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From New International, Vol.12 No.3, March 1946, pp.83-87.
Transcribed & marked up by Einde O’Callaghan for ETOL.
Way back in 1872, Frederick Engels made three generalizations about housing under capitalism, that remain the key to analysis of the problem today. Plus ça change, plus c’est la meme chose. First, he said all the sermons liberals and reformists preach to capital about the profitability of low-cost housing are a waste of time. Capital has ignored the mass housing field because greater profits are to be made elsewhere, and profits, not human need, are the sole criteria of whether capitalism produces.
Secondly, the second problem of housing is subordinate to the basic question of income distribution. Until the unjust and evil system we have today is ended, planned, healthful living in cooperative, functional, truly human communities, is impossible.
Third, the general problem of housing can never be solved, without resolving the “antithesis between town and country.” Translated into simple terms: mass housing is impossible without city planning, and socialist regional and national economic planning.
Since Engels wrote, capitalism has developed, and thoroughly milked its internal markets, which have always remained limited by low incomes of the vast majority of people. Following the exhaustion of the internal markets, capitalism has fought two bloody imperialist wars over the world market.
During all these years, developments in the housing field followed along the lines of Engel’s predictions. Conservative investment and industrial capital, so long as it could make six to eight per cent interest elsewhere, left housing and construction to others. Speculative building capital could make more profits (not to speak of graft) by constructing public buildings, factories, and mansions for the wealthy, than it could by housing the masses. Right up to the 1930’s, the low profits to be made off workers’ housing were too small to tempt even market-hungry US investment capital.
The masters of society have continued to ignore the urgent need of the people for housing, busying themselves with the business of blowing the European housing stock to bits, until at last, even here in the United States of America, the most favored of all nations, the housing scandal has reached a boiling point. Popular indignation has put the heat on the politicians to do something.
The growing social cost of our eight million slum dwellings; the almost complete cessation of house-building since 1929; the millions of homeless, doubled-up families, including newly returned veterans – all these factors have combined to create a problem that highlights stagnation of capitalism as a social order – even in the wealthy United States. The need for decent, sanitary, roomy dwellings is urgent among at least seventy-five per cent of the population. These millions of men, women and children live in rural slums, in city slums, or in antiquated, incommodious buildings in congested, unhealthful, unsafe city areas.
According to the conservative estimates of the National Housing Agency in 1944, there is at present an acute need for sixteen million new dwelling units within the next ten years. Time’s statisticians put the US need for the next decade at twenty-nine million. They figure the annual US replacement needs alone at 1,290,000, allowing the houses an average thirty-year life span. All in all, Time estimates that to satisfy the current demand for new houses, and to catch up on the backlog, some 2.9 million units must be built every year for twenty years. The newly announced US Emergency Housing Program calls for 2.7 million units for the next two years – not even half the annual rate Time urges. This will not quite house the three million doubled-up families expected to need homes by 1947. This program does not begin to solve the problem: it will just take the worst heat off the politicians.
The halting of construction by the depression and the war explains only part of the source of the problem. A more fundamental cause is the backwardness of the construction industry, and the long neglect of the housing field by big capital. This “disorganized and warring group of organisms known euphemistically as the building industry” (Fortune) is an anachronism in this day and age of mass production. Hence, American families get less for their housing dollar than any other dollar they spend on capitalist-produced commodities.
Because it has never had any serious competition from modern big scale industry, home building still uses methods closer to those of the feudal craftsmen than modern machine production. The Industrial Revolution missed them almost completely. The one exception is the field of industrial construction, from which has developed the threatened revolution of prefabrication.
The construction industry is honeycombed with unproductive middle-men, restrictive price raising agreements, and all sorts of labor-job-stretching devices which prolong the process of putting together by hand the 30,000 separate parts of a custom-built house.
Before the war, private builders could not build a good house, at a profit, for under $5,000. They did build a few cheaper houses, but these were shoddy and flimsy. Thus, the construction industry was unable to produce new modern housing for the eighty-three per cent of families earning under $4000 a year, and unable to afford rent or payments on a $7,000 house, in addition to the price of land to build on.
|
% US Families |
Annual Income |
Av. Monthly Rent |
Av. Weekly Wage |
|
20.7 |
under $1000 |
under $10 |
under $20 |
|
29.2 |
$1000-$2000 |
under $20 |
$20-$38 |
|
20.4 |
$2000-$3000 |
under $30 |
$38-$57 |
|
12.7 |
$3000-$4000 |
under $40 |
$57-$77 |
|
(Income figures for 1942; from the Statistical Abstract of the US, 1943; Census Bureau) |
|||
The above table is a break-down of the lower-income families which the construction industry does not serve.
