How the Federal Housing Administration Tried to Save America’s Cities, 1934–1960

In December of 1946, with returning war veterans facing a national housing shortage, President Harry S. Truman released a much-anticipated statement of his housing plans for the following year. Although the nation was on the cusp of a boom in single-family, suburban homeownership, Truman wanted the federal government to support a different type of housing. He said that the “main point of emphasis” for his administration “is rental housing,” since it was essential that returning veterans “should not be compelled to buy in order to get shelter.” He said the administration’s goal was to “increase the proportion of rental units” being built through all possible methods, including “conversion and rehabilitation and re-use,” means most appropriate for older, urban areas. To implement these plans, Truman trumpeted the powers of the Federal Housing Administration (FHA). He promised to authorize the FHA to provide a billion dollars in mortgage insurance “to be used primarily for rental housing,” and urged it to focus its energy on this program, even while he asked Congress to extend rental housing assistance. In this vein, he celebrated the work of the “Mayors Emergency Housing Committees” for drawing attention to the needs of urban areas. Truman emphasized the importance of his program again in his State of the Union address the following month, where he called on Congress to focus on the demands of large cities, and to “establish positive incentives for the investment of billions of dollars in large-scale rental housing projects.”¹

Even before legislation was passed, Raymond Foley, recently installed as the commissioner of the FHA, responded to the president’s exhortations. He wrote Truman’s chief-of-staff, John Steelman, that “every phase of operations of the Federal Housing Administration is geared to production of veterans’ rental housing.” Foley claimed that he had already revamped the agency’s procedures to make multifamily and rental housing (the two were synonymous in the FHA’s literature) easier to produce, and he particularly mentioned the value of “conversion of existing structures—to produce the quickest, least expensive results.”² In a memo to all of the agency’s field offices nationwide, he stated that the “rental housing program upon which we are embarked is a MUST for all offices and all sections of every office.” The agency soon convened more than five hundred meetings with builders to encourage such housing, and at one of these the assistant commissioner explained that “most families in need of housing want apartments, rather than homes of their own.”³

These statements, both from Truman and from the men who would lead the FHA for almost the entirety of Truman’s presidency, may seem surprising. The FHA, created in 1934 to revive the housing market by insuring mortgage loans against default in exchange for a small fee, is almost universally portrayed in the historical literature as the preeminent force behind modern suburbia, with a stark and steady bias for single-family, suburban, and white homeowners that denuded urban centers of middle-class populations and reshaped the nature of the modern American landscape.

Yet these traditional portrayals of the FHA misread its history for two related reasons. First, they treat the agency as having a largely internal and consistent compass toward development, one that operated independently of the larger political forces of its day. In fact, the FHA was consistently buffeted by political winds. The act authorizing the FHA was amended by Congress forty-seven times in just its first twenty years, and the agency was subject to relentless pressure by presidential administrations and their varying appointees.⁴ As Truman’s statements and agency’s response shows, on the whole these political forces pushed the FHA to be more focused on the problems of cities. This article hopes to show that politicians and executive officers in this era had an interest in pleasing existing urban constituencies, rather than an incipient suburban minority, and that those most involved with housing issues in Congress and the executive branch tended to be from urban areas and push the FHA to support urban interests...