The American dream of becoming a homeowner is so compelling that for a long time rising prices were slow to discourage demand; and as prices rose, banks and savings-and-loan companies made it easier to borrow money. The rule of thumb traditionally used by lenders to evaluate the financial capabilities of prospective home-buyers was that housing costs (mortgage payments, taxes, and utilities) should not consume more than 25 percent of the household's income. By the 1980s, as house prices began to rise faster than incomes and this trend began to encourage borrowing, the percentage was adjusted upward: to 30 percent, then 35 percent, and sometimes almost as high as 40 percent.
The rationale was that higher housing costs were being offset by the appreciation in the resale value of the property. This view had some validity, since houses were rapidly increasing in value, but it was a saving on paper, available only in the future, when the house was sold. In the meantime, the homeowner was obliged to tighten his belt and spend less—on recreation, travel, education, culture, books. Many people simply borrowed more to make up the difference. No wonder that credit cards became so popular, and so widely abused. Homeownership was being maintained, more or less, but at what price?
The House That Worked
The development of communities composed of freestanding houses surrounded by gardens was entirely American. Before 1840 American cities and towns followed the European model: attached or row houses were built side by side, on narrow lots, facing the street. This type of house first appeared in walled European towns in the Middle Ages, and it survived in various forms for the next 500 years. Seventeenth-century Dutch towns, Baroque Paris, Georgian London, and the Victorian industrial city were all composed almost exclusively of row houses—it was simply the way that towns, and villages, too, were made.
The row house proved remarkably adaptable to various social circumstances. The lower floor of a medieval row house was devoted to commerce or manufacturing, the upper floors to living. Rich people lived in large, wide houses; the poor lived in smaller, narrower ones. Sometimes the two classes shared the same house—in Regency terraces, the basement was given over to kitchens and servants'quarters, and the owners lived above. The Parisian town house carried social stratification further: the ground floor was usually a shop; the first floor contained a grand apartment; the upper floors contained less expensive lodgings, with lower ceilings; and at the top of the stairs, in the garret below the roof, were the cheapest rooms.
A similar adaptability was evident in the American row house, which was where people lived in all the Eastern Seaboard cities. The so-called Philadelphia bandbox was a tiny row house, ten to sixteen feet wide, built for renting to recent immigrants; on fashionable Society Hill the houses were wider and grander but were also built in rows. The standard American city lot was about twenty-five feet wide, a dimension that could conveniently accommodate a living room and a hallway on the lower floor and two bedrooms above. New York had its brownstones, Boston the streets of Beacon Hill, and Baltimore rows of modest brick houses. As in Europe, the row house was not found only in cities. The Colonial Delaware town of New Castle, for example, was scarcely more than a large village, but many of the houses were row houses, which still give the historic district an urban, and an urbane, air.