The Failure of Flexible Housing Subsidies and the Underdevelopment of the American Welfare State

Jessica Schirmer, University of California, Berkeley

In the 1960s and 1970s, policymakers and the private housing industry sought to expand federal housing supports to very low-income and moderate-income groups, who were left out of the ‘two-tiered’ system of public housing and federal supports for mortgages, by experimenting with new tools for private subsidized housing that combined direct subsidy and credit support. Both President Johnson and Nixon proposed versions of a path-breaking flexible housing subsidy as their signature housing policy initiatives. By the end of this period, however, policymakers reverted to providing housing assistance as a form of locally administered poor relief, rather than a federal safety net. Why did two ideologically divergent administrations promote a federal housing safety net during this period? Why did they ultimately fail? This paper examines why policymakers promoted flexible housing subsidies, why they failed, and what lessons housing policy struggles in the 1960s and 1970s hold for to our understanding of the underdevelopment of the American welfare state, in general, and the weak federal response to growing housing needs in recent decades, in particular. I argue that policymakers and homebuilders promoted flexible subsidies in response to growing concerns about ‘balancing’ urban growth; perceived problems with existing housing subsidy mechanisms; and periodic credit crises wreaking havoc on the vast residential construction industry. The political failure of these policies can be traced to divisions within the private housing industry and moral quandaries associated with principles of equal treatment in government assistance. Significantly, the failure of proposals for flexible subsidies was a lost opportunity to replace a dual concept of housing needs and policy responses, with gradations of need and subsidy. The latter held out greater possibilities for broad-based political support and equitable distribution of federal housing supports.

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 Presented in Session 238. Policy and Society in the United States