Podcasts: Analysis

Podcast: US election special #3 – the housing crisis (part 1)

In the third installment of our podcast series on the US election, we explore the history of discrimination and privitization that has shaped modern housing policy.

Aaron headshot.jpg
Aaron White Freddie Stuart
5 August 2020, 1.01pm
Daniel Norman. All rights reserved.

ourVoices is a new podcast from openDemocracy's ourEconomy section which explores the crisis of our economic system – and promotes intelligent debate about what should replace it.

The podcast brings together some of the most exciting thinkers from around the world, and gives a voice to those who are putting new economic ideas into practice from the ground up.

In the first part of our two-part documentary podcast on the US housing crisis, we dig deeper into the history of US federal housing policy, and place the negligence of Trump’s tenure in the context of decades of underinvestment and privatization by successive administrations.

Listen below – and subscribe on Apple Podcasts, Spotify, or Soundcloud.


Freddie Stuart: In the US today, the number of households who are renting is near postwar highs.

Since the 2008 recession, home ownership has dropped by 6%. While 17% of households pay over half their income in rent, another fifth pay over a third.

According to the standard measures of affordability, there is no US state where a full-time minimum-wage worker can afford to rent or own a one-bedroom dwelling.”

This housing crisis has been further exposed during the current coronavirus pandemic.

With record rates of unemployment, and 30 million workers collecting jobless benefits, the tenuous precarity of America’s housing market is on full display.

In April, almost 1 in 3 Americans did not pay their rent.

Now, with federal unemployment insurance set to expire at the end of July, and eviction bans lifting across the country, some experts believe that “between 20 million and 28 million” people could face eviction between now and September.

But how did it get to this point?

In the first part of our two-part documentary podcast on the US housing crisis, we dig deeper into the history of US housing policy, and place the negligence of Trump’s tenure in the context of decades of disinvestment and privatization by successive administrations.

[Clip: Dr. Martin Luther King on land] (source)

Aaron White: A history of the politics of land and housing reveals the racism and inequality that has been at the foundation of American society since its inception.

Following the Civil War, General Sherman announced Special Field Order Number 15, which declared that freed slaves would be allocated 40 acres and a mule in former Confederate land along the southwest.

However, Andrew Johnson, President Abraham Lincoln’s successor following his assasination in 1865, annulled the order to appease the southern states.

As a result, freed slaves went from being property, to workers living in desperate poverty.

Having been denied education and wages, many newly freed people were forced to rent land from their former white owners. Known as “sharecroppers”, they were obligated to pay rent on the land by giving a portion of their crop to the landowner.

This compulsion to wage-labor essentially eliminated the possibility of land ownership for freed slaves.

Following the period of Reconstruction, racial exploitation took on a new form, imposed not only by explicit force, but by economic dependence.

Following decades of terror, descrimination and destitution – large numbers of black families migrated to northern cities, in a period that became known as the “Great Migration”.

Between 1915 and 1930, over 6 million black people relocated from the South to the North. In cities such as Detroit, New York and Philadelphia – the black population more than tripled.

In 1929, the stock market crashed, launching the US into the Great Depression. Millions of Americans lost their housing.

Mass unemployment forced millions around the country onto bread lines - and in the thriving black community of Harlem, New York, joblessness reached over 50%.

[Clip: 1930s Great Depression] (source)

Freddie Stuart: During the Great Depression the mortgage industry collapsed. By 1934, 50% of urban mortgages were delinquent.

The severe housing crisis saw thousands evicted from their homes and forced onto the streets. More than 2 million people became homeless.

Shantytowns were erected throughout urban centers – often called “Hoovervilles” named after the incumbent president Herbert Hoover.

In New York, the largest “Hooverville” was located in the middle of Central Park. With feebly built shacks, and unsanitary living conditions – these shantytowns were often deemed illegal and raided by state and federal authorities.

[Clip: New Deal, National Housing Act of 1935] (source)

Prior to the New Deal, the US government had no official housing policies at the federal level.

Following the stock market crash, and the subsequent housing crisis, President Franklin Delano Roosevelt passed the National Housing Act of 1934 as part of his New Deal regeneration plan.

This established a Federal Housing Administration or FHA.

Aimed at boosting the economy by expanding the number of homeowners, the 1934 act stated that the federal government would insure mortgages across a range of newly built developments.

The Home Owners Loan Corporation created residential security maps to assess the credit worthiness of certain neighborhoods.

These marked the “best” areas in green, blue for “good people”, yellow for “working class families” and red for quote “detrimental influences”. These red zones invariably included areas with significant minority populations.

