A lthough it has been a year since Hurricanes Katrina and Rita blasted across the Gulf Coast, the scale of the devastation they inflicted remains stunning. In Louisiana, the wind and waters destroyed or heavily damaged more than 123,000 owner-occupied homes and 82,000 rental units. In Mississippi, Katrina destroyed or severely damaged 65,000 homes. Total housing repair costs in Louisiana alone may climb as high as $32 billion. Although the metropolitan area of New Orleans as a whole has recovered a large portion of its pre-Katrina population, Orleans Parish still struggles to achieve half of its pre-Katrina population. A severe housing shortage still chokes the regional economy.

The reality on the ground is both better and worse than these statistics. The situation is better in that individuals are putting their lives back together by rebuilding homes and businesses in many areas. Conditions are worse in that a drive through many of the flooded neighborhoods still reveals block after block and mile after mile of damaged homes, shuttered stores, silent streets, and empty sidewalks.

What is being done to rebuild—particularly in Louisiana, the state that suffered by far the most extensive damage and where the chances of a complete recovery often have seemed the most uncertain? Some have focused on rebuilding the region’s health care delivery system. Others struggle to reinvent public education and restructure local governments. But the single most urgent and yet daunting task is to rebuild the region’s housing stock.

Three major plans have been launched to date to respond to this pressing need: an ambitious congressional plan that gained early support but never came to pass; a Mississippi program that has gained federal support and is now being implemented; and a Louisiana plan that has now gained federal approval and funding and that will begin to be implemented in September 2006.

The Baker Bill

The first of these plans sought to tackle the housing crisis in Louisiana specifically. It came in the form of a congressional bill introduced by Baton Rouge Congressman Richard Baker in late October 2005, Louisiana Recovery Corporation Act, H.R. 4100, 109 Cong. (2005). Dubbed “the Baker Bill,” H.R. 4100 proposed to create a new federal agency, the Louisiana Recovery Corporation (LRC), modeled on the former Resolution Trust Corporation, which would supervise a massive property buyout program.

The Baker Bill was born out of the fear that many Louisiana homeowners would not have enough capital to rebuild their heavily flooded or damaged homes and would be unable to pay their mortgages. This situation would force banks to foreclose on thousands of homes whose post-hurricane value had plummeted. As it turns out, this wave of mass foreclosures (and potential bank insolvencies) has not yet materialized—and probably never will—for a variety of reasons. First, most banks, as required by the National Flood Insurance Program (NFIP), 42 U.S.C. § 4012a (2000 & Supp. 2003), made home loan borrowers purchase enough flood insurance to cover all or most of the value of outstanding loan balances secured by homes in flood zones. In addition, even when homes were not adequately insured against flooding, many banks and government-sponsored agencies holding or packaging mortgages on the secondary market (Fannie Mae, Freddie Mac, and Ginny Mae) have implemented generous payment forbearance programs to avoid foreclosures. See Mary Judice, Lenders Try Not to Foreclose in New Orleans, N.O. Times-Picayune, Feb. 21, 2006, available at www.nola.com/news/t-p/frontpage/index.ssf?/base/news-5/1140505517288820.xml.

This fear notwithstanding, the Baker Bill’s core provision was its call for the LRC to buy damaged property (both residential and commercial) by offering to pay owners at least 60% of their pre-storm equity and mortgagees 60% of their outstanding mortgage balances. The total payment per property was capped generously at $500,000. Although the bill indicated that homeowners would not be allowed to receive “economic windfalls,” it was not clear how the LRC was supposed to account for insurance proceeds in making its buyout offers or whether it would penalize those who were uninsured.

This idea of splitting buyout funds equally between homeowners and lenders was a central tenet of the Baker Bill. Without such an equitable split, proponents feared that many homeowners would receive little or none of the buyout benefit because proceeds would go straight to lenders’ pockets if homeowners had substantial mortgage balances. It was assumed—reasonably or not—that lenders would react favorably to this forced equitable division of buyout proceeds.

This idea of splitting buyout funds equally between homeowners and lenders was a central tenet of the Baker Bill.

