General Electric head Gerard Swope comes from his meeting with President Roosevelt on housing programs involving private capital. Photo from the Harris and Ewing Collection of the Library of Congress.
“The long-continued lag in building is a drag on all industry and trade. This presents an urgent problem which is the common concern of industry, labor, and government. All business needs the infusion of orders and the diffusion of purchasing power that come when building is thriving. Great numbers of people look directly or indirectly to the construction industry for employment. This industry, to a greater extent than any other, can put idle funds to work and thus speed up the circulation of the nation's money supply. This, in turn, would increase national income, reduce unemployment and as a result contribute towards a balancing of the budget.”
When FDR spoke these words in 1937, the effects of stimulus spending were waning and America was once again facing a fundamental economic problem: a lack of aggregate demand. Although FDR was frequently in conflict with the business community, on the point of housing as the future of economic growth in America, their views overlapped.
General Motors presented Americans with a vision of the world of the future at the 1939-1940 World’s Fair in New York City. Their Futurama ride took Americans through an intricate miniature model of a future town with 500,000 detached single-family homes in a suburban environment connected by a modern interstate highway system with over 50,000 miniature vehicles on the road.
The arrival of war in Europe wrought such dramatic changes on the US economy with the orientation towards weapons production it is easy to forget that the expansion of suburban housing during and after the war was a key driver of economic growth. The housing boom resulted from a combined vision and effort of government and industry. GM produced the cars that made suburbia possible, and FDR provided more mortgages to middle-class Americans through the Federal Housing Administration and greater funding for infrastructure through the WPA. This boom continued after the war with the support for mortgages in the GI Bill and through the prosperous Eisenhower years with the building of the Federal Highway System.
Today the US economy is facing a similar post-stimulus stagnation and once again, the housing market presents a major opportunity for growth. With retiring baby boomers looking to downsize and their offspring looking for their first homes, there is increasing demand for energy-efficient homes in walkable neighborhoods.
Businesses are already recognizing the possibilities in this area, but it will take a coordinated effort of the private sector and government on infrastructure and housing policy that can unlock this aggregate demand and move America away from the energy-inefficient suburbs and towards smart growth.