Low-cost housing: Reagan cuts spark debate over US aid

When President Reagan put out his "social safety net" of programs for the neediest, he left a gaping hole for housing assistance. And hundreds of projects, ranging from rent subsidies to neighborhood self-help, are slipping through.

By far the biggest spending item, building low-income housing, took the largest cut in the Reagan budget. While President Carter had promised 254,000 subsidized units this year and 260,000 next, President Reagan calls for 210,000 this year and only 175,000 next -- the lowest number since 1975.

Already the US housing market is in a "crisis," says Cushing N. Dolbeare, president of the National Low Income Housing Coalition, which is lobbying hard for more federal housing subsidies.

Her group claims that 20 to 40 percent of American households cannot afford decent housing at one-fourth of their income, and about 10 percent pay more than half of their income just for shelter and utilities. Hardest hit are the elderly and families headed by women.

"It will get worse," she warns, estimating that the number of low-rent housing units drops by half a million a year as costs rise and more landlords convert to condominiums.

Budget Director David A. Stockman counters that only a small percentage of the poor ever get into scarce public housing and that builders and financiers reap the biggest benefits from new units. "The question is whether we are serving builders or tenants," he told a meeting this week of the House Banking, Finance, and Urban Affairs Committee.

It now costs $60,000 to build a single apartment unit in a federal housing project, he said. That's only a little less than the average cost -- $66,000 -- of a house on the private market. It would be far cheaper to push down inflation and interest rates, thus improving the private market, than to build more subsidized housing, said the budget director.

Meanwhile, the Reagan administration hopes to get more apartments for its housing bucks by concentraing more on rehabilitating existing buildings, which is about half as costly as new construction.

Also being chopped by the Reagan budget are funds for modernizing 1.2 million units that are said to be in disrepair. But Mr. Stockman's budget knife has gone beyond the housing subsidies. It trims whole categories of programs from the Department of Housing and Urban Development (HUD). The Office of Neighborhood Self-Help Development, which by federal standards is a tiny project costing only $10 million a year, will be wiped out by 1982. More than half of its money went to rehabilitate 6,000 units, but the project's strong point is that for every $1 in federal money, it has attracted $14 from private banks, foundations, and charities to help rebuild neighborhoods.

Almost 100 cities have tried the popular "urban homesteading" program which offers abandoned city homes at $1 each to buyers who agree to renovate them and move in. About half of the cities rely on providing financing by lending the homesteaders federal money. Now, much of that financing will be cut off.

Such programs have supporters who will be asking the Democrats to bail them out. But the biggest HUD dispute centers around Reagan's proposal to merge two programs --Urban Development Action Grants and Community Development Grants. The Reagan plan calls for putting the two programs together by 1983, giving them less money than in the past, and asking the states to divide the funding pie. Groups representing both small communities and the nation's mayors are dismayed at the plan.

So far, Reagan's housing budget has won sturdy support from the Republican-controlled Senate, which has proposed cutting subsidized housing units by an additional 25,000 for 1982.

In the House, the President's plan is running into resistance, especially from representatives of big cities. "I really believe you don't have an idea of what the other America is all about," Rep. Robert Garcia (D) of New York told Mr. Stockman this week.

Mr. Garcia, who represents the Borough of the Bronx in New York City, said the cuts were "devastating" to his district.