Stalled Housing for the Poor

April 30, 1991

The 1989 HUD Reform Act was designed to curb the outlandish fees and profits private owners pocketed on subsidized housing. Its unintended practical effect, though, has been to limit scarce and desperately-needed housing for the poor.

Under the new law, the Department of Housing and Urban Development was supposed to draft guidelines for projects built or rehabilitated with low-income tax credits if those projects were getting other forms of government assistance. Instead of coming out with guidelines, HUD has delayed approval of new projects. Six Maryland developments representing $2.7 million in tax credits have been stalled for eight months or more for want of HUD action.

These delays deprive low-income Maryland renters of 999 potential apartments in a tight market and, worse, are bumping up against time limits. Projects must be completed within two years of the time at which tax credits were allocated.

So critical is the situation that the entire 10-member Maryland congressional delegation sent a letter in February to HUD Secretary Jack Kemp expressing concern about the delays. Gov. William Donald Schaefer voiced similar dismay in a letter to Sen. Barbara A. Mikulski, D-Md., noting, "We have reached a crisis situation and we are running out of time." Because it tends to be less profitable than other forms of development, low-income housing demands a patchwork of financial incentives and speed and cooperation among a voluminous collection of public and private players. HUD is at the center of this orbit: the loans, bond sales and other deals that move projects depend on its approval.

The agency blames its slow pace on undeveloped guidelines -- which were supposed to have been published this month but were not. They cannot come too soon. HUD is a central cog in an diverse and complex daisy chain of lenders, investors, developers, non-profit groups and federal and local agencies that makes affordable housing work. HUD should be pushing, not paralyzing, projects.

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