The House That Built America
(While this article is aimed at Minneapolis readers, it holds for the rest of the country)
It was, by almost any measure, the greatest wealth-creation machine in American history. Not the stock market, not the bond market, not the 401(k). It was the front door. In the decades following World War II, buying a house was something an ordinary family could actually do. A returning veteran could get a zero-down-payment loan through the GI Bill. A factory worker, a teacher, or a nurse could qualify for a 30-year mortgage and own a piece of the American landscape. The monthly payment would eat up maybe 12 or 13 cents of every dollar earned. That home would then do something remarkable. It would go up in value, year after year, turning the asset that ordinary families lived in into the primary engine of their wealth. That era is over. According to the National Association of Realtors, a family earning the median American income can no longer qualify for a mortgage on the median American home.
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According to research from the Federal Reserve, the U.S. homeownership rate rose by 20 percentage points between 1940 and 1960, the largest such jump in American history. As HUD documents, it climbed from 43.6 percent to 61.9 percent, driven by government-backed mortgage insurance, a booming postwar economy, and a deliberate federal commitment to turning renters into owners. The price of a median home in 1950 was about $7,400. The median household income was about $3,000. By 1960, as the 30-year fixed mortgage became standard, monthly payments consumed between 11 and 16 percent of income, well inside the 25 percent threshold that financial planners consider the boundary of affordability. That same 1950 home was worth over $17,000 by 1970. Financed with a small down payment, it represented an extraordinary return for a working-class family. The house was not just shelter. It was, quietly, the most powerful financial instrument available to ordinary Americans.
In 1981, mortgage rates hit 18.6 percent. Monthly payments became crushing. Rates eventually came down, but prices kept climbing. By the early 2000s, lenders had found a workaround: if borrowers could not truly afford the homes they wanted, banks would simply lower their standards. Adjustable-rate mortgages, interest-only loans, and no-documentation underwriting all became common tools for keeping the dream of ownership alive. Then 2008 arrived. The foreclosure wave hit Black and Latino families with particular force. As the Urban Institute has documented, Black homebuyers had purchased at peak prices at higher rates than white buyers and were disproportionately targeted by subprime lenders pushing risky products on borrowers who qualified for conventional loans. The equity they had spent years building evaporated.
There is a version of the post-war housing story that leaves out roughly a third of the country. The FHA, the agency that made the boom possible, also underwrote racial segregation. Its guidelines actively discouraged lending in mixed neighborhoods, and it refused to insure mortgages in Black communities in city after city. VA loan programs were administered locally across the South, where Black veterans were routinely denied benefits their white counterparts received. The GI Bill created a generation of white middle-class homeowners. For Black veterans, it was often just a piece of paper.
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The post-war housing boom worked because it combined supply with subsidy. The FHA and VA did not just allow more housing to be built. They made specific financing tools available at prices ordinary people could afford. The 30-year fixed mortgage with a government guarantee was not a market product. It was a policy instrument. And it transformed the economic landscape of the country for a generation.
Reversing the current crisis requires comparable ambition: community land trusts that remove land from the speculative market, down payment assistance targeted at first-generation buyers, and subsidized construction priced below what the private market will deliver. The Urban Institute points to special purpose credit programs as one of the more promising tools for closing the racial homeownership gap, allowing lenders to extend credit on more favorable terms to historically excluded groups. Zoning reform alone cannot do that work.
https://minneapolistimes.com/the-house-that-built-america/
David Schultz
David Schultz, Editor in Chief of Minneapolis Times, is a frequent contributor on CNN, BBC, WCCO and other local media outlets. David is a professor in the political science department at Hamline University where he teaches classes in American politics, public policy and administration, and ethics. Schultz holds an appointment at the University of Minnesota and University of St. Thomas law schools and teaches election law, state constitutional law, and professional responsibility. He has authored/edited 45 books, 12 legal treatises, and more than 200 articles on topics including civil service reform, election law, eminent domain, constitutional law, public policy, legal and political theory, and the media and politics. In addition to 30+ years teaching, he has worked in government as a director of code enforcement and for a community action agency as an economic and housing planner.
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After that, the developers started building bigger, fancier and higher-priced until the suburbs were all built-out. These days all the developers want to build are McMansions in the outer suburbs that very few middle-class Americans can afford to buy. Meanwhile the inner-city houses are collapsing from disuse and neglect.
