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http://www.aeaweb.org/articles.php?doi=10.1257/aer.101.3.366
The New Deal, Race, and Home Ownership in the 1920s and 1930s
contrasting effects and whether the new restrictions hit blacks or whites harder.
Among the programs providing new housing
opportunities, the FHA began providing repayment guarantees to lenders for nonfarm home
repair loans in 1934 and for nonfarm home
mortgages in 1935. As with the HOLC, the
expectation is that the impact given receipt was
to raise home ownership rates for blacks, and the
spillover effect could be positive or negative.
The Public Works Administrations (PWA)
public housing grants cleared slums and built new
and higher quality rental public housing projects
for the poor. To the extent that poor homeowners
were attracted to the new apartments, the homeownership rate would have fallen.
In the farm sector the Federal Land Banks
(FLB) began providing low interest amortized mortgages to farm owner/operators in
1917 and Congress provided a series of crop
and feed loans with ad hoc appropriations in
response to crises. By 1929 the FLBs were
involved in about 19 percent of farm mortgages. The New Deal reorganized the farm
mortgage program and regularized production
and emergency crop and field loans under the
Farm Credit Administration (FCA) and provided aid to poor farmers through the Farm
Safety Administration (FSA). All programs
were said to be targeted at farmers struggling to
obtain private loans. To the extent that low risk
farm borrowers obtained access to the loans,
the programs might have had a perverse effect.
If low risk borrowers crowded high risk borrowers out of federal programs, private lenders
faced a pool of high risk borrowers that would
have led them to constrain credit.
The payments that the Agricultural Adjustment
Administration (AAA) made to farm owners to
take land out of production potentially had mixed
effects on homeownership among the black farm
population. Narrative evidence suggests that farm
owners obtained a disproportionate share of the
payments at the expense of their tenants. When
farm owners took land out of production, their
demand for labor likely fell, leading to fewer
opportunities for share croppers, farm workers,
and lower income tenants. Given that whites in
agriculture were more likely to start the decade
of the 1930s as farm/homeowners while blacks
dominated the ranks of the farm workers, croppers, and tenants, the AAA likely raised white
and reduced black homeownership rates.
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368
MAY 2011
Table 1Marginal Effects and Percentage Change in Probability of Homeownership Associated with the Change
in the Mean Policy Variable between the 1920s and 1930s
Change in probability
Nonfarm households
Farm households
Policy variable
FHA loans insured per 1930
nonfarm homeowner
HOLC Loans 193336 per 1930
nonfarm homeowner
PWA public housing grants
193339 per 1930
nonfarm population
Public works grants 193339
per person in 1930
Relief grants 193339 per
person in 1930
AAA grants 193337 per
farmer in 1930
Federal farm mortgage loans
per farm population in prior
census
Federal farm nonmortgage
loans per farm person in 1930
Federal nonfarm, nonhousing
loans, 193239 per person
in 1930
State mortgage moratorium,
193334
Average state income since
previous census per person
in prior census
Average state crop income
Since last census per farm
person in prior census
Actual change in
homeownership rate
Marginal effects
Nonfarm households
Farm households
White
Black
White
Black
White
1.82*
1.16
0.75
1.08
0.32
1.10
0.07
2.80*
0.37*
0.25
0.05
0.18
0.00
0.27
0.35
0.12
0.24
0.94
1.07
0.00
0.89
0.71*
0.47
0.95*
1.00
0.33
1.10
0.11
0.08
0.11
1.00
0.007
0.005
0.20
0.50
2.10*
1.30
0.002
0.005
1.03*
0.58
0.12*
0.07
0.100*
0.054*
0.099* 0.063a
0.93*
1.56*
0.06
0.04
0.144*
0.237*
0.029
5.0
3.2
1.6
0.7
0.023*
0.004
Black
0.015*
White
Black
0.018*
0.026
0.013
0.002
0.062*a
0.650* 0.443
0.321
1.150*a
0.000
0.027
0.032
0.13
0.010
0.040
0.068*
0.008
0.62*
0.81
0.000
0.088*a
0.039*
0.050
0.86*
1.44
0.375*
0.246
0.546*
0.888
0.473* 0.499a
0.010
0.191
0.641
0.010
0.092
0.021*
0.013
0.018
Notes: Full probit results are reported in the online data appendix (http://www.aeaweb.org/articles.php?doi=10.1257/
aer.101.3.366). Marginal effects are reported in thousands of dollars and are adjusted for inflation using 1967 as the base year.
* Significant at the 10 percent level.
a
Interaction effect is statistically different from zero at the 10 percent level.
The New Deal, Race, and Home Ownership in the 1920s and 1930s
provides context for the changes in probability by showing the actual change in ownership
rates between 1930 and 1940 in the sample. In
most cases statistical tests cannot reject the null
hypothesis of no difference between the black
and white coefficients.1 Typically, the marginal
effects for blacks (based on the combination of
the coefficients for whites and the black interaction term) were less precisely estimated than for
whites.
FHA insurance and PWA public housing provided new housing opportunities. The
spread of FHA mortgage insurance contributed
to increases in nonfarm home ownership that
more than offset the declines contributed by
introductions of public housing. An increase in
FHA insurance of loans from $0 in the 1920s
to roughly $800 (1967$) in loans insured per
nonfarm home owner in 1930 was associated
with a 1.83 percent rise in the probability of
white home ownership and a 1.17 percent
increase in the probability of black home ownership. On the other hand, PWA public housing
and slum clearance appears to have funneled
some home owners into renting in the projects. The rise in PWA public housing spending per nonfarm person from $0 in the 1920s
to $5.60 (1967$) in the 1930s was associated
with a probability of home ownership that was
0.36 percent lower for whites and 0.25 percent
lower for blacks.
State mortgage foreclosure moratoria had
the most success at maintaining homeownership among farm households with little impact
on nonfarm households. In moratoria states,
the probability of white farm households owning their home was 1.36 percent higher and the
probability for black farm households was 0.863
percent higher. The early 1930s reductions in
foreclosures in moratoria states apparently outweighed the impact of tightened credit later.
In contrast, the AAA program was associated with lower white farm home ownership
and higher black farm home ownership. The
rise in AAA spending per capita from $0 in the
1920s to $160 (1967$) per member of the farm
population in the 1930s lowered the probability
of home ownership for white farm h ouseholds
1
The farm interaction coefficient was statistically significant for nonfarm HOLC and public housing programs, and
the nonfarm interaction was statistically significant for the
AAA and nonmortgage farm loans.
369
370
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Fishback, Price V., William C. Horrace, and
Shawn Kantor. 2006. The Impact of New
Fishback, Price V., Alfonso Flores-Lagunes, William C. Horrace, Shawn Kantor, and Jaret
Treber. Forthcoming. The Influence of the
Haines, Michael R., and the Inter-University Consortium for Political and Social Research. 2004.
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Ruggles, Steven, Matthew Sobek, Trent Alexander, Catherine Fitch, Ronald Goeken, Patricia
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