A Decent Home: Housing Policy in Perspective

Government policies directed specifically toward urban areas are certainly not a new idea. Indeed, two thousand years ago Caesar Augustus decreed a set of physical restrictions on Roman buildings and public infrastructure that affected the form and development of the city and whose effects are visible even today. Sets of policies intended to improve living conditions in the big cities were widely adopted in Europe during the latter half of the nineteenth century; the British Public Health Acts and the Salisbury Acts are but two well-known examples.

Urban affairs were, of course, a concern of the states and the cities they sanctioned since the beginning of this Republic. It was only after World War II and the end of the Great Depression, however, that direct urban policies were articulated by the federal government. The Housing Act of 1949 espoused the goal of "a decent home and a suitable living environment" for all Americans and provided the rationale for an ambitious program of urban renewal and slum clearance begun in the 1950s. The factors that ultimately led to the passage of the Housing Act included a severe nationwide housing shortage that continued long after the wartime victory. This shortage reflected the cumulative effects of the Great Depression, the explicit limitations on residential construction during the war, the postwar shortages of construction material, and the massive internal migration to the cities that had taken place during the war.

This paper reviews and analyzes American housing and urban development policy emanating from the landmark housing act enacted a half century ago. Current U.S. policies and programs are directly descended from the 1949 Housing Act. From a broader viewpoint, housing and urban development is the most basic and durable aspect of national urban policy, and provides the spatial context within which other policies operate. The intra-urban distribution of population, the concentration of the poor, the distribution of work sites, housing quality, and tax bases are all directly affected by the substantial resources devoted to housing and urban development policy. These spatial relationships in turn have a profound effect on the economic health of the urban economy.

Other policies that entail substantial central government expenditures may also have important consequences for urban areas. For example, the federal tax code in its treatment of owner-occupied housing may substantially influence urban spatial structure, and the recent changes in welfare entitlements will surely affect the incomes and opportunities of the poor who live in central cities. ¹ Yet neither of these policies is designed to pay attention to its distinctly metropolitan or urban impacts. Metropolitan areas are large, so most national policies do shape urban life in some way. Housing and urban development policies are directly intended to affect the residents of urban areas--and they do so in significant ways.

For the most part, this paper is an exercise in positive economics, indicating the course of urban policies, their economic rationale, and their economic consequences. Nevertheless, the paper also examines some normative issues and offers some evaluations.

Federal Housing Programs for Low-Income Households

The history of housing programs for low-income Americans in the United States can be divided into four phases. During the first phase, from the founding of the Republic to 1937, the national government provided no support at all for low-income housing. Many crucial policy decisions about housing were taken under the new income tax law in 1913 and with the establishment of the Federal Housing Administration (FHA) in 1934. By increasing the demand for owner-occupied housing, both policies had important consequences for urban form. Neither these nor other national housing policies, however, were directed specifically toward those with low incomes. During the second phase, from 1937 to 1962, a single federal housing program subsidized poor households: low-rent public housing owned and...