Defund the City

How the Government Subsidized the Suburbs

Once upon a time in America, the city street was the locus of social life. It was where children would play, neighbors and friends would gather, and vendors would sell their wares. The streets were places for community and commerce, for recreation and integration. They “conveyed an image of urbanity”—what it meant to be cosmopolitan, multi-tongued, sophisticated. The essence of urbanism was the cultural and civic melting pot; the city street was what brought people together. 

When Henry Ford declared that the “city is doomed,” it was because he and other leaders thought that the melting pot was a huge mistake. 

To rectify the error of pluralistic urban society, Americans would have to be liberated from the city and its crowded streets. The fuel for this liberation would not be merely gasoline but massive, sustained subsidies for both highways and housing that would provide financial and physical pathways away from the city. As Kenneth T. Jackson explains in Crabgrass Frontier, the Suburban Lifestyle Dream was as much a creation of government policy as it was of American cultural values. 

Yet both those policies and those values demanded that this new suburbia would be built around the automobile and exclusively the province of the middle-class and white.

While the early suburbs were shaped by the streetcar, those that emerged in the post-World War II era would be molded around the car. The increasing ubiquity of this dazzling new technology presented municipalities with a conundrum. Who should pay for the roads, maintenance, and safety that private automobiles required? Supported by special interest groups, businesses, and city planners, municipalities roundly decided that the public should foot the bill, designating streets as public goods deserving of taxpayer subsidies. 

The street would be given over to the car.

At the same time, city leaders contended that the streetcar should “pay for itself”—while routinely refusing to allow operators to raise fares. Unsurprisingly, with fares fixed at a nickel for decades, the streetcar companies began to run into fiscal problems. By World War I, these once huge money makers suffered from declining profitability that lowered stock prices and limited their ability to raise capital for necessary improvements. When municipalities finally allowed the streetcar companies to raise fares, it was too late. General Motors bought up bankrupt streetcar companies across the country, ripping out tracks and replacing the lines with buses—even in New York City, where the surface streetcars “carried more passengers than the famed subway and elevated trains.” The company was eventually implicated in the destruction of more than one hundred streetcar operations, for which a federal grand jury found it guilty of criminal conspiracy.

Americans “taxed and harassed public transportation, even while subsidizing the automobile like a pampered child,” gleefully destroying their transit systems, once the envy of the world. As a result, they became “abjectly dependent on a vehicle that demanded ever-larger resources in terms of street space, parking facilities, and traffic patrols.” 

With the murder of the streetcar came the death of the streetcar suburb and its ubiquitous rowhouse. Indeed, “between 1946 and 1956, 97% of new single-family homes were detached.” Homes in the new auto-centric suburbia would be designed around the car, and the garage would displace the porch at the front of the house. These were homes built for privacy, not community; for driving away from, not walking around in. 

There would be no sidewalk ballets on auto-centric suburban streets—and there would often be no sidewalks.

The Hoover Administration was not wrong when it proclaimed, in 1933, that “the automobile has become a dominant influence in the life of the individual, and he, in a very real sense, has become dependent on it.” From the mall to the drive-thru restaurant, all of modern life was “redesigned to fit the needs of the motorist rather than the pedestrian.” The city street and its “image of urbanity” would give way to the highway, the symbol of the centerless anti-city. 

The federal government would put automobile dependency into overdrive with the passage of the Interstate Highway Act of 1956. Motivated by a Cold War-era fear that dense cities made for better targets, Uncle Sam pursued a policy of “defense through decentralization,” an intentional effort to depopulate the urban core and disperse the population to low-density suburbs. Cities used federal highway funding to bulldoze interstates through downtowns, destroying historic neighborhoods and longstanding immigrant and black communities. Funded by non-divertible gasoline taxes, “the interstate system helped continue the downward spiral of public transportation and virtually guaranteed that future urban growth would perpetuate a centerless sprawl.” 

The Feds would ensure that the interstates were highways to suburban homeownership.

Created in 1934 to boost the beleaguered construction industry, the Federal Housing Administration (FHA) would stimulate home building by insuring mortgage lenders against losses, providing a massive government backstop to the industry. The FHA reduced downpayment requirements to no more than 10 percent, lengthened loan terms to the now-standard 25-to-30 years, and allowed for full amortization. Consequently, interest rates fell as substantial risk was transferred from lenders to taxpayers, leading to lower monthly payments and foreclosures.

