Rumor Sets Off Uproar in Housing : Reports Denied That Bill Would Halt Use of Funding Bonds
A rumor that federal legislation might be introduced next week prohibiting the use of tax-exempt bonds to finance apartment buildings has caused an uproar at state and local housing finance agencies across the nation.
In Los Angeles, the city’s Housing Division has been urging developers through telephone calls and newspaper advertisements to submit their development proposals by 4 p.m. today to try to beat the supposed deadline contained in the rumored legislation.
Other Southern California agencies report that they aren’t yet taking extraordinary measures but are poised to act more quickly than normal if a bill is introduced.
Rumors began circulating a few weeks ago that Rep. J. J. (Jake) Pickle (D-Tex.) was planning to introduce a bill that would eliminate tax-exempt revenue bond financing for the construction or rehabilitation of multifamily housing. If the bill were passed, according to the rumor, the ban would extend back to the date of introduction, which could be Jan. 22, the day Congress reconvenes.
Denies Rumor
This rumored legislation is separate--and would be more extreme because of the early date on which it would take effect--than the previously announced Reagan Administration tax-reform proposal that Rep. Charles B. Rangel (D-N.Y.) will introduce by the end of January. Under that bill, “private purpose” tax-exempt bonds, including mortgage revenue bonds, are among the investments slated for elimination. But that provision would go into effect no earlier than Jan. 1, 1986, to prevent market disruption, a Rangel spokesman said.
The so-called Pickle rumor flourishes even though the congressman’s spokesmen have repeatedly denied that Pickle intends to introduce such legislation. Agencies that use the popular housing finance bonds remain worried.
“We have not been able to get a handle on how this started,” a spokesman for Pickle said. “We’ve gotten calls from everybody and his dog. We’ve gotten calls from as far away as Hawaii.”
“That rumor has caused a lot of heart attacks,” said Mary Edwards, spokeswoman for the Washington-based Council of State Housing Agencies. “We have received calls from all over the country.”
Tax-exempt housing bonds became popular in the late 1970s when interest rates soared, making development more expensive.
Losing the tax-exempt housing finance program would be a blow to Los Angeles, where 80% of the multifamily housing units built during the last two years were financed with the aid of tax-exempt bonds, said Craig Avery, director of the city Community Development Department’s Housing Division.
“There is a very tight rental market in Los Angeles,” Avery said. “We’ve been trying to do everything we can to increase the supply” of moderately priced apartments, he said.
Just in case legislation like the rumored Pickle bill materializes, Housing Division staffers have been telephoning developers and placing advertisements in local newspapers, urging developers to submit proposals.
Four staff members have called more than 75 developers from the division’s list of 3,000 and have received promises from nearly 40 that proposals will be submitted by today’s deadline, a division spokesman said.
The Housing Division already has 37 proposals and will take the final list to the City Council on Friday for approval of an “inducement resolution.”
The inducement resolution would make the projects available for tax-exempt financing but won’t yet commit the city to providing bond financing for those projects.
Los Angeles County has not accelerated its normal approval process but has identified several projects so that, if a bill is introduced in Congress, the proposals could be approved more quickly than usual, said Charles Taylor, manager of housing finance for the Community Development Commission.
