The Washington herald., 1921-09-04
SCORES NIDDLEMEN
FOR HIGH COST OF
BUILDING HOUSES
Writer Thinks They
Would Cost Less on
Direct Buying.

Direct Buying.
From all over the country queries
pour in to the Congressional hop
per in ever increasing numbers.
why IL labor. lumber and mate
rials are cheaper, does 1t cost us
SO much to build a homer"
Open letters to the various let
ter-publishing departments Of the
leading daily papers on the ques-
ton far outnumber any other single
type of query. II seems to be more
important than the hight cost of
food and clothing.
What is wrong with our methods
of building and financing a home?
There must be some practical way
of hitching labor and material to-
gether to build homes without ex-
cessive cost.
He Examines Costs.
Is it because there are too many
middlemen? Is it because Of in
efficient building methods? Is II
the result of lack of standardiza-
tion Of materials and building
methods?
Let US examine the usual plan
of building a home. The prospec-
tive owner dickers with a realty
development company for financing
his home building. He has signi-
fed his willingness to open actual
negotiations for the project. Now
let US get CT the other end Of tho
operation. assuming, for the time
being. that the prospective owner
ha already purchased his lots and
paid for them.
The manufacturer of the mate
rials going into the home sells to
the wholesaler. adding 4 per cent
for cost of doing business and
per cent for profit. The whole
saler sells to the retailer. adding
per cent for cost of doing busi-
ness and per cent for profit. The
retailer tacks on 20 per cent for
transacting business and 10 per
cent for profit. and sells to the
contractor. The contractor, before
selling to the realty operator, adds
his IL to Is per cent. The operator
adds his 10 to 20 per cent for profit.
He then estimates to receive so per
cent on a first mortgage and 80 per
cent on a second mortgage, dis
counting the second mortgage for
20 per cent. which is customary.
Favors Direct Buying.
BY establishing a system whereby
the real estate developer can finance
and buy material directly from the
manufacturer. lot of goods
through the old system which would
cost him $l.697.16. could be bought
for $1,000, using the figures of profit
quoted above. This shows a prac-
teal saving of 20 per cent, which
would react greatly to the benefit OF
the prospective owner.
Even stopping at letting the con-
tractor handle the transaction, he
could obtain $1,515.32 worth of ma
terial for $1,000 by the same method
of reasoning.
These figures disregard inefficient
labor. high cost of labor. and faulty
architectural design. This latter
factor is one that adds many a
hard-earned dollar to the ultimate
cost of a middle-class home. A
frst-class practical architect, by ap-
plying commonsense knowledge of
standard sizes of building units. can
every $1,000 principal invested.
Real Estate Credit Down.
The vast gap between the actual
value represented by a built house
and the cost of building it has
driven what used to be good per
cent money to other fields of activ-
ity. Until this gap is bridged, the
banks and other sources of finan-
cling power will continue to place
their funds in commercial enter
prises where, although the final
risk may be greater, the return is
larger. That Is why
today the real estate credit dollar
is worth about ~ cents, and the
credit dollar S6.
1t is the natural desire of every
family in the United States to own
its own home, and the remarkable
increase in number of our home
owners over last years number
leads US to believe that the volume
landlord renter is soon to Join the
dodo and the three-toed horse in
the well-merited oblivion of history,
If. then. home-owning is to be the
backbone of the building business,
it is our unfaltering duty to wipe
out excessive costs. drive the gouger
and the 'profiteer to Cover, and
sweep home-building operations to
the fore. SO that our example OF
thrift will react in every corner of
our business life, and establish this
mighty foundation to business in
general. The family is the eco
nomic bulwark of the nation" has
been said. and the family owning
its own home surely cements that
truth.