HUD roadblock for Road Home: Rebuilding vs Compensation
photo by “goldberg”
When the Citizens’ Road Home Action Team (CHAT) was formed, one of their first actions was to advocate for a “greater-than” grant award formula, i.e. the greater of the estimated cost to rebuild and the pre-storm appraisal, up to the $150,000 cap (CHAT resolution #4.2). They were told in no uncertain terms that the “lesser-than” formula was not negotiable because of HUD’s requirements for “rebuilding” programs vs. “compensation” programs. (The following is my own take on the rebuilding/compensation matter, not speaking on behalf of CHAT, but their recognition that the “lesser-than” formula leaves many households very far from “whole” is one of their many resolutions I particularly admire.)
Rebuilding programs, it was explained, automatically trigger compliance with such regulations as the National Environmental Policy Act (NEPA), which would require individual environmental site inspections of every property and bringing those properties up to NEPA’s standards, which would raise the cost, complication, and time to such a degree that actual rebuilding would be all but impossible.
The 2006 [Emergency Supplemental Appropriations] Act authorizes the Secretary to waive, or specify alternative requirements for, any provision of any statute or regulation that the Secretary administers . . . except for requirements related to fair housing, nondiscrimination, labor standards, and the environment . . . – HUD Docket No. FR-5051-N-04 (emphasis mine)
Compensation programs, on the other hand, are subject to far fewer restrictions on grantees, but are limited to the pre-storm value of the property, no matter how short that amount may fall from the actual cost to rebuild today. The resulting compromise by the LRA and HUD was a “hybrid,” which was technically a compensation program with the aim of making it at least somewhat easier for Louisianans to rebuild.
Now it seems that this hybrid has brought us the worst of both worlds. Today’s Times-Picayune article, “Huge roadblock for the Road Home” announces that HUD has determined (at this late stage in the game) that how the Road Home grants are being paid makes the RHP a rebuilding program, and that all the NEPA and other regulations will apply if the state doesn’t scrap its escrow account policy. The “greater-than” hassle for the “lesser-than” payment.
I do have some small hope that HUD’s recommendation of a lump sum compensation plan will ultimately expedite the process of getting more money into the hands of more people faster, but I have my doubts.
HUD’s Community Development Block Grants have a bewildering number of regulations, qualifications, stipulations and discretionary waivers, and trigger cascades of other Federal regulations to boot, such that whole industries have sprung up around advising states and cities on their implementation (ICF, for example). So it’s naive of me to take any sweeping statement from HUD’s website at face value, but I’ve often wondered – if this is supposed to be a compensation program, why doesn’t HUD’s Uniform Relocation Act policy apply, at the very least, in those areas flooded due to levee failure?
The Uniform Relocation Assistance and Real Property Acquisition for Federal and Federally-Assisted Programs Act (URA) was passed “To provide for uniform and equitable treatment of persons displaced from their homes, businesses, or farms by Federal and federally assisted programs and to establish uniform and equitable land acquisition policies for Federal and federally assisted programs.” And while the obligation to provide funds for a “comparable replacement dwelling” are based on pre-event appraisals (like the RHP), and prohibits duplicate compensation in the form of insurance proceeds “in connection with a loss to due to a catastrophic occurrence (fire, flood, etc.)” (like the RHP), the URA allows for up to $22,500 in addition to all other authorized payments if the reasonable cost of a comparable replacement dwelling (which must be “decent, safe and sanitary”) is higher than the original dwelling’s value.
Now, the URA normally applies to State acquisitions of property – it is, after all, a compensation program, not a rebuilding program. But isn’t that what the RHP is supposed to be? One would think that it would apply to the buyout option for certain, and that a “hybrid” program might make the better of the two worlds if the benefits of compensation were extended to those who “relocate” in place. But it turns out that among the many “generous” waivers extended by HUD to the State of Louisiana at its request were exemptions from a number of URA requirements that would otherwise have applied at least to the buyout option, if not to every applicant.
The rebuilding/compensation semantics being bandied between the State and HUD miss the point – that the Road Home Program isn’t really either sort of program. It’s a stopgap: Community Development Block Grants, intended to revitilize low- to moderate-income areas, pressed into service as long-term disaster relief. It may be too late to hope for much more than a better-cobbled Road Home from Katrina and Rita, but this is a wakeup call to Congress and to every state to directly address how disaster recovery should be managed after the immediate emergency has passed.
