mit it to purchase from him at an appraised value before he may exercise the right to sell to an outsider (the appraised value to be determined by three appraisers chosen in the usual manner), the company on its part not to be bound to buy but to undertake to use its best efforts to obtain a purchaser satisfactory to it to purchase at the appraised value, an effort being made, as far as legally possible, to restrict the occupancy to war workers.

6. On a date not more than five years after the close of the war an appraisal shall be made of all the buildings to fix their reproduction cost1 as to that date. This appraisal to include all houses sold as well as those still owned by the company. If the reproduction cost found on that appraisal should be less than the total original cost of the buildings, the Government will abate the principal of its loan to an equivalent amount in favor of the company, the amount of this abatement to be called the excess war cost, but the Government to be given the benefit of the land increment.

Separate appraisal shall be had of each house sold by the company to a purchaser (whether fully paid for or not), and he shall receive the benefit of the allowance of the excess war cost upon his particular house, either by a credit upon the balance of his purchase price, or where that balance is less than the excess war cost by payment of the difference to him in cash.

7. Deeds to purchasers shall contain in full restrictions against nuisances, business occupations, except in permitted localities, and also restrictions of the character of business, setback, sheds, outbuildings, backyard and alleyway development, minimum cost of any new building to be erected in place of that built by the company, percentage of lot, occupation, etc. All these restrictions to be permanent for the benefit of all other purchasers.

8. The mortgage in favor of the Government to run directly to a trustee to secure the bond or bonds given to the Government, this trustee to be preferably a local trust company. Before any sale the trustee will give a release of the property in question so that the company can give the purchaser an unencumbered deed. The trustee will receive the amount of each payment (which will go to the Government) and purchase-money mortgages of the purchasers for the balance in each case, these purchase-money mortgages to be held by the trustee as security for the Government loan in substitution for the properties released. As the purchasers from time to time make payments on account of the purchasemoney mortgages, these payments also will go to the Government.

9. After payment of accrued interest on the Government loan, operating expenses, fixed charges, and the sums necessary for the service of the various reserves, the company will apply any surplus income to the amortization of the Government loan at the rate of about 2 per cent on the original total amount of the loan.

If by reason of installment payments the company shall have available a greater amount than about 2 per cent per annum of the Government loan, the additional amounts also shall be used to amortize the loan. If amortization takes place in any year in an amount greater than such per cent on the loan, the amount of the surplus amortization shall be deducted from the amount of the original loan in order to furnish the basis on which future amortization will be required.

10. After meeting the annual requirements covered in the preceding paragraph, the company may pay dividends on the stock representing the local capital at a rate not exceeding 6 per cent per annum, payable at such dates as the board of directors may decide. The dividends shall be cumulative, so that if less than 6 per cent is paid in any year or years, the deficiency may be made up, when possible, out of subsequently accumulated reve

nues.

1 The words "and their value" should be inserted.

11. After the Government loan has been retired any surplus income may be used by the company for retirement of its capital stock.

12. After all the capital stock shall have been retired except the amount necessary to keep the company alive and to qualify directors, the company will apply its remaining assets in refunding to the Government the amount of any excess war cost which may previously have been written off. The company shall contribute any surplus to the locality for such public benefits as the board of directors of the company may decide to be the most appropriate at that time. They might, for instance, require cash assets to be applied in reduction of the city's bonded indebtedness; or, if available land remained, they might dedicate it for public uses, such as parks, school sites, etc. The articles of incorporation will cover this point in general terms.

13. Finally, during the life of the loan to the housing company the Government shall have the option of canceling the agreement and acquiring its interest by paying to the company all that the company has reasonably expended in the enterprise, with interest from the several dates of expenditure, less the total amounts received at any time by the company with interest on such receipts from the dates of their accrual. This option may be exercised whether the company be in default or not, and will be a means of insuring the management of the enterprise for the best interest both of the Government and of the worker.

