A Senate committee heard yesterday what has become an increasingly familiar story - about a federal regulatory act that has gone partly wrong.
A panel of realtors and builders told the Small Business Committee that they are the victims of a law designed to control the fraudulent advertising of land in one state for sale to buyers in another.
The law grew out of some horror stories a decade ago about elderly people who spent most of their savings on "retirement paradises" they had never seen, only to discover that their paradises were really patches of swamp or desert.
But the Interstate Land Sales Full Disclosure Act has had more effects than this intended one, the panel said.
The disclosure requirements of the law have evolved into a businessman's nightmare of federal forms, several inches thick, to be filled out at a cost that can reach $20,000 for each subdivision of undeveloped lots a developer sells, said Richard Farrer, a spokesman for the 570,000-member National Association of Realtors.
And, Farrer said, the reach of the measure has been extended from interstate sales of land the purchaser cannot inspect before buying, to sales that take place entirely within one state. The result, he said, is higher housing costs.
The realtors found a sympathetic listener in committee chairman Gaylord Nelson (D-Wis.), who sharply criticized the agency that administers the law, the Department of Housing and Urban Development's Office of Interstate Land Sales Regulation.
"In my opinion, OILSR was granted a restricted fishing license to go after a rare species - the 'interstate' fraudulent land developer," Nelson said.
"Instead, OILSR seems determined to distort the intent of the law by widening its net and trapping all the fish in the lake to make certain this rare species does not escape. This is overkill."
Alan Kappeler, deputy director of OILSR, agreed in a telephone conversation that the paperwork required under the law is extensive and that his office does regulate purely intrastate sales.
The reason, he said, is the way Congress wrote the law.
Kappeler said the language of the act gives OILSR jurisdiction "where any use of interstate commerce (including the telephone) or of the mails was concerned."
Since almost all intrastate sales involve the telephone, highway advertisements, newspapers that circulate in more than one state, or the mails, he said, they fall under OILSR's purview.
Kappeler conceded that "the way the regulations are constituted now, we think we're getting more paperwork than we need, and we're taking steps to remedy that now."
But, he said, "I haven't seen evidence of how this act substantially adds to the cost" of housing.
Kappeler noted that whenever OILSR's interpretation of the law has been challenged in court, the agency has been upheld.
HUD will get a chance Jan. 17 to present its arguments to the committee, which is investigating the effect of federal regulations on small businessmen.