O P I N I O N C 0 E N T

A POLITICAL HISTORYOF AFFORDABLE

HOUSINGBY BETSEY MARTENS

What do the U.S. Shipping Act of 1917 and theLow Income Housing Tax Credit programhave in common? Quite a lot, as it turns out.The history of our industry is somethingmany of us have rarely, if ever, considered. Incelebration ofNAHRO's 75^^ anniversary, theauthor shares her political view of the historyof housing, with apologies to the rigoroushistorians out there.

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6 Journal of Housing &• Community Development

Looking Back

FOR THOSE OF US whohave dabbled a bit in thehistory of housing, ourunderstanding of the begin-

ning of housing history is markedby the passage of the U.S. HousingAct of 1937. This article exploresthe idea that many of the chal-lenges facing our affordable housingindustry today have their genesis inthe political compromises that pre-cede tile passage of the U.S.Housing Act of 1937. The articlealso explores the conditions that arepresent in our nation's earlyresponse to a housing crisis thatresulted in a housing policy thatapportions resources to the housinggoals of the wealthy in greatermeasure than to the critical housingneeds of the economically poorFinally, the article looks at threekey themes that will shine somelight on how we might effectivelyaftect significant change inAmerican housing policy today.

Housing was not a policyissue in our nation untilthe mid to late 1800s.Prior to that, before thfindustrialization ofAmerica, mostAmericans workedwhere they lived. Bythe t850s, when mas-sive job creationoccurred in the citiesand rural Americansand immigrantsflooded the urbancenters in greatnumbers, there wasa critical housingshortage. Theresponses to hous-

ing need were private, profitableand often unsafe. Real estate devel-opers were turning old singlc-family homes into subdivided tenementhomes. Where one family hadlived, three, four and five familiescrammed into every inch of thebuilding.

Despite these deplorable tene-ment conditions of the late 1800s,federal policy-makers were sluggishabout any kind of response; stead-fast in their belief that housing solu-tions were the exclusive domain oíthe private andcharitable sectors,and best left tocities and statesto wrestle with. Itfollows, then,that the historyof housing policyin the UnitedStates beginswith the NewYork HousingAct of 1879.

Respondingto workforcehousing condi-

tions that were characterized by alack of fi-esh air, ventilation, fireprotection and indoor plumbing,the Act intended to make condi-tions safi'.r. However, the drivingforce behind the legislation was lessa concern for tlie physical safety ofresidents but a greater concern thatthe deplorable housing conditionswould influence tlie moral charac-ter of tenement reside;nts.

The New York Commissioner ofthe Tfenement House Departmentobserved that "there can be noquestion that the three greatscourges of mankind—disease,poverty and crime—are in largemeasure due to bad housing." '

There was significant debatethroughout much of the early 20thcentui7 about whethei' unsafe andunsanitary housing conditionscould shape a person's character By1915, housing reformers had broad-ened their understanding of hous-ing and began to sec housing less asa moral character issue and apathology and more as a necessarycomponent of healthy neighbor-hoods.

At this early point in our policyhistory, we have the first evidencethat housing policy is often shaped

' Hutchison, Jonet, "Shaping Housing andEnhancing Consumption" Pennsylvania StaleUniversily Press, 20Ö0

January/February 2009 7

by motivations that are not trans-parent, yet must be understood ifwe are to create a more advanta-geous policy for our industry today.

The First FedeialHousing ProgramThe major cities of the east coast,particLilarly New York, continued topass legislation adopting buildingcodes and housing quality stan-dards, while the federal govern-ment continued to see no role foritself in housing policy. The onsetof World War I, though, changedthat laissez-faire approach dramati-cally. Suddenly, the nation was infiill-tilt production for the wareffort. Workers were needed onboth coasts to build ships, and hous-ing was needed for the workforce.The U.S. Shipping Act of 1917authorized President WoodrowWilson to address the workforcehousing problem and appropriated$100 million for the eftbrt.

