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Whenever the end of inflation permits interest rates to decline, housing's prospects will improve. The key to the situation is consumer savings. If bond interest rates come down enough so that the public will deposit more money into banks and savings and loan associations, mortgage money will flow again. Even after prices have stabilized, the Federal Government would have to run substantial budget surpluses for several years to assure a plentiful supply of housing money. If the budget were in surplus, of course, the Government would need to borrow less in the private money market, thus making more funds available for home finance.
Budget surpluses will be essential if the U.S. is to reach the ambitious target set by the 1968 Housing Act. That goal is to wipe out slums by building and rehabilitating 26 million houses and apartments by 1978. Many builders and bankers think that the goal is unrealistic. To achieve it, the nation would have to reallocate its financial resources, raising housing's share of the gross national product from 31% to 41% . The shift may sound small, but it would amount to a multibillion-dollar increase, and leave that much less for corporations and other borrowers.
Breaking the Roadblocks
No simple formula exists for raising the supply and holding down the cost of conventional housing on a long-term basis. "There is such an interwoven web of resistances, so many barriers, that we will not break through unless we have a really big national push," says John Gardner, chairman of the Urban Coalition.
As part of that push, several things could be done:
>Construction unions should stop perpetuating shortages of skilled workmen, as they do through their current practices of excluding Negroes and limiting apprenticeship training. The unions' appetite for hefty wage increases would presumably diminish if industry would provide year-round employment, as it might in factories that mass-produce houses and components.
> The Federal Government should adopt national building standards and insist that they be applied at least to all federally aided construction. The Government might also try providing more incentives for private enterprise to rehabilitate slum housing. Faster tax writeoffs and other income tax breaks are obvious possibilities.
— Local governments should reform the lax administration of property assessment and revise their real estate tax laws in order to tax buildings lightly if at all and land heavily—instead of vice versa. That would significantly alter the whole economics of property ownership. Speculators would have to develop their land or sell out; it would be too costly merely to hold on to property and make no improvements, while waiting for prices to rise. Landlords would no longer have reason to neglect the upkeep of old apartments, except where rent controls persist. A recent study in Milwaukee shows that such changes should force cities to build up instead of out, end the need for urban renewal subsidies, and very likely depress the price of acreage on the suburban fringes.