Was the Rise of Car Ownership Responsible for the Midcentury Homeownership Boom in the US?

It's common to hear from certain quarters that not only did the advent of mass motoring in the mid-20th century lead to a change in the types of homes Americans lived in, but that it brought about increased rates of homeownership as well.  This increase is typically presented as being one of the major benefits of mass automobile ownership.  Randal O'Toole, writing in 2006, makes the claim more boldly than most:

"Homeownership rates have increased by nearly 50 percent, from less than 48 percent in 1930 to nearly 69 percent today. This was almost entirely due to the increased mobility that automobiles offered to blue collar workers."

The point is often grudgingly conceded by sprawl opponents, or else goes unmentioned (The Geography of Nowhere, for instance, does not mention homeownership rates once in its 275 pages, nor does Suburban Nation). If the mobility provided by the automobile did lead to high rates of land consumption for residential uses, at least in doing so it brought down the cost of land accessible to job centers, allowing city workers to enjoy property ownership where once they had been in thrall to urban landlords, right?

The picture, looked at a bit more closely, isn't quite so clear.  The 1890 Census, the first census in which questions about ownership and renting were asked, showed a homeownership rate of 47.8% (homeownership had apparently been declining since at least 1870, however).  In spite of the arrival of the affordable automobile in 1908, the rate continued to decline through 1920. By 1930, following 20 years of explosive growth in household car ownership, it had only regained its 1890 heights of 47.8%.  The first great wave of car-buying, representing one-half of the total increase in household car ownership down to the present day, was accompanied by very little change in the homeownership rate (note that the electric streetcar boom, starting in the late 1880s, was similarly not accompanied by a rise in homeownership).

Based on Census data and car registration statistics.

Although car ownership dipped in the early Depression years, a resurgence after 1933 drove it to new highs by 1940.  In spite of unprecedented government intervention to spur the housing market in the 1930s, however, including the arrival of revolutionary forms of mortgage financing, homeownership declined to 43.6% in 1940.

The most curious piece of the puzzle, however, is the period from 1940-1945. During those years, the homeownership rate increased by around 10 percentage points, representing almost 50 percent of the entire increase from 1940 to 2012.  The timing of this increase is oddly overlooked in much of the economics literature on American homeownership trends (O'Toole himself tells the audience in a CATO presentation from last year, at the 15:22 mark, that the increase in homeownership occurred "after World War Two").

It goes without saying that these were years of exceptionally low car use: although the absolute number of cars did drop substantially, gas rationing reduced automobile mobility to levels not seen since the mid-1920s, if not earlier.  This seemingly inexplicable rapid rise has not received much direct attention in the literature, but one 2012 paper finds that one probable explanation was the wartime imposition of rent controls, which "stimulat[ed] the withdrawal of structures from the rental market for sale to owner-occupiers at uncontrolled prices."

The study also contains an implied suggestion that, counterintuitively, it may have been the very reduction in wartime use and availability of cars that helped spur the ownership increase. Although the study notes that "due to restrictions on the purchase of many goods, much of consumers' income had no outlet other than savings" -- savings which were put toward down payments on homes -- one of the primary savings must have come from reduced spending on new automobiles and associated goods and services.

Of course, homeownership did continue to rise after 1945, but at a slower rate.  Notably, the price of homes did not decline during this period, as might be predicted by the automobile-based theory, but instead after a brief postwar dip continued to climb through the mid-1950s, according to Case-Shiller data.  Prices did begin a very gradual decline in the late 1950s, but by then the rise in homeownership was slowing, and increases after 1960 (at which time the interstate system was less than a quarter complete) were very modest. In fact, as of early 2012, the US homeownership rate was estimated to be close to that of 1965.

Case-Shiller home price data, adapted from original NYT graphic.

Rather than being a benefit of cars, the postwar portion of the increase is generally attributed to a combination of 1) the increasing prevalence of FHA and VA mortgages, which by the early 1950s were approaching 50% of the mortgage market, 2) rising real incomes; and 3) demographic changes.

Although some studies have estimated that increasing car ownership was responsible for as much as 60% of the form of the suburban growth that occurred after 1945, this is not to be confused with homeownership. After all, countries with large shares of multifamily housing, such as Spain and Italy, may have very high homeownership rates (78% for both), while Germany and Denmark, where densities are lower and single-family detached housing is more common, have very low rates (42% and 51%).  These differences appear to be due to government policy toward housing rather than to transportation mode (Spain and Denmark, for instance, have a nearly identical modal split). 

Now, I do think O'Toole ought to agree with at least some of this: he admits in his talk that varying homeownership rates from country to country are due to government policy (at 4:16), and has lately criticized smart growth policies for inflating prices (a topic I plan to get to in an upcoming post). If one's concern is not actually homeownership per se, but rather living in detached single-family residences on large lots (a favorite theme of Joel Kotkin), or perhaps if one believes that ownership of a single-family detached home is the only true form of ownership, then the car does take on greater significance.