Construction, Insurance Costs Eating Into Rental Repair Aid in La.

August 1, 2007

Rental housing programs for storm-damaged south Louisiana won’t rebuild as many rental units as state officials had hoped because of skyrocketing construction and insurance costs, a Louisiana Recovery Authority official said July 30.

Andy Kopplin, LRA executive director, said initial estimates were that federally funded, state-run rental repair programs and a package of federally enacted, low interest tax credits would rebuild as many as 45,000 rental units. But he said the increased costs after hurricanes Katrina and Rita likely will shrink that number to around 30,000 rental units.

The state’s Road Home program includes more than $1.5 billion for rental repair and aid, funded with federal dollars, Kopplin said. Also, a package of federal tax credits is available for rental housing construction in hurricane damaged areas, he said.

But he added, “It never was enough.”

The conversation came as the LRA’s board reworked its plans to reshuffle federal hurricane recovery aid to the Road Home homeowner rebuilding and buyout grant program to stave off some trimming planned for the Road Home rental repair programs.

Rather than $21 million in cuts, the rental aid programs will be cut by $15 million – but the cuts also were readjusted to a different mix of programs.

Planned cuts to rental assistance for homeless and special needs citizens were scrapped, and plans were scaled back to shrink dollars to a small rental repair program for landlords who agree to keep rents low so their apartments are affordable to poorer residents. The biggest part of the rental cuts, about $13 million, instead will fall on a tax credit program for landlords.

The adjustments were sought by the Jeremiah Group, a New Orleans faith-based organization, which applauded the revisions approved by the LRA board, saying the repair of rental housing in New Orleans was critical to the ability to rebuild the city after Hurricane Katrina.

Representatives of the Jeremiah Group held up signs showing how much of workers’ salaries are eaten up by rent payments, which have skyrocketed in the New Orleans area since Katrina. Teachers who rent housing pay an average 41 percent of their salaries on their rent while hotel workers pay an average of 86 percent of their salaries on rent payments, the group said.

Norman Francis, chairman of the LRA board, said board members realize how critical rental housing is to the “most vulnerable” of the city’s residents.

“We made a misstep perhaps in cutting,” Francis said of the original proposal, before it was tweaked.

The reworked rental program cuts were included in an LRA-backed plan to restructure federal recovery aid to help plug a shortfall in the Road Home homeowner assistance program, as part of a $1 billion state bailout for the rebuilding and buyout grant program. The LRA board had approved a preliminary version of the plan last month.

The reshuffling also requires approval from state lawmakers and federal officials.

The Road Home homeowner recovery program is funded with $6.4 billion in federal recovery money, but it faces a shortfall estimated up to $5 billion in what would be needed to aid all eligible homeowners. After adding the $1 billion, Louisiana officials hope Congress will fill in the rest of the gap.

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