Frank Albert Fetter.

Source book in economics, selected and ed. for the use of college classes online

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Low retail or wholesale buildings 10-25 90-75

Residences 20-30 80-70

Non-elevator office buildings 25-35 75-65

Tenements, non-elevator and elevator . . . 25-45 75-55

Elevator apartments 40-55 60-45

Firepi-oof office buildings 40-55 60-45

Expenses and net income. It is clear that the lower the
cost of the building in proportion to the value of the land, the
nearer the income approaches to pure ground rent, against
which the sole charge is taxes. On the other hand, the more
expensive the building the higher the maintenance cost, owing
both to the greater number of services rendered and to the
higher standard of accommodation. Since the operating ex-
penses of a building, whether fully or only partly occupied,
vary but slightly, the larger the proportion of expenses to
gross rentals the more marked will be the rise or fall of net
rentals as gross rentals fluctuate. Ordinarily, expensive office
buildings are properly located, the chief errors being in the
erection of expensive buildings in small cities, or in poor loca-
tions in larger cities. When hard times cause a sharp drop
in rents in the smaller cities, instances have been known of the
upper floors of such buildings not earning sufficient rent to pay
for the mere services rendered, so that it would pay for owners
to close the buildings above the ground floor, even though the
ground floor stores are in active demand. The danger to
owners of heavy flxed charges is shown in the following table
[gomewhat abbreviated] :



of expenses

to gross


If gross rents rise or

20 per cent. 40 per cent.

then net rents rise or


60 per cent,

10 per cent.
20 •' "

22 per cent. 44 per cent.
25 " " 50 " "

66 per cent

75 " "■

30 " "

29 " " 56 " "

85 " «

40 " "

33 " " 66 " "

100 " "

50 " "

40 " " 80 " "'

120 " «

60 " "

50 " " 100 " "

150 " "


Allowance for income from building. The next charge
against gross rents is for interest on capital invested in the
building, this being figured at the same rate as the capitaliza-
tion of the ground rent, after an allowance for depreciation
has been made.

[This charge of interest on capital invested can be looked upon
only as estimate made at the moment of investment, in the belief tiiat
the form and style of building is being suitably chosen. After the
building is done, the amount properly to be charged against gross
rents on account of the building would have to be judged from other
conditions than the amount invested, and the investment may be deemed
to be either partly or wholly lost. This is strikingly brought out by
the pictures and the accompanying explanation which appear in the
text at this point. — Ed.].

Net ground rent. The final residuum constitutes the . . .
ground rent which represents the competitive premium paid
for location. Where there is no residuum of ground rent in
city land it does not follow that the land has no value, but
usually that the improvements are not suitable, so that the
value must be estimated under a different utilization. If the
improvement is a suitable one, absence of ground rent may be
due to temporary drop in rentals or bad management, all city
land normally yielding some ground rent.

Ground rents and various utilities [page 145]. In review-
ing the evolution of value ^ in urban land, the first step is to
conceive of the naked site apart from the buildings, having
only the qualities of location and extension and without value
until there is competition for land. . . . Exchange value con-
sists of [the capitalization of the ground rent] modified by fu-
ture prospects. Ground rent is the residuum after deducting
from gross rents all operating charges, taxes, insurance, re-
pairs, rent collecting, and interest on the capital invested in
the building. Ground rent is a premium paid solely for loca-

1 [In the following paragraphs the statements made regarding "value"
are almost all true also of renfal-value and of usance-value, although they
are made in the text in relation to capital value. — Ed.]


tion and all rents are based on utility. Utilities in cities tend
constantly toward specialization and complexity, business be-
ing broadly divided into distribution, administration and pro-
duction, and then indefinitely subdivided; and residences be-
ing divided into as many classes as there are social grades.
In so far as land is suitable for a single purpose only, its
value is proportionate to the degree to which it serves that
purpose and the amount which such utility can afford to pay
for it. When land is suitable for a number of purposes, one
utility competes against another ard the land goes to the
highest utilization. . . .

