A History of Affordable Housing in America

Affordable housing policy in the United States has moved through four broad phases. It began with state and local reform laws that set minimum standards for crowded city tenements. During the New Deal, Washington began insuring mortgages and paying for locally owned public housing. In the 1970s and 1980s, it shifted from building housing itself to subsidizing private owners through rent payments and tax credits. Since the 1990s, the emphasis has been on redeveloping, refinancing and preserving the homes already built.

Each phase was a reaction to the problems of the last one. The same federal government that expanded homeownership and built public housing also institutionalized redlining in mortgage lending and displaced many Black families through urban renewal. Knowing this history explains why today’s system is a patchwork of programs, and why debates about it remain so heated.

Before Washington: Tenement Reform (1867–1901)

Early American housing policy was regulatory, and it came from states and cities. Fast-growing industrial cities packed immigrant and working families into tenements: multi-family buildings that were often dark, airless and unsafe. New York’s laws are the best-known example.

• 1867: New York’s first tenement law required fire escapes, although the city’s archives note that many were poorly built.
• 1879: The “Old Law” led to buildings with narrow air shafts for ventilation, a standard reformers came to see as inadequate.
• 1890: Journalist Jacob Riis published How the Other Half Lives, a photo-documented account of tenement conditions that built public pressure for reform.
• 1901: The Tenement House Act, or “New Law,” imposed stricter standards and created the city’s Tenement House Department to enforce them.

These laws set standards for buildings. They did not pay for housing or lower rents. Public money for housing came only with the New Deal.

The New Deal Creates a Federal Role (1933–1940s)

Rescuing homeowners and mortgage markets

The Great Depression brought Washington into housing on a large scale. The Home Owners’ Loan Act of June 13, 1933, created the Home Owners’ Loan Corporation (HOLC). According to a National Bureau of Economic Research (NBER) working paper, the HOLC bought and refinanced more than one million troubled mortgages before it finished lending in 1936.

The National Housing Act, signed June 27, 1934, created the Federal Housing Administration (FHA). By insuring private lenders against losses, the FHA helped standardize longer-term home mortgages. The agency still insures mortgages today; see FHA-insured home loans.

The FHA also institutionalized redlining, the practice of denying people credit because of where they live, which fell hardest on Black neighborhoods. The Federal Reserve’s history of the practice notes that the FHA’s 1938 Underwriting Manual treated the “infiltration of inharmonious racial groups” as a credit risk, and it describes the FHA as the architect of federally sponsored redlining from 1934 until the 1960s. Researchers still debate the role of the HOLC’s color-coded neighborhood maps. The NBER paper notes that the HOLC drew its maps after it had finished making its loans.

The Housing Act of 1937 and public housing

Federal agencies, including the Public Works Administration’s Housing Division, built roughly 21,800 low-rent units between 1932 and 1937, according to the Congressional Research Service (CRS). The Housing Act of 1937, signed September 1, 1937, made public housing permanent.

The law was a compromise. Instead of a national agency owning housing, it had Washington finance projects built and owned by local public housing agencies. Communities could opt out simply by never creating one. Rents had to cover operating costs, so early residents were mostly working families who were temporarily poor. The law also required “slum clearance”: for each new unit built, an unsafe or unsanitary unit had to be eliminated. World War II then diverted construction to housing for defense workers.

Postwar Ambitions and Urban Renewal (1949–1960s)

The Housing Act of 1949, signed July 15, 1949, set a national goal that still appears in federal law: “a decent home and a suitable living environment for every American family.” It authorized 810,000 new public housing units by 1954 and launched urban renewal, which paid cities to clear and redevelop neighborhoods labeled as slums.

Neither promise worked out as planned:

• Public housing fell short. The Korean War, budget cuts and local opposition slowed construction. By the end of 1957, only about 210,000 of the 810,000 authorized units were under management, CRS reports.
• Urban renewal displaced residents. Clearance uprooted many low-income households, particularly Black families. Public housing was required to give displaced families priority, and CRS reports that the share of nonwhite families in public housing rose from 36% to 46% during the 1950s.

Meanwhile, tighter income limits, preferences for displaced families and postwar suburbanization meant public housing increasingly served the poorest households. Their rents could no longer cover the cost of maintaining the buildings.

A Cabinet Department and Civil Rights (1965–1969)

The late 1960s reshaped the federal role:

• 1965: The Department of Housing and Urban Development Act, signed September 9, 1965, created HUD as a Cabinet-level department.
• 1968: The Fair Housing Act, Title VIII of the Civil Rights Act of 1968, was signed April 11, 1968. It banned discrimination in the sale, rental and financing of housing. The Housing and Urban Development Act of 1968 also prohibited new high-rise public housing for families.
• 1969: The Brooke Amendment capped public housing rents at 25% of a tenant’s income. Washington began paying operating subsidies to make up the difference.

The Brooke Amendment is the origin of today’s practice of tying assisted rents to a share of income. Congress raised the share to 30% in 1981.

