Case | HBS Case Collection | January 2008 (Revised September 2009)

Financing American Housing Construction in the Aftermath of War

by David Moss and Cole Bolton


At the start of WWI, the United States faced a significant housing shortage. Public officials feared the spread of disease-and even communism-in the nation's cramped urban centers where vacancy rates held near zero and families often "doubled up" in single-housing units. Hoping to spark a burst of new construction, New York Senator William Calder called for the creation of eleven regional Federal Building Loan Banks that would serve as a new source of funds for mortgage lenders. The proposal was controversial, however. Opponents disliked the fact that the Federal Building Loan Banks would have the authority to issue tax-free, mortgage-backed bonds, and many claimed that the private market would solve the housing shortage on its own. Proponents of the bill, meanwhile, believed that it was necessary to stave off a potentially disastrous and protracted housing shortage, and they cited the long-successful mortgage bond markets in France and Germany as evidence that their plan could succeed. Federal lawmakers had to assess the arguments on both sides and render a decision.

Keywords: Central Banking; Bonds; Mortgages; Government Legislation; Business History; Housing; Banking Industry; United States;


Moss, David, and Cole Bolton. "Financing American Housing Construction in the Aftermath of War." Harvard Business School Case 708-032, January 2008. (Revised September 2009.)