Housing 1929-1941

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Housing 1929-1941

Issue Summary
Contributing Forces
Notable People
Primary Sources
Suggested Research Topics
See Also


"The literally thousands of heart-breaking instances of inability of working people to attain renewal of expiring mortgages on favorable terms, and the consequent loss of their homes, have been one of the tragedies of this depression" (quoted in Glaab and Brown, A History of Urban America, 1983, p. 299). President Herbert Hoover (served 1929–1933) wrote these words in a letter during his term in office. The problem of foreclosures quickly became critical as the Great Depression began. In 1932, 273,000 people lost their homes. During the next year, a thousand mortgages a day were being foreclosed.

From the time urban settlements first appeared in America during the eighteenth century, selecting, constructing, and purchasing a place to live had been left to the individual. Housing was not considered an appropriate responsibility of government. However, since the mid-nineteenth century, social reformers recognized some housing in cities as inadequate and demanded changes. In 1929, with the onset of the Great Depression, housing problems quickly worsened. The building of new homes came almost to a halt, repairs went unfinished, and slums expanded. The crisis in housing attracted special attention. Many believed an upturn in construction activity was key to stimulating economic recovery.

Another critical housing situation facing Americans in the early years of the Great Depression was foreclosure. Thousands of homeowners were unable to make payments on their home loans, known as mortgages. This situation, called default, led to fore-closure by the holder of the mortgage, generally a bank. In foreclosure the bank seizes and auctions off the borrower's property to pay off the mortgage. By 1933, 40 to 50 percent of all home mortgages in the United States were in default. The home financing system was sliding toward complete collapse. The default and subsequent foreclosure of mortgages was a major contributor to the banking crisis of the early 1930s.

Beginning in the 1930s, the U.S. federal government, recognizing the need for government intervention, attacked the housing problems on two broad and distinct fronts. First, in the early 1930s, Congress passed three measures to relieve both distressed homeowners and banks and, as a result, to get new construction restarted. First, during President Herbert Hoover's stay in the White House, the Home Loan Bank Act of 1932 was passed. Then, as part of the broad-ranging New Deal economic policies under President Franklin Delano Roosevelt (served 1933–1945) came the Home Owners' Refinancing Act of 1933 that created the Home Owners' Loan Corporation (HOLC) and the National Housing Act of 1934 that created the Federal Housing Authority (FHA). The HOLC began as an emergency agency to stop the avalanche of homeowner defaults. It accomplished this by refinancing shaky mortgages. The HOLC's lasting legacies were long-term, low-interest, mortgages, and the establishment of uniform national appraisal methods throughout the real estate industry. The FHA's enduring legacies were long-term mortgages insured by the federal government and the establishment of national standards of home construction. The beneficiaries of these programs were typically white, middle-class individuals who could afford to buy houses in the first place. Their houses were generally built on the outskirts of cities, in the suburban areas.

The second major housing front dealt with the inner-city slums. Initiatives in this area involved the federal government using public tax money to build dwellings for the benefit of those who could not pay market rates for shelter. The New Deal's Wagner-Steagall Housing Act of 1937 became the first housing legislation where the federal government recognized housing as a social need. Slowly, the idea to provide temporary housing for those in need evolved to providing permanent housing for the most disadvantaged members of society. The locations of these structures were almost always in the poorest parts of central cities. Unlike obtaining help for private homeowners, getting public support for housing programs for the most needy citizens was much tougher in 1930s America. As a result, public housing initiatives met with very limited success in the late 1930s.


More than 3,600 banks suspend operations.
President Herbert Hoover convenes the National Conference on Home Building and Home Ownership to address the emergency in the construction industry and the rising number of home fore-closures.
July 21, 1932:
Congress passes the Emergency Relief and Reconstruction Act to address low-income housing.
July 22, 1932:
President Hoover signs the Federal Home Loan Bank Act to establish a monetary reserve for mortgage lenders.
June 13, 1933:
Congress passes the Home Owners' Refinancing Act that establishes the Home Owners' Loan Corporation (HOLC) to reduce home foreclosures by refinancing homeowners' loans.
April 28, 1934:
Congress passes the Home Owners Loan Act of 1934, further strengthening the HOLC.
June 27, 1934:
Congress adopts the National Housing Act which establishes the Federal Housing Administration (FHA).
September 3, 1937:
President Franklin D. Roosevelt signs the National Housing Act (Wagner-Steagall Housing Act) of 1937 which creates the United States Housing Authority (USHA).
February 3, 1938:
Amendments liberalizing the National Housing Act of 1934 are adopted.
The first comprehensive nationwide housing survey is completed. The housing survey would be conducted every ten years in tandem with the census.

The creation of the Federal National Mortgage Association (Fannie Mae) under the Reconstruction Finance Corporation (RFC) in 1938 completed the New Deal's housing program. Fannie Mae bought mortgages from lenders such as banks, thus increasing the lenders' funds for more mortgages and construction loans. Combined, the New Deal housing policies removed much of the risk from home lending. The FHA and Fannie Mae neither built houses nor loaned money. Their backing, however, provided banks with the assurance that construction and home loans would be repaid with government funds should the loans fall into default. Thus, banks made loans more readily to both builders and homeowners. This stimulated construction and provided a framework for the post-World War II (1939–1945) housing boom. The dream of owning a home came within the reach of all but the nation's poorest.

Issue Summary

The American attitude against government intervention in individuals' lives fundamentally shifted with the onset of the Great Depression. The Depression dealt severe blows to both the construction industry and the homeowner. Between 1929 and 1933, construction of residential property fell 95 percent. Repair expenditures decreased from $50 million to $500,000. In 1932 between 250–275,000 people lost their homes to foreclosure. In comparison, 68,000 homes suffered foreclosure in 1926. By 1933 foreclosures reached the appalling rate of more than a thousand each day. Housing values dropped by approximately 35 percent. A house, worth $6,000 before the Depression, was worth approximately $3,900 in 1932. By the early 1930s, many people owed more money through their existing mortgages than the reduced value of their home. With loss or cut back in employment and the loss of their homes, many middle-class families were experiencing their first taste of impoverishment.

As early as 1930, President Herbert Hoover recognized that the deteriorating real estate and construction industries were dragging down an already embattled economy. The overall unemployment numbers continued to skyrocket, and approximately one-third of those unemployed had worked in construction. Hoover convened the President's National Conference on Home Building and Home Ownership in 1931. The purpose of the conference, attended by over four hundred housing specialists, was to deal with the emergency in the construction industry and with foreclosures.

The conference formulated four recommendations. The recommendations ultimately provided the basis for twentieth-century federal housing policies. They were: (1) the amortization of long-term mortgages; (2) the encouragement of low-interest mortgage rates; (3) lowering the cost of home construction; and (4) providing government monetary aid to private efforts to build low-income housing. (Amortization means the payback of a loan by periodic, usually monthly, payments of principle [the amount of the loan owed] and interest [money paid for use of the lender's money]. The monthly payment amount remains the same throughout the payback period. The result is a declining principle balance with eventual repayment of the loan in full.) The conference members also announced that they firmly believed private industry could accomplish these goals with planning and cooperation. Looking to the future, however, they sternly warned that the failure of private industry would lead to government intervention into housing.

