The End of the Suburbs: Where the American Dream Is Moving

by Leigh Gallagher

  You could argue that the initial wave of government support for modern suburban development was a reasonable, if not well-thought-out, response to our postwar housing shortage that simply didn’t factor in the unintended consequences. But this doesn’t fully explain the ethos surrounding suburban living, which has only become more deeply entrenched in our society in the decades since. A shortage of housing is no longer a problem, of course, and hasn’t been for quite some time. So why have Americans continued to be so obsessed with owning a house in the suburbs?

  This wasn’t exactly an accident, either. Almost as soon as we started building the modern suburbs, we began viewing them as an ideal, almost magical way of life. At the 1939 World’s Fair in New York, General Motors presented a now-famous exhibit, “The Futurama,” that showed what the American landscape might look like twenty years into the future. The model featured a vast network of suburbs overlaid with an intricate web of high-speed “magic motor-ways.” It was a car-centric vision of the future, it was awe-inspiring, and it actually seemed within reach. More than nine million people stood in hour-long lines to view it. After the Futurama exhibit, there was a palpable hope—even a dream—among the American people that this would be the way we would build our country. “It was a brilliant marketing move,” says George Washington University’s Christopher Leinberger. “We fell for it hook, line and sinker as a people.”

  But marketing works best when it taps into something deep within our psyche, and even Leinberger, who today maintains an extensive collection of Futurama paraphernalia, points out that GM would not have been able to sell us this vision if deep down we hadn’t already wanted it. “You have to move people in their guts to make them really embrace something, and people fell in love with it,” he says. The vision of this novel way of life did exactly that. Along with the car, the private home had long been a symbol of prosperity. The Futurama exhibit crystallized for the American people how the car, the house, and the suburban way of life could come together to symbolize something bigger: the American Dream.

  Technically speaking, the original notion of the American Dream wasn’t tied to having a house at all; in 1931, the author James Truslow Adams simply wrote of “that dream of a land in which life should be better and richer and fuller for every man, with opportunity for each according to his ability or achievement,” regardless of “circumstances of birth or position.” But when government policies made home ownership possible for the masses, owning a house suddenly presented a logical proxy for this prosperity. The difference between life before the Great Depression, when only the extremely wealthy could afford homes, and after, when almost anyone could, was night and day. Very quickly, people embraced the notion that anyone who was smart and morally and financially responsible would make it a goal to buy a plot of land and live in a house with a yard. It was as true in rural Minnesota in the 1970s as it was in Levittown in the 1950s. “I grew up believing that prosperity was suburbia,” Chuck Marohn says.

  Owning a home represented more than just prosperity; over the years, it came to represent patriotism, good citizenship, and the mark of a productive member of society. During the Cold War, home ownership was credited with upholding American free-market ideals. “No man who owns his own house and lot can be a Communist,” William Levitt said. In 1995, Bill Clinton launched National Homeownership Day to celebrate the role home owners played in building a productive society. “Strengthening families, establishing communities, and fostering prosperity, homeownership is the cornerstone of our economy and a common thread in our national life,” Clinton wrote in the proclamation. A few days later he established a new National Homeownership Strategy, a joint initiative with the U.S. Department of Housing and Urban Development designed to boost the home ownership rate. In his remarks announcing the strategy, Clinton recounted a charming story about how, when he was trying to “coax” Hillary into marrying him, he finally succeeded by surprising her and buying a house the future secretary of state had admired while she was away on a trip. A decade later, in the midst of what was becoming a massive real estate bubble in 2004, George W. Bush fanned the home ownership flames by touting that we were creating an “ownership society in this country, where more Americans than ever will be able to open up their door where they live and say, ‘welcome to my piece of property.’”

  And then, of course, when mortgages became incredibly, artificially cheap during the recent housing boom, the home-owner-as-hero ethos only became even more evident, as those who had previously only dreamed of owning a home bought up property like the good, proud Americans they had always hoped to be.

  • • •

  While the housing bubble of the 2000s is by now well-trod territory, it is worth mention here since it accelerated, and then accentuated, the decline of the suburbs. In 2001, the United States was struggling to emerge from the ashes of the dot-com stock crash of the late ’90s that weakened our economy and the 9/11 attacks that nearly decimated it. In search of a fix, the Federal Reserve turned to home ownership, slashing interest rates to jump-start home sales and demand for new construction. What better way to juice the economy, the government reasoned—just as it had in the wake of the Great Depression—than to promote home ownership, that reliable engine of growth?

  Only this time, it wasn’t just the government encouraging us to live in big homes on plots of land. A giant assist came from another player: banks, which, in search of better returns, engineered a new asset class around housing. What if investors, who had tired of stocks, could buy packages of home loans instead? The American Dream had suddenly met the Wall Street Machine, two powerful engines that came together with the force of a neutron bomb. The creation of the mortgage-backed security, as we now know, was an instant success, and the cultural obsession with home ownership would play right into the banks’ hands as they happily fed the voracious demand for new home loans. The whole experiment would leverage the hope and hype of the American Dream and award it to millions of new home owners.

