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I want to present another phase of this housing question. The people who have preceded me have talked here for the most part about the home and the single detached house. That is definitely a most satisfactory way of living when it is possible, and all of us want that as an ideal. In the smaller communities it is highly possible to continue that in a large degree but I am thinking of our urban centers. I am not thinking of the follow who has an income of $5,000 a year and up. I am thinking of the man and the family who are earning $2,500 and below. Those people are more in need of better housing facilities, and if this bill is so written as to stimulate new housing I think from the standpoint of supply and demand as we have studied it, received the reports from various cities in the national conference, and have been in touch with groups of five cities of the country who have attempted to find out what could be economically done under private capital; something should be projected to accommodate these large groups of people who are at that earning level right now. There has been no new housing in that field.

Senator Watson. You think Chicago is not overbuilt then in that respect ?

Mr. STERN. It is not overbuilt. It depends on how you interpret that. There is a great deal of vacancy in Chicago to-day at various levels, mostly at the higher levels, in the speculative, high-cost apartments. In the lower levels there has been a great deal of doubling up with two or three families living in one apartment. As soon as there is any business for the people who are now living under those insanitary and indecent conditions there is going to be a demand for decent quarters for that group:

For the last two years, we have been operating a large housing development for negroes. It was opened in the fall of 1929.

Senator WATSON. You mean an apartment? Mr. STERN. An apartment development. We have on our board of directors some of the leading business men of Chicago who have taken a real interest. Mr. Rosenwald put up the capital. He wanted to demonstrate that a reasonable return could be made on such an investment, and that improved housing facilities would be created thereby.

Senator WATSON. When did you start on that?

Mr. STERN. It was opened fully in the fall of 1929, just at the beginning of our debacle.

Senator WATSON. So that there is no way to tell at the present time whether or not it is a paying proposition ?

Mr. STERN. We have had two full years of operation, and during those two years we have earned on the equity moneys, a net return of 4 per cent after all charges and depreciation at an average rate of 3 per cent had been deducted. We paid a 51/2 per cent return on the mortgage, and amortized it in advance of its prepayment dates.

We have also, during 1931, earned 3.8 per cent net. We are catering to a group who are a less economically sound risk; a group who are considered a marginal group, for the most part, in their credit standing

Senator WATSON. How many of those tenants have you?

Mr. STERN. We have a total population of about 1,800 people, in 450 apartments.

Senator WATSON. That many heads of families?

Mr. STERN. Yes. In some cases there are two couples, or families, living in an apartment.

Senator WATSON. You do not think this bill could be used advantageously for apartment construction! The capitalization does not admit it.

Mr. STERN. What I want to propose here is this and this is applicable in New York City to a greater degree than in Chicago. It is applicable in Cleveland and St. Louis, from investigations of able groups of local citizens. Even in the present economic depression, there are really opportunities to-day to build well-conceived groups of houses—they do not necessarily have to be apartments-depending upon your land cost; groups of houses as well as apartments that can be rented at from $8 to $12 a room per month.

If we are talking about supply and demand here, I think we ought to level the new construction at a group who are now badly supplied with any kind of decent housing. That is especially true if we are thinking of stimulating any degree of employment, which, to my mind, is bound to be sound financially if considered in the class of public utilities.

I am proposing, Senator, that this bill, if it is to be amended, should be amended to include the possibility of discounting mortgages of corporations, limited dividend corporations under State supervision, that can be issued through existing channels at a reasonable rate of interest over a long period of amortization. These can not be secured in large enough amounts to-day through mortgage brokers or insurance interests.

Senator WATSON. Could an institution like this, covering all the phases that you suggest, be put on a paying basis?

Mr. STERN. We are on a paying basis.
Senator WATSON. You are on a paying basis?
Mr. STERN. Yes; and there are many other all over the country
Senator Watson. That are on a paying basis?
Mr. STERN. Yes.

Senator WATSON. How many have started to operate that have not paid?

Mr. STERN. There are some that have not.
Senator WATSON. Is it a question of management ?

