I got into marriage and child-raising late in life, having spent most of my first 40 years as a chronically underemployed and single introvert who’s never loved drugs or too much drinking. That’s given me a lot of free time. I’ve spent it mostly reading, pursuing interests as they came up. I’m not an expert on anything and don’t claim to be but in digging into various subjects as a non-professional I’ve been struck by how specialized most Americans are in what they know, especially Americans who are experts. Whole chunks of knowledge seem virtually unknown despite seeming to an outsider like me as important as information that’s routinely shared.
For instance there were millions of black and white sharecroppers in the South in living memory, but now there are virtually none. Where did they go? Many blacks left for Northern cities as part of the Great Migration. Many blacks and whites moved to cities during WWII to work in defense industries. But how many and where and when? I would love for researchers to track where the descendants of black and white sharecroppers ended up over the next couple of generations. There are numerous accounts of sharecropping, but little about the end of sharecropping. Still, sharecropping was largely confined to the South, and scholars specializing in the region are probably just busy with more important subjects.
But take a legal principle called Dillon’s Rule. A certain Judge John F. Dillon of Iowa issued two decisions in 1868 upheld by the U.S. Supreme Court in 1907 (Hunter v. City of Pittsburgh). Dillon’s Rule drastically restricted local government powers to only what is spelled out in written charters. If the state doesn’t say a city can do something, the city can’t do it. Dillon’s Rule greatly undermines the philosophical principle of self-government, the basic Social Contract theory by which America was founded.1 In Virginia, Dillon’s Rule has prevented cities like Charlottesville from controlling the statues in our parks. If a city can’t even choose what’s in its parks, how democratic can we claim contemporary America to be? In light of this, how is Dillon’s Rule not well-known? One can’t swing a dead cat without hearing someone decry how courts defined corporations as people with legal rights back whenever that was, but have you ever heard of Dillon’s Rule? Have you ever read or seen single national pundit or media personality even mention it?
But while Dillon’s Rule is national and important, it never applied to the major metropolitan areas where the pundits and book writers live (or move to) and where teevee networks are based, so maybe that’s why you’ve never heard of it. But there are issues that aren’t regional, do affect major metropolitan areas, were once widely known, and are extremely important, yet are somehow forgotten.
Arguments about racism in America, sparked by the killing of George Floyd this past summer, seemed almost universally unaware of what everyone once knew about race in America. Almost all Americans today know about segregated schools, and lynching, and discrimination and biases of various kinds; black writers will often mention red-lining (the practice of rejecting mortgages based on lines on maps), and some writers are even getting the word out about ‘housing covenants’ (which I’ll take up in a future post perhaps); but there is a more central story that everyone should know, because not only is it essential to any account of race and racism, it directly created the physical world around us. This is the story of how houses came to be built in America after WWII. Obviously, you’d rather hear this story from someone with the credentials to tell it, and maybe I’ve got some details wrong, but until someone else comes along, you’re stuck with me. Let’s start back to the 1920s.
Before the Great Depression if you wanted to own a house, whether you were black or white, you saved until you had the money to buy the land outright, then saved until you had the money to buy the materials outright, and then you built the house yourself, or, if you were rich enough, you paid someone else to build it. Black or white banks and mortgages weren’t involved. American companies like Sears Roebuck developed house kits of bundled plans and materials shipped out of Chicago by rail and carried to the site by a mule-drawn wagon. (Here’s one below)
These mass-produced kits (and their ‘balloon-framing’ structural techniques) made houses cheaper, but it was still pay-as-you-go. Some builders did create what we now call ‘developments’ of multiple houses built and sold on lots at once like the Belmont neighborhood of my native Charlottesville. Builders sometimes even sold such houses on installment plans. But this put all the risk on the builder. The important point is that building and purchasing houses did not involve mortgages or banks.2
Back then a mortgage was a scary thing. Typically a five-year loan based on what the bank thought they could get for your house or farm at auction, mortgages in plays and novels were the providence of mustache-twirling bankers seizing houses from widows and farms from dust-bowl families. Mortgaging were short-term loans with property as collateral. Markets and banks never came up with long-term mortgages on their own.
