Statement of Administration Policy: H.R. 4672 - Housing Act of 1986

(Revision)

(House Rules)

(Gonzalez (D) Texas)

The Administration is strongly opposed to H.R. 4672, a substitute for H.R. 1, because it would reverse the course of Federal housing policies which Congress and the Administration have been following since 1981. If H.R. 4672 were to reach the President's desk in its present form, his senior advisers would recommend disapproval.

The five year cost of the bill is estimated to be $94 billion, $32 billion more than the President's budget. In FY 1987, additional outlays would be approximately $3.8 billion. These estimates could grow if appropriations authorized in this bill for "such sums as may be necessary" exceed current services levels.

Instead of H.R. 4672, the Administration recommends enactment of the housing proposals in the President's 1987 Budget which would:

— more effectively target Federal Housing Administration (FHA) mortgage insurance to borrowers whose needs cannot be fully served by private mortgage insurers,

— authorize public housing comprehensive grants, free-standing housing vouchers, and the Fair Housing Initiatives program,

— repeal the Urban Development Action Grant (UDAG), Section 108 loan guaranty, Section 312 rehabilitation loan, and Section 8 moderate rehabilitation programs,

— modify existing programs to ensure greater efficiency and reduce fraud, waste, and abuse.

The most objectionable features of H.R. 4672 are:

— relaxing the 1981 Omnibus Budget Reconciliation Act provision which targeted subsidized housing to the neediest households;

— requiring that HUD provide rent subsidies to tenants in FHA-insured projects if HUD takes control of the projects on default; this provision would inappropriately create a new and very costly subsidized housing program, as well as impede HUD's ability to manage and dispose of Federal assets efficiently;

— creating a new Federal subsidy for middle-income homeownership, which would be feasible only in a few large cities, contains hidden costs, and targets funds to middle-income homebuyers at a time when interest rates are falling and most families are able to qualify for conventional or FHA mortgage financing;

— extending programs which should be terminated, such as UDAG, Section 312 Rehabilitation Loans, Section 235 Homeownership Assistance Program, Rental Housing Development Grants (HoDAG), and crime insurance;

— altering the public housing operating subsidy system, which would result in added operating subsidy costs and unnecessary restrictions on HUD's regulatory authority;

— prohibiting the establishment of, or increases in, housing credit user fees for the Federal National Mortgage Association, Federal Home Loan Mortgage Corporation, Government National Mortgage Association, and Federal Housing Administration;

— increasing the fees paid to public housing authorities for administering the Section 8 existing and housing voucher programs at the expense of assistance to poor tenants; and

— providing special considerations for several individual cities and projects, absent compelling reasons.