The House Democratic leadership, fearing defeat by rebellious Democrats in league with Republicans, yesterday reluctantly embraced a plan to add $1 billion to this year's budget to help the crippled housing industry by subsidizing mortgage interest rates.
Since the Senate Banking Committee has also approved such a plan and the full Senate seems poised to follow suit, the House endorsement makes early congressional approval of some form of mortgage subsidy almost certain.
The administration, however, continues to oppose the legislation as too costly in this season of high deficits.
Yesterday's agreement by the leadership was reached after it appeared likely that the House would instead approve a bipartisan proposal to take $2 billion in synfuels funding to put into housing, despite the leadership's opposition, congressional sources said.
Faced with choosing between the devastated but politically powerful housing industry and the ably represented oil industry, the leadership followed a time-honored tradition: it chose both. At the insistence of House Majority Leader James C. Wright Jr. of Texas, all funding is to be retained for the Synthetic Fuels Corp., and the $1 billion will be added to the fiscal 1982 urgent supplemental appropriations bill, to go to the House floor next week.
While this approach circumvents an immediate conflict between proponents of synfuels aid and advocates of housing assistance, it leaves the House with the same budgetary problem that the Senate has with its $1 billion-a-year bill--it will raise the deficit--and makes the legislation a good candidate for a presidential veto.
The House subcommittee on housing, meanwhile, yesterday approved another piece of the interest-rate subsidy program, $3.5 billion in seven years of assistance to begin in October, when the next fiscal year begins, as part of a broader housing authorization bill.
The leadership also agreed to put this interest rate subsidy on a fast track by itself, splitting it off from the rest of the committee's legislation and scheduling it for floor action early next week, sources said.
Yesterday's agreement by the leadership followed an acrimonious but inconclusive two-hour meeting Tuesday evening in the office of House Speaker Thomas P. (Tip) O'Neill Jr. (D-Mass.) among other House leaders and the Democratic proponents of the bipartisan plan, Reps. Jerry M. Patterson of California and Les AuCoin of Oregon.
"It was a warm meeting," said Patterson, laughing at his own understatement about the disciplinary session. "There was some antagonism toward AuCoin and me for leading the rebellion. But we got their attention."
The new unity among the Democrats upset the rebels' recent allies on the $2 billion plan, Republicans Thomas B. Evans of Delaware and Thomas Corcoran of Illinois, who were left out of the new agreement.
"It's so galling to have worked for six weeks on this and then have O'Neill pull the rug out from under us," said one Republican staff aide who had worked on the bipartisan plan. "We've been sold down the river."
The interest rate subsidy would involve federal payments of 4 percentage points of the rate for a mortgage to moderate-income buyers of new homes.
The Senate leadership also plans a fast track for the housing bailout legislation, sponsored by Sen. Richard Lugar (R-Ind.), and it may be on the Senate floor next week, staff aides said.