At present this market is served exclusively by real estate brokers, rentier capitalists, small speculators, and the mortgage companies which have foreclosed on much speculative property.
The constructive industry is not geared to produce the 2.9 million units Time says are needed yearly for this market. It can make top profits at a less strenuous level somewhere between its 1919-35 average of 506,000 units, and its 1925 peak of 937,000. The industry is resisting stubbornly the idea that any more than this average is needed.
There are other groups of capitalists who, by more modern production methods, believe they can turn the universal need for new dwellings into a profitable market demand. These newly-interested converts to “mass housing” represent industry and finance capital. They are preparing to upset the economics that rentier and construction interests have imposed on the housing market for so long. Now that the vast amounts of capital so profitably employed in the production of the means of destruction have been released by the end of the war and since the foreign market shows little promise for short term profits, an intensified conflict is in prospect over the internal market, specifically, over the juicy plum of billions of dollars in annual rent from ‘ the working class and middle class.
Let us consider the economic interests and relative strength of the conflicting capitalist groups to see how they are likely to influence the government, and how many houses will be produced.
Just as the peasants of France and Germany cultivate every corner of their fields, even the ditches along the roadside, so the falling rate of profits has reduced American finance capital to intensive cultivation of every possible internal market. Today it considers three per cent government bonds a good buy. This brought it into the market for US Housing Authority Bonds. Once the government had thus forcibly drawn its attention to the low-cost rental field, investment trusts began figuring how they could oust mortgage bankers and other slum rentier interests from control.
Under the guise of slum clearance, many financial institutions are now participating in this campaign. According to their general plan, the municipality buys up slum land at its always-highly-inflated prices. It then clears the land and resells it to private development corporations or insurance companies at a price low enough to yield a profit when put to use for low or medium priced housing. Either the municipal or federal government then guarantees the profits of the new investors by tax exemption or yield insurance.
This plan hopes to buy off the mortgage companies and other slum owners with a big bribe. It also aims at a general stabilization of city property values on which so much of the country’s whole financial structure is based – an important consideration to the portfolio investment interests. [1]
Of course such “slum clearance,” aimed at preserving city congestion and property values, can never be effective in ridding the nation of slums. The extremely small area and the high cost of in-city slum land automatically limits the number of new units that can be built. Only when a vast new supply of housing, on cheap suburban land has siphoned off the tenants of slum and slighted dwellings, will the cost of this land go down enough so that it can all be cleared, and put to use intelligently for either housing or so-called green-belts.
The actual effect of the insurance company plans will be in most cases to cut into the medium-priced market for rental housing – as any new modern low-cost housing is more attractive to renters than hand-me-down housing even if this is non-slum. The so-called slum clearance projects will just push the slums on into other blighted areas. How, for example, can any slum dweller expect to move into the $60-$100-a-month apartments the Prudential Life Insurance Company is planning to build on slum cleared land here in Chicago.
Modern technology applied to construction has opened up a new market to American industry.
The steel monopolies, the chemical and plastic industry, the aluminum trusts, the manufacturers of durable consumers goods (such as sanitary fixtures, stoves, refrigerators, etc.) are quietly going ahead with their plans for undermining the real estate and rentier interests. Consider, for example, Gunniston Hones, Inc., of Louisville, Ky., a subsidiary of the United States Steel Corporation, which “expects to be the biggest US producer of prefabricated homes” (Time); Dymaxion Dwellings of Wichita, Kansas, producing all-aluminum houses; and the Reynolds Metal Co., scheduling production of an aluminum and steel house.
There is no doubt, that, by revolutionizing house production, with new materials, mass production of standard parts, on-the-site dry construction, etc., a superior house can now be built for a lower cost than ever before. This new house may even be brought within the reach of $2000-$3000 income budgets.
Prefabrication will make possible any combination of rooms, and any interior arrangements desired. When perfected, it will represent the ultimate in flexibility, catering to the most varied individual tastes. It should not prove too difficult to show even the most reluctant consumer the advantages of prefabrication. The Ladies’ Home Journal has been educating its millions of readers on this point for over a year now. Prefabrication is eminently suited for the individual free-standing house which some seventy per cent of US families seem to prefer.
