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The Economics of Low-Rent Housing*

Published online by Cambridge University Press:  07 November 2014

L. C. Marsh
L. C. Marsh*
Affiliation:
The University of British Columbia
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Extract

A chemist who either discussed his subject, or worked in his laboratory, on the assumption that all elements were equal, or that matter was composed of single homogeneous units called “molecules,” would not remain long in his profession. Force of ridicule, or of some even more drastic happening, would remove him. But the economics of many practical and pressing problems is continually bedevilled by discussions, and even on occasion policies, which involve a sort of stubborn simplification quite unworried by the facts. It is certainly understandable that, in the field of housing, this complaint has arisen frequently from those who have tried to deal with the subject from a social rather than a particularist viewpoint, and in its full dimensions rather than within the limits of some familiar phase. In the effort to get low-rent housing into its proper perspective, there are two obstacles which are particularly troublesome. One is the assumption that all housing “units” are the same, the kind of view which leads to the belief that “one thousand houses built” is the same contribution to national need, no matter what kind of houses they may be. The other is the argument or belief which really involves the assumption that peoples' incomes are broadly equal, and all comfortably above the average. The most frequent version is that most people, or at least a majority, can afford to own their own home, or should be encouraged to do so. A more valid but troublesome one in its “all-or-nothing” form is that cheapening the cost of construction is the “real” problem; and there are other variants. Another version, less frequently heard in these days of pressure, is that people live in slums because they like it.

Type
Articles
Information
Canadian Journal of Economics and Political Science/Revue canadienne de economiques et science politique , Volume 15 , Issue 1 , February 1949 , pp. 14 - 33
Copyright
Copyright © Canadian Political Science Association 1949

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Footnotes

*

This paper was presented at the Annual Meeting of the Canadian Political Science Association in Vancouver on June 16, 1948.

References

1 See, for example, Nathan Straus, The Seven Myths of Housing or Catherine Bauer, Modern Housing.

2 This designation will be used for convenience for Report IV, Housing and Community Planning, of the Advisory Committee on Reconstruction (Ottawa, 1944).Google Scholar Figures not otherwise accredited in the present paper are drawn from this source.

Space limitations make it necessary to confine the discussion to urban housing, and principally to the main cities where the most serious aspects of the housing problem are concentrated. The writer may perhaps be allowed to cite the Report as evidence that he is fully aware that farm and rural housing should receive their due share of attention.

3 For United States projects, the ratio applies to net family income and gross rent (that is, including utilities). The principle is developed even further by charging only one-sixth of family income for larger families (with three or more “minor dependents”). On this basis (with annual review of tenant incomes) a schedule of graded rents, charging rents according to family income rather than the amount of accommodation, is possible in public projects.

4 The most authoritative figures of total personal income distribution (as distinct from distribution among wage and salary earners only) are to be found in National Accounts Income and Expenditure 1938-1945; (revised edition, Ottawa, 04, 1946).Google Scholar For married men, excluding agriculture and the armed services, these give the following (relating to 1942): below $1,500, 44.5 per cent; $1,500 to $2,000, 25.7 per cent; $2,000 to $2,500, 14.8 per cent; $2,500 and over, 15.0 per cent.

5 There are important qualifications to this overall average. The figures for both manufacturing and building are around $33.00. They are probably nearest to the semi-skilled rate with unskilled workers earning less, and skilled workers more than this figure (the average for road construction is $27.00, for local transportation $39.60): lost time and regional variations must also be allowed for.

6 The standard budget was actually $35.85 a week, for an average family of five, at the last revision in 1944, since when the cost of living has risen 25 per cent.

7 The average amount added by extra wage-earners is easily overrated. In 1937-8 the special Dominion Bureau of Statistics Cost of Living Survey (which excluded social assistance families) showed the average wage-earner income to be $1,433, of which 92 per cent was, on the average, derived from the head of the family.

8 Fifty years is really excessive for predominantly wooden houses, in the light of contemporary revisions of housing design, changing family sizes, and town planning needs.

9 Comparison of typical sizes of contemporary houses and older ones shows readily the trend to much smaller houses. More efficient design has contributed a little to this, especially among the good quality houses, but high costs of labour and materials have dictated most of the pattern. The pursuit of “cheap” houses for sale to get them within the range of wage earners and some middle-income groups has produced a number of examples of houses which are too flimsy or too small (for example, one bedroom, or little more than 500 square feet).

10 The non-urban units presumably include most of the comparatively small number of houses built under the Veterans Land Act, and the Farm Loan Act and Farm Improvement Loans Act (about 2,000 under the former legislation for farms, small holdings, etc., and about 440 new farms under the latter legislation); some of the 3,751 units for municipalities and universities assisted under the Emergency Shelter Regulations; and part of the 456 units completed for military and Defence Research Board use. The priority-rating statistics of the Department of Reconstruction record 850 “prefabricated houses” as under construction without indicating their location: local by-laws prevent their orection in many cities.

Note. Since this was written, a valuable set of statistics has been made available by the Economic Research Division of Central Mortgage and Housing Corporation, in their new bulletin Mortgage Lending in Canada; tables of particular relevance to the theme of this article appear on pp. 27 and 55-7, which analyse in detail the components of the total of 81,404 housing units financed publicly and privately in 1947. Misleading deductions are likely to be drawn from this compilation, however, if it is not remembered (a) that it refers to starts, not completions, during the year, and (b) that it covers a very mixed range of construction activity.

If exclusion is made of farm and rural units, temporary and emergency shelter, housing for military or Defence Board workers, and home improvement, the total is reduced by 7,240. The total of “normal” housing units for urban areas is thus just short of 74,000, and (since these are “starts” only) part of this must be attributed to 1948. It is worth noting that only 17,000 of these (of which Wartime Housing rental units for veterans account for 6,720) were aided directly or indirectly-through government financing. Further, since it is known that 78 per cent of the privately financed or constructed housing was for owner-occupancy, it is possible to compute the overall percentage of rental housing in the “corrected” total of 74,000. Including the 6,720 Wartime Housing units, the number for 1947-8 was 19,300 or about 26 per cent: excluding them, 17 per cent. Practically none of these latter are likely to rent for less than $45.00 a month.

11 These figures of course overlap a great deal: there is no standard count of substandard and overcrowded housing as a whole. A summary of local (city) surveys during the period 1931-41 is given in the Housing Report, pp. 237-40, 243-7. It may be worth noting that a mimimum measurement of (urban) overcrowding in 1931 was 78,000 households.

12 Public housing projects, it may be noted, have proved manageable with very low vacancy rates. Commercial apartments must allow higher vacancy rates the nearer they come to the “hotel level” of mobile occupancy.

13 A Housing Committee of the House of Commons reported, among others, the following as its conclusions thirteen years ago:

“(4) The formation, institution and pursuit of a policy of adequate housing should be accepted as a social responsibility.

“(5) There is no apparent prospect of the low-rental housing need being met through unaided private enterprise building for profit.

“(13) The slum areas which have been shown to cast very heavy expenses on many branches of public administration such as health, welfare, fire prevention, administration of justice, etc., may justify public assistance, which is likely to prove as sound financially as it is certainly desirable socially.” (Final Report of the Special Committee on Housing, 1935, p. 375).

14 By the same token, rental insurance is more likely to freeze the gap than to bridge it. High-rental housing is alone commercially profitable. A guarantee against loss in rents will not induce building at public housing rents, which are too low for profit. Public housing, on the other hand, does not need rental insurance at all.