Housing and Urban Development Secretary Jack Kemp told a Native American housing group yesterday that the Bush administration will drop its opposition to building new houses on Indian reservations, restoring a program that HUD has attempted to kill for 11 of the last 12 years.

Kemp's reversal comes as the House prepares to debate an omnibus housing bill that the Bush administration has threatened to veto if several major elements -- including a new construction program -- are included.

The Indian housing programs have been restored by Congress in past years over the administration's objections, and the Senate's recently-passed National Affordable Housing Act provides for 3,000 new units of construction nationwide. The House version of the housing measure calls for 2,500 units.

Kemp told more than 400 delegates to the National American Indian Housing Council's annual meeting that, although he still finds most new construction programs to be inefficient and susceptible to corruption, reservation housing should be considered an exception.

"As someone who has been critical of some of the construction programs in public housing in the past . . . seeing the flaws and the poison that creeped into those programs. . . I have been a critic" of new construction, Kemp said.

But he said reservation housing, like HUD's elderly and handicapped housing programs, is a "legitimate construction program that shouldn't be thrown out with the bath water of some of the problems we've had in the past."

"You don't have to read my lips," he said of his new promise. "You've got it on tape."

Indian housing activists and members of the Senate Select Committee on Indian Affairs had argued that families often are forced to double and triple up on many poverty-stricken reservations.

"I'm very happy, and sorry that it has taken so long," said Sen. John McCain (R-Ariz.), the co-chairman of the select committee. The administration's support, he said, will make a "huge difference."

Joseph G. Schiff, HUD assistant secretary for public and Indian housing, said it is too soon to say how much money the administration is willing to come up with to fulfill Kemp's promise.

But Kemp said creating a new construction loophole for Indian housing does not change his conviction that government housing programs should focus on rehabilitation rather than new construction.

A Senate-proposed "housing partnership" program was scaled back to deemphasize new construction before it won full Senate approval last month.

"It took our strong statement about the past construction programs and it took the president's willingness to veto a bad bill in order to get some of our friends to realize that we were going to have to work with them to get a better policy choice," Kemp said.

The same issue threatens the progress of the House bill this week. An Office of Management and Budget statement written July 11 proposes "major revision or elimination" for elements of the bill that call for new construction.

The administration and House Banking Committee leaders also disagree about how best to revamp the troubled Federal Housing Administration. Kemp has proposed -- and the Senate has passed -- a measure that would tighten eligibility requirements for FHA borrowers and increase the amount of money paid in up-front closing costs.

Rep. Bruce F. Vento (D-Minn.), who has introduced a competing proposal, said "sharp disagreement" remains on his amendment.