Modernizing the Building Industry: Johns-Manville Thinks Its Way Through the Tangle of Construction

I

THE constructive point of view that corporate profits flow from consumer satisfaction and public goodwill can fairly be said to dominate in many important fields of American business. This is common in industries which place their products in the consumer’s hands as complete units ready for use, to be tested in performance under conditions where the purchaser is a proper judge of quality, as in the case of automobiles. It is less frequently found among producers of goods which are merged with other goods and thereafter cannot be easily identified by the layman — structural materials, for example, which are of many sorts, come from scattered sources and are frequently hidden in the completed structure. Yet in this very field one finds in the Johns-Manville Corporation an acceptance and application of a concept of business which lifts this company well above the horizon of an industry decisively in need of a constructive example of this sort as it struggles to raise shelter to a new dignity and significance in the social order.

Even a casual glance reveals the building industry as lagging in the march toward consumer satisfaction and at its worst in the single family home, precisely where efficient production would most benefit society. In larger structures — notably office buildings, apartment buildings, and factories — there have been marked advances in assembling materials and speeding construction by machine aids. New materials, undreamed of in earlier days and applicable alike to large structures and small, have effected advances in durability, cleanliness, economy, quiet, and safety. For many of the latter Johns-Manville is responsible. It began by introducing asbestos to the American building industry and has gone on to develop a host of other dependable innovations, providing fireproof roofing and walls, insulations against heat and cold, control of sound, and low maintenance costs. Despite these new factors, the building of a home, usually a family man’s largest undertaking financially and certainly his most important contribution to social stability and the future of his country, remains unnecessarily difficult, expensive, and soul-racking.

Home building has changed little in essentials since the beginning of America. Its chief materials and the craftsmanship which joins these materials together are fundamentally those the Pilgrims used three hundred years ago. Details have altered, but the basic conception holds. In housing there has been no revolutionary leap comparable to the shift from horse-drawn vehicles to automotive transport, or that in food habits which followed large-scale canning, packaging, and automatic refrigeration. To this day no customer can tell in advance what the cost of his completed house will be, if one considers everything in the housing equation from raw land to grading and planting after the dwelling is finished. The odds are that it will cost more than the estimates and that from first to last there will be enough delays and disputes to dishearten the budding proprietor. What he owns, after the worst is over, is not a guaranteed house, but one on which he must assume considerable risk in directions beyond his knowledge during construction.

These difficulties inhere in the stubborn fact that most houses are tailormade jobs. Not only are the plans different (standardization is yet an American ideal in housing), but they are executed under widely varying conditions by personnel changing from job to job and sometimes from day to day. The average building craftsman is employed no more than five months a year. Seasonal nature of the work and inefficiency of coöperation during the relatively short periods of joint effort tend to lift costs. As a result some who crave houses cannot afford the great adventure of building, and others who can afford it refuse to enter upon the expensive uncertainties necessary to realize their dreams.

Because the materials involved are so many and the interests behind them so highly competitive, few consistent efforts have been made to vitalize into active demand the widespread desire for better housing. The 400 or 500 manufacturers of building materials, operating 49,000 factories in the United Slates, do not work together to sell the public the idea of better shelter. The industry thinks less in terms of ultimate consumers than in terms of middlemen — chiefly contractors and supply men — who place the orders. Missionary work in favor of homemaking is left largely to realtors and speculative builders who must charge high rates for their services because of the heavy risks they assume between purchase and sale. As a result the construction chain breaks at its weakest point; when housing demand falls off, the decline can be dismal indeed. In the recent depression the building industry registered the rock-bottom low of all business, total construction falling from $10,000,000,000 in 1928 to $2,500,000,000 in 1934, and residential building from $2,800,000,000 to $250,000,000 — the latter more than 90 per cent off.

Obviously many causes contribute to this weakness, an important one being the fact that nearly every housebuilding operation involves a loan. More will be said upon this subject later. However, I think that lack of stability and cohesion within itself is the chief difficulty of the building industry and that this flows directly from its relative inability to think in terms of the ultimate consumer.

II

So important is this point of view as an approach to an understanding of modern business that examples at either end of the scale may be illuminating. At the lowest rung of the ladder leading to popular favor stands the gray-goods division of the cotton textile industry, which with one or two signal exceptions has turned its customer contacts over to the processors. As a result the general public turns a deaf ear when the gray-goods people recount their sorrows. Textiles, as an industry, suffer under what the diplomats call a bad press, and gray goods has no press at all, because its leaders have never cultivated their public.

On the other hand, consider the automobile industry, with which JohnsManville is intimately associated as a leading manufacturer of brake linings. Not only do automobile manufacturers cohere on broad objectives of wide human interest, such as good roads and safety campaigns; they also acutely cultivate consumer satisfaction. To prospects they offer, under effective guarantees, standardized products at stipulated prices with nothing left to vagaries of estimate. If the buyer does not pay on the nail, he is accommodated with credit for a definite period at fixed rates, on a schedule of payments calculated to discharge his debt while the security is still good. The local credit situation means everything to a home buyer, nothing to an automobile buyer. Consumer preference in automobile styling is carefully studied; even luxury appointments may be included in the amount on the price tag. Behind all this, and properly dramatized for public interest, lies a stirring history of technical advance, good reading for a mechanically-minded people. From raw material to finished product, industrial control in automobiledom aims primarily at consumer goodwill.

Contrast this picture with the situation which begins to unfold the moment a consumer goes into the market to buy, not a unit of transportation, but a unit of shelter. When Mr. Citizen purchased his automobile, he did so in a single transaction. This is impossible in house buying unless one deals with a developer or speculative builder, in which case the buyer accepts something which is not always precisely what he wants.

A house is an assembly of from thirty to fifty different sorts of structural materials, fixtures, and equipment, each fabricated and marketed by an independent concern and purchased more or less over the counter at retail. These materials are brought to the site and put together by two to a dozen subcontractors. Each subcontractor naturally holds out for his legal rights and insists on favorable working conditions not always obtainable in the hurly-burly of present building, and his prior agreements with his labor may interfere with most efficient coöperation with other workers on the job. Inherent in this loose-jointed, catch-as-catch-can handling of materials, processes, labor, and executive responsibilities, are possibilities of disappointment which materialize all too often — failure to complete and deliver the house on time, according to specifications, and at a price corresponding to the original estimate. In the end the house buyer is almost sure to find that he has paid for his unit of shelter a price badly out of line with the value he is accustomed to receive at the hands of many industries whose processes, all the way from raw material to ultimate form, have been subject to rationalized industrial control, and whose products and prices represent more or less a consumer’s dividend on large-scale fabrication and efficient, management. In a word, when we set out to buy food, clothing, fuel, transportation, or amusement, we buy in a 1935 market under 1935 conditions, prices, guarantees, and trade customs; but when we set out to buy shelter in its commonest form, there is a throw-back to values, prices, conditions of purchase, and buyer’s risks not essentially unlike those which obtained in Colonial America more than a century and a half ago.

Of course there are valid reasons for this continued backwardness. Housing is ultimately connected with ways of life in which tradition runs exceptionally strong. The house has become an ideal as well as a reality, and radical changes arouse disfavor as challenging something almost sacred. Consequently, there has been little consumer encouragement to fundamental improvement. The home owner has seldom been sure of what he wanted, partly because he was not aware of what he could get.

III

It is idle to stress the home’s superiority over the motor car as a character-building agency and a stabilizing force in society, until convenience in acquiring the two is comparable. Obviously, correction is difficult, since no quick revolution can be expected in an old trade. The best that can be looked for is a fairly rapid evolution which will gain headway as other elements in the industry follow the lead of JohnsManville across the threshold of continuous thought on the consumer’s end of the housebuilding equation. No one can say precisely how the vast but now slumbrous building industry will be revived and revitalized. To-day frank discussion can go on amid general approval, for all the lively minds in the industry are aware that a crisis has been reached out of which the industry cannot pull itself by its bootstraps. The competition is no longer between this material and that, this builder and that, but between home-owning life and other ways of life, with the home-owning life at a disadvantage.

