The public–private welfare state in homeownership has its origins in the 1930s, when reformers in Congress, the Hoover and Roosevelt administrations, and the private real estate and lending industries sought policies that would fundamentally restructure the US mortgage market and increase the safety and availability of homeownership. They envisioned that the federal government would provide the infrastructure to promote these aims, but private enterprise would perform the day-to-day tasks of building, lending, and brokering. In other words, the indirect promotion of homeownership was not an accident of design.

Supporters of this approach touted a variety of potential benefits. Providers who had devoted decades to understanding their industries had valuable existing knowledge and expertise; indeed, the National Association of Real Estate Boards and the United States Building and Loan League were at times heavily consulted as the programs were being designed. They also staffed the agencies, once established. Just as important as what this structure could accomplish was what it might avoid: the high costs and risks (both political and economic) of either full government involvement (especially in public housing) or inaction. Moreover, for some, having the borrower go through a private lender and not the government directly would help to minimize the moral hazard problems associated with its backing of the new loan contracts: had citizens thought of themselves as having borrowed from the government, they might take a more cavalier attitude toward repayment.

The “great societal crisis” of the Depression, then, prompted policymakers to embrace a set of policies they believed would revive the housing market, stem the foreclosure crisis, and bolster employment in the construction sector, but in a way that would work in partnership with the private sector rather than as an alternative to it. This would be challenged in the post–World War II years by a competing vision for the nation's housing policy marked by skepticism of the idea that the profit motive could ever produce adequate housing at prices affordable to workers.