However, the exact size of the market for pre-fabricated houses – that is, the extent to which the capitalist producers will fill the need for houses – depends on the total cost. To keep the over-all cost down, and tap the full extent of this newly discovered market (we socialists have known the masses needed decent houses for years!), cheap land must be found on which to locate the prefabricated communities. Thus arises the specter of decentralization of cities, which haunts both finance capital and its opponents, the rentiers.
If prefabrication actually gets into mass production, it will further the process, already under way, of “resolving the antithesis between town and country” by means of urban decentralization. Large economic regions, knit together by highways, telephones, radios, television and airplanes, will replace urban communities in importance.
The need for large quantities of cheap land [for the yards, roads, service areas, schools, etc., to complement millions of homes] will force prefabricators to build on the outskirts of the existing cities, or in unsettled rural areas. This tendency will be reinforced by the opposition of city property owners who pay seventy-five to ninety per cent of all city taxes. They will use their influence with the city politicians to prevent extension of schools, sanitary facilities, police and fire protection, into new prefabricated areas. Even more fundamental, they will try to prevent prefabrication getting started by manipulating city building codes and zoning restrictions against it.
It is my opinion that the trend toward decentralization of cities, and regional economic development can never come to fruition short of socialism. The strength of the rentier and finance-capital opposition is too great. There are also sections of industrial capital who find it uneconomic to re-locate outside present urban sites.
The basic economic force behind decentralization of the economy comes from the many strategic US industries that have already moved to rural or suburban areas to escape city taxes, traffic congestion, and cut costs by better location in relation to regional geography and their own markets. These groups have no objection to prefabricated mass housing: on the contrary, it would help them, by bringing their “labor supply” closer.
The budding prefabrication industry, well aware of all these complications, is easing into the market cautiously. They are starting out conservatively by planning models costing from $3500-$10,000, showing no hesitation about going after the high-cost construction buyers.
There is one risk, heretofore almost unmentioned, that the prefabricators want eliminated. The working class and lower middle class incomes that must pay for the bulk of this low-cost housing, are always threatened by depression or mass unemployment. The prefabricators, therefore, want the government to underwrite their proposed low-income market by FHA guarantees on small home loans. Then, for at least as long as the government is stable, their profits will be safe.
This form of mass production of homes, while it is more promising for the ill-housed, is farther off in the future, and involves many more variables and uncertainties than does the insurance investment-trust invasion of the rental housing field.
Last we come to the violently vocal real estate and construction interests who are waging a last-ditch battle for the maintenance of the housing status quo. With them in their unalterable opposition to any great volume of new housing construction are the rentier capitalists, mortgage companies, commercial interests, utilities and others who live parasitically off the congestion of cities and profitable investment in the existing, dilapidated US housing stock.
“Creeping collectivism, deliberately fostered by some groups,” said Arthur Binns of the National Real Estate Foundation, referring to government intervention in the housing situation. “Twenty-seven million property owners must organize within ninety days,” he said last January 9, before they are “destroyed in the tide of socialism.”
Boyd T. Barnard, president of the National Association of Real Estate Boards, predicts that the housing shortage will ease up in a year. Leave well enough alone, is his philosophy. Mr. Morton Bodfish, Washington lobbyist of the US Savings and Loan League, is one of the outstanding “viewers with alarm,” to quote a phrase used by Architectural Forum (the Fortune of the construction field).
The National Association of Home Builders declared to President Truman, that “housing needs can only be met by private enterprise,” not by legislation. Further, they stated that government estimates of five million new dwellings needed were much too high. “The construction of a million new homes in the next eighteen months, and the provision of 500,000 new units through remodeling, will relieve the extreme pressure,” according to these “builders.”
The Producers Council speaks for the building materials producers in tones of sheer horror at the prospect of the government building new houses. They want existing public housing projects turned over to private capitalists as soon as “feasible.” If the government feels it must house families under the $20-a-week income level (that it, 20.7 per cent of all American families), let the local governments remodel slum dwellings for the owners, and then pay these owners rent every month for indigent families out of charity funds, is what their argument boils down to.
These construction associations particularly hate the OPA which is struggling vainly to force them by price regulations to produce low-income houses for veterans and stay out of the profitable 110,000 and over homes.
