As geographers we are always reminded that our maps are inherently distorted in some way, whether it’s in shape, distance, or size. Mapmakers have the power to decide what gets included and what gets left out order to tell the most compelling and useful story. Tracking the history of housing policy has been the same for me. I tried to keep focused on housing while providing enough context so the reader could connect the dots. My account below is limited and flawed, but constantly growing the more I read and experience. Any constructive comments, book/author suggestions, or refutations of something I got completely wrong are appreciated. I hope my attempt to bring light to some of the existing literature on housing policy inspires you to further explore this history and question some of the truths you hold to be self-evident. Thanks for reading!
Housing in the United States is preeminently a commodity – an investment vehicle for individuals and families, the object of real estate speculation, the lifeblood of the residential construction industry, and the subject of a long history of government intervention into mortgage markets. Due to the historical legacy of white supremacy and the structures created through it, the cultural and financial benefits of homeownership are not received equally across society, and in fact homeownership can actually impede wealth creation for a large portion of US society because of the high levels of risk involved. Housing policy has evolved over time, but even as various moments in history gave rise to more progressive orientations towards the provision of housing, the focus has remained on promoting homeownership at the expense of social housing, both in practice and in the popular imagination. In this paper I will attempt to summarize the long and racialized history of homeownership and housing policy in the United States as they overlap and inform each other. My goal is to ground a future argument for a right to housing in general, and the need for decommodified social housing in particular, in the long history of racism and market failure that characterize uneven development in the United States.
Land and Housing From Independence to the Great Depression
Even before the advent of the mortgage industry, homeownership was part of the American psyche. The Jeffersonian image of a nation of “yeoman farmers” was cast as the backbone of independence and democracy, while being indebted to a landlord was considered by republicans like Adams and Hamilton to be too close the old feudalism of Europe[i]. But then, as now, the promise and ideal of homeownership was not received equally among the population. “Yeoman farmers” was never meant to include slaves, who were precluded from any and all American dreams from the beginning. While slavery was abolished in most Northern states by the end of the 18th century, the growth of cotton agribusiness demanded ever more slave labor in the South. Slaves could not own property and were housed as necessary to protect the investment of the slaveowner and allow for another day’s worth of labor extraction. As time went on and the population grew, poor white tenant farmers in the South and immigrants, free blacks, and other non-wealthy workers living in industrial cities of the North crammed into small living spaces with other families, paying exorbitant rents to live amongst filth and disease.
By the mid-1850s, with Westward expansion following the Mexican-American War, small farmers displaced by large plantations and industrial workers seeking a better life started moving West and demanding access to land. There were multiple attempts to pass homesteading legislation, but both Southern interests fearing the formation of majority-abolitionist states and Northern interests fearing a mass-exodus of industrial workers shot them down. With the secession of the Southern states, however, the Homestead Act of 1862 was finally passed. The Act allowed for ownership of 160 acres of land after five years, provided that the land was “improved upon”, including the building of a dwelling at least 12 by 14 feet in size[ii]. More than 1.6 million homestead applications were processed by 1934[iii]. The more than 270 million acres given away during this time went exclusively to whites with only a handful of exceptions[iv]
The Southern Homestead Act (SHA) was enacted in 1866 to make land available to freed slaves and loyal whites after the end of the Civil War. 46 million acres of government-owned land – that had been up to that point impossible to sell due to its undesirability – in Alabama, Arkansas, Florida, Louisiana, and Mississippi was made available for homesteading[v]. Although ex-Confederates were not allowed to participate for the first six months of the SHA, most freed blacks had already signed labor contracts that prevented them from taking advantage of that lead time (violating a labor contract would send a freed black right back to involuntary servitude according to the 13th Amendment)[vi][vii]. Additionally, “white resistance to black landownership; fraud; mismanagement by government officials; and homesteaders’ lack of adequate farm implements, other capital, and access to credit” are all considered factors that led to the failure of the SHA, which was repealed after only ten years[viii]. The end result was that “only 4,000 to 5,500 African-American claimants ever received final land patents from the SHA”[ix].
The Rise of Housing Finance Through the Great Depression
By the early 1900s, homeownership was growing (slowly) but still at less than 50% nationally (20% for blacks[x]) as mortgage lending became more popular. Census data shows that these rates varied widely among states in 1900, from only 24% in Washington DC to 80% in North Dakota[xi]. The housing finance and building industries were just beginning to gain footing and were much different than they are today. Mortgages were a strictly private market affair with much shorter amortization (typically just 5-11 years) and down payments were much higher (as much as 50%)[xii]. More often than acquiring a mortgage to cover the entire cost of a house, homes were typically bought or built using a combination of cash, savings, and small personal loans (sometimes in addition to a smaller mortgage)[xiii]. Homeownership was something reserved primarily for the upper classes or those who had benefitted from homesteading, but with the growth of the residential construction industry and early suburbanization there were pockets of the industrial working class that were able to purchase their homes as well. While the US government was not explicitly involved with housing markets just yet, the Russian Revolution (1917) sparked pro-homeownership campaigns by both realtors associations and the US Department of Labor to fight the specter of communism among the working class at home[xiv].