Two Unsuccessful Programs

Disagreeing with the ideas promoted by the National Conference, the National Association of Home Builders immediately responded that private contractors alone could not build homes at affordable prices. They demanded prompt government assistance. Taking this perspective and the recommendation from the conference under consideration, the Hoover administration tried two approaches in 1932. On July 22, 1932, the president signed the Federal Home Loan Bank Act. The act established a monetary (loan) reserve for mortgage lenders—generally banking institutions. This reserve would increase the supply of money available for housing loans to encourage new housing starts and reduce foreclosures. The program, however, proved ineffective since it was not designed as an emergency measure. Loans could not be made to anyone who owed more than 40 percent of the value of their home. For example, an individual might owe $4,000 on a $10,000 home. Before the Depression in 1929, when their home was worth $10,000, they would have qualified because they did not owe more than 40 percent of the value of their home. If the value of their home had declined by 1932 to $6,000, however, their $4,000 mortgage was considerably more than 40 percent so they could not qualify. Everyone's home value had, in fact, drastically decreased after the onset of the Depression. Within the first two years of the act's operation, 41,000 applications for direct loans were made to the banks by individual homeowners. Only three were approved.

President Hoover's second effort, the Emergency Relief and Construction Act of 1932, was equally ineffective. This act enabled the RFC to make loans to corporations formed specifically to construct low-income housing and improve housing in slums. The catch here was that the legislation required states to exempt these corporations from all taxes. At that time only the state of New York had legal authority to make such exemptions. Other state legislatures had not had the public support to pass such tax law exemptions. As a result, the only project ever begun under this legislation was Knickerbockers Village in New York City.

Neither of Hoover's approaches halted the slide of the housing industry or the rapidly worsening predicament of homeowners. For the moment the fledgling framework for a realistic home mortgage system and improved housing for all, envisioned in Hoover's 1931 conference, was threatened by a wave of public disappointment with Hoover's ineffective programs. In March 1933 the problems transferred to the incoming Roosevelt administration.

A Man of the Country

Franklin D. Roosevelt, inaugurated as the 32nd president of the United States on March 4, 1933, was in heart and soul a child of the country. He believed the country bred a "better man." In his perfect world, Roosevelt would have solved the housing problem by moving everyone back to the land—out to country spaces. But Roosevelt's utopia sharply contrasted with reality. Despite the general public's widespread dissatisfaction with urban Depression life, the drift of population out of agricultural areas and into cities continued through the 1930s. The agricultural industry had been economically depressed since the early 1920s, and job opportunities seemed greater in the industrial city centers. Roosevelt was a practical man and knew that the Depression-era urban housing problems would have to be solved within the urban setting.

Roosevelt and those creating New Deal policies faced a choice between two different paths in housing issues. They could support proposals from congressional liberals such as Senator Robert F. Wagner for large-scale European-style public housing projects. On the other hand, they could develop measures to stimulate private home construction and individual home ownership, the path Hoover had attempted to take. New Dealers basically adopted Hoover's approach but would carry it much further. Roosevelt believed private home ownership was fundamental to the American way of life. He had the notion of the ideal home as a single detached structure surrounded by a small plot of land. Multifamily dwellings held little interest for him. With nearly 30 percent of the nation's joblessness involving workers in the building trades, Roosevelt decided he must place special emphasis on reviving the housing sector. New Deal help for the home construction industry and homeowners would follow a different path from later New Deal efforts to deal with inner-city housing for the poor.

New Deal Help for Homeowners and the Home Construction Industry

Home Owners' Loan Corporation On June 13, 1933, Congress passed the Home Owners' Refinancing Act that established the Home Owners' Loan Corporation (HOLC). The HOLC's goal was to stop the flood of homeowner foreclosures in urban areas. The foreclosure situation not only devastated homeowners but undermined the holdings of banks and other lending institutions. Normally, when banks foreclosed, they would sell the foreclosed property to a buyer to cover the mortgage loan. Buyers were often investors hoping to resale the property for a profit. Since no market for mortgages existed, however, few buyers were available. Those that were buying mortgages paid extremely low prices that rarely covered the loan amount for the bank.

The HOLC replaced Hoover's unworkable Federal Home Loan Bank Act. It provided loan money to refinance tens of thousands of mortgages in danger of default and foreclosure. Refinancing refers to setting up a loan under new terms of payment of principle and interest that makes it easier for the homeowner to repay the loan. The HOLC even helped persons who lost homes as early as January 1930 to recover their homes. A second act, the Home Owners Loan Act of 1934, passed the following year. This act guaranteed payment of the principle and interest of HOLC loans with government funds should a homeowner fail to make payments on his loan.

By February 1936 the HOLC had refinanced 992,531 loans totaling over $3 billion. The refinanced loans not only halted countless foreclosures but reduced delinquent property taxes. This permitted communities to meet their payrolls for school, police, and other services. Millions were also spent on repair and remodeling of homes. Thousands of men gained employment in the building trade. Thousands more jobs were stimulated in the manufacture, transportation, and sale of construction materials. Conceived as an emergency agency, the HOLC stopped accepting loans in June 1935 and issued its last loans the following June. By then HOLC had refinanced up to one-fifth of all mortgaged urban homes in the nation. The HOLC spent the next fifteen years collecting its payments and in 1951 ended its operations. Although it tackled the most troubled home mortgages, the HOLC concluded operation without a loss to the government and even returned $14 million to the treasury.

To offer similar relief to rural areas, in 1933 Congress passed the Emergency Farm Mortgage Act, which was aimed at farm foreclosure, and the Farm Mortgage Refinancing Act on January 31, 1934, which was patterned after the successful HOLC. Also, to support farmers in their fight to retain their land, Congress passed the Frazier-Lemke Federal Farm Bankruptcy Acts of 1934 and 1935. The Frazier-Lemke Acts provided major financial relief to farmers heavily in debt. The acts changed general bankruptcy laws for farmers whose debts were far more than the value of their farms. Bankruptcy courts could reduce their amount of debt to approximately the same amount as the value of the farm, ensuring that the farmer would not still be hopelessly in debt even after selling his farm. The farmer also had the opportunity to retain his property if he could pay back his scaled-down debts.

The HOLC refinancing plan is important in history because it introduced and perfected the practical long-term amortizing mortgage. This amortized mortgage revolutionized the home loan and real estate industry-making home mortgages feasible for the common American. With amortized mortgages the loan was completely repaid at the end of the loan period. The HOLC-amortized loans allowed homeowners to pay a set monthly payment of principal and interest at 5 percent for 15 years. At the end of the 15-year loan period, the loan was entirely repaid, and the individual owned his home "free and clear." This approach contrasted to the typical mortgage taken on during the 1920s, a boom period of home building. It was during this earlier period of rising home prices that buyers began using mortgages to finance their home purchases. The typical mortgage was for five or ten years and was not fully paid off at the end of the loan period. The buyer had to either take out another loan for the remainder or pay it off in a large payment. For example, a buyer might have bought a $5,000 home and taken out a $3,000, five-year mortgage at a typical interest rate of six to eight percent. At the end of five years, he might still owe $1,500 that he could pay off or refinance. This practice left the buyer at the mercy of money market forces over which he had no control. If money was easy to come by, he could refinance. If times were difficult and money was tight, as in the 1930s, it could be impossible to refinance. If he could not pay off the loan, foreclosure would result. The HOLC-amortized mortgages ended the need for a large payment at the end of the mortgage period and also lowered monthly payments.

More About… Redlining

Redlining, by the last quarter of the twentieth century, was a standard term in the vocabulary of urban affairs. Redlining referred to the fact that property owners in certain areas could not easily obtain credit for purchase or repair of property because lending institutions had written off the areas as high risk.

Redlining originated in the early 1930s as a rating system for the Home Owners Loan Corporation (HOLC). The system undervalued neighborhoods that were densely populated, mixed racially, or aging. The four HOLC categories of quality were first, second, third, and fourth, with corresponding code letters of A, B, C, and D and colors green, blue, yellow, and red. A, or green, areas were new or always in demand, such as professional residential areas. Ethnically mixed areas were never A's. B, or blue, areas were "still desirable;" C areas were "definitely declining." D, or red, areas had physical deterioration and low income prospects. Black neighborhoods were invariably red as were those areas characterized by vandalism.