(In other bewildering regulation news, URA is applying to property purchased by the Corps for levee improvements, but they’re talking out of both sides of their mouths about pre- and post-Katrina values. On the one hand, “Since both the effective date of taking and the start of the projects happened after Katrina, payment is based upon post-Katrina property values, therefore payments are fixed by law,” but on the other, “With both the just compensation and URA, homeowners whose property is acquired for use by the Corps of Engineers will see parity between what they receive and what they would have received had the just compensation been based upon pre-Katrina values. In other words, they will be in a similar house, with a similar mortgage for a similar length of time.” Huh? For more, see “Property Acquisition and Payment of Property”)
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[...] I’m guest-blogging today at Think New Orleans on the flap between HUD and the State of Louisiana on whether Road Home is a rebuilding or a compensation program. No Tags Posted by becky Filed in Uncategorized, Aside See also: No Related Posts [...]
Now that we seem to be revisting some of these foundation issues, I’d like to way in, independent of CHAT.
Trying to stuff the unprecedented catastrophe into pigeon holes not design for it is a really bad place to start. The law was smart enough to give the players, including HUD and the president the flexibility to do it right. On that basis, a hybrid program is the only thing that makes sense.
Unlike the official, inflexible position of CHAT, the greater of value and cost neither makes sense nor is equitable. In my view there are two distinct value propositions – rebuilding and relocating. If I rebuild, I don’t give a fig for market value. I’m going to rebuild and the only thing that I care about is the cost to rebuild.
If I’m relocating, I could care less about the cost to rebuild because I won’t. The only thing I care about is getting as much of my equity out as possible. In that case, market value is everything.
Having said this, it does make sense to avoid all the social agenda values associated with a rebuilding program such as micro-environments and prevailing wages. Remove the barriers and rebuild fast and cheap. From my understanding a rebuilding program COULD wave all these burdens.
My 2 cents is this: Use cost to rebuild/repair for option 1 and market value for options 2 & 3. The only ones who lose are the wealthy who paid dearly for small cheap houses. Everyone else wins and, the community gets rebuilt as it was not smaller and unsafer as shortchanged rebulders are being forced to consider.
K C should have just to his 2 cents remark, which in my view is a very good suggestion.
However, K C’s remarks about class (The only ones who lose are the wealthy who paid dearly for small cheap houses) was uncalled for and deminished the remarks made. The remarks also show an unkind view of
CHAT (Unlike the official, inflexible position of CHAT) show a similar process of inflexablility on KC’s process of thinking. If not for CHAT (flexible or inflexible) there would be no other place to have any kind of voice.
Well, it’s probably true that not only the rich, but homeowners of all income levels, would be shortchanged by a strict limitation of awards to “pre-Katrina” evaluation. In most of our neighborhoods, real estate values have long been, to varying degrees, artificially low ~ less than rebuilding cost, certainly ~ due to an area’s perceived “desirability.”
There is certainly a racial component to this valuation, and I don’t want to open that can of worms, but I would observe that all of us, black and white and brown alike, anywhere in “Chocolate City” and especially in our many ethnically diverse neighborhoods, have been subject to this devaluation.
On the one hand, we’re enjoyed enhanced affordability and have often been able to buy lovely and extremely sturdy historic buildings for modest prices. On the other hand, many have come to learn that they can’t rebuild except at a cost considerably higher not only than what they had paid for the house, but higher even than they could ever had hoped to sell for.
So, I think KC has hit the nail on the head.
If a given homeowner wants to or has to relocate, pay the pre-K value. It may well be less than what it would have cost to rebuild, but it represents the investment that the family has lost, and they’ll just have to figure out how to move one.
On the other hand, for everyone who chooses to stay and rebuild, the only thing that makes sense is to provide enough funding to complete the necessary rebuilding project ~ and to DO IT RIGHT!
We have to keep in mind that each homeowner involved in this process is not only recovering the use of their own private property, they are also contributing to the wider community by restoring their share of the housing infrastructure, without which there would be no city, no metro area, no state; no taxpayers and no electorate.
