materials without any guidance in the legislation as to the meaning of those terms, and to decide what constitutes interference by local codes and collective bargaining agreements.

By permitting collective bargaining to be overturned, the bill undercuts the National Labor Relations Act, which is supposed to govern the relations between employer and employee.

Finally, the legislation would force local communities to adopt provisions of codes set by private, industry-dominated organizations, which HUD has previously indicated it has no intention of supervising. These codes, adopted with minimal consumer or public participation, will dictate what products go into American homes, overriding valid local considerations of safety and quality.

If this bill is really aimed at stemming the rising costs of housing by trimming labor costs and eliminating restrictive work practices, then it misses the target completely, because it fails to take into account the real causes of housing inflation: the skyrocketing costs of financing, land, and materials.

In truth, this bill will only eliminate local laws designed to protect the consumer from shoddy workmanship and dangerous materials. Thus, S. 3373, is the wrong bill, at the wrong time, positing authority in the wrong hands, and for the wrong purpose.

The other bill before you today, S. 3654, which eliminates the DavisBacon Act as it applies to federally assisted housing programs, is also based on the false premise that wage rates are the main reason for increased housing costs.

Although it is not before this committee, there is another bill, S. 3036, which would totally abolish the Davis-Bacon Act.

Mr. Chairman, it is hard to imagine that either bill could be seriously considered by the Senate. The act has been with us for over 40 years now and, in my view, is needed as much today as it ever was.

The Davis-Bacon Act was originally passed in order to allow local area contractors and local labor a fair opportunity to secure Federal contracts.

At that time itinerant contractors were traveling around the country and were utilizing cheap, often alien, labor to underbid local contractors paying the prevailing wage in their area.

The Davis-Bacon Act, sponsored by Republican Senator Davis and Representative Bacon, was not union legislation. It was simply designed to give local contractors and workers, whether union or nonunion, an opportunity to compete fairly with the out-of-state contractor by requiring the wages prevailing in the area to be paid. And, does not require that a union wage be paid unless the union wage scale is the prevailing one in the particular area. In fact, over 60 percent of the Department of Labor's wage determinations involve rural, nonunion

areas.

There has been criticism directed at the Davis-Bacon Act because in some areas of the country the wage rates certified by the Department of Labor have been very high. It must be remembered, however, that Davis-Bacon does not "set" our wage rates. Although some rates are high, we have shown in our written statement submitted to the committee some examples of wage rates determined within the last year that are actually astonishingly low.

These are only samples and there are others as low or lower in many other parts of the country. Even in areas where the hourly rate is high, one should realize that because of seasonality, weather, and other factors in the building and construction industry, annual earnings are not as high as would normally be indicated by average hourly rates. Also, during the last year wage agreements in the construction industry have been subject to the approval of the Construction Industry Stabilization Committee.

As a result, according to statistics reported in the June 9, 1972 issue of the Daily Labor Report, the median negotiated wage gain in construction settlements this year has dropped about 15 percent from last year. Davis-Bacon does not cause inflation; it merely reflects an existing condition of inflation. If prices, profits, interest, and taxes remain fairly stable, construction wages can also remain stable.

Mr. Chairman, S. 3654 is not an anti-inflationary measure. It is an attempt to revert to the chaotic cheap labor conditions of an earlier day. On behalf of the Building and Construction Trades Department AFL-CIO, I strongly urge this subcommittee to reject both S. 3654 and S. 3373. Thank you.

Senator TOWER. Thank you, Mr. Bonadio, for a very comprehensive

statement.

What assurance do we have that a tritrades agreement signed with the international will be respected by the local unions?

Mr. BONADIO. It has been in the past, sir.

Senator TOWER. Is there some experience to indicate that we would get cooperation from the local unions in this connection?

Mr. BONADIO. Surely. They have always respected the tripartite agreements. I haven't heard that they have not.

Senator TOWER. Would you submit for the record a list of all the tritrade agreements and copies of those agreements?

Mr. BONADIO. I will try to obtain some of them for you, Mr. Chairman.

Senator TOWER. Within the next week?

Mr. BONADIO. I Would be glad to. (See p. 224.)

Senator TOWER. Aren't tritrades agreements forms of "sweetheart" contracts since they are signed by the internationals and the manufacturer and since they require organization of the manufacturer's plant by the building trades without the exercise of a free choice by the manufacturer's employees?

Mr. BONADIO. No, sir; they are not sweetheart contracts at all. I would like to explain it in my own way. Since the great influx and demand for housing began, someone came up with the idea of system building. I am not an engineer, sir; but system building, prefabrication, and modular type construction is one and the same thing. The idea is to take as much work off the site and put it in the factory as possible.

This is what they call system building. So, in order to do this job properly, they decided that they needed just three or four crafts to do the fabrication, not the installation. This brought out the tripartite agreements.

As a matter of fact, one or two international unions have agreements with the system builders, signed by the one international union itself, and this material is shipped to the job site and it is erected and put to

gether by our members. I know of no case where they have refused to do so.

