<P> In 1934 the federal banking system was restructured . The National Housing Act of 1934 created the Federal Housing Administration . Its intention was to regulate the rate of interest and the terms of mortgages that it insured . These new lending practices increased the number of people who could afford a down payment on a house and monthly debt service payments on a mortgage, thereby also increasing the size of the market for single - family homes . </P> <P> The FHA calculated appraisal value based on eight criteria and directed its agents to lend more for higher appraised projects, up to a maximum cap . The two most important were "Relative Economic Stability", which constituted 40% of appraisal value, and "protection from adverse influences", which made up another 20% . </P> <P> In 1935, Colonial Village in Arlington, Virginia, was the first large - scale, rental housing project erected in the United States that was Federal Housing Administration - insured . During World War II, the FHA financed a number of worker's housing projects including the Kensington Gardens Apartment Complex in Buffalo, New York . </P> <P> In 1965 the Federal Housing Administration became part of the Department of Housing and Urban Development (HUD). </P>

The following was a negative effect of the federal housing administration (fha)