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Subsistence Homesteads: President Roosevelt's New Land and Population Policy

by Ralph Borsodi

School of Living, Suffern, New York

January 1934


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THE financial plan adopted borrows freely from approved business practice. Loans are made by the Finance Committee of the Unit Committee. Loans are made first to the Homestead Unit itself for the purchase of land and farm buildings; for materials for roads, tractors, construction machinery, and everything else the community as a whole requires. The Homestead Unit tan incorporated membership corporation, with membership limited to the homesteaders) repays these loans over a period of 15 years, with interest at 5 1/2 percent. Since the government loan to the Unit Committee is made at 4 percent, the Unit Committee has a differential of 1 1/2 percent to cover clerical expenses. If this differential produces a surplus, the government has the right to require either that the surplus be used as a reserve or that the interest rate be reduced.

Individual loans are made at the same rate of interest, amortization varying with the nature of the loan, however. All individual borrowers receive passbooks in which the amount of their loans is charged and payments and "deposits" are entered, through the use of "checks" they pay for materials, equipment and supplies previously paid for through actual loans. Thus all transactions are cleared through the Finance Committee while "barter" of labor and commodities is made possible in terms of "money" to each other.

Amortization of the loans varies from one year to fifteen years, repayable in weekly instalments. An essential principle of the financial plan is that the maximum instalment shall be kept low enough so that even at the present level of industrial and business activity it will not be difficult for the homesteaders to meet their payments. The estimated maximum individual loan sufficient to enable a family to make a modest yet adequate beginning at homesteading after allowance for rising prices, is $1000. If a family does not require the maximum loan, payments will average not more than $15 to $18 monthly including ground rent. But even if the maximum loan is taken, estimates indicate that instalments will not exceed $27.50 monthly the first year, and by the third year they should drop to about 512.50.

Loans for eight different purposes are provided for the homesteaders: for housing materials, well, plumbing and heating, barn materials, agricultural implements and tools; domestic workshop equipment, such as pressure cookers, sewing machines, looms, lathes; livestock, seeds, plants, trees; groceries for the family and feed for the livestock while the first crop is being grown. Few loans have had to be made for the last purpose.

It should be noted that there are no provisions for loans for labor for construction, this because homes must be built by the homesteaders though not necessarily by specific occupants. In fact in selecting the families for each unit, all trades and professions needed not only for building but for the development of a rounded community life are represented. The first unit includes an architect and engineer as well as carpenters, bricklayers, electricians, plumbers and even teachers and social workers.

The system is simple: As the homesteaders work on House Number One, they are paid or "credited" for the work they do by checks drawn by Homesteader Number One. They "deposit" these checks with the Finance Committee, and when they come to build their own homes, they "pay" their neighbors for their work with the credits thus established. This method provides a flexible system for the barter of labor; it makes it possible for those working full time to turn in cash in place of labor to the Finance Committee.

Two very important considerations make this method a fundamental part of this plan of "colonization." First the, spiritual, or if you prefer, the educational value of having the homesteaders create and build their own homes and their own community. No matter how perfect the ready-made homes of architects, such homes could never furnish the satisfaction which the homesteaders secure from moving into homes which they themselves have visioned and actually erected, even though the Finance Committee requires that plans be submitted before loans are made and even though they may have employed architects to assist in their preparation.

A more practical benefit is that this plan enables the homesteaders to establish a substantial equity in their property from the outset without making a cash down payment. Within a single year, fully a thousand dollars worth of labor will have been put into building each house and developing each plot. Thus an equity, probably of more than 50 percent, is created behind the government loans, the bulk of which has gone into land and building materials. Since the farm land and raw materials are transformed into a community with roads and finished houses, the security is adequate.

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