HOLC appraisers literally ranked every block in every city, drawing red lines around less "desirable" areas, hence the redlining practices. The resulting information was then recorded on secret "Residential Security Maps" in local HOLC offices. The HOLC continued to offer loans in all areas, but the Federal Housing Administration (FHA) adopted the maps a few years later and refused to insure loans in the risky red areas. Likewise, private banking institutions, clearly influenced by the government's maps, did not loan in red and most yellow areas. Redlining contributed greatly to further deterioration of inner cities by discouraging the flow of capital into the areas. This pattern of discrimination continued at least until the early 1970s, contributing to the despair and frustration of the black and racially mixed communities. At that time the practice became illegal.

The HOLC made a second lasting contribution by establishing standardized appraisal methods throughout the country. Because HOLC was dealing with problem mortgages, it had to have a way to predict the useful life of the house it was asked to refinance. HOLC appraisers were highly trained in uniform procedures. They put into writing characteristics of the house, such as type of construction; price range of other nearby homes; sales demand; repairs needed; and descriptions of the occupations, income level, and ethnicity of the neighborhood's inhabitants. The ultimate aim was that one appraiser's judgment would have meaning and could be understood by investors in other parts of the nation. Although this practice is credited in raising the level of and standardizing the American real estate appraisal methods, it also had a downside that persisted for decades, called redlining. Redlining originated when appraisers drew red lines on maps outlining neighborhoods of mixed race or ethnic background. The red-lined districts were considered risky areas for loans. Although the HOLC continued to impartially issue loans in those areas, for decades other lenders would tend to loan only in "good" areas. This practice perpetuated discrimination and the actual decline of certain areas. Significantly, the Federal Housing Administration adopted the HOLC's excellent appraisal methods but also its redlined maps.

The Federal Housing Administration On June 27, 1934, Congress passed the National Housing Act, establishing the Federal Housing Administration (FHA). Unlike the HOLC, which was established as an emergency agency, the FHA was a permanent New Deal program. The act was designed to meet President Roosevelt's desire to stimulate building without government spending. He wanted a program that relied on private enterprise. The FHA made a powerful impact on American life throughout the rest of the twentieth century. The declared goals of the act were to encourage: (1) sound home financing on reasonable terms; (2) improvement in housing construction standards; and (3) a stable nationwide mortgage market. All of this was to be accomplished through reliance on private enterprise. The government itself would not be making direct loans.

Despite the three long-term goals, the immediate purpose of the act was to stimulate employment in the construction industry which would likely ripple through the entire economy. Not only had new home construction ceased, but the general lack of funds had let homes fall into disrepair. Both new construction and repair and renovation would provide jobs and, at the same time, increase the wealth of Americans by increasing the value of their homes.

The act, through the FHA, essentially accomplished its goals. First, the FHA insured the mortgage lender against default by the borrower. If the borrower defaulted, the FHA would pay the lending institution the amount owed on the defaulted loan. Over 250,000 home mortgages, valued at more than $1 billion, were accepted for FHA insurance between 1934 and December 1, 1937. Bankers freed loan money since they assumed very little risk if the loan turned sour. With the guarantee mortgage interest rates dropped two or three percentage points, making the loans more affordable. Second, the FHA helped guarantee the loans it insured would not go bad by making the loans workable for the average American. Down payments were drastically reduced. No more than 20 percent down was required. This was further reduced to 10 percent in 1938. Next, continuing a trend by the HOLC, the FHA extended the repayment period for its guaranteed mortgages to 25 or 30 years. This time period greatly reduced the monthly payment, with the loan being paid in full at the end of the loan period. The FHA insisted all loans be amortized. The amortization insured a single stable payment amount for the length of the loan. The FHA also established minimum construction standards to ensure the dwelling would be free of major structural or mechanical deficits. This in turn ensured both the owner's satisfaction with the property and the actual value of the property.

The changes dramatically increased the number of Americans who could afford to purchase homes. According to Kenneth T. Jackson in his book Crabgrass Frontier, "Builders went to work and housing starts and sales began to accelerate rapidly in 1936. They rose to 332,000 in 1937, to 399,000 in 1938, to 458,000 in 1939, to 530,000 in 1940, and to 619,000 in 1941" (1985, p. 205). In 1933 housing starts had numbered only 93,000.

Unfortunately, a downside to these achievements also resulted. The FHA actually contributed to innercity decay by pulling much of the middle class out to the suburbs. First, the FHA favored single-family projects in the suburban areas. It discouraged multifamily dwellings by offering only unfavorable loan terms on multifamily starts. Second, the loan amounts allowed for repair of existing homes were small. A family could just as easily purchase a new home as fix up an old one. Third, in its attempt to set construction standards, the FHA demanded such requirements as minimum lot size, distance from the street, and separation from adjacent structures. These requirements eliminated from FHA loan guarantees whole categories of many dwelling types in the city. Many city residences. were too close to the street. Therefore, existing homes that did not meet this or the other two requirements could not be FHA insured. For example, between 1935 and 1939, statistics from throughout St. Louis, Missouri revealed 92 percent of new homes insured by FHA were in the suburbs.

The FHA strove to meet its goals of stabilization of mortgage markets nationwide in two more ways: (1) the creation of mortgage associations; and (2) establishment of the Federal Savings and Loan Insurance Corporation. The mortgage associations, under FHA regulations, were to be private corporations buying and selling FHA-insured mortgages nationwide. The activities of these corporations were to be limited almost entirely to insured residential mortgages. This process could move funds from areas where mortgage funds were plentiful to areas where local mortgage funds were insufficient. Only one such association was formed, on February 10, 1938, actually as a subsidiary of the RFC. It was called the National Mortgage Association of Washington, but changed its name to Federal National Mortgage Association or, as it is known today, Fannie Mae.

The last provision of the 1934 act established the Federal Savings and Loan Insurance Corporation (FSLIC). The FSLIC insured depositors' savings in savings and loan associations up to $5,000. This insurance was similar to that provided to bank depositors by the Federal Deposit Insurance Corporation (FDIC). Savings and loan associations primarily provided mortgage loans.

The National Housing Act of 1934 was amended and further liberalized with passage of the National Housing Act of 1938. Congress passed further amendments in 1939 and 1940. Both programs, HOLC and FHA, assisted Americans who were able with a little help to buy a home. The appraisal standards; long-term, low-interest, amortized, insured mortgages; and construction standards extended the possibility of home ownership to an ever-widening group and resulted in the development of suburban areas. These policies however, did not reach down to the poor of the inner cities. The New Deal programs, through other avenues, also attempted to improve conditions in the slums and provide the poor with adequate shelter.

Help for Low-Income Inner-City Housing

Until the Great Depression, political and civic leaders expressed little concern for the condition of the cities' inner cores. Only a few social workers and city planners made attempts to deal with the problems of slums, poverty, and poor housing. In an important reversal of policy, the Roosevelt administration involved the federal government directly in construction programs. During the first hundred days of 1933, Congress passed the National Industrial Recovery Act of June 1933. The act's four purposes were to create jobs, improve housing for the poor, remove or renovate slums, and encourage private industry in large-scale community planning efforts. The act established the Public Works Administration (PWA) to provide low-rent housing and slum clearance projects.

