The US government and the Federal Reserve have interfered in the US housing market off and on for decades. In the New England Journal of Public Policy piece titled, “Shelter the American Way: Federal Urban Housing Policy, 1900-1980”, there is evidence galore that such intervention has played a part in every financial crisis since the Great Depression. The emergence of federal housing policy in the 1920’s is no exception. What are we specifically talking about? Federally authorized zoning laws. Federally authorized zoning laws led to a surge in real estate speculation that fueled the Roaring Twenties. This speculation was driven by investors who bought land in anticipation of it being zoned for one purpose or another; in other words, zoning created land-use categories. It limited supply of land for certain land-use, which meant demand sometimes had to chase supply. When demand chases supply, prices rise, and when prices rise, speculators only interested in a profit, start to speculate. Unfortunately, rampant speculation, whether it be in property or stocks, sometimes drives prices to unsupportable levels. It is no surprise in hindsight, that the Roaring 20’s ended in the stock market crash of 1929 and the Great Depression.
The Birth of Zoning Laws
The early 1900’s saw the emergence of zoning laws in the US. At that time, they had not yet been validated by any branch of the federal government. Zonings laws had been in use in Germany for decades. They were first experimented with in the US in 1885, in San Francisco. They were tried as a way of “zoning out” Chinese laundromats from the downtown district. In 1886, they were struck down as discriminatory in a Supreme Court ruling ruling known as Yick Wo v. Hopkins. The case proved monumental, not because it set a precedent against using laws to zone out people; on the contrary, by hearing the case, the federal government validated zoning. Justice Matthews, who delivered the court’s opinion in Yick Wo v. Hopkins, gave no opinion on whether zoning laws were legal or not. He simply said that,
“the administration of the statute in question was discriminatory and that there was therefore no need to even consider whether the ordinance itself was lawful..”
It proved that the Supreme Court was not interested in making a judgement on zoning; they were only interested in making sure laws were applied constitutionally. The ruling meant that zoning laws had to be smartly written, and most of all, pre-emptive. It would be much easier to protect a certain area, than to purge it. The era of zoning had only just begun.
In 1916, New York City introduced the first zoning laws that actually stuck. In New York, according to the New England Journal of Public Policy, they were,
“…adopted following several years of study, when fashionable Fifth Avenue merchants wanted to restrict the spread of garment factories near their stores.”
Garment factories near expensive shops, theaters, and hotels, were a real issue for the bourgeois. Garment factories employed poor, immigrant labor. As this piece from skyscrapers.org states,
“Unstable property values also were a problem uptown, where retailers on Fifth Avenue were fighting the proliferation of manufacturing lofts on side streets. In the early 1900s, many of the same merchants had abandoned the Ladies’ Mile shopping district south of Twenty-third Street after that area had been flooded with lofts used by the garment industry. The immigrant workers who spilled out onto the avenue during lunch hour and other breaks discomforted the upper-class shoppers and the area lost its chic.“
The above is essentially a description of what “snob-zoning” is based on, something that still goes on to this very day in cities across the country, including NYC. Even when the rich merchants moved their shops further north, the loft buildings where garment factories labored seemed to follow, according to the below excerpt from skyscrapers.org:
“Store owners relocated farther north among the mansions and high-priced hotels in the area between Thirty-fourth and Fifty-ninth streets—but again, new loft buildings began to cluster near their markets. Property values in the old and largely vacant district south of Twenty-third Street declined sharply, and many people feared that lofts would invade the new area. The Real Estate Record and Guide warned: “People living there would have to move out, abandoning their homes; the principal retail section would be ruined; the hotels would lose their guests, and New York City as a whole would receive a death blow.”
On March 5th, 1916, an advertisement ran in the New York Times, headlined, “Shall We Save New York?”. It was further sub-titled, “A Vital Question To Everyone Who Has Pride In This Great City”. It seemed that among the wealthy merchants and property owners, the issue of the garment factories and their immigrant laborers, had reached a breaking point. Merchants even threatened boycotts against suppliers that ran factories in the city. Finally, on July 26, 1916, the first zoning laws in NYC were passed. The merchants and wealthy home owners had won the protection for their properties, and it was written into law.
New York City zoning laws were the first break from laissez-faire when it came to real estate practice in major US cities. Since the laws were legislated by elected city council officials, the affluent and business owners had the most sway over zoning policy. Zoning laws were passed to dictate what land could be used for what purpose (residential, industrial, commercial, agricultural), but they were also passed often to preserve the value of real estate owned by wealthy, influential individuals. As this short read by Amanda Erickson of CityLab states,
“The story of American zoning is really the story of how Americans learned to legislate their NIMBY impulses.”