At the same time, The Great Migration (1915-1930) was well underway as nearly 2 million blacks left the ongoing racial violence, lynchings, and unemployment of the South for increased opportunities in the North’s industrialized cities. The population of blacks in Chicago increased fivefold during this time, more than tripled in New York City and Philadelphia, and Detroit’s black population increased from 6000 to more than 120,000, to name a few examples[xv]. This influx of black workers to the cities naturally increased competition for jobs and housing at a time when rental housing for low-income people was already at a deficit, leading to overcrowding and slum conditions, as well as unemployment. Even before postwar suburbanization and the racially restrictive deeds underwritten by the Federal Housing Act, white real estate industry stakeholders (realtors, lenders, lobbyists, etc.) responded to this influx of black workers with the narrative that blacks moving into white neighborhoods would bring down property values and cause the neighborhoods to deteriorate. This narrative became part of the official policy of the National Association of Real Estate Boards in 1924, when it adopted a code of ethics “stating that ‘a Realtor should never be instrumental in introducing into a neighborhood … members of any race or nationality … whose presence will clearly be detrimental to property values in that neighborhood’”[xvi]. It is important to remember that it is these same (white) real estate industry stakeholders – along with banking, residential construction, and government officials – that came together nearly ten years later to write that Federal Housing Act.
When the Great Depression hit, it took the entire mortgage industry down with it because there was no federal regulation or insurance of mortgages at the time. Once unemployment started rising and people were no longer able to pay their mortgages, foreclosure became widespread and millions of people lost their homes[xvii]. By 1934, more than 50% of mortgages were delinquent[xviii]. Individual families and banks weren’t the only housing sector actors that were hit hard by the Great Depression. The residential construction sector was decimated as well: residential permits for all construction fell by 93 percent between 1928 and 1933, which had repercussions all along that supply chain[xix]. By the time Roosevelt took office in 1933, the entire residential housing sector was in shambles. Early in 1934 Roosevelt introduced the Federal Housing Act (FHA) and Congress passed it in June.
While the New Deal in general and the FHA in particular are thought of with great nostalgia nearly fifty years since the dawn of neoliberal policy, their roots seem less populist and more privatist[xx] then popularly imagined, not to mention cast through the lens of white supremacy and exclusion. Even before the Great Depression (and then culminating with Hoover’s Conference on Home Building and Home Ownership in 1931), political leaders and powerful members of the real estate, banking, and building industries were meeting to come up with a new housing policy “that would stabilize and protect property values in new and older residential developments, increase consumer demand, and exempt income on mortgage investments from federal taxes”[xxi]. The result of this strategic partnership is evident in the system of housing finance created by the FHA that propped up and protected private mortgage companies, while encouraging homeownership among the middle and working classes[xxii]. By creating self-amortizing mortgages insured by the federal government, requiring low down-payments (10% vs. the previous 50% or more) and would be paid off over a long period of time (20-30 years vs. the previous 5-7 years), homeownership indeed became a possibility for a huge portion of the population that previously couldn’t afford it. At the same time “it created the illusion of ownership through the reality of debt[xxiii].
The real estate and construction lobbies certainly had the most power and influence at this time, as evidenced by the final homeowner-focused FHA legislation, but there were certainly reformers and “progressives” who advocated for municipal housing as a solution to the housing crisis[xxiv]. After World War I, many cities in Europe built thousands of units of social housing to meet the needs of the swelling industrial working class. Architects, city planners, and housing reformers from the United States toured and were inspired by these often very-large-scale municipal projects, and they came home prepared to make their case. These housing reformers envisioned dense inner-city slums replaced with large-scale municipal housing blocks with interior gardens – attractive and stable housing for the middle and working classes[xxv]. While this grand vision of municipal socialism inspired these public housing activists, their approach was very top-down rather than a mass-movement, so when they lobbied Congress to pass a housing bill that included subsidized loans for cooperatives and slum-clearance, slum-clearance was the much stronger argument among the various political factions in Washington (many of them very conservative). The final version, The Wagner-Steagall Bill of 1937, was greatly watered-down and focused on slum-clearance and housing the very poorest in the most-economical way possible. This was partly due to the resistance of legislators to anything remotely resembling socialism, partly because the real estate lobby and Roosevelt himself did not want to dampen middle-class demand for single family homes, and partly because appeals for public housing never actually came from the mass of people that needed it[xxvi].
Postwar Suburbanization and the Struggle for Full Citizenship
It took the end of World War II for these new longer-term government-backed mortgages to gain hold, as the modest savings accumulated during the war could now function as a down payment for a single-family home. Over the next twenty years, 30 million new housing units were built, and the homeownership rate increased from 40% to 60%[xxvii]. Suburbanization was not just a by-product of these new government programs, it was the goal. The combination of strict land-use requirements attached to FHA loans and the sudden availability of billions of dollars to finance home construction favored large companies with the ability to build at a scale never before seen in areas outside of cities where there was space. Congress passed the G.I. Bill in 1944 which made buying a home even cheaper for returning war veterans (through the FHA-VA), in many cases making the down payment for a house down to $0. Both the FHA and the FHA-VA had strict geographic requirements and would only back mortgages in exclusively white neighborhoods, meaning that home buyers desiring to live in “communities of color, integrated neighborhoods, or urban neighborhoods”[xxviii] (read: non-whites) were routinely denied mortgages. Popularly known as “redlining”, the FHA gave white neighborhoods an A (highest) rating (blue), black neighborhoods a D (lowest) rating (red), and neighborhoods bordering black neighborhoods or with Jewish residents only a slightly better rating in between the two: B and C (blue and yellow, respectively)[xxix]. FHA policy dictated that insurance would not be provided to homebuyers in red neighborhoods and lenders followed suit by denying loans to anyone seeking a loan deemed “too risky” for insurance by the FHA[xxx]. There are examples of black bankers, the NAACP, and other activists challenging these appraisals, as well as attempts to set up black mortgage companies, but land contracts soon became a primary means for black homebuyers to finance homes in the only neighborhoods they were permitted to buy in[xxxi].
