The National Housing Act

I deem it an honor to have the privilege of addressing this group of representative wholesale distributors of Hardwood and allied products in the Lumber Industry on the subject_of the National Housing Act.

Since the founding of our country, homes,. and real property have been recognized as the Nation's best asset. From early Colonial days the American people hav fought to establish and preserve the home. Our history is full of examples extending from early Puritan and Virginia settlements to the western frontier. The American people have toiled long and hard to wring a living from the soil and to establish a foothold on the land. With this heritage we cherish our homes above all other tangible belongings. We count the home our greatest asset. Into this asset the accumulated savings of our people have been poured for over 300 years.

Today the value-of our greatest national asset is threatened. During the last 5 years the ravages of depression have made serious inroads upon real property. Owners desiring to make necessary repairs consistent with good upkeep have been unable to do so because of curtailed income or their inability to secure suflicient credit. This has resulted in a serious situation. Today approximately 16 million buildings in this country are in need of repair. Of these, some 3 million are in such a run down condition that only a major building operation can save them. The remaining 13 million need only minor repairs, but repairs that should be made at once.

No one interested in preserving and increasing real property values can fail to realize the gravity of the situation. Values have slumped during the past few years and thousands of houses depreciated so greatly as to have little or no sales value. There seems to be a danger too, that many of our people are losing some of their interest in homes.

The Better Housing Program, launched this summer by the Federal Housing Administration under the authority of the National Housing Act, is designed to renew this interest. Its provisions making extension of credit to home owners possible for purpose of improvement and modernization, is providing the primary impetus for better housing. A nationwide program, carried into every community, is acquainting property owners with the availability of this credit and is stimulating their interest in improving their property.

The National Housing Act is the outgrowth of a long series of conferences held in Washington which were attended by prominent bankers, real estate men, material manufacturers, executives in the construction industry and civic leaders. The Act became a law Jane 27th, 1934.

In passing this recovery. measure, the government is not venturing into unchartered ground, inasmuch as a similar act has been in operation in England for the past several years, under which 2,500,000 homes have been built.

When in Washington I was greatly impressed with the type of business executive chosen to administer the Act. These executives were drawn in from active private business.. James A. Moffett, who heads the Federal Housing Administration in Washington, resigned from a position ai Vice-President of the Standard Oil Co., and Rogtr Stefian, who is the Director of Modernization Credits, was drawn in from one of the larger financial institutions of New York City. These men are undertaking to administer this law in a most business-like way, with ill so-called govern- ment red tape eliminated.

The National Housing Act is definitely a recovery measure; and I wish to draw a distinction between it and the so-called relief measures as exemplified by C. W. A. The process for providing money under a relief measure is for the government to provide the funds directly, and of course, this money must necessarily be recovered through taxation. Under the National Housing Act which is a recovery measure, the process is quite different. Under the Housing Act, the ball is thrown back to private business and private enterprise is stimulated to function normally by means of government support.

Under this Act unemployment will be greatly reduced. Several million people formerly engaged in building or allied industries are now suffering from lack of work. Many millions a month are required from public funds to administer relief of one sort or another. This program will affect a reduction in unemployment and will in the long run reduce taxation. With the wheels turning at an accelerated pace in many of our larger industries, and with unemployment on the increase and larger pay rolls, the desire and need for greater housing facilities will be felt.

The Act contains four major provisions: IJnder Title 1, it provides for modernization credit insurance under the terms of which financial instituiions are insured against losses up to zo%t of the total face amount of all notes taken. The money loaned must be used for alteration, improvement, repair or modernization of any type of resi-' dence, apartment building, store, office building, factory, warehouse or farm. However, it is required that the money be used for a permanent addition to the property.

IJnder Title 2 a mutual mortgage insurance fund is set up which provides $1,000,000,000 worth of insurance for mortgages taken for new construction, and also a $1,000,000,000 fund to insure mortgages on property which existed on the date of the enactment of this Act. The new construction under this provision will be confined to four family dwellings or less, and the maximum loan will be $16,000.00 which must not exceed 80Vo of. the appraised value of the property. It is under this Title that we find the long range program. It is one of the objects of this Title to make the long term amortized mortgage the standard practice rather than the commonly used short term building loan. This should stamp out the evils of second mortgages and also eliminate the present foreclosure abuses on short term construction loans.

Title 3 of the Act provides for the creation of National Mortgage Associations which shall have a paid in capital stock of not less than $5,000,000. These National Mortgage Associations will be authorized to issue bonds or debentures for a large amount, and therefore will become huge financial institutions with the ability to buy insured paper from the smaller institutions.

Title 4 provides for the insurance of savings and loan accounts.

From all of these provisions you can readily see that there is plenty of money availabli now for alter-ations, improvement and repair, and there will be available soon, all the money that is necessary for new construction purposes.

