WASHINGTON -- The White House is pushing Congress to require state and local governments to kick in a portion of the funding for the new federal housing affordability program in fiscal 1992, a top administration official said recently.
Legislation creating the program last year mandated such cost sharing, which housing lobbyists have said would spur issuance of tax-exempt housing bonds. But the Senate passed a housing appropriations bill in July that would waive that requirement for one year and allow state and local governments to receive program funds in 1992 without having to match them. The House version of the bill retains the match.
Housing and Urban Development Secretary Jack Kemp, in a Sept. 5 letter to housing lawmakers, said the Bush administration wants the final version of the legislation to follow the House bill and leave the matching requirement intact.
"The HOME program was designed as a partnership between states, localities, and the federal government, with strong incentive toward rehabilitation and tenant-based assistance," Mr. Kemp said in his letter.
Mr. Kemp estimated that if state and local governments are not forced to come up with a portion of HOME money, 32,000 families will fail to receive housing aid in 1992. He warned that failure by Congress to maintain the match for 1992 "will jeopardize future support of funding for this program by the administration."
But housing lobbyists said the opposite would happen to housing aid if state and local governments are forced to provide matching funds.
Those governments are so financially strapped that "rather than increasing the amoung of money [available for the program], the real effect of insisting on the match is that less of the money is going to get used," said John T. McEvoy, executive director of the National Council of State Housing Agencies.
Mr. Kemp's insistence on retaining the match "says that these guys are from Mars on this issue," and do not understand the depth of financial problems facing states and localities, Mr. McEvoy said.
That issue will be resolved later this fall, when House and Senate housing legislators convene a conference committee to resolve differences between the two versions of the legislation, which appropriates money for HUD for fiscal 1992. The conferees have not yet set a date to begin the conference, according to an aide to Sen. Barbara Mikulski, D-Md., chairman of the Senate Appropriations Committee's Subcommittee on HUD and Independent Agencies.
Some housing lobbyists have said waiving the match would mean less bond issuance because state and local governments would have no need to sell bonds to finance their part of the program. But John C. Murphy, executive director of the Association of Local Housing Finance Agencies, said he disagreed with that assessment.
"We consider HOME funds to be gap financing that will be part of a larger financing, which will require debt, in the form of tax-exempt bonds and other subsidies," Mr. Murphy said. He said those funds "in and of themselves do not provide sufficient subsidy" to allow new construction or substantial rehabilitation to go forward.
How tax-exempt bonds fit into the HOME program has been an issue since HUD proposed regulations for the program in February. At the time, housing lobbyists were concerned because those regulations did not appear to allow states and localities to count tax-exempt bonds in their matching contributions. HUD partly relented in June, saying it would permit general obligation bonds to count toward the match, but housing industry officials have been pushing HUD to make private-activity bonds and revenue bonds eligible as well.
Along with the match issue, the Bush administration also is objecting to the Senate's proposal to give $2 billion in federal funds to the program in fiscal 1992, Mr. Kemp said. President Bush's 1992 budget proposal suggested $1 billion, and the House has approved $500 million.
In his letter, Mr. Kemp said $1 billion "is both realistic and appropriate, given the competing needs that must be funded in 1992 and the capacity of [state and local governments] to carry out this new program."
Mr. McEvoy said Mr. Kemp's demand for a $1 billion funding level was consistent with what the administration has been asking for. Mr. Murphy, however, said he was "surprised and disappointed" by the demand, which he termed "a reversal of the assurances we were given" recently by the administration that the White House would not oppose the Senate's higher level of funding.