Established by the New Deal-era Division of Subsistence Homesteads in 1934, the community was envisioned by federal planners as a model of cooperative living for the region's distressed farmers, coal miners, and factory workers.

In January 1934, the Division of Subsistence Homesteads chose Cumberland County as a site for one of its "stranded" agricultural communities, in which families were resettled on small farms and would work in community-owned businesses.

Lyons had likely been influenced by earlier Plateau-area "back to the land" experiments, such as the Clifty Consolidated Coal Company's 1917 program that helped Fentress County miners purchase small farms,[4] as well as relief efforts provided by local Quakers.

[5] Due in part to the influence of Tennessee Valley Authority chairman and cooperative living proponent Arthur Morgan, the Division of Subsistence Homesteads accepted the Cumberland County proposal in January 1934.

The Civil Works Administration immediately hired several hundred locals to prepare the newly acquired land, providing wages that effectively ended the Great Depression in Cumberland County.

[5] The Civilian Conservation Corps built recreational buildings and a small lake for the community at what is now Cumberland Mountain State Park.

[2] Kelly Cox, Director of the Cumberland Homestead Tower Association believes the project was successful because of the dire situation.

Charles Tollett, an Association volunteer, was adamant that the Homesteads were not another Government handout, but an opportunity for Tennessee citizens to work hard for a place to live.

Kelly Cox the Museum Director shared that some eventual tenants were working while two thirds of their credit hours would go towards purchasing a home.

[8] Buildings at Cumberland Homesteads were constructed using primarily a locally quarried sandstone known as "crab orchard" stone, which is known for its durability and reddish hue in late afternoon sunlight.

Attics contained water storage tanks, and most houses were wired in anticipation of TVA providing electrical power.