WASHINGTON -- The Senate Appropriations Committee yesterday approved $2 billion in funding for the new federal housing affordability program, but it removed any incentives for issuing tax-exempt housing bonds under the program during fiscal 1992.
The program, popularly known as HOME, requires the federal government to match financial contributions state and local governments make to low-income housing projects. The Department of Housing and Urban Development has said it would allow general obligation bonds to count toward the match, and housing industry officials have been pushing for HUD to make private-activity bonds and revenue bonds eligible as well.
But yesterday the panel approved a provision in its appropriations bill waiving all matching requirements for one year. That would allow state and local governments to receive money under the program in fiscal 1992, which starts Oct. 1, without putting up their own funds. Housing industry officials said the move was taken because many local governments are in serious financial trouble and would not be able to come up with matching funds for the program.
The development, though favorable for state and local governments, is bad news for the municipal bond industry because "there's no incentive now to issue bonds" under the program for the next year if the bill passes, said a housing lobbyist who asked not to be identified.
Before the committee meeting, housing industry officials had been pressing the committee to add language to its bill directing HUD to ease its restrictions on the types of bonds that would be eligible for the match. The officials said they were pleased the match was waived completely for the next year, but they acknowledged that the issue of how tax-exempt bonds are treated under the program will have to be raised again when Congress prepares its fiscal 1993 budget.
"That issue is left for clarification next year," said John C. Murphy, the executive director of the Association of Local Housing Finance Agencies. "We still feel very strongly that, for the long run, clarification is essential."
HUD officials recently said they wouldallow general obligation bonds to count toward the match as long as the revenues generated by the projects are permanently committed to the HOME program. Revenue bonds or private-activity bonds, they argued, would not be eligible because they are secured by income streams from the housing projects and would not represent as strong a financial commitment on the part of state and local governments as would general obligation bonds.
But housing industry officials have been insisting that private-activity bonds also should be counted towart the match. They say such bonds also represent a strong commitment on the part of the state, which must allocate a portion of the private-activity bond volume cap to allow the bonds to be issued.
Housing officials were pleased by the surprisingly high level of funding approved by the committee for the program in 1992, its first year of operation. Those officials have said they wanted between $1.5 billion to $2 billion a year for HOME, but some lobbyists have said privately the program could end up receiving as little as $750 million. President Bush proposed $1 billion in his fiscal 1992 budget, and the House version of the appropriations legislation contains only $500 million.
The Senate committee's $2 billion figure "leaves us hopeful the ultimate conference agreement [between the House and Senate] might be more than $1 billion," said John T. McEvoy, the executive director of the National Council of State Housing Agencies. The bill now goes to the full Senate.