Different uses of land. Th^^ " ^rs distributing values over
the city's area by attraction or repulsing various utilities are,
in the case of residences, absence of nuisances, good approach,
favorable transportation facilities, moderate elevation and
parks; in the case of retail shops, passing street traffic, with a
tendency towards proximity to their customers' residences; in
the case of retail wholesalers and light manufacturing, prox-
imity to the retail stores which are their customers ; in the case
of heavy wholesaling or manufacturing, proximity to transpor-
tation ; and in the case of public or semi-public buildings, for
historical reasons, proximity to the old business center; the
land that is finally left being filled in with mingled cheap
utilities, parasites of the stronger utilities, which give a low
earning power to land otherwise valueless.

Proximity and accessibility. Value by proximity responds
to central growth, diminishing in proportion to distance from
various centers, while value from accessibility responds to
axial growth, diminishing in proportion to absence of trans-
portation facilities. Change occurs not only at the circum-
ference but throughout the whole area of a city, outward
growth being due both to pressure from the center and to
aggregation at the edges. All buildings within a city react
upon each other, superior and inferior utilities displacing
each other in turn. Whatever the size or shape of a city


and however great tlie complexity of its utilities, the order
of depeudence of one upon another is based on simple princi-
ples, all residences seeking attractive surroundings and all
business seeking its customers.

OJoB'' :,


[The British Board of Trade Report on working-class rents, etc.,
in the principal industrial towns of the United States (made in
April, 1911), presents a comparison by means of index numbers, of
average rents for working-class houses and apartments in the various
towns investigated. The dwellings are classed merely by the number
of rooms (the mean between the lowest and highest rates that pre-
dominate being determined) ; and thus the comparison between large
and small cities leaves out of account difl'erences in yards and gar-
dens, in height of building, etc. A four-room apartment on the fifth
floor, without a foot of yard enters into the estimate just as does a
separate one-story, four-room cottage with a yard. The difficulties are
recognized in tlie report, where they are deemed unavoidable. The
method of computing the averages, by a somewhat elaborate process,
having been explained, the report says (p. xxv. flf.) :]

In the following table the index numbers so calculated are
given, showing the relative level of rents in each of the towns
investigated as compared with New York, the predominant
rents in that town being taken as the base (= 100) :

NEW YORK = 100.

Index Index

Town. number. Town. number.

Borough of Manhattan (New New Orleans 72

York) -.. 109 Savannah 71

St. Louis 101 Louisville 71

NEW YORK 100 Chicago 70

Pittsburg 94 Milwaukee 66

Memphis 93 Lawrence 64

Cincinnati 93 Cleveland 64

Borough of Brooklyn (New Paterson 62

York) 88 Providence 59

Brockton 83 Augusta 58

Boston 82 Detroit 57

Birmingham 81 Fall River 55

Philadelphia 79 Baltimore 54

Newark 78 Lowell 52

Minneapolis — St. Paul 77 Muncie 44

Atlanta 76



It will be observed from the above table that, while the index
uumber for St. Louis is slightly higher than that for New
York as a wliole, the figure for the great borough of Manhat-
tan, still often regarded as New York proper and still the
center of the most congested areas in the world, is 109, while
that for the borough of Brooklyn is 88. Apart from St. Louis,
Pittsburg (a rapidly growing industrial center), Memphis (a
city hardly less Western than Southern in temper and stage of
development), and Cincinnati (still somewhat hampered in
the development of its housing accommodation by physical
conditions), also stand out as towns in which the range of
rentals is relatively high. Brockton, the highest among the
New England towns, is the center of a staple industry in
which wages and the standard of comfort are not only gener-
ally high but more approximately uniform than in most towns.
Baltimore and Detroit, with index numbers respectively 46
and 43 per cent., lower than that for New York, are the most
important towns included among the more cheaply rented, al-
though the position of Cleveland, Milwaukee and Chicago is
not far removed, with index numbers of 64, 66 and 70 re-
spectively. Between New York and Detroit, which ranks as
one of the "home cities" of America, Philadelphia, which is
best known by this title, occupies a middle position with an
index number of 79.

