The effects of Hurricane Katrina on Affordable housing stock in New Orleans, both pre Katrina and Post Katrina.
Katrina that struck on Monday, August29, 2005, left New Orleans, Louisiana totally devastated. Passing within 15 miles of New Orleans and accompanied by heavy winds and downpour, the storm raised water level that breached about 53 levees across Lake Pontchartrain. The flood covered almost 80% of the city of New Orleans with a water level of 25 feet high. This resulted in about 1500 deaths and displacement of 700,000 people. (Hunter) This natural calamity was the first of its kind in the last 100 years in the history of the United States. (Richardson)The combined effect of the storm and the levee breaches flooded about 228,000 homes of which 39% was owner-occupied and 56% rental units.(The Brookings Institution Metropolitan Policy Program) About 204,700 houses in Louisiana were totally damaged resulting in displacement of 360,000 its residents outside the State. as of April 2006 About 61,900 persons were occupying FEMA trailers and mobile homes. (Louisiana Recovery Authority….numbers) As the return of the displaced residents has been in progress though sluggishly ever since the receding of floodwaters, this paper seeks to find out how far they have been able to restore their lost/damaged homes and Governmental and voluntary agencies’ roles in this direction while at the same also examine status-quo-ante of their housing conditions. Even earlier to the storm, the affordable housing conditions had been far from satisfactory characterized by racial discrimination, policy decisions and long-term neglect.
This already neglected New Orleans tenements aggravated now by the post-Katrina devastations pose serious barriers for the smooth return of the displaced people. If there are no people around and no impetus for economic activity, how rebuilding process can ever be substantial, is a million-dollar question. Therefore the rebuilding process to resolve housing crisis in New Orleans is a challenging task. Home for all New Orleanians regardless of their race, creed, ethnicity, income level, or gender is going to be a real test for the resources of our country as well as for the test of America as one nation.
Housing Conditions in New Orleans before Katrina
New Orleans had been experiencing housing shortage even before Katrina. According to Federal norms, New Orleanians had been burdened with excessive housing costs. About 67% of the very low-income earners had incurred housing costs more than 30% of their income and 56% of them, more than half their income spent on housing. Ownership was 47 % as against national average of 67%. (. (Popkin et al) Rates of African American ownership were far inferior to that of whites of higher income families. (Greater New Orleans Community Data Center) The residential colonies had been racially segregated in spite of U.S.Supreme Court’s striking down such practices of racial segregation and restrictive conditions long ago in 1948 and 1954 in the decisions concerning Shelly V. Kramer and Brown V. Board of Education respectively. The racial discrimination in segregated housing was intentionally perpetuated by the Federal Government itself as early as in 1969 and was indicted by the U.S.District Court as violative of the U.S. Constitution in Hicks V Weaver, 302 F.Supp. 619 Ed.La.1969. Against this backdrop, New Orleans had been highly segregated when Katrina struck the region. Though the segregation had come down slightly during 1990 to 2000, New Orleans ranked as 11th most segregated city in the U.S. (U.S. Census Bureau) This resulted in economic segregation too with the resultant high and concentrated poverty neighborhoods. New Orleans was the second largest area of African Americans of the nation with 37% of their population living in poverty neighborhoods. The figure 1 below shows the extents of poverty concentration in Pre-Katrina. (Source. Census 2000 USGS: Geography Network.com)
(Figure 1 above )
The lower Ninth Ward, Central city and St.Roch were having high concentrations African Americans deprived of social, educational, economic opportunities having been segregated and subjected to high and concentrated poverty.(Kirwan Institute) Katrina flooded more than 75% these areas affecting the residents of whom 80% were nonwhite.
Impediments to equal opportunities for housing in New Orleans after Katrina
The hurricane literally created a diaspora hundreds of thousands of New Orleanians all over the country. (The Congressional Research Service) The rebuilding process has been incredibly slow affecting mainly the low-income African Americans who were the victims of the storm. The trend shows it would only worsen the pre-Katrina scenario of high housing costs, racial discrimination and segregation.
