Lessons from Kartina and Rita about rebuilding permanent housing for low income hurricane survivors

We learned valuable lessons from Hurricanes Katrina and Rita about providing post-disaster housing assistance to low income families.

This is part of continuing discussion about these lessons os that they can be considered as we develop our response to Hurricane Ike over the coming days.

In a September 13 blog post I begin by discussing the lessons learned from Hurricanes Katrina/ Rita regarding evacuation, shelters, damage assessment and FEMA.  Today I will discuss recommendations based on the Katrina/Rita experience about providing low-income hurricane survivors permanent housing.

A Spring 2008 Affordable Housing Policy graduate student class at the University of Texas at Austin School of Community and Regional Planning which I taught undertook research and made these recommendations. The class evaluated the effectiveness of different models for the provision of this assistance in Texas and other states. I offer the work of that class below and urge government officials to heed these lessons.

The most important lesson we have learned about housing recovery and rebuilding in the wake of Hurricanes Katrina and Rita is that the housing needs of low-income disaster survivors are profoundly different from those of higher income families. Disaster recovery programs to often fail to provide efficient, effective and compassionate temporary housing and long-term housing stability to low-income families.

We have recommendations in ten areas related to the provision of permanent housing to low-income households…

1 Implement quick permanent rebuilding housing policy solutions
2 Provide choices on where disaster survivors can rebuild
3 Rental housing
4 Initiatives for homeownership
5 Solutions for collaboration
6 Create a self-help housing program
7 Invest in new disaster housing solutions like the Katrina Cottage and the Texas Grow Home
8 Impose new guidelines for insurers
9 Offer free financial literacy counseling to survivors
10 Amend current policies requiring ordinary citizens to find and hire their own contractors

1 Implement Quick Permanent Rebuilding Housing Policy Solutions:

• Congress should take steps to amend the Stafford Act to expand coverage by taking off the caps placed on the amount of loans that state and local governments can receive for recovery relief (Moss & Shelhamer, 2007).

“In dealing with the disasters’ aftermath, current federal rules for intergovernmental coordination, funding assistance, and long-term recovery are more suitable for small towns that are hit by tornados than for major metropolitan areas that are significantly destroyed by large-scale catastrophic disasters.” (Kromm and Sturgis, 2008) By expending the coverage of the Stafford Act state and local governments will have the money needed to rebuild houses in a more timely fashion.

• Amend the Stafford Act to require FEMA to redesign its Public Assistance Program so that money is provided similar to block grants. In this redesign one damage survey and estimate can be written for each affected community or state (Moss & Shelhammer, 2007).

Housing rehab for low-income people have kept people in substandard housing or in limbo for years waiting on government bureaucracy to rehab/rebuild. It is estimated that due to the initial insufficient government resources for housing recovery, less than 15% of Texas homeowners who suffered major housing damage will receive any form of government housing assistance (Carlisle, 2007). The original estimate by Governor Perry’s Office was the average damage repair would cost about $8,000 that would not be covered by FEMA or insurance (Carlisle, 2007). Two years after the storm the costs for home repair to severely damaged homes is about $110,000 (Carlisle, 2007) because damage worsens over time. By redesigning the FEMA Public Assistance Program this process can be expedited and these cost escalations can be avoided.

2. Provide Choices on Where Disaster Survivors Can Rebuild:

• Displaced families receiving post-disaster assistance from the government should be given the choice to decide where to permanently settle.

The Texas Homeowner Assistance Program (HAP) administered by the Texas Department of Housing and Community Affairs (TDHCA) does not allow households whose home has been damaged by Rita to receive housing assistance funds and use them in a different city or state: they must rebuild or rehabilitate in their pre-disaster place of residence. This provision poses several limitations for low-income families that live in poverty-stricken, environmentally hazardous or segregated areas.

First, since the choice of relocation represents an opportunity to break poverty patterns, restricting such choice means disaster survivors that live in poverty-stricken areas are condemned to poverty consequences such as crime and violence, failing schools, poor health care access, few jobs, and unreliable public services. Displaced families should be given the opportunity to restart their lives elsewhere, moving to a place with better job opportunities, better schools and better public services. This choice is particularly importance to displaced families that develop support systems in their adopted cities and states and may prefer to stay, particularly when there is no home or job to return to in their pre-disaster place of residence.

