Disaster Assistance: Federal Assistance for Permanent Housing Primarily Benefited Homeowners; Opportunities Exist to Better Target Rental Housing Needs
Published: 2010-01-14T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: In response to the 2005 Gulf Coast hurricanes, Congress provided about $130 billion in disaster recovery assistance, including assistance for permanent housing. Congress has expressed an interest in how this assistance has been allocated to homeowners and rental property owners, particularly for state-administered programs. GAO's objectives were to review (1) how federal disaster-related assistance for permanent housing has been provided to homeowners and rental property owners, (2) the extent to which federally funded programs have responded to the needs of homeowners and rental property owners, and (3) the challenges that homeowners and rental property owners have faced in applying for and using federal assistance, and potential options for addressing these challenges. To address these objectives, GAO analyzed documentation for key programs and program data, and interviewed federal, state, and local officials regarding the challenges associated with these programs.
section_title: What GAO Found
paragraphs: Federal post-disaster assistance for permanent housing was made available to homeowners and rental property owners following the 2005 Gulf Coast hurricanes through grants, loans, and tax incentives. State agencies were largely responsible for administering the programs that delivered most of the assistance, including the Community Development Block Grant (CDBG) program, the most widely used source of federal funds. Congress provided states with broad flexibility in their use of CDBG funds. Federal programs GAO reviewed addressed the repair and replacement needs of more homeowner units than rental units. In both Louisiana and Mississippi, more homeowner units were damaged than rental units, but the proportional damage to the rental stock was generally greater. Programs GAO reviewed provided about $13 billion in assistance for the repair and replacement of about 303,000 homeowner units, and about $1.8 billion for over 43,000 rental units. When the estimated number of assisted units is compared to the estimated number of damaged units, 62 percent of damaged homeowner units and 18 percent of damaged rental units were assisted. The difference in the level of assistance for homeowner and rental units was largely due to states' decisions to award the majority of their CDBG funds to programs for homeowners. When attempting to use the programs GAO reviewed, both homeowners and rental property owners encountered delays in funding availability and other challenges, which have likely contributed to the slow pace of recovery in some areas and fewer affordable units for renters. GAO and others have previously recommended options to minimize these challenges. However, without specific direction on how to better target disaster-related CDBG funds for the redevelopment of homeowner and rental units after future disasters, states' allocation of assistance to homeowners and rental property owners may again result in significant differences in the level of assistance provided.

section_title: Letter
paragraphs: Hurricane Katrina made landfall on the Gulf Coast on August 29, 2005, and  was the worst natural disaster in our nation’s history in terms of  geographic scope, the severity of its destruction, and the number of  persons displaced from their homes. The storm caused damage in  Alabama, Florida, Louisiana, and Mississippi. It devastated far more  residential property than any other recent hurricane, destroying or making  uninhabitable an estimated 300,000 homes. It displaced thousands of  homeowners and renters and created a need for an unprecedented level of  recovery assistance. Then, just 1 month later on September 24, 2005,  Hurricane Rita struck, severely damaging or destroying more than 23,600  housing units in southwest Louisiana and southeast Texas.
In response to the damage caused by these hurricanes, the government  provided significant funding for the recovery of the region, including funds  for rebuilding housing. Congress provided about $130 billion in disaster  recovery assistance, including about $19.7 billion in Community  Development Block Grant (CDBG) funds. The Department of Housing and  Urban Development (HUD) provided Louisiana and Mississippi—the two  states most affected—with the majority of these supplemental CDBG  funds, which were to be used in part for housing recovery. The Federal  Emergency Management Agency (FEMA) within the Department of  Homeland Security (DHS), the Small Business Administration (SBA), and  the Department of the Treasury (Treasury) also provided various  resources—grants, loans, and tax incentives—for the recovery of  permanent housing. However, while Congress has provided funding for the  recovery of housing in the affected areas, some displaced residents are  still unable to return to their homes, in part because of the slow pace of  the repair and replacement of permanent housing and the lack of  affordable housing.
Congress has raised questions about how federal funds for housing  recovery have been allocated for the repair of homeowner and rental  housing units, particularly under programs for which states have  discretion regarding the amount and types of assistance available to  homeowners and rental property owners. In light of these questions, this  report examines the federal assistance provided to homeowners and rental  property owners after the 2005 Gulf Coast hurricanes. Our work focused  on Louisiana and Mississippi, the states most affected by Hurricanes  Katrina and Rita. Specifically, we reviewed (1) how federal disaster-related  assistance for permanent housing has been provided to homeowners and  rental property owners affected by the 2005 Gulf Coast hurricanes; (2) the  extent to which federally funded programs responded to the needs of  homeowners compared to rental property owners in repairing or replacing  units damaged by these hurricanes; and (3) the challenges that  homeowners and rental property owners have faced in applying for and  using federal assistance, and potential options for addressing these  challenges.
To describe how federal disaster-related assistance for permanent housing  was provided to homeowners and rental property owners, we identified  federal programs that made assistance available for the repair and  replacement of housing after the disasters, reviewed eligibility criteria and  award processes, and determined when funds became available. We  included programs that federal agencies, subject matter experts, and  studies and reports identified as being key to the repair and replacement  of permanent housing for homeowners and renters. As a result, we did not  include every program that provides post-disaster housing assistance. To  determine the extent to which these programs responded to the needs of  homeowners and rental property owners in repairing or replacing units,  we compared data on the number of homeowner and rental units damaged  to the number that were assisted through various programs, compared the  amounts of assistance awarded to homeowners and rental property  owners, and determined the extent to which repairs have been completed.  We assessed the reliability of these data and determined that they are  sufficiently reliable for the purpose of our report. To identify challenges to  homeowners and rental property owners, we reviewed studies and  reports, interviewed program administrators, and analyzed the timeliness  of funding availability and application processing. To identify potential  options for addressing these challenges, we reviewed recommendations in  studies and reports, suggestions from program administrators and  organizations that worked with disaster victims, and information on the  congressional intent of post-disaster housing assistance. For more  information on our scope and methodology see appendix I.
We conducted our work from October 2008 through January 2010 in  accordance with generally accepted government auditing standards. Those  standards require that we plan and perform the audit to obtain sufficient,  appropriate evidence to provide a reasonable basis for our findings and  conclusions based on our audit objectives. We believe that the evidence  obtained provides a reasonable basis for our findings and conclusions  based on our audit objectives.
subsections: section_title: Background
paragraphs: After major disasters, various federal agencies provide a range of  assistance to individual victims; state, territorial, and local governments;  and nongovernmental entities. This assistance is administered through  various federal programs, and is generally made available after the  President issues a disaster declaration under the authority of the Robert T.  Stafford Disaster Relief and Emergency Assistance Act (the Stafford Act).  While the federal government provides significant financial assistance  after major disasters, the federal role is primarily to assist state and local  governments, which have the central role in recovery efforts. State and  local governments have the main responsibility of applying for, receiving,  and implementing federal assistance. Further, they make decisions about  what priorities and projects the community will undertake for recovery.
The Stafford Act also specifies that federal agencies providing financial  assistance after a major disaster cannot provide assistance to an individual  for the same loss for which another federal program or private insurance  company has provided compensation. Therefore, homeowners that  sustained damages from the 2005 Gulf Coast hurricanes must first seek  assistance from their homeowner insurance or National Flood Insurance  Program policies. Homeowners in the Gulf Coast area had varying levels of  hazard and flood insurance coverage. Of the 331,070 homeowner units that  sustained minor, major, or severe damage in Louisiana, 126,007 (38  percent) had hazard insurance only, and 118,928 (36 percent) had both  hazard and flood insurance. Of the 157,914 homeowner units that  sustained damage in Mississippi, 94,792 (60 percent) had hazard insurance  only, and 11,481 (7 percent) had hazard and flood insurance. Insurance  industry estimates indicate that homeowners in Louisiana and Mississippi  received average payments of nearly $16,000 in each state for personal  property claims related to Hurricane Katrina and average payments of  $13,000 and $3,500, respectively, for personal property claims related to  Hurricane Rita. For both Hurricanes Katrina and Rita, our analysis shows  that $9.7 billion was paid out through the National Flood Insurance  Program to homeowners in Louisiana and Mississippi, with a median claim  payment of $74,000. Less is known about the extent to which rental  property owners had hazard and flood insurance coverage and the  amounts paid out in claims after the 2005 hurricanes because data are not  readily available. In addition, data are not available to determine the  extent to which insurance settlements made to both homeowners and  rental property owners addressed their damages.
