The economic climate in the postwar period was conducive to helping people realize the dream of homeownership.
During World War II the unemployment rate sharply declined, and people were making a great deal of money working for the war effort. But there were few consumer goods to buy, since most industries were tied up producing wartime products.
This situation created a postwar climate where people had money and they wanted to spend it. Many could afford to buy a home for the first time in their lives. In 1945, 40% of American families owned their own home; by 1960 that number had reached 60%.
Postwar Consumer Spending
By far the biggest boom in consumer spending was in household goods. Five years after the war, Americans spent 33% more money on food and 20% more money on clothing. But spending on household furniture and appliances increased a staggering 240%.
According to Donald Katz, author of Home Fires: An Intimate Portrait of One Middle-Class Family in Postwar America, “As the war marked the 1940s, the new decade would be remembered as a time when millions of Americans found a new house in a new place designed specifically for a family looking to begin anew.”
Government Incentives for Housing
Several government incentives lowered housing costs and made buying a home in the suburbs a realistic possibility for many middle class and even working class Americans.
Federal involvement in housing originated in the days of Franklin Delano Roosevelt. In June 1933 the government created the Home Owners Loan Corporation (HOLC) which introduced the concept of providing long-term mortgages with uniform payments over the life of the debt.
Red Lining Practices
The HOLC started the practice of “red-lining,” the process of categorizing and grading neighborhoods based on factors such as the condition of the neighborhood, the age of the houses, the people who lived in the neighborhood, the proximity to industrial centers and other undesirable areas, and the amount of space surrounding the houses.
After assessing the neighborhoods based on these criteria, the HOLC assigned a letter grade to each area. “A” regions represented the best and most promising neighborhoods, while “D” zones designated the least desirable neighborhoods.
The classification requirements for the various areas were as follows:
- A or First – new, homogeneous
- B or Second – “still desirable,” “reached their peak”
- C or Third – “definitely declining”
- D or Fourth – things taking place in C areas have already happened
Racism and Housing
Once the ratings were given for each area, the HOLC created a “Residential Security Map” for a visual representation of the boundaries for the different categories. As time went on, the A sections were located farther and farther away from the center of the cities, placing a majority of the A areas in suburbia.
In his book Crabgrass Frontier, Kenneth T. Jackson notes that even small numbers of African-Americans often made the entire area “undesirable.”
Getting a Mortgage
These “red-lining” practices influenced private financial institutions who often defined their mortgage patterns by the classification system used in the Residential Security Maps. Therefore it was much easier for one to obtain a mortgage for a home in an A area, or perhaps a B area, but it was virtually impossible in a C or D area.
People were encouraged to develop high quality neighborhoods and avoid other areas.
The Federal Housing Administration and the GI Bill
The Federal Housing Administration (FHA) eventually adopted the HOLC appraisal methods and would only insure mortgages under the same guidelines. The Servicemen’s Readjustment Act of 1944, commonly known as the G.I. Bill, created a Veteran’s Administration (VA) program to help the 16 million soldiers and sailors of World War II purchase a home after the war. The VA followed the policies of the FHA as well.
The message to aspiring young families across the nation was clear: go to suburbia and build your dream.
- Chafe, William H. The Unfinished Journey: America Since World War II
- Coontz, Stephanie. The Way We Never Were: American Families and the Nostalgia Trap
- Katz, Donald. Home Fires: An Intimate Portrait of One Middle-Class Family in Postwar America
- Jackson, Kenneth T. Crabgrass Frontier: The Suburbanization of the United States