In practice, segregation became FHA policy – deeming black neighborhoods as “risky” and thus denying them access to government-backed mortgages.

This became known as “Redlining”.

The last major piece of housing legislation during the New Deal period was the 1937 Wagner-Steagall Act.

This provided federal subsidies for local agencies to eliminate “slums” and build affordable housing units.

It also created the US Housing Authority (USHA) – which disbursed rental subsidies to private landlords on behalf of low-income households - through Section 8 of the act.

Between September 1937 and June 1941, the USHA lent about $800 million towards the construction of 587 low-rent developments.

As these funds were distributed via local authorities, racial segregation was further propogated by entrenched Redlining.

[Clip: GI bill] (source)

Aaron White: Following the Second World War, returning veterans were granted a range of benefits from the 1944 Servicemen's Readjustment Act – commonly referred to as the GI Bill.

By 1955, the GI program had granted guaranteed mortgages to 4.3 million homes.

Once again, however, the administration of this program displayed deepset racial discrimination.

Mortgages were not administered by the Veterans Administration, but rather by financial institutions whose “redlining” excluded the nearly 1.2 million black people returning from the war.

Many GI mortgages were guaranteed in newly established suburbs outside of metropolitan centers - home to predominantly all white populations.

These communities had strict racist covenants, maintaining racial homogeneity by preventing the sale of private homes to minority buyers. (These covenants remained until 1968 with the passage of the Fair Housing Act).

In 1947 Mississippi, for example, only 2 of 3,200 GI-backed mortgages in 13 cities went to Black borrowers.

In the suburbs of New York and New Jersey, “fewer than 100 of the 67,000 mortgages insured by the GI bill supported home purchases by non-whites.”

As federal and local policies excluded the development of black community wealth, America’s post-war population became increasingly segregated.

In a period known as “white flight”, many white residents fled to the suburbs.

In contrast, black communities in urban centres were consistently targeted. Policies such as the Federal-Aid Highway Act of 1944 subsidized interstate highway construction - proposed by city planners such as Robert Moses - which devastated urban largely black residential communities.

Estimates suggest that highway construction “displaced 475,000 families and over a million Americans” most of which were minority communities.

The fallout from these post-war policies strikes at the heart of the racial wealth gap that plagues America today.

By the conclusion of the original GI bill in July 1956 nearly $33 billion had been disbursed.

As white America amassed generational wealth and stability, black America was explicitly excluded from the post-war middle class.

[Clip Civil Rights Act of 1964] (source)

Freddie Stuart: Despite the passage of the 1964 Civil Rights Act, which outlawed the segregation of public spaces, schools and facilities – housing discrimination remained rampant.

[Clip: Malcolm X on housing] (source)

In 1965 Congress passed a housing act to establish a new department for Housing and Urban Development, or HUD.

This largely “symbolic move” consolidated housing governance into one Federal agency with its own cabinet position – the secretary of Housing and Urban Development.

As the 60s continued, it became increasingly apparent that the legislative gains won by the Civil Rights Movement were failing to significantly improve the material conditions of African Americans across the country.

As Dr Martin Luther King and the “Poor People’s Campaign” grew in influence, the Civil Rights Movement began to focus in particular on housing discrimination and affordability in northern cities.

One of the early iterations of this shift was the Chicago Freedom Movement of 1966 – led by the Southern Christian Leadership Conference (SCLC) and Dr King – which highlighted the inadequate and segregated education, housing and employment in the North.

[Clip: 1966 Housing March Chicago] (source)

A central demand of the movement was for a ban on housing discrimination, and the active promotion of black community wealth buildling.

These demands reflected the desperation of poverty-stricken communities throughout urban centres, where living conditions had consistently deteriorated as a result of institutional neglect.

In the summer of 1967, race riots sprung up in majority black cities such as Newark and Detroit sparked in part by egregious acts of police brutality.

[Clip Newark Riots] (source)

As many mainstream commentators dismissed the 1967 riots as sporadic flashpoints of looting and uncoordinated violence; the Johnson administration established the Kerner Commission to investigate the true cause of unrest.

Returning in 1968, the Commission’s report cited a lack of economic opportunity, and in particular, poverty and substandard housing as the key causes of the uprisings.

To address the crisis of systemic poverty, commissioner chairman Otto Kerner stated quote, “A commitment to national action - backed by the resources of the most powerful nation on earth” was needed.

[Clip: Kerner report] (source)

Following Dr King’s public assasination in Memphis in April 1968, President Lyndon Johnson submitted to public pressure, and following the recommendations of the Kerner Report, signed new housing legislation into law.

