Evening star., 1948-11-03
Financing of Housing Considered

TO the Editor Of The Star:
Everybody wants housing-more and better
housing Republicans are for 1t; Democrats
have been striving for 1t; the men and women
Of America need it.
The Federal Government, through its many
agencies and spokesmen, has been pleading for
more residential construction. President Tru-
man and Candidate Dewey are extremely ac-
tive In their demands for better housing; but
how can houses be built II building loans are
curtailed as sharply and as drastically as they
have been within the past six months?
The life blood of construction is mortgage
money-money for construction as well as for
permanent loans. What Is the situation today?
In the Washington area practically every loan
agency tells the same story-"Sorry, no con-
struction loans are available; sorry, no perma-
nent loan in excess of SO per cent of the sale
price can be arranged"
FHA offers commitments based on valu-
ations way below actual cost of construction:
for instance q loan Of $500 on q home
actually costing the builder in excess of $155OO.
The Federal Reserve tells all member banks
to curtail their real estate loans-some banks
say they were told to make no more loans
The result Of this overnight curtailment is
that thousands Of houses in the Washington
area. completed or in the process of completion,
are tied up tight because Of lack of suitable
financing.
Builders by the dozen are on the verge Of
financial disaster, and many have gone over the
brink, for not many builders can continue to
operate when they have to supply up to 60
per cent Of construction costs out of their
own pockets. Would-be home owners who
want to build or who want to purchase are
stymied for few people can make down
payment in excess Of 5000.
Interest rates are being pushed up on the
theory that money Is scarce" The old extor-
ton racket of financial institutions charg-
ing loan commissions once again rears Its
head based on the same plea money is
scarce"
Labor, material and financing are being
channeled to the big-time builder, for only he,
with his inside" connections, can obtain the
financing that any builder needs.
II all these things meant that the cost for
houses would come down. some Justification
might be found for the situation. But how
can the cost Of housing come down If the cost
and dificulty of doing business goes up? A
continuance Of the present situation means
that only those people with money. and I
mean money in quantities, will be able to
build. There is no competition in that group.
real competition in private housing will be
eliminated from the scene. Fewer houses will
be built and they will sell for more money.
The situation calls for prompt and vigorous
action on the part Of financial institutions, or
failing that, on the part Of the United States
Government. The steps would suggest in
clude:
/. A frm holding Of the interest rate.
2. Elimination of the commission feature.
3. Fair appraisals based on todays cost of
construction. and not based on some fictitious
or ancient yardstick.
4. Elimination Of +. H. AS curtailment of
valuation because 81 use of wells and septic
tanks in rural and suburban areas.
s. Elimination of r. H. A. requirement that
there be no secondary financing.
VIII these steps undermine the safety Of
financial institutions or Of the United States
Government? Not unless our entire economic
system Is 50 violently disrupted by internal
depression that the United States, as we know
1t, will fail to exist. Home owners are the
foundation of q free America, and the wages
OF American home owners, bolstered as they
are today by legislation, trade unions and q
world shortage of goods, are not apt to be
greatly lessened overnight. JOHN c. WEBB.
Fairfax, Virginia.