SEATTLE -- A federal housing official this week urged state leaders to participate in the newly-created HOME affordability program, while acknowledging a bitter controversy over state and local contributions.

David Cohen, director of the Office of Urban Rehabilitation of the Department of Housing and Urban Development, attempted to placate state housing leaders angry over attempts to force state and local governments to kick in matching funds to the HOME program.

"Concern over the matching requirements continues to plague us and cause controversy," Mr. Cohen said during a speech at the 21st annual conference of the National Council of State Housing Agencies in Seattle. "I can't tell you where we will come out on this, but by fiscal 1992 or sooner we will have our answer."

Mr. Cohen added that "this is the put up or shut up time for states to come to the table. I would urge all of you to do what you can to make sure your states participate in the HOME program."

Legislation passed earlier this month and signed into law by President Bush this week gives the HOME program $1.5 billion in funds to finance low-income housing. The legislation included a provision waiving for one year a requirement that state and local agencies contribute matching funds to be eligible for the federal monies.

State housing agency officials are worried about reports that HUD is writing HOME program regulations which will apply the matching funds waiver only to money spent in 1992.

Housing leaders say this could make the waiver meaningless because it may be difficult to line up projects and spend the grant money -- which is expected to begin to be handed out in late March -- before the end of the year.

It may also encourage state housing officials to throw money at projects without fully evaluating them in order to spend the funds by yearend.

Many state and local housing leaders feel betrayed by HUD's reported intentions. Housing lobbyists have said they will oppose HUD's interpretation of the waiver.

John T. McEvoy, executive director of the National Council of State Housing Agencies predicted state housing agencies might sue the federal government.

Some housing officials have said the waiver issue could force state and local governments to use the HOME funds for projects that provide rent subsidies for tenants in existing units. Money can be disbursed quicker in a program that goes to existing units rather than new construction.

"I think there has been unnecessary anger about the new construction issue because -- on or off the list -- new construction will be done," Mr. Cohen said.

However, Mr. Cohen spend most of his speech Tuesday dwelling on the positive aspects of the HOME program. He said interim regulations could be out this year, but that final regulations would not be completed until at least the fall of 1992. He said that by the end of November, HUD will publish the amount of funds available for each state along with a list of cities and how much they get.

By the end of December, HUD expects to be getting responses from cities whether they are in the program.

"There will be no problem getting money on the street, then we will be off and running," said Mr. Cohen, adding if a state does not take the HOME block grant, HUD will run a competition among the other states for the money.

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