The PWA's Housing Division attempted to get private developers involved by encouraging federal loan applications. These private developers, however, seemed more interested in unloading on the federal government undesirable city property at high prices rather than developing low-income housing projects. As a result, the government found only seven applications acceptable out of five hundred submitted by private corporations. Abandoning this approach in February 1934, the Housing Division became directly involved in slum clearance and low-cost housing construction projects, originating projects and supervising the construction.

In four and a half years of operation, it started several projects in such areas as Atlanta, Cleveland, and New York's borough of Brooklyn. Overall, however, the program made little progress in solving the housing problem. The PWA built or started 49 projects containing fewer than 22,000 units. The Housing Division, however, did shed light on the fact that slums and shortage of adequate housing reached across the nation, affecting smaller communities as well as big cities.

On a local level, Mayor Fiorella La Guardia set up the New York City Housing Authority (NYCHA) to deal with the dilapidated tenements of the slums. The NYCHA looked to the Lower East Side where 90 percent of the residential buildings were at least 35 years old, over 50 percent had no central heating or toilets in the apartments, and approximately 17 percent had no hot water. Although the NYCHA meant well, the results of forcing improvements meant more homelessness for the very poor. Forced to make costly improvements in the middle of the Great Depression, many landlords chose to simply board up the buildings. In just two years, 10,000 tenements were closed, eliminating 40,000 living units. Some people affected by the closures became homeless, while others moved in with family elsewhere. Those landlords who did upgrade raised rents above what low-income families could afford, pushing them onto the streets of the Lower East Side.

Between 1934 and 1937, states became increasingly interested in the possibilities of federal housing programs and put pressure on Roosevelt to act. Major support for federal housing projects came from Senator Robert Wagner of New York. He introduced housing bills into Congress in 1935 and 1936, but received no support from President Roosevelt until 1937. The National Housing Act of 1937, better known as the Wagner-Steagall Housing Act, became law on September 1. The United States Housing Authority (USHA), created by the act, took over the PWA projects. The USHA, however, operated very differently than the centralized Washington management of projects of the PWA. Under the Wagner-Steagall Act, all slum clearance and low-rent housing programs had to be initiated in the localities themselves. The act was authorized to make loans to local public agencies—called local housing authorities (LHA)—for the construction of low-rent housing projects. These loans were limited to 90 percent of the development cost of the project. The balance of the cost was raised locally, usually through the sale of LHA bonds. Once the project was completed, the USHA subsidized rents by making annual contributions to each housing project. Payment amounted to the difference between the rent paid by the low-income families occupying the dwellings and the actual cost of providing the housing.

Another important feature of the act was to clear out slums and construct new dwellings. For every new dwelling unit built, one slum dwelling had to be eliminated. This was called the "equivalent elimination."

The fact that the responsibility to form a local housing authority and provide tax exemptions for the projects rested with the community made these projects entirely voluntary. If a community did not want to tarnish their image with public housing, it simply refused to create a housing agency. As a result, the policy, like many other New Deal programs that relied on local administration, invariably reinforced racial discrimination and segregation. In this case if a community wanted to block access to minorities to their

U.S. Housing Authority Operations
as of December 31, 1940
Rents, Incomes, and SubsidiesStatus
Number of projects140
Number of dwelling units47,995
Average monthly rent for shelter$12.71
Average monthly rent for shelter with utilities furnished$18.08
Average annual family income anticipated in projects$799.00
Construction Award DataStatus
Number of projects under construction or completed344
Number of dwelling units118,045
Total estimated over-all cost of new housing$507,077,000
Estimated wages to be paid at site for projects$133,843,000

community through low-cost housing, they could choose not to participate in the program. Through such decisions minorities would remain trapped in the declining inner-city areas.

By January 1, 1941, the Wagner-Steagall Housing Act had a very limited impact. Only 118,000 family dwelling units were under construction or completed. Of these units 39,000 were open for occupancy with 36,456 occupied. Although the act's primary function was to provide housing rather than employment, the program did provide thousands of jobs in construction and related industries that supplied building materials. In 1941 President Roosevelt commented in a footnote to the October 1937 executive order establishing the USHA on the success of the agency to provide employment in the building trades and related industries: "While the primary function of the new statute was to provide housing rather than employment, the fact is that the program has provided thousands of men with jobs, not only in actual construction, but in the mines, mills, and factories which supply the materials." (Roosevelt, The Public Papers and Addresses of Franklin D. Roosevelt: 1928–45, 1941, p. 470). The act also forged a cooperative relationship between national and city authorities to initiate, plan, build, and operate low-cost housing. Although it underwent many changes, the basic relationship still exists today.

By 1940, a new need for housing surfaced as the nation prepared for war. The problem of providing living quarters for a vast number of defense workers in shipyards, military camps, and clothing and equipment factories became a top priority. In Executive Order No. 8632, President Roosevelt amended the Wagner-Steagall Housing Act to develop, build, and maintain defense housing projects.

1940—The First Housing Census

A related housing issue was the need for accurate statistics on home ownership, types of structures, and home values. This information had long been available only on a local basis. But with federal agencies participating in the housing industry, new nationwide statistics were needed. Before the FHA could wisely guarantee a mortgage or the USHA could fairly loan or grant money for slum clearance, each had to have certain information. They needed reliable figures on the housing market, vacancy rates, credit availability, and housing supply. Senator Wagner introduced a bill in Congress in 1939 to provide for a complete housing survey as part of the regular decennial (every ten years) census. The bill passed easily and resulted in the first national housing census in 1940.

Contributing Forces

Home Sweet Home

As early as the eighteenth century, Americans viewed their zone of private life—their home family space—uniquely. The space was a personal place of refuge from society at large, free from outside control. The early ideal American home included a great deal of land. As cities developed in the 1800s, they were considered centers of progress and culture. Smaller towns patterned themselves after urban models and sought to project an image of growth. Residents of the towns came to define their family home in terms of a house, yard, and neighborhoods with connecting roads.

As towns grew into cities in the mid-and late 1800s, the privileged urban dwellers tended to relocate on the expanding edges and build comfortable homes. Immigrants came to the United States by the thousands and generally settled in the center of cities where jobs were available. All persons, the privileged and the newly immigrated, needed to be within walking distance of their work or of public transportation.

Public transportation included the rail lines and trolleys. Commuter villages sprung up all along the trolley and cable car rail lines serving the cities. The newly emerging middle-class residents moved to the end of the trolley line where space was available for a house and garden. Between 1888 and 1918, trolley lines radiated out from central business districts, forming large suburban rings. The electric trolleys traveled four times faster than horse-drawn systems and could efficiently take commuters to and from work in the city's core areas.

Cheap land and home prices, good wages, and efficient transportation allowed even the working class to own private homes along the transportation routes. The poor, however, remained clustered in the inner city, unable to afford homes or rents outside the city much less the trolley fares to get to work. The innercity dwellings were increasingly meager with numerous families crowding into small, unventilated areas. By 1910 the "new American city" was segregated by class and economic function and included a much larger expanse of land than the older walking city. As the trolley suburbs grew, a new invention, the automobile, further revolutionized the American city.

The Automobile and the Bungalow

In 1898 there was only one automobile, a sputtering little offspring of a bicycle, for every 18,000 people. In 1900 Ransom E. Olds began assembling an uncomplicated, inexpensive, and utilitarian model, his "merry Oldsmobile." Sixty-five hundred were on the road in 1905. By 1913 there was one vehicle for every eight people. That same year Henry Ford introduced a moving assembly line to roll out his Model T's. In 1927 Americans drove 26 million cars on a rapidly expanding road system.

