Federal Housing Administration Still Tips the Scales Toward Sprawl

Federal subsidies for housing flow disproportionately to single-family homes. Image: Smart Growth America
The vast majority of federal subsidies for housing flow to single-family homes. Image: Smart Growth America

There’s a notion that remains very pervasive in certain quarters — *cough* Joel Kotkin *cough* — that the reason so many American cities are sprawling and suburban is the natural result of market forces. Essentially, Americans love driving and big yards and so that’s what we get.

But it’s a mistake to characterize American housing markets as anywhere close to perfectly market based. The federal government subsidizes housing to the tune of $450 billion a year. The vast majority of that money is reserved for sprawling, suburban housing.

Mary Newsom at Network blog The Naked City carried this update from Governing Magazine. Even after the housing market collapse, the Federal Housing Administration is still promoting sprawl at the expense of, well, anything else. Here’s how Governing’s Scott Beyer sums up the situation:

Since its 1934 inception, the FHA [Federal Housing Administration] has insured mortgages for more than 34 million properties, facilitating mass homeownership over several generations. But only 47,205 of these plans have been for multifamily projects. This is due to longtime provisions that make it harder for condos to get FHA certification. As late as 2012, 90 percent of a condo’s units had to be owner-occupied and only 25 percent of its space could be for businesses.

Newsom notes that “the FHA has eased that rule a bit in the past two years” — after persistent prodding, FHA relaxed restrictions against mixed-use buildings. The rules that remain, however, are still wildly unbalanced, Beyer says:

These policies mean that, although practically every single-family home can be FHA-insured, only 10 percent of condo projects nationwide qualify. This makes condos less affordable, since prospective buyers seeking private financing without FHA backing face higher borrowing costs and typically must make 20 percent down payments rather than the 3.5 percent typically required of FHA-backed mortgages.

There’s obviously a long way to go.

Elsewhere on the Network today: Bike Portland reports that a recent Oregonian column made light of “running over cyclists” — always good for a laugh! Urban Review STL shares stories of gas stations that have been converted into restaurants. And now that Arlington’s Columbia Pike is not getting a streetcar, Greater Greater Washington wonders what’s next.

ALSO ON STREETSBLOG

The Granddaddy of Sprawl Subsidies, Illustrated

|
Despite the ruinous housing crisis just a few years ago, the federal government still keeps the suburban sprawl machine humming. About 85 percent of federal subsidies for housing flow to single family homes, according to a recent report from Smart Growth America, though only about 65 percent of Americans are homeowners and the majority of […]

Two Graphs That Illustrate America’s Dysfunctional Housing Market

|
Jed Kolko, chief economist at real estate information giant Trulia, recently shared these two graphs that give us an interesting glimpse into what’s happening in the American housing market. This first graph shows that housing development is growing fastest in the suburbs. To be precise, the most sprawling, suburban of suburbs. But that’s only part […]

Has the Government Been Bailing Out Sprawl?

|
One of the themes of the financial and economic crisis we’ve faced over the past two years is that government, pressed into responding to serious economic pain, has often found itself supporting the activities that got us into this mess in the first place. Sign of the times? Side-by-side foreclosures in Massachusetts. (Photo: Yovani via […]

The Suburbs Aren’t Dying — They’re Growing Differently

|
Cross-posted from the Frontier Group. Sommer Mathis said much of what needed to be said about the recent round of “the suburbs are back, baby!” stories on housing trends, including this analysis from Jed Kolko, housing economist at Trulia.com, and the related commentary from Matt Yglesias at Vox. Mathis argues that the concept of a battle for supremacy between cities and […]

Can Phoenix Reinvent Itself as a Transit City?

|
Perhaps no other city in the country has the reputation for sprawl that Phoenix does, and it is well deserved. This is a city built around the car — until 2008, sprawling suburban housing in Maricopa County was the driving force of the regional economy. Phoenix got a rude awakening in 2008, when the housing […]