In less than two years, approxi-

mately 16,000 homes were built on120 sites with funds from theShipping Act. The massive produc-tion allowed housing reformers toexperiment on a grand scale. Therewere two dominant themes behindtheir plans. One was to design bothhomes and communities thatwould shape the best possible work-force. And the second, similartheme was to create a captive workforce. The goal was to "get them[workers] to invest their savings intheir homes and own them. Thenthey won't leave and they won'tstrike. It ties them down so thatthey have a stake in our [factoryowners] prosperity." "

In this distinct housing policyshift—from the industrial era, pre-war focus on the pathology of hous-ing—reformers now argued for thebenefits of a housing policy thatwoLild reduce labor turnover,increase productivity and promotesocial harmony.

" Fairbanks, Robert "From Better Dwellings to BetterNeighborhoods", Pennsylvario Stote UniversilyPress, 2000

In this thinking, we can see thesecond key piece of evidence thathousing policy is motivated byinterests that often stray far fromthe simple provision of shelter

The Beginning of theAmerican DreamThe end of the war led housing crit-ics, congressmen and real estateagents to reassess the role of gov-ernment in housing.ii' With theArmistice in November 1918,Congress ordered the halt of hous-ing production on projects lessthan 75% complete. The govern-ment ordered the single-familyhomes to be sold at auction, losingmore than half of its investment.In the end, only 27 of the projects

were completed as planned.

This less-than-admirable resultcooled the nation's enthusiasm forany further government involve-ment in housing.

President Hoover refocused thenation's attention on housing. Inthe 1920s, as Commerce Secretary,Hoover took a strong interest in thesubject. In addition to his profoundunderstanding of how housingcould fuel the economy. Hooverworried that the declining numberof homeowners could have seriouspolitical ramifications. He believedthat insufficient housing would cre-ate a class system of tenants andlandlords that would lead to wide-spread discontent, and possibly rev-olution.

As Commerce Secretary, Hooverelevated the role of the states infiowing capital to a housing produc-tion effort. As President, Hooverdeveloped carefrilly calculated gov-ernment policies that exalted andpromoted the virtues of homeown-

'" Rodlord, Gail, "The Federal Government andHousing During the Great Depression",Pennsylvania State University Press, 2000

Ö Journal of Housing & Community Development

ership. Some scholars suggest thathe was building on the early 19thcentury ideas of a deeply imbeddednational belief in the supremacy ofhomeownership and the sovereign-ty and inviolability of the privatehousing market.iv

His administration set the stagefor the network of programs thatfacilitated the enormous increase inAmerican homeownership—theFederal Housing Administration,the Federal Home Loan Bank, andthe Federal National MortgageAssociation.

This chapter of our housing his-tory adds a third motivation to sig-nificant housing policy: fueling theeconomy and managing the classes.

Depression-fueledHousing PolicyThe early 1930s gave rise to yetanother different housing move-ment created by a number offorces. In the chaos of the earlyRoosevelt administration and themany New Deal initiatives hisadministration created, the PublicWorks Administration [PWA) hous-

'^ National Low Income Housing Coalilion,"Changing Priorities: The Federoi Budget andHousing Assistance, 19762007," August 2002

ing program wasenacted in 1933 aspart of the NationalIndustrial RecoveryAct. The PWA built25,000 units in 58locations over 4years.

PWA projectswere well receivedby the publicbecause they werewell built, neighbor-hood-friendh'' andfamilies didn't haveto be eligible based

on income. This three-partapproach allowed for a wide varietyin household demographic. Threeyears later, in 1936, Congressrequired that PWA housing be avail-able only to families with very littleincome. This administrative changehad significant future conse-quences.

Behind the scenes of the housingmovement in the 30s was a power-ful visionary named CatherineBauer, author of the classic 1934book titled Modem Housing. Bauerwas prophetic in her belief thathousing created solely for poor peo-ple, built in isolation from the fabricof the neighborhood, and adminis-tered in a top-down governmentprogram would be politicallyunpopular She argued instead for alarge-scale housing program, creat-ed by non-profits and cooperatives,divorced from commercial inter-ests, and designed for families of allincomes using an architectural stylethat would allow difi-erences in fam-ily wealth to be invisible.