To overcome this disadvantage will require a sturdy bridge of thought between old ways and new objectives. It is a long crossing; and before it can even be attempted someone must discern the promised land on the distant shore, question the long-accepted limitations on length of span, make a survey to locate firm bases for the carryover, and sound the rallying cry for all concerned to assist. This Johns-Manville has done and is doing. For years it has been financing significant studies and fact-finding surveys on the history and economics of building, the needs and desires of consumers, and the complex trade factors which create the sail lag between the potential desire for home creation and the shrunken materialization of that desire. This corporation has carried through statistical labors which contribute to promising developments in housing, revival of the building industry, satisfaction of consumers, and the welfare of future generations. Johns-Manville can tell you what it cost your great-great-grand father to build the old family homestead in 1786, or what his ancestors paid for labor and materials in England back to 1601; how building costs rose and fell decade by decade, with due allowance for the changing value of money; and how the sectional variations inevitable in a vast country like America affect prices. Another large-scale study examined the housefinancing system of Germany, France, and England to determine what features of their experience should be incorporated into American practice. This statistical spadework, so necessary for building a case for basic change in an industry inclined to let well enough alone, called not only for vision but for a determined pursuit of truth.

If you ask what Johns-Manville stands to recover from this research, the answer is clear. Being one of the greatest fabricators of building materials of wide range and adaptability, whatever tends to revive building and place that industry in a strong, go-ahead position must inevitably react to JohnsManville’s advantage. This is the more certain to be the case because JohnsManville, from 1858 on, has been introducing to the trade products which were essentially novelties to the building craftsmen and house buyers. It began with asbestos, that cheap mineral notable for its fire-resistant qualities and which is now a component of many products in a wide variety of forms. To-day one finds asbestos mixed with cement in transite and other J-M wallboards, strong and fireproof; in shingles of many varieties and prices; in transite pipe, which is proof against ordinary corrosive conditions and electrolysis; in sound-absorbing and quiet-producing interiors, and many other products which, hidden from sight, give quality to a structure. Asbestos is a material with unique chemical and physical properties peculiarly valuable in building; the task was to adapt it to construction. Success with asbestos stimulated laboratory research looking toward the effective use of other low-priced raw materials whose properties recommended their use in shelters. Among these was rock-wool home insulation, to name only one of the many substances which J-M laboratories have brought into new, merchantable form. Experience in developing and marketing new products has given this corporation the courage to strike out in new paths; its whole history has been of discovery and pioneering. But along with the risk of innovation went corresponding benefits. J-M products were novelties easily identified and not easily copied. Consistent advertising established them before copying could become effective; alert manufacturing and fair merchandising policies have since solidified its position so that any building revival must bring it substantial benefits. Consequently whatever Johns-Manville has spent in its investigations of building conditions beneficial to the entire industry may be considered a long-term investment on which, in the very nature of things, it can hardly fail to recover adequate return. Beyond that, the strengthening of its leadership in a forward movement is one of those potent intangibles which stimulate a business group from top to bottom and at the same time interest a wide audience of intelligent and influential persons.

IV

Even a slight reading of history offers proof that the masses of men are better found than of old, and the chief reason for this material betterment must lie in the fact that labor’s purchasing power has increased. In other words, goods have cheapened in terms of toil. Productivity has multiplied through invention and discovery, research, machine technics, mass production, industrial control. Of all the major industries, not excluding agriculture, building felt this quickening impulse the least. Consequently it is not surprising that at last the building industry is attempting to stabilize itself by following precedents effective in other lines. As an indication of the progress being made, the cost of new dwellings has declined almost 25 per cent since 1926, and the home of to-day contains more labor-saving and comfort-giving devices than that of 1926. This is due not only to lower wages and material costs, but also to increased efficiency in construction.

‘ Prefabrication ’ is the term which the industry has adopted to describe this trend, or perhaps it would be more correct to say that this rather loose term has been tacked to the new movement by amateurs and publicists without the whole-hearted consent of the professionals. At any rate, JohnsManville does not believe that prefabricated housing is a complete, ready-made answer to the complicated problems we are examining. Notable steps are being taken in that direction, but if anyone expects the housing problem to be solved at all soon by mass-production methods, let him take counsel of patience and listen to some of the reservations which require to be made in the interests of conservatism.

