Statement on the Construction Industry.

THE COST of building a home or an apartment house has become exorbitant.

The Housing Act of 1968 sets as a goal 26 million houses in the next decade. Unless fundamental action is taken now to reduce the rise in housing prices, the Nation will fall far short of that goal. Low income groups, and a large share of Americans who are better off as well, face the danger of being priced out of the housing market.

Moreover, the rapidly rising costs of housing are a particular cause for major concern when we are striving to bring the forces of inflation under control.

Artificial means of holding down housing prices--whether through persuasion or coercion--cannot be effective in the long run. We must take action that will directly affect construction supply and demand, which is what really determines prices.

The demand for construction is clearly here and must be met; this means that government must move to affect supply-specifically, to enlarge the industry's capacity and thereby reduce the upward pressure on the cost of construction of new housing.

The great construction industry today accounts for almost 10 percent of our entire national output. Besides providing us with housing, this industry constructs the industrial and commercial complexes that enlarge job opportunities, and it meets government needs--from post offices to our far-flung highway system.

The entire construction industry has been laboring under demands that have strained its capacity. And these heavy demands will continue.

It is clear, therefore, that two types of action are now needed: For the near term, we must take steps to relieve immediate strains in the industry. And for the long term, we must take actions now to accelerate the growth in this industry's basic capacity to build.

Accordingly, I am taking action today that will help us get started toward more orderly building for the 1970's.

First, I am directing all agencies of the Federal Government to put into effect immediately a 75 percent reduction in new contracts for Government construction. This limitation, which will continue until conditions ease, will still permit projects of the highest social priority to be carried forward.

Although this action will cause some hardships, it will also release resources for home building where the need is great and where severe strains are already being felt.

Second, I strongly urge the State and local governments to follow the example of the Federal Government by cutting back temporarily on their own construction plans. The degree and promptness with which they respond to this plea for partnership in action will be watched carefully. If the response proves insufficient, I shall need to restrict the commitments for construction that can be financed through Federal grants. Should this step become unavoidable, the States and localities will, of course, be given due notice, so that they can adjust their affairs properly.

Third, I also urge businessmen to reappraise their current construction plans, and to postpone projects that are not immediately essential.

Fourth, I am directing the Secretaries of Labor and Health, Education, and Welfare to move promptly to provide for manpower training and vocational education in order to achieve a major increase in needed skilled labor for the construction industry. A shortage of skilled manpower is at the root of many problems faced by this industry.

Fifth, I am today establishing a Cabinet Committee on Construction. This Committee will be responsible for reviewing the vast range of Federal activities affecting the industry in order to assure that Government is not in its own programs and policies a major source of problems for the industry. It will also appraise the Nation's needs for construction, trends in resources available for building and financing, developments in wages and other costs and prices, problems of seasonality and technology, labor-management problems, and other matters pertinent to assuring that the Nation's on-going construction needs are served in an orderly and efficient manner.

The members of the Committee will consist of the Secretaries of Commerce, Labor, Housing and Urban Development, Transportation, the Postmaster General, and the Chairman of the Council of Economic Advisers, who will also act as Chairman of this Cabinet Committee.

The Committee will consult regularly with representatives of industry, unions, and the public. In this connection, I am directing the Secretary of Labor to explore the establishment of a mechanism to facilitate cooperation with union and employer groups in the solution of collective bargaining and related problems.

I shall direct the Cabinet Committee to report regularly to me on development in the industry and on their recommendations for actions to improve its performance.

With such actions we shall lay the foundation for orderly market conditions and ample productive resources in the construction industry. For this next decade, which may very well call for over $ 1 trillion of new construction, we are preparing for another great chapter in the building of our Nation.