Second, the choice of relocation represents an opportunity to move away from environmental hazardous areas. Not letting disasters survivors have the choice of where to relocate condemns them to stay in polluted and health-damaging zones. This issue is of particular relevance to the residents of Port Arthur, Texas.

Port Arthur residents face tremendous health risks because of the pollution produced by the refineries and chemical plants present in the area. Refineries produce significant amounts of toxic pollutants including benzene, toluene, ethyl benzene, and nickel compounds (Sierra Club, 2002). Benzene is a known carcinogen; toluene is known to negatively affect the kidneys and nervous system; and many of the other pollutants are known to cause anemia and have a negative impact on brain function, organ development and reproduction (Agency for Toxic Substances and Disease Registry). Port Arthur residents are exposed to these and many other pollutants on a daily basis. Restricting the choice of where to relocate condemns them to live the negative health consequences associated with pollution.

Third, the choice of relocation represents an opportunity to move away from racially segregated areas. Restricting the choice does not only condemn disaster survivors to segregation but most importantly is in conflict with fair housing laws. When disasters strike minority communities that are racially segregated, the government has an affirmative obligation under the Fair Housing Act to provide these families with an opportunity to relocate outside of racially segregated areas. According to the Code of Federal Regulation 24 Part 100.70:

“It shall be unlawful, because of race, color, religion, sex, handicap, familial status, or national origin, to restrict or attempt to restrict the choices of a person by word or conduct in connection with seeking, negotiating for, buying or renting a dwelling so as to perpetuate, or tend to perpetuate, segregated housing patterns, or to discourage or obstruct choices in a community, neighborhood or development.”

• Create a Resettlement Guidance Program

Displaced families should be given the choice of making an informed decision where to permanently settle. Create a counseling program that guides households in making resettlement decisions and long-term integration strategies. The program should provide households with information about potential places (cities or states) of residences and their corresponding job opportunities, the environmental risks present (if any), the level of poverty and racial segregation. The program should also provide information on how to find jobs that match their skills, how to enroll children in schools, how to seek medical services and how to find support for child-care. The program should provide financial counseling services that include credit, bankruptcy education, and information on how to recover losses. In many cases, displaced families will choose to relocate in cities or states indirectly affected by the disaster or catastrophes. The program should coordinate assistance with services providers of adopted cities and states.

3 Rental Housing

In the wake of a disaster, affordable housing rental units are most likely to be destroyed. This is due to the trend that low income rental housing is generally made available when modest price rental units age and deteriorate, these units then become available and affordable as low-income rental housing. This was the case in the New Orleans metro area, where 80 percent of affordable housing was severely damaged or destroyed (Clark & Rose, 2007). More than 82,000 rental units were damaged or destroyed during the storms but only 33,000 affordable housing units were scheduled to be rebuilt as of June, 2007 (Clark & Rose, 2007). This would mean that only two in five Louisiana families would be able to return to an affordable rental unit. In the New Orleans metro region, rents have increased up to 200 percent since Hurricanes Katrina and Rita. There is continually a lack of resources to meet the scale of need for people with fixed or very low incomes for housing rental recovery after a disaster.

Policy solutions to provide reconstruction of an equal number of affordable rental units to that which existed prior to a disaster:

• Allocate more federal resources during a disaster to help restore formerly subsidized rental housing units. This can be accomplished by increasing the amount of project based section 8 vouchers targeted at the very low to extremely low households (Clark & Rose, 2007).

Of the 9,500 rental units that were promised to households that make less than 50 percent of the Area Median Income, only 4,650 of these rental units were funded as of June 2007 (Clark & Rose, 2007). Increasing the amount of project based vouchers will allow this gap that continually exists in funding for very low and extremely low income households to be significantly closed during a disaster.

• Authorize HOPE VI funds to rehabilitate and rebuild federally-subsidized housing in disaster-affected areas. There should be a requirement to provide one-to- one replacement of public housing units that includes a process for creating high quality, mixed-income developments on former public housing sites.

In New Orleans nearly 4,500 units of habitable public housing are scheduled to be demolished under the HOPE VI program while building in their place only 800 units (Kromm & Sturgis, 2008). Given the number of New Orleans residents who cannot return home because of a lack of affordable housing, these units should be rehabbed or rebuilt using HOPE VI money and made available to displaced residents (Kromm & Sturgis, 2008). Extremely low-income households who are residents of public housing before disaster lack the financial resources to enter market rate housing. Therefore, it is essential to ensure that an adequate supply of public housing is made available to them. At the same time, the public housing stock in New Orleans Pre-Katrina and around the country has been highly economically and racially segregated the opportunity should be seized to apply the principles of HOPE VI to rebuild better, more integrated housing.