Paucity of Affordable Rental Housing
Lack of even rental housing has displaced thousand of residents after Katrina which destroyed about 82,000 rental units in Louisiana, 20% of which were meant for extremely low-income families. (Louisiana Recovery Authority, The Road Home…Funds) This lack of rental space has led to steep increase in rental rates The following table 1 would show fair market rents in New Orleans from year 2000 at their highest post Katrina. (Lieu et al)
(Table 1 above)
In spite of the enormous shortage of affordable housing, just a paltry $920 million has been allocated from the total $11.5 billion available in Community Development Block Grant for the affordable housing needs of low and very-low income residents of Louisiana. (The National Alliance…Displaced Persons) As a result occupation of emergency trailers and mobile homes has gone up by 30,164 units and number of those receiving rental assistance by 33,350 since March 2006. (The National Alliance..10 months later) The pity is housing is not available to even reconstruction workers without whom there can be no rebuilding activity. Many of them live near construction sites, hotel rooms, cars, and at the work sites. On an average six construction workers share a housing unit while the fact remains that two thirds of them have children and they have relocated their families with children to the Gulf Coast. (Advancement Project)
To aggravate above situation of severe shortage of housing for the low-income households, HUD is demolishing the city’s largest public housing complexes of St.Bernard, C.J.Peete, B.W.Cooper and Lafitte. Even though HUD is opening 1000 units at Iberville, Guste, Fischer, River Garden, Hendee Homes, still 3000 more units will be required to reach at least the pre-Katrina levels in New Orleans. (Roberts)
The haphazard way of reconstruction exercise will only heighten the present racial segregation of homeownership in the region. The Lower Ninth Ward consisting of 94% African American, had an ownership are of 54% despite low homeownership by African American in New Orleans in general. Similarly there were African American populations of 86 % in New Orleans East, 70% in Gentility with a home ownership of 55% and 72 % respectively but without flood and hazard insurance, a cause of impediment for rebuilding. While 1/4th of home owners in Gentility and New Orleans
East had no insurance, 2/3rd in Lower Ninth Ward did not have insurance. (Greater New Orleans Community Data Center Feb 2006)
The displaced New Orleanians from over 100,000 households still live in 1,800, 34,000 and 68,000 FEMA trailers Alabama, Mississippi, and Louisiana. Again they are geographically isolated with no appreciable access to opportunities and resources for rebuilding their livelihoods. (Liu et al)
It has been found that African Americans are discriminated against White Americans in Apartments leasing as per the study conducted by the National Fair Housing Alliance. The study which was conducted by phone calls found that whites received information about availability of apartments in preference to non whites. The study states that the apartment complexes blocked information to Blacks about the availability of apartments, failed to return phone messages left by the blacks, did not provide accurate information regarding number of available units, rental rates, and rental deposits and invariably quotes higher rent and deposit rates to Blacks. In one instance the response was while the deposit and application fee would be waived to White Katrina victim, it insisted on payment of both if it is Black Katrina victim. In some cases, discounts for TV and admission fees were offered to only Whites seeking rental apartments and not blacks.(National Fair Housing Alliance) The above scenario portends reemergence of segregation practices post-Katrina times also thus cutting the African American from the main stream life quality housing, schooling, jobs, health care, and transportation.
The Loss of Community
There has been total lack of rebuilding of community characteristics that stimulate opportunity. as schools have not opened, health care services have not been restored, and homes are not being restored. About 18% of schools, 21% of child-care centers, 17% public transportation have restarted. About 60% of buildings have been restored electricity. (Fellows M et al) And of the total hospitals only 50% have recommenced their operations in the city of New Orleans (Fellows et al)
Unequal opportunity to return
There is going to be a marked change in population shifts, uneven remigration because of the unfair treatment being meted out to African Americans. The low-income colored people will make up a small percentage of New Orleans population as they have most susceptible facing insurmountable obstacles for return to their original home places. (National Alliance to Restore Opportunity) On the other hand those who have returned have been able find employment while 32 % those who do not have secured jobs as against 60% in the case of whites who not returned. (Economic policy institute)
Though New Orleans is plagued by hurricanes and floods, the situation obtaining is exceptional in that housing problems such as absence of affordable housing, segregation in residences, discriminative homeownership rates, have the element of racial discrimination which represents the national scenario for the low-income Americans and colored people.
According to Housing Authority of New Orleans (HANO), Katrina struck at a time when low-income New Orleanian families were realizing the success of years planning trough refurbishing of the HANO’s public hosing portfolio. At the time of Katrina’s striking on August 29, 2005 HANO’s Receiver Team sponsored by HUD had been engaged in redevelopment of five public housing sites out ten such sites in the city of New Orleans and Gulf Coast. Similarly HOPE VI programs had been revived in January 2005 at Desire, St Thomas, Fischer Homes, Florida Homes, and Guste Homes. It says that immediately after the storm hit, satellites offices were set up at Dallas, Houston, and Atlanta to monitor and assist the evacuated families and its staff were positioned in New Orleans itself to estimate the damages to HANO sites. Construction was restarted in two out of four sites under development within six weeks of Katrina as also clean up and repair at other existing developed properties. HANO is doing all its best to restore housing to the residents of New Orleans amidst the challenges other businesses are facing there. Its own staff are finding it difficult to find housing and other public utility services in order to carry out the restoration work. Prior to Katrina HANO had under its command about 7,379 rental public housing units of which 5,146 had been occupied, the rest were about to be demolished. HANO had issued 8,981 out of 9,400 Housing Choice Vouchers allocated prior to Katrina besides another 700 issued to individuals in search of units. Prior to the hurricane, HANO had provided houses to 14,000 families making up 49,000 individuals by means of public housing schemes and hosing choice voucher programs. Funding of the HANO’s projects were based on tax-exempt bonds, low income housing tax credits, HOPE VI Demolition and Revitalization Grants, Capital Fund Programs, Affordable Housing Program Grants, private debt and City and State Funding. It had about 3,163 mixed-income units for different projects coming under its Development plans such as public housing construction, Section 8 projects, Low-Income Housing Tax Credit, market rate rental, and homeownership units. Three years prior to the Hurricane, HANO had spent $186 million on redevelopment of 1,015 housing units besides another 691 units under construction at the time of its strike, having $155 million already sunk in them. It had future plans of development of 1,457 units at several key places.
