CONGRESS OF THE UNITED STATES, JOINT ECONOMIC COMMITTEE Chairman Bolling Announces Hearings on Industrialized Housing by the Subcommittee on Urban Affairs

Representative Richard Bolling (D., Mo.), Chairman of the Subcommittee on Urban Affairs of the Joint Economic Committee, today announced that the subcommittee will hold public hearings on industrialized housing, July 9, 23, and 24. In announcing the hearings, Chairman Bolling said:

"These hearings will supplement the compendium of papers by experts on the subjects of Industrialized Housing,' which the subcommittee released on April 28 of this year. We have planned to receive testimony from the Department of Housing and Urban Development as well as from those in the industry actually working to put housing production on an industrialized basis. The hearings should develop valuable background for the subcommittee's further studies of long-range urban planning both here and abroad."

A list of witnesses, together with the time and place of the hearings, is given below. Additional witnesses may be announced later.

SCHEDULE OF HEARINGS

Wednesday, July 9, 10:00 a.m., Room 6226 New Senate Office Building

Harold B. Finger

Assistant Secretary for Research and Technology, Department of Housing and Urban Development

Charles L. Biederman

Vice President, Technical Services, Levitt & Sons Corp., New York Wednesday, July 23, 10:00 a.m., Auditorium, New Senate Office Building (G-308) Ezra Ehrenkrantz

President, Building Systems Development Inc., and Associate Professor of Architecture, University of California, Berkeley

Peter Terzick

General Treasurer, United Brotherhood of Carpenters, AFL-CIO

Thursday, July 24, 10:00 a.m., Auditorium, New Senate Office Building (G-308) James R. Price

Chairman of Board, and

George E. Price

President, National Homes Corporation, Lafayette, Ind.

Richard Rosen

President, Urban Systems, Inc., Boston, Mass.

INDUSTRIALIZED HOUSING

WEDNESDAY, JULY 23, 1969

CONGRESS OF THE UNITED STATES,

SUBCOMMITTEE ON URBAN AFFAIRS

OF THE JOINT ECONOMIC COMMITTEE,

Washington, D.C.

The Subcommittee on Urban Affairs met, pursuant to recess, at 10 a.m., in room G-308 (the auditorium), New Senate Office Building, Hon. Richard Bolling (chairman of the subcommittee) presiding. Present: Representative Bolling.

Also present: James W. Knowles, director of research; and Douglas C. Frechtling, minority economist.

Chairman BOLLING. The subcommittee will be in order.

This morning the Subcommittee on Urban Affairs continues its hearings on industrialized housing. At our opening hearing, held on July 9, we heard from the Assistant Secretary of the Department of Housing and Urban Development, Mr. Harold B. Finger, and from Mr. Charles L. Biederman, vice president of Levitt & Sons Corp., large producers of onsite assembled housing.

Before proceeding to this morning's testimony, I should like to enter into the record at this point the statement of Peter E. Terzick, general treasurer of the United Brotherhood of Carpenters & Joiners of America, who is scheduled to testify this morning but unfortunately is unable to appear.

STATEMENT OF PETER E. TERZICK, GENERAL TREASURER OF THE UNITED BROTHERHOOD OF CARPENTERS & JOINERS OF AMERICA, WASHINGTON, D.C.

Mr. TERZICK. My name is Peter E. Terzick. I am general treasurer of the United Brotherhood of Carpenters & Joiners of America, and I sincerely appreciate the opportunity to appear before this subcommittee to present my views on the subject under consideration by the sub

committee.

First, let me say that the United Brotherhood has been deeply concerned about the lack of progress in meeting the housing needs of the Nation. Despite all the legislation which has been passed, despite the great concern which many groups in and out of government have manifested in eliminating the ghettos which plague our cities, the housing problem grows more acute year by year for those in the middle and lower income brackets.

Certainly, the inquiry being made by this subcommittee is both timely and appropriate. The Housing Act of 1968, which had our

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wholehearted support, envisioned some brave goals in housing. However, there are no indications in the present situation that these goals will ever be met in the foreseeable future.

Nineteen hundred sixty-nine, instead of being a banner year in house building, is going to be a rather mediocre one. And the prospects for 1970 are no brighter.

Primarily, there are two problems in the housing field. One is the inability of the industry to turn out 2,600,000 houses per year; the other is the inability of low- and middle-income families to purchase houses under the exorbitant financing rates now in effect. Rather than being two problems, these items may be different facets of the same problem. The industry cannot long continue building houses unless there is an adequate market for them. Unfortunately, there can be only very limited demand when land prices and finance charges skyrocket as dramatically as they have in the past few years. The poor and the near poor are priced out of the market.

It is no exaggeration to say that the situation in housing is at a crisis stage. On the one hand, need is growing at an unprecedented rate, as the large group of war babies reaches marriageable age; but, on the other hand, interest rates and land speculation are putting decent housing beyond the reach of all but the relatively well off.

When the solutions to the housing problems that plague us today are finally arrived at, I am certain that factory-built houses will play a substantial role.

