Table of Contents
What was the National Housing Act?
The National Housing Act of 1934 was one of the key pieces of legislation Franklin D. Roosevelt signed into law during the Great Depression. It formed the Federal Savings and Loan Insurance Corp. (FSLIC) and the Federal Housing Administration (FHA), which established a federally-guaranteed mortgage insurance program.
Despite its considerable success, it segregated cities. White families gained an asset in the flourishing suburbs; Black families were forced into the projects. This systemic inequity arguably continues to contribute to the current racial pay gap and imbalances in economic opportunities.
We at the Zero Theft Movement are dedicated to eradicating the rigged economy so that all Americans can thrive. We will examine the National Housing Act and the profound effects it continues to have today.
Behind the Enactment of the National Housing Act
The Great Depression
The Great Depression ravaged the nation. The economy completely collapsed, and with it fell the real estate market. Historian Kenneth T. Jackson found that, between 1928 and 1933, the construction of residential property plummeted by 95% and expenditures on home repairs dropped by 90%. Furthermore, one estimate finds that half of all U.S. urban home mortgages were delinquent as of January 1, 1934.
Migrant Mother (1936) By Dorothea Lange
source: Library of Congress
The Recovery Effort
Franklin D. Roosevelt, taking over as the President of the U.S. in 1933, knew that immediate reforms were necessary to help the nation and its citizens climb out of this deep economic pit. Thus in March, he signed into law the famous New Deal, a comprehensive recovery effort involving programs, public work projects, financial reforms, and regulations. Included in the New Deal was the National Housing Act.
The National Housing Act established the FHA and the FSLIC.
The FHA jumpstarted mortgage lending and home construction by providing federal guarantees for loans made by building and loan associations, banks, along with other financial institutions.
The agency still plays a significant role in the U.S. housing finance system by offering mortgage insurance and subsidies to thousands of low and middle-income Americans annually.
The FSLIC insured deposits to savings and loan associations up to $5,000, effectively reducing risk for lenders. Public confidence had understandably been at an extreme low and in turn had exacerbated the recession with a string of bank runs. The FSLIC regained the public’s trust and provided stability to the banking system.
The National Housing Act gave rise to a recovery in the nation’s housing markets and also created opportunities for housing credit for low-income white Americans. In 1937, Congress passed another Housing Act enabling the HFA to clean up slum areas and provide loans specifically for the construction of low-income housing.
By the end of the 1930s, the recovery effort had allowed “12,000,000 people to improve their housing standards and conditions under the FHA program, including [new home purchases and] the modernization and repair provisions.”
The FSLIC later became insolvent during the savings and loan crisis of the 1980s. According to an estimate by the National Center for Policy Analysis, “Most of the borrowed funds used to bail out S&Ls are being financed by 30 or 40-year bonds. When the interest on these bonds is considered, the total cost will…approach $1.4 trillion [by 2029].”
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Systemic Racism in Execution of the National Housing Act
“Among American citizens, there should be no forgotten men and no forgotten races.”
Franklin D. Roosevelt, on October 26, 1936
Roosevelt’s words did not accurately capture the racist realities of the housing recovery effort. The National Housing Act definitely benefited many low to middle class Americans. Nevertheless, by design, aid from the FHA in particular could be extended only to white citizens. In a way, Roosevelt did get something right unintentionally. African Americans weren’t forgotten; they were remembered, just not particularly fondly.
The FHA primarily restricted its aid to projects building out the suburbs, refusing to lend to homeowners wishing to purchase homes in predominantly black areas. The Agency justified their lending practices by claiming investments in these neighborhoods were high risk. As many low to middle-class white families were still suffering from the effects of the Great Depression, they could not purchase a home unless they followed the FHA’s terms.
African American families, if they needed government support, had to live in the projects. But that’s not all. Author and Economist Richard Rothstein writes, “If a black family could afford to buy into a white neighborhood without government help, the FHA would refuse to insure future mortgages even to whites in that neighborhood, because it was now threatened with integration.”
Sign with an American flag in Detroit, Michigan that reads “We want white tenants in our white community.” It was put up directly opposite a housing project.
source: Library of Congress
In essence, the FHA promoted segregation and engineered a reason for low to middle-class white Americans to support the racist housing system. With the harsh realities of the Great Depression, we can perhaps see how they deserve some blame but were largely manipulated.
The official term for the FHA’s housing segregation was redlining. It refers to the systematic rejection of various services to residents of specific, often racially associated, neighborhoods or communities, either explicitly or through the selective raising of prices.
It actually originates from the literal red lines on maps, which designated specific residential areas for Blacks and Whites. Predominantly-Black neighborhoods were labeled “hazardous.” The government-sponsored Home Owners’ Loan Corporation and the Federal Home Loan Bank Board would only extend lending and investment services if Black (and White) borrowers were planning to live in their designated areas.
Each major city had a redlining map like the one above
source: Urban Displacement
While the Supreme Court eventually ruled in 1948 that racial restrictions were legally unenforceable, the blatantly racist process continued. You can see in the FHA’s Underwriting Manual the following instructions:
“The Valuator should consider carefully the immunity or lack of immunity offered to the location because of its geographical position within the city. Natural or artificially established barriers will prove effective in protecting a neighborhood and the locations within it from adverse influences. Usually the protection against adverse influences afforded by these means include prevention of the infiltration of business and industrial uses, lower-class occupancy, and inharmonious racial groups.”
