Notes on the New Housing Question Home-Ownership, Credit and Reproduction In The Post-War US Economy
We are in a new Great Depression. Mortgages are in default today, just as they were in the 20s and 30s. Unemployment is rising along with living costs. The economy was saved from stagnation and depression then, through a restructuring of the state and capital facilitated by war, but what will save it now? Ours is a crisis of reproduction in a new sense. All crises are crises of capital accumulation and thereby of the reproduction of the life of the worker; however, because the life of the worker and her reproduction have been increasingly permeated by capital, this crisis has also moved deeper, to become a crisis of the class relation itself. The development of this deeper crisis will be the story of the 21st century.1
The story of the 20th century was characterized by the increasing integration of working class life into the circuit of capital. Some characterize these transformations as the transition from an era of formal subsumption to a new regime of accumulation marked by the real subsumption of labour under capital. While this periodization may be problematic, the deepening integration which it describes is apparent in the home itself — that realm of reproduction whose separation from production produces the conditions for capitalist accumulation.
In the years immediately leading up to the previous Great Depression, a speculative bubble in housing and consumer credit ballooned and then burst, sending shock waves throughout the US banking system. While both forms of credit already played a significant role in US prosperity and profitability, the 30s marked a dramatic shift in credit and mortgage markets. The United States was already by this time a rising economic powerhouse whose productivity — especially in agriculture — was leading to rising real wages and standards of living among the working class, while the introduction of the assembly line and other industrial innovations offered the potential for previously luxury commodities to enter into workers’ consumption. The mere existence of this potential was not sufficient however, for in spite of wage increases (such as Henry Ford’s “5 dollars a day”) in certain sectors, wages generally remained too low and credit too restricted to allow for true mass-consumption of the new products that were emerging from the second industrial revolution. What transformed the situation was the introduction of a new political and economic program which set out to increase employment and credit, in what we now know as the New Deal.
The New Deal is commonly understood to have been a series of state interventions that centred around socially progressive policies, such as the high-profile and often controversial efforts to create jobs, protect workers’ rights, regulate prices, build public infrastructure, and provide social insurance or relief. Against this simplistic picture, historians typically point to a shift within the New Deal from an early “developmental state” phase orientated towards equality and social justice, to a “fiscalist state” characterized by Keynesian pump-priming — the shift coinciding with the “Roosevelt recession” of 1937-38 when New Dealers, desperate to revive domestic markets, embraced both deficit spending and a compensatory fiscal policy.
Yet economists have long told another story, one where earlier federal initiatives, beginning in the Hoover administration and culminating with the Banking Act of 1935, created essential preconditions for post-war growth by revolutionizing the state’s ability to manage the money supply and subsidize credit markets. Most importantly, it was during these years that the state began to regulate and provide capital for private banks and the savings and loan industry, transformed the Federal Reserve into a federal regulatory body, and assumed control of interest rates. By 1935, it had abolished the gold standard, was insuring a host of private lenders against loss, and had expanded its ability to buy and sell Treasury securities as a means to supplement private bank reserves, while greatly expanding its powers to provide emergency loans to institutional lenders.
Thus by the mid-1930s, the federal government had set up the mechanisms to promote a new kind of national economic growth by creating and sustaining a very safe and flexible market for consumer credit. Put simply, the state made it easier — in many cases risk-free — for the private sector to lend and borrow, while simultaneously making the national currency more “elastic” so that it could meet producers’ and consumers’ changing needs.2 The new system gave the state considerable control over both money creation and credit cycles, so it could strategically target chosen industries and consumer markets for subsidy. And, most importantly, the state’s credit had now become the linchpin for both stabilizing the economy and fuelling a debt-driven economic expansion. Taken together, these early interventions fundamentally transformed the operations of American banking and credit markets.
The policy of the fiscal state facilitated a monetary and credit revolution that both enabled and actively promoted a new kind of economic growth based on the mass production and consumption of consumer durables. The end of World War II provided the material for this revolution, both in the form of the requisite consumers returning home from war, and in the key commodity which enabled the boom to take shape in its magnitude — housing.
The Post-War State-Driven Housing Market
American troops returning from battle in 1945 were armed by the US government with a panoply of fiscal provisions which they were encouraged — as good patriots — to deploy in the interests of the national economy. The GI Bill was one of the main conveyors of these benefits, offering veterans up to two years vocational or college education, one year’s unemployment pay — and, importantly — loans to start businesses or buy homes. In practice the bill was notoriously racist, denying black vets access to their promised provisions. Yet the millions of white vets who did gain access to home loans were confronted with a homeland in short supply of available housing for themselves and their families. Rather than responding to this situation through the production of social housing as in Europe, the US state chose instead to subsidize private provision for this basic need. Swiftly, massive construction and infrastructural projects were undertaken, providing a supply of houses to the returning population. Rates of homeownership have since grown steeply and steadily, save a few blips during financial crises (see graph 1).
