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many years in industry building a conglomerate company that I think is much more diversified, taking our technique in management and our capital into instrumentation, taking it into business machines and equipment. Exactly 20 years ago Hal Gensen was a fellow officer of Bell and Howell with me. The greatest regret I ever had was that we could not hold him. But his genius that he had taken through the industrial field of industry, his genius in what he has done now in putting together this conglomerate in the best sense of that term, and the breakthroughs of that fertile, imaginative, creative mind, with good management can take the very best of American industry, solid capital, and I hope break through the maze of red tape that you have to fight through in order to do what you are doing, create a fine business in an area of tremendous need in this country. And to the extent that we can help break the barriers and make the job easier to release the boundless energy of private enterprise to get this job done, that is our goal, our mission. I will be proud to work side by side with the other members of this committee in trying to help see the light at the end of the tunnel.
Mr. BIEDERMAN. Thank you, Senator Percy.
Chairman BOLLING. Thank you, Senator Percy.
Mr. Widnall, I should give you an opportunity. I apologize; I did not see you come in.
Representative WIDNALL. Thank you, Mr. Chairman.
Mr. Finger, Mr. Biederman, I regret I was unable to get here sooner, but I certainly will read your testimony with great interest. I know it has been to the point of something that is extremely important to the future of America.
Mr. Finger, do you envision the future demand for industrialized housing as consisting mainly of low-income housing financed by Government initiative, hence a Government-induced market, or do you anticipate a diversified demand?
Mr. FINGER. Congressman Widnall, I really believe that industrialized housing will provide housing across the board at all levels. I think it would be bad if there were an effort to produce it only at one cost level. It would mark it as low cost. I think it would have less chance of acceptability.
There is nothing that restricts its suitability to any simple price range. It is applicable to the full range of housing systems, going up into luxury prices, with variations. There will undoubtedly still always be a desire for custom-built housing among certain people in certain areas. But it should be possible to, and I think will, provide the needs for all of our people.
Representative WIDNALL. But the basic financing will be the guarantees made by the Government in the future; do you not think?
Mr. FINGER. For the low-income families, that is correct. That will still be the main means of making houses available to those people, through the subsidy programs and rent supplement programs.
Representative WIDNALL. What would you say has been the response of industry in this area? Which market do they foresee?
Mr. FINGER. Well, as we mentioned earlier, there really is not an industrialized housing production capability of very large magnitude built up. I think industry sees the need to provide for all housing. There is, however, at this point in time a real need to provide for the lower priced housing range, the housing for lower income families, just
because there is less of that being built, less of it available for those families to acquire where they may want and need it. There is certainly an easier time for someone who can afford it to go out and pay whatever the market demands at this point for housing. Therefore, industry, I think, does look forward to the application of these subsidies and supplements in order to provide an incentive, a market incentive, as well as an incentive for them to go out and get financing and so on, to build these moderate- and low-income houses.
Mr. Biederman may want to add to that.
Mr. BIEDERMAN. I concur with Mr. Finger. I do not believe that industrialized housing is going to be limited to any economic strata. I think the techniques will be employed in all price ranges so that as a result, while Government subsidies may be required to fund subsidized housing for low-income groups, I do not think it will be required for industrialized housing for high-income group housing.
Mr. WIDNALL. Mr. Biederman, the low-cost housing, relatively lowcost housing that you spoke of just prior to the interrogation by me, have you completed much of that, and if so, where? Where can that be seen? I am talking about $20,000 units, eights units to a tract.
Mr. BIEDERMAN. These units are in a project that we call Rittenhouse Park, which is 30 minutes outside of Philadelphia, near Burlington, N.J., in a town called Willingboro. To date, we have completed close to 700 of these units. They initially sold, 2 years ago, in a price range of $13,500 to a top of $15,500. The current price range is $15,500 to $19,500. Representative WIDNALL. What size units?
Mr. BIEDERMAN. These townhouses go from a two bedroom, one-story unit of 985 square feet to a two-story, three bedroom unit of 1,450 square feet.
Representative WIDNALL. Would they be too small for public housing? Mr. BIEDERMAN. Oh, no. They would be too large.
