families also used their homes as income-producing opportunities. They could raise chickens and vegetables in their yards; take in boarders; and run small businesses, such as sewing, out of their homes.5 These supplemental sources of income, together with income earned by children and other family members, typically came close to equaling the income earned by the family’s principal wage earner.6
In addition, working-class families rarely had bank accounts (partly because 19th-century banking hours were so limited— typically from 10:00 a.m. to 3:00 p.m.—that laborers could rarely visit a bank). Instead, they regarded their home as a bank, using their homes as collateral for small loans (from relatives or “real-estate entrepreneurs,” not from banks) to start up businesses or tide them over if the leading income producer in the family was temporarily out of work.7 Realtors of the day said that houses were “better than a bank for a poor man,” and “with hindsight,” says one historian, “this appears to have been true.”8
As such, 19th-century working-class families had powerful incentives to own their own homes. “The lure of land ownership served as the single most important magnet for English and European immigrants from the sixteenth century until well into the nineteenth,” observes historian William Worley. “In the last third of the nineteenth century, this hunger was transformed into desire for ownership of city and town lots.”9 “The ambition of the immigrant to own property in America is one of his most striking characteristics. For it, he will make almost unbelievable sacrifices both of his own comfort and that of his wife and children,” wrote an observer of Chicago working-class living conditions in 1913. “The possession of a house from which one may draw an income is the highest mark of prosperity.”10
Fortunately for the immigrants, housing was inexpensive. Land in most cities was abundant. Although land within walking distance of factories eventually became scarce, in Chicago, for example, subdividers had created enough lots by 1873 to accommodate a million people, or 2.5 times the city’s actual population.11 Rather than buy a lot, people could save a little money by leasing a lot and building a small, wood-frame home that could be moved when the lease expired.12
The cost of erecting a small, wood-frame structure was low and could be made lower if the homeowners did much of the work themselves. Someone could buy a lot and built a small home—suitable for eventual expansion—for $800 to $1,000.13 Median incomes for late 19th-century or early 20th-century wage earners was $350 to $600 a year, or roughly one-third to one-half the cost of a house.14
Early Credit Tools
The financial tools available to 19th-century homebuyers were more primitive than they are today. Until 1886, no one conceived of a contract that would convey a home’s title to the buyer only after the buyer had paid off most or all of the house, and sellers were reluctant to give title to someone without a substantial deposit. So most lots and homes were sold with a 50 percent down payment. Working-class homebuyers would have to save this money or, more likely, borrow it from relatives.
The remaining 50 percent would be paid through a nonamortizing loan—which today we would call an interest-only loan—typically at 7 to 9 percent interest, with a balloon payment of the principal after five or six years. A $500 loan would have a monthly payment of less than $4; at each five- or six-year interval, the family would typically refinance the loan. To make monthly payments, families might take children out of school in their mid-teens so they could earn money and contribute to the household budget.15
Housing affordability was a major political issue in late 19th century cities. After the Chicago fire, the city’s Common Council considered an ordinance forbidding wood-frame homes and requiring brick or stone instead. That constraint would have easily tripled the cost of home construction. When more than 2,000 people besieged city hall in protest, the council agreed to exclude working-class neighborhoods from the requirement.16 Even among the middle class, passage of the ordinance slowed home construction. According to a local writer in 1878, the ordinance resulted in “a brisk demand for building lots just outside of the fire limits, and a chronic dullness in the market for moderately choice lots within those limits.”17
Middle-Class Renters
While working-class families had strong reasons to buy homes, the incentives for middle-class families were quite different. Before zoning, no one could predict what would happen to neighboring properties. Although it was unlikely that anyone would build a factory or dig a gravel pit next to middle-class homes, no one could stop a working-class family from buying a vacant lot and building a small home complete with boarders, in-home businesses, smelly foods, noisy children, and backyard livestock. Unlike today, urban neighborhoods in the 19th century tended not to be divided by income levels.
This lack of security from working-class invaders encouraged the vast majority of middle-class urban families to rent or lease their homes in the late 19th century. Landlords in some cities offered leases for as long as 21 years, blurring the distinction between leasing and renting a home.18 Since middle-class workers had easier access to banks and other means of saving and investing their money, they did not feel the need to buy a home to use as a savings bank. As a result, working-class homeownership rates, especially among immigrants, were higher than for middle-class families.
The 1890 census found that about 37 percent of nonfarm dwellings were owned by their occupants. However, about 40 percent of “nonfarm” homes were in rural areas; homeownership rates in urban areas, though not specifically recorded by the Census Bureau, appear to have been much lower. An 1890 survey of urbanites by the U.S. commissioner of labor found that just 17.6 percent were homeowners, which would put rural nonfarm homeownership at 62 percent.19 That figure sounds reasonably accurate since in other decades for which data are available, rural nonfarm and rural farm homeownership rates tend to be similar, and rural farm ownership was 66 percent in 1890.
Homeownership rates for many ethnic groups, who were mainly working class, were much higher. As early as 1870, 27 percent of German families and 20 percent of other immigrant families owned their own homes in Chicago, and homeownership rates among these groups were probably even higher by 1890.20 Since upper-class homeownership rates were close to 100 percent, middle-class home-ownership rates must have been below 10 percent.
Housing Innovations
Several innovations during the late 19th century made it even easier for working-class families to own their own homes. First was the development of new techniques that sped and simplified home construction. Balloon-framed houses held together with nails almost anyone could pound replaced traditional timber-framing methods that required skilled workers to make the mortise-and-tenon joints that held the house together. Sometimes called “Chicago construction” because it was widely used after the 1871 Chicago fire, balloon framing was made possible by the development of machine-made nails and standardized lumber sizes.
The simplification of home construction stimulated another innovation, which was the growth of the home construction industry and the early application of mass production techniques to home building. Traditionally, subdividers would sell lots, and buyers would build or hire someone to build a home. But the 1880s saw the emergence of housing developers who would sell lots and build homes on those lots, both to order and on speculation.
One of the largest developers in the country was Samuel E. Gross, a lawyer who began subdividing land and building homes in the Chicago area in the early 1880s. In little more than 10 years, he sold more than 40,000 lots and built more than 7,500 homes—more than any other Chicago homebuilder before or since—in 150 different subdivisions.21
Chicago families could buy an S. E. Gross home for as little as $800, and $1,000 to $1,500 would buy a four-room house, the difference in cost depending on whether or not the house had indoor plumbing. Many of
