The Online Library of Liberty

A project of Liberty Fund, Inc.

• Preface
• Translator's Note
• Where and Why Public Ownership Has Failed
• Book I: Public and Private Trading Operations
• Chapter I: Two Precepts
• Chapter II: The Three Mainsprings of Human Action
• Chapter III: Determining Motives of Private As Against Public Enterprises
• Chapter IV: Government and Municipal Trading Operations
• Book II: Financial Results of Government and Municipal Ownership
• Chapter I: Bookkeeping In State and Municipal Trading Enterprises
• Chapter II: The Belgian State Railroads
• Chapter III: Prussian Railroads
• Chapter IV: State Railways of Austria and Hungary
• Chapter V: Italian Railways
• Chapter VII: Railways of New Zealand
• Chapter VIII: Government Railroads In France
• Chapter IX: Public Vs. Private Operation
• Chapter X: The Holy Cities of Municipal Operation
• Chapter XI: Operation of Gas and Electricity In the United Kingdom
• Chapter XII: Tramways In Great Britain
• Chapter XIII: Housing of the Working Classes and Public Ownership In Great Britain
• Chapter XIV: Housing of the Working Classes On the Continent
• Chapter XV: Government Control of Food Supplies
• Chapter XVI: Victims of Government Ownership
• Chapter XVII: Charges, Debts and Credit
• Chapter XVIII: Fictitious Profits
• Chapter XIX: Fiscal Monopolies
• Chapter XX: The Alcohol Monopoly In Switzerland and Russia
• Chapter XXI: Financial Disorder
• Chapter XXII: The Purchase Price
• Chapter XXIII: Delusions of Profit and the Life Insurance Monopoly In Italy
• Chapter XXIV: The Fiscal Mines of the Saar District
• Chapter XXV: Public Versus Private Enterprise
• Book III: Administrative Results
• Chapter I: Administrative Results
• Chapter II: The Safety of Travelers Upon State and Private Railway Lines
• Chapter III: Disorders, Delays and Errors
• Chapter IV: Official Conservatism
• Chapter V: Labor
• Chapter VI: The Consumer
• Chapter VII: Programs of Organization and Regulation
• Book IV: Political and Social Consequences of Public Operation
• Chapter I: Socialist Programs and the Facts
• Chapter II: Bluff
• Chapter III: Results of Experience
• Chapter IV: The State a Dishonest Man
• Chapter V: Corruption
• Chapter VI: Nationalization of Public Utilities and the Foundation of Great Fortunes
• Chapter VII: Disintegrating Character of Public Operation
• Appendix %u201ca%u201d: Alcoholism In Russia
• Appendix %u201cb%u201d: the Financial Year In Australia
• Appendix %u201cc%u201d: the Shortcomings of the Telephone In England

CHAPTER XIV

HOUSING OF THE WORKING CLASSES ON THE CONTINENT

1. There are men who, full of sympathy for their fellow men, wish to house them, feed them, and dress them, but at whose expense? The trouble is they want to house people of one class at the cost of another.

Of late years the activity of the partisans of municipalization and socialism has been turned toward the housing of the working classes, as if the term “working classes” alone were not sufficient to indicate the retrogressive character of such measures. They are instrumental in creating a class apart, who are to be protected by other classes, utterly oblivious of that spirit of equality inculcated by the motto of the French Republic.

The interventionalists denounce the weakness of private initiative, as though up to the present it had not been responsible for the development of the cities which these same individuals, from an entirely different standpoint, so bitterly deplore. It never seems to occur to them that, by deluding the people of the rural districts into thinking that they will be offered desirable and more or less gratuitous homes, they are influencing them to leave the farms for the city. Their real motives are concealed within such vague terms as “public health,” and “the housing crisis.”

Nor are French interventionalists of all kinds ever at a loss for foreign examples. In their report to the Municipal Council of Paris (1912), upon the housing crisis, and the creation of cheap homes, concluding with the recommendation for a loan of 200,000,000 francs by the city of Paris for the purpose of constructing cheap lodgings, MM. Henri Rousselle, F. Brunet, E. Desvaux, and D'Herbécourt review the legislation and practice of foreign countries. We congratulate them upon having at least made the attempt to support their thesis upon facts.

2. Germany:

In Germany it is customary for municipalities to ask for a direct loan from private associations and individuals and to supplement the sums so raised by municipal loans.

