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Volume 3 Number 9
October 2006
In this Issue
Funding for Recovery in the Hurricanes' Wake, Part I
Neighborhoods in Bloom: Targeted Community Investment Works
Homeownership Voucher Programs: Benefits Are Worth the Challenges
The Maturing of America's Housing Finance System
In the next issue of ResearchWorks
Funding for Recovery in the Hurricanes' Wake, Part I
Hurricanes visit the United States every year, but the 2005 storm season will be remembered for the unprecedented extent of damage done to housing stock across an entire region. Three powerful hurricanes, Katrina, Rita, and Wilma, hit the Gulf Coast area between August 29 and October 24, damaging more than 1.2 million housing units, with 25 percent sustaining major or severe damage. The media presented wrenching
images of flooded neighborhoods and dramatic rescues, and neighboring states and communities took in thousands of evacuees. In December 2005 and again in June 2006, Congress approved
emergency supplemental appropriations providing $11.5 billion and $5.2 billion in CDBG assistance for hurricane recovery relief. This article, the first of two installments, explores steps HUD is taking to ensure that allocations are based on states' greatest long-term recovery needs.
A recent HUD analysis, Current Housing Unit Damage Estimates: Hurricanes Katrina, Rita, and Wilma, has served as a roadmap in guiding this process, and in and of itself, represents something of a bright spot in the aftermath of the hurricanes. Thanks to this analysis, state, local, and federal officials now have detailed local-level data on the extent and location of damage to guide their recovery efforts. "The data will be very informative in planning for recovery," said Todd Richardson, Deputy Director of the Program Evaluation Division in HUD's Office of Policy Development and Research.
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Supplemental congressional funding will aid recovery in hardest-hit areas of the Gulf Coast region.
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The analysis found that 204,737 housing units in Louisiana suffered serious damage, along with 61,386 in Mississippi, 23,199 in Florida, 12,103 in Texas, and 3,684 in Alabama. "Katrina itself was the most disruptive hurricane that we have recorded in terms of financial damage," said Richardson. Katrina was unusually costly because it hit a major metropolitan area and because the low-lying Gulf Coast areas have been heavily built up in recent decades.
The HUD analysis began with a congressional appropriation of $11.5 billion in supplemental funds for long-term recovery in the Gulf Coast from the 2005 hurricanes. Congress directed that the Community Development Block Grant (CDBG) programs in the five affected states distribute the funds. HUD's task, explained Richardson, was to "get data to be able to make an informed decision about how much should go to each of the affected states."
The analysis combined inspection data from two major federal agencies that homeowners and landlords turn to in disaster recovery: the Federal Emergency Management Agency (FEMA), which provides grants for some damage not covered by insurance, and the Small Business Administration (SBA), which makes low-interest loans available to homeowners and rental-property owners with sufficient income and credit to qualify.
FEMA inspects almost all properties with significant damage, assigning each housing unit to one of three categories:
- Minor: It would cost less than $5,200 to make the home livable but not necessarily fully repaired.
- Major: The extent of damage lies somewhere between minor and severe.
- Severe: The home is half-destroyed or worse.
SBA, by contrast, calculates a precise estimate of the verified loss of each individual housing unit inspected and uses it to determine the loan amount.
By correlating data from individual homes that both FEMA and SBA inspected, HUD researchers were able to estimate a median verified loss for the neighboring
properties that were not eligible for SBA loans, but which FEMA inspectors had placed in the minor, major, or severe categories of damage. As a result, the HUD analysis produced highly accurate estimates of numbers, types of housing, types of damage (wind or water), and cost of damages at the state, county, and (in New Orleans) neighborhood levels.
For purposes of allocating CDBG funds to affected states, the HUD analysis focused on identifying damaged housing units that were not covered by private insurance, FEMA grants, or SBA loans - what Richardson termed "the gap." In addition, HUD geocoded
the address of each unit that was flooded and determined whether it was in a FEMA-designated 100-year floodplain (an area where purchasing flood insurance is necessary to obtain a mortgage). Many flood-damaged homes lay outside the areas previously
designated as floodplain. Reflecting the 2005 experience, the National Flood Insurance program has produced new advisory flood elevations for Katrina-affected counties that will govern the financing available
for rebuilding.
"The sheer number of housing units that were affected is just startling," said Richardson, who visited the Gulf Coast this spring. "If you go to New Orleans, you can drive through some neighborhoods where the houses were knocked off their foundations. In other neighborhoods,
you can see the high water line on the houses that are standing. Also, in coastal Mississippi, you can go to a neighborhood and there's just nothing there, because it all washed out to sea with the storm surge."
"You can drive through the streets and see where the floodwaters were, or see the 'blue roofs' of houses that lost their roofs to wind and are protected only by temporary plastic sheets," Richardson continued. "This study essentially counts every one of those damaged houses."
The damage was most concentrated in seven Louisiana parishes (equivalent to counties), and four counties in Mississippi. For example, in St. Bernard, Louisiana, 81 percent of the 25,123 occupied housing units had some damage and 78 percent experienced serious damage. About 35 percent of the owner-occupied units that were seriously damaged did not have any insurance to cover the damage incurred. In Hancock County, Mississippi, 90 percent of the 16,897 occupied housing units had some damage and 70 percent had serious damage, while 61 percent of the owner-
occupied units that were seriously damaged lacked insurance.
In January 2006, HUD Secretary Alphonso Jackson announced HUD's allocation of $11.5 billion in emergency
disaster recovery funds to the CDBG offices in the five affected states:
- Louisiana: $6.2 billion
- Mississippi: $5.1 billion
- Florida: $83 million
- Texas: $75 million
- Alabama: $74 million
The funds were allocated based on Congress' intent that areas with the highest need and the greatest concentration
of destruction receive priority consideration. In addition, HUD took into account areas experiencing acute housing needs, such as those with high concentrations
of uninsured homeowners and low-income renters. HUD released the recovery funds between May and July 2006, based on approved plans submitted
from CDBG offices in the field. "This money has got to get to the people and places that desperately need it," said Secretary Jackson.
For more information, see Current Housing Unit Damage Estimates: Hurricanes Katrina, Rita, and Wilma, which can be downloaded at no cost at www.huduser.org/publications/pdf/GulfCoast_HsngDmgEst.pdf.
"The Impact of Hurricanes Katrina, Rita, and Wilma on the Gulf Coast Housing Stock" appeared in the First Quarter 2006 issue of U.S. Housing Market Conditions, and is also available as a free download at www.huduser.org/intercept.asp?loc=/periodicals/ushmc/spring06/USHMC_06Q1_ch1.pdf.
Be sure to read the second installment of this article in the November issue of ResearchWorks, which will focus on the process used to ensure that the second emergency
supplemental CDBG assistance appropriation to states was allocated according to their specific needs.
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