federal government’s interest in housing conditions can be traced
back to the first national investigation of large urban slum areas
in 1892. HUD is the successor to a number of federal housing agencies,
which gradually evolved following a major effort during the great
depression to stimulate housing development. The following narrative
highlights major events and legislation tracing the Department over
the past decades.
the midst of widespread unemployment and financial collapse, Congress
passed the Emergency Relief and Construction Act of 1932, creating
the Reconstruction Finance Corporation (RFC). This was the government’s
first major involvement in the housing field. The RFC was authorized
to make loans to private corporations providing housing for low-income
families. Also in 1932, the Federal Home Loan Bank Board was established
to make advances on the security of home mortgages and establish
a Home Loan Bank System.
However, these efforts did little to assist individual homebuyers.
The average home loan at that time required very short-term credit,
with terms generally ranging from three to five years. Large down
payments, second mortgages, and high interest rates were commonplace.
As the depression ended, and the prospect of improved financial
status for individual families increased, the National Housing Act
of 1934 was passed to relieve unemployment and stimulate the release
of private credit in the hands of banks and lending institutions
for home repairs and construction. To accomplish this, the Act of
1934 created the Federal Housing Administration (FHA). The FHA continues
to this day, under the Assistant Secretary for Housing-Federal Housing
Commissioner, as the main federal agency handling mortgage insurance.
Title II of the Act of 1934 established two basic mortgage insurance
programs: Section 203 mortgage insurance for one to four family
homes; and Section 207 multifamily project mortgages. The FHA’s
assumption of risk, through its insurance programs, made possible
the amortization of mortgage loans with regular monthly payments
to reduce the size of loan.
Act of 1934 also authorized the FHA to create a national mortgage
association to provide a secondary market where home mortgages could
be sold. The allowed more money to be available for home loans.
In 1937, the Federal National Mortgage Association, or Fannie Mae,
was chartered by the FHA as a subsidiary of the RFC.
While these early measures were a major government effort to stimulate
housing construction, they did not help those lower income families
most in need of housing. Because of the needs of this group, the
United States Housing Act of 1937 established the public housing
program. The Act, administered by the United States Public Housing
Authority, authorized loans to local public housing agencies for
lower-rent public housing construction expenses.
The programs created by these acts guided the direction of federal
housing policy for the next 10 years, leading to the creation of
the urban renewal program. Over the years, all of these original
programs have undergone some changes and additions. However, they
continue to reflect the federal government’s aim to marshal both
public and private resources to improve housing conditions for low-and
The same year that the public housing program was approved by Congress,
the Bankhead-Jones Farm Tenant Act was passed to allow the Secretary
of Agriculture to make rural housing loans. The separate administration
of rural loans continues to the present with the Farmers Home Administration’s
(FmHA). FmHA direct loans for rural housing may be used in conjunction
with other housing assistance such as Section 8 housing assistance.
While another major housing act would not be passed until 1949,
government housing agencies underwent several reorganizations between
1937 and 1949. In 1939, the United States Public Housing Authority
was transferred to the newly created Federal Works Agency; and the
Federal Loan Agency was created to assume responsibility for the
FHA, the RFC, Fannie Mae, the Federal Home Loan Bank Board, and
the Home Owners Loan Corporation. Three years later, the National
Housing Agency (NHA) was established to handle all non-farm housing
programs. The Federal Home Loan Bank Administration, the FHA, and
the Federal Public Housing Administration became constituent agencies
of NHA. In 1943, the Housing and Home Finance Agency (HHFA), HUD’s
immediate predecessor, replaced the NHA. Back
War II caused a temporary moratorium on domestic housing construction
except for defense proposes. Legislation during this period, however,
has a major impact on housing. The 1944 authorization of the Veterans
Administration (VA) home loan program has guaranteed millions of
single-family and mobile home loans since its inception. The market
increase in housing construction following World War II, which led
to the growth of suburban areas, is in part attributable to this
financing program. This exodus to the suburbs in turn led to the
need for new housing programs to deal with declining urban areas.
Congress responded to this urban decline with the Housing Act of
1949 (1949 Act). Title I of the 1949 Act authorized funds to localities
to assist in slum clearance and urban redevelopment. This program,
as earlier programs, once again emphasized new construction. In
addition, it provided funding for activities not directly related
to housing construction. Open space land, neighborhood facilities
and basic water and sewer facilities were all made eligible for
federal assistance. Back to top.
Housing Act of 1954 amended the 1949 Act to provide funding, not only
for new construction and demolition, but for the rehabilitation and
conservation of deteriorating areas. These amendments represented
a substantive change in the evaluation of housing problems. The gradually
shift from new construction to conservation has had a major impact
on today’s housing policies where rehabilitation rather than demolition
is encouraged. Two years later the Housing Act of 1956 added special
provisions under Sections 203 and 207 and the public housing programs
to give preference to the elderly, and amended the 1949 Act to authorize
relocation payments to persons displaced by urban renewal. Federal
involvement in housing was rapidly expanding to include not only the
financing of new construction but measures to preserve existing housing
resources and develop better communities. This trend continued throughout
the 1960s and into the 1970s. Back
in the 1960s expressed the social concerns of providing decent and
sanitary housing and ensuring that such housing is made available
to all. In that sprit, Executive Order 11063, Equal Opportunity
in Housing, was issued in 1962 and represented the first major effort
by the federal government to combine civil rights with housing.
