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5/3/76 - Time, Inc.
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Carla A. Hills Speeches
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The original documents are located in Box 2, folder "5/3/76 - Time, Inc." of the Carla A.
Hills Speeches at the Gerald R. Ford Presidential Library.
Copyright Notice
The copyright law of the United States (Title 17, United States Code) governs the making of
photocopies or other reproductions of copyrighted material. Gerald Ford donated to the United
States of America his copyrights in all of his unpublished writings in National Archives collections.
Works prepared by U.S. Government employees as part of their official duties are in the public
domain. The copyrights to materials written by other individuals or organizations are presumed to
remain with them. If you think any of the information displayed in the PDF is subject to a valid
copyright claim, please contact the Gerald R. Ford Presidential Library.
Digitized from Box 2 of the Carla A. Hills Speeches at the Gerald R. Ford Presidential Library
FINAL
TIME, INC.
MAY 3, 1976
IN THIS BICENTENNIAL YEAR WHEN AMERICA HAS ONE FOOT
IN HER PAST, WE CAN SEE BY HINDSIGHT, THAT BY TODAY'S
STANDARDS, MUCH OF YESTERDAY'S HOUSING POLICY WAS WELL-
INTENTIONED -- BUT WRONG.
RATHER THAN DWELLING ON HOW WE WOULD HAVE CHANGED
YESTERDAY, IT IS FAR MORE USEFUL TO CONCENTRATE ON WHAT
WE HAVE TO DEAL WITH TODAY.
So, THAT'S WHERE I'D LIKE TO START.
THE ERA OF HISTORY WE ARE NOW MAKING, BEGAN IN JANUARY
1975, AS THE WORLD ENTERED THE FOURTH QUARTER OF THE 21st
CENTURY.
LET US REMINISCE NO FURTHER BACK THAN THAT, BECAUSE,
FOR OUR PURPOSES, THE PAST YEAR PROVIDES US WITH THE BASIC
ECONOMIC INFORMATION AND EXPERIENCE NEEDED TO CHART AN
INTELLIGENT COURSE TO THE FUTURE.
GENATO FORD LIDRARY
-2-
IT SEEMS TO ME THAT, FOR THE FIRST TIME, THE NATION
ITSELF BEGAN TO UNDERSTAND, AS A PEOPLE, THE DISTINCTION
BETWEEN THE TWO BASIC FACTORS THAT SHAPE OUR NATIONAL
HOUSING POLICIES,
ON ONE HAND: OUR CONCERN WITH THE ESSENTIAL ECONOMICS
OF THE INDUSTRY, AS TRANSLATED INTO LEVELS OF HOUSING
PRODUCTION. FOR, "PRODUCTION" PER SE, IS THE PRINCIPAL
INDICIA OF THE INDUSTRY'S HEALTH IN ALL ITS PARTS -- MONEY
FLOW, MORTGAGE RATES; SALES, AND MARKET MOVEMENT,
OF EQUAL CONCERN, TO ALL AMERICANS -- AND HUD AS THEIR
PRINCIPAL AGENT -- IS THE ESSENTIAL SOCIAL FACTOR OF PROVIDING
HOUSING ASSISTANCE FOR THE POOR.
AND, WHETHER SUCH ASSISTANCE INVOLVES NEW CONSTRUCTION,
UPGRADING OF EXISTING STOCK, OR SIMPLY SUBSIDIZING RENT so
THE POOR CAN PAY FOR OTHER NECESSITIES THE SUCCESS OF OUR
SOCIAL MANDATE, UNDER THE AMERICAN SYSTEM OF FREE ENTERPRISE,
IS RELATED DIRECTLY TO THE STATE OF OUR HOUSING ECONOMY,
IN 1975, THE RELATIONSHIP OF THE TWO WAS CLEARLY EVIDENT.
-3-
OUR HOUSING ECONOMY ENTERED 1975 WITH A STAGGERING SET
OF PRODUCTION LIABILITIES.
