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HUD No. 98-482
Further Information:For Release
In the Washington, DC area: 202/708-0685Thursday
Or contact your local HUD officeOctober 8, 1998

CUOMO SAYS BILL WINNING FINAL PASSAGE IN SENATE TODAY WILL INCREASE HOMEOWNERSHIP AND REVITALIZE PUBLIC HOUSING

WASHINGTON - Housing and Urban Development Secretary Andrew Cuomo said a bill that won final legislative approval in the Senate today on a 96-1 vote "is an important victory for President Clinton's policies to increase homeownership, expand the supply of affordable housing and transform public housing."

The legislation is part of a larger bill that includes HUD's $24.5 billion budget. The bill, passed by the House Tuesday, now goes to President Clinton. Key provisions would:

  • Increase homeownership by raising the limit on home mortgages insured by the Federal Housing Administration from the current range of $86,317 in low-cost housing areas to $170,362 in high-cost areas. The bill increases the loan limits to a range of $109,032 in low-cost areas to $197,621 in high-cost areas. The higher ceiling on FHA-insured home mortgages opens the door of homeownership to thousands of families needing FHA insurance to get mortgages, but locked out now because the current ceilings have not kept pace with rising home prices.

  • Expand the supply of affordable housing by enabling 90,000 more families to get Section 8 rental assistance vouchers that will subsidize their rents in privately owned apartments - the first increase in vouchers in four years.

  • Transform public housing by reducing segregation by race and income, encouraging and rewarding work, bringing more working families into public housing, and increasing the availability of subsidized housing for very poor families. In addition, the bill improves living conditions in public housing, gives the poorest families neighbors who will be role models of working families, and reduces crime. The bill also allows HUD to continue to tear down the largest failed public housing projects and replace them with new townhouse-style developments.

President Clinton said: "I am pleased that my Administration has agreed with the Congress on a bipartisan housing bill that incorporates all of the essential principles for which we have fought during the long, difficult negotiations that led to this agreement.... This legislation will put America back in the business of providing new affordable housing, will transform public housing, and will increase homeownership opportunities.... I thank HUD Secretary Andrew Cuomo for his extraordinary work on this legislation and the many Democrats who worked tirelessly to make significant progress in our housing policies, and I commend those Republicans who cooperated in our efforts to transform public housing. "

"I must note, however, that this legislation is contained within the Fiscal Year 1999 Appropriations bill for VA, HUD and other Independent Agencies - and that I remain concerned about the funding levels provided for certain environmental and economic development programs in that bill," the President said.

Funding for HUD's key programs and renewals of Section 8 rental assistance is increased by a total of about $2.7 billion in the budget over 1998 levels (about $1.3 billion in increased program spending and about $1.4 billion more for Section 8 renewals). Spending wasn't cut in any programs.

"The higher FHA loan limits will help transform homeownership from a distant dream into a sweet reality for more hard-working middle-class families," Cuomo said. "This will return FHA to its historic role as the driving force for homeownership across the nation."

"As a result of President Clinton's successful economic policies and homeownership strategy, our nation's homeownership rate stands at 66 percent -- the highest level in American history," Cuomo said. "Nearly 68 million American families now own their homes -- 6 million more than when President Clinton took office. The* approval of higher FHA loan limits, which President Clinton proposed, will drive the homeownership rate even higher in the years ahead. "

Addressing the public housing reforms, Cuomo said: "The bipartisan legislation implements President Clinton's visionary plans to transform public housing from segregated ghettos of poverty and despair into economically integrated communities of opportunity. I would especially like to thank Senator Paul Sarbanes and Congressman Joseph Kennedy for their effective work to win approval of this important legislation."

Here are more details of the legislation:

FHA LOAN LIMITS

The higher loan limits will not cost the government any money, because FHA insurance is funded by premiums paid by borrowers.

Because FHA loan limits have failed to keep up with rising home values, the agency's share of home mortgage volume has declined dramatically over the years. In 1970, FHA accounted for 24 percent of home mortgage volume, but by 1996 FHA's share had plummeted to just 10 percent.

FHA's single-family home mortgage insurance program has been one of the most successful public-private partnerships in history. Over its six-decade history, the FHA has made homeownership available to about 24 million families.

FHA does not make mortgage loans directly, but rather insures loans made by private lenders to homebuyers. The FHA insurance guarantees the lender timely payment of principal and interest, in the event the homebuyer defaults on the loan.

Because the FHA mortgage insurance protects lenders from losses, it enables millions of Americans who would otherwise have been locked out of the mortgage market and homeownership to qualify for mortgages. Cuomo said the higher loan limits will particularly benefit first-time homebuyers, who receive over 70 percent of FHA-insured home loans.

NEW SECTION 8 VOUCHERS

After a four-year hiatus, the new HUD budget puts America back in the housing business for 90,000 more families this year through the Section 8 rental assistance program, which helps pay the rent of people with low-and moderate-incomes in privately owned affordable housing.

50,000 new vouchers would be created for families moving from welfare to work, and 40,000 vouchers would be made available by eliminating a mandatory three-month waiting period to reissue vouchers that go from one family to another. In addition, the bill authorizes another 200,000 vouchers - 100,000 in the year 2000 and an additional 100,000 in the year 2001.

PUBLIC HOUSING AND SECTION 8 REFORMS

Under the bill, more moderate-income working families can be admitted to public housing where the poorest residents on welfare are now concentrated. At the same time, apartments in public housing are reserved for the poorest families with the greatest need, and more rental assistance vouchers under the Section 8 program will go to the poorest families.

Cuomo said that as important as what the legislation contains are the provisions that were scrapped from inclusion in the bill. He said the legislation does not contain sections of a public housing bill passed earlier by the House that "repeal" the 1937 Housing Act, or harmful income eligibility provisions, or a punitive mandatory work provision for public housing residents that some members of Congress wanted. The House replaced the old version of the bill on Tuesday with the version approved today by the Senate.

To promote access by the poorest families to public and assisted housing where families with relatively higher incomes live, the final legislation provides that at least 75 percent of Section 8 vouchers go to families with incomes below 30 percent of the area median income - compared with just 40 percent in the earlier version of the bill passed by the House.

In public housing, the final bill says that at least 40 percent of newly available public housing units will go to the poorest households (with limited exceptions) - compared with only 35 percent (with broad exceptions) under the original House bill. Median family income varies from city to city. Nationally, it stands at $45,300. Housing authorities would have to adopt admission plans consistent with these goals of access for the poorest families.

The legislation also implements long-pending public housing reforms that were proposed by the Clinton Administration to require improved public housing management and increased program efficiency. These include: mandatory court-ordered receiverships for housing authorities that perform poorly for two years, requirements that housing authorities spend funds to assist residents more quickly, and consolidation of several programs to make them easier to administer and monitor.

The bill also allows well-run housing authorities to operate with less HUD oversight and more flexibility, as the Clinton Administration proposed. This will enable housing authorities performing acceptably to devote less time and resources to reporting to HUD and to focus on delivering good housing.

In addition, the bill limits a House "home rule" provision that would have allowed cities to take over even well-managed public housing authorities and would have allowed the cities to take away significant resident protections. The number of cities chosen, and any waiver of current protections, would be left to HUD. Over five years, cities could take over no more than 100 housing authorities with performance problems.

Content Archived: January 20, 2009

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