Representative WIDNALL. I have seen a lot of public housing where the room, the square footage, it seems to me, has been larger than that. Mr. BIEDERMAN. Well, from the requirements that we have seen on most public housing jobs, and taking the FHA MPS, minimum property standards, as a guide, the room sizes that we have in these units are all in excess of the minimum property standards and in excess, for example, of New Jersey public housing and New York public housing. Representative WIDNALL. In the construction of those units, are you using much prefabricated material?
Mr. BIEDERMAN. No, but we use only precut material. In other words, the carpenters on our job and the sheathers and the roofers do not require a saw. All the wood comes out precut and dimensioned, ready to be assembled. We have found, and we know this to be a fact, based on a great many studies that we have performed, that site-built, precut housing is considerably less expensive than prefabricated partitions built some place else and delivered to the site. However, on several of our jobs, we are suing prefabricated partitions. This, on the surface, sounds a little foolish. We know it is more expensive. We are using it where we have extremely tight labor markets. If we cannot find the labor, then we cannot produce. We then must pay the premium to achieve the production. That is why we will use prefabricated partitions on several jobs.
Representative WIDNALL. I am taking this line of questioning, because of some of the rather exciting things I saw at the National Conference of Homebuilders in Houston, Tex. There they had some prefabricated construction that had a fairly low cost to the homeowner. It was both attractive and in every way seemed to be something that will be a definite contribution to the community, and certainly the people who own it would be glad to have as a home.
Restrictive union practices have often been cited as an effective obstacle to increased production and use of prefabricated, low-cost housing. Recently, the United Brotherhood of Carpenters and Joiners signed a national agreement to produce industrialized housing and erect it onsite.
Mr. Finger, I would like to ask you this: Does this indicate that craft union barriers are beginning to fall?
Mr. FINGER. I believe there is an indication that craft unions recognize the need for a change in the building industry. The agreement between Stirling-Homex and the carpenters is of course a very significant one.
It is important to point out, though, that even before this last agreement was signed, the carpenters were already operating in the StirlingHomex plants, working on the prefabrication of Stirling-Homex homes. But this agreement carries that one step further to say they would also erect those prefabricated units onsite.
In addition to that, they also made an agreement that included the Urban League to train onsite people and bring more people into the craft union. So I think there is a very encouraging development. Our meetings with the labor people have indicated a recognition of the real demand for housing and the need to make some changes in the approaches that have become practice over some time.
One other indication of this, I think, is the agreement of the Detroit Building Trades Department to organize in-plant activities and organize in-plant on prefabricated housing at industrial wage rates, using industrial labor standards. So there are encouraging signs. I think we still have to work with them and indicate the importance to the country of adjusting our process of building so that we can really satisfy the needs of our people over the next decades.
Representative WIDNALL. Certainly it is a healthy advance?
Representative WIDNALL. I was very pleased to see it take place. Now, the National Commission on Urban Problems described the building industry as "a loose conglomeration of small participants who come together on a project-by-project basis."
Do you feel this is an apt description?
Mr. FINGER. I think in general, it is, yes. Mr. Biederman indicated that Levitt last year turned out 6,000 housing units, or half of a percent of all the housing produced; and Levitt is clearly one of the big housing organizations. I should, however, say that the industry would not, it seems to me, choose to operate that way if they had a way of delivering to a large, pooled market without the fragmentation in the market that results from variability of building codes, various zoning restrictions, inspectors who implement building codes in ways that they have become accustomed to and therefore, a large organization can't very well market over a large region of the United States. So it
is also the market that encourages this kind of segmented approach of fragmentation. It does not put a premium or provide an incentive to significant capital investment in any one organization. An organization does not see a real gain because the market is so broken up and the building codes and zoning restrictions and variations in labor practices and consumer tastes variation make it difficult to market broadly. So my impression has been, in the short time I have been here, that the fragmentation of the industry results to a large extent from factors that cause fragmentation of the market. If we could pool the market, we could encourage a greater pooling of the industry capability and, therefore, greater investment in plant capacity, greater investment in research and innovation and improvement. There would be incentives along those lines.