Another key aim of the Baker Bill was land assembly. Congressman Baker believed that private developers would not invest in major housing projects unless an intermediary acquired lots from individual owners, assembled them into larger parcels, tore down damaged structures, removed debris, and cleaned up any environmental contamination. Yet, if all these tasks were accomplished by the LRC, Baker contended, it could sell the larger reconditioned parcels to developers and thus partially pay off the federal bonds that would be sold at the outset to fund the entire effort. Thanks to the backlash over Kelo v. City of New London, 125 S. Ct. 2655 (2005) (the Supreme Court’s controversial eminent domain case), H.R. 4100 promised to accomplish its land assembly work without using eminent domain.

One more intriguing element was the bill’s proposal to offer homeowners “a right of first refusal and option to purchase an interest in real property of comparable size and location in redeveloped areas.” Although it was not clear how these indefinitely defined rights would have been squared with Articles 2620 and 2625 of the Louisiana Civil Code, which impose requirements of a certain price, object, and time period for options and rights of first refusal, the intention was admirable—to give homeowners with no practical alternative but to sell some way of eventually returning to their communities.

Although the Baker Bill gained broad bipartisan support in Louisiana and cleared the U.S. House of Representative’s Financial Services Committee in the middle of December by a 50–9 vote, it soon stalled in the Senate Banking Committee. Key senators and the Bush Administration voiced concerns not only about the total cost of the program (estimated to run near $12 billion for the buyout alone) and the uncertain prospects for a return on investment, but also about a vast new federal agency that could well have become the largest landholder in the region. In late January, President Bush officially withdrew the Administration’s support for the plan, permanently dooming its prospects.

The Emergence of the State/CDBG Alternative

Although disappointment in Louisiana over the Baker Bill’s demise was intense, Louisiana leaders responded in February by putting together a plan that has now emerged as Louisiana’s “Road Home Housing Programs.” See www.lra.louisiana.gov/assets/april26/HousingActionPlanAmendment042606.pdf (last visited June 3, 2006). This plan received final approval from the Louisiana Recovery Authority, the agency in charge of the state’s recovery efforts, in late April 2006 and gained approval from the Louisiana legislature and HUD in May 2006. Curiously, in the vacuum left after the Baker Bill’s support collapsed, Louisiana leaders looked across state lines for a new model and found one in Mississippi’s “Hurricane Katrina Homeowner Assistance Program,” a plan that had been endorsed by the Bush Administration and its Gulf Coast Recovery Coordinator, Donald Powell.

Unlike the Baker Bill, which proposed to sell Treasury bonds to finance its ambitious buyout program, the Mississippi and Louisiana recovery plans will use portions of $11.5 billion in Community Development Block Grant (CDBG) funds, which were initially distributed by Congress to states affected by Katrina and Rita through the Department of Defense Appropriations Act of 2006, Pub. L. No. 109–148, 119 Stat. 2680, 2779–80 (2005). Although Mississippi suffered only a third of the total housing loss that Louisiana experienced and much less damage overall, the Appropriations Act precluded any single state from receiving more than 54% of its overall allocation. This meant that while Mississippi received $5.058 billion of the initial CDBG disbursement, Louisiana received only $6.2 billion. See Allocations and Common Applications and Reporting Waivers Granted to and Alternative Requirements for CDBG Disaster Recovery Guarantees, 71 Fed. Reg. 7,666 (Feb. 13, 2006).

This disproportionately favorable treatment of Mississippi in the end led Louisiana officials to demand an additional $4.2 billion in CDBG funds to fully fund its housing assistance plan. In early June, Congress and President Bush agreed to provide the additional requested funds, so now the Road Home is fully funded as planned by the LRA.

Mississippi’s Plan: Compensation for Covenants

Mississippi’s Homeowner Assistance Program, which will spend $3.4 billion of the state’s $5 billion in CDBG funds, is primarily a compensation program for homeowners who resided outside the floodplain. See Mississippi Development Authority Partial Action Plan, Final Plan, available at www.mshomehelp.gov/approved_ap.pdf (last visited June 4, 2006). Once the program determines who is eligible for assistance and calculates a damage award, the Mississippi Development Authority will simply write checks that leave homeowners with broad discretion to use the funds as they see fit. In return it will demand only that recipients encumber their property with covenants to ensure that improvements are insured against flood loss in the future, that new structures meet stricter building codes, and that structures be raised to new base flood elevations established under the NFIP. In short, one can characterize the Mississippi plan as a grand compensation and covenant purchase plan.