Düsseldorf borrows up to 60 per cent. of the value of its investment, with a 0.20 per cent. premium in the rate of issue.

Frankfort (414,400 inhabitants) has constructed and rents 65 houses, containing 366 apartments.

Ulm (57,500 inhabitants) has provided separate houses, of which the family lodged therein becomes proprietor. During the years since 1891 it has owned 2,131 hectares (5,263 acres) of land. It has managed to dispose of 35. The city of Ulm congratulates itself upon the results it has achieved. Everything depends upon your point of view.

In 1896 Strassburg (173,280 inhabitants) began to construct houses and to manage them directly; it now owns 11 buildings, containing 98 apartments, occupied by 372 people.

Berlin (2,064,000 inhabitants) has done nothing along these lines; nor has Hamburg (802,800 inhabitants) any municipal lodging enterprises.

Freiburg im Breisgau (85,000 inhabitants) owns 77 houses, containing 266 lodgings, and costing 1,225,000 marks ($294,000), which sum was advanced at 3.75 per cent. interest by the savings banks. It was estimated that the rent should bring in 5.25 per cent. on the capital.

Magdeburg (279,600 inhabitants) has constructed 7 buildings, containing 50 apartments.

Barmen (170,000 inhabitants) has constructed 7 buildings, containing 50 apartments.

Emden (20,000 inhabitants) has constructed 228 houses. The capital invested by the village brings in 3.50 per cent. to 4 per cent.

Dresden (547,000 inhabitants) has constructed “out of resources provided by the Krenkel Fund” a model group of 5 houses, each containing 34 separate rooms. “In this work the question of financial return has been considered as wholly secondary.” As a result, the inhabitants of these houses are a privileged class, who enjoy all sorts of advantages and pay 25 per cent. less than the usual rents. With the help of the Krenkel Fund the city has also undertaken the construction of two other buildings, containing 36 apartments.

Munich (595,000 inhabitants) has devoted 1,040,000 marks ($249,600) to the construction of 15 houses, containing 167 apartments, for laborers and other employees of the city.

3. Italy:

Louis Rousselle quotes these words of Garibaldi, spoken at the time of the conquest of the two Sicilies:

“A government sprung from the people is before all else bound to provide for the first necessity of the people—commodious and sanitary homes at a moderate cost.”

Certainly, if any people were ever badly housed it was the Neapolitans. I saw some of their hovels a long time after Garibaldi had pronounced these words. No change had been wrought by them in the filth and misery of the majority of the population. However, the true home of the lazzerone is the shore. The children swarm in the sun, and the sea air counteracts the pestilential atmosphere of the home.

The Italian law of May 31, 1903—modified in 1907 —has constituted an autonomous institution, “a sort of financial organization with social intentions,” to quote the expression of Luigi Luzzatti, recently Minister of Foreign Affairs.

Public construction and control of such works are in force only in Venice, Parma, Reggio, Emelia, Vincenza, Sestri-Ponente, and Carrara.

Venice (167,000 inhabitants) owns 396 houses, lodging 2,000 persons.

Parma (51,300 inhabitants) has 82 houses containing 508 rooms, and sheltering 130 families, or 724 people.

Sestri-Ponente (23,100 inhabitants) has 11 houses, each containing 20 apartments.

4. Belgium:

Brussels (195,600 inhabitants) has appropriated sums for housing purposes amounting to 2,500,000 francs ($475,000). But our report declares that it is necessary to subtract half as devoted to sanitation. Thus, 1,250,000 francs ($237,500) remained to be applied to the experiment. On this basis the net cost of one rented room is 3,575 francs ($679). It is all quite simple.

The Commission estimates the total charges at from 15 to 30 per cent. of the rent. The bonds of the city of Brussels were issued at about 2.70 per cent., interest, premiums and amortization included. The annual rent of one room, taking into account the higher rent of small shops, will be about 98 francs 51 ($18.72).

Saint Gilles-près-Bruxelles (63,000 inhabitants) began in 1894 with 5 small, one-story houses. Later this system was abandoned, and the town now has a group of tenement houses, comprising 130 lodgings.

The loans contracted by the municipality are issued at 3.25 per cent., with an amortization charge of 44 centimes (9 cents), or 49 centimes (10 cents). This appears about to equal the average income.

5. Holland:

A law of 1853 permits officials entrusted with the duty of looking out for house sanitation to enter any building, even in the night. The law of June 22, 1911, confers upon municipal councils the right of preventing the occupancy of unsanitary buildings and of regulating the number of people to a house. But no city has constructed or rents houses.

