Housing RecoveRy

on tHe gulf coast

SUMMARY REPORT

U.S. Department of Housing and Urban Development | Office of Policy Development and Research

Summary

HouSinG ReCoveRy

on tHe Gulf CoaSt

Congress frequently provides supplemental Direct Observation of Housing and appropriations through the U.S. Department of Neighborhood Conditions in 2010

Housing and Urban Development’s (HUD’s)

Based on windshield observations conducted in early 2010, Community Development Block Grant

74.6 percent of hurricane-affected properties on significantly (CDBG) program to help communities recover from natural affected blocks contained a residential structure with no and manmade disasters. These Disaster Recovery Grants substantial repair need—approximately three-fourths of all have been used to help New York City recover from the affected properties in the most damaged areas were in good attack on the World Trade Center on September 11, 2001; condition. An additional 10.8 percent of sites did not contain a to help towns in the upper Midwest recover from severe permanent residential structure; these homes were either flooding in 1993, 1997, and 2008; and to help the Gulf destroyed by the hurricanes or had been demolished since then.

Coast in the wake of Hurricanes Katrina and Rita in 2005.

The remaining 14.6 percent of hurricane-affected properties on Recent research by Abt Associates Inc., under contract with significantly affected blocks contained a residential structure HUD, examines how $19.7 billion in Disaster Recovery that still needed substantial repair. Some areas had much higher Grants were used in Louisiana, Mississippi, and Texas proportions of properties with no residential structure or with to help with recovery from those devastating hurricanes substantial repair needs. In Louisiana, the Lower Ninth Ward of 2005.

Planning District of New Orleans and adjoining St. Bernard Parish had the highest percentages of properties without a residential structure. In Mississippi, Hancock County, Biloxi, and Waveland/Bay St. Louis were the areas most likely to have empty lots. Overall, Mississippi had the highest percentage of properties without residential structures, but it had a relatively small share of structures with substantial repair needs. In contrast, Texas had a low percentage of properties with no residential structure, but about one-fourth of the existing structures had substantial repair needs.

The research had two key components: “windshield observations” of significantly damaged homes and neighborhoods and a survey of the owners of properties that were badly damaged. HUD has published two reports from this research:

1. Housing Recovery in the Gulf Coast, Phase I: Results of Windshield Observations in Louisiana, Mississippi, and Texas.

2. Housing Recovery on the Gulf Coast, Phase II: Results of Property Owner Survey in Louisiana, Mississippi, and Texas.

This summary presents key findings from both reports and describes key policy issues surrounding the federal role in disaster recovery.

Housing Recovery on the Gulf Coast Summary 2

Based on the windshield observations combined with CDBG

previous 1 year. In comparison, 25 percent of households in the administrative records, the Phase I report found that CDBG

study had moved over the 5 years since the storms, suggesting played a key role in the rebuilding process. In Mississippi, a fairly low level of turnover and a strong desire to return and properties that received CDBG assistance are almost 2.5 times rebuild. However, it is also important to note that those who as likely to have been rebuilt as properties that did not receive did move appear to be satisfied with their decision; 66 percent CDBG assistance. In Louisiana, some owners chose to sell their reported that they are not interested in moving back to their property to the Louisiana Land Trust (LLT) rather than rebuild. old neighborhood. Movers are also significantly more likely If these properties are excluded from the analysis, properties in than those who stayed to report being very satisfied with their Louisiana with CDBG assistance are almost twice as likely to current (as of 2011) neighborhood (70 percent and 48 percent, have been rebuilt as properties that did not receive CDBG

respectively).

assistance. Both of these estimates of the effect of CDBG

assistance are from statistical models that include other For the people who continue to own the same home that was characteristics that influence rebuilding.

damaged by the storms, the survey asked about their rebuilding efforts and about the current condition of the home. Among these continuing owners, 75 percent rate the current condition of their home as good or excellent, which the study uses as a proxy for “rebuilt” in subsequent analyses. The study includes multivariate analysis of factors that influenced the likelihood of rebuilding. Insurance is estimated to have a large and highly significant relationship with rebuilding; insured properties are 37 percent more likely to have been rebuilt than uninsured properties. Flood-damaged properties are 16 percent less likely to have been rebuilt than properties that did not sustain flood damage, possibly because flood damage tends to be more pervasive and costly to repair. Properties that are categorized as being leveled, demolished, or condemned are 39 percent less likely to have been rebuilt. When holding neighborhood home Relocating or Rebuilding

value constant, the value of a particular home is negatively The second phase of the study included a survey of individuals correlated with the likelihood of rebuilding, suggesting that who owned properties in 2005 that were damaged by within a particular neighborhood the higher valued homes are Hurricanes Katrina and Rita. The purpose of this survey less likely to be rebuilt than the lower valued homes. One was to talk directly to affected households to find out about possible explanation for this is that the owners of the higher their experience trying to rebuild their homes and their lives.

valued homes in a neighborhood have the greatest ability to The survey found that CDBG funds reached the intended rebuild their lives elsewhere and are skeptical of the households. CDBG recipients had higher levels of assessed neighborhood’s ability to rebound.

damage, had a higher prevalence of flood damage, were more likely to be part of minority racial and ethnic groups (African American and Hispanic), and were more likely to have lower valued homes. They also had fewer resources from other (non-CDBG) sources.