Under Mississippi’s plan, eligibility is limited to homeowners living in four coastal counties who owned and occupied their homes on August 29, 2005 (the date Katrina made landfall), who maintained homeowners’ insurance on their homes, and, most significantly, who lived outside the pre-Katrina designated floodplain but suffered flood damage as a result of Katrina. In other words, Mississippi’s goal is to compensate homeowners who were supposedly caught off guard by Katrina’s storm surge because they had relied on NFIP guidelines and thus had not purchased any flood insurance or were substantially underinsured. Mississippi currently estimates that 26,800 of its otherwise insured homeowners fall into these two categories (19,000 without any flood insurance and 7,800 underinsured). Id. at 4.

Mississippi has not yet announced plans to aid homeowners who either lived inside the pre-Katrina flood zones but were uninsured or underinsured for flood losses or who lived inside the flood zones but above base flood elevations (and thus may not have obtained insurance) and yet also suffered flood losses. By defining its pool of eligible homeowners in this relatively strict manner, Mississippi can offer a fairly generous compensation grant package geared toward replacing these specific uninsured flood losses.

Mississippi will calculate grant amounts by first taking the home’s pre-Katrina insured value and multiplying this value by the percentage of damage the home suffered (as determined through an on-site inspection or by a previous SBA or FEMA assessment). It will then deduct any FEMA grants, homeowner’s insurance proceeds or NFIP insurance proceeds, or any SBA loans received by the homeowner. The program will then award either this sum or $150,000, whichever is less.

The only temporary limitation on the use of grant funds will arise if a home is subject to a mortgage. In that case, Mississippi will co-pay both the homeowner and mortgage holders and deposit the funds into an account for the homeowner’s use. Once any arrearages are satisfied, however, any remaining funds must be released by the mortgage holders and can be directed for any use the homeowner desires.

Unlike the Baker Bill, Mississippi’s plan is not a buyout and land assembly plan. Rather than take title to the affected homes, Mississippi will require only homeowners who receive grants to waive claims against the state or federal government, assign any unresolved insurance claims to the state, and, most importantly, create the future flood insurance, building code, and flood elevations covenants on the affected property. The plan does not detail who will be able to enforce these covenants (presumably it will be the state) or what remedies could be sought for breach of these covenants. Presumably, these details will be resolved at a later date or through litigation.

Finally, it is noteworthy that Mississippi has not yet made plans for direct assistance to owners of rental property or renters, although it just recently announced a plan to use $100 million of its CDBG funds to rebuild destroyed and seriously damaged public housing along the Gulf Coast. Although the state promises to address other housing needs in future plans, Mississippi could face problems down the road if housing activists challenge the program for failure to comply with the Housing and Community Development Act of 1974, 42 U.S.C. § 5301 et seq. (2003), the legislation that authorizes CDBG programs. This Act normally requires that 70% of aggregate federal CDBG spending be directed toward moderate- and low-income populations (see id. §§ 5301(c), 5304(b)(3)(A)), but Congress and HUD have lowered this threshold to 50% for states affected by Hurricanes Katrina and Rita in light of the unprecedented scope of damage. Pub. L. No. 109–148, 119 Stat. 2680, 2779–80 (2005); 71 Fed. Reg. 7,666–67 (Feb. 13, 2006). Mississippi has reportedly sought waivers from this 50% target as well.

Louisiana’s Plan: Options, Escrows, and Incentives

In contrast to the Mississippi plan, Louisiana’s Road Home Homeowner Assistance Program could be characterized as an escrow and incentive plan. This program will use $6.347 billion for direct homeowner assistance and another $1.535 billion for the restoration of rental housing. After determining initial eligibility and calculating how much each homeowner is entitled to receive, the Homeowner Assistance Program proposes to offer three tiers of assistance through one of four options. The three tiers are broken down into a direct “incentive grant” tier (actual cash), a “hazard mitigation grant tier” (funded through the federal Stafford Act and other CDBG funds), and an “incentive loan” tier to help eligible homeowners get into a home if the above tiers of assistance are insufficient and they are otherwise unable to obtain conventional financing.

