The United States Housing Act of 1937, often referred to as the Wagner Act, was the federal government’s first response to urban issues. (Hunt, 2005) The Act declared that it was the policy of the United States to promote the general welfare by using federal funds and credit, among other things, to help state and local governments remedy the unsafe and unsanitary housing conditions… that are injurious to the health, safety and morals of the citizens of the Nation. (Fisher, 1959, p. 27).
When the Wagner-Steagall Act was signed on September 1, 1937, low-cost housing was established as a permanent government function under supervision of the United States Housing Authority. The passage of the act was the first government legislation devoted solely to that field of housing. The Housing Act of 1937 was enacted to create a public housing program in which local housing authorities would have complete responsibility for developing, owning, and managing projects built with Federal funds. Although the administration of public housing changed, the purpose of public housing remained the same.
(Husock, 2003) The Provisions of the Policy In considering the act it should be emphasized that, in contrast to the Public Works Administration policy of federal construction and control, the responsibility for initiation of projects and control of them was placed on the individual communities. Only public housing agencies were eligible to borrow money – a “public housing agency” under the act including local housing authorities, municipalities, counties, and states which were authorized to undertake and finance housing projects under proper enabling state legislation.
(Hunt, 2005) Loans up to 90 per cent could be made to such bodies with amortization over a period not to exceed sixty years, and interest at the going federal rate plus 1/2 per cent. The local housing authority was responsible for the remaining 10 per cent, which could be in the form of land, cash, services, or improvements. It might also be obtained through the sale of bonds by the local authority. Under the arrangement the government was to act in the capacity of a banker, providing advice, technical assistance, and funds.
(Hunt, 2005) The principle of subsidy was recognized as necessary to bring rents to a level commensurate with adequate low-cost housing. Two forms were provided, capital grants and annual payments. The amount of the capital grant was limited to 25 per cent of capital cost unless relief labor was used, when it could be increased to 40 per cent. Supplementing the capital grant, the state or political subdivision was required to contribute at least 20 per cent of the development or acquisition cost of the project.
If annual contributions were made, they could extend only over a period up to sixty years and were restricted to amounts necessary to secure a low-rent character to the project. However, they could not exceed the going federal interest rate plus 1 per cent of the cost of the project. The locality was also required to furnish an annual contribution equal to at least 20 per cent of the annual federal amount. (Hunt, 2005) Mandatory slum clearance was another important part of the act.
To become eligible for subsidy a locality was required to demolish substandard units equivalent in number to those about to be built. Exceptions were allowed in the case of an acute housing shortage. For purposes of administration the act established a body known as the United States Housing Authority, headed by an administrator to be appointed by the President with the approval of the Senate, and under general supervision of the Secretary of the Interior. (Husock, 2003)