The Texas Department of Housing and Community Affairs (TDHCA) has received criticism from elected officials over the slow pace of the Department’s program to repair and rebuild homes damaged by Hurricane Rita. As an advocate for low income families’ housing needs I have been following and commenting on TDHCA’s efforts to set up and operate this housing program over the past three years. While I agree the pace of work has been way too slow, on the whole TDHCA has set up a good program given the circumstances.
Because of the slow implementation, some are now suggesting that the State discard all of the work that has gone on to establish what should be a reasonably successful post-disaster housing reconstruction program. Instead of building on the carefully designed TDHCA housing program the State is moving perilously close to implementing a housing program using a decentralized approach, administered by inexperienced local quasi-governmental organizations that has already been tried and proven to be a failure. This would be a tragic mistake.
Confronting the statutory constraints of the CDBG disaster relief funds.
Let’s begin by looking at the constraints TDHCA operated under. Virtually all of the funding for disaster rebuilding assistance came from special appropriations of Community Development Block Grant (CDBG) funds the US Department of Housing and Urban Development (HUD) made available to the State of Texas. The money was made available in two allocations. The initial $74.5 million was provided to the state on January 25, 2006. A supplemental appropriation of an additional $428.6 million of CDBG funds was provided Texas several months later.
The CDBG funds came with the standard CDBG rules about principally benefiting low and moderate income people, but the State was permitted to seek rule waivers from HUD. To its credit, the State resisted the temptation to divert funds for higher income beneficiaries or other purposes and sought few waivers, electing instead to undertake two activities: reconstruction of critical public infrastructure damaged by the hurricane and providing help to low and moderate income people to rebuild their homes.
The track record of the “critical” public infrastructure program, administered in Texas by the Office of Rural Community Affairs has been lackluster at best. Much of the funding has gone to projects that were not by any means “critical”. Funding was used for projects of questionable merit and expenditures were extremely slow despite the fact the program was subject to few of the complications imposed on the use of the CDBG funds for housing under federal law. The ORCA critical public infrastructure program has received virtually no scrutiny from the media or advocacy organizations. I will discuss some of the failures of the infrastructure program in future postings to this blog.
On the other hand, there were significant constraints imposed by federal regulations on the housing program. If the funds were administered by a government agency then houses had to be rehabilitated to meet basic habitability standards. No partial repairs would be allowed. Most significantly and most expensively, lead-based paint had to be removed or abated, as did asbestos. Houses had to undergo review and plans had to be approved by the Texas Historical Commission. An environmental review had to take place. The Davis Bacon Act required contractors to pay the prevailing wage and maintain records.
How should funds be divided between rental and owner-occupied housing?
The choice was made easy by the nature of damage caused by Hurricane Rita. Overwhelmingly the damage was to single family, owner-occupied housing. In appropriating the CDBG funds Congress mandated that 10% be spent on affordable rental housing. Texas elected to spend exactly 10% on rental housing and no more.
What form of assistance should be provided homeowners?
Texas faced two choices in designing its housing program for homeowners: make direct cash payments to homeowners or set up a program to oversee rebuilding and repairs through a government administered program. The Texas governor’s office looked at the Hurricane Katrina homeowner assistance program in Louisiana and decided it did not want to repeat it. There was a strong desire to see that the funds to be made available for housing reconstruction actually got spent on housing reconstruction in the affected areas and were not made available to hurricane survivors to use for non-housing purposes. Whereas Louisiana paid out benefits directly to homeowners, the Texas approach was to provide housing assistance to homeowners through a state administered program that would allow the state to contract for housing rehabilitation or reconstruction on the behalf of the homeowner.
While some might view this approach as paternalistic, we housing advocates concluded that it was probably for the best. Overwhelmingly the homeowners affected by Hurricane Rita came from a low income population, many were elderly and disabled, had limited education and lacked any experience dealing with contractors. In many cases their homes were old and would require extensive repairs to bring them into compliance with current building standards. This made the population particularly vulnerable to exploitation by contractors. The shortage of qualified contractors, when coupled with the virtually complete absence of any consumer protection laws governing home repairs in Texas, dictated that for the best interest of the hurricane survivors the State should have an active role in overseeing the repair or reconstruction of the homes.
Today, several years after this decision was made, I continue to believe the state acted responsibly in this approach.
The decision of the State to act as the contractor, instead of providing a payment directly to the homeowners, triggered the additional CDBG requirements such as lead based paint abatement, environmental review, etc. This necessitated substantial additional work on the part of the State, increased the cost and, as we will see, greatly increased the amount of time before construction could begin. But, as I said earlier, it was the only responsible alternative to protect those who had lost their homes to the hurricane.
Who should administer the program?
TDHCA tried really hard not to administer the housing program directly. This proved to be a mistake. TDHCA first contracted with the local Councils of Government (COGs) to do housing repairs. Each of these organizations that operated within areas affected by Hurricane Rita were given an initial contract to do housing rehabilitation and reconstruction. Today the COGs are still struggling to meet their goals.
Simply undertaking the process of identifying the homeowners to be assisted and qualifying them for assistance ended up taking the COGs years. Ultimately, the COGs threw up their hands and gave up trying to repair homes and turned to simply contracting for replacement homes. Each of the COGs developed their own approach to purchasing replacement homes. Many of the homes that they ended up buying were mobile homes (hardly the optimal housing solution for in areas subject to hurricanes). The cost of the replacement houses varied widely between the COGs. As of today, almost three years after the initial funds were available, these programs are still trying to deliver the extremely modest numbers of housing units that the COGs contracted with the State to provide.
