La. Rental Repair Program to Begin, 18 Months After Katrina

January 29, 2007

Small landlords form the backbone of much of the housing market in the New Orleans area, but rebuilding aid for mom-and-pop rental property destroyed by Hurricane Katrina has lagged.

An $869 million recovery program set to begin taking applications Monday is designed to help landlords rebuild and improve housing stock, mainly in New Orleans, in a region desperately short of affordable worker housing 17 months after the flooding of Katrina.

But the money isn’t expected to be nearly enough to satisfy the need.

“We’re going to need more money. We’re never going to get the rental properties back up and running in this community” without additional federal aid, said Donald Vallee, who owns 18 housing units in New Orleans and is chairman of a local landlord association in the city.

The Blanco administration and her Louisiana Recovery Authority say the spending plans – another part of Louisiana’s hurricane recovery program called the “Road Home” – will repair or rebuild an estimated 18,000 rental units and help address Louisiana’s housing needs.

Roughly 82,000 apartments around south Louisiana, more than two-thirds of them in New Orleans, were severely damaged by hurricanes Katrina and Rita in 2005.

The Road Home rental repair program will provide 10-year, interest-free, forgivable loans to landlords who own small numbers of apartments and agree to keep rents low enough so their apartments are affordable to poorer residents of hurricane damaged areas.

But even before the repair program has begun, landlords and state officials are questioning whether its requirements are too strict and whether the private contractor tapped to lead the program can handle the job.

ICF International Inc. a firm repeatedly criticized for distributing aid too slowly in a separate recovery program for homeowners, was hired by the Blanco administration to run both the rental repair and homeowner repair portions of Road Home. However, Gov. Kathleen Blanco said she’s reconsidering whether ICF should run the rental repair portion, because she hasn’t been satisfied with ICF’s grant award pace in the homeowner portion.

ICF officials say the rental repair program is beginning eight weeks ahead of schedule, and they say they are working to make sure it moves quickly. In addition, Suzie Elkins, director of Blanco’s Office of Community Development, which awarded the contract and oversees ICF’s work, said ICF has a separate staff working on the rental program and she’s confident they can do the job.

The program is funded with federal recovery block grant aid allocated to Louisiana by Congress after the 2005 storms.

The rental money is divided into pools for 13 parishes, with most bound for the New Orleans area, which had the greatest percentage of damage. More than $684 million is slated for New Orleans and neighboring Jefferson Parish.

“You really can’t revitalize large areas of New Orleans without repairing these buildings,” said Calvin Parker, housing manager for the Office of Community Development. Fifty-three percent of New Orleans residents were renters before Katrina, much more than the national average of 33 percent.

Money will be awarded in rounds, with the first round of $200 million taking applications Monday, and the first loans granted in March, according to Vanessa Brower, director of the rental repair program for the Road Home.

Applicants are scored and ranked against each other to determine if they will receive aid, looking at proximity to schools and services, access to basic utilities, historic significance, energy efficiency and other standards.

The first round of rental repair aid will be given to people who live in and own three- and four-unit buildings and to small landlords with 20 rental units or fewer when the storms hit. The rental property must have had at least $5,200 in damage from Katrina or Rita.

“There’s not enough money to serve everyone,” Brower said.

To qualify for the loans, property owners must agree to keep rents low for up to 10 years, at one of three rent tiers considered affordable to families who earn 50 percent, 65 percent or 80 percent of area’s median income. The lower a landlord is willing to keep the rent, the bigger the forgivable loans – with the idea that the money is helping to supplant the dollars the landlord is giving up by reducing the rents.

The median income for a family of four in the New Orleans area is $52,300, and for example, to qualify in the 80 percent tier, a landlord couldn’t charge more than $940 a month for a two-bedroom apartment. In the Lake Charles area, the rent for the 80 percent tier couldn’t exceed $920 a month for a two-bedroom rental unit.

Landlords don’t have to repay the loans if they keep the rents in those ranges for 10 years. The loan forgiveness will occur in stages over the 10 years, Brower said.

The repair money will go through banks, but Brower said it likely won’t be enough for landlords to rebuild and is expected to be paired with traditional construction loans.

Vallee said the program needs more tweaking, and he said the eight-page application and 32-page application handbook can be intimidating. ICF and the governor’s staff have been holding training sessions for rental property owners, which Vallee must continue so landlords aren’t scared away from the program.

“It could appear confusing to people and overly regulatory burdensome so that some people might not want to participate. That takes guidance and assistance to help with that,” he said.

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