(Figure 2 above)
In a congressional testimony, Richardson A James, Louisiana State University, has opined that housing in full swing is the key to faster recovery of New Orleans Metropolitan Area as its lethargic recovery is attributed to time taken by the families to return to their households. Below are the Tables 1 and 2 showing the damage to housing and Damaged Owner Occupied and Rental Housing Units in Five parishes respectively, as presented by him. Table 3 and 4 show the damages to Owner Occupied and Rental housing units in Orleans Parish and changes in population after Katrina respectively.
It can be seen in Table 3 above that Lower Ninth ward had 92.1% damage next to 98.8 % suffered by NO East. The housing, employment, and population are all intertwined. (Richardson) The linkage of economy to housing is shown in figure below. It can be seen that New Orleans Metro had a population of 600,000 in 2005 with a housing stock of over 550,000. Until August 2005, no deficit of housing deficit existed. Pre-Katrina period economy was not characterized by housing shortage. Katrina destroyed economy and the housing stock. By the end of 16 months after Katrina, employment had gone up to 450,000 persons i.e. about 73% of pre Katrina level while housing stock increased by 63% of pre-Katrina level. There is a net deficiency of 70,000 homes however being managed by trailers, manufactured homes, commuting and families and friends accommodating the needy. By January 2007, demand for trailers had come down by 13,000 obviously due to families having found alternative means. (Richardson) Richardson has further testified that by the end of 2007, jobs will have grown up to 500,000 i.e 80% of pre-Katrina level and housing deficit will increase to 100,000. By the end of 2008 New Orleans will have achieved 90 % of pre-Katrina levels of jobs and deficiency in housing will have increased to 130,000 homes. Newer jobs will keep increasing the housing deficiency and the economic recovery will be hindered by inability to recoup the hosing stock. If New Orleans must grow economically, its people will have to continue living in trailers or other means or commute from outside.
There will be no further growth after 2008 if housing stock deficit is not rectified because infrastructure to accommodate additional labour is virtually absent. There will be wide margin of error in long term estimates, due to uncertainty over the feasibility of Unified New Orleans Plan, the success of current housing initiatives, business expansion as a result of Go Zone Tax incentives and new program aimed for faster recovery.
How the housing stock can be improved to at least to achieve the status quo. Realistically speaking, it is seen that Louisiana added 13,600 homes every year during 1990s in the entire State. At this rate it would take 15 more years for New Orleans to reach the pre Katrina levels. If it gets only 5,000 homes every year, it would take another 40 years to reach pre-Katrina level. Physically it is impossible to add the present deficit 200, 000 homes quickly. Although city of New Orleans issued permits for 500 new buildings and 54,000 permits for repairs, there is no indication how many are in really in progress. The tax credit incentive for reconstruction will be again limited by availability of workers. Rebuilding require skilled workers like carpenters, plumbers, electricians, masons and others. As they are in short supply, the simultaneous requirement of them by all the house owners at the same time would push up the wages for these workers without any additional supply of labour. Though new workers would be attracted to the profession, it would again take time to influence the market rates. Housing market is dependant upon economic indicators that would encourage housing enterprises to take advantage of. The Government has a role to play for bringing about economic signals.
