WHY U.S. HOUSING COSTS TOO MUCH

THE U.S. has long prided itself on being the best-housed nation in human history. Now, that standing is jeopardized by the soaring cost of homes and apartments. Only last year, according to one recent survey, the cost of housing jumped 10% in most areas of the U.S. "Housing prices are going up faster than people's ability to pay," warns Walter Hoadley, senior vice president and economist of the Bank of America. "The demand for housing is on a collision course with rising costs."

Recognizing that trend, President Johnson in February created a Cabinet Committee on Price Stability to delve into industries "which are a persistent source of inflationary pressure." Foremost among these was construction. The President acted after his Council of Economic Advisers warned that building costs were getting out of step with the economy "by a substantial margin." Construction wages have risen faster than those of other industrial workers, complained the CEA, "while improvement in practices and techniques has lagged seriously."

Boston pipe fitters recently signed a three-year contract calling for annual pay increases of 18%, to $7.54 an hour. Last week in Detroit, carpenters were on strike for a 35% increase in pay and fringes, to $8.07 an hour, while striking bricklayers demanded a 42% raise, to $9.02. Despite a decade-old pledge by the AFL-CIO to end make-work practices in construction, union locals are still getting away with restrictions on such labor-saving devices as paint sprayers and power saws and nailers. In Los Angeles, builders who use air compressors pay an operating engineer $5.59 an hour to do nothing but turn the machine on and off.

While pay scales are a major factor, housing's cost problem reaches far beyond wages. The $24 billion industry has been fettered for decades by myriad little, mostly local ties that bind it to old-fashioned methods and an archaic organization. Each strand of that web reinforces the others&$151;enormously inflating the price of the final product.

A notorious source of housing-cost inflation is local building codes, which often outlaw new materials and methods. Factory-assembled plumbing can save builders $200 per house, but hundreds of localities forbid it. Around Chicago, builders generally must string electric wiring inside half-inch metal pipes instead of nonmetallic sheathed cable. The extra cost: $150 per house. Pittsburgh's Ryan Homes sells a three-bedroom house for $19,300 in one suburb, but is forced to charge $3,000 more for an almost identical model a few miles away.

"We have created such an unholy mess of regulations that our building efficiency has been seriously impaired," says Manhattan Architect William B. Tabler, a code authority. The chaotic diversity among 5,000 local codes has become more costly than their wasteful specifications. There are 85 different codes in the Chicago area, 40 around Cleveland, 30 in Greater Minneapolis-St. Paul. They prevent builders from reaping economies of scale, force dealers to tie up capital while stocking too many sizes of lumber and other materials, inhibit innovations by architects and engineers. "Can you imagine mass-producing autos to conform with standards varying from one city to another?" asks U.S. Under Secretary of Commerce Howard J. Samuels. "The U.S. used mass production to make autos at prices people can afford, but has failed to do the same for one of man's most basic needs, decent shelter."

Zoning and planning contribute to higher costs in a particularly controversial fashion. Countless localities use these two tools to upgrade lot sizes, demand large and costly roads, debatable underground improvements and sometimes even rigid siting of houses on lots. Suburbanites generally contend that such requirements help preserve the amenity of their neighborhoods. Critics charge that the restrictions are concocted to exclude unwanted families and prevent an influx of children from swamping public schools and forcing higher realty taxes. Almost everybody agrees that such "fiscal zoning" keeps house prices high.

The largest contributor to housing's skyrocketing cost is the price of land. In 1945, land accounted for only 12% of the price of an average house and lot; today land constitutes 22% of the total. The National Association of Home Builders figures that the price of land has risen by 15% a year for the past six years. Says Miami Realty Broker Jo Nell Nilsson: "Land we couldn't sell for $2,500 an acre three years ago is now going for $4,450." A dominant cause of inflated land prices is the U.S. system of local realty taxes. Vacant land is generally subject to light levies, compared with developed property. Financially strong speculators can therefore afford to hold out for top prices, meantime writing off the realty tax bill on their income tax returns. In search of cheaper sites, builders naturally leapfrog farther away from cities; in turn, this creates a need for new schools, roads, sewer and water lines. Ultimately, housing consumers pay for the suburban sprawl through higher rents or taxes.

For decades, the Federal Government has largely ignored all these fundamental causes of rising housing costs. Instead, it has concentrated on making overpricing more palatable through easier FHA and VA terms for home buyers and direct subsidies for the growing portion of the population unable to afford decent shelter without them. Now the emphasis is beginning to change. Says former Illinois Senator Paul Douglas, chairman of President Johnson's National Commission on Urban Problems: "I don't think the system is right. Almost one-half of American society is priced out of new housing." Douglas has become a champion of building-code reform. The obvious need is for uniform national standards, and Douglas recently warned that "the Federal Government will have to step in and do the job" if private enterprise fails.

Both the Defense Department and the Department of Housing and Urban Development are planning to let substantial contracts to test new technology that may cut building costs by as much as 15%. In Detroit, Contractor H. Fred Campbell persuaded both building inspectors and labor unions to ease some of their rules to help him start a $400,000 project in the largely Negro inner city. Partly by using new techniques, Campbell expects to offer a one-bedroom apartment for $80-a-month rent, well below that of competitive units. In South Bend, Ind., Home Builder Andrew Place has just sold a three-bedroom FHA house for $10,900, nearly $3,000 less than the price of any other new home in the area.

As an experiment, FHA recently backed inexpensive houses built by half a dozen manufacturers of mobile homes. Guerdon Industries came up with a two-bedroom, one-bath model, 12 ft. wide and 46 ft. long, that sells for a mere $4,210 in Ashburn, Ga. To keep the price that low, the city relaxed its requirements for street paving and foundations and FHA waived a few of its ordinary minimum standards.

In another approach, the Senate last week passed and sent to the House a $5 billion bill aimed at, among other things, improving conditions in riot-torn cities by tripling output of subsidized housing for the poor. Soaring costs, to which subsidies themselves would contribute, can make that goal harder to reach; they can also dim the Johnson Administration's hope of almost doubling housing production to 2.6 million units a year within a decade.

For the overwhelming majority of U.S. citizens who pay the full cost of their housing, it should be welcome news that the reasons for high prices are beginning to be recognized. For states and localities, whose shortcomings have helped create the problem, as well as for all segments of the private building industry, Washington's move toward an assault on costs presents a challenge as well as an opportunity to do all that can be done to make the price right.

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