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Intro
This is the size of the median home built in America today: about 2,200 square feet. And this is the size of the median home 80 years ago: only 1,100 square feet.
Seems like a success story, right? But there’s a problem. Nobody can afford this. Because houses have also gotten more expensive, faster than wages and wealth have grown.
So why are these being built and what happened to the “starter homes” we used to build? I dove into almost 200 years of housing history—zoning policy, building codes, mortgage rules—and realized that this is essentially illegal to build today. That sounds insane…because it is…but it’s true.
In some places, people literally sat down and wrote laws that said you cannot build small, affordable homes. But the problem is a lot bigger than that. Over the last century and a half, we made a series of choices aimed at making homes more attainable, safer, and better: a series of choices that denied people what they needed, sold them lies that have repeatedly broken our country, and did nothing to resolve the underlying problems.
Through a combination of malice and mistakes, we have sleepwalked into a catastrophic housing crisis, and nobody seems to realize how we got here and what we have to do to fix it.
People need security, they need homes to build a future, to build a country, to coexist peacefully and to trust each other. This issue couldn’t be more important. So that’s what we’re going to dig into.
This is why homes have gotten so big and so expensive.
Phase One
Nothing changes
For a long time, houses in America didn’t grow, and neither did their prices, really.
Between the mid-1700s and mid-1800s, the median home size remained relatively flat: about 850 square feet. The country was growing faster than its population, keeping land cheap. At the same time, limited to no regulation of construction kept costs low.
Yet homeownership didn’t skyrocket, and home sizes didn’t balloon, because people were relatively poor, houses remained relatively expensive, and very few people had access to loans and lending.
But then something happened.
Industrial revolution
The industrial revolution arrived and transformed American cities. Almost overnight, they filled with factories and millions of laborers from all over the country and all over the world. Hastily-built apartments soon filled every spare corner and crevice in major industrial cities, cramming millions into hastily-built apartments.
In addition to blowing up demand and costs for the limited land in cities, this rapid urbanization and overcrowding brought crime, disease, and urban fires. In response, cities like New York began adopting rules to regulate home-building. First came building codes: standards of construction quality and fire safety to improve dangerous living conditions. Then came zoning plans: restrictions on building height, density, and where you could build what. These were unprecedented moves, but lawmakers argued that they were essential to mitigating danger and overcrowding. Yet zoning—by limiting the number of possible homes in a plot of land—and codes—by placing more demands on construction—both threatened to push up housing prices.
However, by 1920, the median home actually got bigger—now 1,000 square feet—and, at $80,000 in today’s money, was fairly affordable too. This was all thanks to a few major changes. (source, p.57) First, electric trolleys and cars transformed the outskirts of cities into practical places to live, countering urbanization land cost pressures. Second, industrialization reduced construction costs, negating the the increased expense of compliance from new zoning and code restrictions.
And to top it all off, access to institutional finance spread, enabling millions more to take out modest home loans. These covered only up to 50% of the home’s value, meaning buyers had to have the cash to pay half the home’s price up-front and had to pay off the remainder quickly — within about five years. These had been the go-to home loans for ages, but they were becoming much more common, making homeownership far more attainable. Together, these factors combined in the ‘20s to produce a massive housing boom.
So policy responses to urban crowding could have caused a huge supply shortage and blown up housing costs, but technology and modest financing averted that catastrophe. The question now was, what happens if zoning gets even more restrictive, codes get more stringent, threatening to raise costs again? And what if then, there are no more transformative technologies? Would we simply continue to chase inflating prices with ever more generous financing? This is crucial to explaining today’s housing crisis, but for now this disastrous situation had not yet come due. In the 1920s housing was booming.
In fact, it was booming so big that people started trading packages of mortgages on the stock exchange, gambling on the American housing market.
Depression
But in 1929, the boom became a bust.
The Great Depression. The economy collapsed, and people suddenly got a lot poorer. Houses stopped getting built, millions defaulted on those high-cost home loans, and homelessness skyrocketed.