CLOSE OF BUSINESS, AT THE END OF THIS CENTURY'S THIRD
QUARTER, SHOWED US WITH ANNUAL HOUSING STARTS AT THE RATE
OF 880,000; PERMITS INTO THE FUTURE AT THE RATE OF 837,000;
NET SAVINGS INFLOWS OF $600 MILLION AND AN INTEREST RATE OF
9.37 PERCENT.
SALES OF SINGLE-FAMILY HOMES HAD REACHED THE LOW RATE
OF 501,000.
THE STARTLING EFFECT OF THESE DISCOURAGING STATISTICS
WERE EXCEEDED ONLY BY THE NUMBER OF CURATIVES OFFERED ON
CAPITOL HILL TO OFFSET THEM.
THE "CURES" RANGED FROM A 5 PERCENT HOME BUYER TAX CREDIT
TO AN OUTRIGHT DOWN PAYMENT GRANT OF $1,000 -- TO SUBSIDIZING
MORTGAGES DOWN TO 6 PERCENT FOR SIX YEARS, OR 7 PERCENT FOR
LIFE.
As YOU KNOW, SOME OF THESE PROPOSALS BECAME LAW --
SOME, FORTUNATELY, DID NOT.
-4-
A QUICK EVALUATION OF ONE THAT DID -- GIVES US A
PERSPECTIVE ON THE WISDOM OF TAMPERING WITH THE FREE MARKET.
IN MARCH, 1975, CONGRESS PASSED LEGISLATION ALLOWING A TAX
CREDIT OF 5 PERCENT -- UP TO $2,000 -- ON THE PURCHASE PRICE
OF A NEW HOUSE,
HUD's STUDY FINDS THAT THIS "STIMULATED" A GRAND TOTAL
OF 4,000 NET SALES -- BUT THE GOVERNMENT HAD TO GIVE UP
$2,000 IN TAX REVENUES FOR EACH OF THE 160,000 HOME PURCHASES
COVERED TO GET THOSE .4,000 ADDITIONAL SALES, THE $320 MILLION
COST TO THE GOVERNMENT -- $80,000 PER INCREMENTAL SALE -
IS QUITE A PRICE TAG FOR THE IMPACT MADE UPON THE MARKET.
IN JUNE, CONGRESS PASSED LEGISLATION PROVIDING FOR
6 PERCENT AND 7 PERCENT MORTGAGES AS WELL AS A SUBSIDY OF
$1,000 FOR DOWN PAYMENTS, WHICH THE PRESIDENT HAD THE
FORESIGHT AND THE COURAGE TO VETO,
THE GOOD INTENSIONS OF THE LEGISLATION WERE SIMPLY NOT
BASED IN ECONOMIC REALITY. THE RESULTS the cose WOULD NOT JUSTIFY Even
THE COST WHICH THE PROPONENTS ESTIMATED AT $1.5 BILLION,
^
OUR BEST GUESS WAS THAT NEITHER PROPOSAL WOULD HAVE ANY
SIGNIFICANT EFFECT ON NET SALES, BUT THAT EACH WOULD HAVE
HAD A SUBSTANTIAL NEGATIVE EFFECT IN REQUIRING INCREASED
FEDERAL BORROWING -- LEAVING THE GOVERNMENT WITH A LARGE BILL
FOR SUPPORTING A MARKET THAT ALREADY EXISTED.
-5-
THE PRESIDENT'S FAITH IN THE FREE ENTERPRISE SYSTEM
-- AND HIS PROGRAM OF USING FEDERAL STIMULANTS ONLY WHERE
ABSOLUTELY NECESSARY -- WERE WELL REWARDED.