Through executive orders, the authority to provide disaster relief  assistance has been delegated to FEMA. FEMA provides various forms of  temporary housing assistance, such as direct financial assistance or a  temporary housing unit after a disaster, typically for a period no longer  than 18 months, as directed by the Stafford Act. HUD is the recognized  federal authority for housing assistance (including permanent housing)  and has provided assistance such as rental housing vouchers and grants  for federally declared major disasters in the past and prior to FEMA’s  creation in 1979. Over the years, Congress has provided several  mechanisms for disaster assistance, including HUD’s CDBG program  funds for recovery. After the 2005 hurricanes, HUD was responsible for  providing assistance to clients that it had already been assisting and for  providing CDBG funds. Through the Small Business Act as amended, SBA  has the authority to provide home and business loans to repair or replace  damaged or destroyed real estate not fully covered by insurance.
According to FEMA’s National Disaster Housing Strategy, which was  issued in January 2009, throughout the Hurricane Katrina response,  responsibilities and roles that had seemed clear in previous events became  less clear as FEMA and other federal departments and agencies provided  increasing levels of support to state and local officials. For example,  FEMA typically does not provide housing assistance for more than 18  months, and generally does not lead efforts to coordinate and deliver  permanent housing assistance. However, in response to the 2005 Gulf  Coast hurricanes, FEMA led the coordination with states and local  communities and implemented many of the housing options, including  permanent housing. According to a congressional study on deficiencies in  post-disaster housing assistance, there was a lack of clarity in the long- term post-disaster housing-related responsibilities of HUD and FEMA, and  concerns have been raised regarding HUD’s limited housing role after  Hurricane Katrina and its role in future disasters. The National Disaster  Housing Strategy states that HUD is uniquely positioned to assist those  affected by a disaster and will be given lead responsibility for permanent  housing when such assistance is needed in the future.
After the 2005 Gulf Coast hurricanes, a variety of federal programs was  made available to homeowners and rental property owners for the repair  or replacement of permanent housing (see table 1). Four federal agencies  have responsibility for these programs: DHS, HUD, SBA, and Treasury.  DHS administers three different grant programs that can be used to repair  or replace disaster-damaged housing and mitigate damages after disasters.  HUD provides funding for two grant programs, including the CDBG  program, through which states can develop post-disaster programs that  benefit both homeowners and renters. The CDBG program has often been  relied upon as a convenient source of flexible funding that can be applied  to disaster situations to help states rebuild their communities. The SBA  provides two different types of loans for homeowners and owners of  residential rental properties. Both loan products can fund the repair or  replacement of disaster-damaged properties. Finally, Treasury has  responsibility for three programs that provide additional tax incentives to  the states affected by Hurricanes Katrina and Rita to encourage both  housing and economic development. Congress established the Gulf  Opportunity Zone Act of 2005 to provide tax incentives to individuals and  businesses in certain presidentially declared disaster areas. In contrast  with grant programs, where funds come directly from the government, GO  Zone incentives provide investors with relief from certain tax liabilities.
Affordable housing challenges existed for both homeowners and renters in  Louisiana and renters in Mississippi before the 2005 Gulf Coast hurricanes,  particularly in the areas most damaged by these storms. According to  HUD, the generally accepted definition of “affordable” is for a household  to pay no more than 30 percent of its income on housing. Families who  pay more than 30 percent of their annual income for housing are  considered cost burdened. Like renters nationwide, renters in Louisiana  and Mississippi were generally more cost burdened prior to Hurricanes  Katrina and Rita than homeowners. For example, according to the 2004  American Community Survey, for the areas most damaged by the  hurricanes, in the New Orleans metropolitan area (St. Charles, Orleans, St.  Tammany, St. Bernard, and Plaquemines parishes) 48 percent of renters  and 24 percent of homeowners spent 30 percent or more of their income  on housing costs, compared with 50 percent of renters and 21 percent of  homeowners statewide. In the Gulfport-Biloxi-Pascagoula metropolitan  area in Mississippi—which includes Hancock, Harrison, and Jackson  counties—48 percent of renters and 21 percent of homeowners spent 30  percent or more of their income on housing costs compared to 50 percent  of the renters and 24 percent of homeowners statewide (see fig. 1).
Hurricanes Katrina and Rita increased the need for affordable housing in  both Louisiana and Mississippi. For example, of the 82,000 rental units that  were damaged or destroyed in Louisiana, about 54,000 were affordable to  individuals earning less than 80 percent of the area median income,  according to state officials. Similarly, in Mississippi nearly one-fourth of  the 25,000 affordable rental units in three Mississippi coastal counties  were damaged, with Hancock and Harrison counties sustaining the most  damage to their affordable rental housing stock.
section_title: Federal Assistance for Permanent Housing after the 2005 Storms Included Grants, Loans, and Tax Incentives, and States Designed Programs to Award the Majority of This Assistance
paragraphs: After Hurricanes Katrina and Rita, federal assistance for the repair or  replacement of permanent housing was made available to homeowners  and rental property owners in three forms: grants, loans, and tax  incentives. The largest source of assistance was the CDBG program. The  majority of federal assistance was administered by the states, which  designed the programs and used their discretion to prioritize beneficiaries.  These programs made assistance available to applicants at different times,  depending on the structure and requirements of each program.
subsections: section_title: Grants, Loans, and Tax Incentives for the Repair or Replacement of Permanent Housing Were Available to Homeowners and Rental Property Owners
paragraphs: Ten federal programs that we reviewed provided grants, loans, and tax  incentives after the 2005 Gulf Coast hurricanes for the repair or replacement  of housing. Grants were made available through five different programs to  assist with the repair of disaster-damaged housing; to fund hazard mitigation  projects, such as the elevation of housing; and to repair or replace public  housing or other housing owned by a public housing agency (PHA). Loans  were made available through three programs (including one program that  also provides grants) for the repair of disaster-damaged housing for  homeowners and renters. Finally, three different tax incentive programs were  made available to encourage the redevelopment of housing in the GO Zone  for both homeowners and renters. While all of these programs could  potentially be used to repair, replace, or develop housing structures, some  could also be used for other activities, such as economic development.
Of the programs we reviewed, two were available to homeowners only— the Individual and Households Program (IHP): Repair or Replacement  Assistance and the Home Disaster Loan Program (see table 2). Several  programs could have potentially served either homeowners or renters,  including the CDBG program, the Hazard Mitigation Grant Program  (HMGP), and some tax incentives. Finally, four of the programs we  reviewed could have assisted renters by funding or providing incentives  for the repair or replacement of rental housing.
Some programs made assistance available for housing-related activities  only. For example, Home Disaster Loans, IHP Repair or Replacement  Assistance, and GO Zone Low-Income Housing Tax Credits (LIHTC) could  only be used for housing-related activities. However, most of the programs  we reviewed could be used for other activities as well. For example,  CDBG funds could be used flexibly by states and were made available for  economic development, infrastructure, historic preservation, and  demolition. Similarly, GO Zone Private Activity Bonds could be used for  the development of private facilities, such as hotels and retail facilities.
Until recently, vouchers were made available to disaster victims to  subsidize rents in existing housing as a temporary source of housing  assistance. According to some housing experts, vouchers, specifically  Housing Choice Vouchers, which are permanent, should have been  provided to disaster victims, especially low-income renters, more quickly  after the Gulf Coast hurricanes. Congress first made Housing Choice  Vouchers available for families affected by the hurricanes in September  2008.
section_title: State Agencies Administered the Majority of Available Funds
paragraphs: State agencies administered the majority of federal assistance available for  the repair or replacement of permanent housing, including nearly $19  billion in CDBG disaster relief recovery funds, over $13 billion in tax  incentives, and nearly $2 billion in HMGP funds (see fig. 2). Louisiana and  Mississippi created new state offices to design and administer the  programs funded with the supplemental CDBG funds, including housing  programs. In Louisiana, the Louisiana Recovery Authority was created and  charged with establishing spending priorities and policies related to the  state’s use of the supplemental CDBG funds. In addition, a Disaster  Recovery Unit was created within the state’s Office of Community  Development, which has managed the state’s CDBG program over the past  two decades, to administer the funds. In Mississippi, the Governor’s  Office of Recovery and Renewal was established and given primary  responsibility for designing housing recovery programs funded with  supplemental CDBG funds. The Mississippi Development Authority’s  Disaster Recovery Division was responsible for managing Mississippi’s  share of CDBG disaster relief funds.