Mr. STERN. The director of the Marshall-Field development in Chicago is on our board and is very frank to admit the weaknesses in their set-up, as we are in ours. We are attempting to demonstrate something.

Senator Watson. That has not paid?

Mr. STERN. That has not paid. It is about breaking even, but the difficulty there is primarily the location of the undertaking and the high cost of construction. If we were building to-day, we could show a reduction of 25 per cent in our building costs, and savings in the use of improved materials and methods of construction.

Senator WATSON. You would have to rent at a lower rate.

Mr. STERN. We are making a reduction. We anticipate in 1932 a return of better than 2 per cent net, with a substantial reduction in rentals. These, in turn, may be increased in time as there is increased demand. I do not need to go into too much detail with respect to our development, which I will be glad to lay before you. The reports are completely available. We are publishing everything.

that are.

Senator WATSON. Suppose we set up this establishment for the erection of small homes. How many people would move out of your apartments into sinall homes?

Mr. STERN. They are not located so that they can be accommodated in small homes. They have to live near their work, adjacent to the downtown or near-in districts. We have areas in Chicago that are absolutely lying idle, near-in districts, almost within walking distance of the loop, that could be developed on a large-scale basis, that would reach the clerical and skilled workers, the clerks in our department stores, who have no equity money to put up on a home, and who can not pay the rentals that you would expect.

expect. They have to spend an hour or two hours going to work every day. There is an opportunity that is economically sound and socially very sound. It will stimulate a great deal of employment, and will create improved conditions for a much wider range of our people than by continuing to stimulate single-family detached houses in outlying districts, where you are overexpanding your cities, which, in many instances, are already overexpanded. You are reaching the level of the $5,000-a-year class and up.

Senator WATSON. You had better go up than out? You had better build high than build wide?

Mr. STERN. I think, from the standpoint of the utilities investments, and all other public improvements, it is sounder. Here we have this land lying idle in New York, Cleveland, Chicago, St. Louis, and many of our large industrial centers.

Senator WATSON. Do you know how this bill, then, would help the small home owner?

Mr. STERN. I have an idea.
Senator WATSON. What is it?

Mr. STERN. My understanding is that in the case of the home owner who has placed his mortgage in a bank, or in a mortgage company, that mortgage company, by being a member of this regional discount bank, can take a mortgage amounting to a maximum of $15,000 and have that rediscounted, I believe, to 60 per cent of the value, and he can get in cash that amount of money to use in making other business transactions. Is that correct, to a large degree?

Senator WATSON. Yes.

Mr. STERN. My claim, if I have made myself clear, is this. What we need to do is to gear our building machinery and our financial structure to be leveled at a group of working people who to-day are living in miserable habitations that need to be improved and can be improved if we apply the automobile methods of construction and engineering skill to that group of our population, instead of continuing to expand in a disorganized way by building one house here and another house there. It is good for some of the fellows that are sharing in those overhead costs—the banking and real-estate operators, and the whole crowd that are involved. But you can only do what I propose by large combinations of capital, planning, engineering, and architectural and management skill.

Senator MORRISON. I want to ask you this question. Excluding credit difficulties, don't you think now would be a good time for a man who has a job, with the reasonable hope that he can keep it, and the normal amount of cash with which to make the initial payment on a home, either to buy or build a home?

Mr. STERN. I think so, if he can do it.

Senator MORRISON. But for credit conditions, would it not be a good time for him to do it, in your opinion?

Mr. STERN. I think that would be true, but I am convinced, Senator, that it is more true in our smaller cities than it is in our larger cities.

Senator MORRISON. Because of the difficulty of building a home at any time in a city, where land is so high, near enough to the work!

Mr. STERN. Yes.

Senator MORRISON. For that reason, they have to resort to apartment houses, and that sort of thing?

Mr. STERN. That is correct.

Senator MORRISON. But, in the average town and village of the country, and in the smaller cities, where land is not so high and where, under normal conditions, they can hope to have homes, now would be a good time, would it not?