In response, America elected FDR, and to get roofs back over Americans’ heads, he proposed a new 80/20 mortgage. Insured by the federal government, these loans meant only 20% of a home’s value had to be paid up-front, and the remaining 80% could be paid off over 10- to 15-years, at a fixed interest rate set at time of purchase. (link)
This was revolutionary. Where before twenty-thousand dollars could maybe afford a forty-thousand dollar home, now that same ternty-thousand could “afford” a home costing eighty- or a hundred-thousand dollars, courtesy of FDR. By the way, he also made gambling on mortgages illegal. That will be important later.
These were the seeds of another housing boom: cheap land thanks to new transportation technologies, cheap industrialized construction, and cheap money widely available, as long as you weren’t Black.
By 1950, the median home grew to 1,100 square feet. But it’s easy to miss that something fundamentally transformative has happened here. The 1920 upsize came as a result of transformative technological advances. This was different. Industrialization continued, but from 1920 to 1950, the progress here was nowhere near as revolutionary. Instead, this was the result of changes in financing. Homes weren’t growing based on real changes in what was affordable but in seismic shifts in the kinds of loans being handed out, thanks to government insurance.
That, folks, is called a “bubble,” and it’s about to get a lot bigger.
Phase Two
Golden Age
Because at this same time, the lending rules got even more relaxed. 80/20 became 90/10, and repayment schedules stretched to 30 years. This was the key to the postwar housing boom that gave us the truly massive suburbs America knows all too well like Lakewood, California. Here, industrialized construction, automobiles, highways, and near-guaranteed sales thanks to incredibly cheap financing made a massive housing project a no-brainer. Here, they built 17,000 homes in three years on the outskirts of Los Angeles (B, Ch. 1). The median cost of a home in today’s dollars was $100,000.(C)
Seems like a dream…but it didn’t last.
Minimum Lots
Right about this time, Los Angeles county implemented new zoning rules that set minimum lot sizes at 5,000 square feet and restricted huge areas to single-family construction. And LA wasn’t alone. Between 1940 and 1970, minimum lot size rules and single-family zoning exploded across the country (D, 47).
This is really important, because if lots had to be a certain size and could only hold one unit of housing, that increased the minimum cost of a home. No matter how small you built, the land expense stayed the same. So to make money, builds had to get bigger, to justify higher sale prices, to turn a profit. This “price floor” effectively outlawed cheaper homes, which was actually the point! It helped places like Lakewood, which was 99% white in 1960, stop poor minorities from buying homes in their neighborhoods, effectively creating an apartheid housing system (E; D, 2).
By 1970, the median home climbed to 1,500 square feet while the price followed suit, reaching $140,000 (F, 345; G). This was the dangerous scenario foreshadowed in the 1920s. Zoning was getting more restrictive. Prices were climbing, but crisis was still averted—or covered up—by increasingly generous financing subsidizing increasingly unaffordable homes. Building codes too, were about to get much worse.
Environmental Review
Thanks to suburbs, highways, and cars, cities like Los Angeles were increasingly choked in smog. Awareness was growing that construction and homebuilding were causing huge environmental damage. So activists formed groups and demanded legislation to protect the environment, and in 1970 they secured what seemed like big wins.
California Governor Ronald Reagan signed the California Environmental Quality Act or CEQA, requiring environmental impact reviews to make sure government buildings—typically large projects—weren’t damaging the environment. Then the California Supreme Court decided that actually just about every building in the state had to complete these studies, which could be lengthy and expensive (B, Ch. 1). Similar rules soon spread nationwide. At the same time, increased home safety and energy efficiency standards made building codes all over the country increasingly complex and expensive to comply with (B, Ch. 1).
Though these seemed like wins for the environment, they were in fact disastrous. Each of these decisions merely piled on costs to homebuilding, incentivizing even bigger and more expensive homes to recoup those costs which, again, could only be achieved via suburban development. No reforms were made to minimum lot sizes or single-family zoning, the real drivers of environmental damage. When we needed density and affordability, we instead got sprawl and inflated costs. By 1980, the median new home was about 1,600 square feet (F, 345). Yet the price tag in today's dollars, thanks to all these new rules, jumped to over $200,000 (G).