The four options, the key to the Homeowner Assistance Program, are theoretically structured to provide incentives for homeowners to remain in Louisiana. Under option one or two, eligible homeowners can obtain a grant of up to $150,000 to assist in repairing or rebuilding a damaged or destroyed home on its original site. In addition, homeowners who want to sell their homes on the open market will be able to assign their repair and rebuilding assistance rights under these options entitling the assignee to receive the same grant assistance the assignor could receive, subject to a three-year owner occupancy requirement.

Under option three or four, homeowners would sell their homes to the LRA and receive a grant of up to $150,000 to relocate. Under option three, if homeowners agree to relocate somewhere in Louisiana, they can receive the same size grant that they could receive under option one or two and also remain eligible for a hazard mitigation grant (tier-two assistance) and an incentive loan (tier-three assistance) as long as the recipients remain in their new Louisiana homes for three years. Homeowners choosing option four will have no obligation to remain in Louisiana, but will not be eligible for tier two or tier three assistance.

Interestingly, two elements of the Baker Bill now have resurfaced in the final version of the Homeowner Assistance Program in conjunction with these last two options, apparently because of lobbying by Congressman Baker and others. First, the LRA suggests that it may ask lienholders to write off a portion of the current principal balance of a loan or lien or take into account the possibility that owners may lose equity if they relocate or sell out. Whether mortgage holders would be amenable to these “requests” or how the LRA might induce participation in these loan balance reductions remains to be seen.

Second, the Road Home plan now acknowledges that if many Louisiana homeowners take advantage of option three or four, the LRA will be presented with a significant opportunity to perform the land assembly and banking functions targeted by the Baker Bill. The latest version of the Road Home thus commits the state to redevelop and return property acquired through the program to commerce or preserve it as green space. Although there was considerable debate this spring about whether these land assembly and banking functions should be performed at the state or local level, the Louisiana legislature eventually created a new nonprofit entity to be called the Louisiana Road Home Housing Corporation, whose purpose will be to receive and dispose of the properties acquired by the LRA. 2006 La. Acts 654. The enabling legislation does not preclude this state-controlled entity, however, from transferring bundles of property to local entities for redevelopment decisions. Responding to public comments of housing advocates, the LRA also has committed to use 25% of these properties acquired through options three and four for affordable housing according to HUD guidelines.

In general the Road Home Homeowner Assistance Program can be characterized as an escrow plan because under options one through three, the LRA would deposit the grant funds into an escrow account administered by a bank. The bank would then distribute funds for approved repair, rebuilding, and relocation costs. Only the fourth option (to sell and relocate outside Louisiana) would employ a true buyout or compensation model like the Baker Bill or Mississippi plan, under which a homeowner would receive a check with no restrictions on the use of funds.

Eligibility Requirements for Homeowner Assistance Program

To participate in the Road Home Homeowner Assistance Program, a Louisiana homeowner must satisfy eligibility criteria. First, as with Mississippi’s program, the homeowner must have occupied the property as a primary residence at the time of the Katrina or Rita disasters. Second, the property must have been a “single unit” or “double unit” structure, meaning either a traditional single-family home or a structure such as the ubiquitous New Orleans double shotgun, which housed both the owner and one additional rental unit. In the case of a double, the entire structure will be used to calculate the amount of assistance up to the $150,000 cap. For all other owner-occupied, multi-unit structures, if an owner-occupant seeks assistance under the Homeowner Assistance Program, funding will be available only up to the $150,000 cap based on an analysis of the unit in which the owner resides. An owner wanting assistance in repairing or rebuilding other units will be able to seek gap financing, like other small-scale landlords, in the form of deferred payment, due on sale, 0% interest loans. These loans under the Road Home Small Rental Property Repair Program range from $25,000 to $75,000 per unit, with the larger loans being contingent on agreements to offer lower rents affordable to families of moderate to low incomes.