Graph 1: US Homeownership Rates 1900-2008 (percent)
source: Hoover Instituion “Facts On Policy: Homeownership Rates” (2008)
The selective credit initiatives that were essential for this housing market to function were the Federal Housing Association (FHA) mortgage insurance programs established by the National Housing Act in 1934, and the Veterans Administration (VA) mortgage guarantee programs, established in 1944. By insuring private lenders against loss, and popularizing the use of long-term, amortizing mortgages, the FHA and VA revived and dramatically expanded the markets for home-improvement and for privately owned homes, eventually making these markets the bedrock of the new consumer economy.
Federal officials designed, promoted, staffed, and eventually managed credit agencies by working closely with the building, home finance, and real estate industries. From the outset, the FHA enlisted private organizations to collect data from every metropolitan region on tenancy patterns, property values, building permits, volume of housing sales, employment trends, payrolls, and the financial conditions of local lenders. FHA technical staff organized educational conferences nationwide to introduce the insurance system to businesspeople and municipal officials and to coordinate local lending efforts, while in Washington, FHA administrators consulted with developers and bankers to assess the program’s impact, propose legislative reforms, and lobby congressmen for their passage.
In sum, the state did not simply revive and expand existing housing markets, or awaken “hibernating” capital, but rather was instrumental in creating new supply, new demand, and new wealth. As early as the 1930s James Moffett, the FHA’s first administrator, told business audiences that the agency was creating “a year-round market” for home improvement, and “educating the banks to carry on indefinitely a tremendous amount of lending” activity that would “develop far more business than in the past.” Moffett predicted that there were billions of dollars to be taken out of the mortgage insurance programs, and claimed that no such market had ever been offered to industry.3
The expansion in homeownership stimulated the economy above and beyond the housing and mortgage markets proper. At Fed-controlled interest rates — kept low throughout the expansion — investment could take place in products that accompany growing homeownership, such as cars, washing machines and other expensive appliances. The home became a concentrated node of the creation of new needs for the American working class — a space that needed to be filled with household commodities, that usually necessitated car ownership, and that could be infinitely improved and renovated. Finally, it represented an investment, a debt to be repaid, and ultimately an asset, and thus consistently produced a more compliant working population.
Home-ownership and access to credit became a material force representing and entrenching the divisions and inequalities within the working class. This in turn reconfigured the situation of labour with respect to capital, and the horizon of class struggle. These shifts in the capitalist class relation were intensified as the promise of homeownership and credit were extended to larger and larger sections of the working class, at the same time as profitability declined and debt was increasingly financialized.
integration of the (white) working class into housing and credit markets
The initial distribution of the newly built post-war housing stock among the returning working class was done in a rather ad hoc manner, as families scrambled to find decent shelter, and to return to lives now marked by depression and war. Standards were relatively low, and people of all stations lived side by side. However, because of their access to the GI Bill — and thus property, college placements, welfare, employment, and even for some the capital with which to begin a small business — veterans were placed in a position of substantial advantage. Gradually a new stratification of the working population thus began to take shape, as well as a particular American conception of the “middle class” growing and cohering into its own communities, increasingly divided from the often-racialized lower classes.
Access to mortgages and the subsidies provided by the state made it more reasonable for many white Americans to eventually purchase homes than to rent them. Yet racial minorities were continually frustrated in their attempts to obtain the benefits of homeownership — regardless of how crucially they had participated in the war effort. Explicitly racist regulations around mortgages and lending existed in the FHA’s manual until the late 1940s, but even after their removal both the FHA and the VA actively supported racial covenants on a local basis well into the 1960s, excluding millions of people from the growing market for homeownership. Less than 2% of the homes that were built with help from the $120 billion in housing equity loans from the 40s to the early 60s went to non-whites. Yet that $120 billion represented nearly one-half of all new single-family home purchases between 1947 and 1964. These loans facilitated not only the purchase of more than 12 million mostly suburban housing units, almost exclusively for whites, but also helped secure debt financing for billions of dollars of home-repair work.
