Skip to main content

Housing the American Dream: An Analysis of the Housing Shortage in the United State

John E. Rent
Virginia High School
Virginia, Minnesota

During the early 1900s, the Slavic states of the Balkan Peninsula were suffering from a severe housing and land shortage. What little land was available was either too mountainous for settlement or so expensive it could only be purchased by the aristocracy. With little hope of earning a livelihood or attaining a home, my great grandfather, Anton Rent, left his native Slovenia and immigrated to the United States. Moving to Minnesota, he took full advantage of the Homestead Act of 1860, which offered free land and a chance for a prosperous future to anyone willing to work hard for it—the "American Dream." With $135 and an unbreakable spirit, Anton built a hand-hewed log home complete with glass windows, satisfied the homestead requirements and thrived there for decades.

Compared to Slovenia, the United States really was a housing heaven. With carefully implemented government assistance, America's housing supply survived the dark years of the Great Depression, grew robustly throughout the World War II era, and triumphed into the modem age. In 1970, there were 6.5 million low-cost rental units in the United States. That was roughly 300,000 greater than the number of low-income renters (Center on Budget and Policy Priorities). As late as 1982, the President's Commission on Housing stated, "Americans today are the best-housed people in history" (Davis 11).

In the late 1990s, the NASDAQ market ballooned with ripe Internet stocks and the Dow Jones Industrial Average shattered the 10,000 mark. Simultaneously, the number of low-income renters in America increased almost 70 percent from 1970, while the number of affordable housing units actually fell (Center on Budget and Policy Priorities). Who could have guessed that while America was experiencing an economic upswing unprecedented in history, the nation would plunge into a housing crisis unlike anything it had seen in a century?

Today, according to the Coalition for the Homeless, there may be as many as 3 million homeless nationally, due primarily to a shortage of affordable housing (Davis 15). Thus, when Americans are confronted with the question, "Is the United States experiencing a housing shortage?" they must answer with a definite "yes." Ironically, America's housing shortage has been caused, in large part, by the prosperity of our nation's overall economy. Fortunately, the crisis can be stemmed with the correct balance of government intervention and free-market capitalism.

British poet Barnabe Googe first coined the phrase, "out of sight, out of mind," in the late 16th century but, it is still very relevant when applied to the American public's view of its housing shortage. Consider the words of Andrew Cuomo, the former Cabinet secretary of the Department of Housing and Urban Development: "Most of the emphasis today is on the feel-good. People don't want to focus on [the homeless], but there is always the sense that the problem is apparently getting better" (Ratnesar 39). Unfortunately, the more America ignores its inadequate housing situation, the worse the problem actually becomes. According to the U.S. Conference of Mayors, demand for low-income housing has increased every year since 1985, including a monumental 11 percent jump in the last years of the 1990s (Ratnesar 39). Exactly how serious is the current housing shortage? A recent survey conducted by the National Low-Income Housing Coalition concluded that most states needed two, three or even four times as many low-income housing units than were available (Amidei 101). The question remains: What has caused the housing shortage? What has led America from housing surpluses in the 1970s to the severe shortage today?

The answer lies in our own economic prosperity. During the relatively placid economic years of the '50s, '60s and '70s, the housing economy of the United States was able to meet the needs of low-income renters through a process called filtering. Filtering occurs when prospering individuals or families purchase new housing, larger and more expensive than their previous homes. The housing left behind then becomes available for other families to move up from their less desirable housing. That housing in turn is again made available for market at a rate that would likely be affordable to very low-income families. In theory, the principle of filtering would provide a steady stream of low-income housing to meet the needs of America (Davis 26). However, as the American economy began its meteoric rise in the '80s, housing costs around the nation, including the cost of low-income housing, began to skyrocket. In some cases, filtering even began to function in reverse. In a process known as gentrification, old, urban, and often low-income housing is purchased by affluent companies and city dwellers that remodel and modernize the housing. As a result, these housing units become far from affordable. Take, for example, the plight of the housing market in the technology (and money) rich Silicon Valley in California. In urban areas, especially San Francisco and Los Angeles, when the financially flush Internet companies moved in throughout the '90s, renters had to move out. During 2000, the average rent in the Silicon Valley went up 400 percent, and the average price of a home grew to $465,400, up nearly 30 percent (Taylor 29). Angry tenants say they have been "e-victed."

With such an overwhelming housing crisis, Americans must ask themselves what role their government should play in the solution. Of course, the government has a wide range of options. It could adopt a complete laissez-faire policy, believing that eventually the supply and demand curves will settle to an affordable equilibrium price. The other end of the spectrum could involve complete government intervention, with rent ceilings, price controls and a massive bureaucracy to back it up.

A governmental "hands-off policy" would force America's low-income families into an untenable position, waiting for equilibrium to establish itself in an often-unpredictable free market economy. Conversely, too much government intervention has proved to be counterproductive and ultimately destructive. Each year millions of dollars from HUD's budget are spent on "urban-renewal," a process of metropolitan beautification that supposedly increases the appeal of large cities. Although urban renewal is an admirable goal, most of the time the government's idea of renewal involves the complete demolition of thousands of low-income housing units, which are termed "eyesores." Replacement housing, most of it too pricey for the poor, is inadequate. Much of the "renewed" land is used to expand colleges, hospitals and other "beautiful" institutions, leaving thousands of displaced families in the wake of government-sponsored gentrification (Whitman 28).

According to Nancy Merrill, office manager from HUD's Minnesota Housing Authority, government money must be funneled more directly to existing public housing and voucher programs. Merrill states that public housing consists of government-owned apartments with rents geared to be less than 30 percent of a tenant's income. Under HUD's Section 8 regulations, low-income families can also rent privately owned apartments and receive government subsidies for much of the rent (Merrill interview). A balance of targeted government intervention and economic stimulus would reestablish the natural filtering process in America's housing market. If America's homeless and disadvantaged can be made more upwardly mobile by addressing the causes of their economic condition, and if adequate low-income housing can be made available, the housing crisis can be resolved. The "American Dream" will once more be attainable for those willing to work for it.


Amidei, Nancy. "A Needless Shortage." Commonweal 28 Feb 1986: 101.

Center on Budget and Policy Priorities. "In Search of Shelter: The Growing Shortage of Affordable Rental Housing." (no date).

Davis, Bertha. America's Housing Crisis. New York: Franklin Watts, 1990.

Merrill, Nancy. Interviewed by John Rent. 12 March 2002.

Ratnesar, Romesh. "Not Gone, but Forgotten?" Time 8 Feb. 1999: 31.

Taylor, Chris. "When Dotcoms Move In." Time 28 Aug. 2000: 29.

Whitman, David. "Raising Hopes by Razing High-rises." U.S. News and World Report 21 Feb. 2000: 28.