Mr. STERN. I think it would, if there is a need for a new home. In other words, if that person could not satisfy himself that there is an existing good value

Senator MORRISON. I said, either to build or buy.
Mr. STERN. Yes.

Senator MORRISON. If there are so many of them, as many of the witnesses are claiming, it would be a good time, if he could get normal credit help, to buy a home or build one.

Mr. STERN. Yes. I want to call your attention to the fact, Senator, that the people who are in the greatest distress to-day, financially and otherwise, are located in our cities rather than in our rural sections and smaller towns. I think you will agree that the difficulty of getting a cover over your head and getting three meals a day is much harder to manager to-day in our large cities. Their funds are being so tapped for relief

purposes that there is a limit to what private resources can provide. To-day in Chicago we have to secure $20,000,000 to go through the rest of this year for relief work, and we are paying $25 to $30 a month for rent to house these people—that is, the relief agencies are. The fellow in the small town in the rural section has a house. Who is going to take it away from him? They can not do anything with it if they do take it away from him. He can grow something in his back yard, or he has already put up a lot of things. There are farms nearby, and he can get enough to carry him through the winter. He needs his clothing and so forth.

I claim—and I think you will agree—that the urban centers to-day are lost sight of because there are such powerful interests there that we think they will provide for their care, but actually they are being greatly overlooked in their justified demands.

First, I hope that this bill will accomplish some definite emergency results in giving relief to the home owners. If it does that, it seems to me it is sound, if it can not be done any other way, but the point I am trying to bring out is that you should not overlook, in my estimation-and I speak for many others who have been working in this field-you should not overlook the opportunity for stimulating construction and employment on a sound economic basis in our large centers, where we can not get consideration for these groups because such projects do not have the flair of a speculative return. We can not get consideration from mortgage companies or from private investors.

From a social angle, and from the standpoint of actual need for the fellow who is living in indecent and insanitary conditions, I claim that if you do not do something about them we will have a situation in the coming elections in our cities and in our national posts in government, 5 or 10 years from now, similar to what has happened in Europe. I am not trying to scare anybody, or be a communist, but I am telling you that they are going to force government funds, as they have done in Europe, and I am strongly against seeing entirely governmental housing. I think we have to have a share of private capital and, especially, private initiative in these construction programs, but if you do not do something about it, the unemployed, and those who can control our governmental positions, are going to force our hands. I think, if we are intelligent, we will get ahead of them.

Senator MORRISON. You think the bill should be amended so as to attempt some relief in respect to the city difficulty you pointed out?

Mr. STERN. Yes.

Senator WATSON. Get your lawyer to draft what you propose, or do it yourself, and submit it to us.

Mr. STERN. I will get a lawyer to do it, and submit it.

STATEMENT OF L. T. STEVENSON, PRESIDENT NATIONAL ASSO

CIATION OF REAL ESTATE BOARDS, PITTSBURGH, PA.

Senator WATSON. Where do you live, Mr. Stevenson?
Mr. STEVENSON. I live in Pittsburgh.
Senator WATSON. What is your business?

Mr. STEVENSON. I am in the real estate business. At the present time I am president of the National Association of Real Estate Boards.

Senator Watson. How long have you been in that business?
Mr. STEVENSON. Thirty-two years.
Senator WATSON. In Pittsburgh?
Mr. STEVENSON. About 31 years in Pittsburgh.
Senator Watson. Have you examined this bill?
Mr. STEVENSON. Yes, sir.

Senator WATSON. When you say you are in the real estate business, you mean by that that you buy and sell real estate?

Mr. STEVENSON. I am more in the development business.
Senator WATSON. Financing?

Mr. STEVENSON. No, sir; in brokerage. I happen to be president of a building and loan association, and I am also director in a bank.

Senator WATSON. When did you organize the building and loan association ?

Mr. STEVENSON. In 1909.
Senator WATSON. How many members has it?

Mr. STEVENSON. I think there are about 800 members in that building and loan association.

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