Clinton Sympathetic About Housing Woes

President Clinton plans a kinder, gentler and more ambitious federal housing policy over the next four years, or so the early signs would indicate.

Not only does the new President appear to take a more sympathetic view of the nation’s housing woes, but Clinton has also promised, in a departure from the preceding Republican administrations, to spend more money to address the problems and to redesign the housing delivery system.

Housing matters remain overshadowed by other domestic issues, namely the economy, health care, unemployment and crime, said several observers.

Yet Clinton strategists took care to use the campaign to help set the tone for how housing would fare under a Clinton presidency, said Marc A. Weiss, a real estate professor at Columbia University and Clinton’s spokesman on housing issues during the campaign.

“The higher visibility given to housing (during the campaign) is intended to create a bigger mandate” to push Clinton’s “ambitious agenda” for housing affairs, said Weiss, whose name is mentioned as a potential assistant secretary at the Department of Housing and Urban Development (HUD) in the policy and research area.

Clinton is committed to housing issues and that commitment comes from the heart, various observers noted.

“One thing about Bill is that he identifies in the real sense with people who may not have a lot of means to buy a house,” said Lindell Lay, a Little Rock, Ark., lending official who has worked with the governor’s office to help finance low-income housing.

Lay refers, in part, to what has become a staple of the Clinton lore: One of Clinton’s early childhood homes for a brief time had no indoor plumbing.

Housing and community development will serve as components of Clinton’s economic growth package, the “Rebuild America” plan, which the Arkansas governor has promised to send to Congress as his top legislative priority. June, however, would be the earliest Weiss said he would expect to see the proposal pass into law.

Clinton’s campaign promise to restore the pre-Reagan funding levels at HUD over a four-year period is part of that Rebuild America plan, Weiss said. Much of the HUD budget, which was slashed by 80% over the past 12 years, is devoted to the maintenance and construction of public and government-assisted private housing.

Weiss could not pinpoint the cost of restoring the HUD budget.

The President’s critics wonder where he will get the money to support his housing and other spending plans. Clinton, they point out, has repeatedly vowed to leave the mortgage interest deduction untouched, which potentially puts about $16 billion in government funds off limits. Few other choices remain, his critics charge, but to raise taxes on middle-income earners or renege on some of his campaign pledges.

An even more pressing issue for the Clinton Administration is the rescue of two tax credits that the President strongly supports, Weiss said.

The day after the election, President Bush vetoed a tax bill that would have extended the mortgage revenue bond program that provides low-interest-rate financing to less affluent first-time buyers and the low-income-housing tax credit that fosters low-income-housing production. Funding for the programs ended Dec. 31.

“The timing is crucial,” said Paul S. Grogan, president of the Local Initiative Support Corp. (LISC), which trains community groups to tackle neighborhood housing problems. “Any long interruption could severely damage the affordable housing (production) pipeline next year.”

Sometime during the first year, Weiss said, Clinton will also likely convene a White House summit on housing and homelessness, the first such conference in 60 years.

The idea, Weiss said, is to rebuild the national coalition of housing groups that last flourished in the 1970s, settle on a common agenda and signal the return of the federal government to the housing issue through a more hands-on approach.

If Clinton follows through on another campaign pledge, the homeless would benefit from a plan to use housing at closed military bases. Clinton has also floated the notion of setting aside for the homeless 10% of any properties foreclosed on by HUD.

Another initiative on Clinton’s agenda is expected to be the creation of “Individual Development Accounts” for persons earning no more than 200% of the poverty level. In 1991, the poverty level for a family of four was $13,924.

Under this plan, the federal government would match money saved in these accounts for, among other purposes, the purchase of a first home.

Clinton also has called for tenant management and ownership of public housing projects, a position long associated with former HUD Secretary Jack Kemp.

Weiss stressed, however, what he called “important differences” between the Clinton and Kemp approaches to privatizing public housing.

Kemp, Weiss said, “focused on privatization at all costs. He is trying to sell off the public housing stock.” Clinton, though, would be “interested in tenant participation . . . only where it is voluntary, wanted and appropriate,” Weiss said.

Kemp has said that he is “delighted to see” the tenant empowerment concept endorsed by the Democrats, adding “I know it comes from Bill Clinton personally.”

Clinton also favors redeveloping run-down, inner-city neighborhoods by designating them as enterprise zones eligible for tax incentives for businesses that locate or expand there. “As we have seen in L.A. and Miami, there is no substitute for a job and that will be the starting point for any urban policy,” Weiss said.

The country could also benefit from a new housing delivery system that carries a relatively low price tag in that the federal government serves as facilitator but relies heavily on other housing providers to carry out the plan, according to the Clinton view.

Historically the federal government has retained control as well as provided funding for the construction and rehabilitation of low-income housing.

Other housing-services providers that must be brought in include nonprofit housing groups, state and local housing finance authorities and private-sector interests such as commercial, investment and mortgage bankers as well as home builders, said Bob Nash, president of the Arkansas Development Finance Authority (ADFA).

Clinton receives high marks for innovation from several observers by moving his state’s housing finance authority beyond the traditional role of issuing mortgage revenue bonds and low-income housing tax credits to pull off what John T. McEvoy, executive director of the National Council of State Housing Agencies, called a “hell of a coup.”

In 1988, Arkansas formed a consortium with eight other state housing finance agencies to purchase $300-million worth of low-income housing loans that the Department of Housing and Urban Development (HUD) was selling off to help pay down the federal deficit. The private developers who borrowed the low-interest loans from the federal government were getting ready to exercise a 20-year option to repay the loans, thereby freeing them to convert the properties to market-rate rental units.

Not only did the deal keep the properties in the low-income housing stock, Nash recounted, but the Arkansas finance authority has used the interest income and other fees from the loans to fund some innovative housing efforts by local community groups.

Clinton “has a keen understanding of municipal finance,” Nash said.

Another potential public-private partnership alternative to the traditional housing delivery system is found in the network of community banks to invest in affordable housing and other ventures, as outlined in Clinton’s book, “Putting People First.” Weiss, coincidentally, is serving as a consultant in the development of a multibank community development corporation for South-Central Los Angeles.

Under one scenario, the federal government would not capitalize the privately owned and managed banks but might provide some start-up funds, Weiss said. Instead, philanthropically minded depositors would accept below-market interest rates on what would become the banks’ working capital.