Shelter and community

Abstract

B y most physical criteria--notably, quantity and quality of living space--Americans are among the best-housed people in the world. The three decades following the end of World War II showed a marked reduction in most indices of housing distress: overcrowding, lack of adequate sanitary facilities, physical deterioration, and dilapidation. During the same period, there was an increase in home ownership, principally of singlefamily detached suburban homes with some private outdoor space. But since the early 1970s, severe problems have appeared at an alarming rate, throwing into serious question the system's ability to house its people decently. The often-overlapping symptoms of these problems are as follows. Mortgage interest rates are double what they were a decade ago, and triple what they were in the 1950s and early 1960s. There is a severe shortage of residential mortgage credit, as stronger borrowers--principally governments and corporations----compete for a lower level of savings. As a proportion of disposable personal income, personal savings have dropped sharply over the last decade, from the 8 to 8.5 percent range in the first half of the 1970s to the 5 to 5.5 percent range beginning in 1977. A variety of new inflation-sensitive mortgage instruments are rapidly replacing traditional level-payment mortgages, as lenders seek to shift the burdens of inflation to borrowers. The result is more tenuous homeownership status, as owners who use such instruments (either because no other mortgages are available or because superficially attractive temporary advantages are offered as a marketing device) no longer have the security of predictable fixed payments for the life of the mortgage. Moreover, enormous inflation in shelter costs occurred during the 1970s. While the consumer price index (CPI) for all items rose from 116.3 in 1970 to 269 in May 1981, the shelter index (rent, home purchase, mortgage interest rates, property taxes, maintenance and repairs) went, during that same period, from 123.6 to 308.4. The combined impact of rapidly escalating prices and rapidly escalating mortgage interest rates can be shown in the following comparison: