Joseph McCarthy's Lost Housing Wisdom

The consequences of the shift from middle-class homebuilding to slum construction.

On March 16, 1972, 180 pounds of dynamite brought down an 11-story apartment tower in the middle of St. Louis. The dramatic demolition—the first burst of dust and smoke shooting out of the lower floors, then a buckling in the middle, then a slow droop turning suddenly into full collapse—was broadcast over the airwaves for the nation (or at least the city) to take in on 19-inch televisions. It was one of 33 near-identical towers raised on the site just two decades before, at massive expense to the federal government. By 1976, all 33 were demolished.

When the Pruitt-Igoe housing project began construction in 1951, it epitomized the hopes and ambitions of America’s progressives and her poor. Minoru Yamasaki, the project’s architect, was an up-and-coming modernist who would go on to design the iconic twin towers of the World Trade Center. Though initially planned as a segregated development—Pruitt for black residents, Igoe for white ones—the Supreme Court had ruled that out by the time doors opened in 1954, and the new public housing project, among the largest ever attempted, would become an experiment for the new, integrated nation, in a city historically famed as America’s crossroads.

Those hopes and ambitions quickly collided with reality. Within a few years, a combination of poor construction and active vandalism turned the new buildings into virtual ruins. The elevators were designed to stop on only four out of eleven floors, diverting most residents to the dimly lit stairwells—which quickly became hubs for mugging and other violent crimes. Nearly three out of four first-born children to residents, and about half of all births, came out of wedlock. Though technically (and legally) an integrated project funded for the benefit of all citizens in need, the development housed virtually no white residents in its 20 years of operation. Within a decade of opening, the projects saw vacancy rates as high as 75%. By the time the decision was made to tear them down another decade later, 23 of the original 33 towers were completely unoccupied and ransacked beyond repair.

Assessments at the time tried to explain away the dysfunction as stemming from the architecture—a built environment of steel and concrete unsuited to human flourishing—but the truth was far more difficult to face. If it was about the buildings, why did so many equally ugly modernist developments fare perfectly well in different social circumstances? And why did so many projects built in more conventional styles but on the same policy model descend into the same disorder?

The tragedy of Pruitt-Igoe has played out a hundred times across America’s once-great cities. Public authorities—primarily the federal government, though usually with help from the state and city levels—spent millions tearing down inner-city slums only for the public projects raised in their place to produce worse outcomes at higher costs. Nor were those costs born only by the torn-down tenement neighborhoods and down-on-their-luck residents; the chaos of the projects rippled out across the cities and even into the suburbs, irreversibly transforming the physical and social landscape of America.

That failure is not just the result of faulty design, or of improper policing, or even (at least entirely) of the progressives’ flawed understanding of human nature. Pruitt-Igoe was a choice—like every crime-ridden cesspool of urban decay and human misery endlessly funded by the American taxpayer, the result of the wrong response to a genuine crisis. Pruitt-Igoe has been rubble for half a century, but the approach to housing policy that raised it in the first place remains virtually unchallenged in serious politics.

But it didn’t have to be this way—and it almost wasn’t.

At the end of the 1940s, new home construction had been at a virtual standstill for half a generation. Children born in the first years of the Great Depression had aged into adulthood, most without ever seeing a new home built in their town. The housing stock that did exist was largely old and run down, and vast swaths of almost every urban core had deteriorated into slum conditions. In some of the worst cities (which also tended to be the oldest and most populous) it was entirely common for three or more families to pack into a home that had been built for only one. And as the arrival of peace obviated the need for the 12 million-man military of 1945, a population larger than any state save New York suddenly lunged from base housing back to the already overburdened open market.

On top of all this—and in spite of it—the end of the war ushered in a new era of optimism, and with it the largest baby boom in recorded history. After the long, hard trials of the 1930s, wages bounced back fiercely in the war years, and the common citizen, John Q. Public, now had a decent income to support his family. But he did not have the house to go along with it. Newly welcomed into a prosperous middle class, and newly shouldering the burdens of fatherhood, this citizen was no longer satisfied with a cramped urban apartment.

