WASHINGTON -- Key members of Congress are urging federal regulators to ease the examination procedures they have set up for gauging the amount of profit developers gain in certain multifamily housing deals, warning that the process could stall construction of low-income housing.

Rep. Henry B. Gonzalez, D-Tex., chairman of the House Banking Committee, told HUD Secretary Jack Kemp in a recent letter the process "is hampering multifamily housing development" and "will have a chilling effect on any proposed HUD-insured multifamily housing."

Rep. Charles B. Rangel, D-N.Y., a senior member of the House Ways and Means Committee and a supporter of the low-income housing credit, has also voiced concern to the Department of Housing and Urban Development about the procedures, an aide to the congressman said. He is trying to open up a dialogue between state housing officials and the department to make sure HUD addresses the issue, the aide added.

Legislation passed in 1989 requires HUD to prevent participants in low-income housing projects from making excessive profits if the deals are financed with the low-income housing tax credit in combination with other HUD assistance, such as mortgage insurance or subsidies under Section 8 of the housing code.

But housing industry officials have warned that the process HUD has been using for the past few months to examine the deals is so cumbersome that it will delay the projects and hinder any related tax-exempt bond issuance.

The controversy began in May, when HUD published administrative guidelines spelling out the procedures it was following. The department accepted comments on the guidelines until June 10, and it plans to publish a final set of recommendations later this year.

Housing industry officials have said they are worried the department has not been listening to their concerns. But department officials "have indicated to some of the parties that would be affected by these guidelines that we are willing to be flexible when we publish the final guidelines," a HUD spokesman said. "We invited comment so we could do some fine-tuning." He did not elaborate on how the procedures would be changed.

One of the housing industry's complaints about the process is that HUD does not appear to have a timetable to complete a review of each deal. Industry officials said they are concerned that could mean long delays for each review, particularly because HUD is chronically understaffed.

"It has been the experience of several persons involved recently in this process that the department's review process is slow, cumbersome, and unresponsive to other time pressures placed on project sponsors," a group of 10 organizations that lobby on housing issues said in written comments to the department.

The group, which includes the National Multi-Housing Council and the Local Initiatives Support Corp., said those delays also could wreak havoc with financing mechanisms developers are trying to implement to make their deals go forward.

Another complaint is that the guidelines allow HUD to dig too deeply into the financial structure of each project and examine projects in a level of detail unnecessary to make a simple determination of whether the project is receiving too much federal subsidy.

Mr. Gonzalez told Mr. Kemp that another major problem is the fact that for projects receiving the low-income housing tax credit, the department's review is redundant, because Treasury Department regulations already require state housing agencies that administer the credit to monitor the level of subsidy in those deals.

Mr. Gonzalez and housing industry officials suggested HUD could speed the process by accepting state certification that the federal government is not providing an excessive amount of subsidy in the deals.

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