Why Is the USDA Involved in Housing?
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This article discusses the historical origins and mission creep of USDA housing programs, originally created in the 1940s to support farmers but now providing roughly $10 billion annually in housing assistance to rural non-agricultural communities.
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Why is the USDA Involved in Housing?! - Marginal REVOLUTION Thank-you! You've been successfully added to the Marginal Revolution email subscription list. In yesterday’s post, The 21st Century ROAD to Housing Act , I wrote that Trump’s Executive Order “cuts off institutional home investors from FHA insurance, VA guarantees and USDA backing…”. The USDA is of course the United States Department of Agriculture . In the comments, Hazel Meade writes: USDA? Wait, what???? Why is the USDA in any way involved in housing financing? Are we humanly capable of organizing anything in a rational way? It’s a good question. The answer is a great illustration of the March of Dimes syndrome . The USDA got involved with housing in the late 1940s with the Farmers Home Administration. The original rationale was to support farmers, farm workers and agricultural communities with housing assistance on the theory that housing was needed for farming and the purpose of the USDA was to improve farming. Not great economic reasoning but I’ll let it pass. Well U.S. farm productivity roughly tripled between 1948 and the 1990s as family farms became technologically sophisticated big businesses. So was the program ended? Of course not. Over time the program subtly shifted from farmers to “rural communities”–the shift happened over decades although it was officially recognized in 1994 when the Farmers Home Administration was renamed the Rural Housing Service. Today rural essentially means low population density which no longer has any strong connection to agriculture. So that’s the story of how the US Department of Agriculture came to run a roughly $10 billion annual housing program for non-farmers in non-agricultural communities. And how does it do this? By supporting no-money-down direct lending and a 90 percent guarantee to approved private lenders. Lovely. It’s a small program in the national totals, but an amusing example of the US government robbing Peter to pay Paul and then forgetting why Paul needed the money in the first place. Marginal Revolution University See Courses Learn more about Mercatus Center Fellowships Learn More Subscribe via Email Enter your email address to subscribe to updates. Email Address Subscribe RSS Feed Contact Us Alex Tabarrok Email Alex Follow @atabarrok Tyler Cowen Email Tyler Follow @tylercowen Webmaster Report an issue Blogs We Like Interesting People & Sites Our Web Pages Alex Tabarrok's Home Page Alex's TED talk, how ideas trump crises Conversations with Tyler FDAReview.org Tyler Cowen's Personal Web Page Tyler's ethnic dining guide Apply to Emergent Ventures Books Modern Principles of Economics Tyler Cowen & Alexander Tabarrok