Next, just as in Mississippi, the owner must have successfully registered for individual FEMA assistance. Because of concerns that the FEMA registration process was flawed or difficult to access for many individuals (especially recent immigrants and those with low incomes), an appeal process will be available for those who failed to register or were denied FEMA assistance. Further, the applicant’s home must have been categorized by FEMA as having been “destroyed” or having suffered “major” damage, meaning that the homeowner qualified for at least $5,200 in FEMA home repair assistance.

Imitating Mississippi’s plan, the Road Home Homeowner Assistance Program will require homeowners choosing options one through three to sign a “legally binding covenant” obligating them to


• ensure that their newly repaired, rebuilt, or purchased home complies with the state’s new Uniform Construction Code and complies with the latest available FEMA guidance for base flood elevations, unless the LRA grants exceptions to this guidance (see box, “Shrinking a Great City’s Footprint: From Green Dots to Houses on Stilts,” on pages 54-55), for a discussion of the base flood elevations);

• maintain residential hazard insurance and flood insurance if the home was previously flooded or is located in a flood zone;

• agree to subrogate insurance claims back to the program;

• if relocating, move to another home in Louisiana;

• ensure that hazard mitigation is undertaken if feasible and funds are available; and

• assure that the home will remain owner occupied for at least three years after the completion of its repair, rebuilding, or purchase.


According to the LRA, penalties for failure to comply with any of these requirements could range from forcing repayment of the incentive grant to forfeiture of one’s home. Unlike in Mississippi, however, there is no indication that these “legally binding covenants” are intended to run with the land and bind future property owners. If this were the LRA’s intention, the “covenants” probably would be unenforceable under the law because the Louisiana Civil Code only allows permanent affirmative obligations to be imposed under building restriction regimes that involve general subdivision plans. See La. Civ. Code Ann. arts. 651, 775–78 (West Supp. 2006).

The LRA’s latest Road Home action plan also warns that if “a high proportion” of homeowners in some areas decide not to repair or rebuild their homes, then “state or local authorities may limit access to Buyout/Relocate and Sell Programs.” The LRA seems to be reserving some unspecified land use planning authority to declare certain areas off-limits for future development, even though the quantitative cutoff point for such a grave decision is not clear.

Grants Under the Road Home Homeowner Assistance Program and the Moral Hazard Penalty

Calculating the amount of an incentive grant under the Road Home Homeowner Assistance Program is fairly straightforward. As in Mississippi, the value of an incentive grant cannot exceed $150,000. If a homeowner chooses options one through three, the LRA will first determine the pre-storm value of a home by using an undetermined appraisal technique (perhaps Automated Valuation Methods (AVM), insured value, a recent pre-storm appraisal, or assessed value for property taxes). Next, if a house is declared more than 50% damaged by local authorities and found to have suffered “severe” damage by FEMA, the LRA will consider the house to have been totaled, and the grant will be based on the pre-storm value, less any flood or homeowner’s insurance proceeds and any FEMA or other repair assistance received by the applicant. A house with less than 50% damage will be inspected to determine the cost of repairs, and that estimate, minus any insurance, FEMA, or other repair awards, will determine the amount of the grant.

If the homeowner failed to acquire applicable insurance—for example, if the homeowner lived in a floodplain but failed to acquire a flood insurance policy—the LRA will further reduce an incentive grant by 30% for homeowners choosing options one through three. This 30% penalty responds to a classic moral hazard problem—the concern that people who are spared the consequences of unwise decisions will have no incentive to make better decisions in the future.

The moral hazard problem presented by Katrina, however, is complicated by the fact that many homeowners who did not acquire any flood insurance may have had compelling reasons not to do so.

The moral hazard problem presented by Katrina, however, is complicated by the fact that many homeowners who did not acquire any flood insurance may have had compelling reasons not to do so. For instance, elderly homeowners or those living on fixed or modest incomes who owned their homes free and clear of any mortgages—either because they were paid off long ago or the property was inherited—may have been unable to afford the premiums. Many others with more means may have relied on the advice of people they trusted—previous owners, real estate agents, insurance agents, and neighbors—who told them flood insurance was unnecessary because the home and others in the area had never suffered serious flooding in the past. Still others may have relied, reasonably or not, on the implicit representation of the U.S. Army Corps of Engineers that an adequate flood control system existed for the region. Thus, although they may have understood they were exposed to some risk of flooding from rain, they may have reasonably assumed their homes were protected from a catastrophic flood caused by a hurricane. The LRA’s decision to apply this 30% moral hazard penalty aims to strike a rough balance between completely condoning an uninsured homeowner’s lack of self-protection and recognizing the excuses some homeowners may have had—reasonable or not—for failing to insure adequately.