6. Switzerland:

Geneva (145,000 inhabitants) has constructed buildings containing 43 apartments and 111 rooms.

Lausanne (65,000 inhabitants) has constructed 8 houses, containing a total of 24 apartments.

Zurich (191,200 inhabitants) began by building houses for its municipal employees. In 1907 it erected 25 buildings, containing 225 apartments; in 1910 it constructed 228 apartments, and 76 attic rooms. It is now planning to construct 370 new houses.

Bern (85,000 inhabitants) built 134 small houses, containing 182 apartments in 1895, and, in 1898, 25 new houses.

Neuchatel (23,600 inhabitants) has built houses containing 47 apartments.

7. Austria:

In 1911 a plan was discussed in Vienna (1,999,900 inhabitants), involving an outlay of 480,000 crowns ($96,000), for the construction of temporary homes for the homeless.

8. Hungary:

In 1908 the Hungarian government proposed to the Chamber of Deputies to build a group of houses in the suburbs of the city of Budapest (791,700 inhabitants) capable of sheltering from 8,000 to 10,000 families. A credit of 12,000,000 crowns ($2,400,000) was opened to the ministry of Finance, and a tract of land, containing 169 hectares (417 acres), was bought at Kispest, while in the tenth district a second tract, containing 77 hectares (190 acres), was purchased. On May 1, 1911, 970 apartments were finished. In 1912, 2,000 other lodgings were to be open to rent. The work is to be finished in 1914. As tenants the preference is given to laborers and subordinate employees of the government. These houses are exempt from state taxes.

In 1909 the burgomaster of Budapest asked for an appropriation of 69,000,000 crowns ($13,800,000) for the construction of cheap lodgings. In all the city has constructed 26 buildings, containing 1,600 apartments, and costing 27,000,000 crowns ($5,400,000). On September 19th of the current year, it was decided to construct 1,000 more.

A special feature of the lodging schemes of Budapest has been the establishment of temporary settlements, containing 3,000 apartments, and expected to last 20 years, at a cost of 8,100,000 crowns ($1,620,000). Still another special feature has been the construction of a furnished hotel, containing 500 beds. The city is planning to build others.

9. Sweden:

Stockholm (344,000 inhabitants) owns 12,000 apartments. According to the memorandum of M. Gunichard, one of the municipal directors of the city, 10,136 lodgings are to be considered as housing 21,000 persons, almost 7 per cent. of the entire population of the city. But “these apartments are situated in old houses, about to be demolished, and the city is trying to sell the land.”

The government has also built houses for the benefit of government laborers and employees, especially for those connected with the railroad and telegraph services. In the city of Stockholm 443 apartments are reckoned to 1,700 people.

Norway:

Christiania (227,600 inhabitants) has built and rents two buildings, containing 152 rooms.

10. After their review (summarized above) of municipal housing in general, M. Rousselle and his collaborators on the Municipal Council say, with emphasis:

“The conclusion of this rapid review of the work accomplished abroad in the matter of housing the working classes is that in all the great cities the officials in power have approached the problem squarely and have attempted to solve it by the most direct and energetic means.”

Wherefore, there is bitter indignation against “France, which, alone among the great modern nations, obstinately refuses to municipalities the right of direct interference, despite the failure of private initiative and in the light of universal experience.”

It is curious to note the different interpretations to which a single fact is susceptible. These municipal councillors speak of the failure of private industry and universal experience. But, without private initiative, where would ninety-nine one hundredths of the population of London be living? The irrefutable facts already enumerated show that, in most of the cities which construct and rent apartments, the privileged classes who occupy them form but an infinitesimal portion of the population. If individual owners had not housed for a long time, and were not still housing, less favored mortals, the great cities would not exist at all. And still another fact that should be observed in this connection is that, in a certain number of these cases, municipal lodgings actually constitute supplemental wages for employees and laborers.

From no possible point of view is the desire to house so many people justified, and, moreover, it threatens both political and social dangers in the future. For example, the Hungarian government establishes settlements of small homes near Budapest. Then the municipality of Budapest, in order to meet this competition, builds houses in its turn. I gaze with awe on those states and cities which, while confronted with the necessity of husbanding their resources, have the courage to launch out into such extravagances.