State agencies were responsible for administering two of the three tax  incentive programs that we reviewed. For the GO Zone Private Activity  Bond and LIHTC Programs, states were authorized to allocate additional  tax-exempt bond financing and low-income housing tax credits. Each  eligible state was responsible for setting up an application process and  selecting qualified projects to receive allocations up to each state’s  allocation authority under the GO Zone Act. As we previously reported,  Louisiana and Mississippi generally allocated the GO Zone bond provisions  on a first-come, first-served basis, and did not consistently target the  allocations to assist recovery in the most damaged areas, although  Louisiana did set aside some of its allocation authority for the most  damaged parishes. In contrast, in allocating funds for the GO Zone LIHTC  program, the state housing finance agencies in Louisiana and Mississippi  gave priority to the GO Zone counties with the most hurricane-related  damage.
State agencies also administered FEMA’s HMGP. According to FEMA  officials, state agencies in Louisiana and Mississippi accepted applications  from local jurisdictions for the funds, and forwarded applications to FEMA  for review and funding. State mitigation plans document the state’s  priorities for the use of HMGP funds, and states are required to update an  administrative plan for implementing HMGP funds after every disaster.  Plans for the use of HMGP funds should include mitigation activities that  are cost effective, environmentally sound, and either statewide or property  specific.
Federal agencies directly administered six of the sources of post-disaster  housing assistance we reviewed, which accounted for approximately   $5 billion in available funds and $1 billion in available tax incentives (see  fig. 2). For example, the Community Development Financial Institutions  Fund within Treasury administers the New Markets Tax Credit program,  which competitively allocated tax credit authority—the amount of  investment for which investors can claim a 39 percent tax credit over   7 years—to Community Development Entities. FEMA administers both the  IHP Repair or Replacement Assistance and the Public Assistance for  Permanent Work programs. For the IHP Repair or Replacement Assistance  Program, FEMA reviewed applications and awarded funds to homeowners  for losses that were not covered by insurance. Through the Public  Assistance for Permanent Work Program, FEMA reviewed applications for  assistance from PHAs and could award assistance to PHAs for damages to  PHA-owned rental housing that was not funded with HUD funds (i.e.,  public housing could not be funded). HUD was responsible for awarding  Capital Fund/Emergency Natural Disaster funds to PHAs on a first-come,  first-served basis for the repair or replacement of a public housing  development damaged as a result of a natural disaster. PHAs that  experienced an emergency situation or a natural disaster were eligible to  apply for and receive funds from the reserve provided that they complied  with certain requirements. For example, according to HUD’s Grant  Handbook, funds provided because of a disaster were only available to the  extent that needed repairs were in excess of payments from insurance  claims and other federal sources, such as FEMA funds for disaster-related  emergency work (but not permanent work). SBA was responsible for  administering the Home Disaster and Physical Disaster Business Loan  Programs. SBA reviewed applications for assistance and provided loans to  eligible applicants. (See app. V for additional information about these  programs.)
section_title: States Created New Programs to Deliver CDBG Funds to Homeowners and Rental Property Owners and Used Their Discretion in Prioritizing Beneficiaries and Designing Programs
paragraphs: Congress provided states broad discretion and flexibility in deciding how  to allocate CDBG funds and for what purposes. The CDBG program is the  federal government’s most widely available source of financial assistance  to support state- and local government-directed neighborhood  revitalization, housing rehabilitation, and economic development  activities. Congress provided states with supplemental CDBG funding to  help them recover from the Gulf Coast hurricanes, beginning in December  2005. To provide the states additional flexibility in delivering disaster  relief, many of the statutory and regulatory provisions governing the use of  the funds were waived or modified. HUD issued guidance in February 2006  stating that the funds should be used toward unmet housing needs in areas  of concentrated distress. In addition, in June 2006 Congress required states  to use at least $1 billion for the repair, rehabilitation, and reconstruction of  affordable rental housing, including public and other HUD-assisted  housing. This requirement was intended to ensure that states were not  only investing in homeownership but also in the housing needs of all  affected residents.
To make CDBG funds available for the repair or replacement of permanent  housing, both Louisiana and Mississippi created new programs for  homeowners and small rental property owners (owners of rental  properties with up to four units). As we recently reported, Louisiana  created the Road Home Homeowner Program, through which funds were  made available to homeowners to rebuild homes on their own property,  sell their properties and relocate within the state, or sell their homes and  relocate outside the state. Mississippi created the Homeowner Assistance  Program for homeowners that sustained flood damage. The first round of  funding was limited to homeowners that did not have flood insurance  because they were located outside of a federally designated flood zone.  (See app. II for additional information about these programs.)
Louisiana also created the Road Home Small Rental Property Program for  owners of small rental properties in the most damaged parishes and made  forgivable loans available in two funding rounds. Property owners had to  independently finance needed repairs and rent out their units to income- eligible tenants. Once the units were ready for occupancy, the state would  conduct inspections and authorize the disbursement of the loan. In  December 2008 the state announced an additional option for program  participants, designed to provide up-front financing. According to program  administrators, this option was created to increase the production of  rental housing with CDBG funds and to accelerate the distribution of  funds to small rental property owners. According to program  administrators, as of November 2009, 1,024 property owners had agreed to  participate in this option.
Mississippi created the Small Rental Assistance Program for owners of  small rental properties in four counties (Hancock, Harrison, Jackson, and  Pearl River) and made forgivable loans available in two funding rounds.  The program was designed to offer four types of assistance: (1) rental  income subsidy, (2) repair or reconstruction of a Katrina-damaged  property, (3) reconstruction or conversion reimbursement of a non- Katrina-damaged property, or (4) new construction reimbursement. The  state of Mississippi generally disbursed loans in two installments, half  when the property owner provided a building permit and the remainder  when the property owner provided a certificate of occupancy.
In addition, Mississippi used CDBG funds to address the need for  workforce housing and public housing. Mississippi created a Long Term  Workforce Housing Program to provide grants and loans to local units of  government, nonprofits, and for-profit organizations to provide long-term  affordable housing in Hancock, Harrison, Jackson, and Pearl River  counties. This program was designed to benefit households that earned  120 percent of area median income or less. The program could be used to  develop or repair housing for homeowners or renters. The state also  designated CDBG funds for the repair or replacement of public housing  units that were damaged by Hurricane Katrina. Using these funds, the state  created a Public Housing Program to make grants available to five PHAs  that sustained damage.
section_title: Other Assistance Was Made Available through Existing Programs and Processes
paragraphs: Generally, the federal and state administrators of programs other than  CDBG that we reviewed used existing processes to make post-disaster  housing assistance available to homeowners and renters. For example,  FEMA used its existing, but streamlined, processes to make IHP Repair or  Replacement Assistance and Public Assistance for Permanent Work  available to eligible homeowners and PHAs, respectively. FEMA accepted  applications for IHP Repair or Replacement Assistance via phone and the  Internet. Applicants who were awarded housing assistance, but who had  remaining unmet housing needs because damages exceeded the maximum  award, were referred to SBA for a disaster home loan application.  Similarly, SBA used its existing processes to make Home Disaster and  Physical Disaster Business Loans available to eligible homeowners.  Consistent with its existing processes, SBA made loan applications  available to applicants after they registered with FEMA and used its  existing loan underwriting criteria to evaluate loan applications. The  administrators of these programs did not create new programs to make  post-disaster housing assistance available. As we have previously reported,  SBA encountered challenges processing the large volume of applications  after Hurricanes Katrina and Rita but has since taken steps to more  effectively process large increases in application volume.
