Welcome to Great Housing Shortages in History, a new segment here at Realm of Kevin about some of our favorite plutocratic misallocations of free market power and prevention of natural equilibriumization when it comes to the housing space.
For the purposes of this article I will adopt Charles J. Orlebeke’s convenient historical segmentation of ‘modern’ U.S. housing policy into two epochs: one, lasting from 1949 to 1973, the other from 1973 onward. The first period begins with the passing of the Housing Act of 1949 under Truman (itself a post-war update of the earlier Housing Act of 1937) and ends with the announcement of a moratorium on housing production (suspending the Housing and Urban Development Act of 1968) under Nixon in 1973.1 We could also borrow a formulation which dates the earlier segment from 1933 (the year of authorization of the Home Owners’ Loan Corporation and the National Industrial Recovery Act) or 1934 (year in which the National Housing Act was enacted, creating the Federal Housing Administration, the Federal Savings & Loan Insurance Corporation, and a secondary mortgage market via national associations). Or, you could also date the origin of federal involvement in the U.S. housing market to 1937, when the passage of the United States Housing Act enabled a swath of slum-clearance projects with federal money under local jurisdictions. Finally, you could also make a case that the Housing Acts of 1954 and/or 1961 represented the first truly contemporary public housing endeavors which together broadened the remit of urban renewal while establishing mortgage insurance for private developers who were enabled to borrow at the federal rate under the 221(d)(3) or below-market interest rate (BMIR) program, which authorized 100% mortgages to public bodies, nonprofits, and coops and 90% mortgages to developers who agreed to limit their return to below 6% a year on their 10% equity investment.2
Anyway. My own fascination here is with the 1968 Act, which is written in direct communication with the 1949 Act. Representative Wright Patman, chairman of the House Committee on Banking and Currency, explicitly referred to the bill’s extension of the 1949 Acts’ mandate to ensure a “decent home…for every American family”.3
Likewise, within the 1968 Act itself (at the beginning of Title XVI, Section 1601):
“The Congress finds that the supply of the Nation's housing is not increasing rapidly enough to meet the national housing goal, established in the Housing Act of 1949, of the “realization as soon as feasible of the goal of a decent home and a suitable living environment for every American family”. The Congress reaffirms this national housing goal and determines that it can be substantially achieved within the next decade by the construction or rehabilitation of twenty-six million housing units, six million of these for low and moderate income families”.4
Note the obvious extremity of this call for construction: 26 million housing units in a decade, with about a quarter of these for low- and medium-income tenants. This represented an average of 2.6 million units/annum – a dizzying number – and one which, as Orlebeke notes, was especially ambitious given the fact that the combined total in new construction starts (not completes!) was 2.5 million for the past two years for the entire housing industry nationally. Federal subsidies made up a dramatically smaller amount of the whole: between 1950 and 1971, they were responsible for only 2.08 million units.5
In sum, here we have a vast, ambitious plan to rectify a housing shortage by means of public investment – in many ways, a dream scenario, especially to those of us who only know housing subsidy as a tenant-by-tenant voucher system or, perhaps, something more holistic but no less limited, like the Low-Income Housing Tax Credit (LIHTC). While the text of the 1968 Act is by no means the first appearance a recognized “housing shortage”6 it is perhaps one of the first emphatic identifications of it as a persistent issue within the admittedly thin corpus of federal interventions in housing in the United States. Earlier acts had tended to focus on the deleterious public health effects from “slums” as a pretext to engage in large-format destruction of poor and black housing – here, we see a general imperative to build at all costs, of a type we are now much more familiar with.