Property-ownership allowed some of the working class to act in a pseudo-capitalist manner, managing capital relations in their own lives as owners of futures — the rising value of their commodified existence projected in time through credit. The credit provided by increasing home values in the good times allowed homeowners to take out loans for the purchase of various commodities with which to fill their homes, and cars which carried them between work and their increasingly diffuse and distant suburbs. Although median and mean family incomes doubled between 1946 and 1970, the average debt to income ratio rose to 20% during this period, allowing for an even larger increase in the consumption of the working class.
While prior to World War II the reproduction of the household was supplemented by a variety of subsistence activities, in the post-war period these activities — and the production of household goods — were gradually replaced by the purchase of household commodities found on the market, and externally purchased services were replaced by self-service goods. Many products that had been substantially innovated and marketed in the 20s, but had suffered in sales during the Great Depression, were improving their designs and expanding their consumer markets exponentially by the late 40s. In 1940, 60% of the 25 million wired homes in the US had an electric washing machine produced by one of two or three companies. Instant cake mix, first introduced in the 20s, became a phenomenon in the 40s. The freezer and refrigerator — also developed in the 20s and 30s — became standard household staples in the late 40s and 50s, enabling frozen foods — previously a luxury item — to become commonplace.
Here we see the commodity — in the form of the consumer durable — entering the household in unprecedented ways, and substantially altering the experience of the domestic (or “reproductive”) sphere. The heightened consumption of consumer durables lead to a transformation in the kind of work performed in the domestic sphere, as well as transformations in the relationships between people within the household (the “family”) which become further permeated and mediated by commodities.
De-differentiation of the reproductive and productive spheres
Prior to the rise of specifically capitalist relations of production, there did not exist a “domestic sphere” in isolation from the sphere of production. Production of goods — even those produced for exchange — often occurred in or around the “home” (the place where workers lived). In the seventeenth and eighteenth centuries, in order to avoid the regulations of the guilds, merchants contracted out the production of a range of goods to rural households. This “putting-out system” eventually gave way to the modern factory and, in the course of capitalist accumulation, the modern separation between home and workplace. The home was henceforth the place where the worker rested and consumed a fraction of the product of his labour in the form of wage goods. It was also the place where women’s oppression became further ossified. Expected either to stay at home and do the work of reproduction or to submit themselves to worse pay and worse labour standards than those of male workers, pushed out of the common spaces where they had maintained a degree of autonomy and collective power, women’s access to the means of production was blocked or restricted through the patriarchy of the wage-form. In sum, the home became the exclusive site of the reproduction of labour-power, which for the first time appeared as distinctly “outside” the relations of production and thus also, for many, outside the purview of Marxism.
Yet, over the course of the post-war period in the US, the reproduction of the working class and the reproduction of capital came to fold in on one another, integrated increasingly tightly. More and more working class people became involved in the housing market, which meant that the home became not only the commodity which physically contained all the others, but was also a worker’s main asset — the commodity for which all others were sold, and eventually the one which also purchased all the others.
Thus we see in the post-war period the tendential overturning of separations that were central to the development of capitalism. In the originating moment of capitalist social relations a primary separation occurs in which workers are separated from the means of production. In spatial terms this separation takes the form not only of the strengthening opposition between town and country, and of a zoning of the former into residential and industrial areas, but also the fundamental categorical distinction between domestic, “reproductive” space and the “point of production”, each side implying the other. So, while capitalism initially subordinated the reproduction of labour-power through separating reproduction from production, beginning in the post-war period we find social relations and forms of everyday life increasingly subordinated to the prerogatives of capital’s own reproduction through an equally coercive unification of these spheres within the logic of capital.
In the post-war period, this re-unification or de-differentiation of reproduction and production took the form of a house with a two-car garage, a room for each child, and additional spaces for inserting the proper appliances — a complete commodity package with a higher ticket price, and therefore a higher equity value upon which one could take out loans. It became crucial to those with homes to protect their property, and to preserve or increase its value by all means possible. Homeowners thus had higher stakes in the perpetuation of the capitalist class relation, and often came to believe the bourgeois dictum that value breeds value, and that all commodities can equally be capital. Wage workers however — by definition — do not accumulate capital, but only valorize the capital of others. And at the end of the day, the worker returns home with only his wage, to pay for a future that is increasingly on loan.