Similarly, state agencies generally used existing procedures to award GO  Zone LIHTCs and HMGP funds. Specifically, in both Louisiana and  Mississippi, the state housing finance agencies announced the availability  of the additional credits through qualified allocation plans, reviewed and  scored the applications received, and awarded the credits to the highest  scoring applicants. Likewise, the state administrators of HMGP funds in  Louisiana stated they did not make changes to their normal application  processes after Hurricanes Katrina and Rita. In contrast, Mississippi  changed its HMGP application process by developing a Web-based system  to accept applications. This system allowed applicants to submit a pre- application for HMGP funds online.
section_title: Programs Made Federal Funds and Tax Incentives Available at Different Times after the Storms
paragraphs: Federal disaster assistance is generally authorized after a disaster  declaration. Thus after Hurricanes Katrina and Rita were declared as  disasters, HMGP funds, IHP Repair or Replacement Assistance, and Public  Assistance for Permanent Work were made available from FEMA and  Home Disaster Loans and Physical Disaster Business Loans were made  available from SBA. HUD’s Capital Fund Emergency/Natural Disaster  Funding does not require a presidential disaster declaration to become  available; this program was available to PHAs that were affected by the  hurricanes.
CDBG-funded assistance for homeowners and small rental property  owners did not become available until HUD accepted the program designs.  Each state had to submit an Action Plan to HUD detailing the plans for the  uses of its supplemental CDBG funds, and each had to submit  amendments to these plans for substantial changes. HUD accepted  Louisiana’s Action Plan for the Road Home Homeowner and Small Rental  Assistance Programs in May 2006, and the state began accepting  applications for the homeowner program in August 2006 and the small  rental program in January 2007 (see fig. 3). According to an administrator  of Louisiana’s CDBG-funded programs, the homeowner program was  initiated first because homeowners lost real property, homeowners are  less transient than renters, and the state perceived rental property owners  as having other federal resources for recovery, such as tax credits and  SBA loans. HUD accepted Mississippi’s Action Plan for the Homeowner  Assistance Program in April 2006 and the Small Rental Assistance Program  in July 2007. The state began accepting applications for the homeowner  and small rental programs in April 2006 and September 2007, respectively.  According to officials from the Mississippi Governor’s office, one of the  reasons that the homeowner program was implemented first was because  there were more homeowners than renters in the coastal counties. In  addition, according to state officials, it was possible for the state to  implement a compensation program for homeowners more quickly,  because funds could be provided directly to homeowners without the  requirement for environmental review assessments. In contrast, the  officials stated that programs that are established as construction  programs, like their Small Rental Assistance Program, trigger  environmental review assessments, which take time to address. Delays in  the availability of CDBG funding for homeowners and renters will be  discussed later in this report.
section_title: Federal Disaster Housing Assistance Addressed the Repair and Replacement Needs of More Homeowner Units than Rental Units, and Progress in Completing Rental Units Has Been Limited
paragraphs: Federal programs we reviewed addressed the repair and replacement  needs of more homeowner units than rental units. In both states, more  homeowner units were damaged than rental units, but the proportional  damage to the rental stock was generally greater. A comparison of the  number of units damaged to the number of units funded shows that  federal assistance addressed the repair and replacement needs of about 62  percent of damaged homeowner units and about 18 percent of damaged  rental units. The difference in the level of assistance for homeowner and  rental units was largely due to states’ decisions to allocate most of their  CDBG funds to programs for homeowners. States used their broad  discretion under CDBG to decide what proportion of the funds went to  homeowners and rental property owners. Of the rental units that have  received funding, a limited number have been completed, and data are  generally not available for the completion status of homeowner units.
subsections: section_title: More Homeowner Units Were Damaged than Rental Units, but a Greater Proportion of the Rental Housing Stock Sustained Damage
paragraphs: As a result of Hurricanes Katrina and Rita, an estimated 489,000  homeowner and 247,000 rental units sustained minor, major, or severe  damage in Louisiana and Mississippi. Specifically, in Louisiana an  estimated 331,070 homeowner units and 184,179 rental units sustained  damage, and in Mississippi 157,914 homeowner units and 62,470 rental  units sustained damage. Most of the damage was concentrated in specific  areas in Louisiana and Mississippi. In eight parishes in Louisiana  (Calcasieu, Cameron, Jefferson, Orleans, Plaquemines, St. Bernard, St.  Tammany, and Vermillion), an estimated 220,225 homeowner units and  139,249 rental units sustained damage. In Mississippi, an estimated 60,344  homeowner units and 33,964 rental units were damaged in three counties  (Hancock, Harrison, and Jackson) (see fig. 4).
A greater number of homeowner units were damaged compared to rental  units in both Louisiana and Mississippi. However, in Louisiana a greater  proportion of rental units were damaged. For example, in Louisiana, 35  percent of the rental housing stock sustained damage, compared with 29  percent of the homeowner stock. In Mississippi, the proportions of  damaged homeowner and rental units were more similar: 22 percent of the  rental housing stock damaged, compared to 21 percent of the homeowner  stock. In the three counties in Mississippi that sustained the most damage,  80 percent of the rental stock and 64 percent of the homeowner stock  sustained damage. In the eight Louisiana parishes with the most damage,  66 percent of the rental stock and 63 percent of the homeowner stock was  damaged (see fig. 5).
While available damage estimates indicate the need for housing in  Louisiana and Mississippi in the immediate period after Hurricanes Katrina  and Rita, the housing markets in these states have changed over the past  several years as a result of displacement and other demographic changes.
For example, a recent study noted that while the New Orleans  metropolitan area is home to a population that is equal to about 90 percent  of the pre-Katrina households receiving mail, school enrollment across the  metropolitan area has slowed, suggesting that the population that has  returned is different than the pre-storm population. A November 2008  HUD report states that while the demand for affordable rental units is less  than before Katrina, it is difficult to assess how much this population will  grow—and therefore difficult to determine the demand for affordable  rental housing.
section_title: Federal Assistance Addressed the Repair and Replacement Needs of More Homeowners than Rental Property Owners
paragraphs: For the programs we reviewed for which data were available, federal  assistance was provided to repair or replace more homeowner units than  rental units in Louisiana and Mississippi (see table 3). Specifically, federal  programs provided assistance to about 303,000 homeowner units  compared to over 43,000 rental units. CDBG, IHP Repair or Replacement  Assistance, and the Home Disaster Loan Program were the key federal  sources of assistance for homeowners. Homeowners can be eligible to  receive assistance from multiple federal programs, and we identified about  115,000 units that received funding from two or more programs we  reviewed. Of the programs that provided assistance to rental property  owners, GO Zone LIHTC funded the largest number of rental units (about  23,000).
When the estimated number of funded units is compared to the estimated  number of damaged units in Louisiana and Mississippi, we found that  federal programs funded about 62 percent of the estimated number of the  damaged homeowner units and about 18 percent of the estimated number  of damaged rental units in both states combined (see fig. 6). In Louisiana,  federal assistance from the programs we reviewed funded about 65  percent of the damaged homeowner units and 15 percent of the damaged  rental units, while in Mississippi federal assistance funded about 56  percent and 26 percent of homeowner and rental units, respectively.
While the Housing Choice Voucher Program was not in our scope, this  program is the federal government’s major program for assisting very low- income families, the elderly, and the disabled to afford decent, safe, and  sanitary housing in the private market. For fiscal years 2008 through 2009  Congress appropriated $185 million to fund various types of vouchers for  areas impacted by Hurricanes Katrina and Rita and for families that were  assisted under the Disaster Housing Assistance Program. These funds  would support over 20,000 vouchers.