Residents in their merry Oldsmobiles and Model T's explored the edges of their cities and the dream of the single family home in the suburbs. In 1920, 46 percent of American families were homeowners, and 51.2 percent of Americans were urban dwellers. In the seven years between 1922 and 1929, 883,000 new homes were built each year. That pace more than doubled the home building rate of any previous seven-year period. Rising wages and the falling price of constructing homes steadily boosted the construction industry, as did real estate tax exemptions that states began to pass. New suburbs dotted the edge of every major city. Automobile access proved critical, and funds for new road construction came from the general taxpayers.

The Ladies Home Journal, the most successful magazine of the first quarter of the twentieth century, began publishing plans for houses called bungalows. Costing between $1,500 and $5,000, the bungalow was a humble but attractive one-and-a-half-story home within easy economic reach of the growing middle class. Suburban neighborhood after neighborhood filled with the American bungalow.

Although the most affluent paid cash for their homes, most middle-and lower-middle-class home-buyers obtained a mortgage from a bank or savings and loan association. During the 1920s first mortgages were limited to one-half to two-thirds of the appraisal value of the home. This meant buyers needed at least one-third of the price of the property for a down payment. First mortgages averaged 58 percent of the estimated property values. This meant the average down payment was actually 42 percent of the home's value. If buyers did not have enough for the down payment, they could take out "second" mortgages to make up the difference. Interest rates in 1923 were generally between six and eight percent. Because buying on credit, or taking out loans, became common in these boom years of the 1920s, many Americans could afford both a home and car. America's poor, however, unable to afford the American dream, remained behind in the aging central sections of cities.

The Slums

As curtains fluttered in the windows of suburban bungalows surrounded by white picket fences, the interior sections of the large cities deteriorated. Dwellings of the inner-city poor became increasingly dilapidated and overcrowded. To accommodate the massive influx of poor immigrants, large rooms of once-fashionable dwellings were subdivided into tiny rooms with no light or ventilation. As the population continued to swell, sanitation facilities became overwhelmed. Such areas grew into what many referred to as slums, which became characterized by poverty, crime, and filth. In some cities slums would consist of large areas of crowded multifamily housing, or multistory tenements, that had low standards of ventilation and plumbing and were in various degrees of deterioration. They were often occupied by impoverished immigrants.

The landowners' interest in profit was much greater than in the welfare of those occupying their tenements. More apartments meant more rent income for the landlord. Housing structures were hastily constructed on every inch of land. Those structures reached higher and higher, shutting out neighbors' sunlight and making rooms gloomy and dust filled.

As early as the 1880s, poverty, crime, disease, ignorance, and alcohol addiction thrived in frightfully overcrowded districts of not only northeastern cities, but in Midwestern cities such as Chicago as well. In 1890 Jacob Riis raised public awareness of the wretched conditions of New York City's Lower East Side by publishing his photographs of the slums in How the Other Half Lives. Riis's images showed narrow streets and alleys filled with people; clotheslines strung from one building to another. Families, including the children, were shown laboring in crowded tenements making cigars, sweaters, or other products. The dirty streets were filled with open-air markets selling food and clothing. Riis showed homeless people sleeping on sidewalks and in alleyways, or at tables in restaurants. Over 290,000 individuals per square mile packed the East Side. The crime and health problems of other areas like the East Side—Boston's South End, Pittsburgh's Hill District, Cincinnati's Basin Section—cost their respective cities many more dollars than the tax revenues those areas provided to the local governments.

Although the existence of slums was acknowledged, neither state, local, nor federal governments understood their cause well enough to offer meaningful help. Prior to the 1930s, housing reform in America meant surveying slum conditions and passing codes to improve density, ventilation, and sanitation. New York City passed the first housing codes in 1867, 1879, and 1901. The 1901 codes required "model" tenements to be built with air shafts for ventilation, but the shafts proved only to be a source of foul odors, perpetuating the miserable conditions.

During the prosperous 1920s, as long as they continued to grow with people moving to the outskirts, cities closed their eyes to the problems of the slums. But in actuality conditions were so bad that even entrepreneurs began shunning the low-income housing market, and most private investors lost interest.

First Federal Housing Effort

The first U.S. federal government housing effort was neither a result of a conscious attempt to help the poor nor an increased reform spirit. Rather it was more a war power action. In June 1918, a year after the United States entered World War I (1914–1918), Congress appropriated $110 million for two separate programs to develop housing for workers moving to industrial areas to produce weapons. Since the war ended only five months later, the effort resulted in only a few developments—Yorkship Village in Camden, New Jersey; Atlantic Heights in Portsmouth, New Hampshire; and, Union Park Gardens in Wilmington, Delaware.

After World War I, the U.S. government went back to the business of governing and adopted a hands-off policy concerning housing. The Great Depression and subsequent New Deal legislation, however, ended this hands-off policy. Housing became a central issue in the newly forged federal-local relationships of the 1930s.


A House In The Country

Because Franklin D. Roosevelt believed the rural life bred superior qualities in men and that all people lived a better life in the country, he actually viewed cities as rather hopeless. Roosevelt, like many scholars of the day, believed that urban populations in the future would remain stable or even decline. Much of the early New Deal approach to housing reflected this attitude. Roosevelt refused to endorse public housing as an important part of his recovery drive. He even resisted defending the PWA Housing Division against its enemies in the private sector. Banking, real estate, and construction groups regarded public housing as socialistic.

Roosevelt eagerly endorsed the FHA created in the Housing Act of 1934, since it did not involve the federal government directly in construction or financing, and it allowed many Americans to leave the city and purchase a home in the suburbs. The average American thought a single-family home with a yard was the ideal dwelling. The FHA strongly supported this viewpoint as it routinely insured home mortgages for white middle-class houses in the suburbs. In contrast, after more than 12 years of aiding home construction and repair, not one dwelling unit in Manhattan received FHA coverage.

Public Housing—The Most Controversial Housing Issue

Real estate developers, home buildings, bankers, congressmen from rural districts, fiscal conservatives, and those concerned with public spending leading to public debt, opposed public housing. Campaigns against the ever-worsening slums of the cities fell to liberals, social reformers, and philanthropic organizations. By the mid-1930s, organized labor also identified slum clearance by demolition and building decent low-income housing as legitimate areas for federal action. Senator Robert F. Wagner introduced public housing legislation to Congress in 1935, 1936, and 1937. The 1937 Housing Act, the Wagner-Steagall Housing Act, passed only after Roosevelt, realizing low-income housing needed to be addressed, supported it. The act created the United States Housing Authority (USHA) that immediately began work on projects.

Although a welcome achievement to those who had long fought for Wagner's bill, it was strongly opposed on a wide front. The real estate, banking, and home building interests believed government construction would drive private firms out of the housing business. They worried about rising federal expenditures, taxes, and falling property values. Displeased with the new federal-city housing partnership, they argued for home rule, states rights, and individual initiative. They used their influence in Washington to clamp down on public housing initiatives after 1937.

Congressmen and senators from rural districts also opposed Wagner's bill. They believed public housing would primarily benefit residents of large cities. Conservatives feared the high cost of housing projects cited above. They took every opportunity to reduce the USHA's funds. Together, the opposition led to the demise of public housing programs before the start of World War II.

International Perspectives

While by 1980 public housing still accounted for only 1 percent of the U.S. housing market, extensive European involvement with public housing had become the norm. In industrial nations such as Great Britain and Germany, public housing during the 1930s was a standard part of the welfare state. During the Depression it comprised 46 percent of the market in England and Wales and 37 percent of the French housing market. Following the Depression British and Japanese national governments continued to buy inexpensive land in distant areas, concluding it was the only practical means of acquiring land for public housing projects.

