Houses, Houses, Where Are the Houses?
The more homes we build, the greater the shortage. How come? Here’s the answer, and a hint of better times — a year away
MACLEAN'S OTTAWA EDITOR
IN THE greatest Canadian building boom of all time the housing shortage has been getting worse instead of better.
Across Canada, 10,000 families are still in “emergency shelter” — abandoned army huts, empty public buildings, a few old houses chopped into little apartments. Some are comfortable enough but most are ugly, crowded, barracklike quarters, and some are squalid slums.
“It’s not exactly convenient,” a young veteran said of the army hut where he and his family lived. “We have no bathroom or sink of our own; we have to carry all our water. But we’d been in two rooms with no doors, and another family across the hall in rooms just like them. We hung blankets across the doorways, that’s*all the privacy we had.”
A year or so ago the Government’s Central Mortgage and Housing Corporation finished 417 apartments in Ottawa for rental to veterans. They got 3,500 applications. Of these, 1,200 applicants were living under intolerable conditions—families of three, four and five crammed into single rooms or shivering through the winter in summer cottages.
Eight hundred of them are still in this kind of shelter.
Last December an Ottawa family moved into a new house and advertised the old one for rent. They got 65 phone calls between 7 and 11 that evening, and the telephone started ringing again at 7 next morning. Other applicants traced the address from the phone number given in the advertisement and arrived by taxi to plead in person.
Their stories were grim. One young mother was trying to raise her baby in an attic. A family of three was billeted in three different rooming houses.
At least a million Canadians arfe living under some kind of housing pressure today, and the pressure has been increasing, not diminishing. More people are “doubled up,” sharing homes
with other families, than ever before. In 1939 Canada had 200,000 more families than homes. Now the figure is 400,000, and still growing.
True, we’ve done a lot of building half a million homes in nine years. Last year 83,000 were completed, 50% more than the peak year before the war. But 110,000 couples got married and 30,000 people came in as immigrants. Take away 30,000 families broken up by death or divorce, and you still have 25,000 more new families than you have new homes.
That’s been going on ever since war broke out. The building rate has been high, but the marriage rate has been higher. Each year brought a new deficit in houses.
What are we going to do about it?
I’ve put that question to men in all phases of the business - builders large
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Houses, Houses, Where Are The Houses?
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and small, lending companies which finance new homes, and the Government housing authorities. All give the same answer:
For the moment, nothing very startling.
It’s true that for the long pull, and for certain people, things are looking a bit brighter. By the end of 1949 the commercial building boom will have tapered off and the insurance companies stand ready to finance homebuilding with the materials and labor thus released. Wholesale lumber prices are beginning to fall and retail prices can be expected to follow.
Soon, probably within a year, the man with some money and a steady job will be able to buy a better, cheaper house than any contractor can offer him today. The turning point in prices, which has kept retreating year after year, at last seems to be within sight. And that will help—eventually.
But none of the people I talked to had a pat answer that would enable Canada to overtake her housing deficit in 1949.
A few had suggestions that might have improved matters slightly. Builders, for example, complained of bureaucratic red tape. Last year we had an acute shortage of kitchen sinks. Canadian wholesalers got hold of 10.000 sinks in the United States. But because the wholesalers hadn’t been importers in the past, they couldn’t get an import quota from the federal authorities. We had to do without the sinks.
But even the most exasperated builder admitted that those 10,000 sinks wouldn’t have meant 10,000 more houses. Other things were scarce too — especially cement and steel. Everyone seemed to agree that, practically speaking, Canada built as many houses in 1948 as could be built.
All the material and all the labor was put to use. Every bathtub Canada could produce, or buy abroad, went into a Canadian house. Every bricklayer, carpenter and plumber had all the work he could do.
By present forecasts housing materials will be a little more plentiful in 1949key items like gypsum lath, iron soil pipe, cement, sinks and bathtubs ought to be up 7(/ to 15% over 1948 production. There may be more skilled labor to spare from industrial and commercial jobs.
Prices Coming Down
We’ll build a lot of houses—maybe 90,000 or even 100,000. But we’ll still have a deficit on the year’s operations (more new families than new homes) and we’ll make no dent whatever in that great backlog of need, the 400,000 families who already have no place of their own.
When, if ever, will Canada be able to tackle that big job?
There are two answers. It will probably become physically possible to build more houses by 1950. That’s when the great industrial and commercial building boom, the biggest we’ve ever had ($3 billions in 1948, four times the 1939 total), is expected to slow down. Industrial building contracts awarded in 1948 showed a drop of 33% below 1947; the effect of that shrinkage will be felt by next year, when work in hand is completed.
For the building season of 1950, then, we can expect plenty of bricks and mortar, plenty of nails and sinks and bathtubs, plenty of carpenters and bricklayers. The problem of supply
will be solved. But we may have a new problem—the problem of demand. Will the people who need homes still be able to buy or rent them?
It won’t take as much money as it does now. Builders admit that even at present prices of materials, and present wage rates, houses could be built a good deal more cheaply. With more plentiful labor and materials, fewer incompetent workmen would be able to hold highly paid jobs, and there’d be no costly delays in waiting for materials.
Even in 1948, though wages and the price of materials rose, the price of the finished product began to ease.
In Saint John, N.B., the Government’s housing corporation planned a group of rental houses for veterans. All the bids turned out to be too high, $800 per house above the Government’s top price. It looked as if the deal were olf.
A few weeks later Saint John contractors bid for another job, an industrial building. The man who’d made the lowest tender for the housing project failed to get the industrial contract. So he put in a new, lower bid for the housing job, and got it.
When that condition becomes a little more prevalent, private enterprise in Canada is ready to go into the field of housing-for-rental on a larger scale than ever before.
Is This the Time to Plunge?
In Toronto the Manufacturers’ Life Insurance Company has plans ready for a type of rented dwelling that’s new in English-speaking Canada. It’s a block of six houses—not apartments, but four-room units of two floors each with individual basements and furnaces and separate entrances from the street. They’ve already built one such block as an experiment, in a good residential district of Toronto; even at 1948 cost levels they’re able to rent these homes at $65 a month.
The same company has put up small detached houses at prices in the neighborhood of $8,000. Other insurance companies, which in Canada are the principal reservoir of private money for building loans, have similar plans.
“We’re ready and willing to go into rental housing in a big way,” said a man who handles mortgage loans for one of the biggest firms in Canada. “We know the job has to he done. We know that if we don’t tackle it,‘the Government must. We’re just waiting for the right time to move in.
“Today we can’t get a contractor interested in building us 100 or 200 houses—he’s got all he can do already. But when the day comes that we can go to a big contractor, ask and get a firm price for a block of dwellings, then we’ll be in the housing business.”
When will that day come?
At another insurance firm’s head office, the mortgage man replied, “In my personal opinion, it’s here now— we ought to be getting started. But I haven’t been able to get anybody else around here to agree with me.”
Before the war, mortgage companies were not interested in new loans when the price cycle was declining. The new attitude represents a great change in their thinking—a determination to take the risk of using their great reserves of cash to help check deflation, keep men working and wheels turning, and produce for people the homes they need.
To hold to such a course will take courage. It won’t be enough to build for the highest-priced market, for the high-priced market is likely to dwindle. Already, in Chicago, three times as many new houses are unsold as there were this time last year—the American building boom has passed its peak. To
keep the building industry in operation, private enterprise wall have to learn how to build for the family with a small income.
Even now a few men have shown that it can be done.
In Ottawa a businessman named C. E. Pickering was named chairman of the emergency shelter committee a couple of years ago. Pickering wasn’t a builder—had never had anything to do with real estate in his life. But he was shocked by the desperate cases he had to deal with and decided something could he done about it.
He called in three friends—Norman McCrostie, an engineer; Albert Hazelgrove, an architect; Harry Hayley, a manufacturer of building materials. Hayley brought in his four sons, who are also his partners.
They all chipped in $200 apiece to form a little company, Economy Housing Ltd. The company borrowed $25,000 from the bank, and before the year was out it had run an overdraft of $40,000 more. That was their entire working capital.
Hazelgrove and the Hayley brothers worked out a plan for the cheapest possible house—four rooms built of cinder blocks covered with stucco, and a flat roof. No basement, but a small storeroom outside the kitchen door. Oil heating, from a small unit in the living room. Each house has a small lawn, a small back yard.
They thought they could build it for $3,500 including lot, and they took orders at that price. Anyone could apply, with only one stipulation— applicants had to have children. The company went ahead with 35 houses on an experimental basis.