• Create a Disaster Recovery Fund that a state housing authority can specifically utilize for funding to match the one-to-one replacement of very low and extremely low affordable rental housing (Clark & Rose, 2007).

It is historically difficult to reach deep levels of affordability in housing without layering government subsidies. During a disaster this is coupled with the loss of low-cost market rate housing and affordable units in public housing developments (Clark & Rose, 2007). A Disaster Recovery Fund would provide the state flexibility to target deep affordability development without needing to orchestrate various different federal funds that complicate and slow down the rebuilding process.

• Create a Small Rental Property Program during disasters like the one created in the Road Home Program to provide incentives and assist small scale properties with low percentage federal loans to renovate their properties and target low income tenants (Turner, William, Kates, Popkin & Rabenhorst, 2007).

In the current FEMA housing recovery process there are few incentives for landlords to renovate their small rental properties. Currently, if a landlord wants to rehabilitate their rental units he or she has to get a bank loan and banks are very hesitant to give loans for this purpose. By providing incentives and low percentage federal loans, the barriers for small rental property owners are diminished and renovation can occur quickly and rental units can be provided for low income households.

4 Initiatives for Homeownership

Improve Coordination between NGOs and Government:

Due to their flexibility and agility, non-profit organizations can assist FEMA and state governments repair and replace damaged housing, speeding survivors’ return to their own homes or community. To date Habitat for Humanity has built nearly 1,300 homes in Louisiana, Mississippi, Alabama and Texas and local faith-based groups have repaired or replaced some 1,700 houses damaged by Hurricane Rita (J. Higgs, personal communication, April 8, 2008), while government programs, like the Road Home, have lagged behind.

However, apparent from the recent Katrina and Rita Hurricanes was the lack of effective coordination between the public and nonprofit sector in providing housing disaster assistance to low-income households, creating waste and duplication of services (Texas Low Income, 2007). Joe Higgs, an organizer with SETIO, a coalition of local congregations in east Texas, told of an FBO group that was finishing home repairs for a woman in Orange. When they came to do the final repairs, the woman told them that a government assessor had found $110,000 worth of damage to the home (even after the repairs) and home would be demolished rebuilt (personal communication, March 23, 2008).

The conflict arises over the different standards under which nonprofits and government programs operate. Nonprofits in east Texas focused on making the maximum number of houses safe, sanitary and secure. Since many of the homes damaged by Hurricane Rita were substandard, this meant that even after the repairs they would be habitable, but not meet stringent federal codes. Federal housing programs, often funded through CDBG funding, are required to rehabilitate to a much higher standard. As a result, many houses with extensive damage were condemned and put in the queue for rebuilding, even after repairs by nonprofits. The federal program would result in fewer but more high quality homes, while nonprofits could produce more housing, but at a lower standard. Further, in east Texas, there was no established way for nonprofits to communicate with government housing agencies. They used different databases and there was no established forum for collaborating.

5 Solutions for Collaboration:

• Foster increased collaboration by either working through the Voluntary Agencies Active in Disaster (VOAD) which already have formal agreements with FEMA or create a Federal Housing Disaster Assistance Task Force composed of both nonprofit and government agencies to integrate their efforts into model housing recovery programs by establishing standards for participation and guidelines for providing services. The collaboration should include consideration of database accessibility to prevent duplication of services.

• The Model Housing Recovery Program should include a process for a quick initial housing assessment of every house damaged by the disaster to determine if the house is marked for moderate to extensive rehabilitation or rebuild.

These individual housing assessments should delineate out the rehabilitation responsibilities of faith-based groups and state and federally funded programs. These assessments should be given directly to local faith-based groups. This will allow faith-based groups who in many cases are the first ones on the ground to have a strategic housing assistance plan that targets different types of assistance depending on the overall rehabilitation goal with a particular house. For example, a faith-based group could secure houses with tarps that are planned for more extensive rehabilitation work by a long-term recovery government funded program. This will prevent duplication of services and provide a speedier housing recovery process.

