Alex F. Schwartz: Housing Policy in the United States, 2010: Chapter 3

Chapter 3
"Because housing is so expensive, its development and acquisition almost always depend on borrowed money. 
...
The housing finance system has been structured to a large degree by the federal government, often in response to crisis. Many of the most enduring institutions and elements, including fixed-rate, self-amortizing mortgages, mortgage insurance, and a secondary mortgage market, stem from the Roosevelt administration's interventions in response to the Great Depression. (Schwartz 2010, 51)

The Home Owner's Loan Act of June 13, 1933 sought to "pull people out of foreclosure" (Immergluck 2004). It created the Home Owners Loan Corporation (HOLC) to purchase and refinance mortgage loans in default. It used long-term federal bonds to acquire mortgages in default and then rewrote these mortgages on much more affordable terms. It extended the terms of the mortgages to 15 years, thereby reducing monthly payments.  (Schwartz 2010, 53)

The Roosevelt administration and Congress created the Federal Housing Administration (FHA) 1 year and 2 weeks after launching HOLC. ... Through the FHA, the federal government insured mortgages issued by qualified lenders. With FHA insurance, mortgage lenders were protected from default; if borrowers failed to keep up with their mortgage payments, the FHA would cover the unpaid balance of the loan. (Schwartz 2010, 53)

Put bluntly, the FHA deemed properties located in predominantly Black neighborhoods too risky to warrant mortgage insurance. (Ibid, 55)

Although the FHA readily insured mortgages for housing in suburban communities, urban neighborhoods received much less insurance. ... 'FHA was helping to denude St. Luis of its middle class residents' (Jackson 1985: 209). ... FHA had not insured a single mortgage in the declining industrial cities of Camden and Paterson, New Jersey ... In addition to its incorporation of racial criteria in allocating mortgage insurance, FHA also contributed to the decline of urban areas by favoring single-family over multifamily construction, as well as construction of new homes over rehabilitations of existing structures.    ...  (Ibid, 56)

Thrifts were the single largest source of mortgage loans from the later 1930s through the 1970s.
..
Whereas thrifts financed home mortgages out of their deposits, FHA mortgages were financed mostly by nondepository institutions.  (Ibid, 57)

Thrifts came under still more severe stress by late 1970

Shannon: Housing subsidy

In our class Housing and the Community, Shannon - our professor, mentioned that the biggest subsidy to the housing market is not to the poor, which is how most of us perceive subsidy: Public/social/affordable housing for the poor, who get 'massive' discounts on their living expenses. Most of the times the US provides vouchers to poor renters to pay for the remainder of cost over 30% of the renter's income. 30% of income is the 'affordable' price for housing. 

Contrary to this belief that most housing subsidy goes to the impoverished population, Shannon informed us that the mortgage repayment tax breaks for home-buyers are by far the biggest federal housing subsidy. It makes sense if the majority of the population in the United States lives in single family housing and they get a mortgage to buy it, they will get an income tax break for that mortgage.