As for prefabrication, the Producers Council recommends “delaying radical changes” in methods and materials “because the hazards of the immediate postwar era are believed to be sufficiently great to make out-and-out experimentation with new formulas a dangerous luxury.”
The National Association of Homebuilders is a bit more subtle, but not less reactionary, in its opposition to prefabrication. It says, in a recent press release
Prefabricated houses may be used as a stopgap measure, but we doubt that the American public will be satisfied with them other than for temporary use ... (Americans) prefer to keep their individuality and have homes built to suit their individual needs rather than have all the houses look alike.”
One is tempted to ask these stupid reactionaries, how many of the 83 per cent of all American families living in hand-me-downs have they provided with homes tailored to suit their individual needs and tastes? How many of these hand-me-downs are even decent and sanitary, let alone tasteful?
At this early stage, it is difficult to say how this struggle between different capitalist interests over America’s housing dollars will turn out. The politicians reflect these struggles in the clash over housing legislation. Two bills now before Congress, the Wagner-Ellender-Taft National Housing Act and the Kilgore-Mitchell Prefabrication Bill, represent the interests of different blocs of capital. Other bills will surely follow.
The Wagner-Ellender Bill is a gift to the investment trusts. The federal government puts up $500 million to clear city slums. There is no limit specified as to the price to be paid for the slum land. This is a blank check for the city politicians and property owners. However, even this cash gift is not enough to satisfy them because of the threat to their steady incomes contained in the construction of new, modern housing. The Mortgage Bankers Association says this Act is the “atomic bomb of the mortgage business.” The National Association of Home Builders says it is a “threat of incalculable proportions ... incorporating every conceivable proposal for federal aid, regulation and subsidy, it is catastrophic ... it would spell eventual ruin for every segment of the residential construction industry.”
Good features of the bill from the point of view of the working class, although completely inadequate to overcome the housing shortage, or even clear the slums, are: reduction in the interest rate of low-cost FHA home loans; special loans to cooperative and labor housing groups up to 95 per cent of the capital costs; grants for much-needed research in building materials and methods; a token program for improving rural housing; and government construction of 500,000 very low-cost rental units annually for the next few years.
A much-publicized “backstage” tussle is now going on in Washington as to what extent the government should back prefabrication. Wilson Wyatt, new NHA Administrator from Louisville, Ky., home of Reynolds Metal and Gunniston Homes, Inc., is pressing hard for a new government housing policy calling for a million new homes in ’46, two million in ’47 and three million in ’48 as a boon to the new prefabricated housing industry.
What will all the families needing new homes get out of this melée of conflicting private interests? They are in a poor position to get anything. Labor does not have one representative of its own on the floor of Congress to defend its rights and interests, whereas each separate gang of capitalists has its own representatives and senators bought and paid for.
The answer to the question above is: the politicians will give the people as few houses as is safe in an election year, antagonizing as few capitalists as possible – unless labor intervenes politically through an independent Labor Party.
The best possible outcome assuming that labor does not organize politically in time to defend its interests on this score) is mass housing by capitalist prefabricators. These gentlemen, however, accept as God-given the present unequal division of national income. They will produce for their “newly discovered” low-cost market exactly as is. That is, they will try to freeze working class families to their present low living standards. A well equipped, complete, roomy prefabricated house, in an adequately serviced community, will still cost around $10,000. The mass low-cost housing will be graded in quality according to ability to pay. There will be $1,000 units for the under-$20 group and $2,000 homes for the $38-a-week group, which will still adjust housing to poverty rather than use mass housing as a means toward ending poverty as is possible in this land of plenty.
Good housing then remains today, as for the last hundred years, a political problem. However, the solution of the housing question is inseparable from the solution of the general question of production for use on the basis of socialist planning.
1. Investment capital backing for “slum clearance” is seen in the so-called “New York Plan” of sales tax rebuilding. Here the city would levy a 1 per cent sales tax to cover the annual subsidy on low-cost housing;. The Housing Authority would then issue bonds to cover the estimated $1.7 billion cost of land-clearing and erection of 250.000 low-rent units. Another 200,000 units would be built on this land by private capital (higher-renting units, naturally). The $1.7 billion bond issue would be backed up by four big Wall Street firms: Blyth & Co., Lehman Bros., Shields & Co., Phelps-Fenn. Interest would, of course, be paid out of the public pocket. What a bonanza for Wall Street and New York real estate!
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