TDHCA grew extremely frustrated with the glacially slow performance of the COGs and resolved to use $223 million of the $428 million second supplemental appropriation of CDBG funds to provide a housing rehabilitation and construction program across all of the Hurricane Rita affected counties. Instead of using the COGs as a middleman, TDHCA would directly administer this program itself.
Unlike the COGs, TDHCA decided to undertake both a housing rehabilitation and a housing reconstruction program. This was vitally important to the successful recovery of the area as many homes did not require demolition and replacement but needed to be repaired. The COGs had been unable to successfully repair any houses over the years that they attempted to operate their housing program.
As housing advocates we strongly approved this decision as necessary to get the funds expended and to provide a uniform and consistent program for the Hurricane Rita survivors.
Which homeowners should receive assistance?
The State could have requested waivers to the CDBG income targeting requirements. But given the large population of low income families who lost their homes and the relatively small amount of available CDBG funds, TDHCA decided to limit the program to households with incomes at or below 80% of median family income for the area. In Southeast Texas this translates into people with very low household incomes. It was these poor families who generally lacked homeowner’s insurance and thus would be left with no ability to rebuild their homes without assistance from the CDBG program.
As housing advocates we strongly agreed with TDHCA’s decision to limit beneficiaries to low and moderate income families. To have extended the program to families with larger incomes through a waiver of the CDBG grant requirements would have diluted the funds to the extent that the lowest income and most needy households, and particularly the elderly and the disabled, would not have access to housing assistance.
Given that most of the choices made by the state were reasonable ones, why has it taken so long to get the program going?
I think it is tragic that it has taken so long to help the survivors of Hurricane Rita get the housing assistance that they need. But I have been around government programs long enough to appreciate just how difficult it is to establish a new program where none previously existed.
The state wasted at least 18 months trying to help the COGs run the housing program. From the very beginning, we urged the State of Texas to administer the housing assistance programs through TDHCA. We pointed out in 1995 that the COGs lacked any administrative capacity and lacked any previous experience operating housing programs. So from January 2006 to mid-year 2007 valuable time was lost in the frustrating effort to try to deliver housing assistance through the COGs.
Once it became clear that TDHCA would have to assume administration of the housing program approximately 8 months were spent in a lengthy process to advertise in bid for third party contractors to oversee the application and administration of the program and the management of the construction contractors. This process probably took too long but was ultimately unavoidable.
Once the project administrator was in place, the process of developing program rules and regulations, applications, and procedures began. The attempt to satisfy all of the government regulations produced an application which was completely unwieldy (over 50 pages long as I recall). The extreme complexity and burdensome nature of the initial application draft became apparent to TDHCA and to its contractors. Given that the overwhelming majority of the hurricane survivors who would be applying for assistance were elderly and very low income households, it became apparent that such a complex application would simply not work. More than two months were spent reworking the application.
This took the process to mid-2008. At that point TDHCA began negotiating through its contractors with homebuilders interested in building the replacement homes. Despite the downturn in the economy few homebuilders stepped up to express an interest and a number of additional weeks were spent recruiting additional builders. Finally, with builders in place, the first phase of the program began — the rebuilding of homes in the coastal community of Sabine Pass.
As this first phase of the construction was about to begin Hurricane Ike hit. This brought all construction activities in the area to a screeching halt as the Gulf Coast dug out once again from a second disaster.
The Hurricane Rita housing reconstruction program is now finally beginning in earnest. TDHCA expects to complete as many as 50 houses each week over the coming months.
What lessons should be learned from the Rita program that should be applied to the program to rebuild homes damaged or destroyed by Hurricane Ike?
The State of Texas and in particular the survivors of Hurricane Rita have paid a high price to put in place the housing program which is only now beginning to produce results. Survivors are justifiably angry and political leaders are indignant over the time it is taken to get the program operational.
But anger and indignation will not get the houses repaired or built. Indeed, an ill-informed, knee-jerk reaction to proclaim the efforts of TDHCA a failure threatens to discard all of the work that has gone on to establish what should be a successful post-disaster housing reconstruction program.
It is absolutely essential that the State of Texas build on all of the good work that has been done to establish this existing program and not waste time starting all over again. The direction that the ORCA Hurricane Ike CDBG disaster plan proposes, essentially Balkanizing the housing rebuilding program by farming it out across several COGs and numerous local governments, will produce the same failed results that characterize the initial efforts of the State of Texas to use the COGs to deliver housing assistance in the immediate aftermath of Hurricane Rita.
Starting over again from scratch would be nothing short of a disaster. Multiple administering entities will cause much higher administrative costs. Multiple administrating entities will result in widely varying levels of assistance to disaster survivors as each government entity establishes its own rules, eligibility guidelines and benefit limits. This will be highly unfair to the disaster survivors.
Furthermore, there is no indication that the COGs will be able to overcome their past inability to rehabilitate homes instead of simply tearing down and replacing them. There is simply not enough CDBG money available to demolish and rebuild every home damaged by Hurricane Ike. The economies of scale that a state level program is able to secure both in administration and in the cost of rehabilitating and building the houses will be lost. Enormous amounts of time will be chewed up as dozens upon dozens of individual jurisdictions work to develop program rules and guidelines and obtain clearance from the State and from HUD.
We need to instead take one more look at the housing program TDHCA has created, make the necessary modifications, and put it to work not only rebuilding homes destroyed by Hurricane Rita but also rehousing the survivors of Hurricane Ike. In tomorrow’s blog I will explore the program changes that should be made before expanding the program to deal with Hurricane Ike.