At the very beginning of the Road Home “roll out”, when the still-evolving rules were just starting to be presented to the public, I could swear I heard an interview with Walter Leger where he said the intention of the LRA was to have the homeowner’s decision be the factor that would determine the starting point for grant calculation. If the homeowner wanted to sell out and move, the pre-Katrina market value would be the figure used. If the homeowner wanted to repair, then a “repair cost” would be the figure used. I specifically remember this because he even speculated that they would use a figure somewhere between $120 and $130 per square foot to set the “repair cost” for your home; he said this figure would be used across the board for all neighborhoods because unlike regarding the value of real estate the location shouldn’t have that big an effect on the overall cost to repair. Eighty sheets of sheetrock would cost the same at Lowe’s whether it were going into a $125,000 Gentilly home or into a $350,000 Lakeview home.
Somewhere along the way, perhaps caused by the need to fit myriad federal regulations, that seems to have gone by the wayside. As my wife pointed out to me early on, the program as it ended up seems designed such that the homeowners who will come closest to being made whole will be the ones who say the hell with New Orleans and St. Bernard and pack up and move to the North Shore or Baton Rouge.
I can see the point in treating rebuilders and movers as separate cases, although I don’t know how or if such a scenario could work under the bevy of regulations, and of course the additional restrictions currently placed on “rebuilding” programs would make it virtually impossible to actually get on with any actual rebuilding.
A couple things that have bugged me about all this – I’ve never been able to find any sort of clause or case other than Road Home where use of CDBG for rebuilding vs compensation is treated. I know the HUD Secretary is prohibited from waiving environmental, labor, fair-housing standards, etc., but I don’t know why those don’t apply to “compensation” programs.
The only thing I’ve been able to find regarding compensation and CDBG is that use of CDBG automatically triggers the Uniform Act if any of the funds are used to appropriate property (and if URA restrictions aren’t waived by the Secretary). What I find interesting, and possibly pertinent to Road Home, is that the URA considers “compensation” more generously and holistically than a mere lump sum for the pre-event appraisal of the dwelling – it takes into account the availability of “comparable replacement dwellings” within a certain radius, and adjusts the compensation upward if there are no acceptable replacements.
So even if a “compensation” program is the only thing that will truly get money to people, whether they’re choosing to rebuild or not, it seems to me that there could be more flexibility about just what’s being “compensated” for.
I wish one of these officials, HUD or LRA, would cite the Article, Section, Clause, or whatever it is that spells out the differences between “rebuilding” uses and “compensation” uses of CDBG. Looking at the URA is just a stab in the dark on my part, at the only compensation-related matter I can find in connection to CDBG. Without that, it feels like HUD is holding all the cards, and we, and the LRA, have been forced to play a guessing game: “Is it OK if we do this? What happens if we do that?” “Oh, we’re sorry, but that’s rebuilding. Do not pass go, do not collect your Road Home $200. Next contestant?”
“…it feels like HUD is holding all the cards, and we, and the LRA, have been forced to play a guessing game: “Is it OK if we do this? What happens if we do that?†“Oh, we’re sorry, but that’s rebuilding. Do not pass go, do not collect your Road Home $200. Next contestant?â€
Precisely. Much like my first trip to the City’s Dept. of Safety and Permits, before we even had anyone get started on drawing up a set of plans for my home’s renovation (well, a little more involved than just “renovation”…we’re using this as an excuse to thoughtlessly spend even more of our savings and finally add that bedroom we always wanted to add). Since we were more than 50% damaged we’d be required to follow the building codes that had been adopted well after our home was originally built, so we asked if there were some way for us to get access to the code such that we could ensure that all of the requirements were accounted for as the plans were formulated. “Oh, that information’s not available,” we were told. “You just have to have your drawings completed, and then when you submit them to our department for a permit and when we do the on-site inspections as the work progresses we’ll let you know if there’s anything you did that doesn’t meet the code.” Now, is it just us, or does that seem bass-ackwards to everyone else, too?
Arrrgh! And this in the Information Age, when half the time the trouble is having to sift through too much extraneous information.
[...] I wrote about the “worst of both worlds” scenario Louisiana’s Road Home Program was facing the other day at Think New Orleans: in a nutshell, the LRA was allegedly told when designing the RHP that they had to cap awards at the pre-Katrina appraised value of the home even if the estimated cost to repair/rebuild was greater, because basing awards on rebuilding costs would make it, aptly enough, a “rebuilding program” and thereby trigger torrents of onerous requirements and regulations. And just lately, HUD “discovered” that the method of Road Home payments constituted a “rebuilding program” as well – maximum burden for the minimum award. [...]
Do you know of any organizations providing free to affordable property appraisals/evaluations?