The FHA’s Underwriting Manual also made explicit rules to prevent low-income and non-white home buyers from accessing the new suburban single-family homes, requiring racially restrictive covenants to be written into all deeds and emphasizing racial and economic homogeneity as a means to keep neighborhoods “stable”. The result is that less than 2% of the FHA-backed home loans issued from 1945-1955 went to blacks[xxxii]. In 1948, the NAACP challenged these racially-restricted deeds and won in the Supreme Court (Shelley v. Kraemer)[xxxiii], but the practice remained intact through the actions of realtors and lenders using blockbusting, coded language, informational steering and economic filtering[xxxiv], as well as white homeowners using Homeowners Associations (HOAs), activism and outright violent tactics to prevent nonwhites from moving into their neighborhoods[xxxv].
The New Deal provided money for slum clearance and public housing, but the FHA and FHA-VA far eclipsed that spending and most of the planned public housing never came to be. The result was that it became cheaper to buy a new single-family house in the suburbs then to rent in the city where there was a shortage of rental housing – if you were white. The Federal Highway Act of 1944 allowed federal money to be used for the first time within city boundaries and led to the Interstate Highway Act of 1956 which gave more than $13 billion to fund 5,500 miles of highways in urban areas[xxxvi]. Much has been written about how these highways sliced through urban neighborhoods, making the commute for white professionals moving to the suburbs possible while increasing racial segregation in the urban core. I mention them here to add them to the tally of federal tax dollars spent to subsidize homeownership in comparison to that spent to develop multifamily public housing. The Housing Act of 1949 appropriated funding with a mandate to provide “a decent home and a suitable living environment for every American family”[xxxvii] and the goal of creating 810,000 units of public housing, but there wasn’t nearly enough money for such an ambitious goal. In the end 425,000 low-rent units were demolished and replaced by 125,000 primarily luxury units via “urban renewal”, while the new highways destroyed at least 330,000 low-rent units, primarily in Black neighborhoods. By 1959 only 200,000 units of public housing originally mandated by the 1949 act had been built and 97% of those units built on slum-clearance areas were inhabited by non-white households[xxxviii] – essentially warehousing those most vulnerable and least-likely to qualify for a mortgage in any neighborhood.
Inflation, Market Reform and Privatization
From a financial perspective, the new system of mortgages created through FHA policy had some serious problems that contributed to instability in the overall economy. Because mortgage lending became such a significant part of economic activity and grew three times faster than both GDP and disposable income, the consumer’s ability to repay the debts was reduced, which in turn slowed down future economic growth. Another weakness is that the entire housing industry became dependent on the availability of credit through the mortgage system, making the costs related to buying or renting any new or used property sensitive to – and therefore directly impacted by – changes in interest rates. This vulnerability to interest rates would go on to affect “thrift institutions” – the savings and loan associations and mutual savings banks that did most of the mortgage lending to individual homebuyers – when inflation peaked in the 1960s and there was no longer a steady stream of depositors to fund future mortgages. Galvanizing the popularity of debt-financed homeownership – despite these inherent instabilities – was the mythology that solidified around this time that cast homeownership as the center of The American Dream[xxxix]. This had the effect of favoring homeownership over renting in the popular imagination and in public policy for generations to come, as will be discussed further on.
By the late 1960s, urban deindustrialization began to take hold[xl], and savings deposits dropped as unemployment and inflation started growing, creating a crisis in the mortgage market. Interest rates remained low (being as they were federally regulated and kept artificially low to encourage more mortgage lending) while inflation kept going up, leading to a situation where wealthy households decided to move their money from thrift institutions to other investments that paid a higher rate of interest. Thrift institutions responded by borrowing even more money from The Federal Home Loan Bank[xli], at first to fund new mortgages and then just to stay afloat[xlii]. In response, mortgage interest rates began to climb and the federal government was again in the position to mitigate this crisis with policy. As part of the Housing Act of 1968 and The Emergency Home Finance Act of 1970, Fannie Mae was privatized in an effort to stimulate the secondary mortgage market (comprised of big institutional investors such as pension funds, insurance companies, and large commercial banks[xliii]), Ginnie Mae (the Government National Mortgage Association) was created (as part of HUD) “to provide the government’s full financial guarantee to mortgage-backed securities (MBSs) issued by private companies holding FHA and VA mortgages[xliv], and Freddie Mac (The Federal Home Loan Mortgage Corporation) was created to purchase mortgages from thrift institutions and mortgage companies. This made it possible for mortgages to be pooled together and traded by big institutional investors in the same way stocks or bonds, but with considerably more security coming from government insurance and the idea that most people pay their mortgages, making them safe for investors and lucrative for raising the capitol needed to originate even more mortgages[xlv].
