architecture 10-31-73

The general business depression which dominated American life following the boom years of 1926-29 was characterized by a cessation of residential building activities along with the decline of other business. Attempts were made from 1931 on to produce more healthy conditions, so that a revival might come about. Private industry alone, Government alone, and Government and industry together all have attempted to raise the volume of home construction. All these efforts have resulted in progress but still fall far short of actually producing the number of new houses needed.

The National Resources Committee has been thrown in contact with these problems from time to time in connection with various studies.' During 1936-37 the Committee felt the necessity for securing more detailed information concerning a number of phases of the problems closely related to housing. Technicians in the various branches of the Government were asked to present monographs touching these particular problems. Naturally the men who prepared these documents drew on their own experience and presented their personal views which in no way represent the opinions of the agencies with which they are connected.

It was intended originally to try to develop from these individual contributions a comprehensive report on the subject of housing. The natural variety of opinions and approaches to the subject as a whole has made a single report difficult to complete at the present stage of the study. Because, however, certain of the individual contributions are timely in nature and also afford valuable material for technicians in the field, it is felt desirable to make some of them available as soon

1 Cf. Technological Trends and National Policy, Our Cities—Their Role in the National Economy, Farm Tenancy, Problems of a Changing Population and Consumer Incomes in the United States, etc.

as possible in the form of technical reports. It should be held clearly in mind that these are individual expressions and that the opinions stated are those of the authors and that the National Resources Committee is not responsible for such opinions.

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The document presented in this instance was prepared by Mr. Lowell J. Chawner, of the Department of Commerce, and deals with some of the broader background factors which influence the demand for housing and the methods of supplying the demand. The statistical method used for presenting the future demand is subject to one major weakness. It attempts to project past trends. While these trends include the achievements of past undertakings, they also include the distortions and aberrations of past building cycles as well as business cycles. In spite of the weaknesses of the method it is stimulating and thought-provoking. tion should be used in regard to the estimates of future activity: Such activity will result only if the adjustments inherent in the formulae materialize. Furthermore, they are not estimates of need as to number or quality of houses under changed conditions. The numbers of houses required can be materially increased by a stepping up of quality and an increased sense of the need for different types of communities. That changes in the character of demand are upon us seems already apparent. Slum clearance, Greenbelt communities, better design, new ideals for site coverage all are dynamic in their impact. These are the unknowns in terms of their effects. Our new ideals may confuse our statistical predictions, but they do not change the need for better quantitative understanding of our problems. Because Mr. Chawner's analysis makes a definite contribution to this quantitative understanding of the problem, his contribution is being made more generally available.

OCTOBER 22, 1938.

Mr. FREDERIC A. DELANO, Chairman, Advisory Committee,
National Resources Committee,
Washington, D. C.

DEAR MR. DELANO:

Introduction

The marked fluctuations which have characterized residential building in the United States over the entire period for which reliable measures are available may appear at first glance to be erratic and fortuitous. Fundamentally, however, it is believed that the production of domestic shelter is susceptible to rational analysis in terms of measurable economic and other social influences.

Houses, to be sure, differ in several respects from many other commodities, particularly with regard to their pronounced durability. The annual production of houses is thus relatively small when compared with the number of existing structures. Only in a very few years has it been as high as 4 percent of the standing supply even in a country growing as rapidly as was the United States up to recent years. However, as a branch of current industrial activity, residential construction in good years is quite large and has involved. the erection of nearly 900,000 family units in nonfarm areas in a single year (1925) at an expenditure of possibly 41⁄2 billions of dollars.

Single causes are rarely adequate to explain economic processes even for the most rudimentary purposes. In the production and use of domestic shelter, it will be discovered that many varied economic and other social conditions play a highly important part. Marriages and migration, family income, and the competing claims upon income of other items of expenditure as well as building costs and interest rates, site costs and taxes, and similar influences must be carefully appraised in arriving at an understanding of the fluctuations in this industry.

1 Mr. Lowell J. Chawner is chief of the Division of Economic Research of the Bureau of Foreign and Domestic Commerce, Department of Commerce. The author is greatly indebted to the following members of that Division for assistance in compiling the statistical series included in this section: For the estimates of increases in the number of families, Esther Wright Staudt; for the estimates of the distribution of families by income groups and the direction of the calculation of the regression equations, Dorothy Smith Coleman; for the estimates of the number of dwelling units annually from 1900 to 1915, Robert Sherman and Harold Wolkind.

The statistical materials. used in this analysis are

stated largely in terms of nonfarm areas. The data necessary in a measurement of the economic factors related to residential building are more satisfactory during the period since 1920 than for earlier years. Some measures are available, however, over the period from 1900 to date. For example, as a part of this investigation there have been compiled beginning with that year a series showing the annual increments in the physical needs for dwelling units in terms of the net increase in families and a series showing the estimated number of units upon which construction was started annually in nonfarm areas in the United States.

Analysis of Fluctuations

This study of residential building involves two principal stages. First, an analysis is made of the market for shelter, principally from the point of view of the fluctuations in demand. In terms of these demand changes and the changes in the total available supply, an expression is formulated for the price of shelter as measured by rent.

Second, an analysis is made of the factors which influence additions to the supply of available units. These factors are outlined broadly in terms of conditions in the market for shelter, measured by rents and vacancies, and conditions influencing the costs of ownership such as purchase price, financing charges, and taxes. As will be noted later, new construction, unless subsidized by public grant or by private philanthropy, tends to occur only when the economic demand for shelter advances to such a point that the return from existing property, either in the form of rental income or of satisfactions to an owner occupant, is in excess of the annual cost of ownership of new units which may be constructed, having equivalent location, facilities, or other conveniences.

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