Finance
You may be thinking, how was the average American’s budget able to keep pace? Well, it couldn’t, really. By the 1980s, incomes weren’t keeping pace. But instead of addressing these cost-drivers, Congress and now-President Reagan had a different idea.
In 1982, they matched FDR’s ambition: introducing the adjustable-rate-mortgage (H). These had low interest rates when taken on, but the lenders could increase them with time. As Reagan said when he signed the bill, “All in all, I think we hit the jackpot.”
Lenders, buyers, and builders agreed. Buyers were excited by “0% interest for 3 years.” Lenders were excited to sell buyers on 0% interest, before cranking rates up three years in. And builders were excited for the unsustainably elaborate construction this all paid for.
Then, in 1999, Bill Clinton repealed FDR’s rules on mortgage securitization, so people started trading packages of mortgages on the stock exchange again, just like they were doing right before the Great Depression (J).
By 2000, the median home being built was 2,000 square feet, double the size in 1920, and the price more than tripled since then, reaching $230,000 in today’s money.
Now, let’s take stock here. Regulations and zoning rules made building codes more onerous, long environmental reviews more common, and set minimums on lot sizes while restricting where builders could build, and what kinds of housing they could develop. All of this made it basically illegal to build small or dense multi-family projects. In turn, everything got more expensive.
Then when buyers started to feel the squeeze, instead of taking steps to stop the runaway train, the government decided to authorize easier credit, shoveling more coal in the fire. Oh, and then they went and repealed regulations on stock trading that were invented in response to the biggest stock market crash in history.
What could possibly go wrong?
Phase Three
Spoiler alert: everything!
In 2006, people who’d bought their homes on those adjustable rate mortgages were running out of their ability to pay. The default rate started to climb. By 2007, it was clear the housing bubble was bursting. The next year, it reached a full blown crisis. And thanks to Clinton’s mortgage trading, when the housing market went down, it took the whole damn American economy with it, and the rest of the world’s too (K).
Unsurprisingly, this economic catastrophe absolutely wrecked the home construction industry. Housing production plummeted (L). In the aftermath of the crisis, Congress enacted new regulations on the financial sector, justifiably aiming to prevent the mismanagement that precipitated the crisis (M).
Yet this, too, had consequences, as finance sources for housebuilding dried up. Home construction hasn’t come close to pre-2007 levels since (L).
The underlying problems that had led to the crisis went unaddressed. Builders kept chasing profits that would outpace zoning, code, and permitting restrictions, and now they were also just building fewer homes, so prices were beginning to climb even faster as supply tightened.
So the median house size and price just kept growing. By 2015 it reached 2300 square feet and $270,000 (F, 345; G).
And then, COVID happened.
On its own, this actually brought a brief dip in home prices as the economy shut down, spending tightened, and demand shrank (G). But as the pandemic waned and spending resurged, the global economy was slow to spin back up, breaking supply chains and driving up inflation, especially in vital construction materials. Home prices went right back up (G).
Even worse, this inflation pushed the US Federal Reserve to raise interest rates, to reduce lending, spending, and further inflation (N). This, by design, drove up rates on all kinds of loans including mortgages, forcing prospective buyers out of the market (O). Thanks to the suppressed demand, already lagging post-2008, slowed further.
In case that wasn’t enough for our fragile housing market, our current president, a former real estate “tycoon” has levied unconstitutional taxes to smother the economy with massive tariffs on imported goods—again, including essential construction materials (P).
All together, the median new home today is 2,200 square feet, so it’s actually shrunk a bit since 2010. But the price hasn’t. It’s gone insane: over $400,000 (G). Less house, more money, fewer options. The median age of a first-time homebuyer has risen to 40 (Q). In 1950, it was 25. Priced out of homeownership, people like me and probably you are overcrowded in the rental market, which itself has become ridiculously expensive thanks to surging demand, and a limited supply on account the same zoning restrictions, building codes, and material costs that have destroyed the housing market. Moreover, these cost-drivers aren’t just being ignored. They are actively encouraged!