The difference in the levels of assistance to homeowner and rental units is  reflected in the amounts of funding awarded. Although the proportional  damage to rental units was greater, more federal dollars were awarded for  homeowner units through the programs we reviewed. Specifically, federal  and state agencies awarded around $13 billion for homeowner units and  around $1.8 billion for rental units, with the majority of funding awarded  through the CDBG program (see table 4). Of the CDBG funds that  Louisiana and Mississippi awarded for housing-related activities, the  majority was awarded through homeowner programs. According to state  officials, both states created homeowner programs first because more  homeowner units were damaged than rental units. In addition, Louisiana  officials stated that CDBG funds were not intended to assist rental  property owners with their business investments, and the state did not  want to duplicate FEMA’s efforts in assisting displaced renters. Mississippi  officials stated that many homeowners that sustained flood damage were  not located in a flood zone because the federal government did not  accurately identify flood zones, and as a result, these homeowners did not  have flood insurance through the National Flood Insurance Program.  Mississippi officials further stated that by providing CDBG funds to these  homeowners (excluding those sustaining wind damage), the state helped  the homeowners with the greatest need.
section_title: A Limited Number of Rental Units Are Complete, and the Completion Status of Homeowner Units Is Generally Not Tracked
paragraphs: A limited number of rental units have been completed through programs  we reviewed that provided assistance for the repair or replacement of  rental housing. Progress in the completion of CDBG-funded rental units  has been limited. For example, through the CDBG-funded small rental  housing programs, 14 percent of the 10,115 rental units funded in  Louisiana and 25 percent of the 4,242 rental units funded in Mississippi  were completed as of July and August 2009, respectively. Progress in the  completion of rental units funded with GO Zone LIHTCs has also been  limited. For example, approximately 36 percent of the 13,888 rental units  funded in Louisiana and 51 percent of the 9,252 units funded in Mississippi  were complete as of June 2009. Units funded with GO Zone LIHTCs are  required to be placed in service by January 2011; otherwise the credits  cannot be used. Information on the extent to which rental units were  funded and completed through the other programs we reviewed can be  found in appendix VII.
The construction status of individual homeowner units was generally not  readily available for the programs we reviewed. For example, according  to administrators of the CDBG-funded homeowner programs in Louisiana  and Mississippi, the states are not required to track the completion status  of units funded because the programs provide compensation grants.  Similarly, administrators of the Home Disaster Loan, IHP Repair or  Replacement Assistance, and GO Zone Tax-Exempt Private Activity Bond  programs do not track the completion status of homeowner units.
section_title: Homeowners and Rental Property Owners Faced Challenges in Applying for and Using Federal Assistance, but Options Exist for Reducing These Challenges after Future Disasters
paragraphs: Both homeowners and rental property owners have faced challenges in  applying for and using federal assistance. These challenges include gaps in  financing needed to complete repairs and delays in the availability of  funds. Homeowners and rental property owners have also faced adverse  economic conditions, including high insurance premiums and construction  costs and tightening credit markets. These challenges have contributed to  the slow pace of recovery in the Gulf Coast region. Options for addressing  these challenges include changing the allocation of assistance between  homeowners and rental property owners, improving guidance intended to  help states in designing programs, and reconsidering which programs are  used to deliver permanent-housing assistance after a disaster.
subsections: section_title: Homeowners and Small Rental Property Owners Faced Gaps in Financing Repairs
paragraphs: Some homeowners in Louisiana and Mississippi did not receive enough  funding from insurance and federal assistance to complete repairs to their  homes after the 2005 Gulf Coast hurricanes, and some were ineligible for  key sources of federal assistance. A review of Louisiana’s Road Home  Homeowner Program found that some homeowners received insufficient  grant amounts to repair the damage caused by Hurricanes Katrina and  Rita, and were challenged from resulting funding gaps. These gaps in  funding may have resulted from Louisiana’s decision to use pre-storm  home values to determine grant amounts (as opposed to using the cost of  repairs), incorrect grant calculations, and increasing construction and  insurance costs, according to various researchers. In Mississippi, the state  reduced the amount available under its homeowner program when it  decided to dedicate $600 million from this program to a Port Restoration  Program. While this change appears to reduce the amount of CDBG funds  available for homeowners, according to state officials, all eligible  applications for the homeowner program were funded. Program  administrators in Louisiana stated that their CDBG-funded homeowner  program was not intended to make homeowners “whole.”
Other program requirements likely resulted in challenges to homeowners  in obtaining program funds. For example, in Mississippi, homeowners with  wind-only damage were ineligible for the first phase of the Homeowner  Assistance Program. In addition, for the first funding round, only  homeowners that sustained flood damage (in selected counties) were  eligible for Mississippi’s Homeowner Assistance Program. According to  state officials, this program was intended to assist homeowners that  lacked flood insurance because they were not in a federally designated  flood zone. State officials stated they targeted homeowners that were  outside of a flood zone due to concerns about the reliability of FEMA’s  flood zone designations. In addition, both states required homeowners to  prove they had clear property titles. According to state officials,  researchers, and organizations that worked with disaster victims, many  Louisiana and Mississippi homeowners with damaged properties faced  considerable difficulty in establishing clear title because their properties  had been informally passed down through generations.
Owners of rental properties also faced challenges in obtaining program  financing due in part to decisions by the states of Louisiana and  Mississippi to set aside a small portion of their supplemental CDBG funds  for the repair of rental housing. While Louisiana and Mississippi allocated  nearly $11 billion of their CDBG funds to homeowner programs, they  targeted fewer funds (approximately $1 billion) to the owners of small  rental properties. In Louisiana, demand for the Road Home Small Rental  Property Program was seven or eight times what the funding would  support, according to state officials. Mississippi officials said they initially  had twice the demand for their small rental program than expected,  representing 10,000 rental housing units.
Availability of financing has also been a challenge for developers of larger  rental housing developments, including recipients of GO Zone LIHTCs.  Some recipients of GO Zone LIHTCs have encountered financing gaps due  to the declining value of the credits. More specifically, some developers  were receiving less equity from investors in exchange for the tax credits  awarded, which has resulted in large financing gaps and made some  planned developments not feasible. In some cases, state housing finance  agencies pulled GO Zone LIHTCs back from projects that could not secure  additional funds to finance the project, or accepted the credits back from  developers, and awarded the credits to other projects.
PHAs have also faced limited available funding to make repairs to public  housing that was damaged by Hurricanes Katrina and Rita. Public housing  agencies have faced considerable challenges in obtaining funding for the  recovery of public housing units. Public housing is an important source of  affordable housing for low-income households in the Gulf Coast region.  The Gulf Coast states experienced a decline in the number of available  units as a result of the storms, especially in the New Orleans area. For  example, prior to Hurricane Katrina, the Housing Authority of New  Orleans managed over 7,000 units of public housing in 10 different  developments. Hurricane Katrina damaged about 80 percent of these units  (approximately 5,600 units). Less than $30 million was available in 2005 for  damage to all PHAs nationwide through HUD’s Capital Fund  Emergency/Natural Disaster Funding Program. HUD acknowledged that  these funds were not sufficient to repair the public housing that was  damaged by the 2005 Gulf Coast hurricanes.
section_title: Homeowners and Small Rental Property Owners Faced Delays in Availability of Key Recovery Funds
paragraphs: In the wake of the 2005 storms, both homeowners and owners of rental  properties faced significant challenges in receiving assistance from key  federal programs as quickly as possible. For instance, homeowners in  Louisiana waited a year for the Road Home Homeowner program, the  state’s CDBG-funded homeowner program, to begin accepting  applications, and then encountered application processing times that were  a median of 245 days. Although there were no specific time requirements  for how quickly CDBG-funded programs should be implemented, federal  disaster policy, as described in the Stafford Act, states that disaster funds  and special measures must help to expedite the reconstruction and  rehabilitation of devastated areas. In January 2009, FEMA issued a  National Disaster Housing Strategy that included six goals related to post- disaster housing. One of the goals states that housing assistance should  help individuals and households in returning to self-sufficiency as quickly  as possible, including obtaining permanent housing. As required by the  supplemental appropriations acts, states submitted plans to HUD detailing  their proposed use of CDBG funds and the design of their programs. After  acceptance of the plans, each state issued descriptions of their programs,  including eligibility requirements and application deadlines. As shown in  figure 7, Mississippi opened its homeowner program to applicants 8  months after Hurricane Katrina, and Louisiana opened its program 1 year  after the storm.
