“Economy is simply the Greek word for housekeeping,” Rowen Williams, the Archbishop of Canterbury, reminded a conference of trade unionists in 2009. “Remembering this is a useful way of getting things in proportion, so we don’t lose sight of the fact that economics is primarily about the decisions we make so as to create a habitat that we can actually live in… Practically speaking, this means that at both the individual level and the national level we have to question what we mean by growth.”
Ironically, perhaps, significant numbers of Americans first began to question the meaning of growth by questioning how and where they built their homes.
Sometime around the early-1970s, the terms blight and sprawl entered the American vernacular, as the abandonment and dereliction of land and buildings in central cities were matched by the construction of disconnected residential subdivisions and commercial strips in the suburbs. The visible links between the two poles of regional growth were roads which became more and more congested.
Empirical studies suggested a causal relationship between America’s prevalent development patterns and increased air and water pollution, higher infrastructure and energy costs, endangered agricultural and natural lands, and entrenched social division and economic inequities. Concern over the built environment joined the environmental movement’s traditional concern with the natural environment to spawn the sustainability movement.
Sprawl and blight, of course, are worldwide phenomena, consequences of increasing automobile ownership and global market forces. Tumultuous rural to urban migration in developing countries of people seeking jobs and opportunities has created megacities of populations and proportions unprecedented in human history.
But nowhere in the world has sprawl been more planned and premeditated than in the United States. Unlike the unplanned development in the third world, sprawl in America is clearly a conscious effort with a formal legal and regulatory foundation.
Several years ago, a series of exhibitions at the National Building Museum in Washington, D.C. reviewed the major federal legislation that enabled the expansion of suburban America:
In 1913, the U.S. Congress passed the Underwood-Simmons Tariff Act which established the federal income tax. The law contained a provision which allowed taxpayers to deduct mortgage interest and property taxes from their federal tax liability. The mortgage deduction essentially provided a federal subsidy to homeowners only; renters received no deduction.
In 1921, the federal Bureau of Roads was created to plan a highway network to facilitate automobile travel between all major cities in the United States. Federal matching funds were also made available to improve main roads. No such subsidies were offered for railroads.
In 1926, in a lawsuit know as the Village of Euclid v. Amber Realty, the U.S. Supreme Court ruled that communities could use zoning to exclude multi-family housing and other uses from neighborhoods. This gave rise to single-land-use districts — residential-only or commercial-only or industrial-only zones — as opposed to the mixed-use neighborhoods that were typical of cities. Euclid v. Amber also allowed suburbs to specify minimum single-family home sizes, which, along with the ability to prohibit apartments, discouraged affordable housing for lower income families.
In 1931, the Conference on Home Building and Home Ownership, convened by President Herbert Hoover and attended by representatives of the real estate development and design industries, created a federal housing policy that promoted the single-family detached house, the careful planning of subdivisions, and the deconcentration of industries and residences from cities.
In 1933, the federal Home Owners Loan Corporation established the practice of making long-term mortgages available to homebuyers. It also standardized the methods of appraising homes, categorizing them into A, B, C, or D zones. This appraisal system made it much easier to obtain a mortgage in a middle-class suburban neighborhood (A zone) than in a lower-income or African-American urban neighborhood (D zone).
In 1934, the National Housing Act created the Federal Housing Administration, or FHA. The FHA insured mortgages by private lenders, enabling buyers to finance a home with only a ten percent down payment and extending long-term mortgages from 20 to 25 or 30 years. For many buyers, this made it as cheap or cheaper to buy than to rent. FHA insured mortgages were restricted to white homebuyers in the suburbs.
In 1935, FHA building codes mandated rigid construction standards for lighting, heating, air circulation, and other design criteria. The new standards made it more profitable for builders to invest in new construction than improve existing structures. The new standards also encouraged intensive energy consumption by consumers.
In 1935, the Interstate Commerce Commission began to regulate the trucking and railroad industries as separate and competing industries. By encouraging the trucking industry to deliver goods inexpensively to places railroads did not go, this act enabled stores, shopping centers, and industries to move virtually anywhere outside cities.
In 1938, the FHA began to provide nearly risk-free construction financing for builders of large suburban subdivisions. As long as a subdivision’s site and house plans met FHA standards, the FHA would insure mortgages for all qualified buyers in the subdivision.
In 1944, the Federal Highway Act began the design of a national system of interstate highways. The style of highway design often destroyed or divided urban neighborhoods, but greatly facilitated suburban commutes.
Beginning in 1945, utility companies were allowed to provide gas and electrical services to new suburbs at rates averaged throughout a utility’s service area, rather than calculated according to delivery distance. Thus, the existing and predominantly urban customer base underwrote the cost of supplying utility service for new suburban construction.
The Housing Act of 1949 established “a decent home and suitable living environment for every American family” as a basic goal of federal housing policy. Two sections of this act had a profound effect on metropolitan areas. Section I authorized federal loans to cities to acquire blighted areas for redevelopment in a process that became known as urban renewal and that, in practice, destroyed many stable, low-income, ethnic, and African-American neighborhoods. Section III authorized loans for low-rent public housing projects, which often became incubators for social problems and crime. Officially, these public housing projects were known as “Negro housing”.
