The New Deal’s National Housing Act of 1934 established the Federal Housing Administration (FHA), which was the dominant force in federal housing until the 1960s.
The FHA’s long-term mortgages required small down payments to purchase a home in the 1930s, and insured mortgages by providing guarantees against families losing their homes. The widespread loss of jobs and income, as a result of the Great Depression, led to a higher number of foreclosures and tenant evictions with creditors and borrowers both hit hard. This in turn hurt the building industry. The FHA made it possible for an average middle-class family to be able to afford a home within its financial means and bolstered the building industry at the same time.
Returning World War II veterans needed housing, and the FHA expanded aid to the housing industry to meet the high demand. With a growing clientele during the housing shortage crisis, it became politically difficult to attack the program. Congress was reluctant to touch the program because it facilitated the profitable business transactions of a key group of private market participants.
From the start of the program, the FHA turned away from the cities and minorities to support a growing
Suburbia and an expanding white middle class. FHA programs supported racially segregated neighborhoods; the FHA believed this was the way to safeguard its financial investment. The agency also ignored the problems of rehabilitating and repairing older, still sound housing stock in inner-urban areas. This practice was encouraged by the businesses and attitudes of the time.
The administration of DwiGHT D. Eisenhower succeeded in slowing federal involvement in social welfare. The role of the FHA, Republicans believed, was to aid the private bankers in serving the middle class. Not until the return of liberals to the White House in the 1960s did pressure increase toward more governmental action to aid the disadvantaged and minorities. In 1962, an executive order of John F. Kennedy prohibiting racial segregation in FHA programs changed the agency’s mandate. Instead of guaranteeing market-rate loans to qualified families, the FHA became a source of below-market interest loans, and it began to focus on inner-city development. Various programs supported by the FHA helped nonprofit organizations assist moderate-income families. More sensitive management of the programs, better administration, better understanding of the community, more tenant involvement, and expanded social services led to many successful endeavors in which better environments and housing for families were created. In other cases, though, the nonprofit organizations were just fronts for developers. The programs led to enormous profits for some of these builders, who did shoddy work to make a larger profit. There were also cases of mismanagement of funds and housing, which led to the units falling into disrepair.
Under FHA subsidy programs, builders, banks, and real estate firms were guaranteed a profit. But the quality of the housing was called into question, as many units were substandard. Poor construction or rehabilitation of buildings led to the abandonment of these structures. The low-income families who lived in these units could not afford the upkeep of these buildings. The same agency that helped create suburbia in the 1940s, 1950s, and 1960s, helped destroy inner-city communities at the same time.
Further reading: John Egan, et al. Housing and Fuhlic Policy: A Role for Mediating Structures (Cambridge, Mass.: Ballinger Publishing Company, 1981); R. Allen Hays, The Federal Government and Urhan Housing: Ideology and Change in Public Policy (Albany: State University of New York Press, 1985).
—Robert A. Deahl
World History
