Looking back, we can see that Babbitt and his colleagues needn’t have worried–realty rode the American middle class to dominance in the decades before and after World War II, becoming one of the most lucrative sectors of the U.S. economy within a few decades. At the same time, its rise came just as the federal government was taking on new powers and responsibilities between the wars, and it was one of the first industries to realize the importance of maintaining a robust Washington office–a presence that allowed realtors to shape the modern housing market. “Organized real estate brokers structured the rules of the real estate market to create a demand for their services, positioning themselves as the principal purveyors of what came to be the quintessential symbol of middle-class status,” writes Jeffrey Hornstein in his survey of realty in the 20th century, A Nation of Realtors.
But the parallel history of realty and the middle class does not mean that the interests of the two have always intersected. Indeed, as the industry’s status anxieties subsided and its profit motive, a central but previously suppressed driving force, came to the fore after World War II, those interests began to diverge. Realty took a powerful stand against public housing initiatives in favor of suburban tract homes, just as it pressed for tax policies that privileged home ownership over renting, thus promoting the single-family suburban sprawl over dense city living and closing off middle-class ascension to millions of working families. And it has used the immense lobbying power of its trade association to lock in a system of buying and selling homes that centralizes power in the hands of the realtor while hampering the efficiencies inherent in greater consumer choice and technological change. What was once the gateway to greater home ownership has become an obstacle.
It is one of Washington’s many ironies that its second-largest lobbying organization–which last election cycle distributed nearly $4 million in campaign funds–got its start as a model of progressive social reorganization. The brokering of property is an age-old career, and until relatively recently, not a well-respected one. In 19th century popular culture, the broker was an archetypal bad guy, an amoral swindler, a “curbstoner.” But in 1908, a few dozen representatives from local real estate groups got together in Chicago to form the National Association of Real Estate Exchanges, soon renamed the National Association of Real Estate Boards (NAREB) and the precursor of today’s National Association of Realtors (NAR). At the time, the word “realtor” didn’t exist; in just one example of its efforts to establish a new, respectable profession, NAREB adopted the neologism in 1916 to distinguish its members from run-of-the-mill brokers. “We ought to insist that folks call us ‘realtors’ and not ‘real-estate men,’” Babbitt tells a fellow broker. “Sounds more like a reg’lar profession.”
In fact, the history of NAREB/NAR is a long list of such efforts to create, almost from scratch, a profession, complete with a scientific discourse, university-level curriculum, and standardized business practices. The goal, according to the editors of the National Real Estate Journal, was to place realty in the same intellectual category as medicine and law, in which the profession’s members have unique access to a body of knowledge which they then sell, along with their informed judgment, to consumers. “Any man who wants to know anything about medicine must go to a physician,” they wrote in 1910. “If he wants to know anything about real estate or land he must go to a real estate man.”
In 1918, NAREB ratified a model licensing law to be adopted by state organizations; by 1950, licensing had been accepted nationwide. In 1923, a joint NAR-led committee approved a textbook series and two-year curriculum; by 1925, people were talking about the need for university-level instruction in “realology,” a discussion that presupposed an objective body of knowledge and imagined a future for realtors as the arbiters of American land policy. They found a ready ally in Richard Ely, a renowned expert in land economics at the University of Wisconsin, who soon took the lead in creating a national curriculum for real estate education. With the economy booming and a land bubble growing in Florida, the decade between the end of World War I and the Great Crash proved seminal in the transformation of real estate from avocation to profession and of NAREB from “an ineffectual and unfocused men’s club into a distinctive, effective modern hybrid of a trade association and professional association.”
But as with so much in American society, the Great Depression proved the undoing of realty’s progressive optimism. The idea that realtors could remove the random, speculative aspects of the field through a grounding in science was devastated by the bursting of the Florida bubble in 1926 that preceded the stock market crash, and the sector was further devastated by the drop in housing starts in the early 1930s. But a drop in people’s ability to buy homes does not mean that people do not actually need homes, and under the New Deal the federal government stepped in to fill the gap.