“For example, the New Orleans tourist industry needs employees to recover. Presently, the tourist industry has about two-thirds of the employees it had pre-Katrina and this number has been relatively stable for the last six months. That is, for the last six months employment in the leisure and hospitality industry has stayed at about two-thirds of its pre-Katrina employment level. This labor market will have to grow if the New Orleans tourist industry is to recover fully. Housing costs will hamper the ability of these workers to return to New Orleans. The industry can respond to the market by raising wages to an extent and this has happened, but the industry has to compete with cities across the nation that compete for the tourist trade. The ability of the tourist industry in New Orleans to raise wages sufficiently to factor in the higher housing costs in New Orleans will be limited by the existence of a very efficient market place.”(Richardson)
Some of the steps taken by the Government to invigorate the housing market are tax credits, community development block grants etc. The Louisiana Road Home scheme has granted $ 869 million as rebuilding incentives for rental units. 70% of this will be given to New Orleans Parish and the rest to Jefferson Parish. “The housing program has established loans based on the income levels of persons who will be renting the apartment. For example, if the renter is making $26,125 or less than the landlord can borrow up to $47,000 to repair a two bedroom apartment and can charge up to $590 per month. If the renter makes $41,800, the landlord can borrow up to $16,500 and charge $940 per month. Finally, the loans become a grant if the rents are maintained for ten years. The success of this program will depend on how well these parameters fit the market place. If the rent is pegged too low, the landlords will not use this source of funding. The US Congress passed and the President signed the GO ZONE act in December 2005. In order to promote and accelerate the rebuilding of the hurricane-damaged area, this tax incentive act included termination date for the use of certain tax incentives. These termination dates of the tax incentives now needs to be re-thought because of experiences with the recovery process in the heavily damaged areas. The Louisiana Housing Finance Agency, along with the Louisiana Recovery Authority, and the Louisiana Office of Community Development, has allocated 2006 GO Zone tax credits and forward allocated 2007 and 2008 GO Zone tax credits. Current law requires projects receiving 2007 and 2008 GO Zone tax credits with a 30 percent increase in qualified basis and located outside the designated qualified census tract to be placed in service on or before December 31, 2008. About 65 percent of the units receiving these tax credits are at risk of losing them. It is imperative that the Congress extend the place in service December 31, 2007 deadline to December 31, 2009 and the place in service December 31, 2008 deadline to December 31, 2010. The significance of these developments in areas outside the heavily damaged areas is that families are relocating to areas within the state because of the long-term recovery issues in the New Orleans area. Families must get their feet on the ground quickly—a family does not have time for a five-year plan. A community can think in terms of five-year plans. Government policy must be focused on assisting families as well as assisting the rebuilding of a community. These two focus points may require different policies or different emphasis.”(Richardson)
The 9th ward
This was integrated with New Orleans in 1852. One of the 17 wards of New Orleans, the ninth ward is the largest in geographical terms. In 1910, an engineer by name A. Baldwin Wood, was responsible for ground water exploitation for the benefit of New Orleans’ development. Due to the city’s location including 9th ward much below the sea level, the floodings have aggravated the problems for the city though unavoidable. Construction of an industrial canal in 1920 through the center of the city of new Orleans created many new neighborhoods which now form part of the ninth ward. It is a marshy and flood prone area especially that forms part of lower ninth ward. Though this area was the last to be fully developed in the whole of New Orleans, it had the earliest settlers dating back 1800s through sugar plantations and farming. In 1852 itself there were about 1852 persons in Holy Cross Neighborhood. The original settlers were mainly African Americans besides poor European immigrants and people of color. The low cost of housing in the 9th ward encouraged poor people mostly working class to settle there. About half of the lower 9th had developed in 1950. “The greatest asset to the rebuilding and recovery efforts of the Lower 9th Ward is the history of community action and activism in the area. Numerous neighborhood organizations including housing and community development corporations, churches and other faith based congregation led initiatives, Head Start Programs, and other neighborhood associations are found in the Lower 9th. Much of the activism has been in reaction to the political neglect of the area. The actions by civic groups have concentrated on securing assistance to residents in the form of government funds and services.” (Dessauer, Armstrong)
The Ninth ward has developed into three primary neighborhoods ever since the 1923 when an industrial canal divided the 9th ward. The three primary neighborhoods are Bywater which is the portion of the Ninth Ward through Faubourg, Marigny and the Industrial Canal where the river runs, Holy Cross which is the lower ninth ward on the river side of St.Claude Avenue and the Lower 9th ward that runs along the river and bordered by canal, St Bernard Parish line, railway line on the west, east and north respectively. The areas of Bywater and St Claude are known as upper ninth ward. The Lower ninth area was characterized by buildings of not more than one story due to the nature of the unstable clay subsoil soil in the region requiring expensive foundation which poor can ill afford. The population of Lower Ninth ward was 14,008 persons in 2000 forming 98.3% of African American who are the descendants of the Africans that fled along withy their European farm owners from Haiti following a revolt in 1791. While the Africans had been enslaved by these European immigrants continued their stay in the ninth ward of the present day, people of color also joined them. By 1810, the population of New Orleans consisted of 1/3 white, 1/3 slave Africans and 1/3 free people of color originally from Haiti. As per the 2000 census, the poverty level in the Lower Ninth Ward was 36.4 percent with an annual income of less than $ 10,000. As per the Greater New Orleans Community Data Center (GNOCDC), 1,112 households lived below poverty line in the lower Ninth Ward. 60.8% of these had female heads with no husband with children below 18. Half of the entire population categorized as not in the labour force as they had stopped seeking jobs. (Dessauer, Armstrong)
