Before WW2, a house was something you lived in. There were no 30 year mortgages — there were one year personal loans backed by property, which had to be renegotiated each year. These loans were for only up to 50% of the price of a home, so you had to save up at least 50% to buy a home. The end result was that most homes owned by regular working people were modest and often built by the people who lived in them. In the big cities, most housing was rental housing, though the burgeoning middle class could afford the new brownstone townhouses that were being built in places like New York City because they were relatively affordable.
Before WW2, once you bought a home, you expected to live in it for the rest of your life. You didn’t want its value to appreciate because that would result in higher property taxes. Houses were not piggy banks. They were not a savings instrument. They were a place to live.
Starting after WW2, you had Fannie Mae and Freddie Mac and FHA loans and VA loans and so forth. The 50% deposit before the war became a 20% deposit, or even less with the FHA and VA loans. What this caused was housing inflation. With more money going into a fixed stock of housing, the price of housing rose. This in turn encouraged builders to build more housing, often better housing than the existing housing stock, which encouraged people to sell their current house and buy a bigger / better house. People started wanting the value of their home to appreciate because when they sold their current home and bought up to a better home, that meant they could buy a bigger / better house. Then once people reached retirement age, it meant they could buy a smaller house in a cheaper part of the country and bank all that appreciation as income for their retirement.
Sometime in the 1970’s, people who owned houses realized: If we don’t allow more houses to be built, demand for our houses will go up, and then we will be able to get more money when we sell our house! This realization didn’t happen nationwide. It happened mostly in affluent cities like San Francisco and New York City. NIMBY-ism became predominant in those cities. Anything that could cause a decline in the price of a house became basically illegal — including the construction of high density housing, the construction of housing for the poor or mentally ill, and so forth. And as the price of housing increased every year but no new homes were built, the poorest of the poor started being thrown out on the streets and told “Sorry, the American Dream is not for you. Live like a stray dog, not like a human being.”
So now the streets of major cities are clogged with homeless people, a large number of whom are mentally ill, who use the sidewalks as toilets because there are no public toilets, and the homeowners in these cities are outraged, outraged I say. But for some reason, their own part in this outrage never seems to occur to them. Strange, that, eh?