a little more flexible for him
so he is not thrown out of his house after he has paid for 5 or 6 years,
because he happens to be out of work for 2 or 3 months.
Maybe it will be possible to make the period of amortization a
little longer. All sorts of things can be done in encouraging housing.
I am simply referring to that because it is very closely related to
this public program, and I think the public program ought to be
continued and ought to be extended insofar as is necessary to meet
what is left after we have done everything possible to stimulate
private effort, and I would say also to stimulate cooperative effort.
I think we ov/e that to our society, to stimulate private effort and
cooperative effort, too. I think that has been brought out by the
testimony presented here by the representatives of the labor
organizations.
Senator Taft. Monsignor O'Grady, could you finish in about 10
minutes? We have a program here and there are other people
waiting.
Monsignor O'Grady. I think I have emphasized the important
things that we have been thinking about in connection with this
program, and I think that there isn't much that I have to add.
Senator Taft. We will be very glad to put your statement in the"
record.
Monsignor O'Grady. We have another statement that we prepared,
a group of us, and it has not been reduced to final shape and I would
like to have that in the record also if it is possible.
Senator Taft. We will be very glad to put it in. Will you arrange
to give it to the reporter now or later?
Monsignor O'Grady. Yes, I will.
Senator Taft. We are very much obliged to vou, Monsignor
O'Grady.
STATEMENT OF DOUGLAS WHITLOCK, PRESIDENT, PRODUCERS'
COUNCIL, INC.
Mr. Whitlock. My name is Douglas Whitlock, and Qiy offices are
in the Shoreham Building, Washington, D. C. I am appearing as
president of the Producers' Council, a national organization of man-
ufacturers of building materials and equipment. The membership of
the council includes 20 national associations representing manufac-
turers of building products, as well as numerous individual companies.
It is my intention to discuss the eight subjects indicated in Senator
Taft's letter of November 27. First, however, I should like to point
out that the Producers' Council was one of the first business groups
POST-WAR ECONOMIC POLICY AND PLANNING 1987
to begin studying ways and means of attaining a maximum volume
of construction and employment after the war. Since housing is
expected to account for about 40 percent of all new construction in
the early post-war years, and since housing is one of the major prob-
lems confronting the Nation, the council has devoted a large share of
its attention to this important subject.
Our plannmg for the post-war years started in 1942, with the ap-
pointment of a post-war committee. In November 1943, we an-
nounced our platform for post-war construction. I mention these
dates as evidence that we have had the post-war housing problem
under close study over a considerable period of time. In addition,
the early annotmcement of our views has enabled us to obtain the
benefit of coimsel from most of the other branches of the construc-
tion industry, with the result that some of our earlier viewpoints have
been modified and certain of our proposals have been strengthened.
We in the council are convinced of two facts regarding post-war
housing. First, we know that the country never has been in a better
position to meet its housing needs. Never before has the public been
better able to finance residential construction, nor have mortgage
funds ever been so plentiful. In addition, because of the relatively
small amount of private residential buildmg done during the last few
years, home builders, architects, and others have beeil able to do a
great deal of careful planning for their post-war operations.
Secondly, we know that the housing problem is not going to be
solved automatically. Under favorable conditions, it is the belief of
the council that as many as 950,000 to 1,000,000 new nonfarm dwell-
ing units can be built annually, on the average, during the 5-year
period starting 12 months after the end of the war. If that goal is
attained, we will have built 500,000 more units than ever were built
in any past 5-year period. Yet only part of the total need will have
been met, since by the end of 1952 we will have needed approximately
10,000,000 new dwelling units to house families which had no home
of their own before the war, new families formed since the war began,
and families residing in obsolete and substandard dwellings. And I
refer to nonfarm families only.
The need is vast; there can be no doubt about that. But if we are
to fill that need after the war, both private business and Government
must do a better job of planning than either has done at any time in
the past. Without adequate advance preparation, we would fall far
short of our housing goal, which is to enable every family to obtain a
decent home.
I shall not attempt here to describe the steps which private enter-
prise is taking to discharge its responsibilities with respect to post-war
housing, since the purpose of this hearing primarily is to consider the
Federal Government's participation in the housing picture.
The first subject in which the subcommittee has expressed an in-
terest is the way in which housing matters should be administered
in the Government after the war. This matter has been widely dis-
cussed within the construction industry, over a period of time, and
most of us seem to be thinking along the same general lines. In
particular, there is complete unanimity in the conclusion that housing
matters must receive the benefit of the best available thinking,
planning, and administration, in Government and out.
1988 POST-WAR ECONOMIC POLICY AND PLANNING
There are some who beUeve that housing public works, and other
construction matters, because of their great importance to the na-
tional economy, should be placed in a new Department of Construc-
tion with standing equal to that of the other Federal departments.
Although there is much to be said in favor of that proposal, we
recognize that such a plan could not be put into effect quickly, with
the result that such a department probably could not begin to func-
tion efficiently and smoothly in time to meet critical problems of the
early post-war years. The idea has considerable merit and should be
studied further as a development which might materialize later on,
but it does not appear feasible at this time.
The primary consideration, for the immediate post-war years, is to
take advantage of all the best experience and ability which can be
made available in government for dealing with the four major phases
of the housing problem.
These four phases are (1) the financing of private residential con-
struction, (2) the administration of public housing, (3) fact finding
and statistical services, and (4) research, both technical and economic.
In order that the construction industry may obtain the most
efficient assistance from government in the all-important post-war
period, the council recommends that each major housing activity be
placed in the branch of government best prepared to assume responsi-
bility for its specialized phase of the problem.
This policy is particularly desirable in the case of the governmental
agencies concerned with the financing of private residential construc-
tion. The termination of Executive Order 9070 at the end of the
emergency automatically will return the Federal Housing Adminis-
tration and the Federal Home Loan Bank Administration to the
Federal Loan Agency. Thus, the principal agencies dealing with
housing finance would be coordinated in one agency together with
the Reconstruction Finance Corporation and its related corporations
which also deal with Government finance.
During the war, the F. H. A. and F. H. L. B. A. have been coordi-
nated with the Federal Public Housing Authority under the National
Housing Agency, which has been concerned almost exclusively with
the programing and building of w^ar housing. These are emergency
functions which will not be needed when the war housing program
has been completed.
After the war, coordination of the F. H. A. and F. H. L. B. A. with
the other financing agencies of the Government again is desirable.
The lending features of the G. I. bill of rights also could be included
in the Federal Loan Agency. Thus, all lending, insuring, and dis-
counting agencies dealing with housing would be combined in one
organization specializing in financial matters.
We believe that the branch of the Federal Government which will
be responsible for any Federal public housing which may be needed
after the war, and which will administer the present Federal public
housing program, most logically belongs in the Federal Works Agency.
That agency already includes the other branches of Government
concerned with actual construction, including public roads, public
buildings, and other public work.
This proposal does not require special action by Congress, inasmuch
as the Federal Public Housing Authority, formerly known as the
United States Housing Authority, automatically returns to the
F. W. A. at the end of the emergency.
POST-WAR ECONOMIC POLICY AND PLANNING 1989
The building and operating of the public housing are functions
which the Federal Works Agency is better equipped to supervise
than any other agency. The welfare aspects of public housing,
including the selection of the needy families to be housed and the
extension of financial aid to those families, should be the direct
responsibility of the local governments.
There also is a great need for more accurate and more extensive
factual data about housing and other types of construction as well.
The producers' council recommends that responsibility for compiling
and analyziag these facts should be coordinated and placed in a single
administrative agency. In view of the excellent statistical work
which the Department of Commerce has performed in behalf of other
branches of private business, it w^ould seem to be the best place for
centering such statistical work.
If the proper type of statistical and factual information can be
provided, it should be possible for owners, home builders, lenders,
dealers, and manufacturers to plan their operations more intelligently
and thus to eliminate much of the overbuilding and underbuilding
and many of the ups and downs which have characterized residential
construction in the past.
The agency selected will not need to collect all of the data which
should be assembled, since much of it alread}^ is being gathered by
trade associations and other private groups, and by other branches of
Government. It should assemble all of these available facts in one
place.
Provision also should be made for more extensive research on
constructioji materials and methods. By expanding and correlating
housing research, and making the results known to private builders,
it should be possible to make real progress in the industry's con-
tinuous efforts to construct better homes at a lower cost to the public.
In view of the need we suggest that Congress provide as soon as
possible for the creation of a National Committee on Construction
Research. This committee should be composed of outstanding
scientists from both private business and Government and of qualified
representatives of educational and research institutions. The com-
mittee should concern itself with other types of construction, as well
as housing, and it might well be patterned after the National Advisory
Committee for Aeronautics, which has done such outstanding work
in the field of aviation.
In view of their high standing and their notable contributions to
the national welfare in the field of research, the National Bureau of
Standards and the Forest Products Laboratory should play a promi-
nent part in this program. Merely by helping to coordinate the
extensive research activities of private business, such a committee
would make a notable contribution to the solution of the Nation's
housing problems.
Senator Taft. We asked the Road Administration whether they
felt there should be one construction research organization and they
said decidedly not. They thought the construction of roads and
bridges was something entirely different from public housing and
they wanted research right in the Road Administration where it is now.
Mr. Whitlock. I think that is a likely attitude for each group,
but where you have problems of construction the research is one of
91183— 45— pt. 14 3
1990 POST-WAR ECONOMIC POLICY AND PLANNING
construction methods and if there was a coordinator of all research
and the advantages of one could be compared with the other, and all
that material used to the total benefit of construction, it would seem
to me to be much more economical than to have a number of research
organizations working on problems of construction.
Senator Chavez. Didn't Mr. McDonald agree to that?
Senator Taft. He said his committee regarded research as a prob-
lem which is different in the case of roads from the case of housing.
Senator Chavez. I was under the impression he did state there
should be coordination between the different departments.
Mr. Whitlock. There isn't any question that the construction of
roads and airports and so forth also directly affects the planning of
cities and towns and urban industries.
It seems to me if you had an over-all committee such as you have
in research for aeronautics, where that has been put into the over-all
committee — because public roads do have a certain number of air
strips and so forth — the job would be done more effectively and
economically than if they are in separate places, each working on a
separate phase of construction.
After mature consideration and after consulting many other factors
in the construction industry, we believe that these suggestions will
enable the Federal Government to give the strongest possible support
to the thousands of builders and contractors who are waiting to fill the
country's housing needs after the war, and we hope that Congress
will give these proposals serious consideration.
The second question on the subcommittee's list deals with the dis-
posal of war housing. Our views on this subject can be stated in a
few words. We believe that the terms of the Lanham Act should be
strictly enforced. The thousands of temporary dwellings constructed
to meet the needs of the emergency will represent a distinct menace
to the communities in or near which they are located, unless they are
promptly removed. Left standing, they will only depress real estate
values, discourage the construction of the proper type of new per-
manent dwellings, and lead to the creation of new slum conditions.
As for the revival of the home-building industry and relaxation of
wartime controls, which is the next subject on the list, the council
makes two simple recommendations. First, manufacturers of build-
ing materials and equipment should be permitted to turn their atten-
tion to preparing for reconversion as fast as the trend of the war
production program will permit and, second, restrictions on the manu-
facture and use of building products should be removed as fast as
the war requirements for critical materials and manpower decrease.
The housing shortage is critical in many of our cities. Adoption of
a policy permitting the renovation and construction of private housing
to start at the earliest possible date not only will relieve the housing
congestion but also will provide a hirge volume of employment during
the critical period, immediately after reconversion gets well under
way, when many hundreds of factories now producing war goods will
be operating with skeleton forces while reconverting for the production
of peacetime lines. This is why it is especially important that manu-
facturers of building products be encouraged to reconvert at the very
earliest date compatible with the progress of the war.
Senator Taft. Has any study been made to show where the bottle-
necks will be in materials?
POST-WAR ECONOMIC POLICY AND PLANNING 1991
Mr. Whitlock. We have had a committee working on that and
have found certain critical materials which of course are more critical
than others, and that the relaxation of these critical materials is not
going to be possible with the same timing.
It has been very difficult for us to determine first things first
because of the war needs.
Senator Taft. Apart from the war needs, what is it in the house
that takes longest to make?
Mr. Whitlock. There are many things. The plumbing, electrical
equipment, many of those things so highly critical which we assume
will stay on the critical list longer than some others.
Senator Taft. Are there any substitutes that are practically as
good?
Mr. Whitlock. For post-war construction and for sound construc-
tion we are trying to get back to quality construction so the values
will be in construction in the future. Of course, the War Production
Board has studied the question of substitute materials and the making
of them as used today, but we are very anxious that those be gotten
out of the picture as quickly as possible and that we return to quality
construction for post-war building as quickly as possible.
Senator Taft. Is the War Production Board making a study of
what ought to be released from the standpoint of getting a housing
program going?
Mr. Whitlock. The War Production Board was making a study
of relaxation of controls and an advisory committee from the con-
struction industry was created and worked with them on it.
When the war took the turn it recently took in Europe that was all
abandoned and no studies in connection with the industry are going
on now.
Senator Radcliffe. What is the situation with regard to tooling?
Is anything being done substantially at this time to provide an ade-
quate supply of tooling for these post-war needs?
Mr. Whitlock. You mean tooling for reconversion?
Senator Radcliffe. Yes.
Mr. Whitlock. No. I think that is in the same category as our
original discussions. I think all of that has been shelved pending the
further developments of the war.
Senator Radcliffe. Following up Senator Taft's question of a
little while ago, are any studies being made of the supplies of tooling
that will probably be available then, or what should be done to get
tooling in shape so we can move quickly?
Mr. Whitlock. No over-all studies to my knowledge, but many
manufacturing concerns in planning for post-war business are planning
for the reconversion of their plants from wartime back to peacetime
production.
They have engineers and committees in their own plants studying
that, and I think they have a general idea of what tooling they are
going to need. However, I have heard of no pooling of that infor-
mation and putting it into the hands of the War Production Board.
Senator Chavez. Isn't that dependent upon the relief in the critical
materials that you have refeiTed to?