State-constructed housing projects in the Soviet Union housed the majority of Russian citizens and had long been ingrained in the political ideology. Public housing is also an important means to help address massive social problems in third world nations. Whether a necessity or driven by political ideology, public housing is an important institution in most countries of the world.

While government in the United States at the local, state, and national levels remained largely detached from the housing problems during the 1920s, European legislators pursued the matter vigorously, especially after World War I. Great Britain started the European public housing movement with passage of the British Housing Act of 1919. In the 1920s both Britain and Germany built over a million publicly assisted "homes for heroes" for the World War I veterans. The Dutch government housed one-fifth of its population in public housing. In the Soviet Union, all housing rapidly became the responsibility of the government.

Edith Elmer Wood, a widely traveled American proponent of housing reform, wrote The Housing of the Unskilled Wage Earner in 1919. With publication of her book, Wood became an international figure in housing reform. By the early 1930s, Wood would see several groups, including the National Public Housing Conference, lobby for U.S. government involvement in housing construction for people who could not afford adequate housing. Before the New Deal, however, only two states, New York and North Dakota, accepted even limited responsibility for housing its poorest citizens. A further example of the lack of U.S. government involvement in housing came at the International Congress of Cities in 1932. The meeting promoted expansion of government housing programs for the low income. Only one delegation attending, the U.S. delegation, reported no direct ties between the national government and city governments. International public housing initiatives had only limited effects on resolving housing issues in the United States.


Private Money Builds Private Suburban Homes

No New Deal agencies had more lasting or powerful impact on Americans and American cities over the last half of the twentieth century than the HOLC and the FHA. Although short lived, the HOLC established standardized appraisal procedures and first introduced the long-term, low-interest, self-amortizing mortgage. The FHA insured mortgages so lenders faced little risk, expanded the favorable terms for the borrower of the amortized mortgage, and set national building standards for home construction. In 1944 the Servicemen's Readjustment Act (the GI Bill) created a mortgage program under the Veteran's Administration (VA). The VA mortgage program largely patterned its policies after FHA procedures and attitudes. Together, the FHA and VA have a remarkable record of accomplishment. The VA helped sixteen million soldiers and sailors returning from World War II to purchase homes. By the end of 1972, the FHA had helped nearly 11 million to improve their homes. Between 1934 and 1972, American families living in owner-occupied dwellings rose from 44 percent to 63 percent. In the 1950s and 1960s, almost half of all housing claimed FHA or VA support.

Following World War II, the uniquely American dream of a private, single-family home surrounded by a yard in a safe suburban neighborhood was possible for all but the poor. Suburbs popped up and grew rapidly. In 1946 families could buy a home for $5,150. The FHA mortgage guarantee meant the buyers only needed approximately $550 for a down payment, and the long-term mortgage produced a payment of only $29.61 monthly for 25 years. Neither the FHA nor the VA directly made loans. Loans came from private banking institutions and went to the individual homeowners, insuring the loans and eliminating the risk for the lenders.

Today, conventional loans are used more frequently than FHA or VA loans. They are not insured by either the FHA or by the VA, but patterns adopted in the 1930s persist in conventional loans. Private banks offer conventional loans that are long-term (usually fifteen or thirty years) amortized mortgages. Conventional loan terms offer a choice of fixed interest rates or adjustable rates, which start very low and move to a predetermined high. They require at least 20 percent down, or less if the borrower takes out private mortgage insurance. In 2000 the American home ownership rate reached a new record high of 67.7 percent. A total of 71.6 million families owned their homes.

At a Glance Cheaper to Buy Than Rent

In 1939 the Wilmington Construction Company built four hundred six-room houses just north of Wilmington, Delaware. This FHA-backed development was called Edgemoor Terrace. It demonstrated the use of tract production line techniques, including standardized models and lot sizes, construction methods, and model homes. The homes sold for $5,150 with a $550 down payment. The FHA mortgage guarantee meant buyers paid an incredibly low $29.61 monthly payment that included principle, interest, mortgage insurance, and taxes. An apartment of the same size in New York City rented for $50 a month.

Immediately following World War II, tracts using similar techniques sprung up. Levittown, located 25 miles east of Manhattan, eventually included 17,400 separate houses. The dwellings were of Cape Cod style with a living room and fireplace, two bedrooms, and one bath. They were approximately 750 square feet in size. Thousands of young families eager to escape tiny apartments or close quarters with in-laws flocked to Levittown, where it was cheaper to buy than rent.

The Federal National Mortgage Association (Fannie Mae) and the Government National Mortgage Association (Ginnie Mae) completed the New Deal-initiated revolution in the home finance industry. Fannie Mae resulted from the Wagner-Steagall Housing Act of 1937, and by 2000 Fannie Mae was wholly privately owned. Ginnie Mae separated from Fannie Mae in 1968 and today is a government-owned association operating under the Department of Housing and Urban Development (HUD). Through the remainder of the twentieth century, Fannie Mae and Ginnie Mae bought packages of mortgages. This made it possible for funds to travel from regions with historically high amounts of capital to poorer regions. As a result, poor regions had more money to loan than in previous years. Nationally, mortgage funds funneled out of the Northeast to the South and West and out of the cities to the suburbs. In 2000 Fannie Mae and Ginnie Mae were major purchasers of conventional loans, continuing to move money around the nation. Money was moved from where there was ample loan money to poorer areas, equalizing the amount of available loan money around the country.

The New Deal housing legislation put into place the financial structure through which private money built suburbia and the Sunbelt (South and West). The primary beneficiaries were white middle-class families who left racially distressed inner cities by the millions. The U.S. government had adopted policies in accordance with the wishes of most of its citizens. HOLC real estate appraisal methods such as redlining discriminated against racial and ethnic minorities and against older, industrial cities. The HOLC, however, extended aid without regard for its ratings and into all areas of the cities. But, unlike the HOLC, the FHA, acting on HOLC's information, favored homogeneous suburbs over industrial or older mixed sections of the cities. The FHA often denied mortgages solely because of geographical location. In doing so the federal government, for all practical purposes, put its seal of approval on ethnic and racial discrimination. Even more importantly private enterprises, banks, and savings and loans adopted the FHA's practice of denying mortgages due to location. By the mid-1980s, federal housing policies had played a major role in the deterioration of urban centers. The poor had not shared in America's postwar housing boom. Public housing programs attempted to improve their situation.

Public Housing

Many New Deal public housing projects built under the USHA quickly deteriorated into slums. Whereas housing in the cities before World War II had been inadequate, with wartime reallocation of funds, it became much worse. Even during the war, proposals for public housing, slum clearance, model towns, and regional and city planning were proposed by housing reformers. But the American business community wanted no plan that seemingly interfered with the private real estate market. Cries of "European socialism" and "communist front" abounded. Not until 1949 did another housing act, the National Housing Act of 1949, provide a commitment to federal reconstruction of cities and public housing. The 1949 act tied slum clearance to rebuilding, as had the earlier Wagner-Steagall Housing Act of 1937. This time a new term was coined—urban development. The clearance of slums, however, was generally emphasized over rebuilding. To operate within the private real estate market, private firms would build public housing through local housing authorities. The Housing Act of 1954 was an attempt to speed up slum clearance, and it changed the term "urban development" to "urban renewal." Black Americans called urban renewal "Negro removal," as new expensive high-rise apartments and shopping centers went up. Over the years many projects were primarily focused on beautification, such as replacing slums with plazas and sports arenas.

