Mutual Ownership Defense Housing Division

The Mutual Ownership Defense Housing Division of the Federal Works Agency, an agency of the United States government, operating from about 1940 to 1942 under the leadership of Colonel Lawrence Westbrook, was an attempt by the United States Government, late in the New Deal, to respond to the housing needs facing defense workers and develop housing projects for middle-income families utilizing the cooperative/ mutual housing ownership concept. Under pressure by entrenched real estate interests and intense and competing resource needs caused by World War II, the Division lasted for only two years. As stated in the Second Annual Report of the Federal Works Agency:

"As a group, defense workers were also poor candidates for individual home ownership because the duration of their employment was uncertain, and because few of them had savings adequate to finance the downpayment on new homes. Recognizing these characteristics, attention was given early to some special form of housing to meet squarely the economic problem of the defense worker and one which, at the same time, might lead to an ultimate solution of the housing problems of millions of other American families of similar economic status."

Limited staffing resources within the Division also resulted in poor management practices, and a number of the projects were investigated for cost overruns and poor construction standards. Although only eight projects were ever built by the Division, all but one were eventually purchased from the government by their residents and continue to operate as mutual home corporations as of 2009. The Mutual Ownership Defense Housing Division projects can be considered a rare but important example of successful public housing within the United States.

During its very brief existence - from the autumn of 1940 to the winter of 1942 - the Mutual Ownership Defense Housing Division built the following eight projects.

Additional Mutual Ownership Defense Housing projects were planned but never built in Alcoa, Tennessee (250 units); Long Beach, California (600 units); Beaumont, Texas (600 units); Buffalo, New York (1,050 units); Coatesville, Pennsylvania (400 units).

Late New Deal public housing

By the middle of the 1930s the Franklin D. Roosevelt Administration began to bring attention to the housing plight of lower-income groups in the United States. Many of the New Deal administrators became convinced that decent housing was the right of every citizen, and believed it the duty of the government to find ways to provide such housing. A decentralized lower-income housing program was developed, which relied heavily on local community involvement, organization, and input. Financial and administrative support for this initiative were provided by the federal government. In support of this effort, a well-developed public relations campaign was begun to promote and explain the need for public housing, and to establish popular support for the program. Some administrators of the housing program were not satisfied with assisting only the lower-income groups. They asked why programs could not be expanded to assist the middle-income groups in finding decent, affordable housing. Able to afford higher rents, yet often unable to accumulate the required down payments for ownership, members of the middle-income group found it very difficult, if not impossible, to make the jump from renting a house to owning it. Affordable housing plans were developed but were unable to garner the necessary support within government circles, and they were filed away to await a time when the environment would be right for implementation. Surprisingly, the wait was not long. Just prior to direct American involvement in World War II, the nation entered an emergency period of military buildup that required the development of housing for the middle-income defense workers then streaming into defense plants across the country. The nation's entire public housing program needed to adjust quickly to the needs of the middle-income worker, and the proposals for housing programs—filed away just a few years earlier—were dusted off. During this relatively brief period of time (1940–1941) just prior to the outbreak of war and its accompanying material shortages and limitations, housing officials had a great deal of freedom to implement these experimental middle-income housing plans.

The Housing Act of 1937 directed that initial motivation, maintenance, and partial funding of the housing program originate as the local level. The federal government would now provide loans and subsidy assistance to local public housing agencies for the construction and operation of projects for "families whose incomes are so low that they cannot afford adequate housing provided by private enterprise." Those involved actively with public housing were generally pleased with this readjustment in operations. One federal publication stated that "..we must remember that in 1931, Government housing was only a dream of progressives. Today it is a fact and there is strong reason to believe that, in the near future, it will be recognized as a permanent necessity ..." The United States Housing Authority (USHA) was soon established to facilitate the implementation of the Housing Act of 1937. The USHA was charged with the responsibility for the development and administration of all federal public housing programs. One of the Authority's first efforts was the implementation of a public relations campaign to establish popular support for the housing program that would help blunt attacks from the construction industry and others enemies. ''Public Housing'' was a highly polished monthly publication distributed as part of this public relations campaign. This publication not only discussed the benefits and justifications of public housing programs, but charted progress on a national scale. Many other government agency publications also took a very protective and supportive—some might say radical—tone concerning the newly established United States Housing Authority and its mission:

"A clear-cut opposition (to public housing) has been formed of which the spearhead is the Realtor. He sees in this work an invasion of the field of private initiative and contends that Government housing projects subject him to unfair and ruinous competition ... Every attempt is being made to restrict competition with private enterprise to that restricted field where operators exploit the misery of the underprivileged. Here the competition is deliberate and amply justified."