Mr. Whitlock. That is correct. Most of the tooling requires
critical material and I think a good deal of thought is being given
1992 POST-WAR ECONOMIC POLICY AND PLANNING
to what tools will be needed, but it is not being correlated for an
over-all picture.
Senator Radcliffe. Are there any great difficulties involved in
making studies of that kind? I can see where an}^ such studies would
be incomplete necessarily, but some forecasting might be done to an
advantage.
Senator Taft. Take a thing like copper. Copper stocks on
December 31 were 66,000 tons, which was 15 percent more than on
November 30, and 28 percent over a year ago. And I still think
there is a considerable excess of a number of materials. I don't know
about the manpower problem.
Mr. Whitlock. I think the material situation is not as controlling
as the manpower situation in many cases.
I think another thing should be brought to the attention of the
committee. The construction industry does not have the retooling
job that some other forces have. Some building materials have been
produced through the war for emergency construction.
Senator Buck. Does the industry face any shortage of labor?
Mr. Whitlock. The War Production Board indicates from their
statistics that there is a shortage of labor. It is likely to continue
for a while. However, the lumber industry has indicated that they
believe once we can get some of these controls removed there may be
lumber available.
Senator Taft. I went through the Westinghouse plant in Marion
last fall, where they make refrigerators and stoves, which I suppose
would be an essential feature for homes. They apparently would
be able to get their plant going in 15 days and put back the machines
they had before. But their question is whether they can buy the
right kind of steel, which is not being made at the present time. And
it would go back to the various steel mills and other things. They
said they could not judge how long it might take before they got
those materials.
Mr. Whitlock. The problem of going back to peacetime types of
production, for the construction that people really want in a post-war
home, involves all of the use of these critical materials at this time.
I am a member of this advisory committee to the War Production
Board and when we were studying it there was some thought that
when the war in Europe was over there would still be a war in the
Pacific, so the materials would not be available.
Also, there would not be a big supply for all types of construction,
and they got involved in all sorts of planning for relaxation and they
got into many difficulties and it has nOt been discussed further.
The subcommittee's fourth subject deals with public housing — the
housing of needy families which lack the means to provide decent
housing for themselves without public assistance.
Many conflicting proposals have been advanced in this connection,
and some of the proposals are based on the vague assumption that a
large volume of new publicity built housing will be needed after the
war. We in the council do not believe that this necessarily is a valid
assumption, and we wish to take this occasion to emphasize the fact
that much more should be known about the real need before any
large-scale public housing program is adopted by Congress.
Therefore, a necessary preliminary step is to determine how many
needy families there will be during, say, the first 5 years after the war.
POST-WAR ECONOMIC POLICY AND PLANNING 1993
If we are to have an economy of virtually full employment, the number
of families needing housing assistance obviously will be considerably
less than at times in the past. There will be some families unable to
provide decent liousing for themselves because there is no family
member physically able to work. There also will be some families
whose incomes are too low to enable them to house themselves prop-
erly, even though the head of the family is employed. But, surely,
in an economy of maximum employment and high wage rates, the
total number of needy fa-nilies will be relatively small.
We must, of course, provide housing assistance for these needy
families, just as we help needy families to obtain their food and
clothing. As a matter of fact, society has recognized that obligation
in this country for many years, starting with the county poorhouses
which were an early form of public housing.' Of late, we have found
a more constructive attitude toward the problem, but it is the same
problem.
When we have determined, as accurately as we can, how many
families will need housing assistance, the next step obviously is to
find out how many houses already are, or soon will be, available for
that purpose. Building brand new homes, at public expense, is not
the only way to house low-income families. Indeed, it is a last
resort, for it is wasteful to build thousands of new homes for the
needy, if there is, or will be, a sufficient number of sound, decent,
acceptable existing dwellings in which the needy families can live.
However, we cannot answer that question here in Washington.
The only way to determine the adequacy of the present housing supply
is to make an inventory of the housing situation in each individual
community. This means comparing the nature and number of
existing homes, plus those scheduled to be built, with the number
and types of families to be housed. If the inventory shows that
there will be a sufficient number of suitable houses for all local families,
there certainly will be no need to build additional homes for welfare
families.
When there is an adequate supply of existing dwellings which meet
accepted standards, needy families can be housed in those dwellings
with the aid of local welfare funds, administered by local boards made
up of local people who know local conditions.
However, if the inventory indicates that there will not be enough
homes, even after prospective new residential construction has been
taken into consideration, then additional housing will have to be
built, with the aid of public funds.
In this connection the Producers' Council has prepared a plan, en-
titled "Local Housing Inventories," which explains how local com-
munities can obtain this necessary information. In addition, we are
undertaking to encourage individual communities to conduct such in-
ventories.
The next question is: What tj^pe of homes should be provided?
This is another question which has not yet been answered satisfac-
torily. For, in spite of our rather extensive experience with public
housing, no one has yet established acceptable minimum standards
for new public housing.
There are many who feel that the standards adopted in the past
have been extravagant. In the first place, we have spent many mil-
lions of dollars to provide housing for a relatively small number of
1994 POST-WAR ECONOMIC POLICY AND PLANNING
families, leaving many more families completely out of the picture.
In the second place, the public housing built in the past has, in many
cases, been considerably better than the housing in which many of
our self-supporting families live.
We feel that such standards as are agreed on should be determined
realistically, with due regard for the amount of money available for
the construction of new public housing and the number of families
who need housing assistance from the Government.
It is to be hoped that the standard of all American housing will be
raised as time passes, and certainly minimum standards for public
housing should be raised as the standard of privately owned housing
improves.
Finally, there is the question of who should build such public hous-
ing as may be needed. (Tbviously the American system demands that
this responsibility be placed on private enterprise — the developer and
private home builder.
In view of the many differences of opinion regarding the various
phases of public housing, and in view of the lack of sufficient informa-
tion on which to base a sound program, the council recommends that
Congress make a thorough study of the whole subject before attempt-
ing to reach a decision as to the nature and extent of any public hous-
ing and before taking action on any program which may be proposed.
Senator Taft. That is what we are doing.
Mr. Whitlock. That is what the committee recommends. I hope
you get the answer.
In addition, Congres should bear in mind the fact that, during the
first few years after reconversion is completed, the construction in-
dustry will need to devote its entire resources to the huge accumulated
volume of private building that must be done. It is questionable
whether any important amount of public housing construction could
be undertaken during that period without interfering with urgently
needed private building.
Senator Taft. Is there anj^ limitation on materials that you can
see? We have had various programs presented to us, Blandford one
and a quarter million, A. F. of L. want one and a half million, C. I. O.
1,750,000, and Mr. Wallace the other day boosted it to 2,000,000.
Is there any physical limit on the number that can be built?
Mr. Whitlock. I think our experience in the past has been that
we have never built the volume of 1,000,000. We are talking about
500,000 more than we have ever built.
We have seen through this war the capacity of American industries
to step up to unbelievable proportions. It is to be assumed that the
manufacturers of ])uilding materials can build up their capacities to
take care of increased volume.
Another question is the question of skilled workmen to build these
buildings. We have the question of training workmen and we are
giving a great deal of thought now to appearing before the adminis-
trative agencies of Government that have the problem of training
these veterans — war workers. There is a period of time necessary to
train competent workmen and, frankly, I think the whole subject
needs careful scrutiny and, just as we say, if you point up the demand
for private building there is a serious question of a large public-housing
program which, if it would go on, might take away from the private
builders the skilled workmen and there would be a lag which would
POST-WAR ECONOMIC POLICY AND PLANNING 1995
be very detrimental to private enterprise when the industry geared
itself up.
Senator Taft. As far as the industry is concerned, it makes no
difference if it is public or private industry?
Mr. Whitlock. We will supply the materials.
Senator Taft. Public housing is built by private contractors.
Mr. Whitlock. We are concerned in it because it has many aspects
and repercussions on the private enterprise system. We are con-
cerned that public housing be held to a minimum to take care of
needy families.
Senator Radcliffe. Senator Buck a while ago asked j^ou if it was
likely that the supply of lumber, after the w-ar, would be adequate to
meet the needs. Is it likely that the consmnption during this war
program will deplete seriously any other kinds of material which have
been usable in the past but which may not be available in sufficient
amounts after the war?
Mr. Whitlock. I have heard of no depletion of materials. Even
lumber, they tell us, is not being depleted to any extent, to an extent
to cause a serious concern for post-war lumber, and I know of no
materials — in fact, I think it is the reverse. I think some new ma-
terials have been developed which will make more available.
Senator Taft. I think Mr. Northup of the National Retail Lumber
Dealers will testify. He is here.
Senator Radcliffe. We had understood that the supplies of oil
for heating might offer a problem later on.
Senator Chavez. One material that authorities agree is being
depleted is copper. I saw some studies some time ago that indicated
copper would be depleted.
Lumber, however, I have my doubts about. I happened to go
through some of the Western States, New Mexico, Arizona, California,
and Oregon, last fall, probably 1,200 miles through forests.
Senator Buck. You mean our national supply of copper is being
exhausted?
Senator Chavez. It is being depleted anyway. But I went through
thousands of acres of virgin timber that is at the moment not accessible
or ready for production.
Senator Radcliffe. It has been our policy recently to pay a subsidy
in regard to copper in order that certain ores which ordinarily could
not be v/orked to an advantage could be developed and utilized.
Do you knoW' , Senator Chavez, whether we have large quantities of
copper ores which ordinarily would not be workable but wdiich in the
case of a subsidy or some other arrangement might be utilized?
Senator Chavez. Oh, yes. I inserted some figures on copper in the
Congressional Record in'^the last 10 days and they came from pretty
good authority. I was developnig the idea of the good will business
and the copper of South America and South Africa, but there are low-
grade copper fields in the United States that could be utilized.
Mr. W' hitlock. Going on with the question of how public housing
might interfere, it is entirely possible that the large number of public
housing units built before the war may be entirely adequate to meet
the post-war need, when supplemented by the thousands of other-
existing homes that will become available when the post-war private
home-building program gets under way.
1996 POST-WAR ECONOMIC POLICY AND PLANNING
Mr. Irving W. Clark, chairman of the council's residential com-
mittee, will discuss the fifth point, which deals with the financing of
residential construction.
Your subcommittee's sixth point — the relation of housing to the
general credit policies of the Government — already has been discussed
under other headings. However, let me add that, if government and
business both do their full part in planning and organizing for the
post-war years, the financing of private residential construction will
not prove a problem to anyone and will in no way constitute a serious
financial burden to the Federal Government.
As for the eft'ect of veterans' loans on the housing picture, there can
be no doubt that the loans provided under the G. I. bill will mean a
great stimulus to home ownership and should help to keep the volume
of residential construction on a higher level than otherwise would be
the case. We also feel, however, that Congress should keep a watchful
eye on the type of loans which are made. It may be necessary to
provide further safeguards, for the benefit of the veteran himself as
well as the country in general, if it should develop that proper stand-
ards are not being observed in granting the loans.
Senator Buck. Have you heard that this is going on now? Unscru-
pulous real-estate men will sell a house to a veteran with a value much
too high and he will come in and try to get a loan and can't get it at
the bank and he is disillusioned and thoroughly disgusted. If that
is going to be done to any extent throughout the country, some repu-
table group of people will have to be found to do the appraising.
Mr. Whitlock. It all depends on proper standards and values.
I have not heard of such a case as you talk about. Very few loans
have been made up to the present time. It is just now beginning to
function.
Caution is necessary because the G. I. bill will give many thousands
of returning servicemen the opportunity of obtaining new homes with-
out any cash outlay on their part, and because the Government, not
the private lender, will stand any losses incurred. This may easily
lead to overinvestment by servicemen, which would be most unfortu-
nate. It is not aiding the veteran to encourage and permit him to
obtain a home which he cannot keep, or which is not worth the price
he is to pay for it.
I should like to divide the eighth and last question into two parts.
As for rural housing, this is one of the most neglected aspects of the
housing problem. In spite of the obstacles which are encountered,
for which no ready solution has been devised, it is to be hoped that
the Farm Credit Administration or possibly the F. H. A. can help in
attacking this problem. The Nation's farmers deserve equal aid with
urban families in improving their housing.
Concerning the relationship of urban rehabilitation to the general
housing problem, it is important to recognize that urban rehabilitation
and the housing problem fundamentally are related only in one sense.
The two problems are related to the extent that decadent urban areas
which consist largely or wholly of slums or obsolete dwellings cannot
be demolished until sufficient homes are available to rehouse the fam-
ilies now residing in such areas, so that rehabilitation programs must
be coordinated with the construction of new dwellings in the com-
munity. .
POST-WAR ECONOMIC POLICY AND PLANNING 1997
On the other hand, it does not necessarily follow that the land cleared
of slums or other obsolete and undesirable buildings is suited for the
construction of new homes. The area may be best fitted for parks,
for factories, for parking, for transportation terminals, or for public
buildings, and should be utilized accordingly. If the land which has
been cleared is desirable for residential purposes, private industry will
be quick to utilize it for homes to be built in the future.
The important point is that the construction of new housing should
proceed independently of slum clearance or urban redevelopment
programs.
In conclusion, I wish to say that it is most encouraging to the con-
struction industry to see the Congress meeting this housing question
head-on and giving it such thorough and thoughtful consideration.
Senator Taft. Are there any questions?
(No response.)
Senator Taft. Thank you, Mr. Whitlock, for your statement.
Now, Mr. Clark, will you make your statement?
STATEMENT OF IRVING W. CLARK, CHAIRMAN, RESIDENTIAL
COMMITTEE, PRODUCERS' COUNCIL, INC.
Mr. Clark. Mr. Chairman, my name is Irving W. Clark, and my
offices are in Pittsburgh, Pa. I appear as chairman of the residential
committee of the Producers' Council, a national organization of man-
ufacturers of building materials and equipment.
There is no phase of housing to which the council has devoted more
careful study than that of financing the Nation's post-war housing
needs, which is the fifth subject on the subcommittee's list.