The FHA mortgage backstop was so successful that it often made the cost of ownership in the suburbs less expensive than renting in the city. Unsurprisingly, owner occupancy of homes rose from 44% in 1934 to 63% by 1972, by which point owning a suburban home had become “the normal expectation of the middle class.” As Jackson concludes, “the middle-class suburban family with the new house and the long-term, fixed-rate, FHA-insured mortgage became a symbol, and perhaps a stereotype, of the American way of life.”

The highways to suburban homeownership drained cities of their middle classes—by design.

The FHA favored the construction of single-family homes over multifamily projects such that, in the 1950s, it insured single-family projects at seven times the rate of multifamily projects. It discriminated against older buildings and rental housing. It insisted that “crowded neighborhoods lessen desirability” and that older properties were “lower class.” It endorsed restrictive zoning and prohibited mixed-use dwellings. It idealized “bungalows or colonials on ample lots with driveways and garages”—and then attempted to standardize the ideal by requiring minimums for lot sizes, front- and side-yard setbacks, even house widths. These rules “eliminated whole categories of dwellings” from FHA loan guarantees, including the rowhouses typical of streetcar suburbs, and fostered the proliferation of the wide ranch-style house.

The rules also eliminated whole categories of people from eligibility. 

Relying on an appraisal system created by the Home Owners Loan Corporation (HOLC) that “undervalued neighborhoods that were dense, mixed, or aging” or that had small lots and few setbacks, the FHA would mainline redlining in the suburbs. The HOLC system gave the highest grade—an “A”—to neighborhoods that were new and “homogeneous,” which in practice meant they were populated by white professionals without an “infiltration of Jews.” The highest grade a Jewish neighborhood could ever receive was a “B,” while working class neighborhoods tended to receive “Cs”.

And every black neighborhood received the lowest grade, a “D,” regardless of the age and quality of the housing. 

The FHA endorsed racial covenants that maintained black-white separation, “exhorted segregation[,] and enshrined it as public policy.” The inability of black people to access loans impoverished entire communities, robbing them of the opportunity to build generational wealth, and by consequence “black Americans did not share in the homeownership boom.” 

Instead, the government pursued policies that would keep blacks in the inner city. Bulldozing communities through slum clearance programs and highway projects, cities shunted black people into public housing—“the projects”—which became “the dumping ground for the poor.” The projects “reinforced the image of suburbia as a place of refuge from the social pathologies of the disadvantaged” and the “problems of race, crime, and poverty.” Public funds could have instead been invested in rehabilitating housing in the places the poor already lived, but the government only had shovelfuls of money for the white middle class; for poor nonwhite people, only bulldozers.

In moral and financial terms, the FHA assigned a lower value to the city, to the poor, to immigrants, and especially to African Americans. Jane Jacobs once surmised that redlining maps were “accurate prophecies because they are self-fulfilling prophecies.” The defunding of the cities left them in a state of decay, with the urban core becoming “identified in the popular mind with poor people, crime, minorities, deterioration, older dwellings, and abandoned buildings.” Indeed, if by the late 1970s the Bronx was burning, it was because the FHA had lit the first spark.

The suburbs were initially and intentionally not for everybody.

Of course, the policy of explicit racial exclusion and segregation would end with the Civil Rights Era, and today majorities of all races live in suburbia. Indeed, the suburbs remain the fastest growing parts of America, particularly in the Sunbelt. If the Suburban Lifestyle Dream is a fundamentally human aspiration—one not reserved for “only the best people”—it is one that still enjoys the benefits of continued subsidization at the expense of our cities.

Consider some recent examples. In New York, the governor killed a highly anticipated congestion pricing program that would have funded major capital improvements to the city’s beleaguered subway system—because 284,000 suburban drivers opposed it. Meanwhile, the subway had an average daily ridership of 3.6 million people last year. In Austin, a highly unpopular highway expansion project is being pushed through downtown, destroying homes and businesses where city people live and work, for the benefit of suburban commuters. Municipalities everywhere still use exclusionary zoning practices, including large minimum lot size requirements, to keep lower-income people and more affordable housing options out. Meanwhile, federal tax policy continues to favor homeowners over renters, who are concentrated in cities. 

Donald Trump claims that his opponents have a “sinister plan to abolish the suburbs.” The reality is that, for at least a century, there has been a widely-accepted, voter-approved, massively subsidized program to defund the cities for the sake of the suburbs. Subsidies made and maintain the modern American suburb—and they continue to make American cities sub-urban, less than they might and ought to be.

While our cities have certainly managed to contribute to their own challenges, the project of suburbanization was intended, as Henry Ford declared, to leave the city behind. Nevertheless, despite the damage, disparagement, and defunding suburban boosters have inflicted upon them, the cities have persisted.

---

This concludes (for now) our exploration of the American suburb. Read the rest of the story here: