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Full text of "Post-war economic policy and planning. Hearings before a subcommittee of the Special Committee on Post-war Economic Policy and Planning, United States Senate, Seventy-eight Congress, first session-Seventy-ninth Congress, first session pursuant to S. Res. 102, a reslution creating a Special Committee on Post-war Economic Policy and Planning"

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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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2020 POST-WAR ECONOMIC POLICY AND PLANNING 

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 
l lUl ll liU 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.) 

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