The National Housing Act of 1934 had created the Federal Housing Administration (FHA), in which the Federal government insured private long-term mortgages, making it “possible for men of ordinary means to build homes on the easy payment plan.”
Prior to this time, mortgage terms were usually between five and ten years, and borrowers were required to put 50 percent down. When the Depression hit, approximately half of all such mortgages were in default, foreclosures went through the roof, and new mortgages were difficult to obtain.
The FHA brought order, at least to the mortgage process, and enabled banks to make loans that people could afford by insuring them in the event of foreclosure. A 1938 ad by builder Peter Pearson included many inducements and much information about FHA: “New amendments to the National Housing Act encourage the construction of new homes – particularly small homes – through liberalizing the FHA-Insured Mortgage System.” Advantages included:
Small down payment and large percentage loans
Long repayment period – no need for frequent refinancing
Reduction of principal with payments
Construction inspected and appraised by FHA to safeguard investment
A Thorpe Brothers ad of 1939 offers 90 percent FHA construction loans on a “pay like rent” plan, running 20 to 25 years.
Records show that 1,941 homes were built throughout the Village in 1939. Many were story-and-a-half bungalows, well suited to a family of 5 at the time, but considered small starter homes today, contributing to the reduction in population as families moved to larger homes (with more than one bathroom) in the outer suburbs.
One thing the houses did not generally have was a garage. One observer guessed there was only one car per block during this time anyway, since everyone took the streetcar downtown. Building permits indicated that many people built garages a year or so after the house was built.
In an ad placed in the Minneapolis Tribune on March 10, 1940, it is averred that St. Louis Park “Offers you freedom of the country and conveniences of the City.” It boasts that $2.5 million in construction has taken place in the past four years. It also stated that “a municipally operated artesian water system with 150 miles of water mains provides the village with pure, unadulterated water.”
Construction came to an abrupt halt as soon as the war started. Workers went into the service, building materials were scarce, and families retrenched. In some cases, people merely topped off their basements and lived underground until they could resume construction after the war. In 1952 there were still some 44 basement homes, and the Village began to crack down on them. In 1955 there were still 15.