The Problem with Funding Suburbia

How the U.S. government meticulously crafted suburbia to exclude minorities & how it persists today.


Celia Escobar

3 years ago | 7 min read

The American Dream has consistently been portrayed as a dazzling lifestyle where the grass is greener and the opportunities are endless. If people work hard they can make a comfortable living and enjoy a free society. One of the main components of this dream has been homeownership. And not just owning a home anywhere — but a white picket fenced home with a freshly cut lawn and parking spot for your car. Miles of these cookie cutter homes became better known as present day Suburbia.

It is no accident that the United States has the largest suburban population out of any other country, with over 80% of Americans living in the suburbs. This massive suburban population was crafted meticulously through decades of covert policy, homeowner tax exemptions, and other government incentives, all in the name of providing citizens with this sense of ownership and individualism that the American Dream promises to provide.

However, this lifestyle has only been attainable for a very small demographic: the white nuclear family. For this reason, the creation and implementation of suburbia has been one of, if not the most, systemically racist practices the United States has in place. We now know that this practice was deliberate, and is still being maintained in 2020.

Owning a Home is Attractive in the Long Run

Homeownership is the #1 way in which families are able to accumulate generational wealth. Over time, by paying off your monthly mortgage payment, families are able to create equity, which is the value of how much of the asset an investor owns. So in terms of homeownership, the more of your monthly payments you pay off, the larger the share of the home you own. This is generally a great investment for families to make because once the home is paid off, the family that now owns it is able to pass it down to their children and so on, leaving little to no payments for the inheritors.

In addition to building equity, the housing market is a relatively stable appreciating market. Despite infrequent recessions and market crashes, the housing market is constantly experiencing long-term growth, therefore your home will more than likely be more valuable in years to come. Erik Marten goes further in depth on these benefits in his article for the HSH. “A home for most people will serve as a forced savings account… A homeowner will pay into the value of their investment every month — an investment that should be a long-term appreciating asset. That’s what will grow long-term wealth,” says Ralph DiBugnara.

Both the appeal of creating equity and market appreciation prove that housing is a smart decision for any individual in the long run, especially if they want to pass down this asset to their children. However, homeownership was not always this desirable. It wasn’t until the 1930s that the government began providing substantial fiscal benefits to promote this way of life, and changed the course of housing for generations to come.

How the Government Incentivizes Homeownership

Suburban homeowners are the largest recipients of housing subsidies, and this has been the case since 1934 when the New Deal created the Federal Housing Administration.

The FHA provided mortgage insurance to buyers and in turn paved the way for new private developments, which we now know as suburbia, mostly through strict regulations on the types of houses they would approve for mortgage insurance. Through the FHA, the government directly helped homeowners pay for their new homes by offering them lower interest rates and building the lenders’ confidence in the housing market. In other words, they would give insurance to homeowners with specific measurements, dimensions, facade requirements, and the like. They had the intention of helping more Americans own a home, but only if it met the plans of the new homogeneous neighborhoods.

In addition to direct aid, the government also incentivized homeownership through several covert policy methods, such as mortgage interest deductions, property tax deductions, and capital gains tax exemptions. This means that homeowners can deduct mortgage interest rates and property tax from their federal tax income. In short, these major tax breaks help homeowners save money every year in taxes, and are able to pocket that change. This pushes Americans towards buying a home in the suburbs rather than renting in the urban city-center because these tax breaks are not granted to renters.

As a result of the 1997 Taxpayer Relief Act (TRA), homes are mostly exempt from capital gains tax, with a few exceptions and limitations. This means that once you do decide to sell your home, you do not have to pay taxes for its increased value (up to $250,000 if you are single and $500,000 for married couples). This shrinks the risks that come along with homeownership, and since the housing market is generally an appreciating one, your home will more than likely accrue more value the longer you own it.

Taxation determines behavior, and these tax policies make it clear that the government wants to help you buy a home. So why does subsidizing this suburban lifestyle create problems?

Subsidies and Government Aid was Carefully Crafted to be Exclusionary in Nature

In the words of world-renowned author and urban studies figure Jane Jacobs, “Extraordinary governmental financial incentives have been required to achieve this degree of monotony, sterility, and vulgarity”. When the Federal Housing Administration was tasked with revitalizing the housing sector, segregation began right from the get-go through redlining. To provide some insight, redlining was the practice of “refusing to insure mortgages in and near African-American neighborhoods” . Predominantly black and brown neighborhoods were considered “hazardous” and “high risk investments”, and drawn around with red borders. As a result these communities were denied access to capital investment that would grant them economic opportunity.

