The move to extend the mortgage subsidy bond program was endorsed this week by a wide range of interests, which paraded before the House Ways and Means Committee in two days of hearings to talk up the bill.
The program, which allows state and local agencies to float tax-exempt bonds and then lend the below-market proceeds to home buyers, is scheduled to expire at the end of the year.
The Reagan administration strongly opposes extending the program, and the General Accounting Office and the Congressional Budget Office have criticized it as expensive and inefficient. But the program gained a huge constituency during the recent runup of interest rates by providing loans to people who proponents of the program say otherwise would have been unable to buy homes.
This constituency has made itself felt on Capitol Hill, where by this week 77 senators and 318 representatives had signed on to cosponsor extension.
Both the Treasury and the Department of Housing and Urban Development told the Ways and Means Committee this week that the program ought to be allowed to "sunset."
"We do not need mortgage subsidy bonds," said Anthony J. Sulvetta, HUD deputy assistant secretary-designate. They "are not very efficient, and all they do is accelerate first-time homeownership," he said.
Assistant Treasury Secretary John E. Chapoton argued that the bonds are "unnecessary" in light of other federal subsidies to homeowners and said that a three-year extension of the program would cost the federal government $15 billion.
GAO, in a report that has angered the bonds' proponents, concluded that the bonds have helped people who could have bought houses anyway and that a direct subsidy such as a tax credit would deliver aid more efficiently.
But witness after witness, ranging from Rep. Les AuCoin of timber-producing Oregon to the State of New York Mortgage Agency to the National Association of Realtors and the National Association of Home Builders, came forward to endorse the program.
John Ritchie, executive director of the Virginia Housing Development Authority and president of the Council of State Housing Agencies, argued that the bonds are efficient--93 percent of the money goes to mortgages, he said--and that Treasury is wrong about the cost to the government because its analysis doesn't take into account economic activity generated by the bonds.
Limitations that have been suggested for the program are unnecessary because they "assume that these bonds are revenue losers, and I don't accept that," Ritchie said. "I think they are net revenue producers."
Wallace L. Ford II of the State of New York Mortgage Agency said "I don't know that anyone is capable of calculating the full multiplier effect" of housing activity generated by the bonds.
Bernard L. Tetreault, executive director of the Montgomery County Housing Opportunities Commission and president of the Association of Local Housing Finance Agencies, said "the need for this legislation is evident."
He said that because of higher interest rates, since 1979 "the cost of housing has increased 23 percent but the income necessary to qualify for financing has increased 50 percent."
He, Ritchie and others also disputed GAO's conclusion that most of the bonds' beneficiaries could have bought houses on their own. "Actual experience in 1982 showed that the home purchase opportunities presumed to be available to borrowers by GAO were, in fact, not available," Ritchie said.
One of the few organizations to break ranks during the two days of hearings this week was the National League of Cities. It supported a three-year extension, but only if state-by-state volume limits are placed on the bonds, if income limits are imposed, and if the program is limited to first-time home buyers.
Robert Knight, who testified for the league, also suggested that Congress might consider placing an equity participation provision in the program, so that "those beneficiaries who realize enough growth in income to roll over their initial homeownership investment should be required to refund that percentage of the home's appreciation equal to the amount of interest subsidy provided."
And amid all the endorsements, Ways and Means Chairman Dan Rostenkowski (D-Ill.) and Rep. J. J. Pickle (D-Tex.) expressed reservations.
"Every well-intentioned program starts to become a run on the Treasury," Rostenkowski said.
Added Pickle: If GAO is "correct, we have to ask ourselves, 'Is this the best way to help first-time home buyers?' "