It should be noted, though, that despite early attempts of some national leaders (such as Speaker of the House Dennis Hastert) to characterize victims of Katrina’s floodwaters as irresponsible, residents of the New Orleans region generally were active participants in the NFIP and thus were, all things considered, reasonably well-insured. Before Katrina, Louisiana had the highest level of NFIP participation of any state in the nation. According to a survey conduct by Donald Powell’s Gulf Coast Recovery office, 64.4% of the Louisiana homes that sustained hurricane-related flood damage in 2005 were covered by flood insurance. Jeffrey Meitrodt & Rebecca Mowbray, After Katrina, Pundits Criticized New Orleans, N.O. Times-Picayune, Mar. 19, 2006, available at 2006 WL 4559110. In New Orleans, the record of participation is even stronger as 67% of homeowners in the greater metropolitan region were participants in the NFIP. Of the 15 counties or parishes in the country with the highest levels of participation, five are from the metropolitan New Orleans region, with Jefferson Parish (New Orleans’s biggest suburb) having the highest percentage of participation in the entire country. Id.

Grants for Those Who Won’t Come Home Again

If an eligible Louisiana homeowner chooses option four—sell and relocate out of state with no other obligations—the calculation is a little different, but the value of the basic incentive grant may end up being the same as option three in most cases. Under the LRA’s most recent action plan, the program will take 60% of the home’s pre-storm value, deduct insurance payments, FEMA repair assistance, and other assistance, and then give the homeowner either this amount or the incentive grant he or she would otherwise be eligible to receive, whichever is less. Because this move-away penalty would be deducted off the top and in lieu of the moral hazard penalty, it could, if applied strictly, perversely penalize partially insured homeowners for moving out of state while leaving completely uninsured homeowners with the ability to leave Louisiana without a penalty (a free pass out of state).

Perhaps realizing the inequity of such a result, one version of the LRA’s most recent presentation of hypothetical cases under the Homeowner Assistance Program does not apply the move-away penalty so ruthlessly. According to these samples, the LRA will not deduct insurance payments and other assistance from the sum produced by taking 60% of a home’s pre-storm value. This calculation would make the incentive grant for which the homeowner would otherwise be eligible under options one through three equal to the guaranteed minimum amount of any award under option four. The only real penalty that homeowners would apparently suffer for choosing option four is that they will become ineligible for a hazard mitigation grant or an incentive loan assistance that might have brought them closer to becoming completely whole had they elected to remain in Louisiana. Another more recent version of sample benefit scenarios, however, does deduct insurance and FEMA awards after imposing the 40% move-away penalty for insured homeowners leaving the state and also imposes the 30% moral hazard penalty on top of the move-away penalty for uninsured homeowners relocating elsewhere. At a minimum, it is clear that Louisiana’s decision to use the Road Home to encourage citizens to remain in the state has complicated implementation of its housing recovery plan.

Those Who Will Be Helped the Most

In the end, the biggest beneficiaries under the Road Home Homeowner Assistance Program will be owners of modest or substantial homes that suffered extensive damage but were completely uninsured or, as was often the case, significantly underinsured.

In the end, the biggest beneficiaries under the Road Home Homeowner Assistance Program will be owners of modest or substantial homes that suffered extensive damage but were completely uninsured or, as was often the case, significantly underinsured. When the Road Home plan is compared to the Baker Bill, which would have provided potentially larger buyout packages to even the most prosperous homeowners who were caught underinsured because their homes’ values substantially exceeded their flood insurance policy limits, the LRA’s plan can be characterized as a modest, measured, and yet meaningful attempt to help those homeowners who would otherwise face serious financial loss as a result of the levee breaks and flooding induced by Katrina. In essence, it replaces uninsured flood losses. As one New Orleans city councilwoman put it recently, “it is not lagniappe.”

