Although many countries have more renters than homeowners, owning a home is a cornerstone of the American dream. The Homestead Act of 1862, the introduction of the 30-year mortgage, and the GI Bill are all among the milestones that brought home ownership within the reach of millions of Americans. Today, more than 63.5 percent of all Americans own their homes, up from 44 percent in 1940. Here are some of the important landmarks in this history:
Milestones in Homeownership
50,000 Years Ago: The First Homeowners Arrive
Native Americans were the original homeowners in what’s now the United States, making their way from Eurasia to this continent from 50,000 to 10,000 years ago. When European ships brought the first colonists, Native American communal property rights were administered by tribal leaders and rested on the belief that those who work the land are entitled to the fruits of their labor. Around the time of the American Revolution, when Native Americans realized that land deeds with settlers were not agreements to hunt on or work the land together, they began declining to sell it. Tragically, their ancestral lands were then taken by force.
1785: Jefferson Advocates for Small Landholders
Our forefathers disagreed on how to use and distribute the seemingly abundant land in the New World. Thomas Jefferson believed that property was the equal right of every citizen. He wrote James Madison that as few Americans as possible should be “without a little portion of land …The small landholders are the most precious part of a state.” The Land Ordinance of 1785 reflected his democratic vision, establishing a system for settlers to purchase titles to farmland in the West. In practice, land speculators soon got involved.
1862: The Homestead Act
Signed by Abraham Lincoln, the Homestead Act gave each American head-of-household the right to claim a homestead of 160 acres, if they were willing to build a home on it and farm. Much of the land was in the semi-arid Great Plains, which was not always conducive to farming. Still, more than 1.6 million Homestead Act claims were filed and more than 270 million acres, or 10 percent of U.S. public lands, passed onto individuals.
Commemorative Homestead Act stamp, 1962
1917: The “Own Your Own Home” Campaign
The public relations campaign “Own Your Own Home” was launched by the National Association of Real Estate Boards. It was taken over by the U.S. Department of Labor in 1917, becoming the first federal program designed to encourage home ownership.
1929: The Great Depression Begins
During the Great Depression (1929–1939), 13 to 15 million Americans—including 2 million construction workers—lost their jobs, and more than half the banks in the country failed. Before 1933, people lost their life savings when their bank collapsed, because there was no federal deposit insurance. The result was a housing crisis of unprecedented proportions. Up to 25 percent of the nation’s home mortgage loans were in default and the number of mortgages issued annually nationwide dropped from 5,778 in 1928 to 864 in 1933. By 1940, home ownership had dropped to its lowest level in the century—44 percent.
1933: FDR’s New Deal Takes on Foreclosure Epidemic
Mortgage relief was just one of the important reforms from President Franklin Delano Roosevelt’s New Deal, which in 1933 created nationwide work programs in addition to federally insuring deposits and creating the Home Owners’ Loan Corporation (HOLC) to help struggling homeowners facing foreclosure. HOLC helped a million homeowners refinance to long-term, fixed-rate mortgages (usually a 15-year term), helping ensure that that about 800,000 households kept their homes.
However, the HOLC helped create other social problems. In 1935, HOLC drew up “residential security maps” that outlined minority neighborhoods in red and often deemed those areas “too risky” for lending, helping usher in a practice of loan discrimination against minorities known as redlining, according to a 2009 report by the Federal Reserve Bank of San Francisco.
1933: Help for Farmers, Home Loss for Sharecroppers
Farmers were in crisis during the Depression, and the Roosevelt Administration passed the Farm Credit Act to help them hold onto their farms. The Agricultural Adjustment Act (AAA) paid farmers subsidies to let some of their land lie fallow, thus pushing up the price for crops. Farmers were supposed to share the subsidies with their tenant farmers, but many didn’t. The unintended consequence? Many tenant farmers and sharecroppers were evicted, thus exacerbating the housing crisis.
