CONGRESS PASSED a housing bill as it left town, but that was not the most important piece of housing legislation adopted in the final hours. The heavy lifting was done among the tax increases in the reconciliation bill. A provi-sion there will cap the mortgage interest deduc-tion.

The cap was set at $1 million, so stratospheric that hardly anyone will feel it. Who pays more than $1 million in noncommercial mortgage interest a year? But the bite was less important than the principle this first time around. First you establish that there ought to be a limit; then you can argue about where.

Housing policy in this country is upside down. The greatest federal subsidies are given through the tax code -- mainly the mortgage interest and real estate tax deductions, which are tilted toward the rich. Even with the less progressive income tax rates approved last year, the better off a family is and larger its house, the larger its subsidy. The two deductions will cost the Treasury an estimated $27 billion this year in taxes forgone. That is twice what will go to the poor through the controversial spending programs that were the subject of the housing bill.

The cap on the interest deduction marks a first recognition of this regressiveness. There is bound to be a major debate in the next few years on the housing programs for the poor. A major issue will be cost. A lower mortgage interest cap could help finance a needed expansion of these programs. Sound fiscal and social policy would both be served.

The housing bill, in the meantime, seeks to tune the programs and keep them alive. It continues a standoff on housing policy that has characterized this entire administration. The housing programs for the poor were last seriously retooled in the 1970s, during the Nixon-Ford administration. The inherited programs had involved the government heavily in the construction of such housing. The idea was to lighten up by shifting to rent supplements instead. But these were provided under long-term contracts with developers, and they too have proved entangling and costly. The Reagan administration proposed to lighten up further by shifting to vouchers -- shallower subsidies and of shorter term. The Democrats in Congress have resisted. The two sides have fought to a freeze on the older programs, without a venture into new. But the problem -- a critical shortage of affordable housing, in the cities particularly -- continues to worsen.

The housing bill perpetuates this forlorn result until after the next elections. An earlier version was held up in the Senate last month when Republicans charged that Democrats had stitched in a number of new programs that would drive up its cost. The Republicans exaggerated, and Democrats fudged the likely impact of these programs in about the same measure. Now they have composed their differences. But the real work will come in a future administration.