The United Brotherhood of Carpenters & Joiners has been involved in the prefabricated home field for a quarter of a century. We have more than a hundred industrial contracts with companies manufacturing prefabricatd homes or components thereof. Last month we signed a contract with the Stirling-Homex Corp. of Avon, N.Y., which manufactures modular homes.

Modular homes are a relatively new approach to the factory building of houses. Modules, consisting of one or more rooms completely finished, are erected on an assembly-line basis in the factory. These modules are then hauled to the building site where they are tied together permanently. They can be one-level houses or they can be stacked to make two- or three-story dwellings.

Some 1,500 Stirling-Homex houses are to be built in Dayton, Ohio, under the auspices of the Department of Housing and Urban Development. Dayton has one of the most rigid building codes in the Nation. However, the factory-built houses meet or exceed code requirements.

It is expected that they will involve a cost of $17,000 to $18,000, including the site. Rentals will range from $50 to $60 per month.

Corporations are entering the modular home field at a phenomenal rate. We are now carrying on a dialog with several dozen companies going into the field in all parts of the Nation. For our part, we welcome this development, and we will work closely with those companies which are willing to recognize the United Brotherhood and employ our people in the manufacture and erection of their houses. However, I believe it should be pointed out that the advent of modular houses built in factories cannot and will not replace conventional construction. There is sound reasoning behind this statement. There are four main cost categories involved in the price of a home: land, materials, onsite labor, and finance.

Of the four categories, the onsite labor cost contributes the least to the ultimate cost of the home. In the October 1968 issue of the Journal of Home Building, a breakdown of the sales price of an average home in 1944 showed that 29 percent of the sales price was attributable to labor costs. In 1966, that portion of the sales price attributable to labor costs had dropped to 18 percent. This drop was due to increased productivity, offsite fabrication, and other improved technologies in homebuilding. Since, in this period, labor cost was the only category which showed a reduction in the percentage cost of the home, it should be obvious that the cost of labor is the least amenable to reduction in the overall cost of homes.

Taking into account the spectacular increases in the price of land over the past few years, plus the unprecedented increase in interest rates, the portion of the housing dollar attributable to onsite labor costs has actually been shrinking. For example, there has been a 36percent increase in the prime interest rate in the past 6 months. When you translate the jump in mortgage rates from 6 and 64 to 82, 9, and 912 percent, you add a cost factor that really submerges the hopes of millions of people to own a home.

By way of example, let me point out that a veteran of the Korean war returning home in 1952 had little difficulty in finding a house with a $10,000 mortgage at 4 percent. This made the monthly payments around $47 or $48 per month. On a 30-year mortgage, the interest and mortgage costs totaled about $17,000. Today, a Vietnam veteran who obtained a $20,000 mortgage would face interest rates of 9 or 10 percent. At 9 percent, the total payback in 30 years would be somewhere in the neighborhood of $58,000. At 10 percent, the figure would come closer to $64,000. Thus, it is easy to see that, while the interest rates have more than doubled between 1952 and 1969, the payback costs have more than tripled. This is a catastrophic increase, and no amount of efficiency in construction can do very much to offset the gouging now taking place in the money markets.

Land costs also increased dramatically. During the past 9 years, the percentage of the selling price of a house attributable to land jumped from 12 to 20 percent. Land has been increasing at the rate of 7 percent per year on the average. During most of this period, wholesale commodity prices rose by less than 2 percent. So land speculation, too, has added substantial costs to the price of a home.

In fact, it seems to me, the time has come when the Government needs to be devoting serious thought to setting up a permanent landuse policy. Because land has been a very plentiful commodity in our Nation, no set of priorities has been developed for the utilization of land. With the supply of land remaining static and the population increasing at a geometric rate, these two factors are on a collision course. Some hard thinking is needed on the development of land policies which can insure orderly and efficient utilization of our shrinking resources.

Among the measures recommended by the AFL-CIO is the estabment of a housing land reserve, geared to increasing the amount of land available for low- and middle-income housing both inside and outside of urban areas. Not the least important function of such an agency would be the development of subsidy programs to assist in reducing the cost of sewer, water, and other development costs which

now place much existing land out of reach for low- and middle-income housing.

Essentially, what is needed is a partnership between Government, industry, and labor to attack the problem of inadequate housing. Such a partnership was envisioned when the 1968 Housing Act was passed. Unfortunately, the partnership has not emerged as yet.

As far as the United Brotherhood is concerned, we are ready and willing to work closely with industry, Government, financial institutions, and all other groups that have a responsibility in the field of home construction to seek new approaches to solving the mounting problem of adequate housing for all.

I am hopeful that hearings such as this one can help to focus attention on the problem and thus hasten the day when our housing goals can be achieved.

Chairman BOLLING. The demonstration of this past weekend of what can be achieved through the systematic application and organization of a variety of technologies-putting man on the moon and getting him off again-makes it particularly appropriate that our witness this morning is an exponent of the application of systems procedures in organizing industrialized building. Mr. Ezra Ehrenkrantz is the president of Building Systems Development, Inc., of San Francisco, and associate professor of architecture at the Berkeley campus of the University of California. His contributions to systemetizing the building industry earned him the Engineering NewsRecord award of construction's man of the year this last February. I would like the record to include the article on that award. Without objection, that will be done.

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