Magazine article The American Conservative

Roadblock on Main Street

Magazine article The American Conservative

Roadblock on Main Street

Article excerpt

How federal housing policies run downtowns out of business

As a child in the 1950s and '60s I lived in Red Lake Falls, Minnesota; Rushville and Muncie, Indiana; Bloomington and Springfield, Illinois; and finally Milwaukee. Their populations range from Red Lake Falls' 1,700 to Milwaukee's 603,000. But they had one thing in common: they all had Main Streets where people lived, worked, and shopped. Buildings typically had retail with a coffee house or barber shop on the first floor, and apartments or offices on the floor above.

But in most of America since World War II, new commercial developments have been built apart from residential spaces. Offices, too, are at a distance from everything else. As a result, Main Streets have become an historical form. They still exist, often in somewhat deteriorated condition, but almost none are newly constructed. Outside of "Main Street" at Disney's Anaheim and Orlando theme parks, it's hard to find a Main Street built in America since the first third of the 20th century. And it isn't because the public demands less integrated civic space.

Americans still hold a special place in their hearts for Main Streets. "The Andy Griffith Show" and many other classic TV series were built around them. In mythical Mayberry, Floyd's Barbershop was across from Sheriff Andy Taylor's courthouse. Deputy Barney Fife's fiancée, Thelma, lived in the apartment above Floyd's. This interesting assemblage reminds me of downtown Rushville, Indiana, in 1955, when a short walk from our house at 501 Morgan Street brought my older sister and me to an ice-cream parlor owned by Mr. Gimble, whose kindly mother lived upstairs. There were coffee shops, the Durbin Hotel, and the Boys Club where I played basketball on Saturday mornings.

I visited Rushville a few years back, and the downtown is changed. The hotel is closed, and most businesses now sit in parking lots on the edge of town. This is not a natural development, a direct consequence of free-market growth and evolution. It's in large part a result of federal housing policy.

The Federal Housing Administration was created in 1934, but it took until well after World War II for its effects to penetrate the economy. Before this, traditional streets composed of a mix of commercial and housing spaces-i.e., Main Streets-were common, partly because lenders appreciated that risk was spread over different types of real estate, which made loans safer.

For example, my uncle Earl Nelson, a D-Day veteran, became a plumber after the war. He lives in St. Paul, Minnesota, and after establishing himself in the plumbing trade he decided to start his own business. He bought a two-story building on Payne Avenue on the east side of St. Paul. It had two apartments on the second floor and space on the first floor for his plumbing company. When he applied for a loan, the banker was pleased that the building included two apartments. It reduced risk in that if the plumbing business took a while to become profitable, the apartments would provide cash flow in the meantime.

But if my uncle tried to borrow money for his building today, he would likely hear a different message from his banker. The bank would question the viability of a building that contained both a business and housing, as one or the other might fail and diminish the prospects for a return on capital and repayment of the bank's loan. Instead of looking at the diversity of uses as a way to reduce risk, nowadays mixing of uses is considered high-risk, particularly by agencies that issue government-subsidized loans, such as the Federal National Mortgage Association (Fannie Mae).

Yet despite this regulatory stance, in recent years the desire for traditional districts has steadily gained popularity. Demographic and consumer-preference changes over the last decade have created greater demand for walkable urban real estate in communities with mixed residential and commercial uses. New development has not served this demand because federal policies and practices discourage it. …

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