Magazine article Mortgage Banking

A Brief History of U.S. Housing Policy to 1980

Magazine article Mortgage Banking

A Brief History of U.S. Housing Policy to 1980

Article excerpt

The Roosevelt administration's initiatives in the 1930s laid the basis for American housing policy as we know it today.

* FHA standardized mortgage underwriting and mortgage product was established. This dramatically reduced credit risk borne by residential lenders, and in general reopened and broadened the credit markets that had been so adversely affected as the result of defaults in the early 1930s.

* Increasing leniency in the terms of lending brought millions of households an opportunity for homeownership that they did not have before.

* The Federal National Mortgage Administration (Fannie Mae) was formed in 1938, after the private sector failed to develop a secondary market for residential mortgages. Fannie Mae permitted the purchase of the new loans and freed up capital by lenders of the new FHA product.

* The federal government created the basis for the other major thrust of U.S. housing policy: housing for the poor. The Public Works Administration (PWA) built 59 publicly owned projects in 36 cities during the decade, but the more permanent response to the housing problems of the poor was in the public housing program.

* The United States Housing Act of 1937 established our current structure for public housing, with quasi-governmental public housing authorities (PHAs) created at the local level to obtain tax-exempt financing and develop and own housing projects. The government thought the market could not by itself provide enough suitable housing for the recently swelled ranks of poor households. Initially, public housing was seen primarily as housing the "temporarily poor" cast out as the result of the Depression and not as providing permanent housing.


Following World War II, the twin foundations of American housing policy--the FHA mortgage insurance program and the Public Housing program--received new emphasis. Millions of returning servicemen and women who had delayed marriage and families as the result of war and the Depression created unprecedented demand for new housing units, which was supported by Fannie Mae purchases and FHA loans (supplemented by the Veterans Administration [VA] loan guarantee program in 1944 and the Farmers Home Administration [FmHA] insurance program in 1946). Demand pressures were brought not only upon suburban jurisdictions but also upon the existing housing stock in the central cities. Rents rose rapidly in the face of restricted supply, resulting in rent control ordinances in hundreds of jurisdictions across the country (some of which, most notably New York's, are still in existence today). Lower income households were squeezed out. There was a perceived increased need for the public housing program to house not only these displaced households, but increasingly the returning GIs and their families.

* The National Housing Act of 1949, which codified many extensions to the original enabling legislation of the 1930s to deal with the pressures of the 1940s and initiated the Urban Renewal Program, first articulated the goal for U.S. housing policy: to provide "...a decent home and a suitable living environment for every American family."

Little was done on the federal level to address concerns about "suitable living environment," as inadequate land use regulatory systems and infrastructure created sterile, if not actively hostile, living environments in many of the new developments during the 1940s and 1950s. Land use was seen as a local issue

* The Urban Renewal Program, included in the Housing Act of 1949 and expanded in 1954, was intended to eliminate obsolete commercial and residential stock in the older, central city housing markets. It was also intended to redevelop designated urban renewal areas largely as new, high-density, commercial ventures. Whereas the Urban Renewal Program over the years did redevelop vast tracts in many central cities, it has received severe criticism for the "sterility" of its commercial developments; the lack of an integrated residential component, especially for moderate-income and poor households; and the displacement of previous residents, often minority or ethnic and working class or poor, who were provided no alternative housing opportunities and lost their previous neighborhood associations. …

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