An “adverse influence” was “inharmonious racial groups.” In other words, Whites with Whites in the suburbs, and Blacks with Blacks in the urban projects.
Redlines Erect Barriers
“Natural or artificially established barriers will prove effective in protecting a neighborhood and the locations within it from adverse influences.”
The aforementioned Richard Rothstein, in The Color of Law: A Forgotten History of How Our Government Segregated America, recounts the case of a private builder in Detroit. In 1940, the FHA denied the builder’s application for insurance because he wanted to construct a housing development near a preponderantly African American neighborhood.
The builder decided to erect a half-mile long, six-foot tall concrete wall separating the neighboring Black area from where he planned to construct his development. Now, with a physical barrier between the two races, the FHA agreed to insure the houses
A photograph of the wall in Detroit
source: Library of Congress
Developers would often use highways as a physical barrier to segregate White and Black neighborhoods. While racist lending practices are much less prevalent today, the separation remains to this day.
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The Long Term Consequences of the National Housing Act
In addition to the FHA’s discriminatory practices, federal housing projects from the 1930s onward helped keep Black Americans in neighborhoods with fewer education and job opportunities than white neighborhoods.
To this day, housing and education are inextricably linked.
A house on the favorable side of a school district line can have its value increased by 10-20%.
In 2019, the Joint Economic Committee (JEC) found “the average U.S. ZIP code associated with the highest quality (A+) public elementary school has a 4-fold ($486,104) higher median home price than the average neighborhood associated with the lowest quality (D or less) public elementary schools ($122,061).”
Furthermore, for over 70% of the nation’s students, the family’s place of residence determines where they go to school.
When you consider the history of redlining, how African Americans were forced into homes that would only minimally appreciate in value, then you can see how many of their kids, grandkids, and maybe even great-grandkids have received a lower quality of education solely due to their places of residence. A choice they didn’t really have in the first place.
The vicious cycle then extends to job opportunities. It’s generally accepted that the better education you have, the better job opportunities you tend to get. But the figures provide some necessary substantiation to the popular belief.
source: Bureau of Labor Statistics
From funding to the quality of the educators, school districts vastly differ. And as you can imagine, these intermingling factors can create an environment where more students have the chance to maximize their potential and set themselves for a fruitful future (not just monetarily speaking, of course).
But one’s schooling can alternatively have a profoundly negative effect on the African American youth, ridding them of their self-confidence and leaving them with minimal future prospects. This feeds into the cycle, where they earn less and have to start a family in a poor school district (often in a predominantly Black neighborhood).
The National Housing Act & the Rigged Economy
The eminent Martin Luther King Jr., Huey Newton and Bobby Seale of the Black Panther Party (BPP), as well as many other leaders of the Black Power Movement, recognized the systemic inequities established through the National Housing Act and worked to achieve economic justice. While MLK specifically focused on combating redlining, the Panthers led programs to feed and educate Black youths.
These kinds of rigged practices and systems throughout history (e.g. the Old Regime of France, the British Raj, slavery, etc.) have enabled certain groups to profit off the backs of others. While you might not realize it, similar economic foul play could be happening in the U.S. today. We can see just how much lingering damage remains from the National Housing Act through the links between housing, education, and job opportunities for African Americans.
But the problem is likely much bigger than housing?
Major parts of the U.S. economy could be rigged so corporations and the super-rich can boost their profits at the expense of average Americans. The question is: how can we fix this problem potentially worth trillions of dollars?
Join the Zero Theft Movement
The Zero Theft Movement, along with our growing community, works to calculate the best estimate for the monetary costs of corruption in the U.S. Corporate, political, and everything in between.
We have built a safe and independent voting platform where you and your fellow citizens collaborate to thoroughly investigate potential problem areas across the economy. Everyone votes on whether (1) theft is or isn’t occurring in a specific area of the economy, and (2) how much is being stolen or possibly saved. Through direct democracy, we can collectively decide where the problem areas are and start working on addressing them systematically.
Only through hard evidence can we prove where the rigged parts of the economy exist and force Congress to hold the bad actors accountable. We can achieve economic justice, a financial system that allows the many good businesses (big, medium, and small) and good individuals (regardless of their socioeconomic status) to thrive.
The Zero Theft Movement does not have any interest in partisan politics/competition or attacking/defending one side. We seek to eradicate theft from the U.S economy. In other words, how the wealthy and powerful rig the system to steal money from us, the everyday citizen. We need to collectively fight against crony capitalism in order for us to all profit from an ethical economy.
Terms like ‘steal,’ ‘theft,’ and ‘crime’ will frequently appear throughout the article. Zero Theft will NOT adhere strictly to the legal definitions of these terms (since congress sells out). We have broadly and openly defined terms like ‘steal’ and ‘theft’ to refer to the rigged economy and other debated unethical acts that can cause citizens to lose out on money they deserve to keep.