June 27, 1934 - National Housing Act

Policy Name: National Housing Act, (H.R. 9620)

Date: Effective June 27, 1934

In response to the housing crisis of the Great Depression, the National Housing Act established the Federal Housing Administration (FHA), which sought to revive lending for housing construction, home purchases, and home improvements. In order to stabilize the mortgage market, the FHA provided federal guarantees of repayment to banks, mortgage companies, and other lenders that complied with federal standards. To increase the flow of capital into housing, the FHA also encouraged the development of a secondary mortgage market, in which financial institutions could sell mortgages to investors.

In implementing this legislation, the FHA also adopted rules that entrenched patterns of racial discrimination in the housing market. From the 1930s through the 1950s, the FHA’s Underwriting Manuals institutionalized the practice of redlining, which evaluated African American neighborhoods as being too risky to qualify for FHA mortgages. In 1965, the FHA became a part of the Department of Housing and Urban Development (HUD), where it remains today.