Owners of small rental properties in Louisiana and Mississippi faced  longer delays than homeowners in the availability of CDBG funds to repair  or replace properties. Louisiana began accepting applications for its Road  Home Small Rental Property Program 17 months after Hurricane Katrina  and Mississippi began accepting applications for its Small Rental  Assistance Program about 2 years after the storm.
As indicated in our prior work, delays in the initial dates that states began  accepting applications for their CDBG-funded homeowner and small  rental housing programs may be due in part to the states’ lack of staffing  capacity to suddenly manage CDBG programs of such unprecedented  size. In addition, as previously noted, both states decided to implement  programs for homeowners first, which delayed the initial dates states  began accepting applications for the small rental housing programs.  Furthermore, according to Mississippi officials, it took time to obtain  HUD’s acceptance of plans for its Small Rental Assistance Program, in part  because the state had to reach agreement with other entities, including  state historic preservation offices, regarding the potential impacts of this  program on the environment and other concerns.
subsections: section_title: Application Processing Times for CDBG Funds Further Delayed Assistance
paragraphs: After submitting their applications for CDBG funds, some homeowners  and small rental property owners faced significant delays in the processing  of their applications, with rental property owners typically facing longer  delays than homeowners. For example, homeowners in Louisiana and  Mississippi waited a median of 245 and 240 days, respectively, from the  date their application was received by the state until the date that they  received grant funds. These processing times ranged from 32 to 948 days  in Louisiana and from to 70 to 945 days in Mississippi (see fig. 8). For the  small rental housing programs, successful applicants had a closing, at  which point the terms by which forgivable loans would be disbursed to the  owners were agreed upon. Small rental property owners in Louisiana and  Mississippi waited a median of 494 and 405 days, respectively, from the  date that their application was received by the state until the date of  closing. This processing time ranged from 280 to 686 days in Louisiana and  from to 75 to 799 days in Mississippi.
Several factors may have contributed to delays in the processing of  applications for each state’s homeowner and small rental housing  programs, including program design changes, a lack of specific  performance goals, and complex application processes.
Program design changes. Louisiana’s homeowner and small rental  programs may have experienced delays in processing applications because  of changes to the programs’ design after they were first established. For  example, HUD ordered the state to cease operations for the homeowner  program in March 2007. According to an e-mail from the HUD Assistant  Secretary to key HUD staff involved in Gulf Coast recovery, there was an  “apparent inconsistency” between Road Home Homeowner program  operations and the approved action plan. While the state continued to  accept and process homeowner applications after they were ordered to  cease and desist the program, individual covenants had to be revised,  homeowner grant awards had to be recalculated, and scheduled house  closings were postponed. The state redesigned the program to provide  lump-sum compensation grants, and HUD accepted the new design in May  2007. Also, in 2009 Louisiana created an additional option for property  owners that had applied to the small rental property program but had not  been able to secure up-front financing. Under the new option, the state  will pay “advances” of funds to some rental property owners through a  housing rehabilitation program.
Absence of performance goals. Neither Louisiana nor Mississippi initially  established specific performance goals for processing homeowner or small  rental program applications. According to state officials from both states,  immediately after the storms it was difficult to determine what such  performance goals should be. While each state’s initial plans for its  homeowner programs indicated that applications should be processed in a  timely manner or a manner that recognizes the urgency of the need for  assistance, the plans did not quantify goals for processing complete  applications. In March 2007 Louisiana established performance indicators  to encourage the timely processing of homeowner grants and established  similar performance indicators for the small rental program in April 2008.  There were no documented performance goals for processing applications  for Mississippi’s Homeowner Assistance or Small Rental Assistance  Programs until March 2008.
Complexity of application process. According to both researchers and  organizations that assisted disaster victims, the application processes for  the CDBG-funded homeowner and small rental programs were complex,  which made it difficult for some applicants to complete applications  correctly. A 2008 report on Louisiana’s CDBG-funded post-disaster  housing programs stated that both the homeowners and applicants for the  small rental program faced rule changes, which caused confusion for  applicants and likely contributed to delays.
section_title: Adverse Economic Conditions Following the Storms Hampered Rebuilding Efforts
paragraphs: Homeowners and small rental property owners affected by Hurricanes  Katrina and Rita have also experienced challenges in their rebuilding  efforts as a result of local market conditions, particularly high insurance  premiums and construction costs. For example, according to a report by  the Louisiana Housing Finance Agency, premiums for homeowners  insurance escalated to four times their pre-Katrina level for some areas of  Louisiana that were severely impacted by the storm. Such increases have  likely made it difficult for some homeowners to rebuild. Researchers have  stated that rising construction costs in both Louisiana and Mississippi pose  challenges for redevelopment.
The current national economic climate has also made it more difficult for  both homeowners and developers of rental housing to secure adequate  financing. Due to the tightening credit markets and storm-related credit  issues, many homeowners in the area affected by the 2005 storms are  finding it extremely difficult to access credit to cover repair costs.  According to an organization that has researched recovery efforts in New  Orleans, tightened credit markets are one of the key reasons that many  homeowners in New Orleans have been unable to fully recover their  homes. Also, as we have previously reported, as investors’ interest in tax  credit projects declines, developers must seek additional funding sources  to make up for the equity shortfall. According to state administrators of  the GO Zone LIHTC programs in Louisiana and Mississippi, given the  financial crisis, it is increasingly difficult to find investors for tax credit  projects, and it will be a challenge to meet the December 2010 deadline for  units to be placed in service.
section_title: Challenges Have Contributed to Several Negative Effects, Including Slowed Recovery of Housing
paragraphs: Both homeowners and renters have been negatively affected by financing  gaps, delays in the availability of federal resources, and adverse economic  conditions. Cumulatively, these and other issues have contributed to slow  progress in repairing and replacing housing in the Gulf Coast. This slow  progress is putting additional pressure on the already strained housing  market. Slow redevelopment also contributes to neighborhood blight.  According to a recent Brookings report, New Orleans had 65,888 vacant or  blighted residential addresses as of March 2009, and nearly 59,000 of these  addresses were blighted or empty lots. This was a slight decrease from  69,727 as of September 2008.
Another negative impact of these challenges is a lack of affordable  housing, especially for rental households. HUD’s fair market rent for a  two-bedroom unit in the New Orleans-Metairie-Kenner metropolitan area  increased from $676 to $1,030 or about 52 percent, between fiscal years  2005 and 2009. As a result of such rent increases, low- and moderate- income renters who could afford housing in New Orleans before the storm  may no longer be able to find affordable housing. In Mississippi’s coastal  counties, both for-sale and rental housing are estimated to be less  affordable than before Hurricane Katrina, according to a 2009 study.  HUD’s fair market rent for a two-bedroom unit in the Gulfport-Biloxi  metropolitan area increased from $592 to $844, or about 43 percent, while  the general price level for rent nationwide increased about 15 percent over  the same time period. While it is projected that there will be more than a  full recovery of subsidized rental housing units in Mississippi’s coastal  counties, it is also estimated that there will be an increased need for  additional rental assistance in these counties, such as housing choice  vouchers, to make available units more affordable.
Finally, some of the residents who were displaced from their communities  have not returned, especially lower-income renters. As previously noted,  while the New Orleans metropolitan area is home to a population that is  equal to about 90 percent of the pre-Katrina population, school enrollment  across the metropolitan area has slowed, suggesting that the  characteristics of the population that has returned are different than those  of the pre-storm population. According to the Urban Institute, the slow  recovery of housing—especially moderately priced rental housing—in the  greater New Orleans region prevents many families from returning.
section_title: Options for Addressing Challenges Include Better Allocating Assistance for Homeowners and Renters
paragraphs: We reviewed prior GAO work and reports by agencies and research groups  and identified four sets of options that may help address the challenges  faced by homeowners and rental property owners in using program funds.  First, to address the challenges related to the gaps in funding available to  repair and replace damaged housing—specifically rental housing—federal  funds for permanent post-disaster housing could be allocated between  homeowners and rental property owners based on need, and take into  account all of the programs and resources that are available. For example,  Congress could provide more direction to states on how to allocate  appropriations for the CDBG program. Directing how grantees allocate  CDBG funds would entail trade-offs. For example, states may have less  discretion in designing post-disaster housing programs and deciding how  much funding is to be made available for rebuilding units occupied by  homeowners and renters and for economic development activities. While  such trade-offs exist, Congress has previously provided specific direction  to recipients of CDBG funds. For example, Congress provided direction to  recipients of funds under the Neighborhood Stabilization Program, which  is based on the CDBG program and focuses on redevelopment of  abandoned and foreclosed homes. Congress directed recipients of these  funds to focus on areas of greatest need, including areas with high  concentrations of foreclosed homes. Without specific direction on how to  better target disaster-related CDBG funds for the redevelopment of  homeowner and rental units after future disasters, states’ allocation of  assistance to homeowners and rental property owners may again result in  significant differences in the level of assistance provided.