Then came the Great Depression. Newly-elected president Franklin Delano Roosevelt threw together a hodgepodge of programs which he called the ‘New Deal’ to try to improve the economic situation. Among them, newly-created housing agencies hoped to get the construction industry on its feet, which was a major employer on its own and impacted many other industries. Also the New Deal wanted to regulate the banks to shift them from speculative income into steady utilitarian lending. To do all this the agencies worked with banks to create a brand new, highly-regulated financial product: long-term mortgages. Long-term mortgages would allow a home buyer to borrow money from the bank at the same time as they bought land or a house. This was quite radical. The seller would be immediately paid by the bank, the title would immediately transfer to the borrower, and the borrower would then owe monthly payments to the bank for the next 25 (eventually 35) years. The long repayment period meant the money owed by the borrower each month could be quite low. Bank profits would be low too, but steady and predictable. The builders, having been paid immediately, could move on to build more.
Long-term mortgages were the essential part of what become the suburbanized America we see around us. But there were two other important parts. The New Deal also encouraged the newly-regulated banks to give new streamlined loans to builders provided the builders followed strict regulations created by the new housing agencies in what, how, and where they built. The regulations encouraged building groups of single-family homes in cleared land at the edge of cities, which would be sold through the long-term mortgages.
The loans to the builders and the new long-term mortgages were to be the drivers of a vast building boom, but the process didn’t really launch until after WWII with the ‘G.I. Bill‘–a bundle of support money and programs for education and housing for returning war veterans. With the G.I. Bill those serving in the armed forces could get the new long-term mortgages for no money down, and because of the length of the mortgage, the loans to the builders, government guarantees all around, and the new mass-production building methods, the monthly mortgage payments were much lower than the monthly rent on a city apartment. A veteran could buy a brand-new house for a brand-new family in the suburbs, pay less than renting in the city, and instantly become a middle-class property owner without all those steps of paying cash for land and house kits.3
The result was an astonishing construction boom. Across the continent builders created new ‘subdivisions’ with borrowed money. These were bought up by veterans with borrowed money. Banks made steady profits at both ends. This created the automobile-oriented, suburban housing of postwar America, and impacted the ways that blacks and whites interact today in two profound ways.
ANY COLOR AS LONG AS ITS WHITE.
First, suburban tract houses in newly built subdivisions paid by long-term mortgages were offered only to white people. Only white people could take part in any of it. Ring after ring of new housing spanned America, perhaps the greatest building spree in the history of the world, and black people were cut out of of it every step of the way. This was federal government policy:
- Only homes bought by whites in majority white neighborhoods were eligible for the long-term mortgages.
- Only builders building segregated housing were eligible for building loans.
- Only the new single-family subdivisions were eligible for easy purchase under the G.I. Bill, so effectively only white veterans could get the easy no-down-payment homes.
Housing policy wasn’t just segregated in areas that had already been segregated; the new housing policies and the boom they launched expanded segregation even to parts of America that had not been segregated. The postwar period is often described as ‘white flight’ from the cities, as if hatred of blacks were the prime mover, but whites did not so much run from the cities as run to the suburbs where they were being given houses that were cheaper than the apartments they were leaving. And that they would own.
Why did the New Deal cut blacks out of this? Originally, FDR depended on segregationist democrats to pass New Deal legislation, so certainly it was whites-only or nothing, and we could say the New Dealers never expected any of this to be permanent, they needed to get construction moving, they needed to bring the banks to heel, and isn’t helping someone better than not helping anyone? Maybe. It reminds me of Charlottesville’s last mayor, Mike Signer, who claimed that building more luxury housing would eventually supply Charlottesville with affordable housing. Anyway, I don’t know why people did things in the past. We would need actual historians to dig through letters and journals and so on. But whatever the intention, the effect was to cut blacks out of the biggest cash canon in the 20th century. White and black activists did try to break this system with court cases and direct actions, and eventually the court cases succeeded. But from WWII until around 1970, during the peak years of the boom, all those buyers of first- and second-ring suburban developments, all those families who grew up in them, were white.4
SOME MORE EQUAL THAN OTHERS
Second–and not immoral as the discrimination against blacks, but still important for understanding the world we’re living in–is that while all whites were eligible for these new houses, most whites did not live in places where they could take advantage of their eligibility. For the first couple of decades the housing developments were only being built on the outskirts of the metropolitan areas with high populations (especially the cities where the WWII defense industries had been based). Blacks weren’t allowed on the gravy train, and most whites weren’t near enough to the station, so what happened to those whites who got aboard?
