Rebuilding New Orleans: Competing Visions

Stephen Griffin

In the wake of the State of the Union address, there was a flurry of activity which brought into sharper focus the competing visions on how to rebuild New Orleans and southeast Louisiana generally. There was a sharp negative reaction in Louisiana to the State of the Union because President Bush said so little about Hurricane Katrina and its aftermath. He did not recognize those American citizens who died or those who had risked their lives to save thousands. He did not reaffirm his September pledge to rebuild New Orleans. Instead, he referred to the total amount of money that has been authorized by the federal government so far – $85 billion. In Louisiana, we are heartily sick of hearing this figure.

First, this is money authorized, not spent. Second, it is for all the states affected by Hurricanes Katrina and Rita, not just Louisiana and certainly not just New Orleans. Third, about $20 billion is for tax credits, mostly for business, which are of dubious value given the most substantial problem facing the state – housing. Fourth, a substantial fraction of the money goes to FEMA simply to pay the ordinary expenses of running the agency. Fifth, the rest is largely devoted to three necessary, but not very productive, items: (1) picking up debris; (2) fixing some important infrastructure like bridges and roads; and (3) temporary housing. The last point is important. What New Orleans and Louisiana need is a solution to the problem of the vast number of destroyed and damaged permanent housing, not temporary trailers (which, for New Orleans, haven’t arrived yet). And eventually New Orleans in particular will need some funding to make any local plan happen.

Today’s New York Times says the mayor’s plan has been abandoned, but I see no evidence of that. True, building permits are being handed out not in accordance with the plan, but it was never very likely that they would be suspended. The mayor’s Bring New Orleans Back Commission finished submitting a fine set of reports last week (available on the web) and the mayor will announce what parts he accepts or rejects shortly. The main point is that any local plan will require federal funding. So far, the federal answer has been roughly $6 billion in Community Development Block Grants. These are basically all-purpose grants to the state. This is almost certainly not enough to fulfill Bush’s September pledge.

Hence the flurry of activity last week. The Bush administration touted the CDBGs and trashed the comprehensive solution sponsored by Representative Richard Baker. The basic difference between these approaches is that the most the CDBGs can provide is a small grant to homeowners, while the Baker bill provides up to a 60% return on equity, a chance to buy back the redeveloped property and, most important, a chance to redevelop whole areas of the city rather than depend on the actions of outmatched homeowners. So far, the alternative to the Baker bill appears to be mass foreclosures, no chance at any comprehensive plan, and a terrible plague of housing blight. This issue may come to a head at a February 15 Senate hearing scheduled on the Baker bill.

The worst part of the Bush administration’s rejection of the Baker bill has to do with the claim, made in a Washington Post editorial by Donald Powell (the administration’s Katrina coordinator), that it was a heavy-handed federal solution to a problem that must be solved through comprehensive plans adopted by state and local government. In fact, the plans put forward by both the mayor of New Orleans and the governor of Louisiana explicitly depend on the enactment of the Baker bill. Indeed, the Urban Land Institute that assisted the mayor’s well-qualified commission endorsed the Baker bill and the plan of the mayor’s commission cannot go forward without it. In other words, by rejecting the Baker bill, the Bush administration bypassed the state and local plans as developed so far and made them irrelevant. So a truly “federal” coordinated response to the massive tragedy of Katrina has been made impossible. The Brookings Institution reported on February 1 that:

"Hundreds of thousands of households continue to face major obstacles restarting their lives. Nearly 750,000 households remain displaced by Katrina, of which about 650,000 are receiving rental assistance, or about $800 a month. Mortgage delinquency rates skyrocketed between the second and third quarter of the calendar year. In the state of Louisiana, for instance, nearly one out of every four loans is now 30 or more days past due."

So far, the Bush administration has no solution to this problem.
Posted 8:37 PM by Stephen Griffin [link]