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The Federal Housing Act was enacted on this date in 1934. This American legislation began the modern involvement of the federal government in the American housing market.
The Federal Housing Administration (FHA) was created from this legislation. It represented the early New Deal's most important attempt at short-term pump priming of the economy, but it also had long-term significance as a shaping influence on the development of urban America. The FHA revolutionized home ownership by creating our current financial mortgaging system. In the process, it produced a lending structure which helped to solidify the racial segregation that still exists today. The FHA has insured over 35 million home mortgages and 47,205 multifamily project mortgages since 1934.
Recently, FHA has 4.8 million insured single-family mortgages and 13,000 insured multifamily projects in its portfolio. The Underwriting Handbook used by the FHA endorsed the practice of redlining, which marked Black neighborhoods as ineligible for FHA mortgages. The main rationale for the legislation was to revive the ailing construction industry, which accounted for about a third of the total unemployed, and whose recovery would have important consequences for supply industries like wood, cement, and electrical appliances. New housing starts, which averaged 900,000 a year in the 1920s, had plummeted as a result of the Great Depression to 90,000 in 1933.
Testifying in support of the legislation before the House Banking and Currency Committee, Federal Emergency Relief administrator Harry Hopkins confirmed that "a fundamental purpose of this bill is an effort to get people back to work." As 2017 headed by Ben Carson, the FHA continues to work to improve housing standards and conditions, provide adequate home financing through mortgage loans, and to stabilize the mortgage market. The FHA is part of the Department of Housing and Urban Development and is the only government agency that is completely self-funded.