President Reagan's new budget proposes nearly $2 billion in housing and community development spending cuts from current expenditures and calls for elimination of several housing and urban development programs.
The fiscal 1989 budget request of $16.1 billion exceeds the current year's level, however, because it includes nearly $2.5 billion for "credit reform" in the Federal Housing Administration's home mortgage insurance program and the Government National Mortgage Association.
Department of Housing and Urban Development Secretary Samuel R. Pierce Jr. said the budget is "both sensible and fair."
HUD would receive $13.5 billion for all programs, except credit reform, down from $15.4 billion in 1988, if Congress approves the administration's fiscal 1989 request. A cap of $75 billion would be set on the amount of home loans FHA could insure next year. The credit limit can be increased by Congress if needed.
For the first time, the administration is asking Congress to appropriate money equal to the amount HUD estimates that the FHA insurance program and the Government National Mortgage Association, or Ginnie Mae, saves home buyers in fees and other charges they would pay in the private market. (Ginnie Mae forms pools of government-insured mortgages and guarantees that homeowners' payments reach the purchasers of securities backed by those pools.)
The administration claims the saving would be $2.6 billion next year, and HUD proposes that this amount be appropriated by Congress and put into a fund to cover possible government losses. Critics of the proposal have pointed out that the FHA insurance program makes money and has about $6 billion in reserves, while Ginnie Mae has nearly $4 billion.
"This seems to be one more attempt to throttle these programs because Congress will be reluctant" to authorize such large sums, said Warren Lasko, executive vice president of the Mortgage Bankers Association of America. In the past, the administration has sought, unsuccessfully, to impose user fees and loan caps on the programs.
Some programs the administration has targeted for extinction in the next fiscal year, including Urban Development Action Grants, have been rescued and reauthorized by Congress in the past when the administration has tried to kill them.
Community Development Block Grants would receive $2.4 billion, down from $3 billion. In addition, the administration proposes to transfer $145 million from a rehabilitation loan fund to the block grant program and close down the loan fund. The low-interest loans were targeted to low- and moderate-income homeowners and community development projects, but the program has drawn criticism because there are no income limits for borrowers.
The administration is requesting $6.9 billion for subsidized housing, $1 billion below the amount budgeted for fiscal 1988. The money would pay for 108,000 more subsidized units than are now being funded, with 100,000 of them paid for by vouchers.
Pierce said the budget request, if approved by Congress, would increase housing assistance for low-income Americans, while "maintaining restraint" on federal spending. The proposal would provide subsidies for 4.4 million households, a 1.3 million increase over 1980, Pierce said.
The administration would be able to subsidize more households under their proposed budget in part because the vouchers are funded for five years, as opposed to the 15-year certificates previously issued. In addition, while the fiscal 1988 budget provided funds for acquiring or building 8 million public and Indian housing units, HUD is only asking for 1 million units in fiscal 1989.