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Published in Print: April 11, 2001, as HUD Suspends Housing Program For Teachers

HUD Suspends Housing Program For Teachers

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The U.S. Department of Housing and Urban Development has suspended its popular "Teacher Next Door" program for 120 days in an effort to curb fraud and abuse in the initiative.

The year-old program and the related "Officer Next Door" initiative, which was launched in 1997, offer teachers and police officers significant price breaks on HUD-owned houses. Both programs are now on hold until July 31.

The programs were designed to help teachers and police officers buy homes and to revitalize deteriorated communities by encouraging more working residents and their families to live there.

HUD officials announced the move on March 29, shortly after five police officers were convicted of felony fraud charges, 15 were indicted, and 80 others are under investigation. The move also followed the recent release of a report by HUD's inspector general charging that many participants had violated program rules. Although no teachers have been charged or investigated, both programs were suspended because the rules are nearly identical.

"The vast majority of officers and teachers who buy houses through these programs play by the rules," U.S. Secretary of Housing and Urban Development Mel Martinez said in a statement announcing the suspension. "Both programs have proven winners in the communities." Nonetheless, he ordered his agency to review the programs' guidelines and make changes to ensure that houses are being sold only to qualified people who will abide by the stipulations.

Violations Cited

The "Next Door" initiatives allow teachers and police officers to buy, at a 50 percent discount, single-family homes owned by HUD, which often are in disrepair and located in blighted areas designated as revitalization zones. The teachers and officers may move into the houses with a $100 down payment, but they must agree to live in them for at least three years. HUD will still honor contracts signed before April 1.

According to the inspector general, many of the fraud problems can be traced to a requirement added to the Officer Next Door program in 1999—and picked up by the Teacher Next Door program when it was launched later that year. The requirement orders that an applicant obtain a second mortgage, equal to the 50 percent discount, for the property. And if an officer or teacher fails to meet the program's continuing obligations, he or she must assume the second mortgage and essentially pay full price for the house in question.

The preliminary report by the inspector general found, among other problems, that other homeowners had violated their three-year occupancy agreements, had rented or sold the properties, or had owned other residential properties, according to the Feb. 14 report.

For instance, a Fort Worth, Texas, police officer who has since been convicted of fraud bought a house for $58,000, but lived in it only one year and rented it out for the next two years.

"HUD has little assurance that the approximately 3,824 homebuyers are contributing to the goal of strengthening America's communities," the preliminary report stated. About 800 teachers have used the discounts, according to HUD. (For Sale: Affordable Housing for Teachers, March 7, 2001.)

Union Support

The National Education Association and the American Federation of Teachers expressed support for the suspension of the Teacher Next Door program. Both unions have been strong backers of the initiative.

"We don't want the program to be abandoned because there's been abuse of it," said Kathleen Lyons, a spokeswoman for the 2.6-million member NEA. She said NEA President Bob Chase had met with Mr. Martinez to discuss ways to strengthen oversight and also allow school employees other than teachers access to the discounts.

Vol. 20, Issue 30, Page 3

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