the chairman cited, where $10,000,000 is put into a stadium instead of into slum clearance in a community. I am very sure that it would help this country a great deal if there were a determination of the question of whether or not Federal aid for slum clearance is a proper Federal function. It seems to me, as I said earlier, that if it is a Federal function the Federal Government should deal with States, rather than with local communities, as a matter of policy. Mr. MULTER. If the policy is that the Federal Government should lend its aid and money to slum clearance, then it should have no control over how it is going to be done? Mr. WHITLOCK. I think its control should be exercised through the State government. I think that our system of government relationship-Federal, State, and local-has proven very successful, and I think we should not try to destry it by having the Federal Government dealing directly with local communities. Mr. MULTER. If Federal aid is to be given, you do not think that we would need requirements such as you have just read to be sure that people who are now in slum-clearance areas are not simply moved into other slum areas? Mr. WHITLOCK. I think that if there are available accommodations such as described here, those people would get out of those slums and into those better areas without any slum clearance and would leave the place to be cleared. Mr. MULTER. I think you appreciate that this is intended to mean that we will have to create decent living places for those persons in the slum areas before we try to move them out. Mr. WHITLOCK. Is my interpretation correct, then, that it will mean public housing before slums are cleared? Mr. MULTER. It will mean more housing before the slums are cleared. Mr. WHITLOCK. Public housing. Mr. MULTER. Not necessarily public housing, but it will mean more housing. Mr. WHITLOCK. Have the proponents of this bill not said that private enterprise cannot build these low-cost homes for these displaced people? Mr. MULTER. Let me ask you: Do you think that private enterprise can build these low-cost homes? Mr. WHITLOCK. If your position is that we cannot, then we will have to have public housing. Mr. MULTER. Well, let us agree, for the purpose of our discussion here, that private enterprise can. Do you think that private industry will build low-cost housing to take care of these people living in the slums? Mr. WHITLOCK. All I could do would be to look at the record, as someone once said. The building industry has been studying the question of what kind of housing was built in 1947. And we have a document here. If you like, we could have it inserted in the record. We took the number of families and the brackets of income from the President's Economic Report, and we took the BLS figures on the cost of housing that had been built in 1947-of new single-family houses. In the family income brackets from $1,000 to $2,000 a year, the President's Economic Report said there were 15 percent of the families; the census said 17 percent. Twenty percent of the houses built were built at prices for that bracket. Mr. MULTER. Built by private industry? Mr. WHITLOCK. Built by private industry. Mr. MULTER. That percentage of the building took care of what proportion of the 15 or 17 percent of the low incomes? Mr. WHITLOCK. Of the 850,000 houses that were started, 20 percent were built for the 15 percent of the families which had from one to two thousand dollars income. In the two- to three-thousand dollar bracket, 23 percent of the houses were built for 20 percent of the families; three to four thous and dollars, 18 percent of the families, and 25 percent of the housing; four to five thousand dollars, 13 percent of the families, and 14 percent of the housing; above five thousand dollars, 21 percent of the families and only 14 percent of the housing. In other words, this propaganda that you have been hearing to the effect that we have been building only for the higher-income brackets is not true. You will see that we have been building for the markets that exist, and for low-income families as well as others. I would be very happy to put this document in the record. Mr. WHITLOCK. Throughout the United States. Mr. BUCHANAN. Certainly not around my area. Mr. WHITLOCK. I will be very happy to submit this for the record, if the committee should like to have it. The CHAIRMAN. How long is it? Mr. WHITLOCK. Six pages. Mr. KUNKEL. Does it include the table? Mr. WHITLOCK. I could put in the table, and we could leave sufficient copies of the supporting data for the committee. The CHAIRMAN. Without objection, the document may be inserted in the record. And it might be helpful to the committee if you would make available to it a number of copies. (The document above referred to is as follows:) WHO CAN AFFORD OUR NEW HOUSING? PRIVATE HOME BUILDING SERVES PRACTICALLY ALL INCOME GROUPS Prepared by Miles L. Colean, economic consultant. Issued by the Construction Information Committee, Washington, D. C. In the upsurge of residential construction during 1947, an unprecedented number of new single family houses was started, and these houses were so widely distributed in price as to serve almost the whole range of demand. The broad distribution of the new houses according to probable selling prices is in contradiction to commonly voiced opinions that the range of prices of new houses limits their purchase to a relatively small group of high-income families. This latter view found expression as recently as the Economic Report of the