6 Create a Self-Help Construction Program:

• Eligible families should have an annual income below 80 percent AMI and have either good credit or participate in a financial literacy program for natural disaster survivors (see later recommendation). Loans should come from a new loan program designed along the lines of the section 502 program, and be available for natural disaster survivors. These loans will be available for up to 33 years, and payments should be set at 29% of family income. If the borrower becomes unemployed, a payment plan to address defaults and severely delinquent accounts should be in place requiring the household involved to work to repair their credit over an extended period of time. Participating families should work on building their homes a minimum of 30 hours a week, and coordinate with neighbor cohorts of 10 to 14.

Many survivors living in Texas are near homelessness and living in housing they cannot afford: 86 percent of survivors have household incomes under $25,000 a year, with 69 percent having incomes of less than $15,000 a year (Carlisle, 2007). With employment disruption, insufficient affordable housing availability near economic centers, and limited transportation, many who were low-income now are unemployed: 72 percent were employed before their evacuation, and now only 38 percent are employed. 58 percent are currently seeking a job (Carlisle, 2007). Consequently, the Federal Emergency Management Agency has supplied over $7 billion in housing assistance to evacuated victims (CNN, 2006). A program is needed in which affordable permanent residence is available providing families an opportunity to earn equity quickly. This program would minimize rental assistance by repairing or rebuilding homes quickly and utilize the initiative and labor of low-income survivors needing the place to live.

Self-help construction programs, like those administered by Lower Valley Housing Corporation and Habitat for Humanity, have proven effective. The Lower Valley Housing Corporation has been responsible for rehabilitating and building over 1,000 affordable housing units, and has already developed 15 separate subdivisions. Aided by loans through the US Department of Agriculture, borrowers do not spend more than 29 percent of their income on house payments, and working along side each other, neighbors provide free labor. Families buy their house for its cost (around $48,500), yet the houses are appraised around $72,000. For the past 15 years, only six out of 460 self-help house loans have been subject to foreclosure (Texas Low Income Housing Information Service, 2005). Habitat for Humanity has built more than 225,000 houses around the world. Like the Lower Valley Housing Corporation, Habitat for Humanity homeowners invest hundreds of hours of their own labor into their homes, along with the houses of others. The average cost of a Habitat house in the United States is $60,000 (Habitat for Humanity Fact Sheet, 2008).

7 Invest in new disaster housing solutions like the Katrina Cottage and Texas Grow Homes:

Modular-permanent housing can be constructed quickly and is a more stable housing solution than travel trailers and hotel rooms. Katrina Cottages and the Texas Grow Homes program provide affordable, attractive, and efficient permanent housing which will endure over time, whereas money spent to lay infrastructure on transitional sites is wasteful and must be removed when the transitional housing is no longer needed. Investing in modular-permanent housing before the next disaster also allows government to test for quality and durability.

The Katrina Cottage grew out of a solution for post-disaster housing during the Mississippi Renewal Forum, where dozens of architects designed a series of small houses with each home having a total cost under the $70,000 FEMA spent for the temporary travel trailer. Today, supplies for the Katrina Cottage are easily accessible from Lowe’s around the country, with options including include Hardie fiber-cement siding, metal 5-V crimp roof, refrigerator and range, and porches. The Texas Grow Homes program, a coordinated effort between Housing Texas, the Texas Low Income Housing Information Service, and Covenant Community Capital, held a design competition for a two-module house, with three winning designs to be build in Beaumont and sold to families whose homes were destroyed by Hurricane Rita.

8 Impose new guidelines for insurers:

• Restructure the National Flood Insurance Program (NFIP) to ensure that an independent adjuster is assigned to assess damages where both wind and water are possible causes.

According to recommendations from the Hurricane Katrina Task Force (Taylor and Melancon, 2008), “The NFIP allows insurance companies to sell flood policies and adjust flood claims that are financially backed by federal taxpayer dollars. Insurance company adjusters have an obvious conflict of interest when deciding whether claims should be billed to the federal flood insurance program or to the insurance companies that employ them, train them, and advise them on the interpretation of their policies.” Because of this conflict of interest, insurers paid for wind claims inland (where storm surge was not a possible cause of damage), but denied wind claims where water was present nearer to the coast.

• Create an itemizing system for outstanding claims to better allow regulators to track insurance companies’ progress on the resolution of claims (CFA, 2005).