This topic has been discussed at great length among council mem-
bers and with other branches of the construction industry, in an
effort to remove eveiy possible financial obstacle m the way of post-
war home building and to make sure that every desirable form of
financial aid receives full consideration.
As Air. Whitlock pointed out, it appears that ample funds will be
available in the post-war years for the financmg of residential con-
struction. Accordingly, there seems to be no general need for provid-
ing additional financial incentives, over and above those which were
available before the war. To the contrary, we believe that the
principal need is to streamline financing practices so as to be sure
that they are truly sound and that they provide a check on undesirable
methods, both in financing and in construction.
Therefore, these recommendations deal with (1) the operations of
the Federal Housing Administration, (2) methods of encouraging
direct investment in rental housing, (3) revisions in mortgage provi-
sions favoring the borrower, and (4) removal of restrictions on time
payments.
The council believes that the Federal Housing Administration and its
program for insuring residential loans should be retained after the war,
with certain changes designed to place that agency on a sounder fiscal
basis and to enable it to meet post-war housing needs more effectively,
as:
(1) That the requirements for down payments now provided under
section 203 of title II of the National Housing Act be maintained,
except that mortgages on single-family owner-occupied dwellings
91183—45 — pt. 14 4
1998 POST-WAR ECONOMIC POLICY AND PLANNING
should be permitted to amounts up to 90 percent of the appraised
value, provided they do not exceed $6,300.
Senator Taft. That is true now, isn't it?
Mr. Clark. No, $5,400.
Senator Taft. You want insurance for a $7,000 house.
Mr. Clark. Yes. The increase to $6,300 from the $5,400 now ,
permitted under the act is recommended to meet the increased cost of
construction, resulting from the rise in general price levels.
Senator Taft. Have you any idea as to what the increase is?
Mr. Clark. About 30 percent to the present time, the best figures
we have. This would not go all the way. It is a fair adjustment
considering the mortgage exists over a long period where we get ups
and downs in our cost curve.
(2) That the provisions of section 203 also should be changed so
that there is no differential treatment accorded to new construction
and existing constructioiL Specifically, the down-payment require-
ments should not be more bm'densome for existing structures than for
new construction.
Senator Taft. I think the F. H. A. feels it is more risky to lend 90
percent on an old house than to lend 90 percent on a new house.
Mr. Clark. That depends on how you approach the problem.
The market or ready sale of older houses is desirable and stimulates
the market for new construction. The presumption that risks secured
by older properties are per se greater is not valid if the same rules of
eligibility are appKed, and provided that there is a realistic valuation
of the properties and an intelligent patterning of the loans so as to
accelerate amortization when the circumstances justify.
(3) That the act also should be amended so as to indicate clearly
that the provisions relating to the maximum permitted loan-value
ratios shall apply to properties owned in fee simple and not to prop-
erties represented by leasehold estates. Mortgages on leasehold
estates should be eligible for insurance only when there is a bona fide
cash investment equal to the amount which would be required if the
property were owned in fee simple.
Turning to title VI, it is believed:
(1) That the war housing program of F. H. A. should not be ex-
tended beyond the period of the war. Thus section 603 should not be
continued. However, provision should be made to continue the
operations made necessary by reason of the fact that war housing
mortgages are insured for periods extending beyond the end of the war.
(2) That the council does not approve proposals which have been
made for insuring 90 percent loans made directly to operative builders
or for permitting the accumulation of down payments by individual
purchasers on a lease-option basis.
(3) That classes 1 and 2 of title I be modified to establish an average
premium rate at a level adequate to meet all losses arising from legi-
timate claims, thereby making title I self-supporting.
(4) That the class 3 provisions of title I, originally designed to
encourage the erection of very modest dwellings, should be dis-
continued in order to simplify the act. All home buyers should be
afforded the protections and lower monthly payments which are
available under section 203 of the act.
(5) That in addition, consideration should be given to the possi-
bility of including in title I separate provisions for substantial loans
POST-WAR ECONOMIC POLICY AND PLANNING 1999
with relatively extended maturities to encourage the financing of
rehabilitations, reconversions, major additions, and the building of
small residential accommodations other than family homes.
Senator Taft. Some kinds of slum areas, the kind we have in
Cleveland, usually consist of single homes, very shabby homes in
poor condition, rather than as they have in New York City. It seems
to me that could be taken care of by this program.
Mr. Clark. That is true.
Senator Taft. You might have to do it on a large-scale basis and
not improve one unless the whole street is improved.
Mr. Clark. 1 would open the door for several owners to do that.
Senator Taft. I wonder if there should not be something in the
F. H. A. designed for a large scale project of that kind.
Mr. Clark. I think there should be.
Turning briefly to the matter of encouraging the construction of
a larger supply of rental housing, on which more than half of all
families will be dependent, for one reason or another, after the war,
the council recommends:
(1) That State legislation be passed to permit the larger insurance
companies and other holders of trusteed funds to invest directly in
rental housing which they will own outright.
(2) Legislation siiould describe the maximum percentage of its
assets which each type of institution might mvest in this way and
should place suitable restrictions on the character of the projects.
It also should indicate the manner in which such projects could be
owned by subsidiary companies and otherwise. Legislation of this
sort woidd do much to increase the supply of suitable homes for
families not m position to purchase dwellings of their own.
This movement might be stimulated by some form of insurance.
It is believed that serious study and consideration should be given
the possibility of authorizing the F. H. A. to insure yields from
rental housing for limited periods.
Two changes in general mortgage practice are also urged as a
means of aiding borrowers.
(1) That lapsing of payments be permitted at any time when a
borrower is paid up ahead of the contract schedule.
(2) That provisions should be included in dwellmg mortgages
which permit borrowers periodically to secure additional advances to
be used for major replacements, repairs, and modernization, without
refinancing the mortgages.
Naturally, it would be necessary to provide for reasonable controls
by lenders and to extend this privilege at a reasonable expense to the
borrower.
Finally, the council strongly recommends that regulation W of
the Federal Reserve Board be discontinued as soon as possible. This
is the regulation which raises the amount of down payments on homes
and other purchases and limits the time permitted for repayment of
unpaid balances. In a pcacetune economy, when maximum business
activity and full employment are so much to be desired, there is no
place for this type of restriction which was adopted solely to prevent
wartime inflation.
It is the belief of the Producers' Council that with these changes
there will be no serious financial obstacles to prevent a record volume
2000 POST-WAR ECONOMIC POLICY AND PLANNING
of residential construction after the war, and that the country stands
a better chance than ever of meeting its full housing needs.
Senator Taft. I wonder if the suggestion in regard to rent houses
is quite adequate. I don't know how we can encourage the con-
struction of rental housing but I don't think we can rely solely on
the insurance companies.
Mr. Clark. We think the study of the insurance men will bring
an answer to that, bringing other groups into the picture, and, also,
trustable funds other than insurance companies are a very likely
source for that type of construction.
Senator Taft. Thank you very much, Mr. Clark.
Do j^ou have a statement, Mr. Northup?
STATEMENT OF H. R. NORTHUP, SECRETARY-MANAGER,
NATIONAL RETAIL LUMBER DEALERS ASSOCIATION
Senator Taft. Will your statement be long, Mr. Northup?
Mr. Northup, Not over 15 minutes, Mr. Chairman.
Mr, Chairman, and gentlemen, my name is H. R. Northup,
secretary-manager of the National Retail Lumber Dealers Association.
The retail lumber and building materials industry has a very great
interest in the subjects upon which your subcommittee has invited
the comments of representatives of Government and industry con-
cerned with housing and post-war construction. This industry
represents 25,000 lumber and building materials outlets in the 48
States through which the major portion of building materials of all
kinds reach the public. In the field of housing the retail lumber and
building materials dealer, particularly in the smaller urban and
rural communities is primarily responsible for a very large propor-
tion of the aggregate residential construction built in this country in
normal times as he is not only a supplier of materials and equipment
but is also a builder of homes, production buildings on the farms, and
smalj commercial structures.
With your permission, we wish to register the viewpoint of this
industry in respect to a number of the principal subjects in which
your committee has evidenced interest.
1. The nature oj the permanent Federal administrative organization
oj housing agencies. — The emergency grouping of Federal housing
activities by the Presidential Order 9070, in February 1942, was for
the purpose of coordinating the housing activities of the Federal
Government and to expedite the programing and building of houses
for war workers. This war organization of the Federal Government's
housing activities does not seem to be a suitable or a necessary per-
manent type of organization for peacetime housing operations.
Wlien the war emergency is over, there will be no necessity for the
programing of house building by private industry, and there will
be no further necessity for the building of war housing.
It is suggested that the Federal Housing Administration and the
Federal Home Loan Bank Board should be reestablished as inde-
pendent administrations under the Federal Loan Agency. This
would mean that these two organizations would revert to their pre-war
status.
The Federal Housing Administration and the Federal Home Loan
Bank Board have in years past done an outstanding and adequate
POST-WAR ECONOMIC POLICY AND PLANNING 2001
job in enabling the private building industry to perform its function
of providing adequate housing for the prospective home owner.
These agencies would seem to be perfectly capable of providing the
type of Federal aid required by the private building industry in its
peacetime operations.
They have assured the private building industry of an adequate
flow of mortgage funds in the past, and there is no reason to believe
that these agencies cannot do so in the post-war period.
They have taken steps toward improving mortgage lending prac-
tices; have improved housing standards; have developed and can
more fully develop in the post-war period adequate information con-
cerning local housing conditions, practices, and customs; and have
collaborated with private industry in a most splendid fashion in the
industry's efforts to develop lower cost housing with payments that
the average individual could afford.
Our industry has great confidence in the Washington administra-
tion and in the field offices and field personnel of these agencies. We
have learned to work with them over a period of years and are most
anxious to retain these working relationships for the benefit of housing
in the post-war period.
The type of aid required by the private building industry from
Government is largely in the field of home finance, and for that
reason we are heartily in accord with the report that will be submitted
to your committee by the United States Chamber of Commerce on
the subject of organization of the Federal Government's post-war
activities in the field of home finance.
2. Disposal of war housing.- — We would confine our statement to
the matter of disposal of so-called "temporary" war housing. It is a
declared policy of Congress that these structures be removed after
the war. ''Temporary" war housing is admittedly nonstandard
housing by reason of critical shortages existing during the war period
of strategic materials; the housing was built in an effort to meet
emergency war needs.
Recommendations had been made to your committee that this tem-
porary housing is suitable in the post-war period for such uses as farm
utility buildings, barracks for migratory farm labor, section houses for
railroads, roadside filling stations, roadside restaurants, storage ware-
houses, rural schoolhouses, small-town recreational centers, and other
uses of this type.
In the post-war period a substantial part of the construction market
will be represented in the fields of construction activities just men-
tioned, and it is our opinion that the type of construction represented
by temporary war housing is not adequate or suitable to a sound
program of good post-war construction in these particular fields.
We happen to know something about the requirements of the farmer
of the United States and the type of permanent building that is neces-
sary on the farm. It is questionable whether the farmer will realize
as much value per dollar from the reuse of temporary war houses
as he would from investing in adequately designed and constructed
new buildings. At this time the farmer for the first time in decades
has the money to reestablish a sound farm plant.
Temporary war housing of all frame construction is perhaps 70
percent or more salvageable when torn down, and in this condition
2002 POST-WAK ECONOMIC POLICY AND PLANNING
the salvageable materials can and should be considered surplus mate-
rial and should be moved to the market through the normal channels
of trade.
We believe that the intent of Congress to demolish this type of con-
struction immediately after the emergency war period should be ad-
hered to, and that temporary war housing should only be used to serve
temporary needs that might exist in emergency situations in this coun-
try or in Europe if the latter would prove a practical thing to do by
reason of the long haul and shipping stringencies.
3. Problems of revival of the home-building industry including the relax-
ation of wartime controls. — The question of the revival of the home-
building industry in the post-war period is not in any sense a compli-
cated one. The home-building industry is ready to go; there is money
available; there is a tremendous need as well as a trem^endous desire
on the part of the American people for new homes, for the right to
modernize, and to proceed with a great volume of deferred civilian
maintenance and repair.
All that is required is the revocation of the construction limitation
orders of the War Production Board and assurance that the manufac-
turers of building materials and equipment are freed from wartime
restrictions in order that they may produce.
In a very short period of time after these relaxations are possible by
reason of the war situation, the building industry will be on its way.
Senator Taft. You think there is a completely adequate supply of
lumber?
Mr. NoRTHUP. Yes, sir; I do.
Senator Taft. Is that American lumber or imported?
Mr. NoRTHUP. American lumber. Our critical limiber situation
today is directly attributable to the wa,r and the fact that our mills
have equipment and manpower problems the sam^e as any other in-
dustry, but we see no reason why in the post-war period there might
not be an adequate supply of lumber for all the construction that is
necessary.
There might be some doubt about that if some of our planners are
going to undertake to rebuild every nation in Europe with American
Imnber.
Senator Taft. Wouldn't there be a large amount of lumber available
from Finland and Sweden?
Mr. NoRTHUP. Finland, Sweden, Kussia, and France itself, and
Germany have timber available which has not been ruined by the war.
Today we are giving them some lumber because of the situation
during the war, but we should not be called upon to give it to them
after the war, primarily because lumber is not the basic construction
material used in housing in Europe.
Now, the fourth question, the role of the Federal Government in
future public housing
We do not believe that public housing is a function of the Federal
Government. We believe that aid to families of low income is a
welfare problem of the municipality or State and should be considered
at that level without Federal subsidy.
5. Research, standardization, and technological progress in the build-
ing industry. — The statement has recently been made before your
committee:
The condition of the industry [the building industry] fails to produce funds and
the drive for scientific research, standardization, and technological progress.
POST-WAR ECONOMIC POLICY AND PLANNING 2003
It is inferred to your committee that the building industry is back-
ward without funds for research; that it is made up of widely scattered
small operations. The intermittent character of home buildmg is
compared with certain industrial operations, and it is stated that
the cost of housing is too high. • j ^ ^f
All these things being said, you supposedly have your evidence of
the need for Federal funds for housmg research, for an over-all 1^ edera
admmistration to coordinate and lead the building industry and local
com.munities every^'here out of the housing wilderness.