Compounding the crisis, Washington and the nation were going through a massive political transformation—or, rather, a slew of transformations compressed by accidents of history into a single moment. The market confidence of old guard Republicans was shaken a bit in the Depression; far more damaged was public acceptance of a business-first approach to politics. The new intellectual movement that would remake the GOP in the years between Eisenhower and Reagan was still in infant form, and it had not yet found its leaders. The Democrats, meanwhile, had lost theirs, and President Truman for all his abilities could not fill Roosevelt’s shoes. Though an efficient political machine, a cult of personality, and a heavy dose of emergency powers had held the party together through 15 years in control of Washington, by 1948 cracks were emerging in the New Deal coalition.

Truman pushed Congress hard for a progressive solution to the obvious housing crisis. The result was a sweeping, ambitious bill that would allocate $1.5 billion over five years to clearing city slums and replacing them with federally subsidized public housing projects. The bill’s Democrat sponsors were Sen. Robert Wagner of New York, the leader of the New Deal coalition, and Sen. Allen Ellender, a Louisiana conservative. They were joined by Ohio’s Sen. Robert Taft, chair of the Republican Policy Committee and undisputed leader of the conservative coalition. The emergency measures Roosevelt pushed through at the height of the Great Depression were now set to be made permanent, even expanded—with the backing of Taft, the New Deal’s most prominent political opponent.

A first-term senator from Wisconsin stepped into the breach. It would be another two years until a Lincoln Day speech in Wheeling, West Virginia, made Joseph McCarthy a household name. In 1948, the Marine Corps veteran from Appleton was still just a backbencher—a gloves-off pragmatist not much liked by his more buttoned-up colleagues, but hardly the public enemy he would soon become.

McCarthy maneuvered into the vice chairmanship of a joint committee set up to investigate the housing issue, and from this position he began his push for an alternative bill. The McCarthy plan would shift the focus away from public housing and onto private ownership, strengthening the Federal Housing Authority’s mortgage insurance capabilities, providing expanded yield insurance to encourage private investment, and making pre-fabricated homes eligible for FHA-backed mortgages. Though he was up against the full power of both party establishments and operating amid political and economic turmoil, McCarthy managed to steer his version of the housing law through Congress and into law in June 1948. Upon signing the act, President Truman seethed at the passage of “an emasculated housing bill, which fails to include several of the most important provisions of the Taft-Ellender-Wagner bill,” though he had to admit that it “will be of some help in meeting the critical housing shortage.”

There was an obvious populist angle to the inside politics. Taft was the son of a president, a member of Skull & Bones, an editor of the Harvard Law Review; McCarthy was a chicken farmer who paid his way through Marquette University by boxing and gambling. But beyond that, the dynamic got more complicated. The very poor would arguably be better served by Taft-Ellender-Wagner, and there was a real case from charity to be made to that effect. And it was McCarthy’s maverick plan, not the proposal of the insider establishment, that had the full-throated support of the big businesses involved—including the special favor of one company in particular.

That company was Lustron, which had begun operation in 1947 with a $12.5 million loan from the Reconstruction Finance Corp., a federal agency established at the end of the Hoover administration to help drag the nation out of the Depression. Additional RFC loans brought the funding total to $37 million, and Lustron acquired a plant in Columbus, Ohio, where it began to produce its signature enameled steel homes. The homes were meant to be affordable, long-lasting, maintenance-free, and—thanks to Senator McCarthy—eligible for FHA financing as pre-fabricated homes.

Like the move to make Depression-era housing measures permanent, the birth of Lustron signalled an attempt to turn emergency measures toward a reimagined purpose. The RFC was conceived as a lender of last resort for struggling businesses, and the loans to Lustron were the first of their kind: venture capital investments made with an eye toward a prosperous future. Had that blueprint been followed instead, the second half of the twentieth century might have looked rather different from Pruitt-Igoe.