In 1954, the Supreme Court decision in Brown v. Board of Education of Topeka outlawed racial segregation in schools, housing, and public transportation, and was the first in a series of court rulings that led to federally-mandated bussing of children. Many whites in cities reacted to the mandatory bussing of school children to achieve racial balance in urban public schools by moving to suburban school districts which were under no such mandate.
In 1956, the Interstate Highway Act authorized the construction of a 42,500-mile interstate highway system. The federal government paid 90 percent of the cost. The massive investment greatly facilitated the movement of commuters and shoppers between suburban homes and downtowns and encouraged the relocation of homes and businesses outside of cities. No money was allocated to improve or expand public bus, subway, or streetcar systems, which were considered local responsibilities.
In the 1960s, urban race riots instilled fear in many white Americans that cities were unstable and dangerous, exacerbating the white flight to the suburbs. The reality, however, is that, by the 1960s, it had become financially unwise for investors — in homes or businesses — not to locate in the suburbs. The massive public subsidies of suburban roads, sewers, schools, utilities, and mortgages rendered cities non-competitive. Moreover, most of the people most likely to vote now lived in the suburbs. Suburbanization had acquired a momentum, economic and political, that was impossible to stop.
The key question becomes: Why would the federal government create a redundant infrastructure in the suburbs and allow its cities to become obsolete?
The dynamics of capitalist competition provide a partial but powerful explanation.
Businesses need certain regulations, infrastructure, and services to survive, which they are unable to provide for themselves: public education; public health; roads, bridges, sewers, and water systems; national defense; fair trade practices; a money supply that is neither inflationary or deflationary; and laws protecting the health and safety of workers and goods. These are all fundamental to the development and generation of business, but are provided by government. What consumer would buy a foodstuff or pharmaceutical without government assurance that it was inspected and safe? How would firms move products quickly and cheaply without public roads?
Consider, for example, education, which is essential to modern economies. Education, like many other rights and protections we take for granted in advanced societies, simply cannot be provided consistently and extensively by employers. A worker is free to change employers; therefore, training workers for skills that are in demand may not be the wisest investment for a firm. Once trained, the employee may take his or her skills to another firm, representing a transfer of resources from the firm that did the training to a competitor that reaps the benefits of the previously-trained worker.
Moreover, education is linked to economic prosperity. Most American parents are determined to see their children receive the best possible education so they can compete for the best paying jobs. Americans choose where to buy or build their homes based, in large measure, on the quality of the public schools in a community.
Certainly, the market can and does provide education. Private schools and universities are among the best in the nation, and also among the most expensive. If all education were private — or all fire fighting, policing, recreation programs, road construction, basic scientific research, mail delivery, and other services we associate with government — few citizens would be able to afford it.
Government makes sure that capitalist relations function smoothly, that businesses can expand, create jobs, and remain profitable, because it needs the revenues that employers and employees provide in taxes to pay its school teachers, soldiers, and librarians, to build public works projects like roads and schools and water treatment plants, and to keep voters happy by keeping them employed and well-served.
Government and business in America may seem antagonistic towards one another, forever arguing over their proper role or size, but, historically, they have worked together to grease the wheels of capitalism. Real estate is perhaps the foremost example in the United States.
Businesspersons don’t build factories unless they are in locations where money can be made; workers don’t want housing unless it is reasonably close to jobs; and retailers don’t open unless there is a sufficient density of workers and residents within a specific trade area. In virtually all types of real estate transactions, government has the ability to make land valuable to businesses and individuals and entice them to invest in that land. Governments in the U.S. routinely use public undertakings to increase private profit. Road and sewer construction, shovel-ready industrial sites, property tax abatements, residential mortgage subsidies, airport expansions, and a myriad other publicly-provided appurtenances and incentives fuel real estate speculation and development, benefit truckers and retailers, increase travel, fill office buildings, and sustain car manufacturers and home builders.
American suburbs are part of the same dynamic of enhancing the locational qualities of businesses. In early industrial America, railroad, steel, and mining companies built “company towns” to provide low-cost housing, schools, and other amenities for their employees. In the first half of the twentieth century, the U.S. government assumed this role. Suburbia was essentially the U.S. government’s way of providing endless company towns for U.S. industries. Massive public investment reduced the cost of doing business in the suburbs, catalyzing private investment, creating jobs, expanding the tax base, and allowing suburban residents to accumulate wealth, mostly in the form of property. As President Eisenhower wrote in his 1963 memoirs about the publicly-financed national highway system, “Its impact on the American economy — the jobs it would produce in manufacturing and construction, the rural areas it would open up — was beyond calculation.”
Also beyond calculation at the time was the advantage of scale that suburbs would gain over cities in the competition for residents and jobs because of government financial subsidies and legal protections.