In the operation of the foregoing plan, the Government would suggest that the housing company should rent rather thap sell to the industrial workers during the period of the war, if it is feasible to avoid making sales of the houses, the company, however, to make a provision in each lease or otherwise that should the house be sold to the tenant after the war, the housing company will give a credit on the purchase price for a reasonable proportion of what he has paid in the form of rent. This plan would leave the community freer to readjust itself to postwar conditions and to adopt such plan of private or of community owership as may then seem most desirable, both from the standpoint of the individual worker and of the community. It would also leave much more flexible the matter of controlling the character of occupancy of the property during the war and would obviate the necessity of inserting in the deeds (or mortgages) restrictions against alienation or special occupancy, which are of very doubtful practicability. It should always be kept in mind as of first importance that the houses built or acquired must be occupied only by war workers during the period of the war. In case of a sale, it would be difficult if not impossible in many cases thus to control the occupancy. Death, discharge, disability, or removal of the original purchaser, or a resale by him to a nonwar worker might thus entirely defeat the purpose of the appropriation. But all this could be effectively controlled if the property is rented and not sold to the worker during the war.

CRITICISM OF COMPANY PLAN BY DEFENDERS OF REAL ESTATE PLAN.

The Real Estate Division was opposed to the plan adopted because

1. It is so vague and general as to be impossible of practical application.

2. It is of such a nature that practical builders will not operate thereunder on account of the numerous limitations and conditions, notwithstanding that the business of housing ought to be operated by those who understand it.

3. It gives to one company a monopoly of the housing problem in a particular locality.

4. The almost impossibility of sufficiently protecting the Gov

ernment.

5. Workers will not live in houses owned or controlled by their employers.

6. Loss of time and money inherent and incidental to such a policy on account of inexperience and lack of knowledge of the subject.

The policy suggested by the staff at the conference above referred to, other than the Real Estate Division, in substance is a copartnership consisting of the local interests and the United States Government. The Government to furnish practically all the money and practically build the houses. In this plan the first thought apparently seems to be the community feature. It is well to have these community features, but we are at war, and the first problem is housing. Community features will come in due course. There is no question that this plan will be attractive to practical builders and consequently will resolve itself into the construction of houses by local housing companies consisting of manufacturers, bankers, chambers of commerce, and the Government, which on account of the many interests represented will naturally be conducive to a great loss of time, due to such diversity of interest. Practical builders will not operate under this plan because they are subjected to too many limitations. These local housing companies in turn will very likely be compelled to resort to practical building companies or individuals to do their construction who will require a profit. Furthermore, in addition to such profit, these local housing companies will be obliged to add their administrative expenses, which will, therefore, add to the overhead, and consequently unduly increase the cost of construction. Sight should not be lost of the great loss of time incurred in the process of organization of such companies.

The great advantage of the plan proposed by the Real Estate Division is that the Government will not only get its money back because the builders in protecting their interests will simultaneously protect the interests of the Government, but at the same time will secure the much-needed houses at a maximum speed.

The construction of houses is a business just as the manufacture of guns, ammunitions, ships, banking, etc. Let gun manufacturers manufacture guns, ammunition manufacturers manufacture ammunition, shipbuilders build ships, bankers do banking, and let practical builders build houses.

There seems to be no difference of opinion in regard to the alternative plan, viz., that if no other feasible method of operation can be arrived at, the Government itself shall enter upon construction of houses.

THE OBJECTIONS OF THE REAL ESTATE DIVISION CONSIDERED.

The criticisms of the local housing company plan were answered by the assistant director as follows:

The following numbered objections in opposition to the adopted plan have been raised by the Real Estate Division:

(1) That it is vague.

This conclusion was perhaps reached because the Real Estate Division had before it the very brief outline of policy, which of course was not intended to go into details of operation, but which will be covered with ample detail and specific safeguards in the loan agreement, the mortgage, and other instruments that may be found necessary in putting this policy into effect.

(2) That practical builders will not care to enter upon the work because of the numerous limitations imposed by the Government. This criticism is in striking contrast to the charge of vagueness, and, in fact, it is not altogether clear just what the basis of the criticism is. Certainly the housing companies will be amply prepared to employ practical builders of the first order, since the contracts will be of a size to attract them. And in the subsequent operation of the development the housing companies will have ample means to employ men experienced in handling the sale and rental

of houses on a large scale. The Government itself will have the services and advice of its own practical builders, who will doubtless be of great aid in securing the services of other practical builders by the particular housing companies. If, however, it is meant by "practical builders," the small building operators who may be of limited or doubtful financial ability, we would consider it a distinct advantage to have such builders eliminated from the plan of operation.