Federal policy shifted from the public and more towards the private regarding the system of providing public housing by the 1960s. In a renewed effort to carry out the goals of the Housing Act of 1949 in the wake of the Civil Rights Movement, there was also a devolution of responsibility for public housing from the federal to the state and city level with policy instruments that favored private rental markets. This began quietly in 1965 with the establishment of the US Department of Housing and Urban Development (HUD) and continued with the Housing Act of 1968, which “[reaffirmed] the 1949 goal with quantified production targets and timetable, new housing subsidy programs generously funded, planning requirements aimed at dispersing low-income housing throughout metropolitan regions, and even a new fair housing act outlawing racial discrimination”[xlvi]. This was to be carried out by offering financial incentives to developers supplying the affordable housing units rather than direct government provision of them[xlvii]. Section 235 of the Act was supposed to accomplish the admirable goal of helping poor and non-white people to purchase homes by offering subsidies to private sector developers. More than 400,000 families bought houses in the first few years of this program, however, subsequent studies show that most of housing built under this program was built in the suburbs and purchased by white homebuyers[xlviii]. Section 235 not only reinforced racial segregation, but ultimately enabled real estate speculators to perform cosmetic renovations to dilapidated houses, resell them to low-income black buyers in previously redlined neighborhoods (with the government assuming all the risk), and forcing these homeowners to abandon their properties when the full weight of major structural repairs they couldn’t afford came crashing down [xlix]. President Richard Nixon, with the support of a Democratic Congress, led HUD to fully embrace supply-side housing solutions in January 1973, imposing a moratorium on subsidies for the construction of public housing. The hard turn away from direct provision of housing towards privatization and local subsidies as the federal affordable housing strategy was memorialized in the Housing Act of 1974, which authorized funding for Section 8 programs aimed at directly subsidizing both the rents of low-income tenants as well as the housing units set aside for them – both in the private housing market[l]. Nearly 2 million units of privately-owned public housing was developed in the 1970s through these programs, however, many saw them as “expensive bribes to lenders and developers” and they often came with the option for owners to prepay their mortgage and charge market rates after 20 years[li].
From Equal Opportunity to Deregulation and Early Revanchism
Throughout the Civil Rights era, the right to housing became more and more prominent in the campaigns of organizations from the Black Panthers, Brown Berets, and Young Lords, to various tenant and anti-segregationist groups that sprouted up all over the country[lii]. Housing activists continued to challenge discriminatory and racist housing practices and policies in the 1970s. The federal government eventually stepped in once again in to address the persistent issue of racial discrimination in the mortgage and real estate industries that prevented nonwhites from attaining homeownership. The Equal Credit Opportunity Act of 1974 criminalized discriminatory lending, the Home Mortgage Disclosure Act of 1975 (HMDA) required lenders to publish data on the demographics of who is granted and denied loans, and the Community Reinvestment Act of 1977 required lenders with FDIC insurance to provide mortgages in the communities they serve, regardless of income level[liii][liv]. By 1980 the homeownership rate hovered around 44% for blacks and 42% for Latinos, while it rose to 68% for whites, which speaks to the limited success of such homeownership-focused housing policy for nonwhite home buyers in a racialized system[lv]. As the lagging rate of homeownership for nonwhites at this time shows, most nonwhite Americans continued to be renters, and as such struggled for a right to housing as tenants advocating for self-defense against eviction and slumlords, and for more affordable housing.
One aspect of the Community Reinvestment Act of 1977 that was less-focused on spurring homeownership and yielded positive results in the development of affordable housing was the funding of Community Development Corporations (CDCs). Together with the 1966 Special Impact Amendment to the Economic Opportunity Act, more than $500 million in federal money was provided to CDCs for the construction and rehabilitation of affordable housing[lvi]. While the relationship between the goals of groups engaging in community organizing around tenant rights and the development goals of CDCs is complex and sometimes contradictory, there are several examples of the two types of organizations working together to create participatory processes and hybrid organizations that were able to resist professionalization and top-down leadership of the development process[lvii]. While CDCs gained prominence by the late 1970s, tenant organizations in both the private market and public housing sectors were organizing at the national level through organizations such as the National Tenants Union (NTU) and the National Tenants Organization (NTO), as well as ACORN, National Peoples Action, and the Center for Community Change, which struggled for and won many local housing justice victories (although with limited impact at the national level)[lviii].
By the late 1970s, the economic decline stemming from diminished postwar demand[lix], US involvement in the Vietnam war[lx], labor and civil rights victories that increased wages for working class people, inflation, and trade deficits picked up speed and created another crisis in housing finance. Two “oil shocks” (in 1973 and 1979) cut off access to oil in the US and other industrialized nations, which led to high rates of inflation and eventually a recession[lxi]. The savings deposit withdrawal and interest rate control issues that plagued the housing finance markets starting in the 1960s persisted through the 1970s and intensified in the 1980s, as the government responded to the recession by raising interest rates and limiting industrial production. The predictable result was high unemployment and high construction interest rates, which in turn led to decreased demand for housing. 22 percent of federally-insured thrift institutions failed or were acquired by other institutions[lxii].
The push for deregulation that started in the 1950s finally reached fruition with the Depository Institutions Deregulation and Monetary Control Act of 1980 (DIDMCA) and the Garn-St. Germaine Act of 1982. Together these bills put an end to federal control of interest rates, allowed the thrift institutions to invest beyond mortgage markets, permitted variable-rate mortgages, and provided bailouts for thrift institutions that were insolvent. Thrift institutions were now able to divest themselves of their middleclass homeownership mission while maintaining the backing of the federal insurance – a mixture that would prove fatal for many thrifts as they began recklessly investing in high-risk financial products until they were insolvent and ultimately collapsed in 1988. Fortunately for the mostly-wealthy investors who sustained huge losses from the collapse, the Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA) was passed the following year, and hundreds of billions of taxpayer dollars bailed them out[lxiii]. Unfortunately for the rest of the country, this latest series of lending reforms and massive bailouts did not solve the problem of housing affordability or make the mortgage markets any more secure for homeowners.