__Since Aug. l5th, we have been operating under Title l. The financial institutions have given the-ir wholehearted support and co-operation to the plan. Well over 3 thousand loans have already been made in California for mod- ernization purposes by the eligible fipancial institutions.

In the ordinary case, no collateral is taken by the financial institutions other than the ordinary form of commercial note. The amount granted must be between $100.00 end $2000.00 and the loan must be paid back in equal monthly payments over a period of from 1 to 5 years. The cost to the borrower must not exceed an equivalent of $5.00 per $100.00 of the original face amount of one year note, deductible in advance. In this sound and sensible tvay the government has established personal character as a basis for sound lending, and has relieved the home owner of the burden of furnishing collateral.

In supporting this program, the property owner will realize that he is supporting his own best interests. He is really investing for the future. Investment in improving property is an investment in living. Neglected property pays no dividends. Protected and improved, the home pays many times over in convenience, comfort, and happiness for the family.

If the propertv is devoted to business purposes, improvements pay for themselves in effi,ciency, in attracting new customers and keeping old ones. Landlords will find that improvements of their property will increase the amount of rent justified. If in the future any property owner is forced to place his property on the market, he is in a better position to ask a higher price.

But aside from looking at property modernization and improvement in terms of specific investment purposes, rvhich are indeed large, there is a long-term economic-angle to the Better Housing Program which eventually will iffect the entire business and social structure of our society. It is really a long-term business and social investment program.

To realize the scope and the far-reaching effect of the p,rogram we need only to cite the recent survey made by the Department of Commerce which covere.d l$ll,Mz dwelling units in 59 cities. More than lO/o of. the residen- tial buildings involved are in need of structural repairs and more than 44/o are in need of minor repairs. This survey further reveals that more than lOVo of these urban dwellings are without indoor running water, more than 2O/o lack indoor sanitary facilities, and more rhan 25/o have no bathtubs or showers.

A conservative estimate of the amount of monev fequired to put the homes of the country back in good physical condition is $1,600,000,000 and this does not take into consideration the other types of buildings which our modernization credit plan will cover.

The importance of the building industry in any recovery program is emphasized when we realize that next to agriculture, it is the largest employer of men, that one freight car out of five which moves is used in transporting build. ing material, that l/l0th of all manufacturers are engaged normally in making buildirig materials, and that l/1lth of all wholesalers are engaged in their distribution.

Immediate benefits will come to the construction industry by a larger business, returns also will come swiftly to all manufacturers and merchants, who move alertlv to their opportunities. The benefits of a revived building industry will be nation-wide, as this industry is not confined to large centers, but has workmen in every town and village, and draws its raw materials from every state.

16,000,000 buildings throughout the country need improvement and repairs. There is no business or industr;r in the nation which will not feel the stimulating effect of a successful Better Housing Program.

You gentlemen in the lumber business probably constitute the most important factor in this program, and inasmuch as you will benefit first, the obligation is therefore on your shoulders to first study the Act and its benefits, and then. spread this information throughout your entire org'anrzatron.

I would suggest that when you return to your homes that you call a meeting of all your separate distributors, dealers, salesmen and other individuals or organizations operating in your field of influence. When yori have this group in front of you in a meeting, you should present the facts concerning the National Housing Act to them and explain to -them exactly how they may take advantage of these benefits and thereby increase their business aird vour business.

I can cite for you several outstanding examples where large lumber concerns have more than tripled their business in the last 6O days by taking full advantage of the provisions of this Act. This is probably the first time in your. experience where the National government has stepped _in and_ p_rovided a means of financing the sale of your product. What do you suppose the automobile indistry woull4o if they were presented with this same opportun- ity? They wold grasp it at once'and through theii perfect organization would double their sales many times.

Now you have an opportunity to do just that, and it is my opinion that you will derive benefits and additional business from this Act in the exact proportion to the ef- fort you put forth i-n spreading this information through- out your zone of influence.

I have the information that some of our national material houses are receiving from 8 to 10 times normal retums from their advertising. I therefore, feel that the time is here for you to increase your own advertising and encourage your dealers and distributors to do likewise. and make the National Housing Act the key-rrote of your ptogiam.

Title 1 which provides for modernization ioans will be effective until the end of 1935 and Title Z which provides for new construction will be effective soon after N6vember 1st of this year and possibly will extend over a long period. Therefore the time is ripe for you to begin a suitained program for the sale of your product.

You_ will find operating in each of the larger cities of your- State, a civic Better Housing Campaign Committee appointed by representatives of thi Federal-Housing Ad. ministration, and I urge that when you return to yo-ur respective homes, that you contact this committee ahd offer your services and the cooperation of your organization.