increases to 10 percent. He still pays his $185 per month or whatever, but the length of the mortgage increases to, conceivably, 30 years. When the mortgage market decreases, his interest rate decreases and the length of his payout decreases as well. But his monthly payment maintains at a constant level.

In addition to that, we think that an inclining rate of mortgage makes a good deal of sense. The young home buyer in America can look forward to increased earnings during his business career. It would make good sense, we believe, for his mortgage to parallel the rate of his potential earnings so that a young couple could buy housing at a low mortgage rate and as their earnings increase, the rate of their mortgage would increase, which would make the mortgage a very attractive investment for lending institutions. He might start out at a low interest rate of 5 percent, but as his earnings increased, both his carrying charges and his interest rate would increase at the same rate.

Seventh, we believe that pension funds and insurance companies as well as all other financial institutions should be required to invest a minimum percentage of their funds in residential mortgages. If we indicated to pension funds and required of pension funds, for example, that 10 percent of their investments be placed in real estate mortgages, a vast well would be opened for funding for residential construction.

Eighth, we advocate that Congress allocate substantial funds solely for the research efforts required to develop satisfactory and equal techniques for industrialized housing. Gentlemen, there is no member of the building industry that I know of, be he manufacturer or builder, that is capable of taking on singlehanded the research that is required in building. We have subsidized aerospace, we have subsidized our transportation segments of society, we have even subsidized shipbuilding. But we have done very little in the areas of research and development for the building industry for housing of American people.

We suggest strongly that conceivably tied in with this proposed Institute of Building Sciences or Institute of Environmental Sciences, a research branch be set up, funded by the Federal Government, for the research of developmental techniques and new innovative construction methods. We believe that with Government help along the lines we have outlined here and with effective action by the building industry and other elements of American industry, industrialized housing truly could provide a decent home for every American. Thank you very much.

(Mr. Biederman's prepared statement follows:)

PREPARED STATEMENT OF CHARLES L. BIEDERMAN

I am proud to have the opportunity to share with this Subcommittee our thoughts concerning industrialized housing.

If we define industrialized housing as a systems approach to residential building which employs assembly line techniques, manufactured components and some degree of mechanization, then we have been producing industrialized housing for many, many years. However, because of a number of constraints, some originated by builders themselves, some by local authorities, some by special interests, some by market place inertia, others by the peculiar nature and unique character of our building industry in this country today, we as a group have fallen far short of the degree of industrialization achieved by other American producers.

Let's consider that industrialized housing, at least for the purposes of our present discussion, excludes the small degree of industrialization we have accomplished with our primitive site-built assembly and installation methods. 32-679 069-pt. 1-2

Rather, let's consider it as a mechanized, factory--built method of producing housing modules and panels in a controlled environment.

What, then, do we think of industrialized housing?

We believe that the housing goals of this nation cannot and surely will not be met if we do not vastly improve the productive capacity of the housing industry. We at Levitt are actively investigating the feasibility of industrialized housing, or manufactured housing or whatever you choose to call it at this very moment. Even though we feel that our present methods of construction are more economical, we foresee a housing need which cannot be satisfied with our present site-built techniques. That's so because current methods require a great amount of skilled field labor working under variable and unpredictable weather conditions. We must find ways to reduce the total amount of field labor and the work skills required in housing. At the low rate of 11⁄2 million starts predicted for this year, there are simply not enough carpenters and electricians and plumbers. Their number-absolute number, not percentage is decreasing every week. How could we build 2 million houses this year? We can't! We lack the capability! We don't have the capacity to construct the houses required to satisfy our current needs. The only answer we see to former President Johnson's request for 26 million housing units by 1978 is in factory production by semi-skilled workers in place of field production by skilled workers.

Let's consider this chart, which is concerned with plumbers but which would be similar for any of the building trades. Let's assume that (1) Half of our plumbers are engaged in residential work; (2) The anticipated annual 1.7% increase in our work force will apply to plumbers; (3) All these additional plumbers will become occupied in residential work; and (4) We will expand housing production on a straight line basis to meet our housing goals by 1978. Then we will suffer a shortage of 205,000 plumbers nine years from now!

Factory built housing permits semi-skilled workers, with the use of wall framing machines, pre-fabricated plumbing systems, pre-assembled utility cores, and other structural and technical components, to build and complete housing units in a controlled environment under optimum conditions. Consequently, the labor time in a factory-built dwelling unit is only a fraction of what is required to construct a similar unit on-site.

That's why we must look at factory-built housing. That's why factory-built housing must succeed, or we will never be able to produce the homes and apartments needed to house our expanding population and our underprivileged citizens in a comfortable, dignified, decent way.

It is not clear today whether factory housing and industrialized processes are less costly than our present methods, but it is certain that we must work at it today, and begin to develop it today, so that tomorrow we will have a different production method that will result in economies over our anticipated site-built costs of tomorrow.

▪▪▪▪▪▪▪▪▪▪ Indicates $11,000 Direct Cost including $4,400 for Field Labor, Compounded at 10% Annually.
Indicates $11,000 Direct Cost including $1,200 for Field Labor, Compounded at 10% Annually
and $1,400 for Shop Labor Compounded at 5% Annually.