At the start of the company’s short run in 1948, a Lustron house could be bought for about 25% less than a comparable traditional home. Though prices climbed in the second year of business (from an average of about $9,000 to about $10,500), with the newly standard 30-year loan term—even accounting for the era’s much higher property tax rates and assuming the 5% interest rate newly authorized by the McCarthy plan—the average American family could still pay the mortgage on a Lustron house for about $85 a month, or just about one third of their paycheck.

That is how the math was meant to work. McCarthy’s plan was designed to facilitate ownership for the common worker, the forgotten man (an economic priority that had not shifted since his first political campaign, in 1936, as a New Deal Democrat)—which is exactly who was being squeezed by new economic circumstances. McCarthy did not discredit the needs of the genuine poor, whom the Taft-Ellender-Wagner bill prioritized, and in fact he remained open to separate legislation on public housing; but he recognized that they were not actually the subjects of the housing crisis as it existed.

McCarthy’s victory for the middle was short-lived. He had expended his political capital in the 1948 battle, and just a year later the Taft-Ellender-Wagner bill was passed, overriding the McCarthy plan and cementing public projects as the beginning and end of American housing policy. In 1942, when Roosevelt established by executive order the National Housing Agency and, within it, the Federal Public Housing Authority, he did so explicitly as an exercise of war powers. When Congress affirmed and furthered that action in peacetime, it followed a familiar but important playbook in the long march of progressive policy. In an important sense, that moment marked the transition from the emergency measures of the New Deal to the permanent welfarism of the Great Society and beyond.

The results should have been predictable. Even setting aside the social problems—crime, vandalism, family collapse—that quickly became endemic in Pruitt-Igoe and the other public projects, their construction did not actually solve the central problem: a shortage of adequate housing for America’s working families. It did not even address it. And that was no mere accident. These projects failed to increase supply, and thus to reduce costs for any but those directly subsidized, by design. This was the core principle of slum clearance legislation: for every unit of public housing built, the law required that a unit deemed “slum” housing be destroyed. This provision was well-intentioned, but amid an already critical supply shortage, it imposed an artificial constraint at the same time as it raised the floor of the housing market. The result was to raise costs for the very people McCarthy’s plan aimed to help, all while the actual housing stock remained unmoved by government action—or even, as illustrated by Pruitt-Igoe, declined to levels worse than the pre-war slums.

The Space Age utopia Lustron envisioned never came to America. The new technology at the center of the business model could not quite deliver sustainable profit margins, and as political interest shifted elsewhere the company found itself unable to pay back its government startup loans. The company folded less than a year after Taft-Ellender-Wagner superseded the McCarthy housing bill. Enameled steel houses, far from becoming the standard of the future, survived mostly as historical curiosities—though the majority of the roughly 2,500 Lustron houses shipped between 1948 and 1950 are still intact and occupied today.

In spite of the neglect of both party establishments, the overall homeownership rate did crawl up over the course of the postwar boom, from a historic low around 43% at the start of the 1940s to a historic high around 60% within the span of twenty years. At no point since—even at the bottom of the downturn begun by the 2008 financial crisis, circa January 2016—has the rate of ownership dropped below 60% of households.

But that trend should not distract from the plight of middle-class households in the world Taft-Ellender-Wagner built. The costs imposed by the post-1949 housing scheme on these families extend far beyond the taxes they pay to underwrite the projects. Even the trend toward ownership obscures a dark reality: As the 1950s gave way to the 1960s and the projects grew worse than the slums they had replaced, the last of these middle class families were pushed out of the cities they called home. Whole tracts of territory more dangerous, more neglected, and more expansive than the slums of old became effectively unlivable within a single generation. The men and women of the forgotten middle were forced to pay for that transformation both coming and going: first in their taxes, and then in housing and other costs propped up artificially by those very tax dollars. Where was the help for them?

There have been efforts to chip away at the edges of this system—including (credit where due) in the Clinton presidency, when liberal pragmatists saw welfare reform as more than a pipe dream but less than a necessity. On the whole, though, our housing policy remains perpetually frozen circa 1951, even under Republican administrations. It is long past time conservative reformers reconsidered the fundamental assumptions of the Taft-Ellender-Wagner model—and looked back down the road not taken.