According to the advocates of municipalization, all great cities should construct and manage workmen's houses. But when they cite facts in support of their contention, their facts prove precisely the opposite from what they intended them to prove. The majority of the great cities of the world neither construct nor administer houses for the benefit of the working people.

Nor have such cities as have undertaken this kind of work displayed the courage of their convictions, as the oft-quoted example of the London County Council proves. In cities containing hundreds of thousands of inhabitants lodgings are built for a few hundred people. Yet we French are airily urged: Imitate them! If we should imitate them in the same degree our undertakings would certainly not amount to much.

However, the following circumstance proves that the efforts of the promoters of municipal lodgings are bearing some fruit. The prefect of the Seine is demanding the creation of a public bureau of cheap lodgings, to which the city of Paris shall hand over the millions set aside according to the law of December 12, 1912, for that purpose. The plan provides that the bureau shall attend to the payment of interest, and the reimbursement—after 75 years—of the capital thus invested by the city.

But at what rate of interest can the city of Paris borrow now (June, 1913)? The bonds issued at 3 per cent. on May 21, 1912, and rated at 285 francs, are now 250 francs; moreover, the housing bureau must be responsible for capital and all general expenses of administration, rental and up-keep at a gross rate of 2 per cent., as well as the expenses of control by the city of Paris at a gross rate of 0.15 per cent. It must set aside 0.50 per cent. for a reserve fund to cover the more costly repairs and unexpected expenses. We have thus a rate of over 5.65 per cent. Under such a system the city is supplying capital to an association which pays interest, builds, maintains, and rents, it is true, but which, at the same time, is neither more nor less than a monopoly, suppressing all competition, since it frightens private capital away from just such investments.

Conclusions

1. The laws concerning unsanitary buildings are a new violation of the right of property.

2. The establishment of sanitary lists is designed to keep diseased inmates out of these buildings. But, in order to circumvent such regulations, proprietors will contrive to make all prospective tenants pass before a special examining health board.

3. Sanitary statistics of apartments belonging to municipalities are of no value, because the towns may choose their tenants.

4. We see the London County Council dispossessing 45,000 people and lodging 51,000. These latter are seldom or never the same people, and, therefore, between the destruction and construction of houses, the unhappy tenants have found themselves housed under no better conditions than before.

5. Those cities which buy real estate increase the price of that which remains; consequently they are helping to achieve such an end. In constructing houses at all they are withdrawing this branch of industry beyond the reach of private enterprise, and, while they are driving individuals out of business by their competition, they are showing themselves incapable of providing for the needs that they are pretending to care for. In reality they are working in the interest of higher rents.

6. Then such cities are practically subsidizing associations more or less financial and philanthropic. These are frequently granted special privileges, as in France under the law of 1894, reinforced by that of 1906. Léon Bourgeois himself described the results of such laws as “sporadic.” The departmental Committee on Patronage of Cheap Houses declares that: “The number of philanthropic associations is unimportant, and they are not modifying hygienic conditions in the housing of the workmen of Paris.”

7. The law of 1906 has had at least one result: While philanthropic associations were showing their inefficiency individuals and contractors have hesitated to invest capital in the construction of small houses, fearing to see their property decrease in value by reason of the competition of privileged associations or of the city.

8. Statistics prove the conclusions above drawn. The excess of buildings constructed in Paris over buildings demolished has been:

Or a difference between the two periods of at least 22 per cent.

The following table applies to tenements of 500 francs per year and under. These buildings are not taxed.

Or at least 31 per cent.

As a matter of fact the housing crisis in Paris has been provoked by legislative and municipal intervention.

9. On the 11th day of July (1912) the Chamber of Deputies passed a resolution modifying the law of 1906 concerning cheap lodgings. In this law there is no mention of construction and direct public management by municipalities. Nevertheless, the Journal Officiel, of July 30, 1912, duly proclaimed the law as authorizing the city of Paris to borrow 200,000,000 francs ($38,000,000), in order to facilitate “the construction of cheap houses, or to acquire and make sanitary buildings already existing.” The law as modified was placed on the statute books December 1, 1912.

In part compensation for this enormous outlay the prefect of the Seine proposed to levy taxes to the amount of 11,000,000 francs ($2,200,000) upon tenants, owners, and billboards. He has been compelled to abandon the scheme, but meanwhile necessary work on the city streets has been at a standstill.1

[1]Since the foregoing statement was made, the project has again been advanced and has been incorporated in the budget of 1914.