If the 1993 election of Rudolf Giuilani and his “quality of life” to the seat of Mayor in NYC can be seen (per Neil Smith) as evidence of neoliberal revanchism[lxiv][lxv] at the urban scale, it’s easy to see the 1980 election of Ronald Reagan to the presidency as evidence of early neoliberal revanchism at the national scale. Reagan’s election solidified a cross-class coalition of conservative responses to the Civil Rights, feminist, and black freedom movements, the perceived anti-americanism of the anti-war movement, and the economic turmoil that resulted from the OPEC oil embargos[lxvi]. Deregulation, inflation, and unemployment had a real material effect on middleclass whites, but their commitment to white supremacy took precedence over these material concerns and the mounting Conservative movement exploited it. In the realm of housing policy this meant an attack on government programs to help the urban poor in general, and an attack on HUD in particular[lxvii]. A racialized and gendered discourse of “worthiness” came to permeate welfare policy debates at the time as the myth of the “welfare queen” came to justify punitive cuts to social welfare programs as well as increased surveillance and incarceration: “We needed a reason to reduce resources to the poor and what better way than to use the notoriously lazy black woman as a scapegoat. She was the personal manifestation of a lazy well-fed government that had produced no profits and was the reason for the country’s economic decline[lxviii].
At the end of the second Reagan term in 1989, HUD’s budget had been reduced by nearly 72% and has never since recovered[lxix]. In the place of the (relatively) progressive social ambitions of the 1960s and 1970s, the urban poor got the War on Drugs whose spidery reach pervaded the totality of their lives. As part of the War on Drugs, The Anti-Drug Abuse Act of 1988 contained provisions specifically aimed at public housing residents, granting “public housing agencies the authority to use leases to evict any tenant, household member, or guest engaged in criminal activity on or near public housing premises”[lxx]. Housing officials could (and still can) use their own discretion when it came time to decide which crimes made a person worthy of denial and even more, made their children worthy of denial by proxy (resulting in a loss of custody). Because blacks and Latinos were the primary targets of the War on Drugs, this policy disproportionately affected them despite higher rates of drug use among whites[lxxi]. The Anti-Drug Abuse Act of 1988 arguably stripped public housing residents of their Constitutional right to substantive due process, however, since the Supreme Court did not and does not recognize a right to housing as fundamental, so legislation that infringes on that right is only subject to minimum scrutiny[lxxii].
Financialization, The Great Recession, and The End of Public Housing
The recession that began in the late 1980s gave way to the greatest economic expansion in history through the 1990s, only to be followed by a recession following the burst of the dot-com bubble in 2001 and the Great Recession in 2007. The neoliberal project picked up momentum throughout these years as advances in information technology, communication, and shipping allowed for the expansion of the finance, insurance, and real estate industries. Capital was delinked from place and was set free to roam about the world in search of the cheap labor, lax regulations, and the greatest return on investment. Entirely new economies were born in the technology and service sectors as the industrialized nations became post-industrial, relocating most manufacturing to former colonies in the Global South[lxxiii]. It would be impossible to capture the full breadth and depth of the ongoing process of neoliberalism as it pertains to real estate finance and housing policy in the United States with any brevity, so I will try to just give an overview of the effect of financialization and globalization on the evolution of mortgage markets, as well as the effect of austerity and privatization on public housing.
The banking system as we know it today came of age in the 1990s when barriers to global trade and communication were broken down by technological advances (especially the internet) and international agreements. The former system of postwar housing finance had been one that facilitated the relationship between borrowers and lenders and was perennially vulnerable to fluctuations in deposit levels. Borrowers were connected to global finance markets through the new system, solving the problem of credit-rationing while also creating new vulnerabilities[lxxiv]. For this system of home financing to be profitable, however, there was a need for an ever-growing pool of borrowers to access this newly-available credit. This was not difficult in the United States where the ideological commitment to homeownership runs deep across the entire population, and where there was a largely untapped pool of potential borrowers to bring into the fold: black and Latino renters who had been historically blocked from acquiring mortgages due to redlining and white resistance to integration. When home sales stalled in the 1990s[lxxv], the federal government responded with legislation designed to increase minority homeownership by working with the real estate finance industry to come up with private market solutions[lxxvi]. Wall Street responded with new home financing products that removed barriers erected by the old banking system and connected borrowers to the easy credit available in the global finance markets – in essence fulfilling both global and national market needs for financial growth while “solving” the affordable housing problem outside of the shrinking welfare state.
Easier access to credit meant that purchasing new homes, renovating existing ones, and refinancing old mortgages to take advantage of inflated home values was within the reach of people – both minorities and lower income people – that did not have that option before. The result was that the homeownership rate for blacks increased by 25% and for Latinos by more than 60% from the mid-1990s until the market crashed[lxxvii]. People started to feel house-rich, fueling consumer spending even as actual wages had been stagnant for more than twenty years by the mid-2000s[lxxviii]. This was accomplished using riskier lending products that back-loaded the risk of foreclosure onto the individual borrower while offering low or no down payment, “teaser” interest rates that ballooned after a period, and lax underwriting criteria (the information that determines a borrower’s creditworthiness). To buy and sell these mortgages on the global market, their risk for default had to be spread around. Mortgage-backed securities (MBSs), which were formerly traded only in the national market, were integrated into the global economy in ever more complex amalgams that allowed investors to pool risk across borders at different rates of return and little oversight as to how likely any given loan was to be repaid[lxxix][lxxx]. Collateralized debt obligations (CDOs) and synthetic derivatives made even more money available to borrowers lacking credit and savings[lxxxi]. This new access to credit might have fueled the economy but it did not result in higher wages and when the market crashed in late 2007, it was black and Latino borrowers that were the hardest hit as foreclosures skyrocketed.