  As has by now been well documented, our housing industry ballooned. Prices rose nearly 200 percent from 1995 to 2005. Houses that sold for $300,000 were worth $600,000 two years later, then $700,000, then more. It wasn’t just Wall Street making a profit: everyone wanted in on the new gold rush. Everyone became an investor; the cocktail party chatter wasn’t just about the home you bought to live in, it was the home you bought to flip. A Fortune article in May 2005 chronicling this euphoria opened with the tale of a twenty-two-year-old in Phoenix who owned so many homes that he got lost going from one to the next.

  The home-building industry exploded, too, going from constructing 1.3 million new single-family houses in 2000 to 1.7 million in 2006, an all-time high. Farmers made millions as real estate speculators and developers bought up citrus groves and cotton fields by the thousands and converted them into subdivisions. From 2000 to 2007 the United States developed close to four million acres of farmland, spending billions tilling it and filling it with fast, cheap tract houses for first-time buyers. Code inspectors couldn’t keep up with the pace; years later, consumer watch groups would urge home owners who bought homes built between 1999 and 2007 to have them reinspected because so many contractors had cut corners.

  At some indiscernible point, a mania started to take hold. Everyone wanted bigger, better, more. And if you couldn’t afford it near where you wanted to live, you could find one in your price range if you just kept going. Builders and developers plowed farther and farther out along the periphery, where land was cheapest. Soon there were places like the plot of land earmarked by luxury home builder Toll Brothers an hour and a half drive from DC toward the Shenandoah Mountains. A New York Times Magazine profile described the meeting where the president of the company had presented this parcel to cofounder and then CEO Bob Toll, who marveled at the high prices other builders had been able to command nearby: “Look at these prices,” Toll said. “At the end of the world, these prices.” The Poconos soon became bedroom communities of Philadelph
ia and New York, and Poughkeepsie became a suburb of Manhattan; similar development spread out into Loudoun County outside of Washington, DC, and Gwinnett County outside Atlanta. The traditional American Dream said nothing about ninety-minute one-way commutes, but that’s what people were willing to do to get the biggest, best home they could buy. By 2009, three million Americans were making “extreme commutes” of three hours or more round-trip every weekday. Sometime during this era, Bob Toll, who kept an apartment on New York City’s Upper East Side, learned that one of his doormen had moved his family from Queens to the Poconos. He asked him why he did it, when it meant he had to drive an hour and a half—on a good day—to work. “I wanted my family to have their own home and their own land,” the doorman said. “And I was willing to drive an hour and a half a day to be your doorman to do it.”

  This approach put millions more people into millions of homes. In the span of eleven years, the rate of home ownership in the United States went from 64.4 percent, where it had hovered for more than three decades, to 69.4 percent. Rising prices, meanwhile, allowed existing home owners to refinance their mortgages at higher and higher valuations, pocketing the extra cash. This further increased home owners’ sense of wealth and spurred purchases of everything from SUVs to second homes to Saks Fifth Avenue shopping sprees. In addition to representing a place to live, the home had suddenly become a wealth creation machine. It was the American Dream, squared.

  The homes themselves grew bigger and more ornate—Arcadia Land’s Jason Duckworth refers to this as housing’s “baroque” period—and soon we were identifying them with a new label, the McMansion. Though almost every builder started making them during the housing boom, the invention of the modern-day McMansion dates decades earlier; the first use of the term dates to around 1990 and was soon thereafter defined by the Oxford English Dictionay as “a large modern house that is considered ostentatious and lacking in architectural integrity.” But identifying the demand for a new category of housing in between high-end custom-built homes and tract housing can be credited to Toll Brothers, which came to mass produce the most expensive homes of any builder in the country. In the mid-’80s Toll was a regional builder operating in Pennsylvania and New Jersey when Bob Toll identified the demand among a new upper-middle-class buyer for flourishes that suggested prestige, like large floor plans, brass fixtures, columns on the front facade, marble countertops, and the like. Toll masterminded the art of delivering these visual embellishments on houses that were high-end but mass-produced, so they could be built at a much lower cost than custom homes. Toll’s houses were still twice as expensive as its rivals, but it popularized a new category in housing: a halfway point between suburban tract homes and multimillion-dollar upscale abodes. “They were brilliant about it,” says Duckworth (Duckworth says this as a Philadelphia-area real estate developer himself and one with particular insight on Toll: his father was a top executive at the company for years). Toll, the younger Duckworth points out, understood that buying a house was as much about fantasy as utility. “They knew how to push people’s psychological buttons,” he says. “They could see the buyer saying, ‘This is how I’m going to impress my brother-in-law.’ You can get by with a cheap subfloor, but you had to have the Jacuzzi for two.”

  Toll might have popularized the notion of the McMansion, but by the early 2000s nearly every builder was making their own versions of them; soon their two-story foyers, butterfly staircases, and separate media rooms were de rigueur. The houses grew bigger—three to five thousand square feet or larger. They often matched their region—sprawling redbrick colonials outside Washington, DC, adobe castles in Phoenix, French-style chateaux in the suburbs of St. Louis—even if the bricks and adobe were coming off the same assembly line in New Jersey. Builders of these homes saved on costs wherever they could—using synthetic stucco or plywood in place of the real thing, for example, or framing corners with three studs instead of five—and sometimes they didn’t get it quite right: a Palladian window might be under a French gable roof. But most buyers didn’t really care—their purpose was to deliver the signals of wealth if not the actual trappings of it. Provenance and accuracy weren’t as important—it was size and scale and how much it glittered that mattered.