In the first place a house can never be shipped as a package. Difficulties of transport, bulk of materials, and variety of local conditions force assembly at the site. No house can be bought as a thing apart from the land it is destined to occupy, as an automobile can be bought after it comes off the line in a factory where every step in the assembly has been under one management in a controlled environment. The utmost tenable hope of the most ardent champion of complete prefabrication is that house parts will be made in their factories of origin with more regard to ultimate economical use, transported with less delay, put together with greater efficiency by men belter trained in coöperation under management capable of doing an expeditious job according to plan, all the way from excavation to landscaping, to the end that the buyer will receive a completely built, serviced, insulated, sanitated, decorated, electrified, and perhaps also furnished dwelling at an agreed price. This fascinating prospect has stimulated the public mind to new interest in housing, but like most of the happy and hearty ideals of mankind it will be a long time maturing. Nothing like the Utopian programme described above could be realized at once if the whole building industry should suddenly see a great light and move with one accord toward that great objective. Neither the means nor the materials are available; the organization necessary would require years of training; and, most important of all, the customers are not yet ready to buy ready-made houses in quantity.

Tradition works directly for variety in housing. The human spirit craves a dwelling place which reflects individuality. Of course this preference will not stand up forever, if and when prefabrication offers amazingly better values; but a desire so deep-seated may be long a-dying, and in the meantime the building industry must live. What it will do, and is now beginning to do, is to proceed step by step toward prefabrication, expecting that in the future a balance will be struck between factors and forces now in collision. Buyers may come to accept greater uniformity to acquire enhanced values, or fabricators and their architects may find ways of satisfying personal desires to a considerable degree without breaking the chain of orderly, efficient construction.

First steps in this progression are clear. One is prefabrication of materials in such wise that their use at the site makes construction more efficient. At this point Johns-Manville concentrates its immediate energies while looking ahead to more comprehensive developments. Other manufacturers are striving in the same direction; present heavy wastage of materials is sure to be greatly reduced.

Another advance is the relatively complete prefabrication of portions of homes. Even the most ardent individualist in housing will hardly object to a standardized kitchen, because the kitchen is essentially a workroom where labor saving is more important than expression of personality or support of a mood. Consequently assemblies of kitchen equipment are ‘breaking the ice’ for prefabrication. By such acquaintanceships the public will gradually adjust itself to a new order in housing. In some parts of the country and in some lines of building, acceptance may come more quickly than in others. Nevertheless, tradition against uniformity and novel designs will pass slowly enough to render the change evolutionary rather than revolutionary.

V

So far I have touched only obliquely upon the grave question of housing finance. Nearly every construction job requires a loan; nevertheless America developed no safe and satisfactory system of finance for this basic and, in the mass, tremendously large fiscal operalion. There is outstanding $50,000,000,000 in real-estate mortgage loans, almost half of which cover urban home mortgages. This is the largest single category in the whole debt structure of America, exceeding by almost twice the national debt and being four times the industrial debt, yet this gigantic sum is not subject to rational control and progressive liquidation. In the recent readjustment of real-estate values nearly all interests involved suffered loss, but conservatively managed institutions of the savings and loan type, like most of those in England and a number in this country, lost comparatively little. Their relative immunity may be traced directly to two factors. Through prior saving their debtors gained thrift habits and in the main escaped carrying second mortgages; also their contracts called for steady amortization of principal. These interim payments kept the margin of value well above the principal due, in precisely the same way that deferred payments on an automobile are calculated to offset depreciation.