Not until 1965 was the federal-city partnership, began in the New Deal era, revived. President John F. Kennedy (served 1961–1963) proposed a cabinet level department for housing. Finally, under President Lyndon B. Johnson's (served 1963–1969) War on Poverty, the Housing and Urban Development Act of 1965 established a cabinet department of Housing and Urban Development (HUD). The War on Poverty was a 1960s comprehensive social and economic program, in the tradition of the New Deal, with the goal to rid the United States of poverty. The war focused largely on racial minorities living in the deteriorating inner cities. The key difference from the New Deal was that the 1960s campaign was pursued during a time of overall economic prosperity.

Unfortunately, the 1965 act called for HUD to pursue a policy of developing new greenbelt towns to move people out to the country. Greenbelt towns are new communities built on the edges of the urban area to relocate the poor from the inner city. The policy proved even less successful than the limited Greenbelt towns of the New Deal and was soon abandoned. Overall, between 1933 and 1970, only 893,500 units of low-income housing were completed, and a substantial number of those—143,000—were for the aged. Dramatically, in 1972 the Pruitt-Igoe public housing project in St. Louis, once hailed for its progressive design, was demolished because it was beyond repair. By 1974 the public housing concept had been severely discredited.

More About… Greenbelt Towns

Of all the New Deal experiments, Greenbelt towns were the most daring and innovative. Inspired by the turn of the century "garden city" theories of Englishman Ebenezar Howard, Rexford G. Tugwell, administrator of the Resettlement Administration, set out to build new towns. Tugwell is quoted in Mark Gelfand's book, A Nation of Cities: The Federal Government and Urban America, 1933–65, 1975, p. 133):

My idea is to go just outside centers of population, pick up cheap land, build a whole community, and entice people into it. Then go back into the cities and tear down whole slums and make parks of them.

Surrounded by a belt of open land, Tugwell's communities were to have decent housing, a high level of social and educational services, and be limited to 10,000 residents. Built by the government but leased to local cooperatives made up of residents, the cities would help solve the housing problem of the city. Tugwell hoped to build 3,000 towns. Three were actually built—Greenbelt at Berwyn, Maryland; Greenhills near Cincinnati, Ohio; and Greendale outside Milwaukee, Wisconsin. Building towns from scratch proved very expensive, pushing rents for apartments out of the low-income bracket to the middle-income range. As with most utopian ventures, the towns started out filled with energetic young residents but with excessive rules and meetings the zeal faded. Greenbelt towns never fulfilled their goal of serving as model towns for future developments.

Going against the grain of the American tradition of private property, many denounced the communities as "communist towns." Real estate interests continually fought them. After World War II, they were sold at a great loss by the government. The three communities remained private residential communities into the twenty-first century.

Department of Housing and Urban Development—More Responsibilities

After a difficult beginning, HUD evolved through the 1980s and 1990s to address a broad range of issues. The agency is responsible for national policy and programs that address America's housing needs, improve and develop communities, and enforce federal fair housing laws. Depression "poverty programs" assumed poverty could be eliminated by simply altering the housing of the poor. Having learned from Depression-era attempts, rather than attack the problem of low-income housing on only one front, HUD began operating on many fronts. HUD provides housing assistance for low-income persons through "assisted" housing and public housing. Assisted housing is commonly known as Section 8. It helps low-income households with rental subsidies in private apartment complexes or rental houses. Under the Section 8 certification program, HUD determines the amount of rent a household can afford to pay, then pays the difference up to full market rent rates. This is much like the subsidies under the National Housing Act of 1937. Within a standard rent range, it allows tenants a greater freedom of choice as to where they want to live.

HUD provides job training, encourages local businesses to hire public housing residents, and brings residents into the leadership and management of their developments. It also enforces the Federal Fair Housing laws that prohibit housing discrimination based on race, color, national origin, sex, religion, families with children, and disabilities. HUD programs also help the homeless, individuals with disabilities, and AIDS victims with rental assistance and various shelter care programs.

The Community Development Block Grant helps communities and low-and moderate-income persons by providing grants for renovating housing, improving facilities such as sewers, building neighborhood centers, and assisting private businesses with economic development.

The FHA, the New Deal agency established in 1934, operates under HUD today. FHA activities have greatly expanded. The FHA assists first-time buyers and others who might not be able to meet down payments for conventional loans by providing mortgage insurance.

The FHA also assists in providing affordable rental housing by insuring loans for the construction of multifamily housing developments. This represented new developments in twentieth-century policy. Support of multifamily housing was nonexistent in the FHA's Depression years. As of October 1996, the FHA provided mortgage insurance for 6.5 million single-family homes totaling $401 billion. As of September 1996 FHA provided insurance on 15,935 multifamily developments containing two million units.

Notable People

Catherine Bauer (1905–1964). After graduating from college, Bauer began work in New York's City Housing Corporation in the 1920s. The corporation was in the process of building a model garden community. Bauer spent the early 1930s in Europe, studying solutions to housing problems. On her return in 1934 she published Modern Housing. Confident public housing was America's answer to decent housing for all, she became organized labor's top lobbyist for a low-rent housing program. Bauer helped draft the National Housing Act of 1937. After passage of the act, she became a consultant to the U.S. Housing Authority and helped frame its policies. She favored construction of projects on vacant land rather than on slum sites.

Paul V. Betters (1906–1956). Betters served as executive secretary of the American Municipal Association (AMA), a loose federation of municipalities formed to interchange ideas on various phases of city governments. Betters, representing 7,000 members of AMA, repeatedly spoke before Congress, discussing urban problems. In 1933 Betters organized the U.S. Conference of Mayors (USCM). He helped shape the USCM to be an effective lobby for cities with populations over 50,000.

Marriner Eccles (1890–1977). Eccles, a banker from Utah, came to Washington, DC, to serve with Secretary of Treasury Henry Morganthau, Jr. as special assistant in monetary and credit matters. He helped draft the Federal Housing Act of 1934 which created the FHA. Eccles then accepted the position of head of the Federal Reserve Board where he remained until 1951. Eccles believed in government spending to stimulate the economy to preserve the American economic system. During the 1937 economic downturn, he was instrumental in convincing Roosevelt to resume spending which benefited the U.S. Housing Authority.

John H. Fahey (1873–1950). A newspaperman and publisher from New England, Fahey helped establish the United States Chamber of Commerce in 1912 and served as its president from 1914 to 1915. President Roosevelt named Fahey to the board of the HOLC in June 1933, then as chairman in November 1933. Fahey held that position until he retired in 1948.

Cordell Hull (1871–1955). Chairman of the Senate Banking Committee in 1933, Senator Hull masterminded legislation to put the brakes on home foreclosures. As a result, on June 13, 1933, Congress passed the Home Owners' Refinancing Act authorizing the HOLC.

Harold L. Ickes (1874–1952). Ickes, a strong progressive who disliked business domination of municipal government, became known for his honesty and commitment to good government. He became an influential figure in the New Deal. President-elect Roosevelt appointed him secretary of the interior. When the National Industrial Recovery Act (NIRA) of 1933 was passed, Roosevelt also appointed him head of the Public Works Administration (PWA), an agency created under the NIRA. He oversaw the PWA's Housing Authority.

Fiorello La Guardia (1882–1947). Born in New York City, La Guardia served as a Republican in the 65th and 66th Congresses before resigning to join the army air corps during World War I. Elected mayor of New York City in 1933, he proved to be aggressive, energetic, and incorruptible. His election as mayor began a period of close cooperation between the government of New York City and the Roosevelt administration. In 1934 La Guardia set up the New York City Housing Authority to deal with the city's slums. He believed Roosevelt's relief programs, including the Works Progress Administration (WPA), saved the cities. He served as president of the U.S. Conference of Mayors from 1936 to 1945.