TODAY, HOUSING STARTS HAVE JUMPED 64 PERCENT TO AN ANNUAL
LEVEL OF NEARLY 1.5 MILLION AND PERMITS ARE UP 38 PERCENT
TO AN ANNUAL LEVEL OF NEARLY 1.2 MILLION. NET SAVINGS INFLOWS
HAVE SOARED 517 PERCENT TO $3.7 BILLION; SINGLE-FAMILY HOME
SALES HAVE RISEN 29 PERCENT TO AN ANNUAL RATE OF 646,000; AND
THE INTEREST RATE IS DOWN TO 8.93 PERCENT AND FALLING.
To PARAPHRASE THE PRESIDENT'S RECENT COMMENT ON THE
ECONOMY: "EVERYTHING THAT IS SUPPOSED TO BE GOING UP IS
GOING UP, AND EVERYTHING THAT IS SUPPOSED TO BE GOING DOWN
IS GOING DOWN."
THE BROAD LESSON WE LEARN FROM THIS NARROW SLICE OF
TECHNICAL DATA IS THAT IN THE LONG RUN, THE ONLY GOVERNMENT
PROGRAMS THAT REALLY WORK ARE THOSE THAT WORK WITH THE MARKET.
BUT THE FACT THAT THE LEVEL OF HOUSING PRODUCTION IS
DETERMINED BY BROADER ECONOMIC INDICES DOES NOT BY ANY MEANS
ELIMINATE THE GOVERNMENT'S ROLE IN HOUSING; IT ONLY SETS THE
STAGE FOR FEDERAL HOUSING POLICY,
-6-
As I SEE IT, THE PRIMARY FEDERAL ROLE -- ASIDE FROM
HOUSING THE POOR -- IS TO HELP ASSURE THAT THE MARKET IS
WORKING.
THE "CATCH 22" IN DESIGNING THE PROPER FEDERAL ASSISTANCE
IN THE SINGLE-FAMILY MARKET IS HOW TO MAKE SURE THAT GOVERNMENT
INVOLVEMENT ACTUALLY HELPS INDUSTRY -- WITHOUT RETARDING ITS
NORMAL PRODUCTION OF UNASSISTED HOUSING OR RUSHING IN TO ASSIST
HOUSING THAT WOULD HAVE BEEN BUILT ANYWAY,
A SUBSIDY, BY ITS NATURE, MEANS INCREASED FEDERAL
BORROWING WHICH AUTOMATICALLY DECREASES THE AVAILABILITY
OF PRIVATE MORTGAGE MONEY, AND IT IS ALL THE SAME, WHETHER
WE'RE TALKING MORTGAGE PURCHASES, INTEREST SUBSIDIES,
DIRECT LOANS OR CASH GRANTS,
AND, ALMOST INVARIABLY, THE RESULT IS HIGHER INTEREST
RATES WHICH RETARD NORMAL, UNASSISTED PRODUCTION, FOLLOW-UP
STUDIES OF PRACTICALLY EVERY PAST SUBSIDY TO STIMULATE
SINGLE-FAMILY PRODUCTION SHOW A LEVEL OF PRODUCTION THAT
WOULD HAVE OCCURRED WITHOUT THE SUBSIDY.
THE BETTER ALTERNATIVE TO FEDERAL SUBSIDIES IS FEDERAL
HELP CREATE A MARKET ENVIRONMENT THAT IS SUPPORTIVE OF
BUILDING SINGLE-FAMILY HOMES.
-7-
ONE ESSENTIAL, IS FINANCIAL REFORM THAT WILL MAINTAIN
A STEADY FLOW OF MORTGAGE MONEY AND THAT WILL REDUCE CYCLICAL
JOLTS IN PRODUCTION THAT SHOCK THE HOUSING INDUSTRY AND HURT
THE CONSTRUCTION WORKER.
BOTH THE HOUSE AND SENATE ARE CURRENTLY WRESTLING WITH
THIS PROBLEM.