(3) That it gives to one company a monopoly of the housing problem in a particular locality.

It would seem to be clear, from what has been said, that "monopoly" in this instance, with the adequate and continued Government supervision and control, has many advantages in these building operations which can not be secured in any other possible way. The stock objection to monopolies (which the Real Estate Division could scarcely have had in mind) that monopolies make inordinate profits out of the community has no possible application here, as the profits are limited absolutely to a 6 per cent dividend. But there is nothing in the adopted plan that would prevent the local builders from pooling their interests and bidding on the construction work. Other things being equal, no doubt the local interests would be favored in letting the contracts.

(4) That it is impossible sufficiently to protect the Government. One of the great advantages claimed for the adopted plan is the ease with which the Government's interest can be protected, as above explained. Conversely, it would be almost impossible to protect the Government's interests if it had to supervise and audit the accounts of a large number of small building companies in each community, whose limited financial proportions alone make them doubtful risks, aside from the multiplicity of individual managements which would have to be considered.

(5) That workers will not live in houses owned or controlled by their employers.

It is conceded that in many cases it is true that employees will not occupy such houses, while in many other cases it is not. But, true or untrue, the statement has no application here, since the Government will control these houses under the adopted plan.

The ownership of the manufacturers (if it could be accurately called such where they are mere stockholders in a company controlled in its policy by the Government) would be at most a divided ownership. No single manufacturer would own any group of houses or have any control over them. On the other hand, the small real estate operator would be found not infrequently to be dependent upon the local manufacturers for his financing, either directly or indirectly, and nothing would be simpler than for a single manufacturer to secure exclusive control of a group of houses through such real estate operator. While the manufacturers will be among the stockholders in the housing companies, the houses will after the war be sold wherever possible to the workers and precautions taken to protect them from falling into the hands of speculators. Provisions will be made that rents paid during the war will be in part applicable to purchases subsequently made. We should not lose sight of the fact that we are dealing with unusual conditions and where already workers have suffered greatly at the hands of profiteers in securing homes, which evil the adopted plan will attempt, as far as possible, to prevent. In view of these unusual conditions it is not anticipated that there will be any great difficulty in disposing of all the houses that may be built. Furthermore, the Government has reserved the right of "recapture" in the event efforts should be made to secure control of the company, whether by manufacturers or others, to the detriment of the workers. This "recapture," in such an event, would be impossible if we were dealing with small real estate operators.

(6) That there would be loss of time and money because of inexperience and lack of knowledge.

This objection is probably sufficiently answered in what has been said in the first part of this paper, from which it seems to be reasonably clear that there will be a saving, both of time and money, under the adopted plan, as the plan will make it possible to secure the services of the most experienced and skillful builders, architects, and real estate managers obtainable. All of this would bedifficult, if not impossible, for the small real estate operators.

It is not claimed for the adopted plan, of course, that it is perfect, or that it has not some disadvantages, or that other disadvantages may not develop in the course of its operation. What is claimed is that, all things considered, it is the plan best adapted to the purpose of securing as speedily and as economically as possible the great number of houses which will be needed in these various communities to accommodate war workers.

It might be added, finally, that not only has the adopted plan received the most careful consideration and approval of the bureau, but it has the sanction of the Secretary of Labor, who has also expressed his disapproval of the plan submitted by the Real Estate Division; and it has further been ratified by local acceptance in eight different communities already.

DEFENSE OF THE LOCAL HOUSING COMPANY PLAN.

The purpose of the bureau is to relieve housing congestion in those communities where the congestion has immediate relation to the successful prosecution of the war. The end to be kept in view is to provide not only houses, but houses which will be certain to reach the proper hands in such condition and at such prices as to accomplish the purpose above mentioned. It is recognized that private enterprise has thus far failed to provide a solution of the housing problem, and hence the Government has been compelled to step in.

1. Control.-Under the adopted plan the Government's control is complete throughout the development and management of each housing project. Because it is dealing with one concern the Government can supervise and supervise easily the entire project from the time of building until the last house is sold. The various agreements that will be made to carry out the plan will cover a period during which there may be many violent industrial or other changes, including the transition from a war to a peace footing. Under such conditions flexibility is necessary to the success of the enterprise. The Government through its control will reserve the right to make any change or modification which changing conditions may require.