Remember, the white people who did get in on the new subdivision/long-term mortgage/GI Bill system paid less for housing than their black or white peers who didn’t, and amassed tremendous wealth in the process by gaining property. Their lower payments for housing went to owning rather than just renting. After a few years they could sell what came to be called ‘starter homes’ for a profit, use part of the money to pay off the remainder of the mortgage, and use the rest as a down-payment on a more expensive house, also bought with a long-term mortgage, in the next ring of suburban developments being built farther out. ‘Flipping houses’ became a thing. And this one group of whites also immediately got new, richer schools (since schools in the U.S. are usually locally subsidized) which meant easier access to university admission at exactly the point in U.S. history when college became the essential gateway to wealth and power. The federal government reached down and lifted a group of white people into a new type of legal property ownership which led to a new type of wealth, and their descendants became a new college-educated (soon graduate-school-educated) middle class of managers, professors, journalists, administrators, and professionals. While for centuries middle-class status led to owning a home; now owning a home led to middle-class status with all the cultural, legal, and educational advantages of that status.
Eventually, blacks overcame the legal barriers to get in on the real estate game, and gradually new developments spread farther from major population centers until even rural whites could get in too. But by the mid-seventies the real boom was over. Houses would never be as cheap and would never increase in value automatically. Like a Ponzi scheme those who come late cannot catch up to those who got in early. If you want to measure ‘privilege,’ count how many suburban houses your ancestors owned between 1945 and 1975.5
My point in telling this story is not to criticize the people who took advantage of government programs. Family X getting rich doesn’t necessarily hurt family Y. You owning a big house is no worry of mine if I have a safe place to live. Income or even wealth equivalency isn’t important for its own sake. But it has become important as America has evolved to a zero-sum game. During the decade or so centering in the 1980s the American dream ceased to be a version of: Everyone regardless of their background who works hard and does their best deserves to get a comfortable place to live, a decent job, and a family. And became a version of: Everyone regardless of their background deserves to have an equal opportunity to compete for a comfortable place to live, a decent job, and a family. Fairness went from an expectation of outcome to an expectation of process. Schools changed from trying to train everyone to be flag-loving citizens who worked hard and succeeded, and became sifters of the best, brightest, hardest-working and most talented who would go on to lead our institutions. In short, we went from an ideal of equality to an ideal of equality of opportunity. And the descendants of those who got in on the ground floor of the suburban Ponzi scheme–because of their wealth and wealthy schools–have tremendous advantages for gaining places in the professional and managerial classes. Of course there will always be individuals who are exceptions, but even if our system were colorblind, blacks and most whites today cannot compete as equals with the descendants of those who got in on the first- and second-ring suburbs.
Why can’t more individuals of intelligence and ability catch up, and what can we do about all of this? And what are the other effects of the suburban development pattern and the financial Ponzi scheme that underlies it. I’ll take those questions up in a future post.
- Some states have responded by expressly granting more powers to localities in their state constitutions, but unless a state says otherwise, local governments are only administrative units.
- A good hands-on introduction to pre-New Deal real estate is the game Monopoly. Players buy land with cash, build houses on it with cash, and eventually add commercial buildings with cash. (Although the only commercial buildings Monopoly allows are hotels). There is a ‘mortgage’ rule. Properties are put face down for a small amount of cash, and flipped face back up again when the mortgage is paid off. But it’s more a desperation move than a financial strategy. Note that there are no zoning rules in Monopoly either, though these did not come from the New Deal. Single family ‘zoning’ was invented in the 1920s expressly to keep poor people, especially black poor people, from living in middle-class neighborhoods.
- Non-veterans become eligible for similar long-term mortgages, not for free, but for only a $500 down payment (about $2000 in 2020 dollars). The original G.I. Bill expired in the mid-1950s, but these low down-payment long-term mortgages took their place in the economics of home buying.
- I have no idea whether Asian-Americans could buy houses under the G.I. Bill.
- My mother’s family did quite well.
I wish there were a clear account of all this written by someone with credentials, but here are some of the pieces:
Kenneth Jackson’s Crabgrass Frontier is a good overview of the American suburbs. It’s well-written and researched, but doesn’t specifically center the story as I’ve done.
Richard Rothstein’s more recent Color of Law covers a lot of the material I’ve covered above, and his interviews are great. Unfortunately, he’s not a great writer. He gets lost in the details and tries to use lawyer-like techniques in places where a historian’s craft would be more useful.
Chuck Marohn’s work with the Strong Towns organization does wonderful work in understanding the overall ramifications of settlement patterns. (Such as this piece on Lafayette created in collaboration with Asheville’s Urban 3.)