Not only did private mortgage and real estate companies carry out this horrific injustice, but the practice of redlining was made legitimate by The Underwriting Manual, which was a federal set of guidelines that laid out the mortgage lending requirements and preferences. One of the many restrictions said that “incompatible racial groups should not be permitted to live in the same communities.” It also recommended that highways would be a good means to separate black and white communities, thus streamlining the process of redlining and drawing clear borders for federal money to be unevenly distributed based on racial biases.

In addition, the FHA was subsidizing builders who were mass-producing entire subdivisions for whites — with the requirement that none of the homes be sold to African-Americans, according to Author Richard Rothstein in his new book The Color of Law (with whom an interview can be found here).

It Still Actively Leaves People of Color Behind

Almost a century later, we can still feel the impact of these racist policies. Researchers can point to them when thinking about the gap in income and wealth between races. This is summed up perfectly by Richard Rothstein and Tim Gross, “Today African-American incomes on average are about 60 percent of average white incomes. But African-American wealth is about 5 percent of white wealth. Most middle-class families in this country gain their wealth from the equity they have in their homes. So this enormous difference between a 60 percent income ratio and a 5 percent wealth ratio is almost entirely attributable to federal housing policy implemented through the 20th century”. This clearly shows that when millions of black and brown Americans cannot participate in this type of equity building, they are systematically put at a disadvantage.

Along the same lines, communities that were redlined decades ago still are impacted. Bruce Mitchell from The National Community Reinvestment Committee said, “the vast majority of neighborhoods marked ‘hazardous’ in red ink on maps drawn by the federal Home Owners’ Loan Corp from 1935 to 1939 are today much more likely than other areas to comprise lower-income, minority residents”.

Despite many acknowledging and understanding the harmful acts of the FHA in the past, exclusionary practices that the US has claimed to end are still alive and well today. The Affirmatively Furthering Fair Housing policy, or AFFH, works to try and reverse the harmful impacts of redlining practices all across the United States. It has been in place since the 1968 Fair Housing Act, and the Obama Administration put out a rule to finally mandate the policy’s implementation in 2015. But President Trump and HUD Secretary Ben Carson have officially rolled back AFFH and reversed the rule of prioritization of fair housing and desegregation, claiming it negatively impacts “once thriving Suburban areas”. The President said in a tele-town hall that Democrats want to “eliminate single-family zoning, bringing who knows into your suburbs, so your communities will be unsafe and your housing values will go down.” This rhetoric clearly indicates a desire to keep certain demographics out of suburban communities and others in: a blatantly racist policy move under his administration. Reversing progressive rules such as these are direct attacks on communities of color with shells of arguments to back them up.

Those who praise suburbia and adamantly oppose reform within their neighborhoods fail to recognize the privilege that is inextricably linked to their way of life. Homeowners Associations and other suburban proponents (see NIMBYism) have time and time again demanded to keep single family zoning laws and exclude lower income individuals. To them it’s an aesthetic difference in their neighborhood, to black and brown individuals who are excluded, it means less of an opportunity to grow their wealth and make a living for themselves and their families.

No one is threatening to completely abolish suburbs, as many right wing journalists and politicians have tried to claim. Simply put, an ungodly amount of public money goes into these wealthy communities that not everyone can participate in. Homeownership is not attainable nor desirable for every individual, and by allocating massive amounts of funds into private suburban homes, the government is depriving communities that would benefit from urban public housing of valuable funds. Taxpayer dollars should be put into more accessible forms of housing that can help solve the rampant homelessness crisis; not towards giving owners of McMansions tax cuts.

This country is at a pivotal moment with exponentially increasing population growth, mass movements in the fight against racial inequality, and widespread housing insecurity. How we choose to fund housing for our most vulnerable will forever be embedded in our history — and I insist that we choose wisely.


Much of my inspiration for writing this piece came from wanting to digest and further understand Suburbia’s policy, history, and implications. Much of it I took away from an incredible 4 part series written by Devon Zeigel (which you can find here). I cannot in good conscience write about this topic without crediting her, and I highly recommend checking out her work on the topic.

In addition, I am always independently researching and learning about much of the information I wrote about, therefore I encourage anyone reading to take my words with a grain of salt. This particular topic is of great interest to me, yet I do not claim to be any sort of expert.

Finally, you can find me on LinkedIn here. I’d love to connect!


Created by

Celia Escobar

Student at the University of Southern California interested in housing policy, public transport, building walkable cities, hiking, music, and Sudoku puzzles.







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