She was an early advocate of amulti-family approach in whichamenities could be shared by entireneighborhoods and efficiencies inconstruction would deliver afford-ability to all. She was adamant inresisting a growing trend in housing

of creating one tyix of housingstyle for the majority middle classand an inferior, visually stigmatiz-ing product for the poor.

Bauer teamed up with SenatorWagner in 1935 to attempt transla-tion of her ideas into a public hous-ing program. The effort failed in1935 and again in 1936. Finally, in1937, he succeeded in winning tliesupport of Congress for the U.S.Housing Act. While the programwas enacted into law, the spiritedprinciples endorsed by Bauer andothers were completely lost in thepolitical debate and the legislationwas so compromised that they con-sidered withdrawing it.

Three significant compromisesset the stage for the problems wecontinue to wrestle with today. TheU.S. Chamber of Commerce, theNational Board of Realtors and theBankers Association were adamant-ly opposed to government involve-ment in housing production. Theysuccessflilly amended the bill sothat instead of a unified, compre-hensive national housing program,a two-dered system was created. Inthe top tier, significant resourcesand infrastructure assured a contin-uous and robust flow of capital tothe goal of American homeowner-ship. In the bottom tier, a scarceand tightly controlled allocationwould flow to housing for tho poor.

1b ensure that the public hous-ing program operate well outsidethe domain of the private sector,the lobby interests led by the real-tors succeeded in these three keypoints:• that public housing be eligibleonly to low-income families;• that public housing's developmentcosts be limited; and• that the creation of new housingbe tied to the clearance of existingblighted properties.

The combination of the three

10 Journal of Housing & Community Development

íí

require-ments assured that public hous-ing would be a separate and lessequal housing product, hamstrungby the high cost of land purchase inthe inner cities. iTie vision of a uni-versally integrated, broadly accept-ed, strongly resourced programevaporated in 1937.

A national housing program thatfocused sc^nt resources on denseproduct in often undesirable loca-tions produced the results that itsdetractors hoped for. The public'sunderstanding of public housing inthe urban cities consisted of mam-moth high-rise projects occupyingsuper-blocks, many of which hadbeen built to accommodate urbanrenewal and existed in stark isola-tion from sun-ounding neighbor-hoods. Segregated and readilyidentified as charity cases, "ware-housed by society in gray fortressesthat loomed menacingly over thecityscape, public housing residentshad vacated crumbling tenementsonly to b(; placed in sterile silos".v

After WWII, Bauer and her groupof housing reformers had a secondshot at significant housing refonn.Rtîturning soldiei"s were challengedin finding housing that met theirneeds and thr nation wondered,again, if its housing programs wereup to the task. Despite a constant plea

" Fairbanb, Roberl "From Better Dwellitigs to BelterNeighborhoods", Pennsylvania State UniversityPress, 2000

to turn tlienation's attentionto the public hous-ing program, thefocus was, insteadon urban renewal.

Even though theU.S. Housing Act ol"1949 coined thenow-fiimous nationalcommitment thatpromises a "decenthome for everyAmerican," and even

though the Act provided for theconstruction of 810,000 units ofpublic housing over six years (thelargest and most ambitious appro-priation ever), public housing was aminor focus. It centered on slumclearance and downtown develop-ment—the goal of which was to ele-vate property values, boost taxrevenues and encourage privateinvestment in beleaguered centralcities. Urban renaissance, notunmet housing needs, had theattention of Congress.

Congressional appropriation offunds for public housing fell farshort of the ambitious authorizationof 810,000 units. Production limpet!along at an average annual rate of20,000 units.