As it turned out, their costs ran high and they lost $400 on each house. “None of us had any regrets,” Mr. Pickering said. They plan to build 500 similar houses this year at a slightly higher price and make a small profit.
Each of the 35 new home owners had to put up $350 of his own money—10% of the total. The rest he got through a National Housing Act loan; to retire that loan he pays $27.49 a month to cover interest, principal and city taxes. If he couldn’t raise the $350 he could get half of it from the Ontario Government on a second mortgage at 3 %% and pay a slightly higher monthly rate.
This project was not, of course, a straight business proposition. Pickering and his friends got valuable help. David Mansur, president of the Federal Government’s Central Mortgage and Housing Corporation, got land from the City of Ottawa by trading it for a nearby parcel of Crown land, the same size but unsuitable for building. Pickering’s company could sell it for $50 a lot, far below market value in the neighborhood. The city provided sewers and water mains without a special tax levy.
Where to Get the Money
However, this kind of help is available anywhere in Canada. It took only half a dozen public-spirited citizens, willing to engage their personal credit and do a lot of work for small reward except the satisfaction of public service.
The nub of Pickering’s problem, getting the money, was solved by the most important single item in the Canadian housing aid program—loans under the National Housing Act—and the Ontario Housing Development Act.
The federal act enables anyone wishing to build his own house to borrow a varying percentage of the lending value at 4%%, interest on a 30-year mortgage. “Lending value” isn’t the whole cast of the house at today’s inflated prices; it’s an arbitrary amount, set by Central Mortgage and
Housing and supposed to represent the true worth of the house in a less inflated market. The home builder can borrow up to 90% of the first $6,000 of lending value, then a diminishing percentage up to a maximum loan of $8,500.
Suppose a man wanted to build a house for $7,000. The “lending value” might well be $6,000 and he could borrow 90% of that (or $5,400) on a 30-year mortgage. But his down payment would have to be not 10% of the total cost ($700) but $1,600.
Last year the Ontario Government moved in to help plug this gap. Under the plan worked out by Hon. Dana Porter, then Minister of Reconstruction, Ontario will guarantee a second mortgage to cover half of any down payment up to $2,500. So, in the case cited above, the home owner would need to have only $800 cash in order to get his house built. He could then retire his mortgage and pay interest and taxes with a monthly payment of about $40.
So far that extra help is not available to any Canadians outside Ontario. But two or three other provinces have expressed interest in it; probably before this year is out it will be in wider use.
These are inducements to men who want to build their own homes. Other inducements are designed to encourage the speculative builder who puts up houses for sale.
For an “integrated project —a little community of dwellings for sale to veterans at a controlled price the builder gets a Government-guaranteed loan of 85% of his costs. He gets priorities for scarce material. Most important of all, the Government undertakes to buy at cost any house he may be unable to sell.
Fifteen thousand of these units have been built. A typical project is now going up in North York just outside Toronto—about 300 five-room bungalows priced at $8,200 each. Down payment is $2,080 with a National 1 lousing Act loan and monthly payment of $38.15. If the veteran gets a second mortgage from the Ontario Government his down payment is cut in half, his monthly payment goes up to $44.07.
So far the integrated houses have sold like hot cakes. Veterans had gratuities and re-establishment credits to cover the down payments, and the monthly rates are far below current rents. But lately the sales have been slowing down.
The Builder Can’t Lose
In those places what keeps the builder going is the Government s promise to buy back the unsold houses. There is little variation in the need for new housing across Canada. Except in a few places like Pictou, N.S., or Prince Rupert, B.C., where war industries have been shut down, dwellings are scarce in all Canadian cities. But there is great variation in the effective demand for new houses—the number of home owners who can afford them and whose credit is good. Right now it’s believed in Ottawa that if the Government’s repurchase guarantee were withdrawn, half the home building in the Prairie Provinces would stop.
Somewhat the same technique is being used to stimulate building for rental. Since last summer the Federal Government has been offering “rental insurance” to builders willing to put up new apartment blocks with threeand four-room units renting at $84 a month or less. The Government guarantees a rental, effective for up to 30 years, which will cover debt service on 85% of the original cost, operating expenses,
and a two per cent return on the builder’s own money.
In other words, building under either of these plans becomes an investment guaranteed against loss. The builder has a chance to do pretty well when times are good. When times are bad, he can’t lose. The Canadian taxpayer will bear the loss.
