The Washington herald. [volume] (Washington, D.C.) 1906-1939, 1921-12-16
URGES METHODS,
SOUND and VITAL, Z.
ON CONSTRUCTION
High Costs After War
Prevent Resumption
Of Activities.

The Senate Committee on Recon-
struction and Production estimated
in March of this year, the total
construction shortage in the coun-
try at between $4,000. 100000 and
$4,000. 900. 900.
During the world war, private
construction and construction OF
every nature not contributing to
war purposes was prohibited After
the signing of the armisuce high
costs prevented the resumption OF
genuine construction activities. The
Investing public in this field has
rot had confidence in the stability
a. values: they have not been aole
to determine IL and when the cost
Cf construction reached a point
arrantinE their Investment A re-
turn of confidence in values In con-
struction will assure more employ
ment than in any other area. Con-
s.dering all branches Of the con-
stTuction industry. more than e.
600, 900 people could be employed
If construction would be resumed
To Secure Confidence.
There are three outstanding fac
tors in the building and construc-
ton situation which have the great
est bearing on the resumption OF
construction activities. They are
financing. material costs, and labor
costs
These factors present questions
which cannot be settled in a ma
ticnal way. they must be investi-
gated by those interested in each
community for itself. The questions
are:
Ca) Can the prospective investor
finance the operation at a reason
able cost
OBJ Does the cost OF construction
materials to the prospective in
vestor properly represent the re-
duction which has been made IN the
Wholesale prices?
Co Is labor in the particular
locality working at fair rates and
giving fair value in the quantity
and quality Of work done?
II local conditions prove salts
factory, there IS no reason why
work should not proceed immedi-
stely. This is especially true %
pa'sons contemplating the hIild-
ing OF their hSI:..s who a-r nov
paying rentals based on inflated
values That this fact is being rea-
lied is shown by current statistics
During the month of September OF
this year. residential building
amounted to 80 per cent of the
total valuation Of contracts award
ed in that portion of the country
north OF the Ohio and east OF the
Mississippi rivers.
reasonable terms and in reasonable
volume and free from demands for
bonuses and commissions OF a ques-
tionable character.
The savings deposits of the people
are the natural economic source OF
loans for home building. The ag-
Kregate is ample for this purpose
even though a portion is protected
by adequate investment in more
liquid securities to meet withdraw
ais There would be no difficulty In
tho financing of homes IL the fun
oamental principle Of the use of
long-term deposits for home loan
and long term purposes were gen.
orally followed.
In every section OF the country
owners have declined to start new
projects on account OF the financing
charges. both the interest rate and
the commissions and premiums paid
for floating loans being discourage
ingly high. Commissions and pre-
miums varying between 10 and 20
Per cent have been charged in addi-
ton to from I to s per cent interest
For example, before the first work
OF construction was begun the own
ers Of an apartment house were re-
quired to pay for the million and q
quarter involved an interest rate OF
per cent. and a bond premium OF
III per cent, and a floating charge
Of 10 per cent. making total
financing charge OF 1914 per cent
The financing charge OF subse-
quent loan Of s25O.oO0 for the same
structure was $4,000. This Is a
charge Of 80 per cent II Is doubt
ful whether the margins received
by the architect. the contractor, and
by all the producers In the basic
industries involved aggregated a
sum equivalent to these financing
charges.
When an owner must pay such q
sum before construction work even
starts, many projects have neces-
CARLY been abandoned in the face
Of a continual need and demand for
building.
While excessive financing charges
FOR building have not been excep-
tional. many savings banks, trust
companies. and Insurance COM
ranies have maintained a conserva-
tive loaning policy with regard to
real estate and home building and
the building and loan associations
or the United States, with their two
and half billion dollars of assets
have been conducted with e1c.p-
ttonal efficiency. Underlying tn.
whole matter OF the financing OF
construction there is. however, the
sound banking principle that long
term deposits and the savings ac-
counts OF the people should prina-
rily be used for lonE-term purposes
and should not be intermingled with
speculative and commercial bust
ness