Statement of Administration Policy: S. 3031 - National Affordable Housing Act Amendments of 1992

(SENT 9/8/92)
(Senate)
(Riegle (D) MI)

The Administration remains committed to working with Congress to build on the new directions in housing policy established by the National Affordable Housing Act of 1990 (NAHA). To that end, the Administration entered into discussions with the leadership of the Senate Banking, Housing, and Urban Affairs Committee to address concerns with S. 3031, as reported.

The Administration is pleased that progress has been made toward resolving its concerns. The Administration supports Senate passage of S. 3031, provided the bill is amended to reflect the agreement reached between the Administration and the Committee leadership. It is understood that the agreement would be the unanimous position of the Senate during a conference with the House.

If the Senate were to consider S. 3031 as reported by the Committee on July 23rd, the Administration would continue to have serious concerns with the bill. These concerns are outlined in the attachment to this Statement of Administration Policy.

Attachment

Administration Concerns with S. 3031, as Reported

As reported, S. 3031 moves away from the bipartisan compromises that led to the enactment of NAHA. In particular, the bill would make the HOME Investments Partnerships program a less effective tool for meeting the Nation's affordable housing needs. S. 3031 also would revive the costly multifamily coinsurance program and reverse or weaken accomplishments of NAHA and the HUD Reform Act. Finally, the bill would fail to include a number of key Administration initiatives.

The HOME program was established to create a truly national partnership that would address local housing needs and conditions. S. 3031 would weaken the HOME program by:

• Substituting the graduated match in current law with a flat 25 percent match for all forms of HOME assistance. This provision would remove the financial incentive for localities to pursue tenant-based assistance, which can serve more families much faster than project-based assistance or new construction.
  
  
• Allowing tax exempt bond proceeds to count for up to 25 percent of the reduced matching requirement. Because bond proceeds are paid back from tenant rents or higher Federal HOME subsidies, this provision would make the program less of a partnership between the Federal, State, and local governments.
  
  
• Easing the restrictions in current law on the use of HOME funds for new construction. The bill would allow new construction in any rural area or any neighborhood designated by a city as a "revitalization area." New construction is one of the most costly forms of housing assistance and makes families wait three to five years before they can move in to the new units.

S. 3031 would weaken the HUD Reform Act by allowing subsidy layering decisions to rest with State housing finance agencies rather than the Department of Housing and Urban Development (HUD). Enactment of this provision would open the door for housing fraud and abuse at taxpayer expense. The bill would further remove safeguards against fraud by exempting State and local housing officials from the lobbying disclosure requirements of the HUD Reform Act.

The bill would establish a costly multifamily housing finance demonstration. The demonstration would recreate the risky and abuse-plagued coinsurance program that was terminated because It cost taxpayers billions of dollars. Since HUD already administers acceptable and less costly multifamily housing finance programs, it would be counterproductive to revive the failed coinsurance program.

The bill also would expand the appeals process of the Farmers Home Administration (FmHA) to include multifamily tenants. Tenants now have grievance procedures available to them through State law and the management of the multifamily project. The existing FmHA appeals process is designed to deal with relations between FmHA and its borrowers or applicants. Opening the appeals process would result in costly administrative burdens. There is no need to involve the Federal Government in landlord- tenant disputes of this nature.

Finally, S. 3031 would fail to include key Administration initiatives that would: (1) restore vacant public housing to productive use; (2) break down regulatory barriers to affordable housing; (3) consolidate the Shelter Plus Care programs; and (4) make housing programs more cost-effective.

Pay-As-You-Go Scoring

The lead-based paint provisions of S. 3031 would increase direct spending; therefore, the bill is subject to the pay-as-you-go requirement of the Omnibus Budget Reconciliation Act of 1990 (OBRA). No offsets to the direct spending increases are provided in the bill. A budget point of order applies in both the House and Senate against any bill that is not fully offset under CBO scoring. If, contrary to the Administration's recommendation, the Senate waives any such point of order that applies against S. 3031, enactment of this legislation would be included in a look back pay-as-you-go sequester report at the end of the Congressional session.

OMB's preliminary scoring estimates for this bill are presented in the table below. Final scoring of this legislation may deviate from this estimate. If S. 3031 were enacted, final OMB scoring estimates would be published five days after enactment as required by OBRA. The cumulative effects of all enacted legislation on direct spending will be issued in monthly reports transmitted to Congress.

Estimates for Pay-As-You-Go
($ in millions)