Housing Act of 1937

The U.S. Congress passed the Housing Act of 1937 on September 1, 1937. This legislation had three objectives: reduction of unemployment, slum clearance, and construction of low-income housing. Although the legislation did not significantly alter employment rates, it did influence the scope of federal involvement in, as well as the cost and design standards for, many of America's first public housing projects. In doing so, it established precedents for both the location and appearance of the nation's public housing.

The federal government's initial responses to the Great Depression did not address the shelter needs of low-income groups. The Federal Home Loan Bank System, the Home Owners Loan Corporation, and the Housing Act of 1934 primarily assisted financial institutions and current or prospective homeowners. The admittedly numerous beneficiaries of these programs rarely included those who were unable to purchase or rent dwellings outside of substandard areas.

One program that did attempt to provide lowincome groups with affordable housing during the 1930s was the Housing Division of the Public Works Administration (PWA). Established in 1933 by Title II of the National Industrial Recovery Act, the PWA's Housing Division was authorized to spend up to $135 million on low-cost housing and slum clearance. Ultimately, 21,800 public housing units were constructed by the Housing Division during its 4-year existence. Despite this accomplishment, several factors contributed to the division's general lack of success. Federal and local policymakers frequently disagreed over site selection and project development; the courts refused to grant condemnation powers to the Housing Division; and PWA administrator Harold L. Ickes often distrusted municipal officials, which led to intergovernmental conflict and confusion.

Reformers, eager for effective federal housing programs, found a sympathetic ally in Senator Robert F. Wagner, a Democrat from New York. Wagner introduced national housing legislation in 1935 and 1936 but failed to get it enacted. Powerful economic interests, such as the U.S. Chamber of Commerce, the National Association of Real Estate Boards, the U.S. Savings and Loan League, and the National Association of Retail Lumber Dealers, opposed any form of public housing. Many of their concerns prompted conservative lawmakers to amend Wagner's bill when the U.S. Senate considered it again in 1937. The Senate passed this revised version in late summer of that same year. The House of Representatives approved a companion bill introduced by Henry B. Steagall, a Democrat from Alabama.

The Housing Act of 1937 created the U.S. Housing Authority (USHA), a semi-autonomous agency in the U.S. Department of the Interior. Although USHA's programs were administered from Washington, D.C., actual control over housing reform remained on the local level. Municipal housing authorities, in their quest to clear slums and build low-income dwellings, could apply to USHA for loans amounting to 90 percent of a project's construction costs. USHA loans were to be issued at no less than the government interest rate (3 to 4 percent) for a maximum of 60 years. To raise the capital for these loans, USHA was authorized to sell $500 million in bonds.

A little understood but important component of the Housing Act of 1937 was its subsidy program. Contemporaries estimated that prevailing costs translated into rents of at least $11 per room per month in most urban areas; yet low-income groups, given their limited means, were usually unable to pay more than $6 per room per month. To bridge this gap in operating costs, the Housing Act of 1937 authorized a system of annual subsidies to local housing authorities. USHAwould pay up to 80 percent of this subsidy, while the remaining amount would have to come from the authority itself, usually in the form of a tax exemption. [Page 356]In practice, the subsidies were often large enough (when added to rents and tax exemptions) not only to cover operating costs and repayment of the entire amount of the initial USHA loan, but also to service any loan that the local housing authority had used to finance the remaining 10 percent of a project's construction costs. It was thus possible for local public housing to be underwritten almost entirely by federal funds.

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