The Nuclear Option: Suits to Block the Road Home

There is one potential obstacle to the Homeowner Assistance Program coming to fruition. By rejecting the Baker Bill and channeling Louisiana and Mississippi recovery efforts into the CDBG funding program, the Bush Administration has set up a potential conflict that it (and perhaps federal courts) will have to manage in the coming months. The conflict stems from the requirement in the Housing and Community Development Act of 1974 that 70% of aggregate CDBG assistance be distributed to persons of low and moderate income. See 42 U.S.C. §§ 5301(c), 5304(b)(3)(a) (2000). Although Congress and the Secretary of HUD have reduced this 70% requirement to 50% for purposes of hurricane recovery efforts, giving states like Mississippi and Louisiana greater freedom in the design of their disaster recovery programs, Pub. L. No. 109–148, 119 Stat. 2680, 2779–80 (2005); 71 Fed. Reg. 7,666–67 (Feb. 13, 2006), low-income housing advocates may still file suit in federal court soon to block implementation of the program. (In fact, an informal complaint on these grounds was filed with HUD in June.) They will claim that Louisiana’s Road Home does not meet even this lowered 50% threshold because so much of its spending is directed at homeowners rather than renters and because no mechanism is in place to assure that more than half of the Road Home assistance will reach low- to moderate-income populations.

Cognizant of this threat, the Road Home plan now promises to hire an independent firm to monitor the state’s efforts to achieve the community outreach and low- to moderate-income benefit thresholds of the Housing and Community Development Act and accompanying HUD regulations. Just as Mississippi reportedly has done, Louisiana also may seek additional waivers of these requirements. If such a suit does come to pass, however, it would take a remarkably strong willed judge to block implementation of the Road Home plan completely, because so many individuals stand to benefit from the program and are waiting, with increasing impatience, for those benefits to begin to flow.



Shrinking a Great City’s Footprint: From Big Green Dots to Houses on Stilts


By John A. Lovett


On January 11, 2006, New Orleans Mayor Ray Nagin’s Bring New Orleans Back (BNOB) Commission issued a controversial urban planning report entitled, “Action Plan for New Orleans: The New American City,” available at www.bringneworleansback.org/Portals/BringNewOrleansBack/Resources/Urban%20Planning%20 Action%20Plan%20Final%20Report.pdf. The plan seemed to call on what was once the “Queen City of the South,” one of the most beloved cities in America, to shrink its geographic footprint dramatically. Although the plan was praised by some for its visionary emphasis on denser, inner-city redevelopment and its focus on the latest in urban planning techniques such as light rail rapid transit lines, interlocking green spaces, and pedestrian-friendly, mixed-use neighborhoods, it was condemned by residents of some of the most heavily flooded areas of the city as a vast gentrification plan. The plan was seen as a way to rid the city of its poorest and most heavily African-American neighborhoods.

Among its many controversial elements, such as calling for a temporary moratorium on new building permits, by far the most controversial was the insistence that neighborhoods themselves prove their future viability in a remarkably brisk four-month planning process. A neighborhood would have to demonstrate that some sizeable percentage of its residents (perhaps half) were returning. See id. at 12. If neighborhoods could meet this challenge, they would merit new infrastructure and investment. If they could not, they would have to wait much longer for reinvestment to occur or—worse yet—perhaps just fade away or turn into parks or drainage basins. For desperate local residents starved for actual details of a plan and a sense of what their future held, this last specter—their neighborhoods fading into green spaces—was symbolized by large green dots on one of the few relatively detailed maps in an otherwise undetailed report. See id. fig. 30.

What happened to the big green dots? The urban planner in charge of the infamous BNOB report, John Beckman, now admits they were a big mistake. He says they were never intended to be actual representations of future park sites, being only vague suggestions of which areas in the city might profit from having additional green space. The neighborhoods were supposed to control those decisions. See David Winkler-Schmidt, Call to Action, Gambit Weekly, Mar. 14, 2006, available at www.bestofneworleans.com/dispatch/2006-03-14/cover_story.php.

