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Shaw and McKay’s (1942) social disorganization theory was the product of influential scholarship that originated at the University of Chicago. Their work was strongly inspired by Burgess’ (1925) concentric zone model that attributed city growth and crime patterns to an ecological process that involved little government intervention. However, many members of the Chicago School were embedded within a network that created programs and policies—such as the Federal Housing Administration, Home Owners’ Loan Corporation, the Immigration Act of 1924, the National Housing Act of 1934, and the Housing Act of 1949—that dramatically changed city planning and neighborhood structures. In this paper we discuss the historical, political, and economic factors that gave rise to government policy, differences in housing availability, and discriminatory lending that shaped the makeup of neighborhoods. We argue that these factors influenced the neighborhood processes proposed by Shaw and McKay. These policies created one of two outcomes for social disorganization theory in later decades: 1. A self-fulfilling prophecy, or 2. A self-defeating prophecy. Implications for theory and policy are discussed.