1934: Before the FHA, a Nation of Renters
The Federal Housing Administration (FHA) was a New Deal program created in 1934, a time when the country was largely a nation of renters. To get a mortgage before the creation of the FHA and the HOLC, Americans had to come up with a 50 percent down payment and then had only five to 10 years to pay off the house, with a hefty balloon payment at the end. The FHA offered federally backed insurance for home mortgages, allowing lenders to offer better deals. Mortgages went from short-term loans covering only about 50 percent of a house’s cost to fully amortized 30-year loans covering 80 percent of the house cost, which revolutionized home buying. Since its creation in 1934, the FHA has insured more than 34 million properties, and there are currently 4.8 million FHA loans for single family homes in its portfolio.
1938: Fannie Mae Aids Cash-Starved Banks
As borrowers continued to default on mortgages, banks were starving for lack of cash. FDR and Congress created Fannie Mae (the Federal National Mortgage Association) to buy mortgages from lenders, freeing up cash to fund more home loans. This cleared the road for millions of low- and middle-income borrowers who might have been considered too risky for a home loan.
1944: The GI Bill Opens Homebuying to Veterans
U.S. soldiers who had fought against Hitler were returning home. Hoping to bypass the mistakes of World War I, when veterans received only $60 and a ticket home, Congress passed the GI Bill of Rights, which paved the way for World War II veterans to go to college and buy a home. Known more formally as the Servicemen’s Readjustment Act, the GI Bill offered a home loan guaranty to veterans. Between 1944 and 1952, World War II veterans received almost 2.4 million low-cost home loans backed by the Veterans Administration, and VA loans are still an important benefit for veterans, active-duty service members and their spouses today.
1961: JFK Overturns Segregated Housing Policies
President John F. Kennedy issued an executive order prohibiting segregation in federally owned or funded properties.
1965: The Creation of HUD
Kennedy was assassinated in November 1963. His successor, President Lyndon B. Johnson, created the Department of Housing and Urban Development (HUD) as part of his War on Poverty program.
1968: President Johnson Signs Bill to Ban Discrimination in Housing
Just a few days after the assassination of civil rights leader Martin Luther King Jr., Congress passed the Fair Housing Act, which banned discrimination in housing on the basis of race, religion, origin and gender.
1970: The Birth of Freddie Mac
The Federal Home Loan Mortgage Corporation (Freddie Mac) was created to expand the secondary market for mortgage and to increase the supply of money for mortgage lending.
2004 to 2006: The Subprime Mortgage Crisis
In the early 2000s, mortgage interest rates were low and borrowing was easy, with more than one in five borrowers lured into subprime adjustable rate mortgages that they would have difficulty repaying. With the high demand, housing prices soared. When the housing and credit bubble burst in 2007, it led to a national banking emergency and ushered in a long-lasting recession.
2007 to 2010: Massive Foreclosures During the Great Recession
After the subprime market collapse, home prices fell and foreclosures abounded. Battered by other economic pressures, the United States entered the Great Recession. Approximately 3 million homes were lost to foreclosure, and housing prices fell more than 30 percent.
2008: One Agency to Rule Them All
In the fallout from the subprime mortgage crisis, federal regulators took over Fannie Mae and Freddie Mac. The Federal Housing Finance Agency was founded to oversee Fannie Mae, Freddie Mac and the 11 Federal Home Loan Banks.
2009: Housing Stimulus Programs
The Obama Administration responded to the recession and housing crisis with a multi-billion-dollar stimulus program, including an initiative to help homeowners avoid foreclosure through refinancing and reduced monthly payments.
Home prices have recovered most of the ground lost during the Great Recession’s housing bust, according to the Pew Research Center. Home ownership rates are down sharply among blacks and young adults, although most Americans still dream of owning their own home: A Pew survey indicates 72 percent of renters would like to buy a home in the future. However, the Pew survey also found most Americans consider housing prices out of reach for most millennials—something the government may have to tackle in the future.
Michele DiGirolamo is a former longtime reporter for United Press International who covers mortgages for MoneyGeek.com.