President Kennedy's campaignfor office was plagued by the clas .and race problems endemic of thetime and made more difficult bythe problems encountered in somepublic housing in the large cities.As a savvy politician, he turnedthe nation's housing attentiontowards a demographic that wasfar more politically popular—theelderly. Kennedy's administrationushered in the Section 202 pro-gram and legislated admission forthe elderly in public housing. Thissmart political move restored sonu;of the nation's faith in the poten-tial of public housing.

The passage of the BrookeAmendment in 1969 tied publichousing rent to tenant income. Thischange marked the beginning ofthe serious financial problemsencountered by public housingtoday. While excellent in concept,the Brooke Amendment gave riseto funding mechanisms that havehamstrung—and nearly crippled—thiî public housing inventory.

Gathering theMeaning and MovingForwardFrom this brief review of the politi-cal history of affordable housingwe can clearly identify a numberof themes that will be important inframing the next tiiajor initiative in

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RENTS

federal housing policy.The first theme is the centuries-

old confusion, if not outright con-flict, about the role of the federalgovernment in the provision ofhousing. Tb the extent that thefederal role has always beenviewed as competition for, and athreat to, the private sector inven-tory, at least one solution path isobvious—a consistent partnershipof the private sector in affordablehousing. The Low IncomeHousing Tax Credit (LIHTC) pro-gram has shown us that, evendespite the inefficient deploymentof taxes to incent housing produc-tion, it's a successful and political-ly popular model. Public housingshould certainly pursue its own

variation on the theme.The second theme requires an

understanding that the significanthousing policy initiatives in ournation's history have rarely grownout of an authentic vision of doinganything remarkable for familiessidelined by the market, The driv-ers for policy change have consis-tently been two: a need to fuel theeconomy and a desire to shape, orcontrol, behavior. Public housingadvocates often strategize aroundthe goodness of our mission andmiss the key strategic leveragepoints. Public housing reformneeds to be tied to economicdevelopment, community revital-ization and social improvement.

A third conclusion requires anappreciation for how radically theadopted public housing programdeparted fi"om the original visionimagined in the 1930s, and howthe resulting creation of a two-tiered national housing policy con-tinues to work today. According tothe National Low Income HousingCoalition report tided "ChangingPriorities,"'^! housing-related taxexpenditures in 2006 were $120billion, compared to HUD's $30billion for low income housing.Housing-related tax expendituresare for mortgage interest deduc-tion, property tax deduction, capi-tal gains avoidance, and investordeductions. This means that thesubsidy to promote and encouragehomeownership for relativelywealthy Americans is almost fourtimes greater than the subsidy forthe nation's poorest citizens. Thisconfirmation that we have a de-facto two-tiered system has beenlittle challenged. But, as we facethe fact that many workingAmericans can't afford the two

^' Korolak, Eric, "No Idea of Doing AnythingWonderful", Pennsylvonia Stale University Press,2000

bedroom fair market rent in mostcommunities, the idea that themortgage interest and property taxdeduction investments—the toptier of our national housing poli-cy—needs tobe rethought seemsto be gaining some acceptance.

Finally, this review of historysuggests that, since public housingis now so disabled by genuine anddisingenuous attempts to fix it sinceits compromised 1937 birth, weneed to start with an entirely newparadigm if there is to be place-based housing for very low-incomeAmericans in the 21st century. Thekey ingredients of a new policymay well include;

• Strategic partnerships with theprivate sector• Public ownership and steward-ship of the assets• Targeting of the greatest needmarried with mid-market eligibility• Excellent project design that inte-grates into, and improves, neighbor-hoods• A single-tiered housing policythat creates opportimity tor all

Returning to the question posedat the beginning of the article, theShipping Act and the tax credit pro-gram share the common features ofhaving harnessed market forcesand sentiment to win broad appealfor significant housing production.If we can learn fi-om these ideasfrom our housing history, we arebetter positioned to advance thenext chapter. •

Betsey Martens is the Co-ExecutiveDirector of Boulder Housing Partnersand a member of NAHRO's Board ofGovernors and Housing Committee.She can be reached atmartensh@bouldercolorado.gov.

] 2 Journal of Housing & Community Development