National Housing Act Definition
President Franklin D. Roosevelt signed the National Housing Act on June 27, 1934, as a part of his New Deal program. It is also known as the Capehart Act and it established the Federal Housing Administration and the Federal Savings and Loan Insurance Corporation in the United States.
The objective of the New Deal program was to push the economic growth in the U.S. countering the effects of the Great Depression. The National Housing Act was passed to, “encourage improvement in housing standards and conditions, to provide a system of mutual mortgage insurance, and for other purposes.”
A Little More on What is the National Housing Act
Under the New Deal program, the Franklin Roosevelt Administration and the Congress enacted a number of new laws to alleviate the effects of the Great Depression. The laws were passed to expand the power of the federal government for managing and stabilizing the economy of the United States.
The housing bubble burst of 1920 was one of the major contributing factors toward the onset of the Great Depression. According to reports, by “the summer of 1932, as many as one thousand mortgage defaults were being recorded every day…and by early 1933 about half of the nation’s home mortgages were in default…” Thousands of Americans lost their homes and many more were threatened to face the same consequence.
The Federal Housing Administration was created to establish the federally-guaranteed mortgage insurance program. In return for a minimum fee, the program insured the mortgage lenders against the threat of default.
During this time, it became extremely difficult for the Americans to secure a mortgage finance. The loan terms for mortgage became troublesome for most of the Americans. The lending institutions were demanding 50% down payment and repayment of the whole amount within 5 years. After the creation of the Federal Housing Administration, the lending institutions supported by the federal insurance started to offer more generous terms for the mortgage loans as they were insured against the threat of default. They offered 20% mortgage loans with 20% down payment and 20 to thirty years repayment time.
The Federal Housing Administration was successful in its mission and it made the mortgage loans affordable for the Americans. It successfully alleviated the housing market crisis by implementing the policy of insurance.
After the effect of the Great Depression was effectively dissipated, many New Deal Programs were withdrawn by the Congress. However, the Federal Housing Administration stayed as the lawmakers believed it still had a purpose for the growth of the U.S. economy. In 1965, the Federal Housing Administration was incorporated into the Department of Housing and Urban Development.
Till date, the FHA remains an important part of the U.S housing finance system. The Federal Housing Administration has insured over 35 million home mortgages and 47, 205 multifamily project mortgages since its inception. At present, it has 4.8 million insured single-family mortgages and 13,000 insured multifamily mortgages.
The FHA was criticized for endorsing the practice of redlining in their efforts. The redlining left a large section of African American people without having the access to the mortgage loan. The Underwriting Handbook used by the FHA marked African-American neighborhoods as ineligible for FHA mortgages. The FHA denied insurance for the mortgage loans provided to the colored people neighborhood. As a result, the lending institutions refused to provide mortgage loan to these neighborhoods. This unfair policy of the FHA denied homeownership to millions of Americans. Many believe this is one of the main reasons for the wealth disparities between the races that still exists in America.
References for National Housing Act of 1934
National Housing Act of 1934
Racialization and the state: The Housing Act of 1934 and the creation of the Federal Housing Administration, Gotham, K. F. (2000). Sociological Perspectives, 43(2), 291-317. This research paper examines the impact of state structures, class contradictions and corporate interest o the state policy formation process which has been ruled by three different major theoretical views namely; the state-centred theory, Marxian structuralism and the business dormancy theory. This paper recalls that these existing views pay little attention to racial discriminations as a major component in studying the implementation and formulation of any state policy. The analyses drawn from this study shows the value of adopting a racialization framework to account for the racial motivation that surrounds the origin of the state policies. This paper also explained the Housing Act of 1934 and the creation of the Federal Housing Administration.
Public housing as a device for white residential segregation in Johannesburg, 1934–1953, Parnell, S. (1988). Urban Geography, 9(6), 584-602. According to this research paper, the introduction of Public housing for whites in South Africa as an urban segregation measure in 1930 was studied. The major reason for the states to establish this Council housing has been shown to have been the division in the race among the residences of the working-class people. The shelter demands, stringent selection procedure and the fiscal shortages pushed the black working class citizens thereby forcing them to become persistence regarding the racially integrated suburbs irrespective of the efforts to protect the white citizens via council housing supplies.