Title VI of the Civil Rights Act of 1964 assured nondiscrimination
on federally assisted programs. Equality in housing opportunity
was legislated by Title VII of the Civil Rights Act of 1968, the
Fair Housing Act, which prohibited discrimination in the sale, financing,
or lending of housing. The full protection of the law was expanded
by the Fair Housing Amendments of 1988, further prohibiting discrimination
based on familial status or handicap.
In 1965, the Housing and Urban Development Act created HUD to succeed
the HHFA as a cabinet-level agency.
The 1960s brought a new method of developing low-income housing.
The Housing and Urban Development Act of 1965 initiated a new leased
housing program to make privately owned housing available to low-income
families. The Housing and Community Development Act of 1974 (1974
Act) replaced Section 23 with the Section 8 Leased Housing Assistance
Payment Program (Section 8). Title I of the 1974 Act created a new
community development block grant (CDBG) program. Back
the late 1960s to the mid-1970s, laws were enacted to define and
protect the rights of consumers in the areas of interstate land
sales and real estate settlement procedures (RESPA). The Home Mortgage
Disclosure Act of 1976 and the Community Reinvestment Act of 1978
attempted to have lending institutions reveal where they were making
their housing loans in an effort to discourage geographical discrimination
in the mortgage lending industry. Back
1980s represented an era of retrenchment in new housing construction
programs funded by HUD. Project based Section 8 assistance, which
proliferated during the 1970s, obligated the government to long-term
housing assistance payments. Budgetary constraints during the 1980s
led to the elimination of the Section 8 new construction program in
order to limit the scope of its assistance to existing housing.
1990s presented a different set of crises for the Department, much
of which related to the cost of expiring Section 8 contracts and deteriorating
properties. Several new programs were established to ensure the survival
of affordable units and the viability of subsidized housing programs.
The Low-Income Housing Preservation and Resident Homeownership Act
of 1990 attempted to maintain the supply of affordable housing by
offering project incentives not to prepay mortgages and to continue
the low-income rental use of their properties.
In addition, HUD was facing the high cost of renewing expiring Section
8 contracts. At the crux of the problem, was the high cost of FHA-insured
mortgages, which necessitated higher that market-rate rents, thereby
making HUD Section 8 subsidies extremely expensive. The Multifamily
Assisted Housing Reform and Affordability Act of 1997 created a mechanism
to restructure the mortgages in order to maintain affordable Section
HUD was also beset by budgetary pressures and was forced to look to
management reform and personnel cutbacks. Significant organizational
reconfiguration was necessary, based on the long-range HUD 2020 Management
Reform Plan (2020 Plan).
2020 Management Reform Plan was announced in 1997 as an attempt
to streamline the Department through significant staff cuts and
reorganizing operations by function. The intent of the plan was
to eliminate “stovepipe” bureaucratic processes in which offices
operate independently, with duplication of operations. Under the
2020 Plan, programs were consolidated and some functions were to
be privatized, with the number of HUD programs to be reduced from
300 to 70. Although significant staff reductions were achieved,
program consolidation had only limited success. Back
mission of HUD, to “promote adequate and affordable housing, economic
opportunity, and a suitable living environment free from discrimination”
continues to focus the department’s initiatives. Over the past two
years, the national homeownership rate for all Americans has reached
a record of 68 percent, but minority homeownership rates lag far
behind. The Department is committed to President Bush’s goal of
creating 5.5 million new minority homeowners by the end of the decade.
Together with the housing industry, HUD programs play a key role
in helping to reach this goal, including FHA mortgage insurance,
an important source of financing, especially for minority and lower
income homebuyers; homeownership vouchers; the HOME program; CDBG;
housing counseling; and other focused efforts.
During Fiscal Year 2002, HUD launched a major consumer advocacy
initiative: reforming outdated and needlessly complex regulatory
requirements under the Real Estate Settlement Procedures Act (RESPA).
To assist citizens who decide against or who may not be prepared
for homeownership, HUD also maintains a commitment to increasing
quality affordable rental housing. Working with public agencies,
nonprofit, faith-based, and community organizations as well as private
partners, the department has helped expand the availability of affordable
housing and improve structural and living conditions at HUD-insured
and assisted rental housing projects. Moreover, a variety of HUD
program offices offer specially targeted programs to provide housing
and other essential support to populations with special needs, including
the elderly, persons with disabilities, individuals with HIV/AIDS,
and the homeless.
The Department also plays a major role in meeting President Bush’s
challenge to end chronic homelessness within ten years. To help
meet this goal, the Interagency Council on Homelessness has been
reactivated. It consists of 18 federal agencies that assist homeless
individuals and families.