As a matter of fact, there is a great amount of scientific research
being conducted year in and year out in the building held.
cSleges and universities such as Massachusetts Institute ol iech-
nology, Carnegie Tech, University of Illinois and Purdue University;
building materials manufacturers such as the Weyerhaeuser Timber
Co American Radiator Co. tlu-ough the Pierce Foundation, Johns-
Manville Corporation, Libbey-Owens Glass Corporation, General
Motors Corporation, the Steel Corporation, and others too numerous
to mention; trade associations such as the Portland Cement Associa-
tion the National Lumber Manufacturers Association, the Structural
Clay Products Institute, and many other trade groups have m ttie
past and are currently engaged in research to better building products
and to reduce housing costs. As a result of much of this research
new materials and new building tecliniques are available today without
which the cost of home building would be much greater.
As a matter of fact, the widely scattered nature of the home build-
ing industry and its subdivision into many highly competitive units
makes for progress and stimulates competition. i , rpi
The American housing market is not a mass housmg market, iiie
need and desire for good housing starts at our rural cross-roads and
reaches through to the great metropolitan cities. This market will
probably never be most economically served by a highly centralized
or indiistrahzed building industry. ^. ^.ui.nnf
As a matter of fact, the modern American small home is without
equal in the conveniences offered the prospective home owner. I he
pre-war home was infinitely better, more eflicient, more comfortable
than homes of 20 years ago. , , r ^ f ^^ T.lor.T.o^
Automatic heating, insulation, new methods of construction planned
kitchens, many new materials, cost savings through increased factory
fabrication of parts, better planning, are a few of the^ improvements
available to the home-owning public; and yet these homes cost less
on the average than did the homes of 20 years ago. ^ ...^ f^.
There is in our opinion a continued need m the building industry for
the instruments of home finance that have been provided by Congress
in the Federal Housing Administration and the Federal Home Loan
^BeVond that the building industry needs only to be freed of wartime
restrictions in order to proceed immediately with the ]ob of peace-
time reconstruction. We do not believe that an emergency exists m
respect to the private building industry's ability to perform its job.
Thank you.
Senator Taft. Thank you very much.
Are there any questions? [No response .1
2004 POST-WAR ECONOMIC POLICY AND PLANNING
The committee will adjourn until 2:30. The final hearing will be
tomorrow and will be concluded tomorrow afternoon. Then the
hearings will be closed.
(Whereupon, at 12:30 p. m., the committee adjourned until 2:30
p. m. of the same day.)
AFTERNOON SESSION
(The committee reconvened at 2:30 p. m., pursuant to adjournment!
for the noon recess.)
Senator Taft. The committee will come to order.
We will hear first from Mr. Nelson, of the Real Estate Boards.
STATEMENT OF HERBERT U. NELSON, EXECUTIVE VICE PRESI-
DENT, NATIONAL ASSOCIATION OF REAL ESTATE BOARDS
Senator Taft. All right, Mr. Nelson, you may proceed.
Mr. Nelson. Mr. Chairman, and members of the committee, my
name is Herbert U. Nelson. I am executive vice president of the
National Association of Real Estate Boards, a trade association repre-
senting 721 local real estate boards composed of 25,000 real estate firms
which are engaged in building, management, financing, appraising,
and brokerage of housing and other forms of real estate.
I would like to set forth simply and briefly some of the major steps
which we believe Government must take if there is to be a high degree
of post-war building activity in the housing and commercial fields.
The mere fact that great need exists for all types of construction will
not of itself produce real estate and building activity in any great
volume. Before we can have real action, private enterprise must be
able to function freely and make a profit. That is not possible now.
Definite steps can, and must, be taken to make it possible. That is
fundamental. That is what I propose to talk about.
I realize that this committee has listened long and patiently to a
good deal of exposition on the role of housing in the national economy.
You have been told about goals and objectives. You have been urged
to set the stage somehow, someway, for some kind of a national pro-
duction of housing for everyone who needs a decent house. But before
we get to that point, perhaps we should talk about some of the facts
of life in the building business.
The first fact that you must deal with is that building is small
business.
Real estate development and building are in themselves one of the
most pervasive and extensive forms of small business enterprise which
we have. Distributors, contractors, and home builders usually func-
tion with a small amount of capital. The typical home builder does
not produce much in excess of 10 homes per year. Many real estate
firms engaged in development and building are in the same category.
Average earnings in this field do not exceed $4,000 per year.
That is a study made by the Bureau of the Census in 1936 which
probably is not too typical.
Senator Buck. You mean a man who builds 10 homes makes only
about $4,000?
Mr. Nelson. He probably makes just wages. It is not a profitable
business on the whole.
A great many people feel that way.
POST-WAR ECONOMIC POLICY AND PLANNING 2005
Now we come to the catch. All sorts of lip service is given to small
business by Government officials — local, State, and National. But
the fact is that there is no category of small business which is so
oppressed, so restricted, so regulated and so hampered as is the real
estate and building field. I will enlarge on this point as we go along.
But I wish to point out that the gradual drying up of the private
building industry which we have witnessed in the last 15 years can
be traced in large measure to mistaken policies of Government at all
levels — local. State, and National. The truth is that these policies
have played a large share in creating the blighted areas and slums
that afflict our communities and give rise to the cry for better housing.
The second fact of life that we must remember is that within the
restrictions and mistaken policies that have been wound around
building, the construction industry is highly efficient. It is popular,
at the moment, to condemn our method of house construction, to
assert that it is archaic, behind the times, and inefficient. Armchair
experts and even some Government officials seem to believe that if
vast corporations are created the}^ could in some mysterious way
carry on the building business better. We reject such a theory
decidedly and completely.
You have only to look at other nations to discover that the develop-
ment and building industry in the United States is the most efficient
that there is in the world in its field. It has adapted itself skillfully
to the intermittent character of construction which is inherent in our
economic system.
There is ample evidence as to the efficiency of our building industry
compared with other industries. In 100 3^ears, productivity per man-
hour in the light construction field, which includes most commercial
building and housing, has increased fourfold. This compares with an
increase in the field of agriculture in the same period in its efficiency per
man-hour of about 300 percent. I have heard it stated that manufac-
turing in general can show an increase in productivity per man-hour
in the last 100 years of about 350 percent due to machine methods.
Those who criticize the building industry have never taken the trouble
to investigate the facts. A house assembly is one of the most compli-
cated undertakings we have.
Senator Taft. I never knew how they got those figures.
Mr. Nelson. They are necessarily estimates. You don't have
accurate records for the past, but one way to get them in the building
industry is to compare the length of time required to build a house.
It used to take 6 months to build a house. Today we do it in 45 days
and shorter days at that.
One reason why the building industry is highly efficient is because it
is highly competitive. There is much complaint even in the industry
itself that it is disorganized. This very disorganization is to the ever-
lasting benefit of the public. Thorough organization in the industry
which w^ould eliminate the large amount of failures we now have could
only mean standardization of prices and the establishment of m^onop-
oly. It is a curious fact that many of those who are most enthusiastic
in promoting low-cost housing seem to be in favor of the thorough
organization of the construction industry and the consequent price
fixing and monopoly which this would involve.
2006 POST-WAR ECONOMIC POLICY AND PLANNING
The third fact to bear in mind is that we build when we feel confident
of the future. Building is the supreme expression of confidence be-
cause of the long-term commitments it involves. Create the condi-
tions that do not make for confidence and building stops. Those
who cry for a huge home-building program should bear that in mind.
Therefore, we believe it is essential that the Government work to create
conditions which will make men sufficiently confident to go ahead wilh
long-term investments and commitments that building involves. If
the Government fails to do this, and instead, burdens the industry
with handicaps, regulations, and taxes which make building unprofit-
able, the biggest job giver and the biggest stimulator of the whole
business structure is destroyed.
The fourth fact, and one that demands the most realistic appraisal
of all, has to do with how many houses we can count on being built
after the war. This committee has listened to some glowing estimates.
Most of these have to do with how many houses we need. In the
optimistic flush induced by the talk of needs, little attention is paid as
to how many houses actually will be built. I suggest that before we
make too many plans, we canvass this problem rather thoroughly.
There is a big difference between needs and the actual building we can
count on.
We have recently taken a careful opinion survey in a number of cities
throughout the country, calling in realtors, developers, and builders to
seek to determine just what the housing market would be after the
war if present conditions prevail. The general consensus as hitherto
reported to you by Mr. Seward Mott of the Urban Land Institute,
through which the survey was made, indicates that most of the build-
ing that will take place will be in the higher brackets, running from
$7,500 and up. A total volume of some 300,000 or 400,000 family
units in the first year after the war might be expected.
That is undei- present conditions, present restrictions. Perhaps
this could be slowly increased in succeeding years.
Compare this estimate, made by men who are in the business and
who know what they are planning to do, with the fantastic estimates
made by economists and Government officials running from 1,000,000
per year to 1,500,000 units per year. The latter figure may well repre-
sent a desired objective to fill a need. But if the great gap between
what is actually in prospect and what is needed is to be filled, cou-
rageous and drastic action by the Federal Government and by State
and local government to remove obstacles is necessary.
We ask the Congress to view this problem thoughtfully and to
ascertain the facts. Market data is one of the greatest needs in the
home-building field. There should be an office in the Federal Govern-
ment to supply data of this character. We ask for a research set-up
that would care for work of this type. We ask that we be allowed to
remain a small business of high competitive character. We ask that
the small builder, the small land developer, the small property owner^
be protected and not penalized. We ask that the endless paper work,
much of which is useless, be eliminated so that the small and efficient
producer can survive.
We ask also for a free market in the post-war period. Within the
minimiun limitations imposed by sound city planning, and the mini-
mum standards necessary for health and safety, the developer and
POST-WAR ECONOMIC POLICY AND PLANNING 2007
builder should be allowed to function freely. There, are many new-
ideas that arc waiting to be tried out. Some of them are good and
some not. It is only by the method of trial and error and ultimate
public acceptance that we can find out what is best.
Senator Taft. Going back for the moment to the Urban Land In-
stitute survey, I suppose they take a survey by going to the builders,
don't they?
Mr. Nelson. Yes.
Senator Taft. And the builders want to build houses of $7,500 and
up. If that is all that is built it seems fairly obvious to me there won't
be even 300,000 or 400,000 houses built.
Mr. Nelson. That is right.
Senator Taft. But what we have got to do, it seems to me, is to
create a larger market, the way you can sell more automobiles if you
have a cheap automobile. It goes up very rapidly.
I should think a survey of that kind is of rather doubtful validity
if you find you can create conditions where houses from $3,000 up to
$7,500 can be built in large quantities. Then you can sell them. You
say "There is a limitation on the number that can be sold," but when
you examine it the limitation on sale seems to be because of the fact
that the houses aren't cheap enough.
Mr. Nelson. Well, j^ou are exactly right, Senator.
We asked these questions of these builders. We said, "Assuming
that present restrictions are continued, what are you planning to do?"
Builders are buying land in order to be ready to build, but they are
not trying to build for the low-priced or low-rent market in the degree
that is either needed or desirable, so certain conditions have to be.
changed if that market is to be opened up.
I would now like to point out some of the policies of government
that have held back the building industry and to suggest some of the
steps which we believe should be taken to remed}^ the situation.
Only if the obstacles w^e have built up over the years are removed can
we bring about the high degree of development in housing and com-
mercial building that we all want after the war. Many of the things
I mention will be familiar. But they have been in our hair so long
that some of us are prone to overlook them. Nevertheless, they still
need attention. First of all is local taxation.
Your committee may properly ask, "What can the Federal Govern-
ment do about local taxes?" My answer is: "Much."
For one thing, the Congress could create a strong commission, well
financed, on which Federal, State and local government will be repre-
sented. The purpose of this commission would be to review the entire
tax structure of local, State, and Federal Governments and to try to
rationalize it. The present tax monopolies of the Federal and State
Governments should be modified. Local government should have a
broader basis of taxation than it now enjoys. Local government
should not be put in the position of a mendicant at the doors of
State and Federal Government. Unless local government has fiscal
independence, local freedom and self-government will perish.
A bill to create such a commission was introduced in the last Con-
gress by Representative Coffee, of Washington, and received extensive
support. Similar action has been urged by a special committee of
the Treasury eta intergovernmental fiscal relations consisting of
Dr. Luther Gulick, Mabel Newcomer, and Harold Groves, in a report
recently published by the Congress.
2008 POST-WAR ECONOMIC POLICY AND PLANNING
This report, Mr. Chairman, is Document No. 69, and it is one of
the best things on the relationship of local, State, and Federal taxation
that has ever been done, and concludes with the recommendation
that the tangle must be straightened out by an intergovernmental
commission of the type suggested here, because unless there is some
relief on real estate taxes building can't go ahead.
Senator Taft. I have had something to do with taxes, and I frankly
don't see any hope of reducing taxes on residences. I guess it averages
about $100 a year on a $7,500 house.
Mr. Nelson. The actual average is nearer 3 percent.
Senator Taft. On actual value, on cost?
Mr. Nelson. Yes, and in communities like Boston it will run up to
6 percent.
Senator Taft. I would say that in Ohio the appraisal is certainly
not over 80 percent of real value and the tax does not average over
2 percent. In fact, I would think the appraisal on residences is less
than 80 — it might be closer to 70.
Mr. Nelson. The limitation in Ohio applies only to the rate.
Senator Taft. But the average rate is around 2 percent and — —
Mr. Nelson. They all agree that Mr. Zangerle of Cleveland has
it up.
Senator Taft. My only point is that people who live in a house
like that get a tremendous amount of service from the city. Their
children are educated. What they get for $75 is probably as cheap
as anything that anybody can hope to get in a $5,000 house. That
is not excessive. I don't see where you are going to raise the money
otherwise.