[Clip: Johnson Signs Fair Housing Act 1968] (source)

The Fair Housing Act deemed it illegal for “private individuals to discriminate on the basis of race in the sale or rental of housing.”

Even though the legislation explicitly deemed discriminatory housing transactions illegal, it lacked adequate enforcement mechanisms and put the onus on the victims to “file a formal complaint with HUD or sue in federal court to vindicate their rights.”

Alongside the Fair Housing Act’s attempts to deal with discrimination, 1968 also saw the passage of a separate Housing and Urban Development Act – which aimed at improving the material conditions in public properties.

This legislation was an unprecedented attempt to construct or rehabilitate America’s public housing stock – 26 million units were to be built over a 10 year period, 6 million of which would be set aside for low- and moderate-income families.

Aaron White: Despite its breadth, none of Johnson’s 1968 legislation succeeded in addressing the deep, systemic biases at the root of America's housing market.

To prevent an already sizable budget deficit from expanding, the Democratic administration sought to partner with the real-estate and banking industries to shift the production of low-income housing to the private sector.

In an interview with Democracy Now, Keeanga-Yamahtta Taylor, author of the book Race for Profit: How Banks and the Real Estate Industry Undermined Black Home Ownership, explains how this nexus of for-profit corporate housing providers was [and is] incompatible with improving and expanding affordable housing stock.

[Clip: Keeanga-Yamahtta Taylor on Democracy Now] (source)

Whilst in theory this privatisation was intended to remove the human bias from institutional housing policy, in reality it only outsourced the racial discrimination of prior decades to the market, resulting in further enclosure, segregation and gentrification.

As Taylor puts it in an interview with The Nation: “Black people had to pay higher interest rates, they had to pay more fees, they were relegated to isolated and neglected housing. Black people’s housing wasn’t even an asset—it was a debt burden.”

This process was legitimised and empowered by the mortgage guarantees and subsidies of the federal government.

A clear example can be found in Section 235 of the 1968 HUD Act.

This program allowed people to pay 200 dollars as a downpayment on a house, the mortgage rate was set at 20% of their income, and the interest rate was capped at 1%. The federal government insured all mortgages purchased under these Section 235 terms.

By insuring these mortgages - promising to pay off debts if the purchaser went into foreclosure - the government effectively incentivised short-term speculators and entrepreneurs into a newly cracked housing market.

Profiteers bought cheap properties, and after inadequate superficial refurbishments, flipped them to poor families for easy profits. Because losses were publicly insured, desperate communities were targeted, in particular black women, in anticipation that they might default.

The hope of a colourblind private sector distributing the sale of affordable housing therefore gave way to the reality of a government-endorsed system of market discrimination. A home for property speculators to rip-off unsupported communities.

As well as validating this predation, the government also lost the ability to regulate these new private housing developments - which meant it could not step in to correct these disparities without buying up huge swathes of housing stock.

In the words of Taylor “racist exclusion gave way to predatory inclusion”.

[Clip: Keeanga-Yamahtta Taylor on Democracy Now] (source)

Freddie Stuart: In January 1969 Richard Nixon succeeded Johnson as the incumbent of the White House.

Playing to his electoral coalition of disaffected white suburban homeowners, Nixon invoked a law and order backlash against the civil rights movement which promised to quell the race riots that had marked the closing years of the decade.

[Clip: RIchard Nixon 1968 Republican National Convention acceptance speech] (source)

Nixon won the election by promising an alternative path to that of Hubert Humphrey and the Democratic Party; an end to the promise of government spending, and to the expanding welfare state.

“It is time”, Nixon said, accepting his nomination at the 1968 Republican National Convention “to quit pouring billions of dollars into programs that have failed in the United States of America”

In line with this new brand of fiscal austerity, Nixon’s administration placed a moratorium on all subsidised housing programs in 1973.

This included the suspension of the 1937 act - under which the federal government paid all the development costs, and subsidized rents and deficits run by local housing authorities.

In the four years following the passage of Johnson’s ‘68 housing act, subsidy programs had accounted for the initial development of around one and half million housing units. These now ground to a halt.

In New York, Andrew Kerr, the city's Housing Development Administrator, called “the freeze...a massive breach of faith” on the part of the Federal Government.

On February 2nd 1973, Nixon appointed Ohio lawyer James Lynn to the post of HUD Secretary.

Lynn, working with Republicans in Congress, helped to fashion a new Housing and Community Development Act.

The act included $11.9 billion of funding over three years in the form of Community Development Block Grants to local governments, designed to devolve federal control over housing programs back to states and cities.