Although wide difi'erenees are thus shown in rents as be-
tween town and town, the local variations, apart from the
unique position occupied by New York itself, are much less
marked when these are grouped geographically, as the fol-
lowing table shows :

NEW YORK in: 100.


of towns Mean rents.
Geographical group. in group. Index numbers.

NEW YORK 1 100

New England towns 6 66

Other Eastern towns 4 68

Central towns 6 71

Middle West towns 4 79

Southern towns 6 75


The lowest index number is that for the New England group,
66, a figure to which that for the other Eastern towns closely
approximates. The six Central towns include Muncie, a small
town in which industrial conditions, largely owing to the clos-
ing of steel-rolling mills, had been recently depressed and in
which rents in 1909 were exceptionally low in consequence.
Omitting Muncie, the index number of the Central group is
76, or nearly as high as that for the Middle West, the towns in
which, with a mean index number of 79, stand out as the most
highly rented geographical group of all. The Southern group
includes Memphis, a town that is largely dominated by the
"Western spirit and where rents are high. It differs in tone
and character from the other five towns in this group and,
excluding Memphis, the mean index number for dwellings in
the occupation of whites for the remaining five Southern towns
is 72, a figure which still seems a relatively high one for a
part of the country in which the temperature is never low and
in which shelter is perhaps equally important as a protec-
tion from heat as from cold. In these towns, however, homes
are generally self-contained and sites relatively liberal, and
there is practically no congestion, while the towns themselves
are largely representative of the new industrial South.

In spite of the complex and often local causes that help to
determine rent levels, when the towns are grouped on the basis
of population a general conformity with the rule that the rents
of large towns tend to be higher than those of smaller ones is
shown, and in this respect the position is illustrated in the
following table:

NEW YORK z= 100.


Population group. of towns Mean rents.

in group. Index number.

NEW YORK (population 4,766,883) 1 100

Other towns with more than 500,000 inhabitants 8 78

Towns with from 250,000 to 500.000 inhabitants 5 73

Towns with from 100,000 to 250,000 inhabitants 8 69

Towns with under 100,000 inhabitants 5 64


. . . The Census of 1900 gives particulars of the number of
dwelling-houses owned by their occupiers either free or encum-
bered, and the combined percentages ranged at that date, so
far as the towns covered by the inquiries are concerned, from
a maximum of 39.1 in Detroit to a minimum of 12.1 in New
York. In six cases the percentages exceeded 30, namely in
Detroit, as mentioned, with 39,1 per cent., 16.6 per cent,
being encumbered; Cleveland with 37.4 per cent., 16.1 per
cent, being encumbered; Milwaukee with 35.9 per cent., 19.4
per cent, being encumbered; Duluth with 35.7 per cent.,
11.5 per cent, being encumbered; Brockton with 33.9 per
cent., 23.1 per cent, being encumbered ; and Muncie with 32.7
per cent., 14.8 per cent, being encumbered. In fourteen of
the towns investigated the numbers of dwelling-houses owned
by their occupiers, both free and encumbered, exceeded 20
per cent, and were under 30 per cent. ; in eight towns, includ-
ing tive of the six Southern towns with large proportions of
their population colored, the combined percentage fell below
20; the remaining three towns being Boston with 18.9 per
cent.. Fall River with 18.0 per cent., and New York, as men-
tioned, with 12.1 per cent. It must be observed that the above
percentages refer to dwelling-houses of every kind irrespective
of the class of occupier, and that it is impossible, therefore, to
state to what extent the owners belonged to the wage-earning
class. The chief methods by which purchases are arranged
are either through the medium of building and loan associa-
tions or through the special facilities offered by builders and
real estate companies. Building and loan associations are
widely scattered throughout the country, and are especially
numerous in Philadelphia, but the competing activities of
builders and companies, with many variations on the general
plan of a percentage payment of the price in cash with first
and sometimes second mortgages and sometimes on a simple
plan of payment by monthly instalments, are still more gen-
eral. As a rule ownership includes the freehold, but in Balti-
more the buildings are frequently held alone, the ground rent


being a separate and permanent charge. To a less extent a
similar practice prevails in Fall River,