THE ADMINISTRATION IS SPONSORING LEGISLATION THAT WOULD
CUT THROUGH SOME OF THE OLD BARRIERS -- EXPANDING THE POWERS
OF FINANCIAL INSTITUTIONS; ENCOURAGING GREATER COMPETITION;
AND EVENTUALLY PHASING OUT REGULATION Q WHICH LIMITS THE
INTEREST PAID BY SAVINGS INSTITUTIONS ON DEPOSITS,
THE ACTUAL EFFECTS OF REGULATION Q ARE IRONIC, BECAUSE
IT WAS ESTABLISHED INITIALLY TO MAKE SURE HOUSING FUNDS
WERE AVAILABLE. INSTEAD, IT HAS RESULTED IN MORE EXTREME
FLUCTUATIONS, PARALYZED BY ESTABLISHED INTEREST CEILINGS,
THRIFT INSTITUTIONS HAVE NO CAPACITY TO RESPOND WHEN GENERAL
RATE INCREASES INDUCE SAVERS TO MOVE THEIR DEPOSITS TO OTHER
MORE PROFITABLE INVESTMENTS.
THE ADMINISTRATION HAS PROPOSED -- AND THE SENATE HAS
PASSED -- A MORTGAGE INTEREST TAX CREDIT FOR LENDERS TO
PROMOTE INVESTMENT IN HOUSING,
-8-
THE CREDIT WOULD BE AVAILABLE TO ALL LENDERS BASED ON
THE PROPORTION OF THEIR PORTFOLIOS IN HOME MORTGAGES. ITS
OBJECT IS TO BROADEN THE HOUSING FINANCE BASE THROUGH
INCENTIVE -- PARTICULARLY TO COMMERCIAL BANKS.
WE ARE STUDYING CALIFORNIA'S EXPERIENCE WITH VARIABLE
INTEREST RATE MORTGAGES, WHICH WOULD PERMIT LENDERS TO RAISE
RATES ON EXISTING MORTGAGES WHEN THE MARKET RATE RISES.
AND, WE ARE STUDYING THE EFFECTS OF OTHER INNOVATIVE DEBT
INSTRUMENTS IN A SEARCH FOR MEANS TO STABILIZE THE SINGLE-
FAMILY MORTGAGE MARKETS.
THE PROBLEMS OF RECOVERY IN THE MULTI-FAMILY MARKET
SECTOR ARE SOMEWHAT DIFFERENT.
THOSE DIFFERENCES CAUSED HUD TO RECOMMEND IN JANUARY
THE RELEASE OF A SHORT-TERM STIMULUS WHEREBY WE WILL PURCHASE
$3 BILLION OF MULTI-FAMILY MORTGAGES BEARING AN INTEREST RATE
OF 7-1/2 PERCENT WHICH WILL ASSIST ABOUT 120,000 UNITS.
ALTHOUGH THE DRAMATIC JUMP IN MARCH IN MULTI-FAMILY
STARTS WAS VERY GOOD NEWS, THE MULTI-FAMILY MARKET IS STILL
IN TROUBLE BY ANY HISTORIC STANDARD.
-9-
THE COMBINATION OF LAGGING PRODUCTION, IDLE RESOURCES,
AND AN UNMET DEMAND FOR APARTMENTS MAKES IT CLEAR THAT
THESE FUNDS WILL NOT DRAW MONEY AWAY FROM NORMAL PRODUCTION
AND WILL NOT SUBSIDIZE APARTMENTS THAT WOULD HAVE BEEN BUILT
ANYWAY.
ONE OF THE MULTI-FAMILY PROBLEMS, AS YOU KNOW, IS
SIMPLY THE NATURAL MARKET RESPONSE TO OVER-PRODUCTION OF
THE EARLY 1970's.