“Businesses The commercial activities of the Lower Ninth are concentrated along the main streets: St. Claude Ave, Claiborne Ave, and Caffin Aver. The business located there are in service to the needs of its residential population. Small grocery stores, barber and beauty shops, and Laundromats comprise the bulk of the business. Only one gas station serves the area, a reflection of the fact that 30% of the households are without automobiles. Noticeably lacking in the area are fast food establishments, dining places, or bars. Schools Seven schools are located in the Lower Ninth Ward, three of them public and four private. The racial makeup of the public verses private schools in the area is a reflection of the racially segregated nature of the neighborhood. The public schools consist of 100% students of color, while in contrast the private schools are only comprised of 5- 12% students of color. The majority of the private school students reside outside of the Lower Ninth Ward. Test scores of students in the public schools of the Lower Ninth are consistently poor in comparison with those seen in both Louisiana as a whole and those of students nationally. Parks and Recreation Only one public park, the Sam Bonart Playground, is located in the neighborhood of the Lower Ninth Ward. Children typically use the playgrounds at school or play game in their front yards or the streets in front of their homes. Religious Institutions The Lower Ninth is home to a large number of churches and other religious institutions. The oldest church in the Lower Ninth is the St. Maurice church constructed in 1857. The original building still stands at the intersection of St. Maurice Avenue and Chartes Streets. Community Service Centers
The Andrew P. Sanchez, Sr. Multi-Service Center at the intersection of Caffin Street and
Claiborne Avenue houses a number of community service organizations including; Total
Community Action Lower Ninth Ward Head Start Program, The Lower Ninth Ward
Health Clinic, a Great Expectations site, the Lower Ninth Neighborhood Council’s office,
and the 5th District New Orleans Police department sub-station. The Lower Ninth is also
home to a branch of the New Orleans public library as well as a senior citizens center and
a gymnasium. (Dessauer, Armstrong)
Property Ownership and Housing Profiles of Lower Ninth Ward
The Lower Ninth Ward had the highest home ownership in the whole of city of New Orleans before Katrina struck. 60% of them were occupied by owners as against 53% in Orleans Parish. But the homes had been in a very fragile condition due to the fact of the poor condition of the owners, most of the homes having been constructed in 1950’s. Many of the homes had been under the occupation of the same owners for more than 15 years. This long term occupancy and home ownership are indicative of the people’s desire to live there permanently, though it can also indicate their inability to shift due to their poverty. The median home value was $ 52,420 in the Lower Ninth ward as against $88,100 in Parish. The low value suggests the poor maintenance of the buildings. The Lower Ninth ward which became a residence of choice for low income people in order have their own homes at a very low rate of $ 250 per house in the early 1930’s when buildings were being sold at that rate. But the buyers did not improve the houses by further investments leading to the lowly rate prior to Katrina as said above. (Dessauer, Armstrong)
“Vacancy and Physical Conditions The Lower Ninth is also characterized by a high vacancy rate. Of the 5,600 housing units in the Lower Ninth, 14% or 781 units are unoccupied. These homes were often abandoned as a result of dilapidation and unsafe living conditions and contributed to the blighted image of the neighborhood. However pre-Katrina revitalization efforts in the neighborhood were concentrated on refurbishment of these properties in an effort to return them to the occupied housing stock of the ward rather than on demolition or new construction” (. Dessauer, Armstrong)
Rebuilding New Orleans
Association of Community Organizations for Reform Now (ACORN) and ACORN Housing Corporation (AHC) together with Cornel University, Louisiana State University School of Architecture, New Jersey Institute of Technology and Prat Institute started planning rebuilding of New Orleans from September 2005 itself. The team consists of members with experience in architecture, community development, neighborhood planning, public policy and administration, urban design, and city planning. They are experienced in developing cost-effective single family homes, assembling properties, preparing construction financing, and managing construction. Besides the team members have experience in dealing with Department of Housing and Urban Development Programs (ACORN). ACORN which is a grass roots community organization of low-and moderate income families of New Orleans. Prior to Katrina, it had 9000 member families in its fold. It says that the displaced members will return without waiting for the complete infrastructure such as safety, schools, and streets to be in place as ACORN is committed to preserving and strengthening New Orleans. This will further inspire other reluctant displaced persons to return. The planning process is basically flawed in the sense there must be commitment with city, state, and federal governments to give them the required assistance.