The crisis today is different in many ways from that faced by McCarthy’s generation. The demand crunch of the twenty-first century is caused not by a rush of American men returning home from war but by the arrival of tens of millions of immigrants, legal and illegal, who compete against Americans for a housing stock that still has not been meaningfully expanded. The supply problem, meanwhile, is the result not of a global economic depression but of bad regulation, misaligned incentives, and the intrusion of large institutional investors into the single-family market.

Some of that is good news. Building single-family and smaller multi-family homes at scale could be made cheaper and easier with the virtual stroke of a pen—exactly the kind of regulatory reform President Trump has been eager to execute in his second term. To take just one example, large minimum lot sizes in the municipalities where middle-class families tend to seek out homes make the construction of affordable but comfortable housing stock (like the Lustron houses of yesteryear or the starter homes of legend) impractical and prohibitively costly to construct. While such decisions are largely executed at the local level, there is much a committed administration could do to steer things in the right direction.

And if this administration or a future one finds the political will to deliver on the mandate for mass deportation that swept it into power, then tens of millions of foreign visitors currently distorting the U.S. housing market could be removed from the equation. Vice President JD Vance, effectively alone among politicians, has spoken publicly and compellingly about the disastrous effect of mass immigration on the housing market. Likewise, Vance has shown interest in restricting the purchase of single-family homes by large institutional investors, which distort the market from the other end.

As total economic and social transformations go, these are relatively easy options. Still, there is much we can learn from the last great housing crisis—and the policy misstep that followed it, setting off eight decades of avoidable disorder.

The first lesson from the McCarthy battle is a simple one: a housing crisis cannot be solved with money, at least not with money alone. Just last year, the federal government spent $8.8 billion on public housing projects—a long way down a straight path from the $1.5 billion allocated in 1949. Subsidizing demand at the bottom of the market is not just ineffective; it is actively harmful to the forgotten workers of the middle class, whose own tax dollars are effectively used to price them out of ownership. A housing agenda that perpetuates this error, whether put forward by Wagner’s Democrats or by Taft’s Republicans, is worse than worthless.

Second: Joe McCarthy was a techno-optimist. Whether Lustron could have succeeded with political support is impossible to say, but the general principle is a manifestly sound one. That the actual processes of home construction have been virtually unchanged since long before men walked on the moon seems a clear failure of imagination. Besides deregulation and incentives for the right kind of construction, investment in new technologies, as once attempted with Lustron, is one simple way for the federal government to help produce housing stock at prices affordable to American workers. Some startups are already considering ways to implement 3D printing in home construction, and this could bear fruit, though it should not limit the extent of any exploration.

Finally, and most difficultly: The government doesn’t have to pick losers, but it does have to pick winners. We have to know who our housing policy is for. With Taft-Ellender-Wagner (as with so many other policies of the era that it inaugurated), Washington declared that the public interest is in the poor, and only in the poor, and that everyone else should be left to their own devices. McCarthy’s alternative assumed a different goal: to empower the workers and families who make the American economy run; to tend to the needs of the poor, yes, but not to make them the alpha and omega of a policy crisis that was really about a different class of citizens altogether. Only when those priorities are reset can we begin to build in earnest—and the results will define our landscape for generations to come.

For more than 50 years since their televised demolition, the ruins of Pruitt-Igoe have remained vacant—a bombed-out wasteland in the middle of a concrete jungle. Late last year, the National Geospatial Intelligence Agency (NGA) opened a massive new headquarters at the northern edge of the site, which cost the American taxpayer more than $1.8 billion over six years of construction. (One hopes it will last beyond 2045.) A for-profit university based in Puerto Rico plans to build its new medical school there, too, though the red tape surrounding the security of the new NGA campus may see that dream crushed. Ten miles south, on Germania Street, the last Lustron house left standing in St. Louis has been turned into an AirBnB.