A century of housing in review

October 25, 2011 – With the adoption of the Housing Act of 1949, the U.S. formally pledged to provide a suitable living environment for every American family. However, the definition of what is suitable has varied through the years according to economic conditions and political climate.

By the 19th century, industrialization, improved transportation, and immigration led to the rapid expansion of urban areas. Between 1840 and 1850 alone, the urban population of the United States almost doubled. In major cities, much of this growth was populated in tenement flats and other multi-story structures. Many also lived in company towns, which were built and controlled by a private company in order to house workers near industrial sites. Company towns were popular during the Civil War era through the turn of the 20th century.

After the Civil War, government efforts were taken to improve housing conditions, and in 1894, the first federal report on these conditions was issued. However, it was not until 1901 that a law permitting enforcement of housing standards was enacted. By 1930, many state and local governments had adopted city planning, zoning and subdivision regulations to guide the development of new residential areas.

Enter the Great Depression
During the depression years, home building almost at a standstill, and the rate of foreclosures at high levels, something similar to what we were experiencing during the last two years after the housing bubble burst. Back then emergency programs were enacted by the Hoover and Roosevelt administrations to provide jobs in the construction industry. These programs improved housing conditions and extended financial assistance to people losing their homes.

The passage of the National Housing Act in 1934 established the Federal Housing Administration, which revolutionized mortgage-lending practices by developing the level-payment, insured mortgage loan. Unlike the mortgage loans that had been standard until the 1930’s, FHA-insured loans required only a small down payment and repayment could be stretched over 30 years. Since the government insured these mortgage loans against default, lenders were willing to participate in the FHA program.

The government’s role was further expanded under the Housing Act of 1937 that established the U.S. Housing Authority to build subsidized, low-income housing. By 1940, the first national census of housing conditions revealed that almost two-fifths of the nation’s 37 million dwellings needed major repairs. Nearly half of these also lacked some or all-plumbing facilities, and more than 40 percent were classified as rural. Only 44 percent of the nation’s households were owner-occupied, the lowest percent in five decades.

The Post War Era
During World War II, private housing production almost ceased, as national resources were diverted to the war effort. By the end of the war, however, there was a severe housing shortage resulting from the needs of returning military personnel. The mortgage insurance programs of FHA and the guaranteed home loans provided by the Veteran’s Administration helped reduce the shortage, and by 1950, new construction exceeded levels of home building achieved in the 1920’s. By 1965, postwar government involvement in housing had grown so complex that it became necessary to create the U.S. Department of Housing and urban Development.

A Secondary Market is Born
During the 1960’s, sharp swings in interest rates, combined with federal regulations on thrift institutions, restricted mortgage credit. In order to increase the supply of funds to mortgage markets, the government created several agencies for buying and selling mortgages. These agencies included the Federal National Mortgage Association (Fannie Mae), the Government National Mortgage Association (Ginnie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac). These secondary marketing agencies attracted funds from all types of investors.

Onward to the 21st Century
Today, housing problems remain, however historically low rates and low housing prices, something we’ve never experienced together, make it a terrific time to buy if you are a first time buyer and don’t have a home to sell.

Foreclosures are also a continuing problem due to the predatory lending practices by some lenders, and buyers purchasing homes they couldn’t maintain. Still, the market is slowly changing, and most mortgage companies report they are originating plenty of business. In addition, while we still might not be ready to build houses on the moon, we’ll tackle the 21st century’s home ownership obstacles one at a time.

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