WASHINGTON -- HUD's new guidelines for making sure subsidized housing deals don't generate excessive profits are flawed because they provide no criteria for reviewing tax-exempt bond projects and do not permit state agencies to review the deals, industry officials and lawyers say.

"The substance of the guidelines is clearly geared to low-income housing tax credit properties and we do not understand" how the guidelines would be applied to bond-financed projects and others that do not receive housing credits, said the law firm of Peabody & Brown in written comments to the Department of Housing and Urban Development.

"We are concerned that the proposed guidelines apply standards which, while appropriate to the [low-income housing] tax credit program, are not relevant to programs which do not include tax credits," said the Association of Local Housing Finance Agencies in written comments to the agency, adding that reviewing such deals "adds an average of two months processing time."

Congress originally mandated the so-called subsidy layering review in 1989 to make sure housing deals that combine federal subsidies with other subsidies, such as tax-exempt financing, do not give private developers excessive profits. Congress intended for HUD to examine a broad range of deals, but the department chose instead to target only deals that involved the low-income housing tax credit in combination with other federal subsidies.

Housing industry officials complained that the subsidy layering review guidelines that HUD drew up in 1991 during the Bush Administration were too cumbersome and complex, causing delays in completing deals. Last year, the Clinton Administration overhauled the guidelines to help expedite the review process.

In doing so, administration officials discovered they need to begin complying with the letter of the law, which required them to go beyond housing tax credit deals and also review deals that receive bond financing state or local grants, or other forms of assistance in combination with federal subsidies.

But in drawing up the new guidelines, which were published Feb. 25, HUD offered a procedure only for reviewing deals involving the housing tax credit, and failed to explain how it would examine the others, said industry officials in written comments to HUD and in interviews.

"It's never been clear how you would attempt to implement something like subsidy layering in non-tax credit projects," said Anthony S. Freedman, a housing lawyer in Washington.

HUD officials said they realize they need to be clearer about how the reviews will be handled, so they are "in the process of developing instructions for HUD field offices, including adjustments for non-housing tax credit projects," said Linda Cheatham, the director of HUD's office of insured multifamily housing development.

Cheatham, who was speaking last Friday at an American Bar Association conference on affordable housing, did not elaborate on what the adjustments might be.

Along with uncertainty about the review procedure, housing industry officials are objecting to the provision that HUD itself perform the reviews on deals that do not involve the low-income housing tax credit.

Two years ago, Congress acceded to industry demands and passed legislation that allowed HUD to delegate authority to state housing agencies for reviews of housing tax credit deals. But the law was silent on other types of deals, and HUD has decided not to delegate authority for reviewing them.

HUD's decision may create delays for bond-financed housing deals because the department "does not have adequate staff to undertake the extensive project reviews which the guidelines require," the Association of Local Housing Finance Agencies said.

The group urged HUD to join it in petitioning Congress to end the requirement for reviewing deals that do not use the low-income housing credit.

"It is the tax credit program alone which generates third-party fees, such as those for syndication or development which might present an opportunity for over-subsidization," the association said.

The National Council of State Housing Agencies has adopted a wait-and-see attitude on the issue of how to handle non-housing credit deals, said John T. McEvoy, executive director of the council.

"I think our level of concern will depend on whether or not HUD is efficient in processing the deals," McEvoy said. "If it turns out there are a significant number of bond-driven deals that go in there and get turned down because of reasons we consider irrational, we may seek authority to review those deals."

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