American urban housing policy has featured subsidies for the suburban middle class and parsimonious spending for the urban poor. The outlines of this policy took shape during the Progressive Era: acceptance of the capitalistic market economy, support for the deserving poor needing temporary help, toleration of racial segregation, and the designation of overcrowding as the single most important urban problem. Progressive housing reformers championed stricter housing codes and model tenements, but housing conditions for the urban poor showed little improvement.
The U.S. government avoided direct involvement in housing until the early 1920s, when it promoted local zoning legislation. Under the New Deal, the government aided the private housing industry, but housing for the urban poor was not addressed until the passage of the Wagner Housing Act in 1937, which authorized federal funds for public housing. Although the worst features of public housing had been improved by the 1970s, the legacy of limited funding, racism, and the belief that subsidized housing for the poor should not compete with private-sector middle-class housing kept millions of Americans poorly housed.
Karr, Ronald Dale
"Shelter the American Way: Federal Urban Housing Policy, 1900-1980,"
New England Journal of Public Policy: Vol. 8
, Article 13.
Available at: http://scholarworks.umb.edu/nejpp/vol8/iss1/13