HOME, SWEET HOME: Kennedy's $6.1 Billion Housing Bill

By a vote of 235-178, the House last week whipped through the Kennedy Administration's vast housing bill. Already passed by the Senate, the program this week goes to a House-Senate conference, which is expected to reconcile minor differences between the two versions. By far the home-sweet-homiest bill in history, the Administration's program adds up to some $6.1 billion in loans and grants to be spent mainly during the next five years. Built upon a questionable foundation, Kennedy's housing bill is honeycombed like a Victorian mansion with baffling passageways--but it also possesses the political advantages of having enough room for everyone. What the bill provides:

New Mortgage Plan. The most controversial section of the House bill would allow the Federal Housing Administration to insure private 35-year mortgages on houses worth up to $15,000 with only a 3% down payment. The version previously passed by the Senate required a slightly higher down payment, with mortgages to run for 40 years. Real estate boards and private moneylenders charged that the length of the loans would dry up mortgage funds, pointed out that owners would build up equity painfully slowly on 35-or 40-year mortgages.

Urban Renewal. The House bill would spend $2 billion, as against the Senate's $2.5 billion, during the next four years to help cities rebuild blighted areas. Cities would buy up decaying sections, raze the buildings and attract private buyers for the land by selling it at a loss. In turn, the Federal Government would reimburse the cities for their losses. Cities with populations under 50,000 would get back three-fourths of their costs; bigger cities would get back two-thirds.

Low-Income Housing. The Public Housing Administration would subsidize construction of 100,000 apartments for families with incomes below $4,000, giving priority to persons displaced by the urban renewal program. The units would actually be built by local housing authorities. PHA would either finance the project directly or guarantee a loan. Once the apartments were up, PHA would pay the difference between operating cost and rental income.

Housing for the Aged. To encourage cities to admit elderly persons to public housing units, the Public Housing Administration would pay local agencies a bonus of $120 a year for every apartment occupied by persons 60 years old or older. What is more, the House bill adds $100 million to the current fund of $50 million for 50-year, low-interest loans (present rate: 3 1/2%) to nonprofit corporations that build units for the elderly.

Moderate-Income Housing. To erect apartments for families too well off for low-rent public housing but too poor to own houses, FHA would insure 100%, 40-year, low-interest loans to limited and nonprofit groups. Private builders bitterly complain that the program will let FHA subsidize housing for an income group that can pay its own way. Under the program, charge its critics, housing authorities can build two-bedroom apartments to rent for as little as $90 a month--approximately $20 a month under the current market.

Home Improvement. To help owners fix up single-and multifamily dwellings, FHA would insure private loans up to $10,000 for 20 years, limited to 6% interest. Beyond that, FHA could waive any security requirements on the loan. This greatly expanded program supplements the current FHA home-improvement plan that insures private loans up to $3,500 for as long as 61 months at interest rates now running about 9.4%.

College & Hospital Housing. To erect housing for interns, student nurses, college students and faculty members, the House bill would earmark $1.2 billion during the next four years for low-interest, long-term (up to 50 years) loans to colleges, universities and hospitals.

Veterans' Housing. During the next five years, $1.2 billion would go into the federal fund for direct loans to veterans who cannot get mortgages from private lenders.

Financing. Even the most sanguine backers of the Administration's housing bill recognize the cold fact that private lenders will be reluctant to tie up funds for as long as 40 years in the controversial home-mortgage plan, or to lend money at below-market rates for home improvements and for housing for moderate-income and elderly persons. To encourage the money to flow, the Federal National Mortgage Association can buy up the loans from private lenders, thereby giving the lender a quick profit. The bill boosts the mortgage-buying fund of FNMA (popularly known as "Fanny May" in the trade) from $950 million to $1.7 billion.

Kennedy's program should help the lagging housing industry shake off the aftereffects of the recession (see BUSINESS). But critics are justifiably fearful of the program's long-term effects, charge that the bill makes the Federal Government a sort of benevolent landlord for nearly everyone in the nation, including many who do not need federal help. What is more, many builders predict that the bill will spawn hordes of cheap, row-on-row housing developments that will be ramshackle eyesores long before they are ever paid for. But the main attack against the bill is the charge that it is an open-armed invitation to inflation.

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