  By 2005, there were nearly four million homes with 4,000 square feet of space or more, up 17 percent from 2001. By 2006, the average home was 2,500 square feet, more than double what it was fifty years prior. The National Association of Home Builders’ concept home that year was more than 10,000 square feet. As big as McMansions had become, every effort was made to make them look even bigger, with builders employing visual tricks like adding fewer trees and less vegetation, and perching the houses on a man-made hill to make them seem more imposing. The American Dream had morphed from owning a home to owning a palace.

  To keep the endless supply of loans coming after the regular mortgage market got tapped out, lenders turned to people who’d never had a mortgage before. These first-timers kept the party going and fueled suburban expansion even more. Thus began what became known as the “drive till you qualify” mania, which meant going as far as you needed in order to afford your dream home. “Drive 10 miles and save $10,000,” was one developer’s pitch in Wright County, Minnesota, some fifty miles northwest of Minneapolis.

  All told, between 1996 and 2006, more than eighteen million new houses were built, with nearly no increase in average incomes. It was almost like the housing boom of 1947 all over again, but there was one key difference: there was no increase in natural demand. This time around there was no population boom, no millions of returning soldiers needing jobs and homes. The demand was manufactured by Wall Street, and it played to our deepest desires as a country. The national narrative had become even more fixated on home ownership than it already was.

  • • •

  Of course, as we now know, it would all soon fall apart. By the end of 2009, home prices had fallen 29 percent from their peak; that year, the foreclosure process was begun on 2.1 million homes. Each time housing prices hit a new low, experts called it the bottom, only to have prices fall through the floor again. All told, housing prices fell 34 percent from peak to trough, compared with roughly 26 percent during the Great Depression. In some places, like Phoenix and Las Vegas, the number was closer to 60 percent. In all, more than 4.5 million homes were lost to foreclosure. “We ended up with far too many [housing] units,” wrote Warren Buffett, who through his company, Berkshire Hathaway, owns modular home manufacturer Clayton Homes, in his 2011 letter to shareholders. “And the bubble popped with a violence that shook the entire economy.”

  That violence might have busted sprawl’s march for good—it remains to be seen, and we’ll get to that later. For now, we’re left with an endless array of images of the American Dream in tatters. There are thousands of half-built subdivisions around our country, relics of the days of free-flowing credit and a seemingly endless supply of new home buyers. These empty subdivisions dot our landscape, sometimes little more than subdivided lots marking space for homes that were never built. In many cases the infrastructure has been paid for and teed up, with empty lots ready to pipe water and electricity into homes that will now never come. In many communities, the houses were built but now sit empty, drawing squatters. In places like the Inland Empire, the situation was particularly devastating. In the hardest-hit markets, a cottage industry emerged in companies that would spray-paint brown lawns green to mask the blight. In Perris, California, owners of ranches that had foreclosed and couldn’t afford to euthanize their animals left them to starve; officials found forty-one emaciated, abandoned horses wandering the area throughout 2011.

  In other places the damage wasn’t as visibly wrenching, but it was still there. One weekday in December 2011, I went on a driving tour of the Las Vegas housing market, one of the hardest hit in the country. Driving through the Desert Shores community in Summerlin, one of the fastest-growing communities during the housing boom, I initially didn’t notice anything o
ut of the ordinary. The sun was shining bright, the streets were tidy, and the rows of stucco ranch homes with stone pebble landscaping all seemed to fit benignly on the gently curving streets and cul-de-sacs. Things were festive, befitting the holiday week; I noticed an inflatable Santa Claus on one house, icicle lights hanging from the shutters of another, and an entire garage door wrapped in a giant red tinsel bow.

  But soon I noticed that the shutters on most of the homes were closed on the inside, even though it was the middle of the day. There were no people around, anywhere. Newspapers had piled up in a few driveways. Many of the houses had Christmas wreaths on the door and pumpkins on the porch at the same time, a sort of bipolar holiday still life that hinted at the work of lazy real estate agents attempting to mask the fact that the home was empty. I soon realized that all the homes were using the same exact type of wreath and the same exact brand of inflatable Santas, also evidence of realtors at work. In several cases, the Santas had lost their loft and lay deflated on the ground, sad-looking polyester pools that seemed representative of the burst housing bubble itself.

  This blight wasn’t only in places that were created by the housing boom. In Berkeley, California, a city councilman wrote to the mayor asking for help for individual home owners facing foreclosure. In Atlanta, the city’s outer suburban ring, which was particularly hard hit with foreclosures, was coined the “ring of death.” In December 2011, one foreclosure “heat map” showed tony Westchester County, New York, as “white hot” among New York counties for the number of homes entering foreclosure, with seventeen hundred homes listed under payment default status.