VACANCY RATES ARE HIGH IN MANY MARKETS -- 15 PERCENT
ON THE GULF COAST, FOR EXAMPLE, UTILITIES, TAXES, AND
INTEREST RATES HAVE OUTSTRIPPED THE RELATIVELY LOW RENT
LEVELS. IN THE PAST 15 MONTHS, OPERATING COSTS HAVE RISEN
TWICE AS FAST AS RENTAL INCOME -- AND DEVELOPERS ARE LOOKING
ELSEWHERE FOR MORE ATTRACTIVE VENTURES.
MEANWHILE, SOME RENTAL MARKETS ARE BECOMING TIGHT,
BUT OVERALL RENTS ARE STILL TOO LOW TO PROVIDE ANY STRONG
PRODUCTION INCENTIVE.
-10-
WE BELIEVE THAT IN THOSE MARKETS OUR MULTI-FAMILY
SUBSIDY IS TIMELY AND WILL HAVE AN INCREMENTAL EFFECT.
FOR BY THE TIME RENTS RISE ENOUGH TO INDUCE CONSTRUCTION
IN THOSE MARKETS, IT WILL TAKE ANOTHER TWO YEARS FOR THE
RESULTANT UNITS TO BE READY FOR OCCUPANCY. IN THE INTERIM,
THE MARKET SUFFERS A SEVERE SHORTAGE OF AVAILABLE APARTMENTS.
HUD's MORTGAGE INTEREST SUBSIDY HELPS TO FILL THE
PRODUCTION LAG BY STIMULATING MULTI-FAMILY STARTS IN MARKETS
WHICH ARE RELATIVELY TIGHT BEFORE THE APARTMENT SHORTAGE
DRIVES RENTS TO SUFFICIENTLY HIGH INCENTIVE LEVELS TO CAUSE
DEVELOPERS TO BUILD. AND, SINCE IT IS SHORT-TERM, IT WILL
SPUR THE MARKET, BUT NOT SUBSTITUTE FOR IT -- BECAUSE FUNDS
WON'T BE WASTED ON UNITS THAT WOULD HAVE BEEN BUILT ANYWAY
IN THAT PERIOD OF TIME,
HUD's PROGRAMS TO PROVIDE HOUSING FOR THE POOR ARE
ALSO CONSTRUCTED WITH A VIEW TOWARD THE REALITIES OF THE
MARKETPLACE, THE PROBLEM IN THE PAST WAS NOT A LACK OF
DEDICATION TO THE RIGHT CAUSE, BUT IN THE SUPERIMPOSITION
OF SYSTEMS THAT WERE ALIEN TO THE WAY THE MARKET WORKS.
HUD's CURRENT PROGRAMS TO HOUSE THE POOR ARE BASED
ON TWO BASICS OF THE AMERICAN MARKET: COMPETITION AND
FREEDOM-OF-CHOICE.
-11-
OUR NEW SECTION 8 RENTAL ASSISTANCE PROGRAM IS DESIGNED
TO HELP PEOPLE -- NOT STRUCTURES. FEDERAL RENT PAYMENTS
AMOUNT TO THE DIFFERENCE BETWEEN LOCAL RENT LEVELS AND
25 PERCENT OF THE RECIPIENT'S EARNINGS,
THIS, IN EFFECT, PUTS LOW-INCOME FAMILIES ON A PAR WITH
HIGHER-INCOME RENTORS AND MAKES THEM PARTICIPATING MARKET
COMPETITORS FOR THE APARTMENT SUPPLY -- RATHER THAN CONSIGNEES
TO "PROJECT" STRUCTURES.
HAVING THE "WHEREWITHAL" TO SHOP FOR A MODEST BUT DECENT
UNIT, THESE FAMILIES CAN USE THE SUBSIDY FOR NEW OR SUBSTANTIALLY
REHABILITATED HOUSING IN THE NEIGHBORHOOD OF THEIR CHOICE.
