Shall I Build A House
after the War?
What Will Be Spent On Housing?
estimates give us at least a rough idea of the number of houses which will be
needed after the war. But can this need become an effective demand?
we are dealing with so many unknown factors that our guess must be of the roughest
kind. Basically there are four factors that influence the total amount of house
building in this country.
First, materials. Sufficient materials for a
real housing boom may not be available until some time after the war.
the size of the population and its distribution. We know the rate of population
growth in the past, but we do not have any exact idea how the population will
be distributed after the war. For example, how many of the cities and towns which
mushroomed during the war will stay at their present size, or anywhere near it?
Third, the national income. This is perhaps the most important factor.
At the end of the war our national income is likely to be at a high level. While
it may not stay at the 1943 level of 148 billion dollars, it is safe to say that
both private business and government will try to prevent any drastic drop in employment
and national income.
To make a guess at how much money will be available
for housing, let us assume that the annual national income will be around 100
billion dollars (at 1940 prices) in the years just after the war. This would be
fairly close to the level of 1929, the peak of the last business boom.
The national income may actually be a good deal higher. But, assuming this figure,
what part of the 100 billion dollars will be spent for housing? Here we have only
the past to go by—certainly not a perfect guide, but it may offer some good
In general, many houses are built when times are good, and few
when they are bad. In the last 20 years the value of residential building, including
new houses of all sorts as well as repairs and alterations, ranged from 7.2 percent
of the national income in 1925 to 1.4 percent in 1933.
Judged by the past,
a high level of income, such as we may expect at the war’s end, would bring
a high level of house building. We might assume, therefore, that 6 percent of
the national income would be spent for this purpose. If that income reaches 100
billion dollars a year after the war, there would be 6 billion dollars for house
How much housing would 6 billion dollars buy? Again we must
refer to the past. In 1925, nearly 4.5 billion dollars were spent on new nonfarm
dwellings, costing about $4,800 each, not including land. The country spent almost
another billion dollars for repairs, alterations, new farmhouses, and so on. In
other words, 83 percent of the money spent on housing that year went for new nonfarm
homes and 17 percent for other house building and repairs. In 1940, about 600,000
new nonfarm units were built at a cost of around $3,800 apiece, not including
Looking backward, we find that building costs in 1925, at $4,800
a unit, were high, and also that not enough was spent on repairs to keep old houses
in even a fair condition. The same was true in 1940, when too few houses were
being built to take the place of those that had worn out, and a lot of existing
houses, as the census figures show, were in a badly run-down state.
view of these facts, and because recent technical progress has opened the way
to further reduction in costs, we may expect houses to be built after the war
at less cost than in the past. At the same time, a larger share of the money spent
for housing probably will go into repairs.
Suppose we assume for the sake
of getting some idea of the housing picture after the war that (1) it will cost
$3,400 to build the average nonfarm home (excluding land) and (2) of the 6 billion
dollars that will be spent for house building, 70 percent will go for new nonfarm
dwellings and 30 percent for other types of houses and repairs. On this basis,
nearly a million and a quarter new units could be built, costing altogether 4.2
billion dollars. In addition, 1.8 billion dollars would be spent for alterations
and repairs, new farmhouses, and so on.
If this forecast should turn out
to be at all correct, the house-building industry would enjoy the biggest boom
in our history. There would be more jobs than ever before for carpenters, bricklayers,
masons, plumbers, steam fitters, painters, paper hangers, plasterers, electricians,
and all others engaged in house building.
Of course, these guesses may
be off, one way or another. If the national income should happen to drop below
100 billion dollars after the war, these figures would be too high. If housing
costs fall even more than we expect, the figures would be too low.
the population not increase as rapidly as it has in the past, or should people
who have the money generally prefer to spend it on automobiles, refrigerators,
radios, and washing machines, or on travel and other things, then there would
be less demand for housing and these figures would again be too high.
The figures given above, however, are regarded by many authorities as within reason.
They are convinced that house builders will have a huge market to satisfy when
the war ends—a bigger market than they ever had before.
Shall I Buy or Rent?