President of January 19, 1948, which comments as follows: "When examination is made of the relationship between the cost of this housing and our income structure, it is clearly apparent that the housing is being built for families in the higher income brackets. To the extent that families of low and middle income are being served, the high cost is placing an excessive financial strain upon them." WHAT ARE THE FACTS? Official information now available indicates that the realities are quite different from the assumptions. The estimates and comparisons in this study, which are based on family income and housing data from official sources, show that in 1947 homes were built almost in exact proportion for families in all income groups, except those with incomes of less that $1,000 and those in the highest income brackets. Instead of building entirely for the upper-income groups, private enterprise has built homes within the reach of at least 75 percent of the Nation's families. Moreover, the figures reveal that the family of average income was able to afford the average price of homes built in 1947, without overreaching itself. These conclusions are explained in detail in the following exposition. FAMILY INCOMES According to the Economic Report of the President of January 14, 1948, the percentage of all families in the various income brackets in 1946 was as follows: Table 1.-Family income distribution in 1946 (before income tax) 1 Economic Report of the President, January 14, 1948, table 3, p. 19. rounded. 18 percent 13 percent 21 percent 100 percent Percentages are This is the income distribution for all families, whether living on farms or in cities and towns. The figures include also the income of individual living by themselves-bachelors, widows, divorcees, and others as well as the incomes of normal families of two or more persons. Since we are concerned here with nonfarm housing only, and with normal families who are in the market for homes, it should be noted that incomes of nonfarm families are usually higher than incomes of farm families, and that incomes of normal families are usuallv higher than incomes of single persons living by themselves.* In other words, the income distribution of normal nonfarm families which are in the market for houses in cities and towns would-if it were available-show that an even larger proportion of these families were in the medium and upper income brackets, and an even smaller proportion in the lower income brackets, than is indicated by the table. It is also to be noted that the figures on family incomes, which are the latest available, are for the year 1946. There can be no doubt that family incomes in 1947 were even higher than they were in 1946, since the total national income in 1947 was $203,000,000,000 as compared with $178,000,000,000 for the previous year and compensation of employees in 1947 was over $128,000,000,000 as compared with $117,000,000,000 in 1946.3 On several counts, therefore, the figures on income and income distribution used in this report are lower than what actually was the case. PRICES OF NEW HOUSES The Bureau of Labor Statistics has provided data which give the distribution, by construction cost ranges, of new single-family houses built in nonfarm areas, showing the percentage of single-family dwellings built within certain construction cost brackets. These data are from building-permit valuations reported to BLS and from field surveys by that agency, and include an allowance by BLS statisticians for the usual understatement of construction costs in building permits. 2 According to a report, Family and Individual Money Income in the United States, by the Bureau of Census (series P-6, No. 22, dated May 8, 1947), median money incomes per family units in 1945 were as follows: Urban families of two or more related persons, $2,999; rural-nonfarm families of two or more related persons, $2,441; rural-farm families of two or more related persons, $1,410; single persons families in all cities, $903. Economic Report of the President, January 14, 1948, appendix B, table III. In other words, they represent the best approximations to actual building costs that are available. Bureau of Labor Satistics is the official source of Government statistics on residential construction. Since the adjusted BLS construction cost figures do not cover the cost of land nor the operative builder's overhead and profit, 33 percent has been added to the BLS construction costs to arrive at estimated sales prices. This means that 25 percent of the final sales price is estimated to be attributable to land, overhead, and profit. This is a generous allowance in view of the fact that profits and overhead are included in the BLS estimates of construction cost where houses are built on contract rather than by operative builders, and that profits and overhead are either small or nonexistent where owners themselves are the builders and no contractors or only a few special trade contractors are employed. A substantial volume of houses was built in 1947 on contract or by the owners themselves. Although no precise data are available, the Chief of the Construction Division of the Bureau of Labor Statistics, in his statement of January 12, 1948, before the Joint Committee on Housing, pointed out that "the owner-built house is becoming increasingly important in the suburban areas." Since only land needs to be added to construction costs in these cases to obtain an estimate of total cost to the owner, the average allowance of 33 percent means an allowance of about 40 percent for the remaining houses constructed by operative builders for sale, to cover their overhead and profit as well as land costs. The original BLS figures and the estimate of sales prices based thereon are shown in the following table: TABLE II.