fiscal year. As evidenced by building permits, construction was started on 482,804 nonfarm dwelling units as compared with 419,539 in the fiscal year 1939, and the dollar cost of these units was estimated at $1,639,270,000 as against $1,483,148,000 in the preceding fiscal year. This was an increase of 15.1 percent in the number of units and of 10.5 percent in dollar volume, as compared with increases of 53.3 and 41.1 percent, respectively, in the previous year. The larger volume of residential building operated to offset, to a certain extent, a decline in nonresidential construction during the year. Private nonresidential building, especially factory construction, reflected some increase over the fiscal year 1939. On the other hand, public nonresidential construction, which looms very large in total CHART III DISTRIBUTION OF RESIDENTIAL CONSTRUCTION (NUMBER OF NONFARM DWELLING UNITS) THOUSANDS 250 200 150 100 50 PRIVATE U.S.H.A. 2nd Half Is Half 2nd Half 1st Half 2nd Half 1st Half 1937 1938 1938 1939 1939 1940 DIVISION OF RESEARCH AND STATISTICS nonresidential construction, showed a substantial decrease due to the completion of the Public Works Program of 1938. As a result, nonresidential construction as a whole was lower than in the preceding fiscal year. Private Versus Public Construction During the fiscal year 1940, publicly financed building was an important factor in total residential construction. The number of dwelling units provided under the slum clearance provisions of the United States Housing Act of 1937 was 58,716 as compared with 25,505 in the preceding year. This rise was augmented by some State and locally sponsored projects such as those under taken under the New York Public Housing Law of 1939. All in all, it is estimated that over 12 percent of the nonfarm dwelling units on which construction was started in the fiscal year 1940 was provided by projects financed through the United States Housing Authority. The bulk of this activity was concentrated in the period from July to December 1939. In the first few months of 1940, the volume of publicly financed building declined. The following table compares the expansion of USHA-financed construction with the increase in private building activity in nonfarm areas: Comparison of private residential construction with USHA-financed construction These figures indicate that more than one-half of the 1940 increase of total residential construction was accounted for by projects financed through the United States Housing Authority. Private building rose only by 30,054 dwelling units, or as little as 7.6 percent. The relatively small expansion of private building activity during the fiscal year 1940 raises the question whether new private construction is not approaching a period of relative stability. It is true of course that the effects of the defense program may change the present relationships between the supply and demand for housing. However, it appears that at the present level of family incomes and building costs, an annual supply of approximately 450,000 dwelling units is about all the effective demand, resulting from normal replacements and increases in the number of families, can absorb. Further expansion of private building seems to be predicated upon (1) a material rise in national income, without corresponding increase in building costs, (2) a marked reduction of building costs, or (3) a further decrease of financing costs. For a number of years, private home building has been supported by an ample supply of funds and a continuous lowering of financing costs through reduced interest rates. Amortization periods have been extended and down payments reduced. The 1940 experience may indicate that this impetus has spent its force, and it is an open question whether substantial general reductions of financing costs from the present low level will be forthcoming. Essentially, however, and barring unforeseen events, the situation remains favorable to private building. The following chart indicates that the oversupply of nonfarm dwelling units in relation to the number of nonfarm families, accumulating since 1925, had been absorbed by 1938. Since then, the number of total available housing units has been moving closely parallel to the number of nonfarm families, with an indicated slight shortage of dwelling units in 1939 and 1940. In fact, 1938 was the first year showing a deficiency in available family units since 1924.1 MILLIONS CHART IV TOTAL FAMILIES AND TOTAL AVAILABLE DWELLING UNITS IN NONFARM AREAS Predominant Position of Single-Family Houses The single-family dwelling continues to hold a predominant position in new construction. This is not only indicative of the strength of traditional preferences of the average American, but should also be an encouragement to local savings and loan associations which from the very beginning have specialized in financing this type of dwelling. 1 Chart IV measures the total number of available dwelling units and the total number of families. The fact that an oversupply of dwelling units is revealed for the period from 1925 to 1938, and that the undersupply thereafter is only small, does not preclude serious local shortages; nor does it preclude shortages for certain income groups. In addition, the number of available housing units includes substandard dwellings as well as others. The doubling up of a large number of families also influenced these trends. The two curves in the chart are based on: National Resources Committee, Housing Monograph Series, No. 1, Residential Building, Table VI. The underlying estimates of the number of nonfarm families and the number of nonfarm dwelling units were brought up to date by the Construction and Real Property Section of the Bureau of Foreign and Domestic Commerce. In past building cycles, an upswing was usually accompanied by a disproportionate increase in the erection of apartment houses, attendant upon the growth of our cities. In the Twenties, for example, the proportion of new dwelling units in apartment houses to total dwelling units built rose from 18.6 percent in 1922 to 22.2 percent in 1925 and to 31.7 percent in 1928, with both an absolute and relative decrease in the construction of one- and two-family houses. In fact, the boom in apartment-house building came into full swing from 1926 to 1928 when total residential construction was already on the decline. The present building recovery thus far has distinguished itself by a consistently high share of single-family dwellings in total construction, and a large proportion of these dwellings is designed for owneroccupancy rather than rent. Cities still grow in population, but the expansion is mainly in outlying metropolitan areas where there is enough open space for the desired single homes, rather than in the congested central districts where apartment-house building previously was concentrated. Improved highway facilities and increasing per capita ownership of automobiles have accelerated this movement toward suburban single-family homes. |