Realtors had maintained a Washington presence since 1917. In 1920, they had established a “Division of Information” to influence policy-making. Interestingly, many in the organization opposed the idea of a lobbying arm, and even the head of the Washington office at one point urged it be shut down because “I do not think this Association will gain friends or make progress by maintaining the bureau in Washington.” Nevertheless, the Washington bureau grew, and political ties between NAREB and the proliferating arms of the federal government involved with everything from land policy to banking expanded apace. “Thus by the beginning of the 1930s,” Hornstein writes, “the Realtors were well positioned in Washington, poised to take advantage of the crisis brought on by the deepening Depression. The logic of their professional project had almost inexorably interjected their ideas and personnel into the policymaking process.”
So, it was natural when the federal government took up the issue of public housing that it turned to NAREB and its members to provide staffing and expertise. Indeed, the centerpiece legislation of New Deal housing policy, the 1934 National Housing Act, drew inspiration primarily from a set of principles outlined in the 1920s by then-Secretary of Commerce Herbert Hoover and NAREB, which gave primacy to single-family, detached homes through mortgage insurance and standardized building practices.
Ironically, what should have been a crisis for realty–the collapse of the market–turned out to be a watershed opportunity. As the demand for cheap housing grew, policymakers considered a variety of alternatives, including directly funded public housing and public/private partnerships. But thanks to their lobbying power, realtors were able to ensure primacy for the private sector; as they filled the ranks of the newly established Federal Housing Authority, they shaped an agenda that privileged new construction over rehabilitation and suburban, detached dwellings over multi-unit urban ones, “effectively,” in Hornstein’s words, “abolish[ing] a wide range of housing and neighborhood forms, thereby over-determining the monotonous post-Depression landscape of the American suburbs.” After the war, that influence only grew, as decommissioned soldiers returned home to start families–in newly minted suburbs created by commodious federal and state tax and mortgage programs, which had been themselves shaped largely by NAREB.
Hornstein, unfortunately, loses track of the NAREB/NAR story after the war, dedicating the book’s final two chapters–and the bulk of his discussion of post-war realty–to the rise of women realtors. This is, of course, a very important story, so much so that it deserves its own book. Meanwhile, outside of the (admittedly dramatic) changes in realty’s gender makeup, the reader learns little about how the sector and its trade association have fared since the 1950s. What makes that period so striking, though, is that there’s not much to tell. Housing prices have risen steadily, while the suburbs have expanded at a dizzying pace. And, thanks to NAREB (which changed its name to NAR in 1974), the role of the realtor within those trends has remained the same. Through its $4 million-a-cycle moneybag, it has largely managed to stave off any further federal involvement in its industry, a remarkable occurrence when one considers Washington’s efforts in such related industries like insurance and securities.
Political influence is one thing; market control is another. In most markets, producers vie for control, and ideally their competition keeps prices down and gives consumers a variety of choices. But real estate is an odd beast. Realtors are not producers (i.e., they do not, in the main, buy or sell homes); they merely advise clients. They are intermediaries. So how can they make sure that their carefully constructed system remains dominant? The key lies with information. During the first half of the century, an ingenious method of sharing information among realtors emerged, the multiple-listing system (MLS), in which every realtor could see information on every other realtor’s houses. Each local real estate board now maintains its own MLS through member contributions. And while over the years the MLS model has gone from a card file to an online database, it has remained fundamentally unchanged since the end of World War II–for good reason. Even with the advent of the Internet, consumer access to the MLS is very difficult without the cooperation of a realtor, making it a control point for the national organization and an ongoing rationale for the standard realty model.
The MLS allows control not only over consumers–who, with little other choice, cough up six percent of a home’s selling price as commission–but over realtors as well. In recent years several web-based models for buying and selling homes have emerged, many of which disaggregate the broker’s responsibilities, passing many onto the consumer and as a result offering much lower prices than the traditional model. In response, the NAR and state-level real-estate commissions (the public entities which are in turn tightly controlled by state real-estate boards) have passed or are considering a raft of policies that would allow individual realtors to blackball these startups by denying them access to their MLS listings. That this ultimately hurts the consumer, who sees fewer homes and therefore has less than perfect information, as much as it hurts these fledgling firms is proof of how far the industry has come from its progressive-era founding–and how far it has deviated.