Insurers say that 99% of the 1.2 million claims have been settled (Treaster, 2007), yet this may not mean that policyholders are satisfied with the settlements, nor does it mean that claims were distributed equitably. A system wherein insurance companies must report the amount of claims filed in a geographic area, the amount of claims paid in the geographic area, and the amount of claims denied in the geographic area would provide a level of accountability currently lacking. Many survivors would benefit from such a provision; providing transparent information would permit citizens to mobilize, as well as allow regulators to quickly identify practices creating gaps in coverage.

• Create an outreach campaign for particularly vulnerable policyholders to inform them of their rights and provide resources to assist them with insurance negotiations.

Insurance companies estimate that 9 out of every 10 claimants will accept whatever settlement they are offered, assuming that survivors of disasters are too weary to challenge the offer or too hurried to being reconstruction. Critics claim that this serves as incentive for insurers to deliberately lowball policyholders, leaving them to pay a fair price only to a portion of the challengers, not all of whom even turn to litigation (Bach, Merlin, and Kestenbaum 2007).

• Make legal representation available for low-income insurance claimants.

To help address inadequate discrepancies between damage and insurers’ settlements, the Legal Services Corporation should assign attorneys to work with low-income insurance claimants in negotiating settlements.

• Impose a moratorium on cancellations and non-renewals to allow for alternate insurance arrangements to be developed.

In the wake of a disaster, insurers may try to raise premiums to cover their costs, cancel or refuse to renew existing policies and refuse to write new policies in order to limit their exposure, and even fully exit a given market. A similar approach should be taken to that used by the state of Florida in the aftermath of Hurricane Andrew (CFA, 2005).

9 Offer free financial literacy and credit counseling to survivors of natural disasters

Because natural disasters disrupt everything in the lives of their survivors—shelter, employment, location, family structure, etc.—financial resources are particularly strained. The resources of nonprofit groups as well as homebuyer education programs, should be utilized with support from federal grants during times of catastrophic disaster. One effective model for adult financial literacy is one used by the Department of Health and Human Services (HHS) in the form of aid for refugees. Their approach is a holistic one; education is included as housing, employment, and mental health services are offered. Through the HHS’ Administration for Children and Families (ACF) grant opportunities, funds are available for programs educating refugees on financial obligations and providing caseworkers for complicated paperwork. Because these resources are intended to help those with the most fragile of circumstances, they should be offered to survivors at no cost. Providing grants for such programs during times of disaster, while a seemingly excessive cost, will actually save money in temporary housing costs (for these programs should help renters who have credit problems that make finding a new apartment difficult and reduce bankruptcy, etc.).

10 Amend current policies requiring ordinary citizens to find and hire their own contractors:

• Create a regulatory system designed to ensure construction businesses provide fair and equitable services. Design an easy-to-use system of reporting potentially fraudulent activity and implement a system of responding to these claims.

Homeowners have no bargaining power and contractors have little incentive to make bids on small jobs or price their contracts according to their actual costs. Contractors can very easily overcharge clients and there is a severe lack of accountability in terms of discriminatory practices. To date, the Louisiana attorney general’s office has received more than 2,000 complaints related to contractor fraud (FOX News). The horror stories of contractors ripping off dozens of helpless disaster victims and families getting scammed out of thousands of dollars are in fact a reality. Many disaster victims have had their life savings sucked away by ruthless contractors who have exploited people’s vulnerability.

• Provide homeowners with information and education on selecting contractors. Offer lists of approved construction companies who have passed certain screening processes and who meet certain base service standards.

Eliminating contractors who do not meet a minimum standard will save homeowners money, time, and frustration. It is important for this information database to be easily accessible to low-income homeowners.

• Create guidelines and recommendations for homeowners when selecting a contractor.

Many of the most vulnerable victims of a disaster have absolutely no resources or experience in order to be able to hire a contractor. Requiring an elderly or disabled victim to undertake the technical task of soliciting bids for repairs in order to get FEMA aid is essentially the same as telling these victims that they are not eligible for aid at all; they simply to not have the ability to undertake such an arduous task.

• Provide especially vulnerable homeowners with extra support though a case management system, which may operate through a larger FEMA program.

Homeowners with no previous experience or expertise cannot be expected to collect bids and keep track of all of the necessary documentation to repair their homes, and some homeowners may need additional assistance from FEMA in way of a program specifically to help homeowners find and use contractors. The extreme vulnerability of a large segment of the population and the record of past exploitation indicate that government needs to be more actively involved in the process of rebuilding of homes in the wake of a disaster.

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