THE SUBSIDY WORKS WITH THE MARKET, AND NOT AGAINST IT,
BECAUSE IT INCREASES DEMAND, WHICH IN TURN INDUCES INCREASED
SUPPLY AS NEEDED, AND IT UTILIZES COMPETITION TO DISCIPLINE
COSTS,
SIMILARLY, OUR SECTION 235 HOMEOWNERSHIP ASSISTANCE
PROGRAM, WHICH WAS REVISED AND REISSUED IN SUBSTANTIALLY
NEW FORM IN JANUARY, WAS STRUCTURED TO WORK WITH THE MARKET.
-12-
WE DID THIS IN TWO WAYS: FIRST, BY GEARING IT TO THE
MARGINAL LOWER INCOME FAMILIES, CURRENTLY PRICED OUT OF
THE HOUSING MARKET; AND SECOND, BY SCALING THE SUBSIDY TO
AUTOMATIC PHASE-OUT AS THE FAMILY'S INCOME INCREASES, WE
SOUGHT TO REACH INCREMENTAL PURCHASERS IN THE MARKET.
THE PRINCIPAL SAFEGUARD OF THE TAXPAYER'S MONEY IS A
BUYER DOWN PAYMENT OF ABOUT $1200, PROVIDING A PERSONAL
INVESTMENT INCENTIVE FOR NOT DEFAULTING ON THE MORTGAGE.
THE SHALLOW SUBSIDY DOWN TO 5 PERCENT INTEREST BRINGS THE
PAYMENT WITHIN THE FAMILY'S REACH.
IT ALSO CREATES AN INCENTIVE FOR MORE OF THE AVAILABLE
MORTGAGE CAPITAL TO BE INVESTED IN LOWER-COST HOMES.
IN AGGREGATE THE PROGRAM SHOULD STIMULATE THE PRODUCTION
OF 250,000 HOMES -- NEW OR SUBSTANTIALLY REHABILITATED -- AND
CREATE 500,000 CONSTRUCTION JOBS,
BUT NOW THAT THE FEDERAL GOVERNMENT is MAKING ITS
HOUSING PROGRAMS -- ALL OF WHICH ARE STILL IN START-UP STAGE
-- MOVE WITH THE MARKET, CONGRESS SEEMS ABOUT TO ENACT
MASSIVE CHANGES WHICH, IN MY ESTIMATION, WILL SET HUD RIGHT
BACK TO THE ERA WE HAD FINALLY PASSED,
-13-
LAST WEEK THE SENATE PASSSED A BILL WHICH WOULD COMPLETELY
SABOTAGE OUR RENTAL SUBSIDY PROGRAM BY REACTIVATING THE
CONVENTIONAL PUBLIC HOUSING PROGRAM AT THE HIGHEST LEVEL OF
ACTIVITY IN 40 YEARS.
YET, ONLY TWO YEARS AGO, CONGRESS ITSELF, HAD DECIDED
-- ON THE FACE OF IRREFUTABLE EVIDENCE -- THAT IT WAS PAST
TIME FOR THE GOVERNMENT TO STOP BUILDING PROJECTS THAT
CONCENTRATED OUR ECONOMICALLY DISADVANTAGED IN SINGLE BUILDINGS.
TRUE TO YESTERDAY'S THINKING RATHER THAN TODAY'S REALITIES,
THE BILL TURNS ITS BACK ON THE PRIVATE MARKET AND PROPOSES A
PROGRAM OF FEDERALLY GUARANTEED AND SUBSIDIZED PUBLIC BOND
FINANCING.
ONE OF ITS MOST SERIOUS FLAWS IS THE TIME IT WILL TAKE
AFTER THE BILL IS PASSED TO ACTUALLY HOUSE THE PEOPLE IT IS
SUPPOSED TO HELP. OUR EXPERIENCE TELLS US THAT OCCUPANCY OF
NEW CONVENTIONAL PUBLIC HOUSING TAKES TWICE AS LONG AS NEW
CONSTRUCTION ASSISTED BY RENTAL SUBSIDIES,
BUT, IN THE FINAL ANALYSIS, THE BILL REPRESENTS THINKING
AND PLANNING THAT FAILS TO RELATE TO URBAN NEEDS OF 1976.
