WASHINGTON -- Congress was close to final approval yesterday of legislation that would give housing proponents a partial victory in their fight to allow private-activity bonds to be issued in conjunction with the HOME housing affordability program.
The measure, part of a larger bill needed to reauthorize the HOME program, was cleared by the House last week and was expected to come to a vote in the Senate last night as lawmakers rushed to adjourn for the year. President Bush has not said what action he will take on the bill, although housing lobbyists said the expect him to sign it.
The bill would allow state and local governments to count a portion of their multifamily and mortgage revenue bond issuances in the contributions they make to the program that are eligible for federal matching funds. Housing advocates had been trying to persuade Congress to permit the full value of those issues to be counted toward the match.
"It wasn't as much as we had hoped for, but we are nevertheless thankful we got something out of the process," said Jim J. Park, a lobbyist for the National Community Development Association.
The HOME program requires the federal government to match contributions that state and local governments make to low-income rental and home ownership projects. The 1990 law that created the program did not specify what financial instruments may be counted among the contributions eligible for federal matching funds.
Last year, the Department of Housing and Urban Development issued regulations stating that general obligation bonds are eligible for the match, but private-activity bonds are not. The rules sparked criticism from housing lobbyists, who urged Congress to reverse HUD's decision on private-activity bonds.
The House approved legislation in August that would have allowed states and localities to count the full value of both multifamily and mortgage bond issuances as part of their eligible contributions.
Last month, the Senate approved its version of the housing bill, which would permitted only 10% of the value of multifamily issuances to be counted toward the match. Mortgage bond issues would not have been eligible.
But last week, House and Senate negotiators reconciling the two authorization bills struck a compromise on the bond question. Under that agreement, 25% of an issuer's total contribution to the HOME program may consist of private-activity housing bonds.
Within that amount, an issue is permitted to count 50% of the value of multifamily housing bonds he has issued for projects that are eligible to receive HOME funding. The issuer is also permitted to count 25% of the value of his mortgage revenue bond issuances that are sold for projects eligible for HOME funding.
Housing lobbyists had been pushing for the House version, saying that state and local issuers of private-activity bonds are taking a risk with their credit ratings that should be considered as a c contribution to housing. In addition, issuance of bonds cannot occur without an allocation under the private-activity volume cap, a scarce resource in many states, those lobbyists have said.
But HUD lobbied the housing conferees to leave the regulations intact and not allow private-activity bonds to count toward the match. Although the department was unsuccessful in that attempt, it was able to persuade the housing conferees to scale back their compromise, lobbyists said. The original accord would have allowed 50% of an issuer's total contribution to the HOME program to consist of private-activity housing bonds.
Although the final agreement was significantly smaller than what they had been urging, housing lobbyists said they were pleased with what the conferees worked out.
"We would much rather have had the House version, but given the extent of the administration's opposition to any use of debt, this is enormous progress," said John T. McEvoy, executive director of the National Council of State Housing Agencies. "We're just delighted."
John C. Murphy, executive director of the Association of Local Housing Finance Agencies, said the final bill "is certainly a dramatic improvement over current law."
However, he said, "it's not as much as we would have liked or even what was originally agreed to before HUD insisted that the agreement be changed."