To address the financing gaps faced by homeowners, larger amounts of  assistance could be made available to households. Several of the reports  we reviewed indicated that additional funds should be provided to  homeowners that did not receive sufficient CDBG funds to recover from  the storms. For example, one private research organization recommends  that the federal government allocate funds to close the gaps created by the  formula for the Road Home Homeowner Program, the CDBG-funded  homeowner program in Louisiana. In addition, this organization has  stated that grants should have been calculated based upon either the  higher of the assessed value or the damage estimate repair costs rather  than the pre-storm estimated value of homes. For future disasters, basing  grant amounts on repair costs rather than property values may be helpful  to households in closing financing gaps—especially those households that  live in distressed or less desirable communities where property values are  less than the cost of repairs and replacement. However, in providing larger  amounts of assistance to individual households, fewer households may be  served with the same amount of overall program funding.
To help reduce delays in delivering funds for the recovery of housing,  guidance could be developed, eligible uses of funds could be clarified,  states could design programs to provide funds up front, and application  processes could be simplified. We previously recommended that HUD  issue guidance for CDBG disaster-assistance programs that provides  information on acceptable program designs and discusses program  elements that trigger federal environmental reviews. We also  recommended that HUD coordinate with FEMA to clarify options and  limits of using CDBG funds with other disaster-related federal funds.  Such guidance could help states in the future by clearly articulating  applicable legal and financial requirements, as well as the types of  activities that may trigger federal environmental review requirements.  State officials in Louisiana have acknowledged that delays in making  CDBG funds available to small rental property owners could have been  minimized by designing a program that provided funds up front, rather  than after property owners independently financed repairs. Such program  designs for the use of CDBG funds after future disasters could potentially  reduce delays. Furthermore, organizations that represented disaster  victims have stated that complex application processes contributed to  delays in Louisiana, suggesting that for future disasters, delays could be  minimized if application processes are clear and transparent.
Decision makers could also reconsider what federal programs should  deliver assistance for permanent housing. A report by the Office of the  Federal Coordinator indicated that the CDBG program should be re- evaluated to determine whether it should be the primary funding vehicle  for replacing housing stock following a disaster. The Office of the Federal  Coordinator also indicated that experts should convene to discuss how  challenges associated with the current federal funding vehicles for post- disaster recovery and rebuilding—such as CDBG, Public Assistance,  Individual Assistance, and HMGP—could be addressed and to explore  ideas for potential new vehicles and/or frameworks. According to HUD  officials, the CDBG program is not one of the federal government’s official  disaster recovery programs. However, to date the supplemental CDBG  funds that have gone to the Gulf Coast have been the largest amount of  CDBG disaster relief provided to one area in the history of the program. A  previous GAO report stated that HUD should continue to work with the  administration to determine what role the CDBG program should have in  disaster recovery. HUD officials have also stated that a permanently  authorized disaster CDBG program may be more effective in delivering  post-disaster housing assistance. HUD officials have stated that if a  disaster-specific CDBG program is given a permanent role, they would  issue permanent regulations and program guidance. In addition, there  would be less need after each disaster for HUD to consider the use of  waivers and write federal notices to guide the use of CDBG funds.
section_title: Conclusions
paragraphs: The response to Hurricanes Katrina and Rita highlights the need to re- evaluate how housing assistance for homeowners and rental property  owners is delivered after a disaster. If the federal government adopts a  similar approach in the future, it will likely encounter many of the same  challenges, including gaps in available financing for permanent housing  and delays in the availability of program funds to victims. The state  programs, funded under the CDBG program, the largest single source of  federal assistance for permanent housing after the 2005 Gulf Coast  hurricanes, focused much of their resources on addressing the needs of  homeowners. Our analysis shows that recovery funds addressed a  substantially larger percentage of the rebuilding needs of homeowners  compared to rental property owners and that state-designed programs  have not fully accounted for the needs of renters in their decisions  regarding how to allocate funds. As a result, there continues to be an acute  need for affordable rental housing in the Gulf Coast area, and many  displaced residents may not be able to return to their communities. States,  which had broad flexibility in their use of CDBG funds, did not prioritize  the repair or replacement of rental housing for several reasons, including  their decisions to rely on other sources of federal funding for rental  housing, such as SBA loans and GO Zone LIHTCs. However, the GO Zone  LIHTC program addressed only a small part of the repair and replacement  needs of rental properties and furthermore, according to program  administrators, investors’ demand for tax credits in the current economy  has been weak. In the event of a future disaster, the lack of specific  direction to states on how to target disaster-related CDBG funds may  again result in a significant difference in the amounts of assistance for the  redevelopment of homeowner and rental property units. Within the  programs, administrative improvements could be made. In fact, we have  previously recommended that HUD issue guidance for CDBG disaster  assistance that provides information on acceptable program designs and  that HUD coordinate with FEMA to clarify options and limits of using  CDBG funds with other disaster-related federal funds. We believe that  implementing these recommendations would help minimize delays in  making CDBG funds available for homeowners and rental property owners  after future disasters. Furthermore, we continue to believe that HUD  should work with the administration to determine what role the CDBG  program should have in disaster recovery.
section_title: Matters for Congressional Consideration
paragraphs: To the extent that the CDBG program continues to be the primary vehicle  used to provide post-disaster assistance for permanent housing, Congress  may wish to consider providing more specific direction regarding the  distribution of disaster-related CDBG assistance that states are to provide  for homeowners and renters. If Congress wishes to change the proportion  of assistance directed to homeowners and rental property owners in  future recovery efforts, Congress could, for example, require states to  demonstrate to HUD that they are adequately addressing the needs of both  homeowners and renters with their CDBG allocation and other resources  as a condition for receiving funds. Alternatively, Congress could direct  HUD to develop a formula that accounts for the housing needs of both  homeowners and renters. Such a formula could be used by states to  determine the proportions of their disaster CDBG funds that should be  used for housing, specifically rental housing. Further, the formula could  also reflect the anticipated production levels of other programs that  provide permanent housing assistance, such as the Low-Income Housing  Tax Credit program.
section_title: Agency Comments
paragraphs: We provided a draft of this report to the Department of Housing and Urban  Development, the Department of Homeland Security, the Department of  the Treasury, and the Small Business Administration. We received  technical comments from all of the agencies and incorporated them as  appropriate. We also provided relevant sections of this report to state  officials in Louisiana and Mississippi, and incorporated their technical  comments as appropriate.
As agreed with your offices, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date.  At that time, we will send copies of this report to interested  congressional committees, the Secretary of the Department of Housing  and Urban Development, the Secretary of the Department of Homeland  Security, the Secretary of the Treasury, and the Administrator of the Small  Business Administration. In addition, the report will be available at no  charge on the GAO Web site at http://www.gao.gov.
If you or your staff have any questions on matters discussed in this report  or would like additional information, please contact me at (202) 512-8678  or sciremj@gao.gov. Major contributors to this report are acknowledged in  appendix VIII.
section_title: Appendix I: Objectives, Scope, and Methodology
paragraphs: Our objectives were to (1) describe how federal disaster-related assistance  for permanent housing has been provided to homeowners and rental  property owners affected by the 2005 Gulf Coast hurricanes; (2) evaluate  the extent to which federally funded programs responded to the needs of  homeowners and rental property owners in repairing or replacing units  damaged by these hurricanes; and (3) describe the challenges that  homeowners and rental property owners have faced in applying for and  using federal assistance, and potential options for addressing these  challenges.
