The New York herald. [volume] (New York, N.Y.) 1920-1924, 1920-12-19
SEES NO PROSPECT
OF RENT RECESSION
Loan Expert Compares Cost of
Living Space With That of
Other Commodities.

ALTHOUGH the processes of liquidation
now In progress have brought recessions
in the prices of nearly every commodity
of life, 1t is of the utmost significance
that rents have not receded generally
aud that the tendency of prices for 1hous-
ing accommodations is toward higher
levels thus making more substantial the
income from property" says S. W.
straus of s. w. Straus & Co.
"It Is also noted that a we'll defined
sentiment against a higher interest rate
than 6 per cent for first class real
estate mortgages is making itself felt
Unquestionably a far reaching and per-
manent readjustment of income from
real estate investments is taking place.
It Is fact generally conceded that In
many instances and localities income
from improved property previous to the
war was too low. Estates and large
holders OF realty were in such cases not
able to secure a return commensurate
with the income derived from many
other forms of investment.
IAN indefinite continuation of these
conditions would mean a slowing down
of the building industry, and the present
readjustments of rental income, there
fore is a very favorable indication and
will help the entire housing situation
and real estate market.
Economic Law Must Prevail.
while there has been a great amount
of public agitation against the present
range OF rents. it must be borne in mind
that any conditions or influences,
whether they be legislative or economic,
which have the ultimate effect OF d.
verting capital from building invest
ments to other channels simply impose
additional hardshps on the public In the
long run. The law of supply and de-
mand must hold full sway in the final
analysis. Property rights must be safe
guarded, and II the nations housing
conditions are to be restored to normal
everything possible must be done TO en-
courage the flow of capital through
these channels of investment and not
avert it elsewhere through adverse leg-
4kation which would stop progress or
though unsound financing brought
ahSut by too high interest rates on real
,S1ftite investments.
The first consideration of capital
seeking investment is safety. Efforts,
therefore, to attract capital at eXoroi-
tant rates of interest must necessarily
be viewed with dstrust. The two great
dangers of a too high interest rate may
be epitomized as follows;
First a corporation paying an in
flated price for capital is endanSering its
future security. The purchasing power
or the dollar is just about one-half OF
what 1t was five years ago, which means
that corporation must borrow twice as
much money to meet the same ends as
was the case a half decade ago If, in
addition, 1t pays an inflated interest
charge 1t Is ihdulging in practices hat
must weaken the financial structure and
place the safety of its obligations In
Jeopardy.
s,"Second-Exorbitant interest rates
Necessarily encourage profiteering. Thus,
where too high rate is paid to attract
capital It necessarily means unjust ana
inflated rents beyond the ability and
Willingness of the public to pay.
Taxation Keeps Rents Up Too.
THE tendency. therefore, to keep the
interest rates on high grade first mort
gage investments at a conservative fig
ure will rebound to the ultimate benefit
of the entire building situation.
I'm addition to the readjustment of
property income now In progress, other
factors are tending to keep rents at
present levels, In the first place. taxa
ton has been growing continually
heavier. and there Is no immediate In
dication that these charges Will become
lighter, as all governmental bodies are
being operated at greatly increased
costs In the second place, we are con-
tlnualy developing better standards OF
living. Finer buildings, more extensive
improvements and conveniences and a
better environment are continually be-
ing demanded by the public. 1t is be-
cause OF this restless impulse that civili-
zation has advanced through the me-
dunn of the arts and sciences, and these
conditions will continue as long as hu-
man nature remains unchanged. These
Increased comforts and conveniences
must mean correspondingly Increased
prices. We also must remember that
the cost OF operating buildings is much
higher than formerly was the case.
THE tremendous housing shortage,
said to approximate some 2,oO0.0es
homes throughout the nation. also will
continue to have an important bearing
on rents and the income from property.
IT is to the best interests OF the public
that this abnormal shortage be ellmi-
mated as speedily as possible. and the
various developments heretofore out
viii begin to manifest Itself
lined lend encouragement 10 the belief
sNF Frrft