-14-
TODAY, WE HAVE NO CHOICE BUT TO USE EVERY MEANS AT OUR
DISPOSAL TO REBUILD OUR CITIES -- AND WE MUST DO so WITH EVER-
DIMINISHING RESOURCES. GOVERNMENT CANNOT DO IT ALONE,
CERTAINLY, IT CANNOT BE DONE WITH CONVENTIONAL PUBLIC HOUSING
PROJECTS,
WE CANNOT SUBSTITUTE MANDATED FEDERAL CONSTRUCTION PROGRAMS
-- AS THIS BILL WOULD HAVE US DO -- FOR THE MARKET DISCIPLINE
OF PROGRAMS THAT MAKE ALL OF OUR PEOPLE COMPETITIVE PARTICIPANTS
IN THE ECONOMIC LIFE OF OUR CITIES.
THE BILL WILL THWART THE THRUST OF OUR RENTAL SUBSIDY
PROGRAM, WHICH NOT ONLY HELPS TO PREVENT THE DECLINE OF OUR
HOUSING STOCK -- THAT NOW REMAINS AS ONE OF THE CITIES MOST
VALUABLE ASSETS -- BUT ALSO ADAPTS DIRECTLY TO THE NEEDS,
THE SUPPLY, AND THE DEMAND OF PARTICULAR NEIGHBORHOODS.
So, I DON'T THINK IT IS NECESSARY TO TELL YOU WHAT MY
RECOMMENDATION WILL BE IF THIS BILL REACHES THE PRESIDENT'S
DESK IN ITS PRESENT FORM.
AND THAT BRINGS ME FULL CIRCLE ON OUR HISTORY TO DATE
-- AS I SEE IT -- IN THIS NEW ERA OF HOUSING:
-15-
-- WHERE WE WERE AS IT OPENED 15 MONTHS AGO.
-- WHAT WE HAVE TRIED TO DO.
-- WHERE WE STAND NOW -- INCLUDING THE VERY REAL
DANGER OF NEW LEGISLATION THAT COULD CANCEL
OUT OUR PROGRESS.
I WOULD LIKE TO CLOSE BY STEPPING BACK FOR A MOMENT TO
LOOK AT THE THICKER SLICE OF TIME IN THIS NEW ERA: THE FUTURE.
WE HEAR so OFTEN THAT AMERICAN FAMILIES HAVE BEEN PRICED
OUT OF HOMEOWNERSHIP.
LAST MONTH'S FORTUNE PURSUED THIS THOUGHT IN SOME DEPTH
-- POINTING OUT THAT THE AVERAGE MORTGAGE PAYMENT IN 1975
WAS $269, AS COMPARED TO $42 IN 1950.
THE ARTICLE CORRECTLY NOTED THAT THERE WAS A GREAT DEAL
OF DIFFERENCE IN THE AVERAGE HOUSE OF-THOSE TWO PERIODS,
ABOUT HALF OF THE PRICE INCREASE IN THE 1975 HOUSE CAN BE
ATTRIBUTED TO THE FACT THAT IT IS 75 PERCENT LARGER -- AND
THAT IT HAS INNUMERABLE APPLIANCE "EXTRAS" THAT WERE NOT
INCLUDED IN THE 1950 HOME.
-16-
THE OTHER HALF OF THE PRICE INCREASE IS DIVIDED BETWEEN
HIGHER INTEREST RATES AND INFLATED COSTS OF BUILDING AND LAND.
