Bill overhauling federal housing aid would give 240,000 families a home

October 17, 1990|By Los Angeles Times

WASHINGTON -- An estimated 240,000 low-income and homeless families would be housed by state and local officials and existing housing programs would be bolstered under a $57.7 billion bill expected to be signed into law in the next week or two.

The first overhaul of housing programs in a decade was approved by a Senate-House conference committee late Monday night. The bill also attempts to shore up the troubled Federal Housing Administration while preserving low-income interest programs.

The bill authorizes $27.5 billion for housing programs in fiscal 1991 -- $3.4 billion more than the previous fiscal year -- and $29.9 billion in fiscal 1992.

"This is landmark legislation," said Sen. Alan Cranston, D-Calif., who drafted the Senate version. "The federal government is at long last taking up its responsibility for making decent homes more affordable for all Americans, including the poor."

The initiative is "a major move to reverse the federal neglect of public housing," said Barry Zigas, head of the National Low Income Housing Coalition.

The centerpiece of the proposed agreement is the home investment plan, which would provide $3 billion over the next two years for housing programs developed by state and local officials.

Although state and local officials would have to apply for their share of the funds, they would be given greater flexibility in how to spend the money. For example, they could choose to build new units or assist renters with monthly payments in private housing.

"State and localities would be able to choose housing programs that work for their communities," said Don Campbell, a housing expert and aide to Mr. Cranston.

Officials estimate that 1 million people are now on waiting lists for public housing and that another million are waiting for rental assistance.

The bill clearly falls short of providing help to everyone seeking it. However, in addition to reaching out to some families not currently receiving help, the bill also authorizes $9.56 billion in rental assistance and other programs whose funding was due to expire.

In an effort to retain the solvency of the FHA mortgage insurance program, conferees agreed after much debate to increase the amount of up-front costs paid by borrowers.

Under the existing FHA program, which was enacted in 1934 to boost private homeownership, homebuyers must provide only a 3 percent down payment and may finance all of their closing costs on the first $25,000 of a mortgage and 5 percent on the balance.

The bill, however, calls for borrowers to provide at least 43 percent of their closing costs in cash, effectively raising the amount of money needed to qualify for the government loans.

For example, a family purchasing a $65,000 home under the program would have to have about $3,639 in cash, or about $800 more than the current program requires.

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