At this point, I should recommend reading Keeanga-Yamahtta Taylor’s excellent Race for Profit, and in particular Chapter 2, for a fuller understanding of the precise conditions of the passage of the 1968 Act.7 Taylor makes an in my opinion irrefutable case that the Act comes as the direct result of a desperate attempt to “save” American cities which had been the site over most of the 1960s (and especially during the “Hot Summer” of 1967) of extreme rioting in response to disinvestment, police brutality, the withdrawal of any semblance of social provision with the departure of the white tax base to the suburbs, etc.8 She makes the point that as the war in Vietnam was ongoing, the Great Society/“War on Poverty”, with programs dependent upon federal New Deal-style cash infusions, found itself flagging – and thus, the Johnson government (Nixon wasn’t in office until late 1968) found itself turning to a private sector which likewise found itself desperate to wiggle out of a mounting pressure wave of boycotts, strikes, sit-ins, and the like from both labor and a nascent consumer movement which properly identified insurance and mortgage companies for their essential role in making urban renting and ownership untenable for, especially, people of color.9
The turn to private enterprise to shore up sagging public programs would have, of course, been useless if it was mere rhetoric; but here, black stars aligned – political pressure (from an militant and radical left wing) pushed capital and state into a new configuration in which public money was used to create an investment environment in which, for an exceedingly brief time, an amputated, dulled sort of public housing provision existed. In this framework, called into existence by the 1968 Act (specifically the 2 new “large volume subsidy programs” of Section 235 and 236), over 50% of all directly subsidized housing units built between 1935 and 1971 were built between 1968 and 1971.10
That said, none of these were truly public in the commonly understood sense. Section 236, established as an addendum to Title II of the National Housing Act a rental housing assistance program which capped rent payments for tenants at 25% of their income, along with a $300 reduction/annum for minors in the household while also providing the building owner with FHA-insured 1% mortgage financing to make up the shortfall from loss of revenue in the form of capitalized rents. The benefit here was twofold: first, attracted by government-ensured low-interest loans, developers were enticed to flood in to construction of low-income housing; second, the government was able to avoid significant budgetary impact at the outset of the program given mortgages didn’t begin coming due until construction was completed. Simply put, the private-sector developers fielded the entirety of the start-up cost on the premise that their lifetime costs on a project would be greatly reduced.11
By 1971, corporate reaction was in full swing against the program. The President’s Third Annual Report on National Housing Goals, released in that year, notes that while production quotas were being admirably hit, the government now saw itself on the hook promising 1% loans as inflation climbed higher and higher – essentially, as the report putting it, leaving the FHA “standing at the cash register”. Ultimately, it was the prospect of future cost overruns, avaricious attacks from the National Association of Home Builders, the Mortgage Bankers Association, and the National Association of Real Estate Boards, increasing wildcat strikes in the construction industry, and finally, the relative “cooling” of broader, dramatic political activity like that which had been seen in the late 60s which all contributed to the abrupt cessation of the 10-year project laid out in the 1968 Act in Nixon’s 1973 moratorium and the overnight shift to indirect subsidization in the form of vouchers, credits, etc.
All in all, the U.S. had, by the loosest definition, “public” housing from 1968 to 1973, which was not public at all, but merely a blip in which the federal government and business as such found themselves painted into a temporary corner to the degree they saw fit to fund a bare-bones (and still racist! seriously, read Race for Profit) program in which public money lined private pockets in order to half-solve a public problem, dressed up in high-flying rhetoric about opportunity caring for the poor and other bullshit. The program set out in the 1968 Act was by turns a rear-guard action, an audacious attempt, a pathetic failure, and a palliative scheme. It was the best we ever had it here. And it’s all gone now. :)
Announced by then-HUD Secretary George W. Romney (yes, of the Romney Mormon Dynasty) in a talk given to the National Association of Home Builders in Houston on January 8th, 1973. Reported in Orlebeke, C. J. (2000). The Evolution of Low‐Income Housing Policy, 1949 to 1999. Housing Policy Debate, 11(2), 489–520. https://doi.org/10.1080/10511482.2000.9521375.
Coan, C. A. S. Jr. (1969). The Housing and Urban Development Act of 1968: Landmark Legislation for the Urban Crisis. Urban Lawyer, 1(1), 4.
Summary of the Housing and urban development act of 1968: S. 3497 Note. (1968). Summary of the Housing and Urban Development Act of 1968 : S. 3497, I–74.
Downs, A., & Real Estate Research Corporation. (1972). Federal Housing Subsidies: Their Nature and Effectiveness: And what We Should Do about Them. National Association of Home Builders, 10.
Not by a long shot: Engels’ The Housing Question focuses on this exact term to a great degree and clarifies the method of its operation: “The so-called housing shortage, which plays such a great role in the press nowadays, does not consist in the fact that the working class generally lives in bad, overcrowded and unhealthy dwellings. This shortage is not something peculiar to the present; it is not even one of the sufferings peculiar to the modern proletariat in contradistinction to all earlier oppressed classes. On the contrary, all oppressed classes in all periods suffered rather uniformly from it”. Engels, F. (1971). The Housing Question (3rd Edition). Progress Publishers, 15.
Taylor, Keeanga-Yamahtta. (2019). Race for Profit: How Banks and the Real Estate Industry Undermined Black Homeownership. University of North Carolina Press. http://ebookcentral.proquest.com/lib/rutgers-ebooks/detail.action?docID=5889896
Her causality is especially backed up when one considers the 1968 Act contains extensive provisions for “Urban Riot Insurance” in the form of a federal subsidy for private insurance companies under Title XI.
This pressure worked miracles in softening the Federal Housing Authority-approved practice of redlining (though private insurance and lending corporations often simply ignored directives against segregation, of course).
Downs, A., & Corporation, R. E. R. (1972). Federal Housing Subsidies: Their Nature and Effectiveness: And what We Should Do about Them. National Association of Home Builders, 10.
For a dopily and cloyingly quietist position on this whole setup, see von Hoffman, A. (2013). Calling upon the Genius of Private Enterprise: The Housing and Urban Development Act of 1968 and the Liberal Turn to Public-Private Partnerships. Studies in American Political Development, 27(2), 165–194. https://doi.org/10.1017/S0898588X13000102.