NEW YORK CITY (By David W. Chen, NYTimes) September 2, 2004 - Saying that they had averted a major housing crisis, New York City officials announced yesterday that the federal government had agreed to restore almost all the $55 million that had been scheduled to be cut under a recent regulatory change affecting the government's main housing program for the poor.

At the same time, the Department of Housing and Urban Development announced that it would restore about $160 million that 378 other housing agencies across the country had protested was also being unfairly cut out of their Section 8 voucher financing.

HUD officials attributed their decision to the agencies' collective ability to prove that they needed more money. Without such financing, many agencies warned, the regulatory change might have forced them to freeze the number of rent vouchers, squeeze more money from tenants or even evict them.

In New York, the shortfall might have produced other bad effects, as well, said Shaun Donovan, the city's commissioner of Housing Preservation and Development. He said that it might have delayed Mayor Michael R. Bloomberg's ambitious plan to renovate or build 65,000 units of housing; made it harder to get more homeless families out of shelters; and even given financial institutions pause to finance Mitchell-Lama and other private developments because of a loss of confidence in Section 8.

"Section 8 is the most important housing program in the country, period, and quite frankly, drastic measures were on the table had this money not come through," Mr. Donovan said. "But I think HUD heard a chorus around the country about the importance of Section 8, and I think they heard that voice, more strongly, from New York."

For years, the federal government has paid the full cost of rent vouchers, now totaling 1.9 million, given to poor tenants to help them find and pay for their own housing under the Section 8 program. But in the last three years, the Section 8 budget has ballooned by 27 percent, alarming the Bush administration. In April, HUD informed housing agencies that, for the current fiscal year, it would pay only an amount based on the cost of a voucher in August 2004, plus an inflation adjustment. But housing agencies denounced that regulatory decision, saying it would shortchange, by hundreds of millions of dollars, New York and other places where the cost of providing vouchers has outpaced inflation.

To plead New York's case, Mr. Bloomberg talked with Alphonso Jackson, the secretary of housing. Mr. Donovan, a former deputy assistant secretary at HUD, and Tino Hernandez, chairman of the New York City Housing Authority, lobbied HUD officials. And a bipartisan coalition of lawmakers in other states - including the governors of Massachusetts and Minnesota, both Republicans - wrote letters.

In May, Mr. Jackson announced that the federal government had spotted an extra $150 million that had been left over from the 2004 budget to help 525 agencies absorb Section 8 cuts.

Of the $13.2 million that went to New York State, the city's two primary agencies distributing vouchers, New York City Housing Authority and the Department of Housing Preservation and Development, received $12.3 million.

HUD also gave agencies until July 15 to appeal the proposed changes. And late last week, HUD began notifying, by individual letters, its decisions for the 400 or so agencies that had filed such appeals. New York, for one, was told that it would receive an extra $52 million, with roughly $37 million going to the city's Housing Authority and $15 million going to Housing Preservation and Development.

"Secretary Jackson is pleased that HUD has been able to respond positively to many of the nation's public housing authorities who successfully demonstrated a need for a higher inflation factor for their 2004 voucher funding due to various market conditions," said Michael Liu, HUD's assistant secretary for public and Indian housing. "The secretary is also pleased that these housing agencies, including several in New York, have taken appropriate steps to reduce or keep their voucher costs in line with local housing costs."

It was not immediately clear yesterday whether the restored money, expected within a month, would come in time to help families around the country who have already been notified that their vouchers will not be renewed. This was particularly pronounced, housing groups said, in places where the fiscal year ended sometime this summer.

New York's housing agencies had not yet reached that stage, in part because their fiscal year begins in January. Still, officials informed HUD of the rising cost of housing, higher rents in rent-stabilized apartments of up to 6.5 percent this year and a shortage of low-cost housing.

Just last week, the Census Bureau reported that the percentage of New Yorkers paying more than 35 percent of their income on rent rose to about 42 percent from 38.5 percent.

Section 8 enables poor, disabled or elderly tenants to receive vouchers from a local housing agency and redeem them with any private landlord who is willing to participate. Tenants pay 30 percent of their income in rent, while the vouchers pay the rest, up to a limit set by the federal government, depending on the local market.

The New York City Housing Authority furnishes about 90,000 vouchers, or three-quarters of the total in the city. About 83 percent of the authority's voucher recipients have incomes of less than $16,320. The median contribution from tenants with vouchers from the authority is $216 per month; the median payment to landlords is $670.

For all of the credit that Mr. Donovan and Mr. Hernandez lavished on HUD yesterday, though, they cautioned that another important and controversial issue looms: HUD's proposal to loosen the eligibility rules for Section 8 for the 2004 fiscal year. That change could mean that families with higher incomes could receive vouchers, leaving those with lower incomes to battle for a smaller piece of the pie.

In July, the House Appropriations Committee approved a bill that would slightly increase the financing for Section 8 vouchers, now $14.4 billion a year. But the committee also approved a 4 percent cut for other programs, leading many housing groups and elected officials to predict another spirited battle in the months to come.