The Tenant Gets a Break

The landlord, lordly so long, is getting into trouble. In New York City, the ads for new apartments trumpet "Rent Concessions--Of Course" and "Move in November, 1962--Rent Starts February, 1963." One Chicago builder, worried about filling his newest. 39-story lakeside building, is offering such extras as a babysitting service, three restaurants, a health club and free limousine rides to the Loop on wintery mornings. Not every U.S. tenant has it so good (rents remain firm in such cities as Atlanta and San Francisco), but rents are easing in many areas because so many new apartments are rising.

The Hollow Boom. Apartments accounted for barely 10% of the new housing market a decade ago, but this year will make up almost one-third of it. Greater Chicago and Southern California are among the areas where in 1962 for the first time more apartments than houses will be built. This is one trend that does little for the U.S. economy, because an apartment usually requires far less concrete, lumber and glass than a house. The average apartment costs 57% as much to build as the average single-family house. And because apartments usually go up in well-developed areas, they do not kick off a fresh round of construction of streets, sewers, schools and shopping centers. Neither do they make for many two-car families.

Many families have switched to apartment living because houses have become so costly. "Around here," sighs one Los Angeles real estate man, "an $18,000 house is a cheapie." Around New York, a $22,000 house is a cheapie. Lawn mowing, long commuter trips and crowded highways have taken some of the luster off the suburbs, and have led to some return to the cities. (New York City, which normally puts up 10% of the nation's new housing, has a special reason for its apartment building boom: to beat the deadline for the first major zoning ordinance change since 1916, builders took out as many permits last year as they normally would in three years. )

The Coming Fall. Some 1,400,000 new houses and apartment units will be built this year (a gain of 9% over last year), but 7.4% of the nation's apartments are now vacant. Says one top mortgage specialist: "The owners can't afford such a large vacancy rate. There has got to be a drop in starts."

Other housing specialists expect a slowdown for a few years, then a surge in demand for apartments, as the big generation of World War II babies grows up, marries and moves in. Buyers and renters need shed few tears for the builders, who continue to earn a pretax return of 30% to 40% on invested capital. "The smart builder is still making a good profit," says Washington, D.C., Housing Consultant Robinson Newcomb: "It's only getting a little harder to become a millionaire."

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