A fierce but little-known imbroglio within the Carter administration over raising federal mortage insurance limits offers fascinating insights to the difficulty the President faces in devising his "urban strategy."
The controversy occurred earlier this month at the top levels of the Department of Housing and Urban Development.
With the passage of the Housing and Community Development Act of 1977, many HUD officials were looking forward to rapid revival of the Federal Housing Administration's mortage insurance activities.
The new law, signed by President Carter Oct. 12, raises the basic FHA mortage limit for single-family homes and condominiums to $60,000 and cuts down payment requirements sharply. FHA, dormant in major metropolitan areas across the country because of its outdated mortage limits and its non-competitive down payment terms, was to be the law's single largest beneficiary.
The new $60,000 limits would "put us back in business," said HUD's assistant Secretary for housing and FHA Commissioner, Lawrence B. Simons, even in high-cost areas like Washington, San Francisco and New York. FHA might not get back to its former 20 to 25 percent share of the housing finance market, he noted, "but we'll certainly be a hell of a lot more active" than the current 7 to 8 per cent level.
Starting last spring, HUD Secretary Patricia Roberts Harris, Simons and other officials pushed hard for the changes on Capitol Hill. No one from HUD ever publicly murmered the slightest hint of opposition to increased mortgage limits.
Inside HUD, however, it was different story when the housing bill neared enactment. Robert C. Embry Jr., assistant Secretary for community planning and development - who for eight years ran Baltimore's nationally-praised urban redevelopment programs - studied the new FHA insurance limits and decided they'd be disastrous for a number of older cities, including Washington, New York and Baltimore.
Embry then took the highly unusual step of trying to block the regulations of a fellow sub-cabinet member's bread-andbutter program. He "nonconcurred," in bureaucratic parlance, and effectively called for a halt to Commissioner Simons' planned revival of FHA.
FHA, Embry reasoned, has the power to foster sprawling newly constructed suburban subdivisions with its mortgage insurance. It has done so in the past, particularly during the 1950s and early 1960s, and could do so in the 1970s with its revamped, attractive terms.
Modest-cost, FHA-assisted suburban development, in Embry's view, tends to "cream off" the most vital segments of older cities' populations, and ultimately leads to economic decay and housing abandonment within inner-city neighborhoods.
In light of FHA's link with central city problems and the Carter administration's stated desire to help, not retard, urban American, HUD should put important new restrictions in its FHA mortgage regulations before issuing them said Embry.
FHA insurance should not be permitted for newly constructed houses in market areas, he argued, where such construction "is likely to have a detrimental effect on the condition on the housing stock in the central city or is likely to counter departmental policies aimed at decentralization of lower income and minority groups," according to an internal HUD summary of his position.
In essence, Embry called for pinpointing of FHA mortgage aid, rather than universal usage. New construction support could go to metropolitan areas with relatively healthy central cities. FHA insurance for existing houses, and for rehabilitation, could go to any metropolitan area.
HUD housing officials were "absolutely livid" at Embry's unprecedented "intrusion" into the FHA arena, according to key aides. So were the leaders of home building and home finance trade associations who though Congress's instructions fairly cleaar on the subject of FHA mortgage limits. FHA supporters inside and outside HUD holwd that Embry was exaggerating the power of the agency to mold the future of cities, that in any event, the new leaders at FHA intend to expand insurance activities in the central cities.
Embry, however, carries substantial weight in the urban field - he came very close to being President Carter's choice for the HUD cabinet slot last January - and his non-concurrence with the FHA regulations produced genuine uproar at HUD. After sharp debate the issue finally was bucked up to Under Secretary Jay Janis - a former home builder - and to Secretary Harris.
The decision went against Embry. The FHA regulations, at least at this writing, will contain no special protections for central cities.
The issue Embry raised, though, is far from dead. FHA does have the potential - if its single-family insurance programs for new housing are allowed to boom where the land is cheapest and most readily available - to weaken central cities by rendering the suburbs more economically attractive to middle income families.
No one, even the most vigorous defenders of a free-wheeling, competitive FHA, can deny that the agency (along with federal highway funds) helped create the imbalanced urban sprawl that afflicts the U.S. today.
The unresolved question is: what will an active FHA do to avoid the patterns of the past? Can it sustain both high levels of sub-division building and high levels of central city rehabilitation? Can it, in the heady upswing of its own revival, help revive aging central cities?