As regards foreigners, among those who appear to be the
most active buyers of real estate are the Germans, Italians, and
Jews, but also the Poles in towns such as Detroit and Mil-
waukee, the Bohemians in Chicago, and the Scandinavians in
Dulutli and Minneapolis-St. Paul. The great effort made to
become house-owners is frequently mentioned in the town re-
ports, a special impulse to incur a present sacrifice being
doubtless often found in the confidence with which a future
rise in the value of land is anticipated. When a customary
local type of building is for the accommodation of more than
a single family, the dwelling is still often purchased by small
owners and one or more tenements, as the ease may be, are then
sublet. This would be the usual and, indeed, under local con-
ditions, the almost necessary practice in such towns as New
York and even Boston, but subletting part of what is designed
for the accommodation of a single family, or the introduction
of a disproportionate number of lodgers and boarders, is also
apt to follow on purchase, as among the Poles in Milwaukee.
In general it may be observed that the practice of purchasing
dwellings by wage-earners in the United States has assumed
large proportions ; that it is regarded as a satisfactory feature
of the urban situation ; and that, in spite of the large transient
element of the population, it is apparently increasing.

[In the comments made on conditions found, some interesting prob-
lems of house rents are suggested, page xxi:]

The normal difficulties of standardizing dwelling accommo-
dation in the United States are increased by the special im-
portance that attaches there to what is understood by "loca-
tion, ' ' a quality that every town both in the Old and the New
World exhibits in some measure, but one which assumes a dis-
tinctive character when segregation is apt to follow not only
the more usual broad distinctions of class and income but also
minor subdivisions due to race and color. In general, how-


ever, the rental differences due to these forms of segregation
are less marked than the differences due to the character and
general advantageousness of the dwellings themselves.

The most conspicuous illustration of this is found in the
housing conditions of the negroes who, although as a class they
generally have to pay somewhat more than the white man for
identical accommodation, are found frequently paying a lower
range of rent, not because the individual houses occupied by
them are more moderately rented and really cheaper, but
rather because those which they are able to secure rank often
amongst the older, and, more uniformly, among the less de-
sirable properties. Such conditions are illustrated, for in-
stance, in Baltimore or Savannah. When, as in New York
City, much the same class of dwellings are in colored as in
white occupation, a somewhat higher level of rent is generally
paid by the former class of tenant, even in recognized colored
districts and always in districts which are still predominantly
white. . . .

[Page xxiv] As regards housing accommodation in general,
there is much evidence of an activity of competition among
owners and builders and of a degree of material prosperity
that are tending very widely to raise its standard. Thus, al-
though the areas of deterioration and congestion frequently
found and the occasional rapidity with which the character
alike of the buildings and of districts is apt to change for
the worse in the racial kaleidoscope of American towns, mili-
tate against improvement, the general standard is being dis-
tinctly raised. Powerful influences to this end are found in
the increasing facilities for transit, including nearly every-
where electric tramway systems, and in some cases in the
construction of bridges and tunnels by which physical bar-
riers of the past are being still further overcome. Of the
power of these influences New York is itself perhaps at once
the most important and the most striking example. But a
more fundamental explanation of this improvement is found
ill the higher standard of demand that follows from an increas-


ing prosperity. The demand for improved housing itself is,
indeed, a natural accompaniment of similar changes that are
taking place as regards, for instance, amusements, clothing
and food, in all of which a great variety appears to be resulting
from a vast and an increasing effective demand. In other
directions analogous changes are manifest, and just as man-
sions are becoming more splendid and middle-class homes more
replete with comfort, so cottages and smaller homes are be-
coming more attractive and more convenient. Congested areas
of crowded dwellings are, it is true, manifest and glaring ex-
ceptions to this rule, while the not infrequent practice of build-
ing more flimsily and the large number of dwellings still being
erected for three or more families are opposed to it; but the
general tendency, especially as regards the dwellings in the
occupation of the more skilled workmen, is nevertheless to-
wards a marked improvement.


