President Reagan appears ready to overrule his budget director and continue funding for urban development action grants (UDAG), and perhaps for FHA mortgages, while going along with other large cuts in the housing budget, according to an informed administration source.
The UDAG program for distressed cities began as an experiment in the Carter administration and quickly became a favorite with mayors and other local officials. The FHA program has put millions of Americans into their first homes and depends on federal backing provided by the Governmental National Mortgage Association (Ginnie Mae).
The Office of Management and Budget wanted to cut UDAG in fiscal 1983 and Ginnie Mae by 1987, while the Department of Housing and Urban Development is hoping to save both.
HUD Secretary Samuel Pierce made his budget appeal to Reagan yesterday at the White House, with OMB Director David Stockman there to argue for his proposal asking for large cuts in a broad range of HUD programs.
The HUD appeal that received the most favorable hearing from Reagan was for UDAG, one source at the meeting said. FHA was a closer call, but "I think it will be saved," this source said.
There also was much discussion of how much rent tenants in public housing should have to pay and how many assisted units there should be in fiscal 1983, but it was unclear what the president would agree to on this, others in the meeting said.
One source who was there said that the president announced no decisions at the time, but mainly asked questions of Pierce and Stockman. The White House was to receive more briefing papers from HUD yesterday, and Reagan said he would let his advisers know today his decisions on the various HUD programs.
UDAG was the Carter administration's main initiative to help deteriorating cities, providing grants in areas when the private sector invests at least 2 1/2 times the size of the federal aid. Critics have said the program merely redistributes resources to particular areas and does not actually increase jobs or economic development.
HUD argues that the program has been effective, and Pierce has said he wants to de-emphasize housing aid in the program and instead focus on industrial and commercial projects.
In addition to proposing a phase-out of Ginnie Mae, OMB wants to limit FHA-insured mortgages to only the highest-risk buyers who can't get private mortgage insurance. FHA-insured mortgages, for which buyers pay a fee, mainly help first-time homebuyers because only 5 percent down is required.
OMB also proposed substantially increasing tenant rents at federally funded low-income housing and wants to subsidize fewer units at a lower amount per family than HUD had proposed.