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Even if the Government would permit it, most S. & L.s and mutual savings banks could not afford to raise the rates they pay to depositors. The bulk of their assets is invested in 20-year to 30-year mortgage loans at the much lower interest rates of bygone years. Insurance companies, normally the third biggest source of mortgage money, have increasingly withdrawn from the housing field. Wary of inflation and eager to improve their profits, they are funneling most of their property loans into projects in which they become part owners.
Builders complain that housing is being squeezed by the Government for the fifth time in 15 years. Paul McCracken, chairman of the President's Council of Economic Advisers, admits that they have a point. Because housing depends so greatly on credit, he concedes, the industry lies "at the end of the economic whipcracker." When the Government snapped that whip by severely tightening money in 1966, housing absorbed 70% of the resulting cutback in lending. Builders had not yet made up for their 1966 production losses before they were hit again in 1969.
The Nixon Administration has tried to cushion housing from the impact of tight money. The Federal Home Loan Bank Board has lent nearly $4 billion to savings and loan associations. The Federal National Mortgage Association, which is privately owned but Government-controlled, has become the principal source of funds for Federal Housing Administration and Veterans Administration loans. But money is so scarce that average private mortgage rates have risen from 6.4% two years ago to 8.1% now. Many borrowers must pay 81% or even 9%. Though the rates may fall a bit next year, they will probably stay high by historical standards. Any would-be buyer who holds off in hopes of a significant drop in overall housing costs is likely to be disappointed.
Excluding the Negroes
Beyond the immediate problems caused by inflation and tight money, there are other, longer-term reasons for the trouble in housing. The home-building industry is like a sprawling Gulliver, pinned down by gremlins. The industry is snarled in a tangle of little, mostly local restraints that make houses and apartments cost more than they should. A modern Mr. Blandings who tries to build or buy his dream house often finds the experience turning into a bad trip. Among the difficulties that he faces:
BUILDING CODES. They often perpetuate make-work practices, waste, and the use of yesterday's materials and methods. U.S. communities operate under at least 8,300 different building codes; the provisions often conflict, making it impossible to standardize such items as the type of wiring, piping and plumbing. This not only inhibits architects and engineers from developing cost-cutting innovations (for lack of a big enough market), but often prevents builders from reaping the economies of standardized plans and production. Few other big industrial countries permit such a senseless riot of diversity. Code uniformity has helped Western Europe to pass the U.S. in making use of new technology, including precast concrete panels and high-precision assembly systems. in the construction of tower apartments.