New-York tribune., 1921-02-27

lukJoH TcCeHtiy, 10 QEVuuCc hSCqu@be
housings. They are, broadly speaking:
81. Through the Investment of capi-
tai by private initiative in the expecta-
ton of direct returns.
"2. Through the investment Of capi-
tal by private initiative in the cxpecta-
tion of both direct and indirect re-
turns. - "'~
SO. Through the investment Of capi-
tai by the public initiative in the ex-
pectation of direct returns.
at must be plain to ALL" MIR. Ma
combers said, "that If the capital in
vested in residential housing ty pri-
vate initiative is to be recovered with
interest, 1t must be recovered out of
rents; that the capital invested by pri-
vate initiative in the expectation of
direct and indirect returns must be re-
covered with interest, partly out of
rents and partly out of such Eenetits
as may accrue from the, reduction of
high labor turnovers, chargeable to
lack of housing facilities, and that the
capital invested in residential housing
by public initiative can be recovered
with interest through rents alone, since
the indirect benefits that may flow
from such housing are absorbed by prl-
vate enterprise and any losses that
may be sustained must fall inevitably
upon the taxpayers.
Building for Rent Not Popular
For some years past the housing
Ly fn- 1, of
purchase has become more and more
restricted, and it is not too much to
say that this class of property, speak
ing broadly, of course, has in many
parts of the country ceased to be q
preferred investment. 1t is significant
that the capital recovered in the last
year or SO from investments of this
character has rarely returned to the
real estate field.
"Not long ago one Of our great mu-
tual life insurance companies in its an
nual report explained to it's policy
holders that there has been steady
and gratifying increase in interest
earned on the company's as
sets for several years. This result is
chiefly due to the exercise of economy
securities and to the conversion of
real estate into more productive in
Yestments.'"
"lt goes without saying that an in
veStor in the real estate field should
be quite as much entitled to the recov-
cry of his capital with interest as an
investor in any other field. If such an
investor builds with reasonable econ
omy, recognizes and secures the proper
ratio between land and structure, and
improves his property in response to a
real demand, he should be not only en-
titled to the return of his capital with
interest, but in addition he should be
entitled to some reward for his labor
and the risk ne has incurred.
Capital invested an such residential
constructions can be recovered only
with interest out of rents, and the
rental return of such property is,
therefore, intimately related to its
value. And if this capital is to be re-
covered out of rents such sum must
be annually returned for the use of the
property as shall cover not only inter
est and carrying charges, but proper
reserves for vacancies and bad &C
counts and for depreciation and OBJ
solescence.
Less Than Per Cent Is Confiscatory
THE assumption by the public that
residential properties are very profit
able bears an inverse relation to the
actual fact. With savings institutions
paying 4 and per cent on deposits,
and with government, state and munic-
ipal bonds, to say nothing of industrial
bonds, selling upon to and 10
per cent basis, it is probably wen
within truth to assert that in the past
decade capital invested in residential
real estate has barely earned per
/ hp fpI in
connection that The Supreme Court of
the United States handed down de-
cision in connection with one of our
public utility corporations to the effect
that any return of less than s per
cent on the capital invested is con-
tiscatory.
"Not only have residential properties
not paid, but by strange fatality they
have been still further discredited by
many short-sighted advertisers and
even sincere advocates of home owner
ship. Who is not familiar with the
timeworn fallacy in respect TO the
landlords worthless rent receipts?
Who is not familiar with the merchant
who advertises that he buys and sells
strictly for cash and has no rent to
pay?
Now, the fact is that both the tenant
of some one else's property and the
owner of his own property pay rent,
and the factors governing the just de-
termination Of it are:
Maintenance.
Service.
Insurance.
Taxes and assessments
Vacancies and bad accounts.
Depreciation and obsolescence.
Administration.
Interest.
Adequate Reward viii Find Funds
'If capital is to flow again into the
residential field it will flow only in re-
sponse to an adequate reward and to
the assurance. of adequate protection.
ut must also be plain that if the
capital invested in residential housing
by private initiative is to be recovered
with interest in the expectation of both
direct and indirect return, it must be
recovered partly out of rents and part
ly out of that saving to industry
brought about through reduction in the
labor turnover caused by shortage
Of housing facilities. Many large in
duserial plants have invested in resi-
Dental housing in the last few years
and, without doubt, much of the capl-
tai has been recovered through the
saving in labor turnover, and, we may
also suspect, through the saving in ex-
cess profit taxes. The fundamental
wrong inherent in housing produced In
y DO