As the U.S. prepares to celebrate its 250th birthday on Saturday, now is the perfect time to look back at how the nation has historically helped its citizens fulfill the American dream of homeownership, and what’s in store for the next generation of homebuyers.
A new report from Realtor.com® examines how two centuries of federal housing policy successfully “unlocked doors” to create a staggering $48.7 trillion in real estate wealth, while also highlighting the modern hurdles still left to overcome, including a slowing growth of the homeownership rate due to affordability constraints, massive supply shortages, and a historic rise in first-time buyer age.
“We hope to show that the challenges facing the housing market today are not entirely new, and that the federal government has some ability to create change today as it has in the past,” says Realtor.com senior economist Joel Berner.
A study of U.S. Census Bureau data going back to the late 19th century reveals that the U.S. homeownership rate languished in the 40% range for decades after Reconstruction. It wasn’t until the end of World War II that the rate skyrocketed, driven by a flourishing middle class and a suburban boom.
However, Realtor.com economists point out that between the Civil War and the early 2000s, the federal government enacted five landmark policies that reshaped U.S. homeownership, stepping in when the market was under intense stress.
Today’s market is under new duress from affordability constraints. Since 1990, home prices have risen nearly twice as fast as incomes, and the typical time required to save for a down payment has jumped from about three years to nearly 10.
Meanwhile, the national housing supply gap widened to an estimated 4.03 million homes in 2025 as new construction continued lagging behind household formation. Berner highlights overregulation at the local level as the single biggest hindrance to homebuilding, making development more expensive and time-consuming for builders.
The National Association of Home Builders estimates that regulation adds over $130,000 to the cost of a newly built home, making up over 26% of the final price tag.
“Policymakers should act aggressively to promote supply increases in places that need more homes,” Will Fischer, senior fellow and director of housing policy at the Center on Budget and Policy Priorities, wrote in a recent report. “Perhaps most importantly, state and local governments should use their broad authority over zoning and permitting to allow more construction—particularly of multifamily and small single-family homes, which are more likely to be affordable to middle- and low-income households.”
While the federal government lacks direct control over local zoning rules and permitting processes, it holds a powerful tool to drive change: financial incentives. More on that modern strategy later, but first, here is a look back at the historic federal laws that overhauled American housing.
Homestead Act of 1862
Passed at the height of the Civil War, the Homestead Act democratized land by giving away 160-acre plots to anyone who was head of a family or 21 years old and could pay the modest filing fee. Unlike previous land-grant laws, it did not have any provision mentioning race.
If the homesteader spent the next five years living on and improving the parcel, it became theirs free and clear. However, it’s critical to note that the land was often taken from Native American tribes and handed mostly to non-Natives, fundamentally disregarding Native American equity.
The legislation was instrumental in settling large swaths of the country that were previously underdeveloped, with more than 270 million acres across 30 states being claimed by 1976.
National Housing Act of 1934
In response to the Great Depression, Congress adopted the National Housing Act of 1934 that created the Federal Housing Administration (FHA) to address a mortgage crisis.
As the economy tanked and millions of borrowers lost their jobs, an epidemic of mortgage defaults and foreclosures swept the nation. Wary of the risks, lenders stopped issuing new mortgages, grinding the housing market to a halt.
The newly created FHA brought stability to the industry by insuring mortgages issued by banks and other lending institutions to encourage them to offer more loans to buyers.
Crucially, the legislation also slashed the minimum required down payment, which often ranged from 30% to 50%, to 10%. It also extended the standard repayment period up to 30 years, from the five- to 10-year loans that had been standard.
Although the homeownership rate cratered soon after this act passed, Berner maintains that the impact of the crisis could have been worse without it, and the new lending standards set the stage for the postwar homeownership boom.
Servicemen’s Readjustment Act of 1944
Commonly known as the GI Bill of 1944, the legislation subsidized suburban homeownership for veterans returning from the battlefields of Europe and Asia.