During the recession (2007-2010) there were about 3.8 million foreclosures[lxxxii]. Homeownership rates among blacks and Latinos returned to the levels they had hovered at since the 1990s – 28% lower than whites for blacks and 25% lower than whites for Latinos by 2010[lxxxiii][lxxxiv]. In the aftermath of the Great Recession, blame has been cast on the government, the housing finance industry, and greedy or uneducated borrowers who got in over their heads. While each of these elements share some of the responsibility to varying degrees and the rise of the subprime mortgage market has had profound effects on loan origination, recent research suggests that many minority borrowers who would have qualified for prime mortgages were steered towards riskier and predatory loans by the subprime market channels. This analysis by Reid et al. provides strong evidence that the historical legacy of housing discrimination by race in this country interacted with the subprime mortgage market in ways that had real material effects for black and Latino borrowers[lxxxv]. Data shows that “between 2007 and 2010, the average Black and Latino households lost three and four times more wealth, respectively, than the average White household”, and that the racial wealth gap between whites and blacks is set to grow from about $500,000 in 2013 to over $1 million by 2043[lxxxvi].
The globalization of real estate and finance markets since the 1990s didn’t just make credit available for borrowers looking to buy a house. It also made it easy to invest in real estate around the world, particularly in cities. In the US, many urban areas that were experiencing growth for the first time since white flight had shrunk the population, experienced an influx of private capital investment. This flood of global capital has changed the face of cities and reoriented their real estate, planning, and policy goals to attract more investment, and gentrification has been the result. Gentrification was once thought of as a highly-localized phenomenon involving middle-class people moving into working class neighborhoods and changing the culture and structures to reflect their own desires, but contemporary gentrification is better understood as part of these wider political and economic shifts happening in advanced capitalist countries resulting from this international movement of capital. Increasing land values in urban centers ripple outward through adjoining neighborhoods, raising property values as investors and developers race to fill the demand for single-family homes and condominiums brought by higher-income buyers. These working-class neighborhoods had already been experiencing the consequences of capital flight to the suburbs and “developing nations” for more than a generation by the mid-2000s: deteriorating physical structures, abandoned properties, the disappearance of jobs, and withdrawal of state services, all of which contributed to neighborhood devalorization[lxxxvii].
As investment drives property values in working-class neighborhoods up, rents go up, leading to the displacement of those residents whose wages have been stagnant since the 1970s. The rent gap describes this long cycle of disinvestment, devalorization, reinvestment, and displacement that seeks to extract as much profit as possible from a property over time[lxxxviii][lxxxix]. While this definition might seem self-evident to anyone who has ever been priced out of a neighborhood or who accepts the basic premise that rising real estate prices will eventually result in higher rents, the crucial difference is that the rent gap is firmly situated in a capitalist geography of uneven development whereby “physical deterioration and economic devalorization of inner-city neighborhoods is a strictly logical, ‘rational’, outcome of the operation of the land and housing markets”.
This is the increasingly competitive market-driven landscape upon which current housing policy is built and the struggle for housing justice is carried out. Since the Great Recession, Congress has passed a great deal of legislation aimed at ameliorating particular injustices in the system, while also bailing out major institutional players in the system and continuing to divest from public housing. Black and Latino home buyers with adequate credit continue to be turned down for mortgages, even in the very neighborhoods they grew up in[xc]. As has been discussed previously, public housing policy in the United States shifted in the 1980s from a federally-funded and publicly-managed system of housing provision, to a system comprised of public-private partnerships that use a variety of market-based strategies and limited public funding to develop affordable housing[xci]. Rental housing assistance is now primarily tied to the individual renter in the form of vouchers, which are used to secure housing in the private market (and whose funding continues to be cut as well)[xcii]. In the current moment, Public Housing Authorities across the nation are using a variety of strategies to secure private and public funding to meet increasing demands for affordable housing through the private market. While these strategies have resulted in the development and (temporary) preservation of essential low-income rental units, their market orientation means that they will always be subject to the ups and downs of the real estate market, in particular rising property values in cities.
The commodity value of housing in the United States has taken precedence over its use value for many generations. Because of this, American housing policy has grown less likely to demand housing as a right, and more likely to focus on access within the confines of the private market. Struggles over affordable housing take place an increasingly small economic playing field, as most people have come to embrace the mantra that “there is no alternative”. Housing advocates are left scrambling to figure out how to make a few units of below-market-rate rental housing profitable and mortgages more accessible, while activists build campaigns around bad actors in the system. To move from a reactionary position that engages in struggle over the few available crumbs allowed by the status quo, to a position that demands housing equity and reparations, it is crucial to understand how we got here and why private market solutions have failed and continue to fail nonwhite and working-class people. The rent gap as a predictive model of displacement remains contested in the academic literature due to the difficulty of measuring it[xciii], however, when we take a long historical look at housing policy over time in the United States and take into consideration its highly-racialized landscape, we can start to see the extent to which the cultural celebration of homeownership and political commitment to the private market have created the housing crisis as we experience it today. We must remember that none of these processes happened in a vacuum or without the support and financing of the state. Our imaginations must not be limited by the amplified voices of the real estate finance, development, and construction industries whose sole mission is to redistribute wealth upwards for investors. Instead, let us build a movement for housing justice that demands a right to housing that de-centers homeownership and the exchange value of housing, while struggling for decommodification, racial justice, and new forms of wealth creation.
[i] Cannato, Vincent J. (2010) “A Home of One’s Own” in National Affairs: Spring 2010. https://www.nationalaffairs.com/publications/detail/a-home-of-ones-own. Retrieved 4/1/2018.
[ii] National Archives (2016) The Homestead Act of 1862. https://www.archives.gov/education/lessons/homestead-act. Retrieved 4/1/2018.
[iv] Merrit, Keri Leigh (2016) “Land and the Roots of African-American Poverty” in Aeon. https://aeon.co/ideas/land-and-the-roots-of-african-american-poverty
[v] Canaday, Neil, Charles Reback, and Kristin Stowe (2015) “Race and Local Knowledge: New Evidence
from the Southern Homestead Act” in The Review of Black Political Economy (2015) 42:399–413.
