Second, the recent financial crash did not result, as many believe, from a political effort to increase homeownership. Instead, it would be more accurate to say that the housing bubble and inevitable crash that followed resulted from a tension between federal policies aimed at increasing homeownership and state and local policies aimed at reducing homeownership. It would be even more accurate to say that the policies aimed at reducing homeownership caused the bubble, while some of the policies aimed at increasing it might have made the bubble worse than it otherwise would have been. But without the policies aimed at limiting homeownership, no housing bubble and no financial crisis would have occurred.
Finally, this book reveals that many of the superficially noble debates over housing, homeownership, and land use are really a form of class warfare in which members of the upper and middle classes attempt to shield their privileges, status, and lifestyles from the working and lower classes. One way of doing so is to promote policies that reduce homeownership—policies that were an underlying cause of the recent financial crisis, yet are overlooked by writers and analysts who have looked at that crisis and made recommendations for preventing future crises. Unless states and cities reverse these anti-homeownership policies, more housing bubbles and crashes are inevitable.
In short, homeownership did not let us down; government planners did by trying to discourage single-family homeownership. Their actions led to the housing bubble whose inevitable deflation was the catalyst for the financial crisis of 2008. This consequence suggests that it is both condescending and defeatist to think that some people should spend most or all of their lives as renters.
Why would anyone want to reduce homeownership? Around four out of five Americans own or dream of owning their own homes. But not all are certain they want you to own your own home. Many are certain they don’t want you to own a home near them—or on any land they regard as “theirs,” which can include millions of acres they don’t own but feel entitled to control to protect the pastoral or other scenic values they gain from that land. Debates over who gets to own a home, and where they can own it, fill a large portion of this book.
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