A New Deal for the American Mortgage: The Home Owners’ Loan Corporation, the National Housing Act and the Birth of the National Mortgage Market, Carrozzo, P. M. (2008). U. Miami Bus. L. Rev., 17, 1. This paper explains the new deal for the American mortgage. It also explains the Home Owner’s loan corporation, the National Housing Act and the genesis of the National Mortgage Market.
Public housing transformation: Evolving national policy, Smith, J. L. (2015). transforming public housing communities (pp. 31-52). Routledge. According to this paper, irrespective of the potential economic benefits which are clearly important in the 1930s-member of the housing industry, the Congress, however, is concerned that the publicly owned housing went far enough to even beyond the view of the United state government. This paper studies the transformation that occurred in the public housing which gave rise to a new evolution in policies. This paper, however, states that the Federal government might be regarded as “reluctant” inasmuch as public housing is concerned. Although, a lot of individuals believes that housing development does not depend on the function of the reigning government.
Architectural Competitions and Bureaucracy, 1934–1945, Shanken, A. (1999). arq: Architectural Research Quarterly, 3(1), 43-56. This academic thesis recollects that the Federal government and other giant corporation held design competitions to cause a change in the building industry during the great depression. In the early 1930s, the United State celebrated a significant turning point in the relationship that exists between the architectural profession both between the corporations and the government. This led to the transmission of the profession from one grounded in the ideal of the architectural artist by the American Institute of Architecture.
Public administration in the United States in 1934, Gaus, J. M., & White, L. D. (1935). American Political Science Review, 29(3), 442-451. This paper explains the public administration in the United States in 1934 and the various policies that were developed regarding the council housing Act.
The federal response to home mortgage distress: Lessons from the great depression, Wheelock, D. C. (2008). REVIEW-FEDERAL RESERVE BANK OF SAINT LOUIS, 90(3), 133. This paper examines the response of the federal government to mortgage distress during the great depression. A feature of the housing cycle of the 1920s and early 1930s were documented thereby forcing a significant development in the mortgage debt and subsequent increase in the mortgage foreclosures and default during the great depression. However, several similarities between the most recent episode and the great depression suggest a revisit to the historical experience which can provide undiluted information about the alternative policies to relieve the stress on the mortgage policies.
A New Form of Credit: The State Promotes Home Improvement, 1934–1954, Harris, R. (2009). Journal of Policy History, 21(4), 392-423. This paper disagrees with the view that the United State government became directly and actively involved in the housing market Act in 1934 which was considered notable via the agency of the Federal Housing Administration (FHA). From that time onwards till the early 1970s, the main aim of the federal policy remains to promote the finance, sale and construction into the owner-occupancy of the suburban single-family dwellings. This paper, however, argues that although most owners have tried improving and maintaining their properties, they are some that remained precedent for modernization credit. Hence, this research thesis studies the new form of credit and the state’s promotion.
Financing home ownership: the federal role in neighbourhood decline, Bradford, C. (1979). Urban Affairs Quarterly, 14(3), 313-335. This study examines the federal housing policies related to the single-family home ownership from the moment they are created (the 1930s) to this present moment. This paper focuses majorly on the policies if the Federal Housing Administration and the Federal Home Loan Bank Board and other federal regulators of a financial institution in an economy. This paper describes the main policies of the Federal Housing Administration and the financial regulators by directly prohibiting the FHA lending to other residents or minorities or the racially mixed neighbourhood. The result got from this study shows that this neighbourhood became inundated with the Federal Home Administration lending. Hence, the attempts of the federal government to cur the problems facing inner-city housing finance only exacerbated the situation.
Federal National Mortgage Association: Its Response to Critical Financing Requirements of Housing, Hunter, O. (1970). Geo. Wash. L. Rev., 39, 818. This paper explains the federal National Mortgage Association as well as it responds to the critical Financing Requirements as regards housing.
Rethinking federal housing policy, Landis, J. D., & McClure, K. (2010). Journal of the American Planning Association, 76(3), 319-348. This paper studies the trends in rethinking federal housing policy by summarizing the research and evaluating the performance of the program. This paper also suggests the various steps to take in other to make them synchronize and thus more effective