Kemp Closes Third Housing Program

WASHINGTON--Housing Secretary Jack Kemp yesterday suspended an elderly-housing program, saying it has cost the government more than $119 million in direct losses and failed to serve the low-income people for whom it was designed.

Kemp said he was suspending new and pending applications for the Retirement Service Center program, the third program he has moved against as a part of an investigation of suspected fraud and mismanagement at the Department of Housing and Urban Development (HUD) during the administration of President Ronald W. Reagan.

In less than six months on the job, Kemp also has suspended or canceled two other programs: HUD's rental rehabilitation program and a loan insurance program that financed such luxury projects as golf course condominiums.

In many of those projects, HUD and congressional investigators have determined that politically connected consultants helped win HUD's backing of the developments.

Kemp said that in addition to direct losses, the program which he suspended yesterday has incurred loan defaults in excess of $250 million.

"This is a program that should serve low-income people but instead is serving upper-and middle-income persons--and doing it very poorly at that," he said. "I plan a complete redesign of the Retirement Service Center program and will require that it be targeted to low- and moderate-income elderly."

About 30 percent of the projects that have received HUD funding since the program was launched in 1983 are in default, the department said. Many were built in areas where there was not a sufficient shortage in housing for the elderly to support the projects, officials added.

The program was designed to provide housing to people over age 70 who can live on their own and afford market rents. The centers do not provide medical care but do offer such services as central dining and recreation.

The program was criticized in an internal audit by the HUD inspector general completed earlier this year.

One project identified in the audit was a Florida development that served upper-income people and charged $2100-a-month rent for two-bedroom units, the department said in a statement that announced Kemp's decision to suspend the program.

Kemp announced his action as congressional aides said several prominent figures in the investigation will be called to testify again, including former HUD Secretary Samuel Pierce.