Statement of Administration Policy: H.R. 5334 - Housing and Community Development Act of 1992

(House Rules)
(SENT HOUSE 8/5/92)
(Rep. Gonzalez (D) TX)

The Administration and Congress worked together in 1990 to enact the National Affordable Housing Act (NAHA), the first major housing authorization bill in almost a decade. The Administration is committed to maintaining and improving the new directions in housing policy established by NAHA.

The Administration's fundamental housing objectives today are the same as they were in 1990: (1) authorizing the Homeownership and Opportunity for People Everywhere (HOPE) program at meaningful funding levels; (2) securing the financial soundness of the Federal Housing Administration's (FHA) single-family insurance fund; (3) directing housing resources more effectively to the neediest poor families; (4) increasing the power of poor people in the housing marketplace; and (5) maintaining fiscal responsibility.

H.R. 5334, however, would wastefully spend scarce housing resources and reverse many of the bipartisan compromises that led to the enactment of NAHA. The bill fails to address any of the Administration's objectives outlined above, takes no action on key Administration initiatives to improve NAHA, and weakens safeguards against housing fraud. If H.R. 5334 were presented to the President in its current form, his senior advisers would recommend a veto.

Specifically, H.R. 5334 fails to address Administration objectives because it would:

• Authorize appropriations of only $411 million for the HOPE program. This amount represents less than half of what NAHA authorized for HOPE in FY 1992 and only 40 percent of the funding requested in the President's FY 1993 Budget.
  
  The bill also would hinder implementation of the HOPE program. It would do so by maintaining a one-for-one replacement requirement for HOPE public housing units and requiring compensation be paid to Public Housing Authorities for units sold.
  
  
• Undermine reforms of the FHA single-family insurance program that are intended to put the Mutual Mortgage Insurance (MMI) fund on sound financial footing. H.R. 5334 would eliminate the regulation that allows FHA borrowers to finance a maximum of 57 percent of closing costs. On an annual basis, elimination of this rule would increase FHA defaults by an estimated 3,700 and cost the MMI fund $66 million.
  
  
• Increase the limit on FHA mortgages, moving FHA away from its traditional role as a financial resource for lower- and moderate-income first-time homebuyers, particularly within inner cities.
  
  
• Decrease the number of families that can be served by the HOME Investments Partnership program by weakening income targeting, match, and cost limit requirements. These requirements are essential to the cost-effectiveness of the program.
  
  
• Eliminate review of subsidy layering as required in the wake of scandals at the Department of Housing and Urban Development (HUD) several years ago. The bill also authorizes lower research and development funding, thus jeopardizing the Department's ability to meet requirements of the HUD Reform Act. These provisions would create new opportunities for fraud and abuse at taxpayer expense.
  
  
• Reduce targeting of public housing to very low-income families by allowing more higher-income tenants to live in these units. This provision further weakens targeting in public housing before the full implementation of targeting provisions enacted in NAHA.
  
  
• Restrict housing choice for very low-income tenants who receive housing vouchers. H.R. 5334 would also limit opportunities for empowerment by dramatically reducing self- sufficiency program requirements enacted in NAHA.
  
  
• Authorize appropriations totaling approximately $30 billion, $6 billion above the amount requested in the President's FY 1993 Budget for housing and community development programs.

In addition, H.R. 5334 ignores key Administration initiatives that would: (1) allow public housing residents of troubled projects to choose alternative managers and owners; (2) restore vacant public housing to productive use; and (3) break down regulatory barriers to affordable housing.

Pay-As-You-Go Scoring

Enactment of H.R. 5334 would result in a net decrease in receipts for FYs 1993-1997; therefore, the bill is subject to the pay-as- you-go requirement of the Omnibus Budget Reconciliation Act of 1990 (OBRA). Increasing the limit on FHA mortgages would increase receipts, while eliminating the regulation that allows FHA borrowers to finance a maximum of 57 percent of closing costs would decrease receipts.

OMB's preliminary scoring estimates for this bill are presented in the table below. Final scoring of this legislation may deviate from this estimate. If H.R. 5334 were enacted, final OMB scoring estimates would be published five days after enactment as required by OBRA. The cumulative effects of all enacted legislation on direct spending will be issued in monthly reports transmitted to Congress.

Estimates for Pay-As-You-Go
($ in millions)