The drawback of the American house mortgage has been its static position. Negotiated for a relatively short period, either three or five years, it contained usually no written provision for renewal. No amortization was required, and because of this lenience the lending bank customarily made only a 50 or 6O per cent loan. As a result the borrower was forced into the market with an already impaired security and had to pay through the nose for the remainder on second mortgages, thereby incurring a double set of legal fees and mortgage taxes. In the recent pinch this system came under well-deserved fire. With the passage of years mortgage security had become impaired through depreciation; borrowers had difficulty in saving their properties when mortgages matured and could not be renewed; homes that might easily have been cleared of debt, or at least put in sound condition for amortization payments in good times, either went under the red flag or were saved by desperate expedients, perhaps with government assistance.

This melancholy situation called loudly for a new procedure on home mortgages. The first step taken in the way of cure was the creation of the Home Loan Bank system in 1932; the next was the National Housing Act in 1934. Mr. Lewis H. Brown, president of Johns-Manville Corporation, was an important factor in drawing this act, which is having a profound influence on all private mortgage relationships. The chief features of this measure are the elimination of the unduly burdensome second mortgage and the establishment of a single insured loan on the basis of 80 per cent of value, with a standard clause providing for amortization from the first month of occupancy. This plan benefits both borrowers and lenders, giving the latter conservative investments always safely margined, and is likely to attract enough capital to exercise a sound and natural influence toward lower interest rates. JohnsManville strongly upholds the principle behind the National Housing Act, for it holds that funds for a true revival of home building must come from private sources. All that government can do is lead off in the direction of fair and enduring standards, and this has been done.

Fundamental recovery in building awaits the general acceptance of these two lessons from recent experience. The first is that a debt is made to be repaid. This is old doctrine; your grandfather probably told it to you, but in the meantime the habit of steady repayment declined in the mortgage field. The second lesson is new to us but commonplace in Europe; this is the advantage of opening the national money market to home owners and the national mortgage market to investors by listing broadly based and easily negotiable mortgage securities on the security exchanges. Where this has been done under adequate regulation, mortgage securities have sold at highly favorable figures even in bad times.

On the question of slum clearance and the substitution of modern multiple housing, Johns-Manville takes an equally realistic and cautious view. Giant apartment houses use enormous quantities of the Corporation’s products, because these meet effectively the need for low maintenance cost, low upkeep, and safety from fire, but such structures are held unlikely to drive the single family dwelling from the American heart and scene. Where such projects are the result of slum clearance, it is felt that the latter is essentially a social rather than an economic problem. Close observation of population shifts in many cities gives evidence that slums are made by slum dwellers quite as much as by neglectful landlords, corroding taxes, and scant public services. Slums can be cured by main strength at great expense, but can the slum makers be as quickly reformed? When a slum is cleared, new tenants of higher type usually invade the reconstructed area while former inhabitants move on to assist in creating another slum somewhere else. A long and necessarily slow education in better living and the proper care of modern, sanitary housing is one of the essentials of slum eradication, — which is the correct long-range objective, — whereas slum clearance as properly understood is only a temporary betterment usually missed by the very persons it is designed to help. Still, Johns-Manville is not cynical on the subject of slum clearance. It has done its share to rouse landlords toward improving their outmoded properties. Even if slum dwellers on the move create new slums, the latter may not be as foul slums as the ones left behind, and in the process some of the befoulers of decent property may have learned better ways of domestic life. The point is that JohnsManville does not expect the impossible from any combination of government money and large-scale housing.

VI

This article leaves untouched, through sheer lack of space, a broad range of subjects which have received the attention of Johns-Manville’s investigators over many years. Among these are effective land utilization, sound community planning, influences of real-estate taxation, questions arising from the relationships of labor, contractors, supply dealers, realtors, architects, and manufacturers, and the vital problems of distribution, transporting, and warehousing. All that is possible within these narrow limits is to present the point of view of an enterprising corporation as it attempts to cleave through the jungle of custom and commerce which hinders the average American on his way to getting the best possible shelter for his money. To clear away the tangle is perhaps beyond the power of any single corporation; but to see the goal clearly and point the way is an act of leadership for which the entire building industry and a nation drastically in need of more and better housing may well be thankful.

Copyright 1935, by The Atlantic Monthly Company, Boston, Mass. All rights reserved.

  1. Tenth in a series of advertisements on Industrial America: Its Way of Work and Thought.