An earlier series of Antiplanner posts looked at the recent financial crisis and the role the housing market played in that crisis. This has led the Antiplanner to look deeper into the history of housing and home ownership.

The Census Bureau began tallying homeownership rates in the 1890 census; before that, American homeownership rates can only be guessed at by the fact that the vast majority of American lived in rural areas and most–roughly two-thirds in 1890–American farmers owned their farms and, by extension, their homes. Between 1890 and 1940, census data found that about 40 to 45 percent of Americans owned their own homes. Then there was a sudden increase to 62 percent in 1960, after which it slowly crept up to 65 percent.

The Antiplanner has always assumed that the 40 to 45 percent of households that owned their homes represented middle-class (white-collar) families, and the 20 percent growth after 1940 represented working-class (blue-collar) families. But as Margaret Garb shows in City of American Dreams, reality is a bit more complicated.

In late nineteenth-century cities such as Chicago and Detroit, middle-class families didn’t have much interest in owning their homes, and so the great majority of them rented. In Chicago, you could lease a home for as long as 21 years, which was almost the equivalent of owning it. On the other hand, working-class families–largely immigrants from Germany, Ireland, Italy, and other non-Anglo countries–were strongly motivated to own their homes.

There were a couple of reasons for this difference. For one, middle-class families regarded a home as nothing more than a place to live in; working-class families considered a home as a source of income. They grew vegetables and sold them; they took in borders; they ran small businesses out of their homes. They could also borrow against their homes when they needed extra cash, and frequently did so.

The second reason was that middle-class employees had lots of places to invest their money, starting with interest-earning bank accounts. Banks and other investments were almost completely inaccessible to working-class families–typical banking hours of 10 to 3 meant they weren’t even open when most working-class employees might be able to conduct business. So working-class families consider their homes to be their virtual savings accounts, something to pass along to their children when they retired or died.

In late-nineteenth-century Chicago, a small home might cost $800 to $1,000. People could buy such a house by making a 50 percent down payment and then paying a monthly fee representing the interest on the difference. This is what is known as a non-amortizing or interest-only loan. Most loan terms required a balloon payment of the principle after five or six years; most borrowers took out another loan to cover that. The loans were made by “real-estate entrepreneurs,” sometimes including the people who subdivided the land or built the house.

Two things changed in the early twentieth century to make home ownership the domain of the middle class and push more working-class families into rental. First, for public health reasons, cities installed sewer lines and sooner or later required all homes to be hooked up to those lines. Chicago also required homeowners to pay substantial hook-up fees; other cities such as Boston recognized that serious public health threats would continue until everyone was hooked up and so paid for the sewage systems out of general tax funds. But home owners still had to pay for indoor plumbing and fixtures, which at least doubled the cost of a small home.

The second change was zoning, which had two effects on the housing market. On one hand, by providing security that a neighborhood of single-family homes would not be invaded by industrial, commercial, or high-density residential uses, zoning increased the value of homes to middle-class families, leading more to buy rather than rent. But this increase in value also made housing less affordable for working-class families, especially in cities that explicitly zoned for amenities that made housing more attractive to the middle class but more expensive.

Over the next few weeks, the Antiplanner will review more books about the history of American home ownership. Ultimately, I hope to answer the question of how important home ownership is in our society. Is it important enough that we need to keep government policies like the mortgage-interest deduction? It is important enough that we should avoid government policies such as urban-growth boundaries that make housing less affordable? I have a pretty good idea of what my answers will be, but I am always ready to be surprised as I review the literature on a subject like this.