House-Raising on the Hill

Preserving the American dream of owning a home is a laudable idea, but not the way Congress has decided to go about it. True, the Commerce Department announced last week that construction on new homes in April dropped to an annual adjusted rate of 881,000, a slump of 6.4% from March. True, housing starts during the first three months of 1982 were the lowest for any first quarter since World War II. And true, a poll conducted this year by Market Opinion Research showed that many Americans would once again be able to afford homes if mortgage rates, now hovering at a prohibitive 17%, fell below 12%. But in an attempt to salvage the housing industry, both the House and the Senate are voting to spend money the Government does not have for a program whose impact is questionable. Said Republican Representative Dick Cheney of Wyoming: "The bill is a turkey."

Two weeks ago, the Democratic-controlled House voted 349 to 55 for a $1 billion bill that would pay home buyers up to six percentage points of mortgage interest rates on new houses. The bill would cover mortgages of up to $90,000; the maximum yearly income of eligible buyers would range from $19,000 to $55,000, depending on the region. The Senate Appropriations Committee last week approved its own bill authorizing $1 billion a year in subsidies for five years. This version would pay as much as 4% of mortgages up to $77,600 for eligible buyers earning a maximum of $35,000. Someone signing a 25-year mortgage for $65,000 at 15 1/2% interest, for example, could receive as much as $12,754 in federal aid over five years; the buyer would be required to pay back the money only if the house were sold at a profit. The full Senate is virtually certain to pass its bill this week, with the differences expected to be hammered out in conference within the next month.

Republican Richard Lugar of Indiana, sponsor of the Senate bill, insists that it will produce 400,000 new housing starts and provide 700,000 jobs. Most experts, however, predict that the measure will create, at best, a few thousand more homes. Even the National Association of Realtors, which would benefit from the bill, doubts that the program would work. Said Jack Carlson, chief economist for the trade group: "Getting down the deficit is the only solution."

White House advisers are concerned that the housing subsidy could lead to a flood of relief bills for other ailing industries, such as autos and steel. Though President Reagan would like to veto the measure, he may sign it anyway. He has rejected only three bills so far, and he may not be anxious to mortgage his own reputation if it appears his veto might be overturned.

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