This situation of growing working class indebtedness, combined with rising living costs, meant that women and mothers were forced to enter the labour market in new numbers. Although the “family wage” under Fordism implied that the male breadwinner would be capable of supporting both wife and child, as early as the 1950s wives began to increasingly supplement the incomes of their husbands with jobs of their own. But while in the 1950s the re-entry of women into the workforce indicated the desire to maintain the pattern of a rising standard or living, after the 1960s the wife’s or mother’s wage was largely pursued in order to offset the decline in real wages suffered by male workers. Thus was created a reserve army of women workers, temporarily and precariously plugged into capital, supplying it with flexible and expendable labour, maintained in this position by patriarchal structures in both corporate practice and the labour movement.
Women’s entrance into the labour force was a double-boon to capital, because the goods that could replace the various activities internal to the household — and reproductive services external to the home — were the very same consumer durables which were so crucial to growth during this period. Both the need and ability of the household to purchase such expensive commodities grew in direct proportion to the degree in which women left the home. The diminished time allocated to domestic labour fed into growing demands for self-service consumer durables, as well as the — now necessary — additional car. As consumer needs grew absolutely, the ability to pay for them was ensured by the expansion of the labour supplied by households. All in all, this was a self-perpetuating cycle of reproduction: couples returned to the labour market in order to pay for the goods that they had purchased on loan, in order to reproduce themselves for that same labour market.
The family also was substantially transformed in the process. Children went from being productive members of the household to liabilities. The formation of the normalized nuclear family, along with the upkeep of the household itself, became a series of purchases and risks subject to the logic of cost-benefit analyses, while the home became a container for compartmentalized anxieties regarding the future of its own sustainability. The life of the individual took on its own generational temporality determined by capital and projected through credit: the breadth of the thirty year mortgage eveloping childhood, adolescence, college-years, marriage and children; all the stages of life became entirely bound to the reproduction of the wage-relation.
The expansion of the housing market and access to credit invigorated capitalist accumulation in the face of lagging consumer demand, but the growing integration of the sphere of reproduction into that of production, rather than disrupting the oppressions built on this division, reinforced severe separations and inequalities amongst the working class. Racialized and gendered barriers to acquiring housing and credit, alongside the commodification of familial relationships and activities, successfully effected a “general movement of isolation” amidst a “controlled reintegration of workers depending on the needs of production and consumption”.4
This could only be sustainable however, as long as wages increased in proportion to productivity. Until the 1970s, debt-financing for the household thus never went too far beyond remuneration, and average housing values tended to hover around average wages, with needs rising not too far ahead of the ability to fulfill them. People were borrowing somewhat beyond their immediate means, but their rising wages generally compensated for this expansion of debt. So long as capitalist expansion continued to thrive, the projected future of the reproduction of the working class seemed inevitable. After 1975, household debt — already significant — began to spin out of control. Mortgage equity withdrawal began to rise in 1975, booming in the 80s, and growing exponentially in the late 90s, to the extent that it was the only thing that kept the US economy out of recession in 2000 and 2001(see graph 3). General debt-to-income ratios, which had first boomed briefly in the mid-20s before they dropped in the Great Depression, also begin to increase in the late 70s, surpassing the 30s boom in the late 90s and doubling its peak (see graph 2). Around 1989, the homes in the lowest 20 percentile income bracket saw their debt increase above and beyond that of all the other income brackets.
Graph 2: Total US Credit Market Debt as a percent of GDP
source: Ned Davis Research (2007)
Graph 3: US GDP growth and Mortgage Equity Withdrawal
source: Calculated Risk (2006)
Today we are witnessing the breakdown of the ability of the working class to reproduce itself on the level to which it has become accustomed. In the most recent housing-consumer cycle, investment in housing failed to jumpstart production, which experienced its worst performance in the entire post-war period. As investment opportunities for capital dwindled in the productive sector, over-investment in mortgage and debt instruments took place, thereby creating an over-accumulation of housing stock. Now we have a similar predicament to that immediately after the war, except in a perverted form: today we are not in short supply of housing, but of the money and credit to afford it. Money in the form of wages is limited by the constraints of capital accumulation, for which housing and easy money can no longer provide the basis of a renewal.
- Thanks to Alex Wohnsen for help editing these notes.
- Before the New Deal the nation’s money supply was relatively ‘inelastic’ because the Treasury’s specie reserves limited the amount of new money that banks could inject into the economy (either through lending or draft withdrawals). Following abandonment of the gold standard and the creation of a multifaceted federal regulatory, reserve, and insurance system, the money supply became more elastic, enabling private lenders to expand the amount of liquid capital provided to both businesses and consumers.
- Kevin Kruse and Thomas Sugrue, The New Suburban History. (Universiy of Chicago Press, 2006), p. 20.
- Debord, Society of the Spectacle (Rebel Press, 1992), § 172.