THE FACT IS THAT IF THE TYPICAL 1950 HOUSE WERE BUILT
AND SOLD IN 1975 -- SIZE, AMENITIES AND PROPERTY DIMENSIONS
-- ALMOST 80 PERCENT OF AMERICAN FAMILIES COULD AFFORD IT,
NONETHELESS, THE FORTUNE ARTICLE ENDED WITH A GLOOMY
PROGNOSIS FOR THE REST OF THIS CENTURY -- PHENOMENALLY RISING
PRICES FOR 15 YEARS, ASTRONOMICAL DEMAND AND PRODUCTION, THEN
AN ABRUPT DECLINE IN DEMAND WHICH HUD, FORTUNE PROPHESIED,
WOULD MEET WITH SUBSIDIZED HOUSING DEMOLITION. IT SEEMS
APPROPRIATE, PARTICULARLY AT THIS CONFERENCE, TO DECLARE THAT
HUD's FORECASTS ARE MUCH MORE OPTIMISTIC.
WE SEE LACKING IN THAT UNHAPPY PROPHESY ANY ALLOWANCE
FOR INCOME INCREASES TO MATCH THE PREDICTED ZOOM IN PRICES
--- YET, HISTORICALLY, INCOME INCREASES HAVE OUTSTRIPPED
HOUSING PRICES EVEN DURING PERIODS OF INFLATION. TRUE, THE
RECESSION YEAR OF 1974 WAS AN EXCEPTION, BUT IN 1975 WE WENT
BACK TO THE NORMAL PATTERN AND WE EXPECT INCOME INCREASES TO
CONTINUE AHEAD OF HOUSING PRICES,
-17-
SECOND, WE SEE HOMEOWNERSHIP INCREASING AS THE TREND
OF THE PAST 25 YEARS IS AGAIN RESUMED. TODAY, ALMOST
TWO-THIRDS OF AMERICAN FAMILIES OWN THEIR OWN HOMES --
WHICH IS 16 PERCENT MORE THAN IN 1950. BUT, WE SHOULD ALSO
KEEP IN MIND THAT THIS NATION HAD 65 MILLION FEWER PEOPLE
IN 1950, so THAT THE 16-POINT JUMP IN 1976 MULTIPLIES INTO
EVEN MORE IMPRESSIVE OWNERSHIP GAINS.
THIRD, WE SEE IMPROVED TECHNOLOGY AS AMERICAN INDUSTRY
REACTS TO THE PROBLEMS' OF RESOURCE SHORTAGES AND ENERGY
COSTS. WE ARE ALREADY ACTIVE IN SOLAR ENERGY DEMONSTRATIONS.
THERE IS MUCH INDUSTRY ACTIVITY IN THE TECHNOLOGY OF MANUFACTURED
HOMES. UNLESS AMERICAN INGENUITY IS A THING OF THE PAST, WHICH
WE DO NOT BELIEVE, THERE WILL BE NEW CONCEPTS TO COME, IN THE
NEXT QUARTER, THAT ARE NOT NOW EVEN IN THE THINKING STAGE.
AND I MIGHT ADD THAT ALTHOUGH WE TALK A LOT AT HUD ABOUT
FUTURE TRENDS -- MASSIVE DEMOLITION IS CERTAINLY NOT ONE OF THEM.
SURELY, WE CANNOT PREDICT PRECISELY HOW THIS NEW QUARTER
OF A CENTURY WILL END ON THE BASIS OF WHERE WE ARE TODAY. BUT
WE DO KNOW THAT WE HAVE SAFELY TURNED ONE OF THE MOST DANGEROUS
CORNERS IN OUR ECONOMIC HISTORY ON THE WAY TO THE YEAR 2,000.
-18-
IF WE HAVE THE FORESIGHT, IF WE HAVE THE GOOD SENSE TO
CONTINUE ON THE STEADY COURSE WE HAVE SET IN THE FIRST 15
MONTHS OF THIS NEW ERA -- I THINK WE CAN LOOK TO THE BEST
25 YEARS IN THE HISTORY OF HOUSING.
IF WE DO NOT, WE'LL ALWAYS HAVE HINDSIGHT TO REMIND
US OF WHERE WE WENT WRONG.