Evening star., 1947-11-09
U.S.AidVital
ToBuilders
End of FILA Credit
Would Be Blow to
Home Industry
By Robert J. Lewis

By Robert }. Lewis
Home construction has gone for
ward by leaps and bounds IN the
United States during the last year
and a half, far outstripping the rest
of the world and reaching month
ly rate equaling the record achieved
in the mid-'20s.
Yet within matter of weeks ex-
haustion of the Federal Housing
Administrations postwar mortgage
insurance authorization Of $2,400,-
000,00O-a principal source Of pro-
duction credit for housing construc-
tion-threatens to interrupt con-
tinued expansion of this critical
industry.
Apartments Built on Credit
Because Of the nature Of this
Government aid any such inter-
ruption would damage the housing
program at It's weakest point
rental dwelling production. For by
far the heaviest majority of rental
apartments already put under con-
struction, or planned, depend on
this form of emergency credit.
With this type of help builders
can obtain 90 per cent loans on
necessary current costs Of building.
This means only comparatively
small amount of capital is needed
to GO ahead.
Without 1t builders are obliged
kodepend on conventional loans. This
means they generally must have
available a far greater share Of
the needed capital, since banks or
other lending institutions could not
afford to risk making loans on the
basis of 30 per cent Of projects
cost.
FHAs emergency system Of mort
gage insurance was first authorized
by Congress in 1941 to encourage
volume production of privately
owned defense housing.
Title E Program
Under this program FILA for the
first time was able to insure 80 per
cent construction loans to builders.
This liberal credit was needed ini-
TALLY to provide houses and apart
ments for defense workers. Alto
gether, Congress authorized issuance
of $1,000, 100000 in. such mortgage
insurance during the defense and
war period.
In 1916, as part of the veterans
emergency housing program, this
form of financing was made avail
able for production of veterans
housing, and Congress authorized
additional insurance amounts total
ing s2,40O, 100000.
Under the emergency program
known in the industry as the title 6
program m''-insuranc is issued for
single dwellings. two-tofour-family
fats and apartment projects having
eight or more units. In addition,
financing is made available to man.
ufacturers of prefabricated houses
under certain conditions.
During the original period, when
the program was aimed at producing
privately built defense and war
housing, by far the great bulk OF
dwellings financed were single fam
lily homes for sale. The figures were
379,858 dwellings under the one-to-
four-family classification, mostly
single family homes for sale, as COM
pared to 37,OS9 apartment units.
Variation in Ratio
However, under the veterans hous-
ing phase, which began with passage
of the Veterans Emergency Housing
Act in May, 1916, the ratio of renta
housing units to for-sale houses has
sharply increased.
AS of September 80 this year, there
we're 195,O37 one = to four family
units covered either by insured
mortgages or by an outstanding
commitment for FILA title 6 insur'
ance in comparison to coverage o1
71.O41 large-scale apartment units.
FHAs success in inducing build
ers to 60 ahead with apartment
units In a high-cost period is
measure of the liberality of the title
6 program. It is also somewhat OF
surprise, since the universal COM
plant last year was that hardly
anv apartments were then under
construction or contemplated.
Normally, In a high-cost perloc
builders fear to undertake apart
ment construction, aware that IN
subsequent defationary period low
cred rents may fail even to pay the
interest on the mortgage. Thus ar
incentive had to be found, and the
title 6 program, with its liberalizeo
ratio of loans to value Of property
and other benefits, was that lncen-
tive
Incentive Was Needed
Under it, kaleidoscope array Of
businessmen previously unidentified
with the building business, as vel
as established builders, have en-
tered the home-construction field
Willing to buck labor and ma
! terials shortages, and consequent
high wages and prices, yet hoping
for a profit. they are gradually
whiting down the housing short
age. with Government aid, on
private-enterprise basis.
Builders and lending institutions
naturally, do not want the Govern
ment to withdraw this type of helr
Just as housing production is be,
ginning to roll in high gear. Las
week, for example. the Board oi
Directors of the National Associa.
ton of Home Builders went on rec.
ord in favor of an authorization fol