More specifically, the following elements of control will be combined in the adopted plan.

(a) All contracts will be drawn by the Government, or subject to its approval.

(b) Construction will be carried through under plans and with types of buildings approved by the Government and will be at all times under the supervision of the Government.

(c) Adequate maintenance will be assured, and thus the Government's investment will be amply protected.

(d) The books of the housing company will be subject to Government audit at all times.

(e) Because of large-scale production and consequent low cost, sale prices and rentals can be kept down to a much lower figure than if the houses were erected and operated by private companies or individuals, and the Government, by keeping control, can insure that the tenants or purchasers will get the benefit of this saving.

(f) Occupants can be limited to war workers throughout the period of the war and the prime purpose of the housing act carried

out.

(g) The board of directors of the housing company to be formed under this plan, and to which money will be loaned for the con

struction, will include Government representatives, who will see that all the Government's requirements are in good faith observed and that the policy of the housing company is shaped in accordance with the spirit and purpose of the act and this policy strictly adhered to until all the houses are sold.

(h) The Government in all of its contracts will reserve the right to take over the entire development (which may be necessary if the management should become inefficient). This also serves as an effective club in the hands of the Government to insure the faithful observance by the housing company of all of the conditions of its operating agreement for the Government's protection as well as for the protection of the workers who may have rented or purchased from the company.

(i) Profits will be strictly limited to dividends of 6 per cent per annum, payable on the stock in the housing company, with a provision that any surplus earnings at the time of the dissolution of the company shall be returned to the particular community in some form of community benefit. This plan is made possible because those who will take stock in each company will be primarily interested in securing additional workers in the community with the consequent benefit to the community and its industries and who do not expect to look to profits derived from the rental or sale of houses for a return on their investment.

The Real Estate Division objects that the foregoing limitations are so drastic that smaller private building enterprises will not be willing to consent thereto. We are all the more fortunate, therefore, in that we may thus secure for a given community a single housing company that will be willing to submit to this character of governmental control for the good of the community and without asking for large profits to be derived from the rent or sale of the houses.

2. Centralization—(a) Large-scale production.-The whole course of the war and the method of meeting its tremendous demands upon our industries and labor supply have shown conclusively the great advantage, both in the matter of saving money and saving time, in resorting to the method of large-scale or quantity production. There is a vast saving in overhead expenses. There is eliminated the disastrous competition for labor and materials resulting where several competing concerns are carrying on the same character of work in the same neighborhoods or sections. The undertakings are (and would be here) of sufficient size to attract the services of large contractors with their wider experience and excellent organizations. And, finally, priority orders for manufacture and shipment of construction material can be made and carried out with a speed and safety utterly impossible when dealing with a great number of small contractors.

(b) Ease and practicability of dealing with one concern.—At the outset, instead of dealing with thousands of loan applications and examining and investigating their attendant plans and specifications and methods of operation generally with the multitudinous delays inevitable in any such system, one responsible company is dealt with by the Government in each community. In other words, instead of great numbers of plans and proposals, each to be revised and passed upon, each different from the rest, the Government, by working with a single company, can submit one plan carefully worked out in advance by the bureau, each part of which fits in with the rest and adapted to the community as a whole, and which can be put into effect both economically and expeditiously. Furthermore, difficulties of auditing are eliminated, financial responsibility is more easily insured, the deduction of excess war cost is made simple, and in every way the machinery is cut down.

(c) Unity of development.-Under this plan it is made possible to build all the houses with proper regard to transportation facilities, the accessibility of the homes to the manufacturing plants, etc. Where it might be economical or wise to provide additional trans

portation or other community utilities, this can be done with reference to a single plan and not to haphazard, isolated, independent groups which may have been built up without reference to such a plan. Obviously, the location and character of such unrelated groups would be determined primarily by the varying interests of each real-estate operator, and not by the needs or interest of the community as a whole.

3. Foreclosure.-Under the plan adopted foreclosures will not be carried through in the name of the United States, a fact which will prevent considerable dissatisfaction and complaint.

REASON FOR ABANDONMENT OF COMPANY PLAN.

The plan of loaning Federal funds to local limited dividend companies for the purpose of building houses for war workers was taken up with bodies of local citizens of Bridgeport, Erie, Niagara Falls, the Rock Island district, and elsewhere.

The attempt to induce communities to form local. housing corporations was welcomed by many of the larger industrial cities, but although they approved the principle it proved exceedingly difficult to work out a detailed contractual relationship to which both the local housing company and the Bureau of Industrial Housing would consent.

1. It did not prove possible to induce all of the local committees to accept the plan. There was a tendency for each to seek special privileges and exemptions. 2. Several existing local companies, after having accepted a plan of operation, returned to the Housing Bureau time and again with requests for modifications.

3. Serious delays resulted from the continuous need of negotiating with the communities as to their participation in the housing development.

4. In many places it was found impossible to raise sufficient local capital for building purposes. Navy yards in small, remote communities and remote proving grounds and arsenals were often the only industry within the vicinity, and they had no resources available for the establishment of a housing. company. In many such places the land most suitable for building purposes was that already owned by the Government. In such communities the only recourse was to have the Government build and operate properties direct.

5. In still other places there was but a single large corporation engaged on war contracts, and this industry was the only possible source of local capital. Its representatives were the only available representatives for the operation of a local housing company. In such cases, and indeed in all cases where capital was subscribed by manufacturers, the employees would be likely to object to the establishment of a local housing company, for they fear that if the manufacturer's capital is utilized to build the houses, and the manufacturer's representatives operate the hous

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ing company, their domestic life will be dominated by the employer. The freedom-loving American workingman desires to be out of his employer's sphere of control during his leisure hours.

6. The establishment of local housing companies was rendered difficult because of the tendency of local interests to attempt to promote the utilization of special properties not necessarily the cheapest or the best situated properties in the communities. The Bureau of Industrial Housing under such a plan would never have had a free hand and would have been forced to carry out its policy only after considerable negotiating, if not actual contention, with self-interested local groups.

7. Serious difficulties in the operation of their local housing company plan had already been reported by officials of the Housing Division of the Emergency Fleet Corporation to officials of this bureau.

ADOPTION OF PLAN OF GOVERNMENT CONSTRUCTION AND OPERATION.

By the end of the first week in June the staff of the Housing Corporation was virtually unanimous in the conviction that speed and efficiency in construction could be obtained only by direct Federal action. They were, therefore, in hearty accord with the decision of the Secretary of Labor in his memorandum of June 13, 1918, in which he stated: "The Government will build, own, control, and rent the houses until after the war."

POLICY WITH REFERENCE TO INVESTIGATIONS.

The original policy of the Housing Bureau with reference to investigations has been briefly outlined in the preceding chapter. Investigations were made by sending a field agent to the community and by means of questionnaires sent to manufacturers and civic organizations. This practice met the original emergency needs of the bureau with a fair degree of adequacy. The volume of production of war essentials, however, increased enormously during the early months of 1918, and colossal contracts were being let which would still further aggravate the already menacing conditions of the industrial cities.

In July the Housing Corporation had gone to Congress with a request for an additional appropriation of $196,000,000 for further house construction, which its staff and the representatives of the War and Navy Departments deemed indispensable to meet future local needs which would inevitably arise if the war should continue for another 12 months. Only $40,000,000 of the $196,000,000 requested was appropriated. It became clear, therefore, that the problem of housing workers engaged on war contracts could

Rec

not be met unless the Government should take immediate steps not only to place the majority of its new contracts in communities that were not saturated but also to transfer workers in communities already saturated from nonessential to essential industries. ommendations to this effect were made by the Housing Corporation to the War Industries Board. Coordinated effort to secure the information necessary for the placing of future war contracts and for the elimination or reduction of the less essential industries was recognized as indispensable. A new policy of surveys was, therefore, recommended by Mr. Joseph D. Leland, the vice president of the Housing Corporation, which is outlined in what was approximately its final form in the following memorandum of October 4, 1918:

1. The functions of the United Housing Corporation require it(a) To provide housing and passenger transportation at such points as manufacturing production for the Government requires. (b) To anticipate and take steps to avoid, or to assist in avoiding, conditions which might or could result in requiring additional housing and passenger transportation facilities.

2. In the fulfillment of its duties, arising as set forth in paragraph 1 hereof, this corporation needs to have information on the following subjects:

(a) Housing and passenger transportation requirements of certain manufacturing establishments, together with the existing available facilities.

