Advocates of strong measures to revivify the multifamily housing market are guardedly optimistic about the recent announcement by Housing and Urban Development Secretary Jack Kemp that HUD will simplify its method by which it attempts to police the "layering" of federal government subsidies.

"It is long overdue but it's welcome and I'd like to see it implemented,' said Anthony S. Freedman, a partner in the Washington office of the Atlanta-based law firm, Powell, Goldstein, Frazer & Murphy. Freedman, deputy assistant secretary for housing policy and budget at HUD during the Carter administration, is a strong critic of FHA's policies on multifamily housing.

The administration once before had hinted it might ease the regulations but nothing came of it. But Robert Salomon, head of government relations for the Washington law firm of Brownstein. Zeidman & L4ore, said he is optimistic HUD officials will make some changes. He also forecast the changes will be promulgated in the form of regulations by this coming fall.

HUD officials "are UM with legislation in both the House and Senate that would change the system substantially in a way they don't want." said Salomon.

The layering regulations are a contentious issue between multifamily housing advocates and HUD. Basically, they require detailed calculations designed to ensure that use of federal subsidies doesn't unduly enrich speculators.

C. Austin Fitts, former commissioner of the Federal Housing Administration in the Bush administration, said in written testimony delivered last year that HUD'S layering regulations and policies ... are absurd and, I believe, violate the original legislative intent. Their development raises serious questions about the true legislative agenda of the department's current leadership.'

Fitts, who served as FHA commissioner and assistant secretary of housing in 1989-90, is a partner in the Hamilton Securities Group, a housing finance firm.

The importance of the layering regulations is more than symbolic. Federal subsidies are the only incentive for private investors to build low-income housing and the layering regulations, the critics contend, make it difficult to qualify.

The overall picture for low- and moderate-income multifamily housing is not bright. Private credit is virtually unavailable, and the FHA still is preoccupied with cleaning up the mess caused by scandals in its coinsurance programs that led to the closing of that program in 1990. The only serious player in the view of advocates like Freedman is the Federal National Mortgage Corporation. Though the Federal Home Loan Mortgage Corporation has announced that it will get back into multifamily housing this year, it will only focus on refinancing its current portfolio.

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