ACORN’s recommendations are “In the battle against eminent domain, there should be no demolition without the permission of the home owner for at least one year after notification. Preserve existing housing stock. All owners of residential property should be given options for free cleaning and gutting of their properties and this should be government funded. 100% of the affordable units removed from public housing must be replaced. Ensure affordability of replacement housing. The City should use inclusionary zoning to require 25% percent of new units to be affordable by leveraging the increased revenues of developers. The residents of a neighborhood should have first priority to purchase property in their own community.All publicly owned lands and facilities, housing developments should be retained for the use of the public. Residents of adjacent neighborhoods should have the right to determine the use of vacant buildings. Affordable housing must remain affordable. Low-interest rate loans and target tax credit allocations must be made available to residents in the worst hit communities and in communities that lost the most affordable housing stock. Fast track the expenditure of CDBG and HOME funded to support affordable housing and neighborhood redevelopment. Ensure there is adequate gap financing for low-income residents who wish to return. Provide gap financing for residents who intend to rebuild using best practices for energy efficient, green, and hurricane resistant housing construction.” What do we want? … Money to rebuild our homes is a step in the right direction. We need to fight so that it happens and funds are used to rebuild our homes, not to displace African-American and other low to moderate income families from their communities.”- Maude Hurd, ACORN President” (ACORN)
Whenever a natural disaster strikes, Federal Government is expected of to take the first initiative to rescue. Before spending billions on repairs and reconstruction, it should be pondered over whether it is worth rebuilding a city after a natural disaster or for that matter an enemy strikes as posed by Hahn. (2005) While the House Speaker Dennis Hastert asked a question whether New Orleans should be rebuilt, it created a furor and he was rebuked by the former Louisiana Senator John Breaux. The economist Hahn says he was right to raise the issue. Because cost of rebuilding the city could go up to 75 billion dollars. Wall street Journal in fact had quoted twice the amount for disaster relief and rebuilding costs for the entire region. When tax payer’s money is spent on such a big project, realistic study cost-benefits must be made. The economists have made a frame work for the purpose. “.The economists’ framework provides a useful starting point: select policies that will maximize or increase net benefits—defined as economic benefits
less costs. One way of increasing net benefits is to get people to take into account
both the private and social cost of their decisions. This clearly has not been the
case in places like New Orleans, where the federal government foots the bill for a
major part of the flood protection system, subsidizes flood insurance, and hands
out cash cards after the disaster. More generally, if insurance for disasters related
to hurricanes, earthquakes, and even terrorist-prone regions is subsidized, we can
expect inefficiencies following from too many people choosing to live in high-risk
areas. Of course, sometimes the government should intervene in markets. For
example, providing some liability protection for firms manufacturing anti-terrorist
devices after 9-11 may have been sensible. But the onus should generally be on
those favoring intervention to show why the benefits are likely to justify the costs.
Toning up Benefits and Costs The first priority is to weigh the desirability of varying degrees of government commitment to restoring New Orleans (and the other Gulf coast
cities) to pre-Katrina status. Ideally, though, that assessment should be just the
beginning of a more fundamental analysis of the government’s economic response
to natural (and unnatural) disasters. The examination should, at least initially, be shielded from rough-and tumble politics by convening a non-partisan panel of experts—perhaps a National Academy of Sciences panel—to study that issue. The panel could examine
whether parts of the city might be better built elsewhere, in a place that is less
susceptible to natural disasters. This would not work well for tourists who come
to see the French Quarter. It might work fine, though, for the port facilities and
the oil and gas industry. Let me suggest two ways for experts to help the public think through the dimensions of this issue before the next disaster. First, economists could use cost benefit analysis to compare options for rebuilding, relocating, or abandoning
cities when disasters like Katrina occur. Second, they could help formulate ways
in which market tests could inform the comparisons. For example, it would be possible to hold auctions for permits that allow developers to rebuild designated parts of the city. The government could use its power of eminent domain to auction off large blocks of land that were largely destroyed by the storm. The bids from these auctions could be used to estimate the overall economic benefits from rebuilding the city. By the same token, auctions for infrastructure contracts would offer insights into what private contractors betting their own money think the new infrastructure would cost. The idea is not that far-fetched. Washington already has considerable experience in this area, auctioning rights to emit sulfur dioxide emissions and rights to use the electromagnetic spectrum for cell phones and the like. A parallel approach could be to use prediction markets modeled after
markets that now allow individuals to bet on elections—to forecast the costs of
rebuilding or the consequences in terms of increased economic output. (See, e.g.,
Wolfers and Zitzewitz in The Economists’ Voice.) Combining market and non-market estimates for benefits and costs would provide valuable information for decision makers. If, in total, the bids for permits were too low to pay for rebuilding the public infrastructure and the levees, this may be a sign that it isn’t worth doing. Of course, such markets can hardly be expected to provide perfect measures of either societal benefits or costs. For one thing, expectations of future government subsidies would affect bids. The long term economic solution to the subsidy problem is to design the subsidies so they have a minimal impact on relocation decisions and economic growth. Better yet, courageous politicians should remove them altogether. In the meantime, economists could estimate the impact of current subsidies on market prices to obtain a better estimate of the net benefits of rebuilding a city. The general impact of subsidies would be to raise bids for property, because bidders will factor in the expected windfall from the subsidies.