(b) The ability or inability of local interests to provide required housing and passenger transportation service and facilities.

(c) The adequacy or inadequacy of existing public utilities for present and future requirements and the ability of local interests to supply them.

(d) The extent to which labor in such localities is engaged in essential and nonessential employment.

(e) The extent to which manufacturing capacity in such localities is engaged or might be engaged in Government requirements. (ƒ) The ascertainment of the nature and extent of industries in such localities that are engaged in essential and nonessential work. (g) The extent to which women are being and might be engaged in the manufactures of such localities, and the source and extent of the supply of such labor.

(h) The extent to which men of deferred classification are being and might be engaged in the manufactures of such localities and the source and extent of the supply of such labor.

(i) The character and composition of the labor force, by sex and color.

(j) The possibility of meeting labor shortage by diverting labor already housed and provided with passenger transportation facilities from less essential industries or from civilian work to plants engaged on war requirements.

(k) Classification of wage rates of present and required employees of industries in such localities as bearing upon the nature, character, and type of housing to be provided.

(1) Whether or not housing to be provided should be of temporary or permanent character. This involves a study of each community, of its civic conditions, of its history, and the likelihood of the continued operation of plants engaged on war production after the cessation of hostilities.

All the above and other information to be of service to this corporation must be kept up to date, and must be gathered in each suburb of each locality that lies within reasonable commutable distance of the principal center affected.

3. Much, if not all, of the foregoing information is essential in one form or another to one or more other governmental departments, and if gathered by this corporation and not disseminated to other departments interested would require by such departments a duplication of the work done by this department. On the other hand. information essential to other governmental departments, and gathered by them, while not essential to the requirements of this corporation, would be of great value to it if promptly furnished to it as gathered.

4. This corporation, until a short time since, attempted to gather information by mailing questionnaires to communities and manufacturers, by causing single investigators to visit communities and make surveys of the plants requiring immediate housing or passenger transportation relief, and by making a superficial community investigation.

5. This corporation found, as have other governmental departments, that these methods were inefficient and did not produce the results desired. Thereupon, in August last, after conferring with certain other governmental fact-gathering agencies and their departments, it consented to turn over its investigating and statistical work to a bureau then formed, known as the Industrial Service Division of the Bureau of Labor Statistics; but in consenting to the arrangement, on August 19, 1918, addressed a letter to Messrs. Gay, Lamson and Meeker, as follows:

"This corporation can not afford to jeopardize the important functions committed to it, and therefore expressly reserves the right, should the plan in its judgment prove unsuccessful for any reason, or the action be so hampered as to fail in its usefulness to this corporation, to again return to the plan of procedure now used by it, and also as outlined in my memorandum of the 5th instant, entitled 'Coordination of effort in acquiring essential information, etc.,' and thereupon institute its own research work in the gathering of information and statistics which it must have in order to successfully carry on its work."

6. The method of conducting investigations adopted by the new bureau of having able men, schooled in the requirements of the Housing Corporation and expert in organizing communities, to furnish desired information and of overseeing and directing their effort, has proved to be as a method the only satisfactory and efficient one, and this corporation intends to use this method in the conduct of its future investigations; but it appears that other departments object to the work of this division, and impede it by their own effort. This has gone so far that this corporation will be obliged to resume, through its individual effort, the collection of the information and data it needs, unless some common plan be adopted.

7. The disadvantages, waste, etc., which will immediately result from separate action are so evident that we pass at once to the proposal of a

Plan.—(a) That the Industrial Service Division of the Bureau of Labor Statistics as a separate entity be abandoned and a Division of Industrial Service (this was changed to Division of Surveys and Statistics) be created by the United States Housing Corporation in its own organization.

(b) That the Division of Industrial Service of the United States Housing Corporation, the regional advisers of the War Industries Board, and the labor control boards of the Department of Labor act as the sole fact-gathering agencies of the several governmental departments.

(c) That the Central Bureau of Planning and Statistics prepare and keep revised as frequently as may be required one or more questionnaires to serve the requirements of the several departments. (d) That these questionnaires be known as the official governmental questionnaires and that no other questionnaires to the manufacturing or business interests of the country be permitted to be circulated by any department.