May 5, 2009 City Council packet - Laserfiche WebLink

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loans expanded homeownership further and kept demand high. By 2004, a record 69.2 percent of American families owned their home. For the generation that grew up during the Depression and was inclined to pinch pennies, policies that encouraged freer spending were sensible enough —they allowed the economy to grow faster_ But as younger generations, weaned on credit, followed, and credit availability increased, the system got out of hand. Housing, meanwhile, became an ever -more -central part of the American Dream: for many people, as the recent housing bubble grew, owning a home came to represent not just an end in itself, but a means to financial independence. On one level, the crisis has demonstrated what everyone has known for a long time: Americans have been living beyond their means, using illusory housing wealth and huge slugs of foreign capital to consume far more than we've produced. The crash surely signals the end to that; the adjustment, while painful, is necessary. But another crucial aspect of the crisis has been largely overlooked, and it Wright ultimately prove more important. Because America's tendency to overconsume and under -save has been intimately intertwined with our postwar spatial fix —that is, with housing and suburbanization—the shape of the economy has been badly distorted, from where people live, to where investment flows, to what's produced. Unless we make fundamental policy changes to eliminate these distortions, the economy is likely to face worsening handicaps in the years ahead. Suburbanization—and the sprawling growth it propelled —made sense for a time. The cities of the early and mid -loth century were dirty, sooty, smelly, and crowded, and commuting from the first, close -in suburbs was fast and easy. And as manufacturing became more technologically stable and product lines matured during the postwar boom, suburban growth dovetailed nicely with the pattern of industrial growth. Businesses began opening new plants in green -field locations that featured cheaper land and labor; management saw no reason to continue making now -standardized products in the expensive urban locations where they'd first been developed and sold. Work was outsourced to then -new suburbs and the emerging areas of the Sun Belt, whose connections to bigger cities by the highway system afforded rapid, low-cost distribution. This process brought the Sun Belt economies (which had lagged since the Civil War) into modern times, and sustained a long boom for the United States as a whole. 15