[vii] Merrit (2016)
[viii] Canaday (2015)
[ix] Merrit (2016)
[x] Collins, William J. and Robert A. Margo (1999) “Race and Homeownership: 1900 to 1990”. NBER Working Paper Series. National Bureau of Economic Reporting. http://www.nber.org/papers/w7277.pdf. Retrieved 4/5/2018.
[xi] US Census Bureau (2011) Historical Census of Housing Tables. https://www.census.gov/hhes/www/housing/census/historic/owner.html
[xii] Federal Reserve Bank of St. Louis (2008) The Past, Present and Future of the U.S. Mortgage Market. https://www.stlouisfed.org/publications/central-banker/summer-2008/the-past-present-and-future-of-the-us-mortgage-market. Retrieved 4/5/2018.
[xiii] Molina, Emily Tumpson (2017) Housing America: Issues and Debates. Routledge: New York and London.
[xiv] Cannato (2010)
[xv] Gotham, K.F., 2000. Racialization and the State: The Housing Act of 1934 and the Creation of the Federal Housing Administration. Sociological Perspectives, 43(2).
[xvii] Stone, Michael E. (2006) “Pernicious Problems of Housing Finance” in A Right to Housing: Foundation for a New Social Agenda. Philadelphia: Temple University Press.
[xviii] Federal Reserve Bank of St. Louis (2008)
[xix] Gotham (2000a)
[xx] Ibid. Gotham describes privatism as “the underlying commitment by the public sector to helping private business grow and prosper. It is an entrenched and deep-rooted belief in the supremacy of the private sector in nurturing societal development, with the public sector adopting a “hands-off” (laissez-faire) strategy whose principal obligation is to encourage capital accumulation” (295).
[xxiv] von Hoffman, A., 2005. The End of the Dream: The Political Struggle of America’s Public Housers. Journal of Planning History, 4(3), pp.222–253.
[xxv] Ibid. there was a split among housing reformers about whether or not to include the very poorest in the housing plan. The more technocratic camp saw the poor as too risky and dooming the project to failure; the social workers advocated for integration.
[xxvii] Stone (2006)
[xxviii] Molina (2017)
[xxix] Satter, Beryl (2009) Family Properties: How the Struggle Over Race and Real Estate Transformed Chicago and Urban America. New York: Henry Holt and Co.
[xxx] Dickerson, Mechele (2014) Homeownership and America’s Financial Underclass: Flawed Premises, Broken Promises, New Prescriptions. New York: Cambridge University Press.
[xxxi] Land contracts were a means for black homebuyers shut out of the FHA-designed mortgage markets to finance the purchase of their homes. A real estate speculator would purchase a home in a black neighborhood and sell it “on contract” for a steep markup to a black buyer. These contracts made the buyer responsible for insuring and maintaining the property, while at the same time making them vulnerable to swift eviction and loss of equity in the event that they missed a payment (Satter 2009).
[xxxii] Hanchett, T. W. (2001). The other “subsidized housing”. Journal of Housing and Community Development, 58(1), 18-22+.
[xxxiii] Gonda, Jeffrey D. 2015. Unjust Deeds: The Restrictive Covenant Cases and the Making of the Civil Rights Movement, CHAPEL HILL: The University of North Carolina Press.
[xxxv] Massey, D.S., 2015. The Legacy of the 1968 Fair Housing Act. Sociological Forum. 30, pp.571–588.
[xxxvii] Orlebeke, Charles J. (2000) The Evolution of Low‐Income Housing Policy, 1949 to 1999, Housing Policy Debate, 11:2, 489-520
[xxxviii] Molina (2017)
[xxxix] Stone (2006)
[xl] Manufacturing first began leaving cities for the cheaper land, tax, and labor costs in the suburbs and rural areas before moving to even cheaper locales overseas in the following decades.
[xli] The Federal Home Loan Bank was created during the New Deal to insure deposits and centralize the banking system
[xlii] Stone (2006)
[xlv] Molina (2017)
[xlvi] Orlebeke (2000)
[xlvii] Achtenberg, Emily Paradise (2006) “Federally-Assisted Housing in Conflict: Privatization or Preservation?” in A Right to Housing: Foundation for a New Social Agenda. Philadelphia: Temple University Press.
[xlviii] Molina (2017)
[xlix] Gotham, K.F. 2000. Separate and Unequal: The Housing Act of 1968 and the Section 235 Program. Sociological Forum, 15(1), pp.13–37.
[l] Orlebeke (2000)
[li] Dreier, Peter (2006) “Federal Housing Subsidies: Who Benefits and Why” in A Right to Housing: Foundation for a New Social Agenda. Philadelphia: Temple University Press.
[lii] Yates, Larry L. (2006) “Housing Organizing for the Long Haul: Building on Experience” in A Right to Housing: Foundation for a New Social Agenda. Philadelphia: Temple University Press.
[liii] Dickerson (2014)
[liv] Molina (2017)
[lv] Dickerson (2014)
[lvi] Bratt, Rachel G. (2006) “Community Development Corporations: Challenges in Supporting a Right to Housing” in A Right to Housing: Foundation for a New Social Agenda, Philadelphia: Temple University Press.
[lvii] Yates (2006)
[lix] Hilfiker, M.D., David (2002) Urban Injustice: How Ghettos Happen. New York: 7 Stories Press. Europe and Japan, decimated in World War II, had finally rebuilt their manufacturing sectors and were now successfully competing with that of the United States.
