New tax incentives are needed now to stimulate the construction of apartments and to provide mortgage money at interest rates which middle-income families can afford, according to Herman J. Smith, vice president of the National Association of Home Builders.

"Any tax cut must be targeted and structured in a way to avoid inflationary pressures," he recently told the Senate Finance Committee. "The tax cut should be directed toward improving industrial productivity and creating jobs."

Smith commended finance committee chairman Sen. Russell Long (D-La.) for his resolution that has allowed state and local communities to issue tax-exempt revenue bonds to finance single-family housing through the end of the year.

"This should permit the release of mortgage funds at interest rates families can afford and help the housing industry get back to building houses and construction workers get back to their jobs," Smith said.

To spur more rental construction, NAHB supports a bill by Sen. Harrison Williams (D-N.J.) which provides 20-year straight line depreciation for rental property and a 15-year depreciation for low-income housing.

Also recommended by the 125,000-member trade group is repeal of Section 189 of the Internal Revenue Code which prevents tax deduction for in interest and taxes during the year in which payments are made. These expenses are now amortized over a 4-to-10-year period.

To provide more affordable mortgage funds, the NAHB supports a bill by Sen. Gaylord Nelson (D-Wis.) that would allow a tax exemption for interest on savings deposits used by thrift institutions to make mortgage loans.

The trade association also favors a bill by Sen. Robert Dole (R-Kan.) to establish tax-exempt housing savings accounts which families could use to save the down payments needed to purchase new homes.

Smith asked for changes in the present income tax structure to reward savings rather than consumption. The personal savings rate in the United States is now below 5 percent of after-tax income, the lowest among all industrialized nations, he said, because the "after-tax yield on a savings deposits at a commercial bank or thrift institution may be as little as 3 to 4 percent."