Many public housing officials in the Roosevelt Administration were progressives, and had strong convictions about the right of all citizens to inexpensive, quality housing. The provision of decent housing seemed to many of these officials to be a key to the preservation of democracy during the dark days of the Depression. Housing was simply too important a concern to be left only to private industry, labor, or even individual citizens; they believed it was the responsibility of the government to take the lead. Sentiments such as these quickly led to the consideration of public housing programs for those other than just the low-income groups. But the government creation of middle-income housing projects was viewed by many members of the nation's building and real estate industry to be a much larger threat to their livelihood than that designed for the lower-income group. Although pressure from these groups did not stop the development of innovative middle-income housing programs, it did stop those programs from being implemented during the 1930s.

In 1939, the Federal Works Agency (FWA) was established with the aim of consolidating all government public works programs, including those for public housing, into one agency. This new agency became responsible for the United States Housing Authority(USHA), its planning and operations; under a great deal of pressure, the FWA promptly filed away the newly developed plans for middle-income housing initiatives. However, few of those involved in the design process forgot about these innovative ideas, and hoped that one day they would be reconsidered.

Defense housing programs

The 1940s began in a state of global crisis as the European and Asian Wars began rapidly expanding into what would eventually be known as World War II. The United States, although officially neutral, was busily taking defensive measures to ensure national security, while also attempting to assist friendly nations already in the midst of the fighting through measures such as the Lend-Lease program with Great Britain. The corresponding expansion of defense industries, especially those located along coastal areas, and the massive migration of workers into these booming regions, created a serious housing shortage that demanded immediate government intervention. On June 20, 1940, the Congress passed the National Defense Bill. Shortly thereafter, on June 28, the 1937 United States Housing Act was amended, instructing the USHA to waive income requirements for potential public housing residents, and to apply all remaining monies from low-income housing projects into efforts to house defense workers. Additionally, monies were made available for defense housing through the President's Emergency Defense Fund. In July 1940, President Roosevelt created the position of the Defense Housing Coordinator to oversee the new defense housing effort. Out of political necessity this position possessed only limited authority, and the Coordinator was instructed by the Presidential directive to fit the defense housing program into the decentralized public housing program already in existence since the 1930s. Real authority for the Defense Housing effort would remain vested in the FWA and its administrator, John Carmody (This administrative structure would last only until early 1942, when wartime limitations not only permitted but necessitated far greater centralization.)

The establishment of the defense housing program accelerated quickly after the passage of National Housing for Defense Act of 1940 (also known as the Lanham Act) by Congress on October 14, 1940, which provided $140,000,000 for defense housing construction. The Lanham Act specified that, "The housing is to be wherever feasible of a permanent nature, and after the emergency has passed these homes are to be disposed of, and in that way the Government is to recoup the initial investment ... and they will be available for permanent homes." The cost per unit was set at, and not permitted to exceed, $3000. By its very nature, defense housing was primarily constructed for the middle-income employees of the defense industry. The Act also empowered the Federal Works Agency (FWA) to overrule local governmental resistance and regulations in order to expedite construction. Additionally, it ensured that the host communities of defense housing projects would receive payments from the federal government, in lieu of taxes "equivalent to full ad valorem tax, less the cost of any municipal services provided by the project". During the war years the Lanham Act was regularly amended by Congress in order to provide additional funds for housing and to adjust various aspects of the Act, especially its impact on local communities. By 1945, almost 9,000,000 individuals had been provided with housing. Total costs approached $7.5 billion ($5.2 billion private financing and $2.3 billion public financing), with the average unit costing $4,566.00.

The Federal Works Agency, as the principal governmental agency responsible for construction, maintenance and disposal of defense housing constructed prior to 1942, established three goals for its efforts:

1. To provide housing to defense workers as quickly as was possible.

2. To provide housing to defense workers as inexpensively as possible,"in accordance with the permanent or temporary character of the need and prospective uses of the facilities."

3. To provide to employees housing of a quality and standard that "benefits the defense personnel for whom the housing is constructed, and for the purpose of realizing the maximum permanent public benefit to be derived from the new housing."

The concept behind mutual home ownership was developed in the late 1930s and filed away by the FWA as were other middle income housing plans. But the emergency guidelines and policies outlined by the Lanham Act, the goals of the FWA, the availability of necessary resources, and the decentralized administrative structure for the development of public housing all contributed to an ideal environment for experimentation in public middle-income housing. The mutual housing concept was taken off the shelf, to be tried as an experimental community. An entirely new office was established by FWA in support of this effort. Headed by Colonel Lawrence Westbrook, this office was known as the Mutual Ownership Defense Housing Division.

