The Bankrate promise
At Bankrate we strive to help you make smarter financial decisions. While we adhere to strict , this post may contain references to products from our partners. Here's an explanation for .
The National Housing Act (NHA) was a piece of legislation that formed a key part of the New Deal, the series of federal programs to restore the U.S. economy in the 1930s. Intended to promote homeownership, the Act improved housing conditions, made mortgages more accessible and affordable, and reduced the foreclosure rate on homes during the Great Depression.
What is the National Housing Act (NHA)?
Also known as the Wagner-Steagall Housing Act, the NHA was signed into law on June 27, 1934, by President Franklin D. Roosevelt. It created two federal agencies, the Federal Housing Administration (FHA) and the Federal Savings and Loan Insurance Corporation (FSLIC). The FSLIC insured insured savings and loans account holders’ deposits and operated from 1934-1989.
The FHA insured mortgage lenders and banks against the threat of borrower default on their loans, in return for a fee. The FHA became part of the U.S. Department of Housing and Urban Development (HUD) in 1965.
Why was the NHA passed?
The stock market crash of 1929 wiped out the assets of professional investors and regular citizens alike. Thousands of U.S. banks failed, as did numerous businesses. Unemployment skyrocketed, as did foreclosures: By 1933, nearly 50 percent of all mortgages were delinquent or in default.
One of the sectors hit hardest during the Great Depression was the construction industry. To revive it, along with the mortgage lending business, the FHA provided federal guarantees for loans made by building and loan associations, banks and other financial institutions. The idea was that the government backing would reassure the institutions and encourage them to lend, on more generous terms. That would in turn encourage individuals to buy homes, which would in turn stimulate developers to build them.
What did the NHA do?
As a result of the NHA, mortgages — and the concept of homeownership — became more available to thousands of middle-class and working class Americans. The government-backed loans did jump-start the real estate market. Along with homes, they stimulated the construction of farm buildings and small commercial properties and restored jobs in construction trades.
The National Housing Act was amended in 1937 to empower the FHA to clean up slum areas. The FHA made low-interest, 60-year loans to local governments so they could build apartment blocks, which were then rented to low-income families.
Among many low-income programs made possible by that law and other New Deal programs were the first public housing projects across the United States. This fell in line with President Roosevelt’s beliefs, later solidified in the 1944 Economic Bill of Rights speech, of the “right of every family to a decent home.”
What was the lasting impact of the NHA?
In the 1930s, the National Housing Act helped revive the lending and construction industry by guaranteeing loans. In the longer term, the NHA provided the scaffolding for more stable and equitable housing for Americans throughout much of the 20th century. Home mortgage terms became more standardized — in fact, the familiar 30-year fixed-interest mortgage that finances 80 percent of a home purchase, evolved as a result of the program.
The FHA helped finance new housing developments and communities on the outskirts of major cities. While it was not a cure-all for the inequities in American housing across racial groups, the NHA did pave the way for later federal legislation having to do with equal opportunity and fairness of housing in the United States.
And it introduced the concept of federally insured mortgages, which spread to other agencies. In fact, FHA loans are still in existence today, making homeownership possible for those with low-to-moderate incomes or little credit.