We have been trying and have not discovered any way to raise
the Federal budget after the war, and in Ohio we have shifted to a
sales tax. We get $50,000,000 from a sales tax, but I don't think
you can get your real estate tax down very much.
Mr. Nelson. The difficulty with the real estate tax is the incidence.
We don't argue the fact that the family you speak of may get
good value for the contribution, but as long as the owner of the real
estate is in all cases made the tax collector, in fact, you have a risk
which is very difficult to overcome and provide for, and it is true
that during the depression millions of homes had tax liens on them
and a great many were lost.
Senator Taft. You mean they didn't pay their taxes?
Mr. Nelson. They couldn't. There is no relationship between
tax liability and income.
Senator Taft. But there is a relationship between tax liability
and service which is true of all taxation.
Mr. Nelson. All other taxes have a direct relationship to ability
to pay.
Senator Taft. A sales tax has no relationship to ability to pay,
nor have any of our Federal excise taxes.
Mr. Nelson. You don't pay the tax unless you spend the money.
Senator Taft. You have your tax rates on ability-to-pay basis up
to about as high as you can get them. And if you are going to raise
money to pay the expense of government you are going to have to
have general taxes. I regard the real estate tax as a method of trying
to divide up local service on a fairly equitable basis in relation to the
size of a man's house.
POST-WAR ECONOMIC POLICY AND PLANNING 2009
In all of our considerations we are going to assume that taxes will
stay as the taxes are today, because, as a matter of fact, even if they
should be reduced there is no way we can go about reducing them
with any certainty of success.
Mr. Nelson. Our greatest fear of all, Senator, is that as soon as
the war is over they will be sharply increased. Most of the cities
are getting ready to increase wages of civic employees and a great
deal of civic house cleaning needs to be done, and a sharp increase
in the real estate tax will certainly stop building.
Senator Taft. It is a rough and ready method of taxation, no
doubt about that, but whatever way you do it these same people
are going to pay that much tax or more after the war. We all are,
T am afraid.
Mr. Nelson. I am pleading the case of building and of property.
Senator Taft. The argument is all right. I just say in facing
our problem we almost have to assume that those taxes are there,
and we can't do much about it.
Mr. Nelson. For 150 years it was true in this country that local
taxes were light and that increases in ground value tended to offset
depreciation of the improvements. We went ahead and built our
cities on this assumption. In the last 15 years all this has been
changed. We now have declining urban land values everywhere due
largely to the personal transportation provided by the automobile
which has spread urban population over an area six times greater in
proportion than was true 30 years ago. Local tax systems have taken
little or no account of this fundamental fact. High valuations on
close-in property and even on blighted and slum property have been
maintained. The tax burden on such property has been a major
factor in maintaining those high prices. Owners naturally add taxes
to their book value and hope through some stroke of luck to recover
their outlays.
Taxes on shelter today take about 25 cents out of the rental dollar.
This means that shelter is subject to an annual sales tax of about 25
percent. Think what an outcry would go up throughout the country
if a similar sales tax were imposed on food or clothing or any other
basic necessity of life.
In this connection, private enterprise has been blamed for not
building for lower rentals. Those who speak such words forget that
one-fourth of the rent dollar consists of taxes. If, therefore, a builder
is able to build accommodations at a $40 a month rental he is in
fact building for a $30 a month economic rent if the local taxes are
deducted.
We are seeking real estate tax ceilings in many States and have
succeeded in nine of them. Ohio was the first to adopt a real estate
tax ceiling. This is good, but it is not good enough. Local taxes on
real property must be still further reduced if low-rent building is to
be produced.
The major reason why local taxes bear so heavily on real property
is that the vState and Federal Governments have preempted taxation
of the vast wealth produced by our cities. We have everywhere today
the spectacle of cities in difficult financial circumstances barely able to
maintain their services, while State government piles up huge sur-
pluses. The Federal Government draws 90 percent of its vast re-
sources from the cities. Gradually financial independence has been
2010 POST-WAR ECONOMIC POLICY AND PLANNING
taken away from our cities and home rule and local and State govern-
ment is becoming a fiction.
There is plenty to do in this field to encourage building.
THE THIRD PARTNER
2. Federal taxation. — Real property and buildings are peculiarly
subject to a triple tax load which in the future will tend to scare off
new venture capital. Local taxes absorb from 20 percent to 50 per-
cent of gross revenues from buildings of all types. In office buildings
it will often run up to 50 percent of the gross revenues. State govern-
ments in many cases still levy ad valorem taxes and half the State
governments levy income taxes which is a further burden on real
property income. Finally, the Federal Government comes along and
taxes nearly all of what is left through the Federal income tax.
We believe that the Federal Government should take cognizance
of the fact that real property remains the peculiar and major tax
source of local government. Both State and Federal Governments
should, therefore, in our judgment lighten the burdens on real prop-
erty in every possible Way.
We suggest that the Federal Government lighten the burden on
real property and provide incentive for new building by amending
the Federal Revenue Act so as to provide incentives. These incen-
tives might be in several forms and I suggest two of them:
(a) The current income of individuals or corporations which is
invested in new construction in the post-war period might be taxed
at the capital gains rate, namely, 25 percent. If the capital-gains
rate is later reduced to 12}^, where it once was, the tax on incom.e in-
vested in new improvements on real property should follow suit.
This could constitute a special investment tax to stim.ulate buUding
which has been recommended by able economists and which woidd
in itself provide a tremendous stimulus to new construction. We do
not believe that the Federal Government would lose money in the
long run by such a policy. The economic activity that would be
generated would yield enlarged tax returns as a whole and would in
addition add to the permanent wealth of the Nation.
{b) The Federal Government might adopt the offset principle for
local taxes paid in the Federal Revenue Act. If this were done, real-
estate taxes paid locally would be offset against the net Federal tax
duo on tlie part of an individual or corporation up to a certain percent,
say half, of the taxpayer's liability to the Federal Government.
Such a policy would clearly lecognize the great role of real property
in financing local government. It would be applying also the same
principle which the Government has already adopted in permitting
State inhe.'itance taxes paid to be offset against the Federal estate tax.
You w^ill recall that you can deduct your real-estate taxes as an
expense in figuring out your Federal tax. It is deductible from gross
income, but that is different from offsetting the local real-estate tax
against a portion of the Federal tax due which would be a real tax
incentive for building.
Senator Taft. It seems to me that there is not very much hope,
I would think of doing as you suggest. In the first place it w^ould
be a far greater incentive to other building than residential building
POST-WAR ECONOMIC POLICY AND PLANNING 2011
because you propose a general exemption of real-estate income rather
than one for building.
I thought there might be an approach here connected with the
encouragement of rental housing by eliminating the double taxes and
permitting men oi stockholders who invest in real estate to take the
income directly into their personal income, not paying a corporation
tax.
You now have in real-estate investment, if you want to do it with
a corporation — and if you don't, you subject yourself to a lot of
liability — double taxes — and there isn't any rapid turn-over.
It seemed to .mo that we might provide that a man who invested
in rental housing through the purchase of corporation stock and so
forth, could simply carry that into his own income once and pay on
it as a part of his income, possibly permitting him to accumulate
something in the corporation without tax. There seems to me better
hope of approaching it from that standpoint than there is of a direct
treatm.ent of income from real estate on a different basis than other
income.
I don't think Congress will consider that. It makes the tax much
more complicated. You have to figure out which portion of the
income comes from real estate and what comes from other things,
and treat them differently, but it has seemed to me there is a serious
handicap on housing through this double tax to corporations and
individuals.
Have you studied any proposal along that line?
Mr. Nelson. We felt the first step that must be taken is to provide
a means for the investment itself. If you take that portion of a
man's income which he invests in building on an incentive basis you
w^ould get a lot of equity money. The country is full of mortgage
money
Senator Taft. But you are proposing something about which
every other group in the United States can say the same thing.
Farming is vital. You need some special war industry here and you
give them a different rate. We have not done that. We have given
special privileges by letting people deduct depreciation and depletion
and various things like that, but having a different rate for income
from different sources — I don't believe you could hope to get the finance
committees to do that, but I do think there is some hope that we might
eliminate the double taxation of corporations and individuals.
Mr. Nelson. It isn't as much the income from the corporation that
owns the real estate that we have in mind, as the initial investment
itself. If you have an income of $20,000 or $30,000 and decide to
invest $10,000 or $15,000 of that income in a certain year in a building
enterprise, then that portion of your income which you invest in that
enterprise would be taxable at the lower rate.
Senator Taft. I don't think you would ever get Congress to give
different rates to different kinds of investment. I don't think I
would be in favor of it. I don't think it is possible.
I think you have to approach your tax incentive from some other
standpoint than by giving a different rate on an investment in real
estate.
Mr, Nelson. Then you think tax incentives are largely pleasant
conversation and we won't get them?
2012 POST-WAR ECONOMIC POLICY AND PLANNING
Senator Taft. You won't get much if you have to raise
$30,000,000,000 for Federal and State governments. But my idea
further is that this idea of different rates on different kinds of income
or different kinds of investment, is not a practical thing to hope for.
Mr. Nelson. You have one rate for income and one for capital
gains.
Senator Taft. Your gross income is all subject to the same thing
outside of capital gains, and it is a dispute as to whether that is or is
not income. You have a favorable tax situation for owning homes
today under the present circumstances, of course, because you can
deduct interest and taxes.
The Government will pay a large part of your expense if you buy
your own house. So you have a fairly favorable Federal tax situation.
I know, because I just saved $1,000 a year by buying my house.
Mr. Nelson. That isn't the kind of building that is wanted.
What they want is rental houses.
Senator Taft. Rental housing is another question. In the first
place, I think your tax incentive had better be confined to rental
housing and I suggest that the best way to give an incentive to rental
housing is to try to eliminate the double corporation and individual tax.
And a higher depreciation, if you please. I had a letter from one
man suggesting there be a very high depreciation the first year.
I think he wanted to permit the charging off of 25 percent the first
year on the ground that that is where the big depreciation came.
When a house was not a new house it went down at once in value,
and he pointed out that the Government in the end would not get
anything different because after that the depreciation might be more
gradual.
Then you might permit a man to charge depreciation on his own
home and permit that to be deducted. It seems to me that sugges-
tions of that kmd are a little more practical than what you mention
here.
Mr. Nelson. We did introduce a bill, Senator, on permitting the
home owner to deduct depreciation which he is now not permitted to
do if he occupies his home, and we also made the suggestion that on
all rental property they ought to bo peimittod to write it off in 10
years which is similar to the proposal you just discussed.
That would be an incentive and would carry the project over the
high risk period of promotion and development which is always a
chancy period, to some maturity.
Item 3 is rent control.
A restriction on post-war building that would elTectively paralyze
the home-building industry would be continuation of Federal rent
control after the war. Obviously, it is not possible to build for
profit or for revenue under present rent ceihngs and present costs.
We therefore suggest that assurance should be given now by th6
Congress that when the war or emergency conditions are over, Federal
rent control will be lilted. If areas remain where control is regarded
as necessary, the problem should be handed over to the States or
localities for action.
There is at present a widespread fear throughout the Nation caused
by comments of certain public officials to the effect that controls will
be continued for years after the war which we believe will do much to
stop post-war building activity. Because of various kinds of mass
POST-WAR ECONOMIC POLICY AND PLANNING 2013
pressures, post-war Federal rent ceilings probably would bo so low as
to make it unprofitable for years to come to do any building. You
need only examine the experience of France, Germany, Italy, and
England with rent-control measures that effectively put the construc-
tion industry out of business to see what I mean.
They put rent control on in France in 1914 that is still on about
four-fifths of their property and it killed construction, which was a
major factor in their economic difficulties.
In many cases, the removal of rent control after the war would mean
increases in rent. But this very increase in revenue would quickly
stimulate new building. I know of no other way to insure new build-
ing for the rental market.
Commercial rent control if imposed and if continued for a long time
would have equally disastrous effects on building and employment.
We do not believe in the necessity of control over commercial rents
and hope that Congress will take no action along this line. The
free market should be contmued here.
If we could have in the near future from the Congress some definite
assurance that it will be the policy, in order to encourage post-war
building, to remove rent ceilings now imposed by the Federal Govern-
ment, it would provide reassurance that would bring about immediate
planning and work for new activity.
Senator Taft. I understand the administration is going ahead
immediately with a bill to extend the O. P. A. provisions. I don't
know for how long, or what Congress will do about it.
Would you express your opinion as to how long after we see the
end of the Japanese war the rent control should be abolished or ended?
Mr. Nelson. Six months.
Senator Taft. Do you tliink 6 months after the end of the Japan-
ese war — you would like to have that extended as a definite policy so
that eveiyone will know it?
Mr. Nelson. That is right. There is no fieW where you have to
have assurance as to what future policy will be, any more than in the
field of building.
Senator Chavez. What makes the commercial owner now charge
anything he pleases, $150 for a $40 building, for instance? Why
should the owner be so much interested at the moment as to the
limitation of rent control by the Federal Government for the dura-
tion, if he himself does not try to cooperate and hold rentals down
now?
In my home city I know they are charging $150 for $40 buildings,
just because they can get away with it.
Mr. Nelson. We don't deny there are some abuses. The fact
that you have an occasional raise in rent does not mean that that is
general.
Senator Chavez. I know where I come froai
Mr. Nelson. I don't know where you are from.
Senator Chavez. I am from Alburquerque, N. Mex., and they are
charging a poor girl who is trying to earn a living as a beauty parlor
operator $150 for a building worth $40.
Mr. Nelson. Maybe her business had quadrupled.
Senator Taft. I opposed this last fall, but I am not sure when it
comes up now that you are not getting into a speculative real-estate
market that may be a pretty bad thing after the war. Rents are
2014 POST-WAR ECONOMIC POLICY AND PLANNING
beginning to go up, and while it is not. a general condition as to
excessive increases, it is a kind of accelerated movement. I am not
afraid so much of excessive receipts now, but it may drive real-estate
values up to a point where they are inflated again, and you will face
the possibility of a serious deflation later on.