A potential drawback of markets is that they may not adequately take into account the preferences of future generations.1 Rebuilding New Orleans may not be worth the cost to current residents. But who is to speak for future generations in deciding how much it would be worth to our grandchildren to have an intact French Quarter to enjoy? While such considerations underscore the need to interpret results with care, they should not be show-stoppers. Economic analysis of rebuilding options could inform the policy process and make it more transparent. In the end, value judgments will inevitably need to be made by our elected leaders. We should not, however, assume that these judgments cannot change. The Dutch, who live with a system of dikes, have recently changed their strategy to reduce the human costs associated with floods. Likewise, the U.S. government
could change its strategy for rebuilding after disasters, as we learn more about
what works. Clearly, economics can’t tell us all we need to know in deciding whether
to spend billions of dollars in rebuilding a great city. Yet, the failure to frame the
issues in terms of costs and benefits leaves us flying blind.” (Hahn)
The following 10 points for an equitable renewal of Gulf Coast regions should serve as broad outline for the restoration of affordable housing to the affected residents of city of New Orleans.
“ 1 Ensure that all residents who want to return can return to communities of opportunity. Everyone who was evacuated from the region should be able to return and to have a decent living. Focus on targeting low-income housing tax credits to spread affordable housing broadly across the city and surrounding region, and set up a guiding entity to help families find housing in communities that connect residents to opportunity.
2 Equitably distribute the amenities and infrastructure investments that make all communities livable. For example, parks should be spread throughout the city; attractive, modern school buildings should be placed to serve every neighborhood; a transit system should be built or enhanced to serve all the residents of New Orleans.
3 Prioritize health and safety concerns. Rebuilding efforts should not expose residents to potential hazards like residual toxins, air and groundwater pollution, or future flooding.
4 Ensure responsible resettlement or relocation for displaced Gulf Coast residents. Adequate relocation support must be provided for New Orleans residents who wish to return to the city (but cannot and should not return to their former neighborhoods), as well as evacuees who choose not to return or cannot return to the Gulf Coast for an extended period of time. Make sure that residents are not relocated multiple times; whenever possible, provide families with choices; provide counseling for those being relocated; ensure appropriate support and transition assistance; and safeguard against exploitation by predatory lenders.
5 Restore and build the capacity of community based organizations in the Gulf Coast region and beyond. Federal, state, and local government—in partnership with the philanthropic community—must dedicate resources to enable New Orleans and Gulf Coast community based organizations to reestablish operations, actively participate in rebuilding efforts, and connect with returning residents in need of critical support. Additionally, in Houston, Baton Rouge, and other areas welcoming substantial numbers of evacuees, government resources must enhance the capacity of local community and social service organizations to provide assistance to newcomers, so that already underfunded support networks for the poor are not further diminished.
6 Create wealth-building opportunities to effectively address poverty. In addition to not concentrating poverty, the rebuilding effort should increase wealth and assets of residents through jobs that pay wages sufficient to lift people out of poverty, home ownership opportunities, personal savings, and small business development.
7 Strengthen the political voice of dispersed residents. Specifically, every effort should be made to ensure that everyone can continue to engage in the voting process. Residents of color, whether returning to the Gulf Coast or settling permanently in other regions, must continue to have representation that serves their interests and needs.
8 Create a system for meaningful, sustained resident oversight of the $200 billion investment that will be implemented by private development corporations. Community benefits agreements and local oversight policies can ensure “double bottom line” investments that offer financial return to investors while also building social capital and healthy, vibrant communities.
9 Leverage rebuilding expenditures to create jobs with livable wages that go first to local residents. Make investment in massive job training for those who need such assistance to qualify for jobs. Rebuilding efforts should also build assets for residents and small businesses—not simply siphon opportunities to non-local corporate interests.