In addition to these “inducement” programs, the Government is also doing some direct building of its own, for rental to veterans. Wartime Housing Ltd., now absorbed into Central Mortgage and Housing Corporation, has built a grand total of 37,000 dwellings for war workers and veterans. Eight thousand of these were built last year and 11,000 more will be built in 1949.
This program, too, gets assistance from the Ontario Government. Wartime Housing has required municipalities to provide free land and services for the new low-rental homes the Federal Government builds. Ontario offers to pay half the cost of land and services for any municipality wanting to take advantage of the federal plan.
However, all these schemes of state aid are only a drop in the ocean of the current housing boom. Of the 83,000 homes built in 1948 only 8,000 were built directly by the Federal Govern-
ment for rental; 17.000 more had the help of National Housing Act loans. That means 60.000 homes—three quarters of the total —were built without Government aid. They were built because 60,000 people had the money to build or buy the houses they wanted.
If there are still plenty of these people left in 1950, when materials and labor will be easier to get, Canada could build at least 125,000 houses without difficulty. But in the construction trade there is doubt that well-heeled buyers will be as plentiful as they have been.
Builders and lenders both seem to agree that Government building for the low-income tenant will be necessary. Allan C. Ross, president of the Canadian Construction Association, told his annual meeting that “low-rental housing for the low-income group is only possible with some form of Government assistance.” A resolution at the same meeting called for “adoption, as a social measure, of a modest, national, long-term, low-rental housing plan.”
“We mean subsidized housing,” a member explained. “We wiggle around to avoid using the word, but that’s what we mean just the same.”
Governments are much less enthusi-
astic about this—they know the headaches of the state landlord. Who would choose the lucky few to live in the nice new subsidized homes?
Other obstacles face private as well as public schemes for large-scale building, and the worst of these is the shortage of serviced land.
All the major cities of Canada except Montreal and Edmonton are solidly built up to their own municipal limits. Beyond the city limits are suburban towns with plenty of empty land, but no money to install new services— sewers, water, lighting, etc.
There are at least two ways out of this dilemma, and probably more. One is a reform of municipal finance. Somehow, by annexation or borough system, the great metropolitan areas will have to pool their tax resources to carry their common burden. Tax-rich Toronto would then help tax-poor North York, and so all the way from Greater Halifax to Greater Vancouver.
Filling the Schools
Another solution is to make room for more people within the big city, where schools and services are already available. City areas which were once residential are now filled up with small shops, rooming houses, etc. School classrooms in these areas go empty íor the lack of pupils.
That sort of area could be expropriated, cleared, and made the site of a really big housing development large apartment blocks that would triple or quadruple the child population, fill the schools, rehouse hundreds of people without requiring great capital outlays for new streets and sewers. But that s the kind of project that m-eds maximum co-operation. fl he municipality would have to expropriate the land, province and I lominion would have to put up a lot of the money, and private enterprise would have to undertake most of the work and some of the risk involved in clearing and rebuilding.
Most building experts agree that any kind of building for lowand medium-income tenants, whether it s don«; by the state or private enterprise or both, will have to be large-scale. That's the only way to keep costs down. Few seem to think that houses for th*! Canadian climate should b.; built in a factory, like automobiles. But there is considerable saving, usually about 15%, in the modified “on-site” préfabrication that g«>es with large-scale building.
The idea is to erect a small plant on the site where the homes are going up. Make 200 or 300 front doors, all the same size; 1,000 window frames; thousands of joists, beams, fl*)«ir lioards cut to specified lengths; hundreds of kitchen and bathroom panels.
To do this on a national scale we need a lot of changes in municipal building laws. Today houses acceptable in one town are forbidden in another, often for obsolete reasons. Kansas City has been using for 30 years a patented material for pip:;, which it. finds better than steel or iron. But all through the postwar shortage Canadian towns insisted on steel pipe.
None of these obstacles is insuperable, but none is trivial, and even if all the difficulties mentioned were solved we’d still have a housing problem.
Even at the high wages and full employment of 1949, only about half of Canadian wage earners can afford to pay $40 a month for shelter, let alone raise $1,000 as down payment on the house. It will take more than NHA loans, or insured rentals of $84 a month, to meet their needs. And that is a problem which has not yet been solved in Canada. ík