Mr. Nelson. We don't want an inflation in real estate. We have
had plenty of that.
Senator Taft. The Banking and Currency Committee will consider
that when the new O. P. A. matter comes up.
Mr, Nelson. Finally, restraint through regulation.
The endless regulations that exist at local, State, and Federal levels
for all types of building should largely be done away with. It is in
the public interest that we have good city planning and that structures
be built so as to assure health and safety. We do not object to such
regulations and are, in fact, principal proponents of them.
We do believe, however, that the Federal Government should take
the lead in getting cities to eliminate detailed, useless, and highly
costly building codes. In many cities the codes are little more than
a racket because they specify methods of building or materials which
are of value to special local interests.
The Bureau of Standards is doing some good work along this line
and we think it should be encouraged.
There are many lists of the abuses in this line. Mr. Thurman
Arnold, when he was in the Department of Justice, cited many of
them. Some cities forbid the use of hollow tile construction to
protect the local brick distributors. In some places, three coats
of plaster are required when two would do. In other places, rigid
conduit is required where flexible would serve. Certain types of
pipe, which are more costly but more efficient, are required in some
building codes. And so it goes.
The Federal Government can also take the lead through the
Department of Justice in eliminating some of the uneconomic union
labor policies which produce high costs with no resulting or adequate
benefits.
Under Mr. Thurman Arnold, when he was in the Department of
Justice, some progress was made as to the monopolistic practices in
which both distributors and labor unions were at that time operating
in collusion and a number of like actions were brought in Cleveland,
Chicago, and New York. These were effective as far as they went
but they were only a start. Labor unions have their proper place
with respect to the establishment of fair compensation, hours and
working conditions. They should not, however, be instrumental in
prohibiting new techniques which are labor saving and money saving.
Builders should be allowed to use such things as plaster guns, paint
guns, and certain prefabrication methods which will save time and
money. It is in the public interest that the Department of Justice
continue its work along this line.
Finally, the Federal Government should, in our judgment get some
practical people to review the endless regulations for building set up
by the Federal agencies. These are cumbersome and costly. The
small builder has difficulty in keeping up with them. Different
agencies from time to time have different regulations or different
requirements. We have often had the experience when one of our
members has sought to build an apartment building which might be
POST-WAR ECONOMIC POLICY AND PLANNING 2015
acceptable for mortgage insurance under F. H. A. to have many weeks
and months elapse while the plans were redrawn to suit the ideas or
whims of some Federal employee. We do not believe that one concept
or pattern of building should be imposed on the entire Nation.
Senator Taft. Is that a criticism of the F. H. A.?
Mr. Nelson. Yes. There was too much of this redrawing of all
plans and very often they were not suitable to the property. I can
call names, but it is not necessary. There is no reason why what is
acceptable locally should not be accepted by the office down here.
While we seek improvement in building, we feel that the Federal
agencies, which are useful and necessary as facilities for the private
enterprise field, should accept without too much question those types
of building and construction which local taste and custom finds
acceptable. Many of the activities of N. H. A., F. H. A. and several
other agencies could be reduced if this attitude were adopted. We
urge that the Congress give this matter consideration and help to
reduce regulation by Federal Government in this field.
Senator Taft. What do you think of the F. H. A. appraisal system,
as a whole?
Mr. Nelson. That is the best thing that the F. H. A. has done.
It has rationalized the national appraisal system as much as possible.
Senator Chavez. They base theirs upon local appraisal, do they not?
Mr. Nelson. Yes; but they have a set appraisal that the ap-
praiser goes through.
Senator Taft. Are they a little tighter in their appraisals than
building and loan companies and banks are, or not?
Mr. Nelson. That is a controversial question that I would not
undertake to answer.
Senator Taft. Is there any generally acknowledged difference?
Mr. Nelson. I wouldn't say so; no.
State Governments are also trying to regulate building. Several
States now have plumbing codes and heating codes which apply to
urban conxmunities generally, the purpose of which primarily is to
make work, and the result of which is to add to costs. On the whole,
it would seem to be fully adequate if the matter of regulations of
building were left entii'ely to local government alone.
Many have estimated that if useless and non-result-producing regu-
lations, Vviiich include the regulations of labor unions — could be re-
duced to practical levels by local, State, and Federal Government, the
cos I of building in the larger cities would be cut fully 20 percent. It
costs 20 percent more in Chicago to build inside the city as it does
just outside.
Senator Taft. Is that due to wage rates?
Mr. Nelson. Not so much as to code restrictions and wage rates.
Senator Chavez. Limiting the supplies of certain products?
Mr. Nelson. And also requiring the builder to function in certain
ways.
In Chicago, for instance, you can't install a preglazed window and
have it glazed on the job. That adds to the cost.
Now, public housing:
We recommend that no further appropriation be made for public
housing and that all of the public housing now in possession of the
Federal Government and the local housing authorities be disposed of
after the war. We recognize that this is a drastic recommendation.
2016 POST-WAR ECONOMIC POLICY AND PLANNING
We believe, however, that a candid appraisal of the public housing
program will indicate that it has not served the objectives set up for
it. It has not on the whole eliminated slums nor functioned in the
slums, although there are some notable exceptions. It has not served
the people most in need of help. On the contrary, the tenant-selec-
tion process has sedulously avoided taking people on relief or without
employment.
We believe that the herding together of people of modest incomes
in Federal projects is in itself unwholesome. It creates a type of
citizenship which has a lively awareness of public benefits received
and about to be received. It people are in financial difficulties they
often need the stimulus of contact with neighbors who do not suffer
under the same disabilities rather than those who do. The political
implications of public housing projects are obvious and to us seem most
dangerous.
Senator Taft. If you are going to oppose all public housing, have
you any alternative suggestion for getting rid of the slums and pro- jij
viding housing for low-income groups? *
Mr. Nelson. That is a double-barrelled question.
Senator Taft. It is a double-barrelled program. That is why I
asked a double-barrelled question.
Mr. Nelson. The clearing of slums, we think, is a matter of urban
redevelopment that requires no legislation, and is not a housing
problem. That land should be recaptured and turned over to private
enterprise for development or used for public purposes as may seem
best.
Senator Chavez. What is the matter with the public purposes when
it comes to housing?
Mr. Nelson. We think the building of houses is something that is
well understood and can be handled by private enterprise, and if the
Federal Government wants to enter this field, they should subsidize
the family inste.id of subsidizing brick and mortar. Help the family
that is in distress if it is required. That is the way it was handled
during the depression years.
Many families got rent checks by which the rent was paid, but there
was no permanent vested interest in buildings and no group of families
were set up on the basis that from now on they were going to be
subsidized indefinitely as to housing.
We gave 2,000,000 or 3.000,000 families rent relief through checks
distributed largely through the Works Progress Administration.
Senator Taft. That is all right in a depression, but it looks as if
you have millions of families livmg under normal conditions and
drawing some pay who could not pay rent under any economic basis
unless your figures contradict some others.
I don't believe a rent-check proposition in normal times would be
a very good method of solving the problem. All of the testimony has
been against rent relief, and Father O'Grady this morning was very
strong against the needs test, and that is what that will be.
Mr. Nelson. I can't see that rent relief is any different from any
other kind of relief.
Senator Chavez. There is quite a difference. The average
American citizen with a family of three would like to say, "I would
like to own this little shack. It is my castle." AU he would like to
get is a little help to achieve that end.
POST-WAR ECONOMIC POLICY AND PLANNING 2017
It is different from giving him a little dole of $12 a month for rent.
He would like to set himself up as a property owner.
Mr. Nelson . We are all for that if you want to help him on these
houses, and the Federal Government would be much better off
building houses and giving them away than
Senator Taft. The trouble is that the men for whom they subsidize
would probably not be able to support it. $500 would not make
enough difference in the man's ultimate rent to enable him to pay
the rent.
It seems to me if you are going to oppose public housing, you are
going to have to have some better proposal than rent checks. I
don't know what it is.
In the beginning I asked a number of people whether the plan of
subsidizing private limited-dividend corporations to provide low-
rental housing would be a practical plan. Have you any thoughts
on that?
Air. Nelson. That is virtually being undertaken in Canada where
the Federal Government will underwrite the low return, 2}^ percent,
I think it is, on 100 percent of the funds invested by the fiduciary in
low-rent housing. That shakes down to about the same tlrng.
It is the Government guaranteeing an investment in the housing
field.
Senator Taft. But housing is a little different from food. Food is
eaten and gone. In any event, we don't subsidize it except m
depressions, or some economic situation.
But in housing, the costs are such that many people can't get a
minimum house today unless you work out some plan of financing
the rehabilitation program for houses.
If you are going to oppose the pubhc-ho using program, I think
you have to present some alternative. I think you have an obligation
to present some alternative.
We haven't any obligation to take it, necessarily, but I don't think
you meet the present public opinion at all by just saying you are
against it. I don't believe that is going to prevent Congress from
going ahead.
Mr. Nelson. If you go ahead with the public-housing program,
you necessarily will stop a lot of private enterprise just through plain
ordinary fear. Those who ordinarily go into the lower brackets and
try to build just won't do it. That fear is a real thing.
\\ e want to provide low-rent housing and want to give some public
subsidy and we have studied and may recommend — I don't know
whether we will or not — the idea of conversions.
We undertook through a special committee to assist on the 60,000
conversions that were made through F. P. H. A. for housing and those
cost about $1,600 per family unit. They took 10- 11- or 12-year
leases on older buildings and modernized them at about $1,600 per
family unit and provided plenty good housing. In fact, better than
you would necessarily need for some of these low-rent families.
There is a possibility there at much less cost and in terms of much
shorter commitments by the Government.
Senator Taft. If you have such recommendations, I wish you
would suggest them, because I have a good deal of difficulty in seeing
how we are going to solve this problem.
Mr. Nelson. Finally, Mr. Chairman, we have a suggestion as to
the streamlining of Federal housing activities, and rather than read
2018 POST-WAR ECONOMIC POLICY AND PLANNING
that, I would like to refer you to a little chart which is attached
which indicates very simply and briefly what we have in mind.
We find there are more than a dozen, maybe 16 functions with
respect to housing, and we suggest that public housing aid of any
kind that is extended in the future be shifted over to the Federal
Works Agency. That is similar to the recommendation made by
Mr. Whitlock this morning.
(The chart referred to appears on p. 2019.)
Mr. Nelson. Then we sot up a research agency with provision for
technical research, economic research, and general urban research,
and show below the functions now being performed which would be
consolidated in this new research agency.
There are no new functions in the reorganization plan.
I don't know what the future of technical research would be if it
were in the Federal Government, but we do feel the need of economic
analyses, and market research which private industry cannot always
undertake on a sufficient basis.
Urban research refers primarily to problems with respect to blight
and slums, and we think there should be a national clearing house for
that sort of thing.
About a dozen States have bills on urban redevelopment either
pending or passed, and we are waiting to see what some of the bills
will do. We have five in the District of Columbia which Congress
is considering — urban redevelopment for the city of Washington.
Somewhere in the Government there should be a spot where that
kind of information should be collected for general use.
And we suggest a Federal Home Finance Board with three advisory-
bureaus under it — financial research, risk rating, and inspection — and
the director of real-estate policy having to do with land use, and so on.
Then the functions now performed by the housing agency would
be dumped on this Board, each m charge of what in a bank would
be a vice president.
Mortgage .insurance is F. H. A. The Federal savings and loan
set-up is the home loan. The mortgage discounting would — now
conducted by the First National Mortgage Association — -be a part of
the Federal Home Finance Board.
Mortgage loans, the wind-up of the H. O. L. C. operation and
veterans' loans would be administered under this same set-up. We see
no reason for having the Veterans' Administration duplicate all the
complex procedure and personnel that F. H. A. now has all over the
country. There is no reason why that procedure should not be
coordinated. That would give us one Federal homes finance board
which would comprise all of those activities in the Federal Govern-
ment that are set up to facilitate private enterprise and it would
remove from that group the public housing which we believe does not
belong in the private enterprise group at all. They are not happy
partners.
It worked out all right as a war emxergency undertaking under
N, H. A., but the N. H. A. does not, in our opinion fill the bill for the
post-war period.
Finally, we have indicated that disposal of war housing should be
turned over to the Treasury Department where such activities have
always, according to custom, been carried on.
Senator Chavez. What is the basis of that?
POST-WAR ECONOMIC POLICY AND PLANNING
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Mr. Nelson. In the past, the Treasury Department has always
been the major procurement and major disposal agency of the Govern-
ment, and even now, under the Surplus Property Act passed by
Congress, the Treasury Department will dispose of all property other
than real property.
Senator Taft. The R. F. C. is disposing of a large amount, isn't it?
Mr. Nelson. The R. F. C. is taking over the real property.
Senator Taft. And airplanes and a long list of stuff.
Mr. Nelson. But we see no reason why that should not go back to
the Treasury.
Senator Taft. At the present time the National Housing Agency
has been designated as the agency to dispose of housing.
Mr. Nelson. That is correct, but we anticipate in the post-war
period the National Housing Agency will be done away with.
Then I have a final paragraph here which I would like to read.
The need for urban redevelopment and the rehabilitation of blighted
areas in our cities has been thoroughly discussed before your com-
mittee, and so I will not go into that. We accept the statements as
to need. But I must emphasize that you cannot expect to get private
enterprise into this field, and private initiative is the only thing that
can do the job, unless building is made attractive. As I have tried to
point out, you can't expect the private constructiop industry to unleash
its full vigor in any building field unless and until its fetters are cut.
May we suggest that the greatest contribution this committee pos-
sibly could make toward a sound and healthy building program in the
post-war period would be to start the cutting process.
Senator Taft. Mr. Nelson, the real estate board has sponsored a
bill, haven't they, for urban redevelopment different from the bill
presented to us by Mr. Bettman?
Mr. Nelson. There was a bill presented by what we call the
Urban Land Institute about a year and a half ago. That institute
does not in any way reflect business policy. It does research work in
the land-planning field.