Senator TOWER. Thank you very much. For the record, you quite properly note that part of the inflation in the cost of housing is land cost, closing cost, material cost, and so forth.

I would like to state for the record that in reporting the Housing Act of 1972, this committee included provisions to deal with the high cost of closing and land transfers.

In addition, we extended legislation which governs interstate land sales, and we have conducted hearings on the cost of lumber and building materials.

So, I think it is altogether proper, having considered those things, we consider labor costs as well.

Thank you very much for appearing today.

Mr. BONADIO. Thank you, sir.

(The full statement of Mr. Bonadio, and the additional information requested follows:)

STATEMENT OF FRANK BONADIO, PRESIDENT, BUILDING AND CONSTRUCTION TRADES DEPARTMENT, AFL-CIO

Mr. Chairman:

Thank you for allowing me to appear before you to present the views of the Building and Construction Trades Department of the AFL-CIO, on behalf of its 17 affiliated International Unions and their more than 3 million members, in regard to S. 3373 and S. 3654. I would like to first address myself to S. 3373 introduced by Senator Brock. Quite bluntly, the Building and Construction Trades Department believes that this legislation is bad for the workingman, bad for the homeowner, and bad for our local communities throughout the nation.

Moreover, it is premised upon the completely erroneous assumption that soaring labor costs, caused by restrictive work practices embodied in building codes and collective bargaining agreements, are the main reason for high and ever rising housing costs. Even before discussing the deficiencies of the bill itself I would like to make it clear that this assumption is false. When Senator Brock first introduced this legislation as a proposed amendment to the 1972 Housing Bill, S. 3248, he stated that the exorbitant increases in construction costs were due to higher and higher wage rates in the construction industry. Congressional Record March 2, 1972, p. S3140. Senator Sparkman correctly informed the Senate that construction wages was hardly the only factor involved in the rise of housing prices and that, in fact, the cost of land showed the greatest increase, followed by the materials, such as lumber, that are needed in constructing a house. The increase in these costs are principally responsible for the rise in housing costs.

Incidentally, in response, Senator Brock did admit that in some instances construction wages were simply catching up to where they should be. He also recog nized that there is a distinction between inflationary wages and those which reflect increased activity, greater productivity, fewer manhours, and overall reduced wages. Studies indicate that because of greater productivity, labor costs, as a percentage of the cost of a house, have actually decreased during the last decade. According to an article in the September 1971 issue of the Monthly Labor Review entitled "Labor Requirements for Construction of Single Family Houses", on site construction manhours per $1,000 of construction have actually declined from 72 hours to 52 manhours, a reduction of 27.8%. This article was based on a survey conducted by the Bureau of Labor Statistics. We must remember that part of the increase in the cost of new homes is that homes built today have more features included in the price of the house than did homes built in the past-features such as central air conditioning, washers, dryers, dishwashers, ranges and refrigerators. These in turn require more manhours to install, but the increase in labor is quite small in comparison to the proportionately increased value of the home.

Let's consider the price breakdown of residential housing in this country. The AFL-CIO has consistently maintained, supported by statistical evidence, that land, materials and finance costs are the principal components of construction costs; not labor costs. There are two different appropriate measures of

residential housing costs that reflect the proportionate cost factors, and both indicate that labor costs are a minor ingredient. The first index indicates the construction cost of a single family house-i.e. the initial cost of the home. A comparison of construction costs between 1949 and 1969 indicates the folowing breakdown of the various factors as a percentage of the total cost of the house:

These are statistics presented by the National Association of Home Builders based on a Bureau of Labor Statistics survey and can be found in the Congressional Record of October 20, 1969, p. E9113. The single largest cost factor in both years is building materials, but the greatest increase has been in the cost of land and the cost of financing, which have doubled. The only significant decrease has been the cost of on site labor, which has declined by almost 50%, much of the decline being due to greater productivity at the worksite.

Of course, these statistics are based on national data, and in particular areas any one cost factor may be somewhat higher or lower. For exmple, although on a nationwide basis land constituted 21% of the housing cost in 1969, in the growing, congested metropolitan areas land is an even larger factor in the rising cost of housing. In the metropolitan areas the scarcity of available land for building purposes has resulted in an inflated value for residential property. As a result, builders and occupants have been forced to turn to multiple family dwellings, such as apartment buildings, which utilize much less land per unit of housing than single family homes. An example of these spiraling costs is indicated by the increase in the site value of new FHA homes from an average of $1626 in 1955 to $3427 in 1965 and $4277 in 1969. Site values of existing homes increased from $1707 in 1955 to $3219 to $3737 in 1969.

