Feature
by Jessica Swesey
This month: Modern-day Land Grab Could Learn from the Home Stead Act.
The remarkable homeownership rate in America is not a free-market phenomenon. Since the time of our founding fathers, the government has had a deliberate policy of promoting and subsidizing property ownership. From the Declaration of Independence to the Homestead Act of 1862 to the modern policies of President Bush, both federal and state government have made it easy for more and more families to own a home. In this four-part series, we dig up the history around how the U.S. government seized on this idea of democratic ownership of property and made it the envy of the world. (See Part 1 in the May 2005 issue of this magazine).
With seven-million home sales in 2004 continuing a decade-long housing boom—fueled by low interest rates, a liquid mortgage-lending market and favorable federal housing policies—the United States today is experiencing the greatest land grab since the Homestead Act of 1862.
In the late 1800s, people lined up for their chance at owning land that the government was practically giving away as part of a plan to stimulate the settlement of western territory. Today, prospective home buyers storm real-estate Web sites, crowd open houses each week, and engage in cutthroat bidding wars for their piece of real estate.
Buyers in every state but California can today expect a median $180,000-price tag on their real-estate purchase and upwards of $400,000 if they are following the homesteaders’ footsteps and moving west to California. Thanks to a secondary mortgage market and down-payment assistance programs, it has never been easier to qualify for a home purchase—at least not since the late 1800s.
The Homestead Act, passed during the Civil War, on May 20, 1862, provided that any adult citizen or person intending to become a citizen, who headed a family, could qualify for a land grant of 160 acres. All families had to do was pay a small registration fee, build a house on the land and cultivate it continuously for five years. After only six months’ residence, a settler could own the land for a mere $1.25 per acre, a steal even in those days.
Daniel Freeman is identified as the first homesteader to make a claim for land under the Homestead Act, according to the Homestead National Monument of America Web site. Freeman reportedly filed his claim 10 minutes after midnight on Jan. 1, 1863, at the Land Office in Brownville, Nebraska. It was the first day the Homestead Act went into effect.
Thirty states were eligible for land settlement under the Homestead Act, and most were located in the West, the Midwest and some in the South. Non-homesteading states included almost all eastern states and Texas. About 8%-to-10% of land in the U.S., or 270 million acres, was settled under the Homestead Act. An estimated 400,000 to 600,000 families were provided with new farms as a result of the original act and amendments, according to a report in Ancestry Magazine by author and researcher Michael John Neill.
But like housing policies of today, there is some disagreement among observers about whether the Homestead Act ultimately succeeded or failed in its original intention. According to some, the law did not provide the new beginning for urban slum residents that lawmakers were hoping for. Few families had the resources necessary to start a farm even if the land was free. Over time, many of the individual homesteads were replaced with a smaller number of larger farms, according to a discussion on Houghton Mifflin’s American history Web site.
The Homestead Act remained in effect until 1976 when the Federal Land Policy and Management Act repealed it, but granted a 10-year extension on claims for Alaska. The last known homesteader is a native Californian named Kenneth Deardorff, according to the Homestead National Monument Web site. In 1974, the young Vietnam veteran filed a homestead claim for 80 acres of land on the Stony River in southwestern Alaska.
Freeman’s initial rush to claim land mirrors young settlers of today—now known as first-time home buyers—who, in recent years, have rushed to take advantage of the lowest interest rates on long-term home loans the nation has seen in nearly four decades. That rush has pushed the home ownership rate up to almost 70%, a record high, according to U.S. Census Bureau figures.
In spite of this growing level of home ownership today, a few states in the Midwest are revisiting the idea behind the Homestead Act of 1862 in order to give people incentives to stay in rural areas and reverse a long-term trend of out-migration. On March 17, 2005, Sen. Byron Dorgan, a Democrat from North Dakota, introduced the “New Homestead Act of 2005.” This bill would use tax and other financial incentives to repopulate rural America, aiming to fight out-migration of people from rural communities and boost rural economies.
Dorgan’s bill would create a tax credit for the purchase of a new home, as well as “Individual Homestead Accounts” to help build savings and access to credit and capital for people who live and work in rural counties that suffer from high out-migration. The bill would also provide investment-tax credits that states could use to attract businesses to locate and expand in rural areas.
In addition, it would establish a New Homestead Venture Capital Fund for investments in start-up and expanding businesses, and to help repay 50% of college loans (up to $10,000) for recent college graduates who live and work in high out-migration counties for at least five years. In a statement, Dorgan said that communities from North Dakota to Northern Texas have suffered population losses and economic devastation for decades and that many rural communities are in danger of becoming ghost towns.
Several communities in Kansas are also offering free land and other incentives to help rural areas sustain and grow economically. Seven communities are identified on the Web site www.kansasfreeland.com as participating in these programs. They are Atwood, Plainville, Lincoln, Minneapolis, Ellsworth County, Marquette and Chetopa.
The opinions expressed in this article are those of the author and do not necessarily reflect the viewpoint of SFAA or the San Francisco Apartment Magazine. Copyright © 2005 by Inman News. All rights reserved.