That was called the Wagner bill and provided for certain grants and
aid by the Federal Government to cities that would undertake certain
redevelopment.
Senator Taft. Nobody has presented that bill here?
Mr. Nelson. No.
Senator Taft. Are j^ou backing the other bill that has been pre-
sented to this committee? Are you in favor of that bill?
Mr. Nelson. I can't say that we are backing it, particularly. We
are interested in the movement, trying to work out the legislation at
the State level.
As I stated, we have about 16 redevelopment acts now in process
of passage or that are passed, and we want to see what those are like
and see what local government wants before we feel competent to
come here and say, "This is what the Government should do ta
help out."
Senator Taft. So the Wagner bill is not apt to be brought up again?
Mr. Nelson. Not through us. We want to see the thinking of
cities, communities, and States. Some fine efforts are being carried
on through planning commissions in Chicago, Los Angeles, and New
York. They are doing some hard planning on this problem of redevel-
opment. We want to see what they come out with in the next few
POST-WAR ECONOMIC POLICY AND PLANNING 2021
months before we limit ourselves too much to what the Federal
'Government should do.
Senator Taft. I suppose they all depend on the Treasury to some
extent.
Mr. Nelson. They avoid it as much as possible.
Senator Chavez. I would like to see the State or city that feels
that way.
Mr. Nelson. That is because the Federal Government today is
preempting so many of the tax resources of the cities. I don't know
how we can help it. We must face it.
Senator Taft. I don't know that we preempt the revenues of the
cities.
Mr. Nelson. You draw your revenues from the wealth produced
by the cities.
Senator Chavez. And the resources of the country.
Senntor Taft. If we didn't they would move out of the cities that
try to tax them, so I don't think we have interfered with any of the
cities' revenues.
Mr. Nelson. The State governments are begiiming to think about
a larger redistribution program on the great revenues from sales taxes
and other types of taxes, which they levy.
In Illinois, where I live, the State government has a surplus of
$110,000, while the city of Chicago hasn't enough money to collect
the garbage. Some of that money should go back to support local
government even though it is collected by the State.
Senator Taft. It does in Ohio.
Thank you, Mr. Nelson.
STATEMENT OF REGINALD A. JOHNSON, FIELD SECRETARY,
NATIONAL URBAN LEAGUE
Mr. Johnson. My name is Reginald A. Johnson, and I am field
secretary of the National Urban League with headquarters at 1133
Broadway, New York City. The National Urban League is a national
social-service organization that has been actively engaged since 1910
in the improvement of the working and living conditions of Negroes.
Research is conducted in the fields of industrial relations, housing, race
relations, health, and recreation.
Literature is prepared on these subjects and programs are effected
to meet problems requiring attention in these fields.
For your information I am leaving with the committee several
copies of a bulletin prepared by the league entitled "Racial Problems
in Housing."
We operate under an interracial board of directors composed of
responsible citizens and have affiliated offices in 50 cities. At our
last conference held in Columbus, Ohio, September 28, 1944, we pre-
pared recommendations in the field of housing involving a Federal
and private program, urban redevelopment laws and basic policies
for action by Federal agencies. These will be read into the record as
the recommendations in this testimony.
It will be the purpose of my testimony to bring to your attention
data on the nature and status of housing among Negroes. This data
will be based on observations and experiences of our own staff and
2022 POST-WAR ECONOMIC POLICY AND PLANNING
such 1940 census information that is pertinent to the inquiry of our
committee. It will also include observations made on the impact
present war migrations have made on present and future housing
Deeds. It is our interest that data as presented will be of value to the
efforts of your committee to establish a sound and permanent housing
program based on the actual facts and needs of those that need to be
rehoused.
This committee has had presented to it the housing needs of the
Nation which naturally included the housing needs of the Negro popu-
lation. The committee has not received, however, a comprehensive
statement on the distinctive characteristics of the housing problem as
faced by Negroes. It is essential that the committee understand
these factors because failure to recognize the basic elements of this
problem and to formulate specific procedures to meet them will pre-
clude a solution of the total housing problem.
The distinctive housing problem of Negroes stems from a complex
of disproportionate low-income and racial restrictions. The results
as we will show are: (1 ) Artificially restricted housing supply; (2) Less
housing value per dollar spent; (3) Intensification of overcrowding,
blight, and deterioration.
As to the compartive physical condition of existing housing, 16.3
percent of units occupied by white were judged by the 1940 census
as in need of major repairs, whereas among the nonwhite the ratio
was 35.1 percent, or twice that for white.
I have some charts here that I would like to have included in the
record that will give a little more graphic picture of this. I only have
one set but I will leave that with the committee. (The charts follow
on pp. 2022a and 2022b.)
Twenty-eight and seven-tenths percent of those occupied by white
and 47.6 percent of those of nonwhite had major plumbing deficiencies.
Or 45 percent of white dwelling units and 82.7 percent of nonwhite
dwellings needed major repairs or had serious plumbing deficiencies.
Putting it another way, there were 4}^ out of 10 white dwellings and 8^
out of 10 nonwhite dwellings which needed repairs or had deficient
plumbing. Conversely 1 out of every 2 houses for white were of
acceptable standard and 1 out of every 6 per nonwhite dwellings were
in the same category. There was no running water in 26.7 percent
of the white dwellings as compared w^ith 61.9 percent of the nonwhite.
One-fifth of nonwhite units and three-fifths of white units had private
baths and flush toilets.
Senator Taft. These are all urban?
Air. Johnson. These are all urban and rural.
Of the 19,000,000 urban dwellings, more than one-fourth were so in
need of major repairs and deficient in plumbing as to be regarded as
substandard. One out of every four of these dwellings occupied by
white were substandard. More than two out of three occupied by
nonwhite were in the same category. In other words, three out of
every four homes occupied by white were acceptable, while less than
one out of every three occupied by nonwhite were in this category.
That's the urban part of it.
According to the census definition of overcrowding — an excess of
one and one-half persons per room — 8 percent of the urban units
occupied by whites and 25 percent of the urban nonwhite were over-
crowded. Thus in 1940 the extent of overcrowding of nonwhites
was over three times that of whites.
POST-WAR ECONOMIC POLICY AND PLANNING 2022A
STATE OF REPAIRS AND PLUMBING EQUIPMENT FOR OCCUPIED UNITS
BY RACE. FOR THE UNITED STATES (TOTAL)
NON-WHITE
WHITE
NO RUNNING WATER
I I NO PLUMBING DEFICIENCIES
l-.:::\ PRI FL TOILET; NO PRI BATH
llUlllliU RUNNING WATER. NO PRI FL TOILET
^^ RUNNING WATER
STATE OF REPAIRS AND PLUMBING EQUIPMENT FOR OCCUPIED UNITS
BY RACE, FOR THE UNITED STATES (URBAN)
NON-WHITE
WHITE
^ir^^^s^l
SOURCE SIXTEENTH CENSUS OF THE US,
NO RUNNING WATER
NO PLUMBING DEFICIENCIES
PRI FL TOILET. NO PRI BATH
RUNNING WATER. NO PRI FL TOILET
RUNNING WATER
2022b
POST-WAR ECONOMIC POLICY AND PLANNING
^J$
NON-WHITE
LZ]
WHITE
30
Pe
40
rceni
50
60
70
PERCENT OF OCCUPIED DWELLING UNITS NEEDING
MAJOR REPAIR OR WITH PLUMBING DEFICIENCIES. BY RACE
TOTAL (US)
'URBAN
iRURAL
iNON-FARM
RURAL
IFARM
SOURCE SIXTEENTH CENSUS OF THE US. 1940, HOUSING
PERCENT OCCUPIED UNITS NEEDING MAJOR REPAIRS OR
"WITH PLUMBING DEFICENCIES FOR THE U. S. (URBAN). BY RACE
SSS? NON-WHITE I I WHITE
PercenI
30 40 50 60 70
TOTAL (US)
THE
NORTH
THE
SOUTH
THE
WEST
SOURCE SIXTEENTH CENSUS OE THE US. 1910, HOUSING
POST-WAR ECONOMIC POLICY AND PLANNING 2023
In addition to overcrowding in substandard structures, the neigh-
borhoods predominantly occupied by Negroes are also highly con-
gested. In Baltimore, Negroes comprise 20 percent of the population
and are crammed into 2 percent of the residential space.
It is reported by the Chicago Housing Authority that on the Chicago
South Side, more than 250,000 persons are living in properties designed
to accommodate fewer than 150,000. In the second and third wards,
occupied almost wholly by Negroes, the population density is 90,000
per square mile. That is according to the Chicago Housing Authority.
Similar land crowding can be repeated for New York, Pittsburgh,
Washington, and cities with a large Negro population.
For all urban localities, 32 percent of all white tenants and 71
percent of the nonwhite paid montlily rents below $20 a month; 46
percent whites and 81 percent nonwhites below $30. In other words
in the cities, 6 out of every 10 white families and almost 9 out of every
10 nonwhite families were paying monthly rates below $30 a month.
In the same cities, less than 7 percent white and over 40 percent non-
white were owner-occupied valued below $1,000; 21 percent white and
68 percent nonwhite below $2,000; 39 percent white and 82 percent
nonwhite, below $3,000.
Against these conditions of housing, supply must be viewed along
with the income distribution of Negroes. Of 35,000,000 famihes
reporting incomes for 1939, 54 percent of the white and 85 percent of
the nonwhite had incomes below $1,000. This is the over-all figure.
Rural and urban.
SLxty-eight percent of the white and 93 percent of the nonwhite
below $1,500; 79 percent of white and 96 percent of the nonwhite
below $2*000. The median annual income for families with only
wages and salary was $1,409 per white and $531 for nonwhite. For
families which had other incomes, $1,133 for white and $429 for non-
white. Forty-nine percent of white urban dwellers had annual
incomes below $1,000; 68 percent below $1,400, and 84 percent below
$2,000.
Corresponding percentages for nonwhites were 87 percent, 95 per-
cent, and 97 percent. The median annual income for urban white
with only wages and salary were $1,064, and for nonwhite $457; for
urban individuals with other income the medians were $1,102 for
white and $390 for nonwhite.
All informed observers agree that nonwhite consistently pay a
larger part of their lower income for housing than do whites.
Senator Taft. T\Tien they have the same income?
Mr. Johnson. When they have the same income, yes, sir; that is
right.
Senator Buck. And get less for it?
Mr. Johnson. And get less for it, that is right.
Our next consideration is the effect of racial restrictions.
The racial restrictive covenants and neighborhood agreements
serve to confine the masses of Negroes into sharply defined and gen-
erally static neighborhoods. This artificail limitation of land area
and housing accommodations available to Negroes prevents adequate
provision for normal expansion of the population group, creates racial
tension and aggravates the overcrowding, congestion, and deteriora-
tion of these neighborhoods.
2024 POST-WAR ECONOMIC POLICY AND PLANNING
The social and economic costs of these congested and constricted
neighborhoods are prohibitive and should not be tolerated. They are
the natural breeding ground for disease, delinquency, and crime which
blight the lives of the slum dwellers, drain the tax resources of the
city and like festering cancerous sores, vitiate the life stream of the
entire community. An excerpt from Public Management, July 1944,
page 200, cites a pertinent illustration:
Different groups who have Uved successfully in slum areas of different cities
have been found to develop certain tendencies toward criminal and delinquent
behavior as a result of living in such neighljorhoods. In Chicago, for example,
there is one deteriorated neighborhood which has been occupied Vjy successive
waves of immigrants — Irish, Polish, Jews, Italians, Mexicans, and finally Negroes.
This neighborhood, no matter which of the groups is currently living in it, always
produces a great deal of organized crime and gang activities.
Added evidence that this is essentially an economic rather than a
racial question is supplied by the fact that in these same localities
where Negroes are the predominant slum dwellers, there are growing
numbers of Negroes, either scattered in other areas of the locality or
living in neighborhoods whose homes show all the care and beauty
which reflect their economic and cultural level. It is essential that
the objective should be the removal of the conditions which foster
the spread of these slums and the encouragement of the forces which
enlarge the number of dwellings and neighborhoods of which Negroes
and whites and, indeed, the entire cit}^ are justly proud.
There is a notation here that according to the Chicago Housing
Authority, restrictive agreements have increased in the past few years
and at the present time 80 percent of the city of Chicago is covered
by such covenants.
The National Association of Real Estate Boards has recently
evinced new interest m this growing and profitable market. This
interest should be encouraged and supplemented when necessary to
the end that all Americans regardless of race, or creed or national
origin may live in a decent home. As the supply of decent housing,
well adjusted to the size and income of the families, increases, the
racial opposition and tensions arismg out of competition for too few
homes will tend to disappear.
One of the more serious consequences of these racial restrictions is
that they compel the Negro to bid in a discriminated housing market.
Property management m this market has little stimulation toward
adequate maintenance because the demand for any type of dwelling
available to Negroes exceeds the supply and competitive maintenance
is not necessary to hold their tenant market. The Negro is therefore
forced into blighted areas which bottle him up so that when he breaks
out, it is often into high-rent areas beyond his usual economic
capacity to keep in adequate repair.
With then- housing supply artificially restricted while whites have
full access to the open housing market, Negroes receive proportion-
ately less housing value for the same prices than do white. This fact
was statistically demonstrated in an analysis of the 1940 census data
for 14 northern and western cities and 26 southern metropolitan dis-
tricts on the relationship between condition of dwelling and rentals
by race. This data reveals that at every rental level and in all
sections of the country whether owner or tenant, the Negro suffers a
definite disadvantage in his effort to get decent housing, solely because
POST-WAR ECONOMIC POLICY AND PLANNING 2025
of his race. This means that the group getting the lower income not
only pays a larger part of it for shelter, but receives less value for
his housing dollar.
The most recent and constructive analysis of the impact of racial
covenants on the total housing problem appears in an article by
Robert C. Weaver Entitled "Race Restrictive Housing Covenants"
in the August 1944 issue of the Journal of Land and Public Utility
Economics. The writer reveals those covenants have failed to
achieve their purpose of maintaining property values and instead
have aggravated the total housing problem. He suggests the sub-
stitution of income and occupancy standards for racial covenants.