The other basis for measuring housing costs is the monthly occupancy cost. This differs from the home building cost which measures only the initial cost of completing the home. The monthly occupancy cost index reflects the percentage of costs attributable to various factors over a period of time. Using the 1968 Report of the Kaiser Committee on Urban Housing as a basis, on-site labor represents only about 9-11 per cent of the monthly occupancy cost to the home owner or renter. Thus, the labor cost is even a lower percentage of the actual cost of the house to the homeowner than is reflected in the home building index. Although labor costs as a percentage of the total housing cost have been declining, housing prices have been rising due to the other cost factors. Even barring a continued rise in these other costs, a decrease in labor costs would not significantly lower the cost of housing. For example, a twenty per cent decrease in labor costs would only have a corresponding four percent decrease in the monthly occupancy cost of the house. Conversely, a twenty per cent increase in labr costs would only increase the monthly occupancy cost of the home by four per cent. In contrast, an increase in finance charges can have a significant impact on the cost of housing. A one per cent increase in the mortgage rate on a $20,000 20 year FHA mortgage will increase the average monthly payment of principal and interest by about ten per cent over the life of the mortgage. Mr. Chairman, if the legislative objective is to hold down housing costs, Congress is going to have to deal with the problems posed by the high and ever rising costs of land and financing. The legislation which is the subject of this hearing does not even attempt to solve those problems.

As for the question of restrictive work practices and the claim that the construction unions are totally opposed to industrialized or prefabricated housing, and use local building codes as a means of preventing such housing, the truth is that many local unions have included in their collective bargaining agreements changes from past practice which permit greater use of off-site production, On a national level the Building Trades Department has an agreement with the National Contractors Association to eliminate restrictive work practices and to reduce jurisdictional disputes. But, as I have pointed out, land and financing costs are the real culprits, and industrialized housing will not solve those

problems. And until we can solve those problems, housing costs are going to continue to rise.

To set the record straight, we believe that there is room for both prefabricated and on-site construction in the housing area. Demand for both commercial and residential housing is so great that both types of construction are needed. But our desire for greater housing production should not lead us to abandon quality, to sacrifice safety or to override local authority. And that brings us to the Brock bill itself, because that is precisely what it would do.

First, I would like to consider the text of the bill itself. One of the most unfortunate aspects of the bill is the vagueness of the language and the absence of any standards guiding those charged with enforcing it. The bill makes unlawful any contractual or building code provision that interferes or restricts the use of new or improved techniques, methods or materials in connection with any development, construction, rehabilitation or maintenance activity assisted under any program administered by the Secretary of Housing and Urban Development unless the provision is determined to be necessary to assure safe and healthful working or living conditions. The bill further provides that, regardless of the amount of money involved, any aggrieved person can sue in federal or state court to obtain an injunction against the "restrictive practice"; and, when the "restrictive practice" is in a collective bargaining agreement, the person will be able to obtain money damages as well.

This language is completely open ended. The bill neither specifies any criteria to determine what constitutes new or improved techniques, methods or materials: nor does it specify any standards by which to decide that a building code or contract is restricting their use. Interpretation and enforcement of these open ended provisions is left to the courts, who certainly have no particular expertise in this highly complex area. Moreover, if this bill were enacted, persons and organizations with miniscule financial interest in the outcome of the litigation could institute lawsuits against local governmental authorities and the parties to collective bargaining agreements to overturn local codes and collective bar gaining agreements. This provision thus encourages the institution of lawsuits for the purpose of harassment by those who have little or no interest in the outcome of the litigation. Apart from the disruptive effect this would have on the local building code and collective bargaining agreements, it would serve to strain still further our already overburdened courts.

Although it purports to be a housing bill, S. 3373 is really a backhanded attempt to amend the Taft Hartley Act and change the tenor of American labor relations as it has evolved over the last half century. Ever since the National Labor Relations Act was passed, the entire thrust of federal labor legislation has been to allow the parties to negotiate their working relationship by collective bargaining and to incorporate the results in a binding contract. S. 3373 seeks to change this traditional method of collective bargaining, and would empower and encourage third parties to attack collective bargaining agreements in court. I would respectfully submit, therefore, that this bill contains a serious threat to our system of labor relations and to industrial stability, and should be rejected. Still another objectionable feature of the bill is that the only authority for setting any criteria regarding techniques and materials is delegated to the Department of Housing and Urban Development (hereinafter referred to as HUD) and private standard setting organizations. The legislation in effect establishes a presumption that any technique, method, material or product that conforms to standards adopted by a nationally recognized standard setting organization approved by the Secretary of Housing and Urban Development is permissible. As a result, local authorities will be forced to include those provisions specified in the private codes approved by HUD. Only in this way can the local authorities have some assurance that they will be eligible for the federally assisted projects that are so vital to our cities today. And, of course, keeping control over this system will be HUD which, under the Brock bill, has the authority to designate the approved private standard setting agencies. Incidentally, here again the legislation has no specific criteria to guide the Secretary's selection of a private agency. The legislation simply requires that it be a "nationally recognized standard setting or testing agency."

That this type of omnibus control by HUD can lead to abuses is amply demonstrated by this Federal agency's previous conduct. In the past HUD has directly interfered with local communities' control over their building code by conditioning certification of workable programs under the Housing Act upon their changing housing codes in accordance with HUD's wishes. In various areas of the country, such as Kansas City, Jacksonville, Los Angeles and San Francisco,