The term “American dream” was coined and popularized by an early 20th- century history writer named James Truslow Adams. His 1931 book The Epic of America used the phrase “American dream” more than 30 times and defined that phrase as “the belief in the value of the common man, and the hope of opening every avenue of opportunity to him.”9 Adams, in fact, wanted to name his book The American Dream, but his editor argued, “No one will pay three dollars for a book about a dream.” The editor was soon proved wrong, as the Library of Congress today lists more than 700 books whose titles contain the term “American dream” that were published after 1931 (and none before).10
Adams’s book did not specifically mention homeownership as a part of the American dream. Instead, he focused on “the belief in the common man and the insistence upon his having, as far as possible, equal opportunity in every way with the rich one.” One of those opportunities was the opportunity to own a home and a piece of land—a desire, other writers have shown, that extends far back into the nation’s history.
Thanks in part to advertising campaigns by realtors and home-builders, the American dream has become indelibly associated with homeownership in the public mind. But the American dream is more than just an advertising slogan: homeownership was originally an immigrants’ dream, as the opportunity to own land and a home attracted people from European and Asian nations where most residents were denied such opportunities through the end of the 19th century. Although Americans were once proud of providing that opportunity, for more than a century cities and states have passed ordinances and laws whose effective result, if not outright purpose, has been to reduce homeownership.
Homeownership did not become a middle-class dream until developers and planners figured out how to protect homes and neighborhoods from unwanted intrusions, such as factories, shops, and—ironically perhaps—working-class homes owned or occupied by immigrants and minorities. Unfortunately, the long-term result was to blanket much of the nation with land-use regulations that ended up making housing far less affordable.
Without this government regulation, anyone who could pay rent and come up with a modest down payment would be able to afford to buy a home if they want one. Not everyone wants to be a homeowner, and the debate over whether homeownership is really worthwhile for families or society at large is endless. But everyone who wants to be a homeowner should have the opportunity to do so. American Nightmare proposes a 10-point plan to both end subsidies to housing and remove restrictions from the housing market. I estimate that doing so will increase the American homeownership rate to as much as 75 percent.
To examine these issues in detail, American Nightmare first examines six somewhat overlapping periods in history, before the American Revolution through the post–World War II era. Chapters 7 through 10 look at specific postwar issues: the debate over urban sprawl, public housing for low-income people, government land-use policies, and urban renewal. Chapters 11 through 13 focus on the events leading to the recent financial crisis by looking at housing markets, the housing bubble, and the crisis itself. Chapter 14 reviews homeownership policies and housing markets in other parts of the world, while Chapter 15 shows how reforming America’s housing markets will increase homeownership and how that will help make America, once again, a land of opportunity.
Before exploring the history of homeownership in detail, defining some terms and identifying sources of data are important. Among the terms are “urban” and “rural”; “middle class” and “working class”; “cities” and “suburbs”; and “single-family home” and “multifamily housing.” Among the data are sources for homeownership rates, housing prices, and different ways of adjusting past dollars for inflation.
Urban and rural: Until shortly before 1920, the majority of Americans lived in rural areas—which, by Census Bureau definition, include isolated towns with fewer than 2,500 people. The nation’s first census revealed that barely 5 percent of Americans lived in communities—not necessarily incorporated cities—of 2,500 people or more. As late as 1900, 52 percent of Americans lived in truly rural areas outside cities or towns of any size at all.1 Thus, the 18th- and early 19th-century American dream was more about farm ownership than homeownership.
Today, the Census Bureau defines an urbanized area as a central city and all its suburbs, incorporated or not, whose population totals 50,000 people or more. The Census Bureau redefines the boundary of each urbanized area at the time of each census. And although the definition has changed over time, in recent censuses it has generally included all land contiguous to the central city whose population density is greater than 1,000 people per square mile. An urban cluster is a central city and all its suburbs whose population ranges from 2,500 to 49,999 people. The 2000 census identified more than 400 urbanized areas and more than 3,000 urban clusters. Together, these areas are urban and all other lands are rural.
Urban areas are quite different from metropolitan areas, which are often used in media reports and some analyses. Metropolitan areas are defined by county boundaries, even though large parts of those counties may be rural. The Atlanta urbanized area, for example, covers fewer than 2,000 square miles of land, while the Atlanta metropolitan area extends over more than 6,000 square miles of land.
The history of homeownership is quite different for urban and rural areas. In 1890, for example, almost two out of three rural families lived in their own homes, but only about one out of six urban families did so. Data before 1890 are sparse, but this book will attempt to track the history of homeownership in both urban and rural areas to colonial times.
Middle class and working class: For many, owning a home is a sign of belonging to the middle class. A 1975 survey found that three-fourths of the members of the American Federation of Labor and Congress of Industrial Organizations—most of whom were, by definition, working class—owned their own homes, and most of them defined themselves as “middle class.”2 Americans who pretend to be insensitive to class distinctions tend to define classes by income: upper, middle, and lower classes. In fact, however, distinct cultural differences existed and still exist between working-class and middle-class families even if they earn about the same incomes.
Working-class employees, also known as blue-collar workers, have little college education, earn wages, and have occupations that rely more on physical labor or repetitive activities. Middle-class or white-collar employees are more likely to be college graduates, earn salaries, and have jobs focused more on knowledge and analysis than physical labor. Mainly because of differences in education, the middle class and working class have significant differences in tastes.
Most sociologists break these two groups down still further. The upper-middle class might include corporate executives and top doctors and lawyers; the central-middle class would include middle managers and other professionals; the lower-middle class might include clerks and other low-level managers. Working-class employees are often broken into skilled, semiskilled, and unskilled. Outside these groups are the wealthy—sometimes called the leisure class—who don’t have to work and the hardcore poor, sometimes called the underclass, who for some reason are unable to work regularly.
Social class is more than about money; it is about status and opportunity as well. Some divide the upper class into two groups: old money and new money; old money has, at least to some, a higher status. In the latter part of the 20th century, many working-class jobs paid as much or more than some middle-class jobs. Yet as sociologist Bennett