10 Develop a communications and technology infrastructure that provides residents with the means to receive and share information related to community building, support services, and access to jobs, transportation, and temporary and permanent housing, and that strengthens public will for the changes that will be required for short-term and long-term efforts to rebuild Gulf communities and lives. Online communications systems can supplement and fill gaps in mainstream media coverage of the equity implications of rebuilding New Orleans and serve simultaneously to inform and engage by providing evacuees and advocacy networks dispersed across the country, as well as the general public, opportunities to organize and take action online.”(Policy Link)
Having seen the pre and post Katrina status of New Orleans, one is forced to ponder over the economics of the decisions on rebuilding the city only to be struck by another disaster to strike in such vulnerable areas. If there are no spaces around, well it could be said that there are no other choices. Or if the place is of economic importance like a source of rich natural resources and sea transportation, other than tourism, the rebuilding may be worth the money spent. New Orleans though housing a major port has only attracted low-income people to settle in as it was the only affordable place for them. The fact that there were no appreciable construction and industrial enterprises, would point out that there cost-benefits have not encouraged the entrepreneurs to start big projects. Elsewhere in this paper, it has been mentioned that it may take another 40 years to reach Pre-Katrina levels as far as housing is concerned if only 500 housing were to be added every year, given the poor availability resources and shortage of labour for reconstruction at affordable rates.
Yet another issue that has arisen in the wake of Katrina strike at New Orleans is the purpose of Federalism going by the reports that Federal Government did not take the initiative suo-moto for rescue operations. It was waiting for the State Government to make a request called ‘Pull’ to render necessary ‘push’ by dispatching requires assistance in the form of men and materials. The fact that in spite of the repeated fervent appeals by the Louisiana State Governor and Mayor of New Orleans to the Federal Government, it did not immediately respond is another story. However the fact remained that Federal Government could invoke emergency provisions and render necessary assistance by pooling all the resources at its disposal in times of emergency situations such as this without waiting for State Government to make a request. Some time it might be the case that State Government might not have been in a position even to make such a request. It should be pointed out the U.S. was the first country to rush assistance to Indonesia when Tsunami struck in 2004. It is ironical therefore the same Federal Government did not respond immediately to the emergency situation at New Orleans.
“Federalism impedes the government’s ability to plan for and respond to emergencies. Emergencies often transcend federalist divisions of power and responsibility, rendering unclear which level of government should respond. Though many emergencies require a coordinated response by local, state, and national government, getting different levels of government to work together in times of crises is difficult. Even when states and localities call for outside assistance, they resist undue federal interference in their affairs; a national government that lacks experience working with local actors on the ground can find it difficult to implement relief programs. Hurricane Katrina, causing extensive damage in the Gulf Coast region in August of 2005, vividly illustrated how federalism undermines an effective response to emergencies. with deadly results. Despite years of emergency planning in the wake of the terrorist attacks of 9/11, and ample warning in the days preceding Hurricane Katrina that it would cause
widespread destruction, no government. national, state or local. adequately prepared vulnerable communities. After Katrina struck, the governmental response was inept. Local governments in New Orleans and other towns were overwhelmed, unable even to communicate with their personnel on the scene. State governments found their resources stretched to breaking point. The national government, cautious about appearing too proactive, delayed its response until specifically asked to help. Federal and state personnel, unaccustomed to working together, mounted independent responses to the hurricane’s aftermath and operated without the benefits of a single command structure. State officials rebuffed federal requests to assume overall control of the response efforts. While people perished, officials argued about who was actually in charge. Future emergencies. an unwarned detonation of a crude nuclear device in an American city, for instance. could easily dwarf Katrina’s impact. Given the widely-recognized failures of the government’s response to Katrina and the urgent need for reform, some federal officials have proposed a dramatic solution: in a future emergency, rather than try to
work with state and local response personnel, the federal government should simply deploy the military to take over the relief effort. Over opposition from every state governor, in October 2006, Congress passed a bill giving the President authority to deploy military forces to states and localities following a natural disaster or other emergency where specified federal interests are put at risk. Though this new law is not a wholesale authorization to use military resources in times of emergencies, critics
contend that any domestic deployment of soldiers undermines civil liberties.”(Mazzone)
The Katrina lessons should be a guidance for the country to deal with future emergencies. Now having come midway in the rebuilding efforts in New Orleans there can be no going back for economic or any other reasons, though one study says it may take another forty years for the complete restoration of pre-Katrina levels of housing facilities in the city of New-Orleans. It is felt that economics of decisions and spending tax payers’ money without forethought are all the policies of short sightedness in the wake of current thinking on Globalization and on humanitarian grounds, viewing the world as one Global village. and reaching assistance to Indonesia during Tsunami strike which was not based on economics. If New Orleans is a place of choice for millions, then it should be respected and their aspirations fulfilled even at a fraction of cost of the tax payers elsewhere.
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Based in part on documents created by the reading group on New Orleans, Fall 2005 January 18, 2006
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