Trump has repeatedly campaigned as a defender of suburbia and single-family zoning, while lately he’s proposed a new 50-year mortgage (R)!
Great idea, that’ll solve it!
The Way Forward
So, where do we go from here?
If all this history teaches us anything, we must axe the minimum lot sizes, reduce single-family zoning, be judicious with environmental reviews, streamline compliance with safety and energy codes, free up investment to build more homes, and quit the stupid inflationary tariffs. In short, we have to make building cheaper, and we have to build.
Luckily, in some places we’re making some progress.
California, the capital of sprawl and skyrocketing housing costs, has passed a whole slate of pro-housing measures to loosen zoning restrictions and ease the permitting process, like Senate Bill 9 passed in 2021. SB9 allowed property owners to split lots zoned for single family homes in two and to build duplexes on those lots, in theory quadrupling the number of units that could be built in areas that were once highly restricted(S). Yet, out of millions of qualifying lots in California, only a few hundred owners have taken advantage of the new rules, because communities all over California have invented all kinds of new complexities in their own zoning rules, building codes, and environmental review processes to protect their home values make implementing SB9 nearly impossible (T).
This happened because so many housing regulations are fragmented across municipalities. But that doesn’t just impede reform efforts. It also just generally increases housing construction costs, because it’s hard to achieve economies of scale when you need to change your building practices to match the arcane requirements of each city and apartheid-esque suburban enclave you want to build in.
Compare this to countries like Sweden or Japan, where codes are more uniform. Typical construction happens far more frequently and far more cheaply, while offsite mass production of modular pre-fabricated housing also makes up a significant chunk of both of those countries’ markets, allowing for far greater scale in production, helping to keep costs in line (U).
They also don’t do massive tariffs on imported construction materials. Tends to help.
Then there’s the problem of finance. Looking at the long sweep of this history, a mix of good and bad intentions have landed us with a financial system around housing that’s encouraged predatory lending and induced borrowers to step well outside their budgets, putting the entire housing market on shaky footing. But on the flipside, reforms, inflation, and raised rates since 2008 and Covid, which tightened the money supply, haven’t helped. They’ve only made homeownership less attainable.
It seems like a catch-22. Either easy money subsidizes runaway costs, or tight money prices people out. But this tradeoff isn’t built-in. It’s a result of home costs artificially inflated by bad zoning, bad codes, and bad trade policies. If we fix this cost disease first, then we can stop chasing runaway prices with irresponsible financing schemes. Then we can putting budget-friendly roofs over American heads, like we used to.
Conclusion
But of course, with all things in politics, it’s one thing to understand the problem, to know the solution, and quite another to actually get that done. Local or national, one major problem, as writers like Ezra Klein have pointed out, is that even with the very best reforms, homebuilding is a slow process and bringing down prices will take years at best.
In a country with unusually short election cycles and intense polarization that inhibits rational policy-making, it will be easy for those who are invested in the status quo to exploit our divisions and seize on slow progress to reverse changes before they bear fruit.
But difficulty is no excuse for inaction. For the vast majority of Americans, the single largest line item in their monthly budget is going to be rent or mortgage. And that’s important, because a lot of folks—we here at Spectacles included—have spent years puzzling over why people, especially young people, are losing faith in our democratic system. It’s inconceivable that the skyrocketing cost of shelter and the dwindling hope of homeownership have nothing to do with it.
Politics is the merely the vehicle for our collective attempt to build the good life, and people cannot trust a political system that routinely rug-pulls their basic, most fundamental needs. People need homes where they build lives, families, and futures, not mansions that require an unsustainable down payment at an adjustable interest rate. Yet over the course of a century, we built a system that denied people what they needed, sold them lies that have broken our country time and time again, and then done almost nothing to resolve the underlying problems.
It’s not an exaggeration to say that when liberal democracy in the United States is in a profound crisis, this might be the most important issue to resolve if we’re to restore even a semblance of faith in that system.