[The conditions of the wood supply in America have been rapidly
changing. An interesting illustration of the manner in which this
change is related to prices, and the way it is affecting the use of land
for timber (which is coming to be looked iipon as a growing crop
instead of an incumbrance on the land), is found in a portion of
"An Agricultural Survey," by G. F. Warren, and others, Bulletin 295,
of the N. Y. State College of Agriculture, 1909, p. 464, ff.]

Development of the woodlot. A little over a hundred years
ag'o Tompkins County was covered with a dense stand of ex-
cellent virgin timber. This consisted of white pine, oaks,
hemlock, maples, beech, elm, basswood and many other species.
In the early days there was little market for lumber and in the
haste to get the land cleared for farm purposes much of the
finest timber was burned. It is estimated by men whose
fathers settled the county that fully 60 per cent, of the virgin
forest was cut and burned in order to clear the land. Un-
fortunately, neither the early or later clearing had much ref-
erence to the character of the soil. Woodlots are still common
on some of the level rich land; and poor barren hillsides
that are too steep for tilled crops or even for good pastures
were cleared. There seemed to be no plan or system in clear-
ing land. Whether a field was cleared or not seems to have
been a matter of chance rather than a result of judgment.

Prices of lumber. The ''log-run" prices of timber for a
number of years show how rapidly the price that the lumber-
man gets for timber has increased. Not only have the prices
increased but many kinds of lumber that once had no value
now sell at fair prices. The figures in Table 68 give the
average prices obtained by examination of the books of some




of the oldest lumbermen. They are for the lumber just as
it comes from the saw-mill, or "log-run" prices.


lumbermen's books.









White pine . .

$6 00

$ 8 00

$12 00

$16 66

$21 33

$24 00

$28 00

$35 00

Hemlock . . .

4 00

4 66

6 33

7 00

9 33

12 33

18 66

White oak. .

6 00

7 50

14 00

15 33

16 00

18 66

26 66

Red oak. . . .

10 00

12 00

13 33

14 50

15 33

18 33

22 50

Hickory ....

18 00

20 00

20 00

22 50

22 00

26 00

27 33

White ash. . .

12 00

12 50

16 00

19 00

19 00

20 33

26 00


7 00

12 50

18 50

19 50

24 00

26 50

35 00

Basswood .,. .

6 00

8 00

9 00

11 00

12 66

15 66

20 66

Hard maple.

6 50

8 00

10 50

12 00

14 33

19 00

Chestnut . . .

7 00

8 00

10 66

14 66

17 66

21 33


9 00

12 00

14 00

15 00

19 50

20 50



8 00

10 00

14 00
5 00

14 50
7 00

17 50
11 00

21 50
15 00

Chestnut rail-


road ties. .





Oak railroad







Soft cord-

wood ....

1 50

2 00

Hard cord-

wood ....

3 00

3 25

4 00

4 50

4 00

Present condition of the woodlots. The present conditions
of the farm woodlots in Tompkins County are representative
of the conditions of the woodlots in many other counties in
New York State. They might well be described as irregular,
detached pieces of woodland, consisting of all sizes and ages
of mixed deciduous and coniferous species, of first, second,
and stump growths. They occupy no definite position as re-
gards soil or altitude. Steep hillsides and ravines are denuded
of their forest covers, in certain sections, and in other sections
more or less thrifty woodlots occupy good agricultural land.
They have no definite relation to the general lay-out of the
farms. They are composed of dead, diseased, young, mature
and weed trees all thrown in together. The valuable are left
to struggle for supremacy with the useless but hardy species,
and in addition are frequently required to withstand the rav-
ages of stock. The fact that useful woodlots persist in spite of


these conditions is evidence of the excellent adaptation of
this region to the growth of trees.

It is a deplorable yet self-evident fact that only a few of
the farmers in Tompkins County have done anything toward
improving their woodlots. When a piece of land is cut over,
little attention is given to saving the young growth. Prob-
ably one-third of the woodlots of the county are being pastured.

Online LibraryFrank Albert FetterSource book in economics, selected and ed. for the use of college classes → online text (page 6 of 30)