WASHINGTON - A house subcommittee wants to revamp the Section 8 rent subsidy program in a way that is expected to give participating multifamily housing project owners a more reliable stream of payments and thus a better credit rating on their tax-exempt debt.
The proposal is included in a huge omnibus bill that the House Banking Committee's subcommittee on housing and community development passed yesterday.
The overall measure is needed to reauthorize Section 8 of the housing code and dozens of other federal housing programs before they expire Sept. 30.
On other issues important to the municipal market, the omnibus bill would:
* reauthorize the multifamily risk-sharing insurance program for two more years;
* water down a controversial plan to revamp the public housing modernization program; and,
* increase funding for the HOME and Community Development Block Grant programs.
The subcommittee is proposing to go beyond merely reauthorizing the rental subsidy program, popularly known as Section 8, by approving a provision that would overhaul the program.
Current law permits a low-income person to receive Section 8 rental assistance in two ways. Under one method, a person could receive a voucher for a designated amount of money to be used toward rent payments.
The second method of assistance is through the certificate program, under which a tenant pays only 30% of the rent charged by an apartment owner, who is required to charge a so-called fair-market rent. HUD then agrees to make up the difference.
Certificates can either be issued to tenants and move with them, like a voucher, or can be "project based" and issued to specific housing projects. Current law permits only 15% of the Section 8 rental subsidy certificates that a project receives to be project-based.
The subcommittee is proposing two changes that would have a beneficial affect on project owner's credit ratings. First, it is proposing to eliminate the 15% cap on project-based assistance.
Rating agency officials said removing the limit would boost an owner's rating because the more project-based assistance an owner has, the more reliable the income stream. The subcommittee plan would retain current law provisions permitting the certificates to be issued for five years at a time, with two renewals, for a total of 15 years.
The second, and more fundamental change proposed by the committee would be to merge the voucher and certificate programs into a single "Rental Assistance Programs" patterned after the current certificate program.
Merging the two programs means the availability of even more project-based aid: All assistance under the voucher program was distributed directly to tenants and thus was not considered a reliable income stream for project owners, lobbyists said.
Among its other provisions, the subcommittee's housing bill would also extend for two additional years, through 1997, a pilot program designed to test the idea of permitting state and local housing agencies to help HUD insure multifamily loans.
HUD officials have said they hope the program will revive the Federal Housing Administration's moribund insurance program. If successful, the program could spark a revival in issuance of tax-exempt multifamily housing bonds, lobbyists say.
Housing industry officials said they were pleased that the panel wants to extend the program, but they are pushing for it to be made permanent.
Another provision in the bill would revamp HUD's public housing modernization program, which allocates money to public housing authorities each year for rehabilitation of deteriorated housing. The plan would permit the authorities to use modernization funds to replace the old units with new housing.
But the subcommittee did not include in that provision a proposal by the Clinton Administration that would have permitted housing authorities to obtain large, up-front blocks of money for large-scale replacement activities by borrowing from the federal government.
The administration's plan would have allowed the authorities to use a portion of their modernization funds to repay the loans, but it would also have required state and local governments to back a portion of the loans by putting up collateral for them.
State and local housing officials vehemently opposed the collateralization idea, telling the subcommittee during a May 4 hearing that many jurisdictions are financially troubled and cannot afford to back the loans.
Housing lobbyists said the loan provision was not included in the bill because of concerns raised by Rep. Henry Gonzalez, D-Tex., the chairman of both the subcommittee and the full banking panel.
Gonzalez was reportedly worried that, after the initial infusion of funds for replacement provided by the loans, public housing modernization would grind to a halt in later years because future funds would be pledged to replaying the loans.
The housing bill also includes funding levels for the next two years for the HOME and CDBG programs. Under the subcommittee plan, Congress would be permitted to give HOME $1.27 billion in fiscal 1995 and $1.5 billion in 1996. CDBG would be permitted to receive up to $4.4 billion in 1995 and $4.5 billion in 1996.