What about the city’s footprint and urban planning citywide? The BNOB plan sparked many neighborhoods to organize on their own to defend their viability. New neighborhood associations formed. Older ones became revitalized. Hundreds of people packed church and school halls and spent hours upon hours trying to figure out how they could contact their neighbors and obtain commitments to return home. With the help of professional volunteers from leading planning firms and universities around the country, they sketched out neighborhood redevelopment plans.

In the end, though, the city’s ability to coordinate and take advantage of this flurry of grassroots planning activity remains in doubt. Only recently has the funding necessary to support the city’s role in the planning efforts materialized thanks to several foundation grants. And only recently have all the players—the mayor, the city council, the LRA—agreed on a process for producing a Unified New Orleans Neighborhood Plan, a kind of master plan to guide rebuilding efforts. Further, Mayor Ray Nagin had made it clear that he has no intention of declaring any neighborhood of the city off limits for redevelopment, even though many still question whether the city in the long run will be able to afford restoring the full range of municipal services to all of its pre-Katrina neighborhoods.

Instead, the future shape and direction of the city may be determined less by urban planners than by scientists, engineers, and policymakers working on FEMA’s new flood maps prepared as part of the National Flood Insurance Program. These new maps will not be finalized until 2010 at the earliest because of the complexity of drawing flood maps for Southeast Louisiana’s intricate topography, hydrology, and flood protection systems. Recognizing that property owners cannot wait four more years to make rebuilding decisions, FEMA has recently published Advisory Base Flood Elevations, which will go a long way toward shaping the direction and nature of rebuilding in the region.

Although the advisories do not have the force of law, they will be a crucial factor in determining the plans of many residents whose homes were damaged or destroyed by Katrina. The Louisiana Recovery Authority, the state agency in charge of recovery efforts, has made it clear both that local parishes must adopt the advisories for their residents to be eligible for the Road Home Homeowner Assistance Program and that individual homeowners who seek assistance to repair, rebuild, or relocate in the state must comply with these advisories, unless a specific waiver is granted for a particular area.

Unfortunately, the actual meaning of the advisories is somewhat confusing and open to interpretation. Although the advisories do not actually change the base flood elevations (BFEs) established for the area in 1984, FEMA nevertheless recommends that any homes that suffered substantial damage as a result of Katrina flooding (more than 50% of the pre-storm value) be raised or rebuilt to an elevation equal to the existing 1984 BFEs or three feet above ground, whichever is higher, until the U.S. Army Corps of Engineers can certify that it has completed a substantial upgrade of the flood protection levees around the affected areas. The Corps’ levee reconstruction and certification work is ongoing, so it remains to be seen when the additional three-foot elevation recommendation will be lifted.

As a result, homes that were not substantially damaged and were built before 1984 remain grandfathered into the NFIP program and their owners remain eligible for subsidized flood insurance at reduced rates. Owners of homes that suffered more than 50% damage, however, face an agonizing set of choices. If the amount of damage they suffered is not too far above 50%, they can appeal the initial FEMA damage assessment of their properties and seek to have it lowered below the 50% cutoff. A substantial number of homeowners have chosen this path. The city has resolved doubt in such cases in favor of appealing homeowners, so that many such borderline homeowners have obtained building permits and are rebuilding on site—sometimes by raising their homes on piers, sometimes by rebuilding their slab-on-grade houses as they were.

Others whose homes suffered far more than 50% damage face the difficult choice of either walking away from their homes by taking the Road Home Homeowner Assistance Program’s relocate or sell options, or investing their insurance proceeds and whatever grants or loans they obtain from the state in new homes that in many cases will have to be elevated six, eight, or even ten feet above ground. Although FEMA and the LRA plan to make mitigation grants of up to $30,000 available to homeowners to raise homes for precisely this purpose, it still may be economically unfeasible to raise many homes that were built on slab foundations before 1984 high enough to meet these new standards. As a result, the heavy cost of compliance with the advisory BFEs may relegate many homeowners to option three or four under the Road Home Homeowner Assistance Program—relocate elsewhere in Louisiana or sell out completely.

Rather than waking in the night with visions of big green dots on a fuzzy map, many Louisiana homeowners now lie awake at night wondering if they will be able to raise their homes high enough off the ground.



John A. Lovett is an associate professor at the Loyola University New Orleans School of Law .

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