Post-Script
This video was a beast. Turns out, 200 years of housing market history is…complicated. We couldn’t cover every single detail, but we did our best. We hope this production style, free of AI slop, and these 3d-printed models helped make it all make some sense. If you believe in what we do and want to help make more stories that matter to democracy, consider patronizing our sponsor, by downloading AnyDesk for free, grabbing some of our merch like this new sweatshirt, this coffee mug, or this poster, dropping a tip down below, sharing the video, or by joining our Patreon. By the way, if you’re keen to grab some of these models, let us know and subscribe. We may make some available soon. And as always, thanks for watching.
Sources
**NOTE:** All pre-2025 dollar amounts have been adjusted using this inflation calculator: https://www.usinflationcalculator.com/
A. “The State of the Nation’s Housing 2025.” 2025. Harvard.edu. 2025. https://www.jchs.harvard.edu/state-nations-housing-2025.
B. Ezra Klein and Derek Thompson, *Abundance* (Avid Reader Press, 2025).
C. “Lakewood, California (and the Lakewood Plan)" in Goldfield, David. 2007. Encyclopedia of American Urban History. SAGE Publications, Inc. EBooks. SAGE Publishing. https://doi.org/10.4135/9781412952620.
D. Tianfang Cui, 2023. “The Emergence of Exclusionary Zoning across American Cities.” https://www.tom-cui.com/assets/pdfs/LotsEZ_Latest.pdf.
E. Ryan Reft, “[The Lakewood Plan: Homeownership, Taxes, and Diversity in Postwar Suburbia](https://www.pbssocal.org/history-society/the-lakewood-plan-homeownership-taxes-and-diversity-in-postwar-suburbia),” *PBS SoCal*, 16 January 2015.
F. US Census Bureau, “2015 Characteristics of New Housing,” 2015.
G. U.S. Census Bureau and U.S. Department of Housing and Urban Development, Median Sales Price of Houses Sold for the United States [MSPUS], retrieved from FRED, Federal Reserve Bank of St. Louis.
H. Garn-St. Germain Depository Institutions Act, Title VIII (1982).
I. Ronald Reagan, “Remarks on Signing the Garn-St Germain Depository Institutions Act of 1982,” 15 October 1982.
J. Joe Mahon, “Financial Services Modernization Act of 1999 (Gramm-Leach-Bliley),” *Federal Reserve History*, 22 November 2013.
K. John Weinberg, “The Great Recession and Its Aftermath,” *Federal Reserve History*, 22 November, 2013.
L. U.S. Census Bureau and U.S. Department of Housing and Urban Development, New Privately-Owned Housing Units Started: Total Units [HOUST], retrieved from FRED, Federal Reserve Bank of St. Louis.
M. Keith Goodwin, “Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010,” *Federal Reserve History*, 22 November 2013.
N. Board of Governors of the Federal Reserve System (US), Federal Funds Effective Rate [FEDFUNDS], retrieved from FRED, Federal Reserve Bank of St. Louis, December 8, 2025.
O. Freddie Mac, 30-Year Fixed Rate Mortgage Average in the United States [MORTGAGE30US], retrieved from FRED, Federal Reserve Bank of St. Louis.
P. Alex Strong, “How Tariffs Impact the Home Building Industry,” *National Association of Homebuilders.*
Q. “First-Time Home Buyer Share Falls to Historic Low of 21%, Median Age Rises to 40,” *National Association of Realtors*, 4 November 2025.
R. Samantha Delouya, “Trump just floated a 50-year mortgage. Is that a good idea?” in *CNN*, 11 November 2025.
S. Conor Doughty, “After Years of Failure, California Lawmakers Pave the Way for More Housing,” *New York Times*, 26 August 2021.
T. Ben Christopher, “‘Limited to no impact’: Why a pro-housing group says California’s pro-housing laws aren’t producing more,” *CalMatters*, 24 February 2025.
U. Francesca Mari, “How an American Dream of Housing Became a Reality in Sweden,” *New York Times*, 26 June 2024.
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