Trivia: Near the beginning of the film, Addy's mother mentions that a movie is shooting nearby, an allusion to "The Lost Boys", which actually was partly shot at the Boardwalk in Santa Cruz.
Trivia: The voice of the Fun House Narrator is that of the film's director, Jordan Peele.
Trivia: Spoilers: Among the video-tapes seen next to the TV after the opening credits are "C.H.U.D." and "The Goonies." This is quite relevant to the plot, in which it is revealed that the doppelgangers come from beneath the ground in a series of tunnels that used to be run by the government. "C.H.U.D." is about mutant creatures that live underground and have began to rise up and attack, like the doppelgangers, and "Goonies" takes place largely in underground tunnels and caverns, much like the film's climax.
Answer: The project was abandoned, but they obviously kept the tethered ones alive. This may have been out of some sense of compassion, or because there was a possibility they would be useful in the future.