NIMBY stands for “not in my backyard”. Logically, one would think zoning laws would be passed in coordination with urban planning and development. Logic would tell us that urban and city planners should have considerable sway over where residential, commercial, industrial, and agriculture zones are located. The way land is ZONED, and consequently used, has everything to do with infrastructure planning and development, i.e. sewer, power, roads, rail stations, etc… Whereas the impetus for urban planning is building functional and efficient cities, the impetus for zoning laws,
“…was [destined] to become a tool of politicians, lawyers, and land developers, not comprehensive planners.”
Similar to Gerrymandering
Zoning and gerrymandering have striking similarities. Gerrymandering is zoning for votes to create enclaves of common political ideology. Both zoning and gerrymandering are legislated, meaning elected officials play a critical, if not entire, role in the process. To gerrymander, as defined by Google is to,
“…manipulate the boundaries of (an electoral constituency) so as to favor one party or class.”
It is a form of zoning, so as to exclude a certain “constituent” and include another. A look at the definition of “constituent”; as a noun it is (according to Google Dictionary),
“a component part of something.”
The constituency of a city, county, district, ward, etc… is not just its citizens, but also everything else that make it up. The schools, businesses, homes, apartment buildings, factories, warehouses, parks, all are components of that something. Zoning laws decide where each of those things can go within its boundaries. Furthermore, they decide if they can exist at all!
Zoning and Architecture
Zoning laws even decided how buildings would look. The most fascinating evidence of this is in New York City. According to CityLab, and according to Columbia University’s Andrew Dolkart,
“…the law worked by regulating building shape rather than height. He [Andrew Dolkart] writes: The idea was that that light and air would reach the sidewalk; light and air were a major issue. So the law stated that you could build right up to the lot line on your building and you could rise up to a certain height and then once you reached that height, you had to step back, you had to set the bulk of the building back.”
Zoning and Segregation
By influencing architecture design, zoning also influenced science and engineering. With that precedence, it’s no wonder that zoning laws inserted themselves into the social engineering of American society, specifically as they applied to race. Ultimately, if zoning laws can determine where and how real estate is built, a landslide of follow-on effects can occur. For example, if low-income apartment housing can only be built in a certain ward or city district, or not built at all in a certain town or village, it is possible to exclude an entire cross-section of the population. It becomes a tool for social engineering, potentially used for segregation of population along socio-economic lines. In the decades following the Great Migration, African Americans found that the federal government was actively legislating and supporting segregation. Via housing initiatives such as the Home Loan Corporation, the New Deal, and the Federal Housing Authority, the segregation and outright denial of home ownership to African Americans was sponsored. As ProPublic notes,
“Around this time the federal government began promoting the racial division of Northern cities, primarily through New Deal loan programs. The Home Owners’ Loan Corporation, created in 1933, introduced the practice of redlining, marking in red ink swaths of cities in which it would not lend. It rated white neighborhoods as the least risky and black neighborhoods as the most. It would not lend to a black person seeking to buy in a white neighborhood, or vice versa. When the Federal Housing Administration opened its doors a year later, it adopted the same practices. As a result, 98 percent of the loans the FHA insured between 1934 and 1962 went to white borrowers. The policies encouraged white flight as even neighborhoods with small numbers of African Americans were rated as “hazardous.” White residents who didn’t mind black neighbors found their home values decreasing as the government refused to insure mortgages for new buyers. A 1938 manual for the FHA encouraged officials to avoid mixing “inharmonious racial or nationality groups” and “the occupancy of properties except by the race for which they are intended.” With the end of World War II, a grateful nation made available vast amounts of credit to returning soldiers, who could borrow money through the GI Bill to buy their dream homes in the suburbs. But banks often refused to approve loans for black soldiers attempting to use the GI Bill to buy homes. The Veterans Administration and the FHA officially supported racial covenants banning African Americans in new suburban developments until 1950, refusing to underwrite loans that would bring “incompatible” racial groups into newly created white areas.”
The underlying reasoning for all this was racism of course, but the effect it had was to give African Americans very few options for housing. And with that, came the birth and maturation of public housing, a story Ben Austen tells so wonderfully in his book, High Risers. With public housing, segregation in America’s cities was further solidified.