Local rent controls such as those in the District would effectively be prohibited by federal law under a recommendation approved last night by the President's Commission on Housing.
The recommendation is the first indication that the Reagan administration might try to intervene in local decisions on rent controls. During earlier debate on the issue the administration has taken a hands-off approach, saying such decisions should be left to states and local communities.
The proposal is a controversial one, and Congress has been divided on the issue. The Senate last year adopted a less sweeping plan to discourage rent controls, but the idea was rejected in the House.
Other proposals expected to be adopted this week by the commission would provide between $3.6 billion and $6.3 billion for federal subsidies to more than 1 million units of housing.
These include housing vouchers, which the administration already has proposed to replace new construction of low-income housing, and a complementary housing block grant program for rehabilitation and new construction of low-income housing. Other plans are for various tax incentives, including tax-exempt housing accounts for saving for a down payment and a mortgage interest tax credit for lenders increasing their investments in home mortgages.
Meanwhile, 20 members of the Housing Banking Committee introduced legislation yesterday to provide a year's worth of assistance to families facing mortgage foreclosures because of temporary financial hardships, such as job layoffs. The bill will be part of a larger package of housing proposals to be offered next week, a staff aide said.
The commission's regulations panel said that rent controls in some 200 cities throughout the country prevent landlords from getting a fair return on their investment and therefore prevents new construction of rental housing. This is one of the main arguments used by developers and lenders in the District in opposing the controls that affect around 120,000 apartments in Washington.
New York City has had an "emergency" rent control law in effect since 1943.
In calling for a prohibition, and in justifying it in the face of the Reagan administration's dedication to federalism, the commission took circuitous routes.
The mechanism recommended for ending controls was denial of federal assistance, direct or indirect, for housing for any state that did not agree to remove controls in its jurisdiction. This would force a ban throughout the country, as it would include such widespread housing programs as FHA- and VA-insured loans or mortgages from any federally insured lending institution. The states would have five years to end rent controls or lose all such assistance.
In a related development, the Federal National Mortgage Association said it will expand its conventional mortgage-backed securities program, begun on a trial basis last year, by opening it to new loan originations starting on March 17. The purpose of the program is to provide a vehicle for getting new money sources, particularly pension funds, into home mortgages.