I think, also, it would really help the way we finance housing. It would not be a project-by-project basis, but we should be able to get a broader umbrella of financing available. As a result, these organizations should have greater leverage in the arrangements they make with suppliers, with labor, with other industrial groups, within the communities in which they operate so they could be stronger and be able to operate more nearly as a group. I think the overall effect would be beneficial. It is really that kind of change of process we are seeking. Representative WIDNALL. I have just two more short questions. Mr. Finger, what effect will the development of an industrialized housing industry have on the overall construction industry?
Mr. FINGER. I think what we are looking at is a need for an increase in the construction industry activity, an increase in production. Therefore, I think we have to look at the changes we are talking about as being a means of supplementing the production that we now get and with time, increasing the efficiency of our present industry.
I suspect also that many of the companies that will propose in this Operation Breakthrough that will want to operate over a fairly large part of the country, will still go to the local builders, local labor, local contractors to do that final onsite field erection work that is required. But in general, I think there will be a supplement provided with an eventual filtering of that know-how into the existing building business.
What we are really looking for, though, is a total increase in our building capacity. Mr. Biederman may want to comment on that point, being in industry.
Representative WIDNALL. The two can go side by side?
Mr. FINGER. Yes.
Representative WIDNALL. And one can learn from the other?
Representative WIDNALL. Mr.Biederman, what are the advantages of a more stable construction industry with large-scale firms such as Levitt?
Mr BIEDERMAN. I believe that on that kind of basis, we would be able to respond to the needs of the country far more effectively, because right now, with industry being composed of well over a hundred thousand builders, there is no real voice aside from the National Association of Home Builders, which, as you can imagine, would have difficulty getting the opinions of a hundred thousand builders, all of whom are concerned with these small projects. The needs of a small
builder, the requirements of a small builder, who is building less than 25 houses a year, are different from the needs of a large builder. The small builder can't devote adequate resources to plant facilities; can't devote adequate resources to research and development market techniques. If there were a constant large demand or market for housing that could be counted on so that major firms in the country could become involved and develop the wherewithal and the responsibility, then the moneys that should be spent on research, the moneys to be spent on development, the moneys that should be spent on plant facility could come about, because the industries would recognize that there would be a reception for their product.
I would like to underline what Mr. Finger said and point out that right now, we do not have the productive capability to meet the needs of the country. The country needs 22 million houses a year. The most we were able to produce last year was 1,500,000. If there were some major firms using industrialized processes on a large scale, catering to large markets, they would be able to meet that kind of production need. They cannot do it now. There is no strong central body.
There is an organization called the Council of Housing Producers which is composed of the 12 or 13 largest builders in the United States. That council today is only responsible for a little over 25,000 of the housing units built in this country. They cannot respond any more extensively because they have not been able to aggregate a market sufficiently large to receive high-scale production and they have not been able to attract the labor or they have not been able to find the labor to build the units for the market that they are in. Under the Operation Breakthrough program, the aggregation of markets will permit these members of the Council of Housing Producers and people who are not even in the housing industry today to come into the housing industry and set up large firms.
So I think that HUD is absolutely correct in saying that an aggregation of market is very necessary to develop the kind of response on the part of industry, to create an incentive for industry to develop the productive capabilities. That is the advantage of having the large market.
Representative WIDNALL. That is all, Mr. Chairman.
Representative BROWN. Thank you, Mr. Chairman.
I would like to make several comments on extraneous things that have come up through the testimony thus far.
I think I am correct that in some States mobile homes are taxed as real property if they lose their mobility. In other words, if you have a trailer fixed in one location and the wheels are off it for a long enough time, do you not get into a real estate tax problem?
Mr. BIEDERMAN. In California, for example, if the axle is removed, then the mobile home is judged as taxable property. If the axle stays on, it is personal property.
Representative BROWN. So you have that complication of local requirements of the law in even this area of mobile homes?
Mr. BIEDERMAN. Yes.
Representative BROWN. I also was pleased that Senator Percy did not suggest that he thought the Rayburn Building was esthetically acceptable. It seems to me that much of the Federal building we have