Everything Changed in a Generation

Tom Brezsny
- Tom Brezsny

Everything Changed in a Generation

We’re tracking the history of homeownership, looking for the roots of the current housing crisis. Here’s what we’ve learned:

The huge increases in homeownership that followed WW2 grew out of the government’s desire to help millions of GIs who were returning home to a severe housing shortage. The Feds initiated a program of subsidies and incentives aimed at expanding affordability and ramping up the pace of home construction. 

To increase demand, the Feds invented the  “American Mortgage” with favorable terms that included low interest, low down payment, 30 yr fixed rates along with fully-amortized payments, mortgage interest and property tax deductions, capital gains deferment and step-ups in basis.  It was a game-changer for an entire generation and it offered a way for middle class Americans to convert equity into significant personal wealth by upscaling over time.

To increase supply, the Feds offered tax deductions and tax credits and also undertook enormous public infrastructure projects to incentivize home builders to buy cheap land and build sprawling subdivisions using faster, more efficient assembly-line techniques. Since there was already a queue of ready-made buyers, developers could use government-backed loan guarantees to access private money and avoid risking their own.

Those “American Mortgages” were steered towards subdivisions that best fit the Fed’s definition of “low risk”. They favored detached, newly constructed homes in uniform, low density neighborhoods with private yards and cul-de-sacs.  What followed was one of the great mass migrations in history as millions of Americans moved to the suburbs and the dream of a single family home became the centerpiece of the American way of life.

In the span of a single generation, more than 35 million homes were built as more jobs were created, wages increased, consumer-spending soared and new home construction took its place in the pantheon of the quasi private/public partnership that linked the interests of the auto, fossil fuel and defense industries and drove the rapidly expanding economy. 

Between 1945 and 1970 the homeownership rate ballooned for the first and only time in history – rising from 45%-65%   where it still remains today, 50 years later. No one could have imagined the ways the housing market would be transformed or the series of unintended consequences that would only become apparent over the course of a lifetime.

Today’s housing market stands in stark contrast to the post-war era. There’s no room to build out. There’s not much consensus about densifying within. Millennials either can’t qualify to purchase or find themselves competing with buyers their parents’ age, to drive prices up.  And there’s no miraculous manna coming from the Feds. 

Next Week: Where did it all go wrong? What kind of housing legacy has been left? 

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