A New Form of Credit: The State Promotes Home Improvement, 1934–1954

“America has become shabby”

—Anna S. Richardson, Women’s Home Companion, 1934

Since the 1970s, the gentrification of many inner-city areas has shown that houses do not always deteriorate or neighborhoods decline. Many writers have said that this truism was ignored by federal policy for several decades. This article probes that view.

The U.S. government became actively involved in the housing market in 1934, notably through the agency of the Federal Housing Administration (FHA). From then until at least the 1970s, the main thrust of federal policy was to promote the construction, finance, and sale into owner-occupancy of suburban single-family dwellings. The FHA accomplished this by making a revolution in mortgage finance: it normalized long-term, high-ratio amortizing mortgages on new homes in standardized subdivisions. Encouraged by the real estate industry, the agency’s assumption was that such policies facilitated an inevitable process: houses vacated by the new suburbanites would “filter down” to moderate- and then low-income households.¹ Looking back, however, historical scholars have argued that FHA programs were self-validating: by encouraging the neglect of older homes and neighborhoods, they made filtering inevitable, and with it the decline of older neighborhoods in central cities.²

There is some truth to this assessment of federal policy. However, and although the fact has been widely ignored, from the beginning the FHA also sought to improve existing homes and neighborhoods. At first its efforts were led by Title I of the National Housing Act of 1934, which promoted the improvement of homes (and retail stores).³ In 1947 an economist who wrote what is still the fullest evaluation of the early impact of the housing aspects of the program claimed that Title I loans were “a new form of credit,” while a later survey of federal policy identified them as one of six major federal innovations in housing finance.⁴ In principle, they were as revolutionary as FHA mortgages because they encouraged home improvement—or what was then referred to as modernization—by offering insurance on installment finance. Moreover, in practice, Title I loans were aggressively promoted by the FHA and to great effect. This article tells the story of the origins, nature, and impact of the Title I program from its inception to its eventual incorporation into the system of mortgage finance in 1954.

The neglect of Title I is part of the wider failure among historical scholars and housing researchers to examine what happens to dwellings after they are built. From the 1920s to the 1970s, contemporaries deplored the disarray of the building industry.⁵ Since then, historians have explored some industry innovations, notably the rise of community builders and the (largely abortive) efforts at prefabrication.⁶ By comparison, on the subject of how dwellings were being maintained, contemporaries said little and historians have written even less.⁷ This neglect is unjustifiable. Today we spend as much—to adapt Stewart Brand’s phrase—in teaching buildings how to learn as we do in bringing them into this world.⁸ The home-improvement industry is huge, sustaining the second-largest retailer in the United States, Home Depot. It is important to understand how that industry emerged. This article argues that although, obviously, most owners have always maintained and improved their properties, and although there were some precedents for modernization credits, Title I played a major role in creating the modern home-improvement industry.

To make this argument, Title I must be set in the context of the markets for housing and consumer credit. To that end, I draw on the three trade journals that were most read by lumber dealers, who initiated four-fifths of all improvement loans.⁹ Other valuable sources are contemporary newspapers, NHA hearings, and the Insured Mortgage Portfolio, the magazine the FHA published to promote its programs to approved lenders.¹⁰ The first section of the article shows how Title I emerged at the nadir of the Depression. Drawing on precedents established by credit agencies and manufacturers of building materials, and on the recent experience of the Home Owners Loan Corporation, it...