A key provision of the bill provided eligible veterans with a low-interest, no-money-down loan for a home or business backed by the federal government.
These loans could pay for the purchase, construction, or improvement of property, and the impact was swift: By 1950, the Veterans Administration had guaranteed over 2 million home loans. Over the next two decades, this wave of low-cost financing fueled a suburban boom, driving the U.S. homeownership rate to over 61% by 1960, up from 43.6% in 1940.
Fair Housing Act of 1968
Signed into law by President Lyndon B. Johnson, the Fair Housing Act was the third major civil rights act adopted in the 1960s.
The legislation outlawed discrimination in the sale, rental, and financing of housing based on race, color, national origin, religion, sex, familial status, or disability. The goal was to dismantle decades of federally sanctioned segregation and redlining—the practice of denying mortgages to residents of minority-majority neighborhoods, opening more pathways to homeownership for minorities.
“Outlawing discrimination in the sale or rental of housing will not free those trapped in ghetto squalor, but it is an absolutely essential first step which must be taken—and taken soon,” said Sen. Walter Mondale, from Minnesota, who championed the bill.
Initially, the legislation worked: The homeownership rate for Black Americans climbed from 38% in 1960 to 44% in 1980. However, the progress has since stalled, and today’s Black homeownership rate is the same it was 46 years ago.
Housing and Economic Recovery Act of 2008
In the aftermath of the financial crisis and the subprime mortgage meltdown of 2007, Congress passed the Housing and Economic Recovery Act (HERA) not to expand homeownership, but to prevent its collapse.
The legislation placed Fannie Mae and Freddie Mac under government conservatorship of the newly commissioned Federal Housing Finance Agency, averting the potential meltdown of the mortgage market.
“Without this intervention, the collapse of these two institutions would have effectively shut down the American mortgage market entirely, making homeownership inaccessible to the vast majority of buyers,” says Berner.
The U.S. homeownership rate bottomed out at 63.4% in 2016, stemming from a loss of about 600,000 homeowner households compared with the rate’s peak of over 69% reached in 2004, but economists argue the decline would have been longer and deeper without HERA’s intervention.
The next 250 years: enter the Road Act
In 2026, the housing market is not reeling from an economic depression, a world war, or a mortgage crisis. Instead, what ails it is a structural supply failure. Simply put, the U.S. does not have enough housing units to meet demand from buyers.
The obvious solution is to build more homes, but a tangle of municipal-level regulations, permitting delays, and restrictive zoning rules dictating what can be built where makes new development both difficult and costly for developers, with buyers paying the ultimate price.
Here’s where the recently passed 21st Century Road to Housing Act comes into play. The sweeping bipartisan bill, which is currently awaiting President Donald Trump’s signature after an unexpected delay, represents the most direct legislative attempt to tackle the inadequate housing supply.
At the heart of the bill, which includes 45 provisions, is an annual competitive grant program offering $10 million to local governments and tribes that demonstrate measurable increases in housing supply, incentivizing reforms such as cutting red tape, streamlining permitting, and offering density bonuses.
“By expanding homeownership and rental housing opportunities nationwide, this legislation will help ease the housing affordability crisis,” predicts Bill Owens, chairman of the National Association of Home Builders.
The bill also updates the National Environmental Policy Act review process, which can significantly delay affordable housing construction, and encourages the conversion of vacant or abandoned commercial buildings into housing.
“The bill fits squarely within the tradition of federal housing legislation this report has examined, though it addresses a different category of failure than its predecessors,” says Berner. “Where the National Housing Act of 1934 stabilized a collapsing mortgage market, the GI Bill expanded access to credit, and HERA prevented institutional collapse, the Road Act targets the regulatory gridlock that is today’s primary barrier to homeownership.”
It’s important to remember that the Road Act is not a magic bullet. Just as the Homestead Act took decades to shape the American West, this supply-side shift will take time to bear fruit. However, it represents the first real structural effort to bring back the affordable starter home.