WASHINGTON -- The Department of Housing and Urban Development has backed away from plans to draft regulations that would force state and local governments to kick in their own funds to the HOME housing affordability program in 1992, a HUD spokesman confirmed last week.

The HOME program was designed in 1990 as one that would be funded jointly by federal, state, and local governments. But over HUD's objections, Congress passed legislation last month that allows states and localities to receive federal funds under the program during 1992 without matching those dollars with their own money.

Over the last few weeks, word leaked out of HUD that the regulations the department was drafting to implement the law would have eviscerated that statute. The rules were going to say the matching requirement would be waived only for states and localities that spent all their 1992 HOME funds in the same year.

But last week, a HUD spokesman said the department's current interpretation of the law is that the waiver applies to any money appropriated in 1992, no matter when it is spent. "That's the intent of Congress," the spokesman said.

Housing lobbyists said the department was backing off from its earlier position because of negative publicity that had been generated and because of indications that Congress would take action if necessary to make sure HUD carried out lawmakers' intent in writing the statute.

"We certainly don't consider [HUD's change of heart] a favor granted to us," said John C. Murphy, the executive director of the Association of Local Housing Finance Agencies. "It was congressional intent that the waiver flow with the funds so as to be a meaningful waiver."

Mr. Murphy said that after learning of HUD's earlier intention to restrict the waiver, "we went back to the Hill, and the Hill said, 'You're absolutely right, and we'll fix it if we need to."

The legislation waiving the matching requirements had been included in the HUD appropriations bill enacted a few weeks ago. That bill also provides a $1.5 billion for the HOME program in 1992.

HUD Secretary Jack Kemp had said he opposed the legislation because he wanted a lower level of funding for HOME and disagreed with the idea of waiving the matching requirement. He had tried, but failed, to persuade President Bush to veto the appropriations bill on those grounds.

When it became clear that HUD would restrict the waiver to money spent in 1992, housing lobbyists objected, saying the curb would render the waiver meaningless.

It will take state and local governments months to begin spending program money, so they may not have time to spend all they are allocated. Another danger is that it could encourage states and localities to throw money at projects indiscriminately to make sure it was spent by the end of 1992, they said.

Housing lobbyists have been divided over what the waiver means for tax-exempt housing bond issuance. The HOME program has generally been seen as a stimulus for bond issuance, though some lobbyists said waiving the matching requirement will make state and local governments less inclined to issue bonds to fund part of the housing projects built next year under the program.

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