The National Housing Act that was passed by Congress in 1934 and set up the Federal Housing Authority (FHA). This agency encouraged banks, building and loan associations, etc. to make loans for building homes, small business establishments, and farm buildings. If the FHA approved the plans, it would insure the loan.

In 1937 Congress passed another National Housing Act that enabled the FHA to take control of slum clearance. It made 60 year loans at low interest to local governments to help them build apartment blocks. Rents in these homes were fixed and were only available to low income families. By 1941 the agency had assisted in the construction of more than 120,000 family units.