Charles E. Merriam (1874–1953). Merriam, a social scientist from Iowa, helped found the Social Science Research Council, which he headed from 1923 to 1927. He then created what became the Research Committee on Social Trends (1929–1933). The public works administrator appointed Merriam to the advisory committee of the newly formed National Planning Board in 1933. His work through these various groups focused on developing national policies promoting economic and social improvements in U.S. society. He was a champion of urban life and insisted the federal government pay attention to urban problems. He expanded the definition of public works to include broader planning in various areas by both private and public sectors. Merriam worked to forge federal-city partnerships.

Henry B. Steagall (1873–1943). Elected to the U.S. House of Representatives in 1914, Steagall was long a proponent of federal deposit insurance but reluctant to support public housing. He feared public housing programs would only benefit cities and was socialistic. He did not support Senator Wagner's housing bill until President Roosevelt urged him to do so. Nevertheless, the landmark 1937 housing bill partially bears his name, the Wagner-Steagall Housing Act.

Nathan Strauss (?–?). Strauss, an old friend of Senator Robert Wagner, served on New York City's Public Housing Authority. President Roosevelt appointed him head of the newly created U.S. Housing Authority in 1937.

Rexford Tugwell (1891–1979). Tugwell was trained in economics from the Wharton School of Finance and the University of Pennsylvania. He left Columbia University to join Roosevelt's administration as an assistant secretary of agriculture. Informally, his major role was economic advisor to the president. Tugwell was instrumental in creating the Agricultural Adjustment Act. In 1935 Roosevelt appointed Tugwell head of the Resettlement Administration (RA). The chief goal of the RA was to resettle poor farmers into better areas, but another goal was to establish subsistence homestead communities with low-income housing called "Greenbelt towns." The towns were highly controversial, and, in reality, rents were too high for the poor.

Robert F. Wagner (1877–1953). Elected to the U.S. Senate in 1926, Wagner focused on unemployment issues. After the onset of the Great Depression, he concentrated on federal attempts to relieve economic stress, labor issues, and social insurance. In 1935 he continued to press for an expanded welfare state. He had a particular interest in public housing, and he introduced a public housing bill in 1935, 1936, and again in 1937. When President Roosevelt finally supported the bill, it was passed as the Wagner-Steagall Housing Act of 1937 and established the U.S. Housing Authority.

Edith Elmer Wood (1870–1945). An American housing reformer, Wood argued social behavior was conditioned by housing. Having studied housing in European nations, she campaigned for public housing. She lobbied for the U.S. government to replace slums, which would in turn reduce crime and delinquency. Wood wrote The Housing of the Unskilled Wage Earner, published in 1919, and became an international figure in housing reform. Joined by Catherine Bauer and others in the 1930s, she worked for public construction of dwellings for people who could not afford adequate housing.

Primary Sources

National Housing Act of 1934

The following words were spoken to Congress by President Roosevelt on May 14, 1934, as he stressed the need to pass the National Housing Act of 1934 to stimulate the construction industry (Roosevelt, 1938, p. 232):

May I draw your attention to some important suggestions for legislation which should tend to improve conditions for those who live in houses, those who repair and construct houses, and those who invest in houses?

Many of our homes are in decadent (deteriorated) condition and not fit for human habitation. They need repairing and modernizing to bring them up to the standard of the times. Many new homes now are needed to replace those not worth repairing.

The protection of the health and safety of the people demands that this renovating and building be done speedily. The Federal Government should take the initiative immediately to cooperate with private capital and industry in this real-property conservation."

Federal Housing Administration (FHA)

President Roosevelt proclaimed the affordability of homes financed by FHA-insured loans established under the National Housing Act of 1934. As stressed by Roosevelt, many lower-income families were able to now afford homes, and the resulting mortgage payments did not place an unreasonable burden on their monthly expenses. A broad spectrum of the public could now afford homes. The FHA, however, aided mostly white, middle-class homeowners in suburban areas (Roosevelt, The Public Papers and Addresses of Franklin D. Roosevelt: 1928–45, 1938, p. 236).

The records of FHA show that over one-half of the families buying homes under the FHA plan have annual incomes of $2,500 and less; and that most of these are purchasing their homes by payments of $25 a month or less. Nine out of ten of all new home owners under the FHA plan are using less than one-fifth of their incomes to meet their monthly payments on their home.

Neglect of Cities

The National Resources Committee argued in its 1937 landmark report titled "Our Cities: Their Role in the National Economy," that the problems of cities had been largely neglected by the federal government. The Committee had been created by the National Industrial Recovery Act in 1933 to guide national economic planning and advise the president and Congress on needed social and economic policies. Concern for deteriorating inner cities and attempts to plan for the urban environment would be a continuous feature of national policy during the remainder of the twentieth century (quoted in Glaab and Brown, A History of Urban America, 1983, p. 298):

The United States Government cannot properly remain indifferent to the common life of American citizens simply because they happen to be found in what we call "cities." The sanitation, the education, the housing, the working and living conditions, the economic security—in brief, the general welfare of all its citizens—are American concerns, insofar as they are within the range of Federal power and responsibility under the Constitution.

Wagner-Steagall Housing Act of 1937

On March 17, 1938, President Roosevelt, enthusiastic about the start of work on the first five projects under the 1937 Housing Act, wrote these words in a note to Nathan Strauss, chief of the United States Housing Authority (USHA), which was formed under the act (quoted in Jackson, Crabgrass Frontier: The Suburbanization of the United States, 1985, p. 224):

Today marks the beginning of a new era in the economic and social life of America. Today, we are launching an attack on the slums of this country which must go forward until every American family has a decent home.

Suggested Research Topics

  • Research the many programs offered by the Department of Housing and Urban Development (HUD) at the beginning of the twenty-first century. Does the FHA still play a role in HUD? How does HUD help low-income persons occupying HUD housing to develop long-term strategies for bettering their lives?
  • If you had been part of a family faced with losing their home, how would this possibility affect you, your schoolwork, your family relations. Write a diary entry relating your thoughts.
  • Contact and interview a local bank loan officer about the types of mortgages available today. What factors do bankers consider when making a home loan to a family?
  • Research the architectural style of the American Bungalow house.



Davies, Pearl Janet. Real Estate in American History. Washington, DC: Public Affairs Press, 1958.

Gelfand, Mark I. A Nation of Cities: The Federal Government and Urban America, 1933–65. New York: Oxford University Press, 1975.

Glaab, Charles N., and A. Theodore Brown. A History of Urban America, 3rd Ed. New York: Macmillan Publishing Co., Inc., 1983.

Huthmacher, J. Joseph. Senator Robert F. Wagner and the Rise of Urban Liberalism. New York: Atheneum, 1968.

Jackson, Kenneth T. Crabgrass Frontier: The Suburbanization of the United States. New York: Oxford University Press, 1985.

Roosevelt, Franklin D. The Public Papers and Addresses of Franklin D. Roosevelt: 1928–45. New York: Harper & Brothers, 1950.

Further Reading

Duchscherer, Paul. The Bungalow: America's Arts and Crafts Home. New York: Penguin Books USA, 1995.

Housing and Urban Development (HUD), [cited November 8, 2001] available from the World Wide Web at http://www.hud.gov.

Kennedy, David M. Freedom from Fear: The American People in Depression and War, 1929–45. New York: Oxford University Press, 1999.

Lancaster, Clay. The American Bungalow, 1880–1930. New York: Dover Publications, 1995.

Lower East Side Tenement Museum, New York City, [cited November 8, 2001] available from the World Wide Web at http://www.tenement.org.

Riis, Jacob A. How the Other Half Lives: Studies Among the Tenements of New York. New York: Dover Publications, Inc., 1971.

See Also

Banking , Everyday Life

About this article

Housing 1929-1941

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