The first step in rebuilding is to return home and commit to staying, so the first step in this study is to understand who returned home and who chose to relocate. Among pre-storm property owners, 18 percent no longer owned the property at the time of survey (early 2011). An additional 7 percent still owned the property but were living elsewhere. According to the 2007 American Housing Survey, among all owner occupant households nationwide, 7.64 percent moved during the Housing Recovery on the Gulf Coast Summary 3

Timing of Recovery

Conclusion

The property owner survey reveals some interesting findings This research has important implications for how to prepare about the speed of recovery. Property owners affected by the for disasters and how to recover from them. The research storm largely resolved their situation in the 3 years following shows that the presence of insurance before the hurricanes was the storm. Among those who sold their property, 89 percent a strong predictor of rebuilding. This finding emphasizes the did so in 2008 or before. Among those continuing owners who importance of homeowner’s insurance and flood insurance, have successfully completed rebuilding, 89 percent did so in particularly for households in disaster-prone areas.

2008 or before. More than one-half of continuing owners who successfully completed rebuilding did so in 2005 or 2006.

The research has several implications for disaster recovery.

Affected households that moved reported higher neighborhood Models for Homeowner Assistance

satisfaction than those that stayed, suggesting that a model that The second phase of this research also examines two different allows for relocation may serve the affected households better models for providing homeowner assistance. Texas implemented than a rebuild-only model.

a traditional home repair and rehabilitation model, in which housing assistance was directly tied to the home for the exclusive The research also finds that the extent of damage and the purpose of rebuilding, and the state managed the process of hiring presence of flood damage have a significant and substantial and managing contractors. This program served roughly 1,000

negative effect on the likelihood of a unit being rebuilt.

households. However, Mississippi and Louisiana, confronted by Neighborhoods that suffer widespread, significant flood damage a more widespread disaster, had to operate at much larger scale, are less likely to be successfully rebuilt, suggesting that those serving approximately 28,000 and 129,000 households, respectively.

neighborhoods either should not be rebuilt or would require As a result, these states received a waiver enabling them to provide substantially more resources per unit to be rebuilt.

homeowner assistance in the form of a “compensation” grant Finally, the study finds strengths and weaknesses in both to individual homeowners, which did not necessarily have to the rehabilitation model and the compensation model. The be used for rebuilding. The waiver was granted to distribute the compensation model does appear to have been successful in administrative burden and allow for faster recovery. Homeowners responding to the scale of the problem in Mississippi and could hire their own contractor and get started immediately. It is Louisiana. As of 2011, the rebuilding rates are comparable unclear whether this strategy was successful. The average length of across the three states, despite the fact that Mississippi time from the start of construction to the end of construction was and Louisiana served approximately 28,000 and 129,000

only 8.1 months in Texas, compared with 10 months in Mississippi households, respectively, compared to only 1,000 in Texas.

and 13.9 months in Louisiana. It seems that Texas—with a relatively The rehabilitation model, on the other hand, resulted in small program and abundant contractor capacity—was able to more complete application of funds to rebuilding; 16 percent carry out its program effectively once the program was developed.

of households in Mississippi and 6 percent of households in However, if measuring from the date of the storms to the end of Louisiana did not use any of their grant funds for rebuilding.

construction, rebuilding in Texas took considerably longer than it Although the rehabilitation model may be difficult to scale did in Louisiana and Mississippi. Given the size of the programs up there is some evidence that it is an appropriate strategy in Louisiana and Mississippi, this suggests that the compensation for situations in which the priority is to rebuild and adequate model did enable rebuilding in Louisiana and Mississippi to start capacity exists among building contractors. The rehabilitation sooner than it would have with a standard rehabilitation model.

model also enables the government to supervise how rebuilding occurs. The organization managing the program can ensure compliance with building standards (such as elevation requirements) and incorporate other improvements (such as energy efficiency upgrades). A homeowner-driven rebuilding model runs the risk that assisted households may not pursue these important goals.

Ultimately, the most appropriate rebuilding strategy depends on the scope of the damage and the community’s plan for recovery.

The federal government plays an important role in response to, and recovery from, natural disasters. HUD hopes that this research helps to inform that role and to help disaster-affected communities recover faster and more fully.

Housing Recovery on the Gulf Coast Summary 4