Statement of Administration Policy: S. 566 - National Affordable Housing Act

(Senate)
(Cranston (D) CA and 28 others)

The Administration is committed to working with Congress to enact a fiscally responsible housing and community development authorization bill. Such a bill should (1) reform flawed HUD programs to advance on-going HUD efforts to eliminate fraud and abuse; (2) focus housing resources more effectively on the poor; (3)  increase the power of poor people in the housing marketplace; (4)  make the Federal Housing Administration's (FHA) single-family insurance fund financially sound; and (5) meet overall tests of fiscal responsibility. S. 566, as ordered reported by the Senate Banking, Housing and Urban Affairs Committee, does not meet these important principles. If S. 566 were presented to the President in its current form, his senior advisers would recommend that the bill be vetoed.

The Administration is working with several members of the Senate Banking, Housing and Urban Affairs Committee to develop an acceptable set of amendments to the current bill, consistent with these principles. The Administration has provided a number of essential amendments to these members. No agreement has been reached on these amendments, but discussions continue.

The Administration opposes S. 566 because of the following major problems:

— The bill's multi-billion dollar Housing Opportunity Partnerships (HOP) block grant would establish a costly, poorly-targeted new housing construction program. The new program would not meet the housing needs of the poor.

— The bill's changes to the Administration's HOPE proposal would, make it ineffective by drastically reducing funding; by requiring one-for-one replacement of public housing units that are sold; and by effectively precluding prepayment of FHA multifamily mortgages.

— The bill's removal of the 15 percent cap on the number of Section 8 certificates that can be project-based would undermine the ability of poor people to choose where they want to live. This change would also virtually eliminate owner incentives for upkeep and maintenance of units.

— The bill exceeds the President's FY 1991 Budget for HUD and Department of Agriculture housing programs by over $5 billion in budget authority. For FYs 1991-1993, S. 566 exceeds the President's Budget, including the Administration's recently proposed FHA reforms, by over $18 billion in budget authority and $8.6 billion in outlays. A fiscally responsible funding level for-a new housing bill will depend upon (1) the substantive character of the housing provisions, and (2) agreement on domestic discretionary spending limits pursuant to the on-going budget summit discussions.

— The bill's changes to HUD's low-income housing programs would harm poor neighborhoods, weaken tenant housing Choices, and increase the costs of the Section 202 elderly housing program.

— The bill includes excessive funding for Farmers Home Administration new rural housing construction direct loans. It also defers mortgage payments for very low income borrowers. These provisions are contrary to Administration policy. Instead of increased direct loans, the Administration supports the use of a combination of direct and guaranteed loans as well as vouchers. The bill's proposed deferral of mortgage payments would increase Federal credit risks.

— The bill does not include the Administration's proposed comprehensive grant proposal for public housing modernization. It also does not permanently authorize the Administration's Operation Bootstrap initiative to provide self-sufficiency and economic independence opportunities to recipients'of Federal housing assistance.