From Building to Subsidizing: Section 8 (1973–1983)

By the early 1970s, federal construction programs were drawing growing criticism for taking too long and costing too much. In 1973, President Nixon imposed a moratorium on new subsidized housing commitments.

The Housing and Community Development Act of 1974, signed August 22, 1974, ended that pause with two lasting innovations. It created the Community Development Block Grant, giving cities flexible federal funds, and the Section 8 program. Section 8 paid private owners the difference between a unit’s rent and what a low-income tenant could afford, either through long-term contracts tied to buildings or through certificates tenants carried to the private market.

The building-based contracts became today’s Project-Based Rental Assistance. In 1983, Congress repealed Section 8 new construction as too expensive and authorized portable vouchers. A 1998 law merged certificates and vouchers into the Housing Choice Voucher program, now the largest piece of Section 8.

The Tax Code Takes Over: The LIHTC (1986)

The Tax Reform Act of 1986, signed October 22, 1986, created the Low-Income Housing Tax Credit. Instead of spending appropriated money, the federal government gives states tax credits to award to developers. Developers sell the credits to investors to raise equity for rent-restricted apartments.

CRS describes the LIHTC as the federal government’s primary tool for developing affordable rental housing. Its design moved key decisions to state housing finance agencies and private developers, including nonprofits. That decentralization remains its defining feature. In 1990, the Cranston-Gonzalez National Affordable Housing Act added the HOME Investment Partnerships Program, a federal grant that states and local governments use for a range of affordable housing activities.

Rethinking Public Housing: HOPE VI and the 1998 Reforms

In 1992, a national commission reported that 6% of public housing, about 86,000 units, was severely distressed. The Housing and Community Development Act of 1992 created HOPE VI to fund demolition and redevelopment of those properties.

HOPE VI replaced many isolated, high-poverty projects with lower-density mixed-income housing, often with added private financing. A 2004 Brookings and Urban Institute review called the $5 billion program one of the most ambitious urban redevelopment efforts in U.S. history. Critics pointed to the net loss of public housing units and to the treatment of displaced residents. CRS reports that Congress cut the program’s funding substantially, partly over slow spending and partly over concerns about displaced residents. Congress later shifted funding to a similar program, Choice Neighborhoods.

The Quality Housing and Work Responsibility Act of 1998 then barred housing authorities from using federal capital or operating funds to add net new public housing units. Congress had not funded new public housing development since FY 1994. The public housing stock, which peaked at just over 1.4 million units in the mid-1990s, has declined since.

Preservation and Recapitalization: RAD (2011–Present)

By the 2000s, public housing had a large backlog of repair needs that federal funding did not cover. The Rental Assistance Demonstration (RAD), authorized by an appropriations act signed November 18, 2011, lets housing authorities convert public housing to long-term Section 8 contracts. Unlike regular public housing funding, those contracts can be used to raise private capital for renovations.

Congress has raised RAD’s unit cap and extended it several times. The 2026 ROAD to Housing Act raised its cap from 455,000 to 555,000 units and removed its expiration date, according to CRS.

Recent Reforms (2020–2026)

The 2020s brought another burst of change:

• Emergency rental aid: Congress created a $25 billion emergency rental assistance program in December 2020 and added $21.55 billion in the American Rescue Plan of 2021, according to the Treasury Department.
• LIHTC expansion: Public Law 119-21, signed July 4, 2025, permanently raised states’ annual LIHTC allocations by 12% starting in 2026. It also lowered the tax-exempt bond financing threshold for 4% credits from 50% to 25%. The lower threshold applies to buildings placed in service after 2025 that are financed in part with bonds issued after 2025.
• The 21st Century ROAD to Housing Act: Public Law 119-101, enacted July 11, 2026, reauthorized HOME for the first time since 1992 and eased voucher inspection rules. It also allowed manufactured homes to be built without a permanent chassis and, with some exceptions, barred large institutional investors from buying additional single-family homes for 15 years beginning January 7, 2027.

Timeline at a Glance

Recurring Themes

A few patterns run through this history:

• Local control. From the 1937 Act’s local housing authorities to LIHTC’s state allocation plans, Washington has mostly funded housing and let others decide where and what to build.
• Public versus private delivery. Policy has swung from government-owned housing toward private ownership with public subsidy, and each model has drawn criticism.
• Race and place. Federal programs both reinforced segregation and later tried to undo it, and the results are still visible in many neighborhoods.
• Funding versus need. Demand for public housing exceeded supply in most communities, CRS reported in 2014, and waiting lists could run for years or close to new applicants.

The Bottom Line

American affordable housing policy grew in layers. Tenement codes, New Deal mortgage insurance and public housing, Section 8 subsidies, tax credits and preservation tools each answered the problems of their time. None of them replaced what came before. Today’s patchwork of programs, and the inequities some of them created, makes sense only in light of that history. So do the reforms Congress is still enacting.