Phase No. 5

>"The past eight months' experience in building may well be the beginning of a new cycle for construction in the United States--a period that will be greater and longer in building activity than we have ever seen before." So said President Samuel M. Waters of the Mortgage Bankers' Association at a Texas convention last week.

> Some "big outfit" is soon going to "build houses on a belt like Ford and drop them off where the cellars have been dug." So predicted State Comptroller Morris S. Tremaine of New York last week, for the passage of a constitutional amendment to authorize State housing-subsidy bonds.

>To eight cities, for 15 more low-rent rehousing projects, last week went $32,632,000 more of the $800,000,000 which U. S. Housing Authority is authorized to lend to local housing authorities. This brought total USHA loans to $265,054,000; and total commitments (including rent-reducing contributions) to $576,104,000. Thus did Administrator Nathan Straus celebrate the first anniversary of his big New Deal program of sheltering the worst-housed, lowest-income portion of the populace. His estimate of the families thus far provided for by USHA: 52,951*

Looking forward to his legislative program for the next Congress President Roosevelt last week also turned his thoughts to Housing. He told his press conference/- that four phases of his broad Housing program were now functioning effectively: Home Owners' Loan Corp., to save small mortgaged properties for their owners; Slum Clearance, which has been taken up by almost all large U. S. cities; USHA, which finances new tenements for people who can afford not more than $5 per room per month; Federal Housing Administration, which finances home owners who can afford $10 per room per month and up.

Next, declared the President, must come Phase No. 5--housing for lower-middle families who can afford rooms between USHA's $5 maximum and FHA's $10 minimum. The President hoped that money to finance Housing in this field could be found among thousands of people with $1,000 or so to invest, small private capital brought into an enormous pool by a sure promise of 3% or 3 1/2% interest.

A voice in his audience asked the President if he was now describing the "Lambert Plan." No, said the President; the plan he was sketching would be worked out in final form shortly but had as yet no special name. Nevertheless, reporters knew that before the President's press conference a lean, iron-grey, mustachioed gentleman had attended an earlier session with the President, Secretary Morgenthau and Under-Secretary of the Treasury Hanes, Administrator Stewart McDonald and other officials of FHA. After the President's conference, so many reporters telephoned the iron-grey gentleman that his boss, Stewart McDonald, called in the press next day, and the Federal career of Gerard Barnes Lambert, $1-a-year man in Washington since May, had its newspaper debut.

Gerard ("Jerry") Lambert, 52, is the venturesome businessman who, in 1921, invented the great "halitosis" scare and made fortunes for himself and three brothers by selling the world "Listerine"--a mouthwash invented by their father, produced and sold conservatively at St. Louis since 1880. He liquidated most of his Lambert Co. holdings in 1928 for about $25,000,000 and took up racing J-boats-- the big, expensive class that competes for the America's Cup.

He did very well with Vanitie and Yankee but in 1931, lonely after separating from his first wife, he returned to business, as J. P. Morgan & Co.'s trouble-shooter for the slipping Gillette Safety Razor Co. His bet was that he would lift the earnings to $5 per share, or take no pay. If he succeeded, he would get 20,000 Gillette shares, and 20,000 more if earnings reached $6. Depression kept him from lifting earnings above $1.98 after four years of trying, but the new one-piece Gillette which opens up like a clamshell is basically his invention. This spring, just to see if he could do it, he wrote a mystery story, Murder in Newport, which Scribner's accepted and published. He also plays the mouth organ (upside down) and does sleight-of-hand.

Last spring Administrator Stewart McDonald of FHA, longtime St. Louis friend of Jerry Lambert, telephoned him at his estate in Princeton, N. J., asked him down to Washington to help on Housing. Inventor Lambert knew nothing of that subject but went anyway, studied under FHA's experts. Within three months he had invented something and was building it at Princeton with $30,000 of his own money.

On cheap land (near the Negro quarter), with union labor, standard materials and a satisfactory profit to the contractor, he put up a one-story structure bounding three sides of a rectangle with a sunken grass court (Powell & Morgan, architects). Ten living units of four rooms & bath each have individual front doors opening in this court. Each unit has its own heating plant. There are no garages. Rent: $25 per month per unit, or $6.25 per room.

Proprietor of this "Franklin Terrace" Project is the Princeton Housing Authority, from which Inventor Lambert accepted tax-exempt bonds for his $30,000. They will be amortized over 28 years and meanwhile pay him 4% interest each year on the balance outstanding. After 28 years the land & buildings will become the Borough of Princeton's property, Inventor Lambert will have his $30,000 back, and the Franklin Terrace occupants will have had brand-new Housing nowhere else available at $6.25 per room per month (plus $3 per month per unit for heat).

In explaining his creation as a model for national use, Inventor Lambert stressed these points:

1) The U. S. market for $5-to-$10 a room Housing is 5,000,000 urban families (census of 1930).

2) To break into this market, all speculative profit must be eliminated, also excessive mortgage overhead and only the most economical maintenance charges.

3) Remission or reduction of local property taxes should be easy to arrange between builders and municipalities, since title in the property eventually reverts to the town or city.

4) If special inducement for private capital to enter this wide new rental market is needed--in huge chunks supplied promptly by big corporations from dormant surpluses instead of in pooled driblets as suggested by President Roosevelt--it could be provided in a variety of ways: by offering tax-free securities of local housing authorities (as at Princeton), now available in 37 States; by insuring mortgages on the properties through FHA with a limited return on the equity; by offering some degree of Federal tax exemption to private capital entering the field.

President Roosevelt last week (just before elections) shied off all suggestions of tax-exemption in his aloof discussion of the Lambert Plan, but Inventor Lambert had an argument appealing to more than one New Dealer: tax exemption would cost the Government nothing, since much of the capital contemplated for the vast Housing market of Phase No. 5 is now lying idle and untaxed anyway, and the stimulation to industry would increase the revenues of the Treasury.

*The number of families in the "ill-housed one third" of the U. S. population is some 9,000,000.

/-For which he was made tardy by listening to the Seabiscuit-War Admiral horse race on the radio.

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