Mutual home ownership concept

One of the United States government's plans for middle-class housing was the Mutual Ownership Defense Housing Division of the Federal Works Agency (also sometimes referred to as the "Camden Plan" in honor of the city closest to the first project at Audubon, New Jersey). From the conception of the Division; through the development of its eight projects;, and to its demise at the hands of inept management, wartime limitations and shortages, and attacks from powerful enemies was only a short few years. By the conclusion of the Second World War, the Mutual Ownership Defense Housing Division was all but forgotten. The Division's eight projects were presented by critics as unworkable and highly unattractive projects in the economic and political environment of the post-war period. But almost seventy years later, all but one (Dallas Park) of these projects is reported as continuing to operate as highly successful mutual housing corporations. The passage by the United States Congress of the Housing Act of 1937 can be thought of as a reaction to criticisms of earlier New Deal low-income housing programs operated through the office of the Federal Emergency Administrator of Public Works. Many officials were concerned about the over-centralization and disregard for local involvement and control in these early experimental programs.

The Mutual Ownership Defense Housing Program, as designed by Westbrook and his team, called for government construction of houses or apartments to be occupied—and eventually owned—by middle-income defense workers. A key to the plan was the commitment made by the federal government to sell the projects, at the conclusion of the emergency period, to a non-profit Mutual Housing Corporation made up of the projects' residents. This cooperative, non-profit corporation would be initially supported and advised by the government and later turned over completely to the members. This corporation would be responsible for amortizing the government backed mortgage over a 45-year period through monthly payments that included a 3% interest charge on the unpaid balance. Each of the project's residents would be a member of the corporation, and receive a contract from the corporation entitling him/her to perpetual use of his/her unit and one share of stock in the corporation. The monthly payment made by each member to the corporation would include individual amortization payments based on a 30-year rate, as well as set costs for maintenance, taxes, insurance, major repairs, etc. Each share was interchangeable among residents, thus allowing families to easily exchange different size units as family sizes and needs changed over the years.

As an added bonus, each member would build ownership equity within the corporation,

"since, during the amortization period, the tenant is paying off his share of the mortgage in 30 years, rather than the 45 years allowed the corporation, he is in effect enabling the corporation to make prepayments on the principal owed to the Government. In this way he builds up an equity, or cash value, equal to the original value of the house, less depreciation and less the amount of principal still unpaid. Should he wish to withdraw from the project the equity is returnable to him in cash. Moreover, if for hardship reasons such as unemployment or illness he is unable to meet his monthly payments, the equity can be drawn upon to tide him over."

This equity could also be available to the Corporation as an emergency fund.

In a mutual home ownership corporation, rents are kept low by creating an economy of scale. There are also savings for mass-construction, improved land use, centralized facilities, operating economies, and maintaining a non-profit status. Costs can also be contained—although controversially—by the federal government providing all necessary public works (i.e. sewers, streets, curbs, sidewalks) through the Works Progress Administration (WPA). According to Colonel Lawrence Westbrook, membership in the community should be based on a process in which individuals of predominantly similar income groups from a cross-section of area occupations, and from different age groups, are selected. These demographics made the community less vulnerable to economic crisis, while the differing family sizes and space needs allowed for flexibility in housing requirements. Plans called for the final selling price of the Mutual Housing project to be set through negotiations between two separate appraisers—one representing the federal government and the other representing the Corporation—and title would be transferred at the 20% amortization point.

Advantages of the Mutual Housing plan

Testifying before Congress in the summer of 1941, Colonel Westbrook outlined the following advantages that he believed would result from the implementation of the Mutual Housing program:

Advantages for Workers

#Permits the building of substantial financial reserves for bad times through the elimination of down payments and high rents for housing.
#Allows interchangeability of housing units to account for changing family conditions.
#Enables a family to maintain a substantial investment in a "facility in which it will always have a personal need."
#Prevents individual foreclosures through cooperative risk sharing.
#Group maintenance and repair is possible and can be accomplished at less cost while also maintaining a uniform community appearance.
#During times of financial stress the program will permit large-scale refinancing and a more effective means for investment protection.

Advantages for the Government

#Affords a better protection for the Government's investment by reason of the occupants' direct concern and interest in their homes.
#Eliminates a sudden flood of housing in the real estate market at the conclusion of the emergency, because "occupants in the Mutual Housing program will have been selected on the basis of their probable permanence, high credit ratings.."
#Improves the chance of recouping original investment by permitting the purchase of the project by its residents.
#Creates a stable and responsible community with lower defense worker turn-over.
#Creates a new and valuable pattern for home building.

Advantages for the Host Community

#Acquires a group of carefully selected stable new citizens.
#"Full participation of the residents of the project in community affairs and in the sharing of the community expenses."

Supporters

Among the first groups to support (and continue to support) the plans of the Mutual Ownership Defense Housing Division was the Industrial Union of Marine and Shipbuilding Workers of America, a member union of the Congress of Industrial Organizations (CIO). Representatives from the Kearny, New Jersey

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