2. The Emergence of a Policy

The Federal Government's housing policy, until recent years, has been largely a response to crisis. Its seeds were sown in the urgency of World War I when housing near industrial sites proved inadequate and the Government stepped cautiously into the scene as money lender and house builder. It took firm root in the economic collapse of the thirties when the Government turned to housing as a major weapon to stabilize and stimulate the Nation's economy. And it grew in the massive defense effort of World War II when the Government faced up to the problem of providing housing for workers during war and then for returning servicemen in peacetime. Its full potential has not yet been reached. That lies in the future.

TENTATIVE BEGINNINGS

The first fleeting expression of Federal interest in housing occurred in 1892, when Congress appropriated $20,000 to investigate slums in large cities. The study provoked nothing in the way of legislation but it indicated an official awareness of the fact that slums did exist and did involve problems. It also reflected a change—what had once been an essentially rural nation was now fast becoming urbanized. Three cities, New York, Chicago, and Philadelphia, had populations in excess of 1 million. There were 28 cities, each with a population of over 100,000, whereas 20 years before there had been only 14.

Negroes were already coming to the cities in large numbers. By 1890, 1,500,000, or one-fifth of the 7,500,000 Negroes in the United States lived in urban areas. By 1910, the former figure would almost double. As yet, however, their increasing number was obscured by the rapid growth of the cities, themselves. The housing problems of urbanized Negroes were not yet deemed national problems worthy of congressional notice.

By 1913, Dr. George Haynes, professor of sociology at Fisk University, could define the outlines of the problem of residential segregation. In an article titled "Condition Among Negroes in the Cities" Haynes said,

Migration to the city is being followed by segregation into districts and neighborhoods within the city Thus the Negro Ghetto is growing up.... [The Negroes] seek other neighborhoods, just as the European immigrants who are crowded into segregated sections of our cities seek better surroundings when they are economically able to secure them. But a prejudiced opposition from his prospective white neighbors confronts the Negro

Intel

ligence and culture do not often discount color of skin. Professions of democratic justice in the North and deeds of individual kindness in the South have not yet secured to Negroes the unmolested residence in blocks with white fellow-citizens. In northern cities where larger liberty in some avenues obtains, the home life, the church life, and much of the business and community life of Negroes are carried on separately and apart from the common life of the whole people.

In southern communities, with separate streetcar laws, separate places of amusement and recreation, separate hospitals and separate cemeteries, there is sharp cleavage between whites and Negroes, living and dead.

The first positive congressional action in the field of housing came during the emergency of World War I. On March 1, 1918, Congress authorized the United States Shipping Board Emergency Fleet Corporation to provide housing for shipyard employees. This program was based on direct loans to real estate companies incorporated by the shipbuilders. Housing projects were constructed under this program in 24 localities. They included 9,000 houses, 1,100 apartments, 19 dormiories, and 8 hotels. On May 16 and June 4, 1918, Congress expanded its housing activities by authorizing and appropriating funds for the housing of war workers in general. The Bureau of Industrial Housing and Transportation was established within the Department of Labor and the United States Housing Corporation was created by Executive order. The Bureau, working through the United States Housing Corporation (USHC) built, organized, and managed 25 community projects containing more than 5,000 single-dwelling units, as well as apartments, dormitories, and hotels. The USHC also considered and adjusted rent grievances. Investigations were made in more than 100 cities, plans were drawn for 128 sites in 71 communities, and work started on 140 projects. The war's end, however, stopped these tivities. The USHC was in operation for only 109 days. Almost

all Federal housing was sold to private owners and the Government hastily withdrew from the housing business."

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During the 1920's there was some demand for legislation that would ease home mortgage credit, but none resulted. It was only with the advent of the economic collapse of the early 1930's that Congress again passed housing legislation. Again it was a crisis that prompted Federal action. This emergency was of a nature different from war and the means that Congress used to meet it were as different-and more farreaching.

RESPONSE TO ECONOMIC CRISIS

On July 21, 1932, Congress passed the Emergency Relief and Construction Act-the first Federal legislation to meet the crisis of the Great Depression. This measure authorized the Reconstruction Finance Corporation (RFC) to make loans to State-regulated, limiteddividend corporations chartered to provide housing for low-income families or for the reconstruction of slums. The corporations were subject to State and local laws as to rents, charges, capital structures, and rates of return. Under this law a loan of $8,059,000 was made to finance Knickerbocker Village in New York City, but the program was not received with widespread enthusiasm.

The President's Conference

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A year and a half earlier, in December 1931, President Hoover had called a conference on home building and home ownership. Its only immediate result was the Federal Home Loan Bank Act, but the conference had more profound and far-reaching effects. The reports of its committees occupied 11 volumes.10 Its findings and recommendations covered such areas as slum clearance, public housing, cooperative housing companies, and neighborhood planning. Significantly, an entire volume was devoted to the problems of housing for Negroes." Negro migration to the cities had begun to take on significant proportions. In the 20-year period prior to 1930, the Negro population of New York City had almost quadrupled; in Philadelphia, it had more than doubled; in Chicago, it had more than quintupled; in Detroit, it had increased more than twenty-fold. After considering the uniqueness of the housing problems of Negroes, the President's Conference offered 16 recommendations to improve their situation. Some of these

consisted of general suggestions for changing the climate of public opinion and inducing "civic-minded people" to establish adequate financing agencies to provide loans at reasonable interest rates. The report also recommended that a National Housing Commission and State commissions be established to promote adequate State housing laws. It recommended that permanent commissions be established on the community level to investigate housing conditions and propose specific controls. It also recommended that interracial groups be established to secure local housing improvements. In connection with the construction of low-priced apartments, it recommended that "consideration be given to the intervention by public funds either through tax relief or through direct subsidy." 12 Finally, the report recommended the organization of local cooperative associations of Negro homeowners and prospective homeowners for the purpose of enabling community groups to bargain collectively for financing facilities.

The importance of the President's Conference lies in the fact that for the first time a federally constituted body had studied the housing field in all its aspects and made proposals for dealing with it as a problem that was national in character.

Creation of the Federal Home Loan Bank System

The only immediate result of the President's Conference was the enactment on July 22, 1932, of the Federal Home Loan Bank Act, 13 which created the Federal Home Loan Bank System. This was the first long-term government measure in the area of home financing and is still the basic law governing the network of financial institutions within the Federal Home Loan Bank System. It was a bold device to integrate local credit institutions into a national system that would be supported on a permanent basis by central reserve facilities. It provided a reserve credit pool exclusively for home financing institutions, independent of the commercial banking system. The Federal Home Loan Bank System (FHLBS) was patterned somewhat after the Federal Reserve System in that it had a central governing board, called the Federal Home Loan Bank Board, appointed by the President, and a group of regional banks (Federal Home Loan Banks). Under this system, 11 of the latter were established with an original capital stock of $125 million subscribed by the Secretary of the Treasury." Building and loan associations, savings and loan associations, homestead associations, savings and cooperative banks, and insurance companies were eligible to become members of the system. In 1933, the credit activities of the Federal Home Loan Banks were broadened by the provision in the Home Owners' Loan Act authorizing the chartering of Federal