The Reagan administration as part of its plan to cut the budget again is contemplating a complete transformation of the government's subsidized housing program for the poor, in part through a new system of housing vouchers.
For years the government has steadily increased the number of subsidized housing units available to low-income households, until the housing program has become third-largest of federal welfare programs, behind only Medicaid and food stamps.
The new proposal by the Office of Management and Budget would halt this expansion in its tracks.
The government has also for years required those covered by the housing programs to pay only a fixed percentage of their incomes in rent; it made up the rest. Under the new plan the program no longer would be so open-ended. The government would give poor people fixed amounts, through the vouchers, and they would be required to pay the remainder of their rents, no matter how high.
The government now pays an average of about $3,000 a year toward the rents of families under the housing program where vouchers would be used. The vouchers OMB has in mind would be worth only $1,800 on average.
OMB is also proposing that two other large aid programs for cities, providing so-called community development and urban development grants, be phased out over the next two years.
This proposal is expected to be appealed to the president by Housing and Urban Development Secretary Samuel R. Pierce Jr.
Finally, according to some sources, OMB is proposing cutting down and perhaps phasing out the programs run by the Government National Mortgage Association. GNMA backs up government mortgage insurance programs. Curtailment of its activities would almost certainly reduce mortgage money available in the general housing market.
Initial Capitol Hill reaction to the urban aid and low-income housing cuts was unfavorable.
Senate Banking and Currency Committee Chairman Jake Garn (R-Utah) called the contemplated urban grants cutoff "stupid" and said that while he favors retrenchment in the low-income programs, the OMB plan as reported in the press is not what he has in mind.
House housing subcommittee Chairman Henry B. Gonzalez (D-Tex.) said, "If I were Sam Pierce I'd fight the OMB on this and if I lost I'd quit." House Banking Committee Chairman Fernand J. St Germain (D-R.I.) said OMB's proposal reveals "a lack of understanding and compassion for low-income Americans."
And Sen. Alan Cranston (D-Calif.) called the plan "cruel and shortsighted" and said Senate Banking Committee Democrats would draft their own "more sensible" plan to reform some housing programs.
Under the OMB plan, there would be no authorization in fiscal 1983 for additional subsidized units for low-income families, whether through new construction or other methods. The number of families in the housing programs would thus be frozen at around the current 3.7 million. By contrast, under past administrations the number was generally increased about 200,000 or more a year.
The OMB plan could also force low-income households to pay larger shares of their income toward rent. At present, under the Section 8 existing housing program, an eligible household need pay no more than 30 percent of its income toward rent. The government subsidy covers the rest, and the government payment is adjusted to cover rent increases. Under the OMB plan, the government payment would be fixed and the tenant would have to pay rent increases out of his pocket or move to a cheaper apartment.
All these changes represent a fundamental reversal of federal housing policy. The low-rent public housing program began in the New Deal period, in 1937, and the federal government has had a presence in subsiziding housing for the poor and simultaneously helping finance construction of low-rent units ever since.
In 1974 Republicans, who did not like some aspects of then-existing programs, helped recombine most of them into Section 8. But the programs continued to expand, and the government remained in the business of increasing the stock of rental housing for low-income households.