Partners (Number 3, 2006)

Vol. 16, No. 3, 2006


CLTs Keep Housing Affordable

Keeping Pace in a Changing Environment

EITC Boosts Local Economies

Split Refunds Link Tax Time to Savings

Banking the Unbanked on Both Sides of the Border

Bringing HBCUs Back to Their Communities

CDFI Investing Made Easy with CARS

Post-Katrina Housing Woes Challenge Residents and Planners

Spotlight on the District—Alabama and North Florida



Post-Katrina Housing Woes Challenge Residents and Planners

The post-Katrina housing challenge facing Louisiana and the Gulf Coast goes beyond simply rebuilding physical structures: it also encompasses the need to establish guiding principles for creating communities that are inclusive, healthy and safe.

damaged and rebuilt post-Katrina house
Photos by Mark Wolfe, courtesy of FEMA

FEMA reported that 426,773 Louisiana residences and 234,284 in Mississippi suffered damage from Katrina. Of those, 283,838 in Louisiana and 68,729 in Mississippi were completely destroyed. Residents and business owners in flooded communities lost homes, rental property and commercial property—basically the entire community infrastructure.

Plans for rebuilding must look beyond current conditions and demographics to consider the make-up of the citizenry prior to the disaster. Otherwise, planners risk under-investing in affordable housing, making it impossible for previous residents to return to their neighborhoods.

An opportunity to eliminate concentrations of poverty
The hurricane season of 2005 revealed the disastrous consequences of patterns of poverty in the Lousiana and Gulf Coast regions. A recent study by the Brookings Institution suggests that many areas in the United States with demographics and economies similar to those of the communities ravaged by Katrina and Rita have been created through policies that concentrate the poor in segregated inner-city neighborhoods.

A RAND Gulf States Policy Institute study further suggests that lack of information for low-income populations about home financing and affordable housing options has helped to perpetuate poverty in these neighborhoods.

Regardless of the reasons for the widespread disparity in the region, the ultimate goals of rebuilding an equitable Gulf Coast region should be progress and improvement—not simply re-establishing the status quo.

Barriers to rebuilding equitably
The trend in government disaster assistance is to pay more to those who incur larger financial losses. The elderly living on fixed incomes, disabled and low-income populations are not only more at risk after hurricanes, but they are also more likely to experience difficulty acquiring financing for rebuilding compared to more affluent populations who have the means to rebuild, acquire funding through lenders and access larger pools of federal assistance.

Middle-income individuals and families who lost their possessions and the equity in their homes also face hardships as they continue to pay mortgages on mere slabs and incur the added costs of securing new residences. Many middle-income individuals unable to recover from losses have essentially become the new poor.

Some inflated land and housing costs can be attributed to the possibility of redevelopment.

Until disaster assistance is expanded to include provisions that consider the availibility of resources and funds in conjunction with financial loss, low- and even middle-income individuals and families will find it especially difficult to repair or rebuild their homes following a disaster.

The economics and politics of rebuilding
After Katrina, the cost of land and housing in many hurricane-affected areas increased substantially. Some of the increases are fueled by demand for housing while some inflated land and housing costs can be attributed to the possibility of redevelopment. Regardless of the reason for the increases, widespread destruction of property on valuable coastal land is opening the door for private developers and community leaders to re-envision the use and look of some of these areas.

Although Katrina damaged over 234,000 Mississippi residences, 68,729 of which were completely destroyed, only 1,504 formal building permits for new construction and repair were issued in Hancock, Harrison and Jackson counties—the three hardest hit counties—between Katrina's landfall and June of 2006.

Gulf Coast homeowners must jump a number of hurdles to rebuild: Hurricane victims have to settle with insurance companies to determine how much money they will receive to rebuild. They must also understand how or if the plan for recovery in their area will affect their property or its zoning. They must then find contractors and workers who can do the work. And they must ultimately follow new regulations and requirements for rebuilding. For those desperate to see progress or come to a decision about whether to rebuild, the recovery process is slow and sometimes confusing.

Many homeowners have waited for redevelopment plans to be released so they can make informed decisions, but some have decided not to wait and have stickered their property with outrageous price tags in hope that a developer or a casino will meet their asking price. Others fear the city will acquire their land through eminent domain, offering a fraction of the land's future value, or worry that the bank will foreclose and seize the property.

Large numbers of rental properties were lost in Louisiana and Mississippi, and renters are waiting to see if their residences will be rebuilt for lease or sold by the owner for development. Across the board the shortage of rental property is hampering economic recovery in these areas because the low- and moderate-income employees who make up a large percentage of the workforce are unable to find affordable rental property.

The financial stability of residents continues to be compromised by the escalation in costs following Katrina. Although jobs are currently plentiful, pay has not kept pace (except in the casino and gambling industry) with the rising costs of housing, insurance premiums and building materials.

Wind, water and limited credit
As storm victims have turned to insurance companies or lenders for help rebuilding their homes and businesses, many have been met by complications that make them uncertain about whether they will be able to find the resources they need to recover from their losses.

damaged post-Katrina house
Photo from Foundation for the MidSouth.

Many policyholders believe their insurance companies have not provided adequate compensation in proportion to their covered losses, and insurance companies have been widely criticized about their service and performance following the storms. Debate was sparked by insurance companies' assertions that the flooding outside of New Orleans was not a wind-driven occurrence. This opinion, recently reinforced by a federal ruling in Mississippi courts, leaves tens of thousands of insured homeowners in areas hit by 20 to 30 feet of storm surge ineligible to collect on their claims.

Some lenders, including the Small Business Administration, are basing their decisions to provide loan assistance on traditional lending criteria such as the victims' current job status, credit scores and credit history. These qualifiers, especially unemployment, can exclude tens of thousands of people from accessing the funds they need to rebuild their homes and restart their lives.

New Rules and restrictions
New rules, restrictions and zoning are also affecting construction in Louisiana and Mississippi. Because they are concerned about future disasters, policymakers, insurance companies, mortgage companies and developers have tightened building regulations, changing and adding rules that will govern the rebuilding process. New regulations not only stipulate the designs and materials that can be used, but they also escalate the cost of rebuilding.

FEMA recommendations are particularly important to insurance companies and lending institutions, which use them to determine premiums and to decide whether flood insurance is required with a mortgage.

FEMA's new recommendation in Biloxi, for example, increased the base elevation for construction from 13 feet to 18 feet above the ground, and some elevation requirements extend as high as 27 feet, depending on the location of the property. Estimates for elevating an 800-square-foot home by 12 feet range from $20,000-$50,000, dramatically increasing the cost of rebuilding and severely limiting the number of people who can afford it. Those who fail to comply can be denied building permits from the city and insurance coverage from private companies or the federal government.

Zoning regulations and building codes also affect the ability of disaster-stricken communities to rebuild in innovative and equitable ways.

Since the storms affected everyone—the rich, the poor and people of all races and ethnicities—the success of the rebuilding will be largely determined by its inclusiveness. At the very least, local, state and federal leadership should enforce provisions to protect the rights and property of homeowners and renters with plans that are carefully considered, well-informed and equitable.

Selections from "The Bridge," August 2006 special edition, were reprinted with permission from the Foundation for the MidSouth.