WASHINGTON -- A House subcommittee approved legislation last week that would reverse rules barring the use of tax-exempt private-activity bonds to help finance projects under the HOME housing affordability program.

The bill would let state and local governments count the value of their multifamily and mortgage revenue bond issuances in the contributions they make to the program that are eligible for matching federal funds.

The House Banking Committee's subcommittee on housing and community development approved the measure, which is part of a broader package needed to reauthorize HOME and several other housing programs that expire later this year. The full committee is expected to vote on the package around the middle of June.

The HOME program, created by a 1990 law, requires the federal government to match contributions that state and local governments make to low-income rental housing and home ownership projects. The law does not specify what financial instruments may be counted toward the contributions eligible for matching funds.

Last year, the Department of Housing and Urban Development sparked criticism from the housing industry when it issued regulations for the program stating that general obligation bonds were eligible for the match, but private-activity bonds were not.

In the Senate, the Senate Banking Committee's subcommittee on housing and urban affairs has circulated a draft proposal that would only partially reverse HUD's rules. The Senate panel's plan would permit state and local governments to count no more than 25% of their multifamily housing bond issuances toward the matching requirement.

In other action, the House subcommittee unexpectedly approved an overall funding level for the HOME program of $2.1 billion for fiscal 1993.

Rep. Henry Gonzalez, D-Tex., chairman of both the subcommittee and the full banking panel, had proposed only $1.5 billion for the program, the same amount Congress approved for 1991. But over his objections, the subcommittee approved an amendment offered by Rep. Marge Roukema, R-N.J., to raise the funding level to $2.1 billion. The Senate subcommittee has not said what level of funding it will support.

The House subcommittee also approved a proposal by Rep. Gonzalez to modify HUD regulations governing the ability of private, nonprofit organizations to acquire low-income units under a program to preserve affordable housing.

Nonprofits are expected to buy many of the properties with mortgages financed with 501 (c)(3) bonds and insured by the Federal Housing Administration. But the housing industry has complained that some of HUD's regulations for the program make the mortgages, and in turn the debt financing, too costly.

One such rule requires that the term of the mortgages be no more than 20 years. The House subcommittee's bill would lengthen that term to 40 years.

Another proposal in the housing bill approved by the subcommittee would suspend for two years HUD's authority for reviewing the costs of some multifamily housing projects.

The reviews were designed to ensure that housing developers do not receive too much in federal subsidies when they build projects with the low-income housing tax credit and other federal housing aid. Industry officials have complained that the process is too cumbersome.

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