We quote as follows:
If, instead of restrictions on account of race, creed, and color, there were agree-
ments binding property owners not to sell or lease except to single families,
barring excessive roomers, and otherwise dealing with the type of occupancy,
properties would be better protected during both white and Negro occupancy.
This would afford an opi)ortunity for the Negro who has the means and the urge
to live in a desirable neighborhood and it would protect the "integrity of the
neighborhood." It would also prevent, or at least lessen, the exodus of all whites
upon the entrance of a few Negroes. But it would do more; it would become an
important factor in removing racial covenants in other improved and vacant
areas.
Such action would permit areas open to Negro occupancy to expand more
normally. It would provide more space and housing units for colored people.
This, in turn, would lessen the pressure upon other, ill-adapted — from the eco-
nomic point of view — neighborhoods, permit selective in-migration of Negroes
into such areas, and reinforce the type of protection mentioned above.
The only permanent protection to values in the better-class neighborhoods
contiguous to present Negro occupancy is to secure adequate space and housing
for the colored population elsewhere. If, as has been said before, this housing is
well located and well designed, it will be more desirable to low-income Negro
families than are the existing structures in the high-rent neighborhoods. Were
such facilities available, the demand of Negroes for high-rent houses in neigh-
borhoods near the Black Belt would be small. Tho.se who .sought such houses
would, as in the case of earlier in-migrant groups, be largely persons of comparable
or higher cultural and economic status than the present inhabitants. The
infiltration of such people, if properly timed and understood, would not lead to
mass exodus of present white occupants. It would not occasion physical decay;
it would not lead to a decline in property values.
I am leaving a copj'' of that article for the information of the
committee.
To this point we have largely used the 1940 housing census to
reveal the housing and income status of Negroes in the United States.
However, during the past 4 years extensive internal migrations of
some 750,000 Negroes have served to intensify these housing condi-
tions in the principal industrial localities. The impact of this war
migration was greatest on the nonwhite population. First they were
already living under more congested and deteriorated housing condi-
tions; second, they were late in securing war jobs and hence late in
becoming eligible for new war housing. Even when they became
eligible it was more difficult for them to get housing. Approximately
250,000 Negroes are among the more than 2,000,000 who have mi-
grated to the west coast. In that area alone, temporary war housing
has been almost the sole source of shelter for Negro war workers.
They have moved into many of the houses that were slums when the
Japanese occupied them. "Jap town" in San Francisco now has
many hundreds of Negro residents and "Little Tokyo" in Los Angeles
formerly housed 7,500 Japanese, is reported by the housing committee
2026 POST-WAR ECONOMIC POLICY AND PLANNING
of the Council of Social Agencies of that city to have at one time
housed 30,000 Negroes. Vancouver, Wash, had a mere handful of
Negro families before 1942, and now has some 7,500 living exclusively
in war housing. A large percentage of these in-migrants expect to
remain, hence a serious need for housing available for Negro occupancy.
As far as income is concerned, while war employment has raised
the general level, the income of Negroes has not increased propor-
tionately because of their general restriction to the lower-paid and
unskilled and semiskilled jobs.
Because of seniority regulations and the fact that his employment
gains have been in aircraft, shipbuilding, and ordnance— industries
that may receive the quickest and deepest cut-backs, the Negroes will
suffer disproportionately in the lay-off period.
At this point in our testimony I want to call to your attention that
all of the foregoing in regard to Negroes in housing is existent here in
Washington, D. C. Extensive testimony was filed before a special
subcommittee of the Senate on local housing April 1944, I quote the
following from the testimony of our Washington representative.
Mr. Nolan indicated in his testimony that practically all of the 66,000 units
constructed during the past 3 years in the metropolitan area were located in the
outlying portions of the city with some 33,000 or half of them in nearby Maryland
and Virginia. It is a known fact that little of the new construction either outside
or within the District has been for Negro occupancy. Even more important,
however, through this same period, the areas for occupancy for Negroes within the
District have remained substantially unchanged.
It may thus be said that despite the virtual doubling of Negro population in the
District, no provision has been made for the expansion of areas of living for this
racial group. It is, moreover, our conviction that, if anything, the areas avail-
able for occupancy by Negroes within the District of Columbia have decreased
during this period, as a result of demolition incident to the construction of public
buildings and public roads and the conversion of acreage formerly occupied by
Negroes to white occupancy.
I might add, Mr. Chairman, that the roads to the Pentagon Building
under construction in that area on the Virginia side are examples of
that, where there was extensive housing that was done aw^ay with
and these people crowded into other areas that were already crowded.
The main reason why Negroes have not moved from these congested areas into
more adequate neighborhoods is the widespread use of covenants, agreements, and
neighborhood resistance to the occupancy of Negroes of undeveloped and devel-
oped areas. The effect of these restrictions has been to limit artificially the hous-
ing market for Negroes and cause them to pay higher prices for the same or les5
value and service. This feature makes the housing problem of Negroes dis-
tinctive from that of any other racial group.
It is important to understand why a condition constituting a public nuisance
and financial drain on the city has persisted and increased despite health and
building regulations.
In the tight housing market for Negroes and in view of the shortage of homes
for low-income groups generally, slum properties are profitable. Owners of slum
property often, being absentee, hold their investment until the future use is
determined. Meanwhile, the rents charged low-income families who cannot find
more pleasant and sanitary shelter constitute a steady source of income. Because
of the restricted market, tenants are unable to demand repair, maintenance, or
upkeep, and thus the incomes from the properties usually increase. The encroach-
ment of commercial developments into these same neighborhoods contribute to
blight, but, more important, increase the speculative value of slum property to
the point where public agencies responsible for slum clearance and private builders
interested in rehabilitation are confronted with prohibitive sale prices.
POST-WAR ECONOMIC POLICY AND PLANNING 2027
I have here, Mr. Chairman, a copy of a case before the United States
Court of Appeals in the District of Columbia.
In the dissenting opinion of Judge Edgerton, he makes this point
in regard to this case, which had to do with covenants and property
values:
There is ample testimony to the effect and there is no dispute about it. Real-
estate dealers testified that the houses in this block are worth about $7,500 for
sale to white purchasers and about $10,000 for sale to colored purchasers. Appel-
lants' house had been vacant for some time, and a white person had offered $7,500
for it, when appellant Mays bought it for $9,950. Performance of the restrictive
agreement, instead of maintaining the value of the property in the 2200 block,
will actually depress it. The court should not enforce the agreement and defeat
its most obvious purpose.
Senator Taft, Did that case go on to the Supreme Court of the
United States?
Mr. Johnson. I understand there is an appeal to the Supreme
Court from the court of appeals decision.
It would seem to be unsound policy for a court, in the exercise of its equitable
discretion, to enforce a privately adopted segregation plan which would be uncon-
stitutional if it were adopted by a legislature. Moreover, the Supreme Court has
recently said that "discriminations based on race alone are obviously irrelevent
and invidious."
There is another part which I will quote later on.
From this array of facts can be drawn three important conclusions:
1. A disproportionate number of Negroes have incomes too low to
pay for the full cost of standard housing.
2. There is an increasing number of Negroes in the upper and middle
income groups that are not adequately served by private enterprise
that can afford to pay the cost of standard housing.
3. There is insufficient land area available to accommodate the
housing needs of Negroes.
To meet the housing needs of Negroes, therefore, as part of a total
housing program, it is necessary to provide adequate land area and
additional housing accommodations at rates they can pay.
In conclusion I wish to submit to you as recommendations, the
report of housing recommendations made by the National Urban
League at its thirty-fourth annual conference held at Columbus, Ohio,
September 28 to October 3, 1944, which are as follows:
This obviously is a job for both Federal and private housing. The conference*
therefore, recommends the following legislative action and program policy that it
feels is necessary to its proper solution:
The enactment of Federal legislation establishing a national housing agency
responsible for national housing policy, and the coordination of Government
resources to assist private and public agencies in providing adequate housing for
all people of middle and low income levels.
Appropriation by Congress of adequate Federal funds to be made available
under the United States Housing Act of 1937, as amended, to assist local com-
munities to provide decent housing for low-income families whose housing needs
cannot be met by private enterprise without subsidy.
The adoption of Federal and State urban redevelopment laws that will achieve
the following:
"Provide the right of eminent domain where necessary to assemble land for
development or redevelopment, but remove all racial restrictions from land ac-
quired under eminent domain or redevelopment laws;
"Assemble adequate parcels of land to make possible the development of large-
scale coordinated housing programs by public and private enterprise;
"Provide adequate housing for people displaced by slum clearance of redevel-
opment programs."
2028 POST-WAR ECONOMIC POLICY AND PLANNING
While the conference approves the acquisition 'of land lor public and privatc
housing through the exercise Oi eminent domain, we are unalterably opposed to
the delegation of this public right to any private individual or concern.
The conference is further opposed to current proposals made by private inter-
ests demanding that rent subsidies for public housing be channeled to private real
estate and financial institutions through local relief or other public assistance
machinery. Inst^-ad, we insist that such rent subsidies be administered by local
public housing agencies.
The insertion of a general nondiscrimination clause in the National Housing
Act, the United States Housing Act of 1937, and anv subsequent Federal housing
or urban redevelopment legislation.
In addition to these legislative steps, the following items of policy
are recommended for action by Federal agencies:
1 . Whenever Federal assistance of any form is involved in housing
development, it is the responsibility of the Federal agency to see that
benefits are made available equitably to all economic and racial groups
based on need.
2. In order that the additional areas necessary for the normal and
orderly expansion of the Negro population be made available for
occupancy:
(a) The Federal Housing Administration must withdraw all orders, manuals,
or policy provisions which condition approval of mortgage insurance upon racial
restrictive covenants and agreements.
At that point I want to read into the record an excerpt from a report
prepared "by Dr. Gunnar Myrdal, a social scientist brought to this
country by the Carnegie Foundation to study the relationship of
Negroes in this country. I might add that Dr. Myrdal had never
been in this country before, and had never had any contact with the
matters he studied.
Particularly significant is the fact that, year by year, it has been possible to
reach deeper down into lower economic strata. In spite of that, less than 30
percent of the main category of new borrowers on one-family homes in 1940 had
incomes under $2,000 and but 5 percent had less than .$1,500.
Under such circumstances, it is apparent that Negroes cannot have had any
great benefit from the Federal Housing Administration, nor, for that matter, from
any of the other Federal credit agencies, which are organized on the basis of so-
called ordinary business principles.
The failure" of the Federal Housing Administration to help the Negroes goes
even further than can be explained on the basis of their low income. This Federal
agency has taken over the policy of segregation used by private institutions, like
banks, mortgage companies, building and loan associations, real-estate companies.
When it comes to developing new subdivisions, the Federal Housing Administra-
tion is obviously interested in getting such a lay-out that property values can be
maintained. Private operators, in order to secure Federal Housing Administra-
tion backing, usually follow the advice of the agency. One of the points which
property valuators of the Federal Housing Administration are specifically urged
to consider is whether the area or property to be insured is protected from adverse
influences.
This, in the official language of the agency "includes prevention of the infiltra-
tion of business and industrial uses, lower class occupancy, and inharmonious
racial groups"
Senator Taft. Is that a regulation fo the F. H. A.?
Mr. Johnson. That is in the F. H. A. manual:
In the case of undeveloped and sparsely developed areas, the agency lets its
valuators consider whether * * * effective restrictive covenants are re-
corded against the entire tract, since these provide the surest protection against
undesirable encroachment and inharmonious use. To be most effective deed
restrictions should be imposed upon all land in the immediate environment of the
subject location.
POST-WAR ECONOMIC POLICY AND PLANNING 2029
And, I quote further from this report:
The restrictions, among other things, should include "prohibition of the occu-
pancy of properties except by the race for which they are intended."
This matter is a serious one for the Negro. It is one thing when private ten-
ants, property owners, and financial institutions maintain and extend patterns of
racial segregation in housing. It is quite another matter when a Federal agency
chooses to side with the segregationists. This fact is particularly harmful since
the Federal Housing Administration has. become the outstanding leader in the
planning of new housing. It seems probable that the Federal Housing Adminis-
tration has brought about a greatly increased use of all sorts of restrictive coven-
ants and deed restrictions, which are the most reliable means of keeping Negroes
confined to their ghettos * * *
The urban Negro population is bound to increase. The present Negro ghettos
will not suffice. The Negro will invade new urban territories. Unless these
changes are properly planned, they will occur in the same haphazard and friction-
causing manner with which we have been only too well acquainted in the past.
I want to add to that a concurring opinion by Mr. Justice Murphy
in the case of Steele v. Louisville & Nashville Railroad Company,
December 18, 1944. This opinion was used by the dissenting judge
in the previous case I referred to.
Senator Chavez. He concurred with the dissenting judge?
Mr. Johnson. He concurred in the opinion of the Supreme Courts
but the dissenting judge in this case, used his opinion.
Senator Chavez. What does Justice Murphy concur with?
Mr. Johnson. With the majority opinion of the Supreme Court in
this raih-oad case, but the dissenting judge in the court of appeals
case used his opinion in this case.
The court of appeals voices its disapproval whenever economic discrimination
is applied under authority of law against any race, creed, or color.
Lastly, the Federal Public Housing Authority or other public
housing agencies must desist from making commitments to local
neighborhood or community groups which restrict the occupancy of
public housing projects to specific racial groups in areas where other
public facilities such as schools, playgrounds, parks, transportation
facilities, and so forth, are used by all racial groups on an unsegregated
basis.
Senator Taft. We are very much obliged to you, Mr. Johnson.
You have presented an aspect that has not been covered by other
testimony — and added to our problems.
The hearing will recess until 10:30 tomorrow morning when Mr.
Eric Johnston and Mr. Morton Bodfish will testify.
(Whereupon, at 4:15 p. m., the hearing was adjourned until to-
morrow morning, February 7, 1945, at 10:30 o'clock.)
X
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