Housing: The Swing Back to Ticky-Tacky

THE main trend in new housing for the past 15 years has been toward bigger--and better-equipped--homes and apartments. Now the nation's housing crisis has thrown that movement into reverse. Builders are turning again to the construction of small, stripped-down dwellings. The result is a reappearance of what social critics call suburban "ticky-tacky." Much of it is almost as cramped, though perhaps not quite as ugly as the postwar bungalows that earned developers considerable derision in the 1950s.

Builders have rushed back to the low-priced end of the market because the soaring costs of labor, land, materials and especially mortgage money make it impossible for many buyers to afford larger, more expensive homes. "The three-bedroom, two-bath house that in 1966 cost $25,000 now goes for $32,000," says Michael Tenzer, a senior vice president of Los Angeles-based Larwin Group Inc. "Four years ago, about 41% of the people around here had incomes of $9,600 or more, which could qualify them to buy that house. Today only 22% of the population can meet the $14,900 annual income requirement for that same house."

Little More Than Livable. To hold prices down, builders offer less space and fewer amenities. Larwin's three-bedroom models have shrunk from 1,300 sq. ft. to 1,000, for example, and the company is putting them up on cheaper land farther from the center of the city. Larwin has dropped dishwashers as standard equipment, substituted a single oven for a double one, and switched to lower-quality kitchen cabinets. Kaufman & Broad, which builds in 43 communities, has not only eliminated fireplaces, landscaping and air conditioning as standard items, but also shifted to a more boxy-shaped house because extra corners raise building costs.

The stripped-down models have a special appeal to the increasing legions of young couples eager to find a home of their own. Denver builders report brisk sales of $15,000 one-family homes. In Dayton, $16,000 three-bedroom models are market leaders. Carrying the trend to its extreme, many builders are successfully bringing out two-bedroom, one-bath houses, which buyers had shunned for years. In Houston, $11,995 buys a two-bedroom home. Pardee Construction Co. sells a two-bedroom model for $16,000 in San Diego. "It's livable," says Vice President Vance Meyer, "but it's more a shelter house than anything else."

In another move to control costs, some 40 companies have begun manufacturing modular housing--factory-finished rooms that are assembled at the site. Richard Wasserman, president of Levitt & Sons, which is building a modular factory, expects that this system will cut construction costs to at least 5% below those of today's conventional, on-site building. Wasserman anticipates much larger savings in the years ahead because "the incredible shortage of skilled craftsmen" seems certain to drive wages at building sites up much faster than those of lower-paid factory workers.

Modular housing may help to free the fragmented building industry from its dependence on localized and often inefficient production methods. Stirling Homex Corp., largest of the modular builders, last month moved an entire trainload of $20,000 town houses 950 miles from its plant in Avon, N.Y., to Corinth, Miss. Each house was built and shipped in four sections, averaging 12 ft. by 24 ft.; then the modular units were swung by crane onto foundations and were made ready for occupancy on the same day that they arrived.

Subsidizing the Mortgage. To spur sales of houses, developers in Southern California, Texas and Michigan have adopted gimmicks that temporarily reduce mortgage rates and thus cut monthly payments of buyers. At the new town of Valencia outside of Los Angeles, Builder Don Bren sold $1,000,000 worth of homes in three weeks; for three years, his customers will pay only 6% interest on their mortgages, instead of the 8 1/2% to 9 1/4% rate prevailing in the area. After the three years, the owners must refinance the loan. The refinancing could involve lower interest rates than at present, but, if the prevailing rates do not decline, buyers could easily wind up paying more for their homes than they would have with an ordinary loan.

The Government is sharply increasing its mortgage aid, mostly to people in the lower-middle-income brackets. Through the Federal Housing Administration, families with incomes from $4,000 to $8,000 can obtain a mortgage on which the Government subsidizes up to 7 1/2% of the 8 1/2% interest rate for the 30-year life of the loan. The Government pays the subsidies to private lenders, which extend the loans. For one recently completed group of $17,500 town houses in Pittsburgh, the buyers (mostly blacks) will pay only $97 a month for interest and amortization on their mortgages; the taxpayers will chip in another $86. In addition, the Emergency Home Finance Act, signed last month by President Nixon, creates a new program to subsidize loans on an estimated 280,000 houses priced up to $30,000 over the next three years.

High-Price Squeeze. "People have panicked over the stock market," says Pittsburgh Builder Vincent Amore, whose $50,000 homes are selling slowly. The market is particularly sluggish in the suburbs around New York City. Several major corporations have shifted their headquarters out of troubled Manhattan, and transferred executives are forced to sell their houses, creating an oversupply in the market. Many have shaved the asking prices for their houses. A house that commanded $90,000 last year now moves for about $85,000.

One bright sign is that conventional mortgage money is again trickling out from banks and savings and loan associations. Reasons: the Federal Reserve Board has relaxed last year's squeeze on the money supply, and recession-wary consumers have reduced their spending and increased their savings. Still, demands for the limited supply of credit are so great that few moneymen expect mortgage rates to dip much below 8% in the near future. The frustrated home seeker who is waiting for a big drop in interest rates, construction costs or rents is almost sure to be disappointed.

The Administration counts on an increase in construction to help lift the economy out of the 1970 slump. Housing starts have risen 28% from their January low, to an annual rate of 1,358,000 units in June. Though the rate may well reach 1,600,000 units by year's end, most estimates place total 1970 output no higher than 1,440,000 units (not counting mobile homes), v. 1,500,000 last year. That would leave the U.S. far behind its congressionally set goal of 2,600,000 starts a year. Thus, in the nation that has long taken pride in having the best housing in the world, finding a suitable place to live will remain a headache for many people.

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