[lx] Ibid. President Lyndon B. Johnson declared a “War on Poverty” in 1964, however, as the US became more embroiled in the Vietnam War, both resources and political will to implement the War on Poverty were diverted.
[lxi] Ranney, David C. (2014) New World Disorder: The Decline of US Power. CreateSpace Independent Publishing Platform.
[lxii] Stone (2006)
[lxiv] Lees, Loretta, Tom Slater, and Elvin Wyley (2008) “Genrification: Positive or Negative?” in Gentrification. New York City: Taylor Francis.
[lxv] Ibid. Revanchism, from the French word for revenge, is the term Neil Smith used to describe ‘a reaction against the supposed “theft” of the city, a desperate defense of a challenged phalanx of privileges, cloaked in the populist language of civic morality, family values and perceived neighborhood security’ [quoted from Smith, N. (1996) in New Urban Frontier].
[lxvi] Howison, J.D. & Ebook Central (2014). The 1980 presidential election: Ronald Reagan and the shaping of the American conservative movement. New York: Routledge.
[lxvii] Dreier (2006)
[lxviii] Baldwin, Bridgette (2010) “Stratification of the Welfare Poor: Intersections of Gender, Race, and “Worthiness” in Poverty Discourse and Policy” in The Modern American. Spring 2010, 4-14.
[lxix] Dreier (2006)
[lxx] Alexander, Michelle (2012) The New Jim Crow: Mass Incarceration in the Age of Colorblindness. New York City: The New Press.
[lxxii] Cazenave, Dean P. (1990) “Congress steps up war on drugs in public housing – has it gone one step too far?” Loyola Law Review, 36(1), pp.137–157.
[lxxiii] For background on neoliberalism see: Brown, W. (2015) Undoing the demos neoliberalism’s stealth revolution. New York: Zone Books; Harvey, D. (2005) A brief history of neoliberalism. Oxford ; New York: Oxford University Press; Saad-Filho, A. & Johnston, D. (2005) Neoliberalism : a critical reader. London ; Ann Arbor, MI: Pluto Press.
[lxxiv] Newman, K. (2015) Globalization of Finance and the Future of Home Mortgage Finance. Housing Policy Debate 25(4), pp.1–3.
[lxxv] Mortgage debt makes up such a large part of the US economy, that sustained periods of sluggish growth can slow down the entire economy.
[lxxvi] The Clinton White House developed the National Homeownership Strategy and the Bush II White House issued a National Homeownership Challenge after that.
[lxxvii] Dickerson (2014)
[lxxviii] Michel, Lawrence, Elise Gould, and Josh Bivens (2015) “Wage Stagnation in Nine Charts”. Economic Policy Institute. https://www.epi.org/publication/charting-wage-stagnation/. Accessed 4/20/28.
[lxxix] Stone (2006)
[lxxx] Molina (2017)
[lxxxi] Newman (2015)
[lxxxii] Dharmasankar, Sharada and Bhash Mazumder (2016) “Have Borrowers Recovered from Foreclosures during the Great Recession?” Federal Reserve Bank of Chicago. https://www.chicagofed.org/publications/chicago-fed-letter/2016/370. Accessed 4/20/2018.
[lxxxiii] Dickerson (2014)
[lxxxiv] Reid, C.K. et al. (2017) “Revisiting the subprime crisis: The dual mortgage market and mortgage defaults by race and ethnicity. Journal of Urban Affairs, 39(4), pp.469–487. 28% of blacks and 31% of Hispanics who purchased homes during the height of subprime lending were in or near foreclosure by 2013
[lxxxv] Reid, C.K. (2017)
[lxxxvi] Asante-Muhammad, Dedrick et al. (2016) “The Ever-Growing Wealth Gap”. Institute for Policy Studies. https://www.ips-dc.org/wp-content/uploads/2016/08/The-Ever-Growing-Gap-CFED_IPS-Final-2.pdf. Accessed 4/20/18.
[lxxxvii] Smith, N. (1996) The new urban frontier : Gentrification and the revanchist city . New York: Routledge.
[lxxxviii] Rameau, M. (2008) “Gentrification is dead: A proposition”. http://www.maxrameau.com/index.php?mact=News,cntnt01,detail,0&cntnt01articleid=12&cntnt01returnid=58
Retrieved 4/21/2018. Rameau succinctly explains the rent gap theory in this essay: “Prior to the new round of capital investment, Actual Rent- the price of real estate for rent or purchase- is extremely low in the target inner city community, compared to the neighboring downtown and the distant suburbs. At the same time, the planned capital investments, and corresponding physical improvements, promise to dramatically increase the Actual Rent in years to come. This strong possibility of increased real estate values is the Potential Rent. The Rent-Gap is the difference between the Actual Rent and the Potential Rent”.
[lxxxix] Smith (2006)
[xc] Glantz, Aaron and Emmanuel Martinez (2018) “For people of color, banks are shutting the door to homeownership”. Center for Investigative Reporting. https://www.revealnews.org/article/for-people-of-color-banks-are-shutting-the-door-to-homeownership/. Retrieved 4/20/2018.
[xci] Kleit, R. & Page, S. (2015) “The Changing Role of Public Housing Authorities in the Affordable Housing Delivery System” in Housing Studies, 30(4). Federal funding for subsidized affordable housing declined by 48%, from $56.4 billion to $29.2 billion from 1976 to 2004 and federal funding for the operation and maintenance of its affordable housing stock fell by 25% between 1999 and 2006.
[xciii] Newman, K., & Wyly, E. K. (2006) “The right to stay put, revisited: Gentrification and resistance to displacement in New York City” in Urban Studies, 43, 23+.