[Clip: HUD Secretary James Lynn] (source)

Just 12 days after Nixon’s farewell speech following the scandal at Watergate, the new President Gerald Ford signed the 1974 Act into law.

This landmark piece of legislation amended the previous 1937 Act, to create what is still known today as Section 8 housing.

Under Section 8, HUD administers vouchers as open-ended subsidies to private home providers as an alternative to building public housing projects.

By targeting these subsidies at those who provide shelter to extremely low-income households, Section 8 intended to make unaffordable market-rate housing accessible to those otherwise excluded by extortionate rent prices.

In this way, successive US governments slowly phased out public investment on housing construction, replacing it with a system of subsidies and market nudges.

Aaron White: With the stagflation crisis of the mid to late 1970s, and the failure of Keynesian spending plans to reinvigorate the economy, this small government logic worked its way to the forefront of all policy issues in the guise of neoliberal economics.

In 1981, Ronald Reagan was elected on a mandate to slash federal spending across all sectors - with the exception of the military.

[Clip: Ronald Reagan’s 1982 State of the Union] (source)

Making a distinction between what he called “real dependency”, and those defrauding the federal government, Reagan promised to streamline spending - cutting $40 billion from the budget, with $16 billion coming directly from programs that primarily aided the poor.

Alongside Medicaid, food stamps and unemployment relief, the Reagan administration made vast cuts to housing aid.

Following the advice of his newly appointed housing task force - dominated by developers, landlords and bankers - Reagan halved the budget for public housing during his first year in office, cutting Section 8 spending to about $17.5 billion.

In 1970 there were 300,000 more low-cost rental units (6.5 million) than low-income renter households (6.2 million).

By 1985 the number of low-cost units had fallen to 5.6 million, and the number of low-income renter households had grown to 8.9 million.

By the late 1980s 600,000 Americans were sleeping on the street on any given night.

Elected on a mandate to streamline public finances and root out corruption, Reagan’s time in office was marked by a tide of deregulation which resulted in just the opposite.

The 1980s saw pervasive racial discrimination by banks, real-estate agents and landlords, as well as an orgy of commercial property speculation.

In 1986, Reagan’s Tax Reform Act proposed a new supply-side solution to the rent affordability crisis. The Low Income Housing Tax Credit system introduced subsidies to private developers to incentivise the production of housing units for low-income tenants.

In the years after Reagan had left office, it was discovered that his HUD Secretary Samuel Pierce and his associates had been rigging the distribution system for tax credits in favour of Republican benefactors and lobbyists.

Although sixteen convictions were eventually handed out, Secretary Pierce was not charged.

By the end of Reagan’s term in office federal assistance to local governments had been cut by 60 percent.

Freddie Stuart: The next meaningful piece of housing legislation came in 1992, when Congress authorized the Hope VI program.

Hope VI (also known as the Urban Revitalization Demonstration program) sought to replace what it designated as “severely distressed public housing” with “mixed-income” developments through federal grants.

Whilst the program cleared swathes of existing public housing stock, it did not replenish the supply of affordable housing for tenants that lost their residences.

Only a third of displaced renters received voucher assistance for the newly refurbished mixed-income properties.

Instead, HOPE VI has been used as a loophole by private developers to demolish “tens of thousands” of public housing units that were not initially categorised as “severely distressed”.

During the period from 1991 to 1999, affordable units to renters with “very low incomes” fell by 1.3 million, while the units affordable to “extremely low income” renters fell by 940,000 units during this same period.

[Clip: Bill Clinton’s 1996 State of the Union] (source)

In 1996, President Bill Clinton introduced his “one strike and you’re out” rule as part of a “war on crime” initiative - declaring that “anyone committing a violent or drug-related crime in public housing” would face eviction.

Clinton’s HUD enforced this order by grading the housing authorities on their compliance with the new rule. Those with a low score, would be “less likely to receive … federal funds”.

This coupled the systematic disinvestment in public housing seen under previous administrations, with new discriminatory regulations - making it increasingly difficult for low-income, often minority, people to access affordable housing.

In the final year of his second term in office, Clinton signed into law an ultimate legal cap on the number of public housing units that can exist at any one time.

The infamous “Faircloth Amendment”, essentially halted the construction of new public housing, by setting limits on the number of units owned by local associations.

Since the Faircloth Amendment was signed, the US has lost up to 15,000 housing units annually, due to disrepair.

With public housing stocks dwindling, and their occupants being increasingly stigmatized, the private sector entered the new millennium as the only agent developing in America’s increasingly precarious housing market.

