WASHINGTON - Congress is expected to pass legislation this fall to provide more federal money to state and local governments under the HOME program for the construction of multifamily housing, industry officials said yesterday.

The legislation is likely to increase the use of tax-exempt financing in conjunction with the HOME program. As it is drafted, the legislation would end the program's bias toward the rehabilitation of existing housing units in favor of encouraging the building of new units, those sources said.

Later this month, a Senate housing subcommittee is scheduled to begin debate on the measure, which is part of a package of 10 changes to the HOME program proposed in August by the Department of Housing and Urban Development.

The HOME program, created by a 1990 law, requires the federal government to match contributions that state and local governments make to low-income rental and home-ownership projects.

Of the 10 HUD proposals, housing industry officials said they place most importance on the one that would eliminate a provision in current law that requires state and local governments to put up a larger matching contribution to gain federal funds for new construction than for other types of housing projects.

Under current law, states and localities must contribute $1 for every $3 of federal funds received for new construction. But states are only required to contribute $1 for every $4 of federal funds received for projects involving substantial rehabilitation of existing units or rental assistance.

The HUD proposal would bring new construction in line with other rental projects, and make more states and localities willing to seek matching funds for new construction, housing officials said.

The proposed change shows that the Clinton administration is much more supportive of the HOME program than the Bush administration was, the officials said.

The proposed increase in federal matching funds for new housing construction "is probably the tombstone on the grave of the opposition the previous administration had to this program," said John T. McEvoy, the executive director of the National Council of State Housing Agencies.

"I think it reflects a very positive, helpful attitude" on the part of the Clinton White House "in contrast with the obstructionist attitude of the previous administration," said John C. Murphy, the executive director of the Association of Local Housing Finance Agencies.

Increasing use of the HOME program for new construction could translate into increased bond issuance. This is because the HOME rules permit the value of some types of tax-exempt bonds to count as a part of a state or local government's contribution that is eligible for HOME matching funds.

HUD rules for the program originally stated that only general obligation bonds are eligible for the matching funds. But last year, Congress approved legislation allowing state and local governments to count part of the value of their private-activity multifamily and mortgage bond issues toward their HOME contributions.

Under the law, 25% of an issuer's total contribution to the HOME program may consist of private-activity housing bonds. Within that amount, an issuer is permitted to count 50% of the value of multifamily housing bonds issued for projects eligible to receive HOME funding. The issuer may also count 25% of the value of his mortgage revenue bond issuances that are sold for projects as eligible for home HOME funding.

Housing industry officials said they were disappointed but not surprised that HUD failed in its package to propose further easing of the private-activity bond restrictions. The proposal would have generated controversy, something that HUD was trying to avoid in its package of changes, the officials said.

But the officials said that they hope the issue will resurface in Congress sometime soon. "We continue to believe full credit for private-activity bonds should be allowed," Murphy said.

In addition to passing the HOME changes, Congress this fall is expected to approve a fiscal 1994 appropriation for the program. The House has passed legislation that would grant $1.25 billion to HOME in fiscal 1994, up $250 million from fiscal 1993. The Clinton administration had proposed an increase to $1.6 billion.

The Senate is expected to begin drafting a version of the appropriations bill later this month. Murphy said he hoped that the Senate will also approve an increase to $1.25 billion for HOME.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.