-Cost and price distribution of new single-family houses in the second quarter of 1947 Table II presents the Bureau of Labor Statistics data for the second quarter of 1947, this being the most typical period for housing starts in all sections of the country and the last one in which the Bureau made resurveys to obtain adjustments of the original costs reported to it. If the Bureau's data for the last quarter of 1946 and the first quarter of 1947 were used, they would show an even greater concentration in the lower cost and price brackets, and the comparison with family incomes would be more favorable. However, housing starts during the winter months are concentrating in the South where both construction costs and incomes are lower than in other parts of the country. The second-quarter figures therefore provide a fairer basis for comparison with incomes. COMPARISON OF INCOMES AND PRICES For the purpose of comparing the price of housing with the ability to pay for it, the widely accepted rule, that a family usually can afford to buy a home costing up to two and one-half times the annual income of the family, has been adopted. Thus, a family having an annual income of $3,000 is generally assumed to be able to purchase and pay for a home costing $7,500. In view of the low financing charges for veterans and FHA home loans, with which about 50 percent of all new homes are financed, this formula may in fact be conservative. The next table and the accompanying chart bring together the data on family incomes and prices, which have been presented separately in Tables I and II. Since the available BLS figures do not permit a distribution of house prices on precisely a 2.5 ratio of price to income, the table gives the nearest possible distribution to this ratio. In all ranges, it will be noted, the range of price is below the maximum which families in the various income groups can be assumed to afford. The maximum price range is shown for comparison in the sixth column of the table. TABLE III.-Comparison of family income distribution and price distribution of new single-family dwellings Columns 1, 2, and 3 are from table II; columns 4 and 5 are from table I; column 6 is 21⁄2 times the family income brackets given in column 4. It thus becomes evident that, of the single-family houses built last year, 20 percent were in the price range of families with income below $2,000 who constituted 28 percent of the total families; 23 percent of the homes were in the price range of families with incomes between $2,000 and $3,000 who constituted 20 percent of the total; 25 percent were in the price range of families with incomes between $3,000 and $4,000 who constituted 18 percent of the total; 18 percent were in the price range of families with incomes between $4,000 and $5,000 who constituted 13 percent of the total; and only 14 percent were in the price range of families with incomes of $5,000 or more who constituted 21 percent of the total. If, as is probable, only a few of the new houses in the lowest price class were purchased by families with annual incomes below $1,000, then the 21 percent of the houses in this class could be considered to have been built for the 15 percent of all families-those having between $1,000 and $2,000 annual income who formed the lowest income group actively in the market. Excepting the relatively small group of families having incomes of less than $1,000 a year, which cannot be expected to be in the market for newly constructed housing, the one group for which new houses were not provided in proportion was that with income of $5,000 a year and over. The highest income group, instead of getting all, or even a disproportionately large share of the new housing, as frequently is charged, actually was provided with less than its reasonable allotment. OTHER SUPPORTING DATA The above findings are in a broad way confirmed by evidence from other Government statistics. According to the Economic Report of the President of January 14, 1948, the average income of all American families in 1946 was $3,806. This, it should be noted again, includes the incomes of farm families and of individuals living by themselves. The average income of normal nonfarm families of two or more persons must have been considerably higher. Again, on the rule that a family normally can afford to buy a house costing up to 21⁄2 times its annual income, the average American family was able to buy a house priced at $9,515. Acording to a report of the Veterans' Administration, the average selling price of new houses bought by veterans with the aid of GI home loans was $8,200," or $1,315 less than the amount the average family could afford. New houses bought by veterans represent a fair sample of all new houses built during 1947. The Veterans' Administration states that nearly half of the home loans that it guarantees or insures are for newly built houses, and since these loans totaled about 500,000 last year, 250,000 new houses must have been involved. 4 Table 2, p. 18. The average News release of the Veterans' Administration, dated November 30, 1947. is based on data for the 4-month period from May through August. The same release stated that nearly one-half of all VA-guaranteed loans were on new homes. |