Aaron White: In the wake of the 2003 tech crash, private investors turned to mortgages as a secure source of revenue, with ever-increasing property prices as virtually guaranteed collateral.

Mortgage lending and home buying kicked in overdrive, and investors increasingly sought to maximise returns on ever more risky contracts.

In 2007, the housing bubble, created by the lending of impossibly-insured subprime mortgages, blew up - millions of Americans defaulted on their payments.

[Clip: Black Monday] (source)

With America’s largest banks on the brink of collapse, and millions of homeowners facing foreclosure, Congress passed the Emergency Economic Stabilization Act, which was, at that time (prior to Covid), the largest bailout ever instigated by the federal government.

The Troubled Asset Relief Program, TARP, saw the government purchase the assets and equity in a number of failing financial institutions.

[Clip: George W Bush announcing TARP] (source)

TARP infused $250 billion into the banking system to facilitate lending. (The Treasury purchased “bad debt” from banks and mortgage lenders).

With the giant investment bank Bear Stearns on the brink of collapse – the Federal Reserve Bank of New York curated a rescue package, with $29 billion lent to JPMorgan Chase to buy the firm.

Fannie Mae and Freddie Mac, two massive mortgage lenders, were also rescued from insolvency when the US government committed $200 billion to bail them out.

In September 2008, the US government also bailed out AIG (one of the world’s largest insurance companies) to the tune of $180 billion – taking 79.9% equity in the company.

As the federal government spent upwards of $700 billion bailing out the banks and insurance giants most responsible for the crisis, millions of homeowners were left to face eviction or foreclosure.

In 2008, 3 million units were foreclosed. One in every 54 households.

[Clip: Obama announcing HAMP] (source)

Faced with an immediate foreclosure crisis, President Obama instituted the Home Affordable Modification Program in 2009.

Rather than providing support directly to borrowers, HAMP gave federal “money to mortgage servicing companies, to encourage them to modify the loans”.

With aid arbitrarily doled out by banks, public funds were constrained to the whims of private interests. By 2016, less than 1 million people actually received sustained assistance, while over 6 million households had been foreclosed.

With America’s public housing stock also in a state of disrepair from decades of disinvestment, Obama instituted a new rental policy, the “Rental Assistance Demonstration” (RAD), in 2012.

Like previous administrations, Obama’s RAD program outsourced responsibility for affordable lets to the private sector - allowing local authorities to transfer public housing over to private ownership, on the condition that they be subsidised by Section 8 vouchers.

This increased pressure on an already oversaturated and unaffordable private housing market, and new applicants joined Section 8 waiting lists so long that nearly half of them were struck off.

While Wall Street firms were bailed out, those struggling for affordable housing at the bottom, were left to face the full force of the Great Recession.

[Clip: Ben Carson interview 2017] (source)

Following the election of Donald Trump, and his administration’s explicit agenda to hollow out regulatory executive departments, Ben Carson, a former neurosurgeon with no political nor housing policy experience was tasked with heading HUD.

In eroding the administrative state, Carson’s main task has been to cut HUD spending.

Trump’s 2020 federal budget aimed at eliminating the Community Development Block Grant program, and whilst unsuccessful the administration has re-proposed its removal in 2021.

Freddie Stuart: Facing the worst Covid outbreak in the world, the US Congress passed the Coronavirus Aid, Relief, and Economic Security Act in March of this year.

As part of the largest stimulus package in American history, the $2 trillion CARES Act instituted a 120-day moratorium on all evictions in federally-assisted housing.

With over 4 million confirmed coronavirus cases, and more than 150,000 deaths, the expiration of this moratorium at the end of the month foreshadows a tsunami of evictions.

While the 2008 recession displaced 10 million people from their homes, the current downturn could be far worse.

With emergency aid expiring, and Congress stalling over a new relief package, some experts believe that “between 20 million and 28 million” people could face eviction between now and September.

But Trump’s negligence does not represent a departure from decades of federal housing policy.

Whether it be the discriminatory Redlining practices of the New Deal, or the turn towards marketization in the neoliberal era, federal policy has produced a housing system ripe with inequality and precarity.

Since Nixon’s moratorium in 1973, successive administrations, with bipartisan congressional support, have taken an axe to public housing, producing skyrocketing homelessness rates – and for those who do have homes, unaffordable rents.

In the second part of our documentary on US housing, we’ll take a look at the growing movement of people pushing a radical new set of policies in the face of the current eviction crisis; and consider how popular social movements are reshaping the political discourse on housing in the context of the 2020 US elections.

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