In reviewing post-disaster assistance for permanent housing provided after  Hurricanes Katrina and Rita, we focused on Louisiana and Mississippi  because these two states sustained the most damage of the five states  affected by these hurricanes. To identify federal programs that provided  this assistance, we reviewed statutes and regulations, studies and reports  by government agencies and research organizations, and agency Web sites.  In addition, we interviewed officials from the Department of Housing and  Urban Development (HUD), Department of Homeland Security (DHS),  Department of the Treasury (Treasury), and the Small Business  Administration (SBA); state and local housing agencies in Baton Rouge  and New Orleans, Louisiana, and Biloxi, Gulfport, and Jackson,  Mississippi; and various housing groups. We selected programs that were  disaster-related and provided funds or tax incentives to encourage the  development of permanent housing, which included repairing or replacing   housing. We defined assistance for permanent housing as assistance for  housing that is intended for long-term occupancy. Given our methodology,  we did not include every program that provides post-disaster housing  assistance. The programs in our review include the following:    Capital Fund Emergency/Natural Disaster Funding (HUD)
Community Development Block Grant Program (HUD)
GO Zone Low-Income Housing Tax Credits (Treasury)
GO Zone Tax-Exempt Private Activity Bonds (Treasury)
Home Disaster Loan and Physical Disaster Business Loan (SBA)
Individuals and Households Program: Repair or Replacement Assistance  (DHS)
GO Zone New Markets Tax Credits (Treasury)
Public Assistance for Permanent Work (DHS)
For each of the programs identified, we determined whether homeowners,  rental property owners, or both were potentially eligible to benefit from  the program; whether the assistance was in the form of a grant, loan, or  tax incentive; the types of activities that could be funded; and the  program’s purpose. We also identified whether the program was  administered by a federal or state agency, the amount of funds available,  and how the administering agency awarded funds. For most programs, we  used the amount appropriated by Congress as the amount available.  However, for programs that were funded through the Disaster Relief Fund  (Individuals and Households Program: Repair or Replacement Assistance  and Public Assistance for Permanent Work), we used the amounts  awarded in Louisiana and Mississippi. More specifically, for the Public  Assistance for Permanent Work Program, we reported the amount  awarded to public housing authorities.  We generally used the date that the  initial application period opened, if applicable, to describe the dates that  the programs we reviewed became available. For the Gulf Opportunity  (GO) Zone Tax-Exempt Private Activity Bond Program, we reported the  dates that states made either the first final approval or the first allocation.   For Mississippi’s Public Housing Program, which was funded through the  Community Development Block Grant Program (CDBG), we reported the  date that HUD approved the program design.
To determine the extent to which the programs we reviewed responded to  the needs of homeowners and rental property owners in repairing or  replacing homeowner and rental units, we compared the available data on  units funded to the estimated number of units damaged for homeowner  and rental units. We first obtained data on the number of homeowner and  rental units with minor, major, and severe damage in Louisiana and  Mississippi from the Federal Emergency Management Agency’s (FEMA)  published estimates. We used this information as an indicator of housing  need at the time of the disaster. We also used this information to highlight  the Louisiana parishes and Mississippi counties that sustained the most  damage. Based on available data for damaged homeowner and rental  units, we determined that eight parishes accounted for 70 percent of the  total homeowner and rental units damaged in Louisiana and that three  counties accounted for 43 percent of the total homeowner and rental units  damaged in Mississippi. To determine the proportion of homeowner and  rental units that sustained damage in each state and in the most damaged  areas, we compared the estimated number of homeowner and rental units  damaged to the number of occupied homeowner and rental units  statewide and in the most damaged areas from the 2000 Decennial  Census.
We obtained data from program administrators on the numbers of  homeowner and/or rental housing units that were funded. For each  program, we requested data on the number of units funded as of  December 2008, although for some programs, program administrators  could not provide data as of this date. Specifically, data for Mississippi’s  Small Rental Assistance and Long Term Workforce Housing Programs  were available as of April 2009; data for the Home Disaster Loan Program  were available as of July 2009; data for the Capital Fund  Emergency/Natural Disaster Funding Program for Mississippi and the  Physical Disaster Business Loan Program were available as of August  2009; and data for the New Markets Tax Credits (GO Zone) Program were  available for activities that were undertaken through December 2008. We  do not believe that the different dates for the count of units funded under  these programs will have a material impact on the results, as month-to- month unit count changes have been small for the key programs. For  Louisiana’s Road Home Homeowner Program and Mississippi’s  Homeowner Assistance Program, we counted awards to homeowners as  homeowner units funded, although homeowners are not required to use  their grant funds to repair their homes. We were not able to include data  on the number of rental units funded through the Physical Disaster  Business Loan Program because SBA did not have readily available  information on the number of rental units funded. To determine the  number and amount of Physical Disaster Business Loans for the repair of  residential rental properties, we obtained data categorized by the North  American Industry Classification System. We included approved loans for  real estate repairs only. Due to data limitations, we may not have included  all physical disaster business loans that were provided for real estate  repairs to residential rental properties. While we did not include a $15  million appropriation for the repair of rental housing damaged by  Hurricanes Katrina and Rita as one of the programs in our review, we  included these funds as well as data on the number of rental units funded  with this appropriation as a part of our analysis because it is an additional  source of funding for permanent rental housing. With available data, we  compared the total number of homeowner units funded to the total  number of homeowner units damaged in each state.
Because some funded units may have received assistance from multiple  programs, we took steps to avoid double counting. We compared the  addresses of homeowner units funded by Louisiana’s Road Home  Homeowner Assistance Program, Mississippi’s Homeowner Assistance  Program, Individuals and Households Program: Repair or Replacement  Assistance, and the Physical Home Disaster Loan Program for both  Louisiana and Mississippi. This comparison allowed us to determine  whether a unit was funded by only one program or by multiple programs.  In order to ensure that an address was counted only once, we converted  the addresses of the homeowner units funded by each of the programs we  reviewed into a consistent format and applied standardization rules (for  example, “Street” was consistently changed to “St.”). This allowed us to  look for double counting for over 99 percent of the addresses we  compared. We could not compare addresses for homeowner units funded  by the HMGP, Long Term Workforce Housing Program, and New Markets  Tax Credits (GO Zone) Program, because unit-level data on rental property  street addresses were not readily available.
In addition, we summarized the amounts of assistance awarded (and loans  approved) to homeowners and rental property owners through the  programs we reviewed as of December 2008, unless program  administrators could not provide funding data as of this date. For example,  administrators of Mississippi’s Small Rental Assistance and Long Term  Workforce Housing Programs did not have archival data for December  2008, and thus they provided data as of April 2009. For the New Markets  Tax Credit Program (GO Zone), funding data were available for activities  that were undertaken through December 2008. However, while we could  determine funding amounts for homeowner units, we could not determine  funding amounts for rental units for this program because rental units are  funded as a part of mixed-use projects (that is, projects with both  commercial and residential uses). It was not possible to determine the  amounts funded only for the rental units associated with mixed-use  projects.
We also obtained and analyzed data from program administrators to  determine the extent to which funded homeowner and rental units were  complete as of summer 2009. We were unable to determine the extent to  which homeowner units were complete because either program  administrators were not required to collect data or the data were not  readily available. For most of the programs that funded rental units, data  were available on the extent to which they were complete as of June, July,  and August 2009 (see app. VII). Data on the extent to which rental units  funded through the New Markets Tax Credit Program (GO Zone) were  complete were not readily available.
To assess the reliability of agency data on the numbers and location of  homeowner and rental units funded as well as the amount of assistance  provided, we (1) performed electronic testing for obvious errors in  accuracy and completeness; (2) reviewed related documentation,  including audit reports on data verification for some programs we  reviewed; and (3) worked with agency officials or contractors to identify  any data problems. When we found discrepancies, such as unpopulated  fields or data entry errors, we notified agency officials or contractors and  worked with these officials to correct the discrepancies before conducting  our analysis. We determined that the data were sufficiently reliable for the  purposes of our report.
To identify challenges to homeowners and rental property owners, we  reviewed studies and reports about housing recovery in the areas affected  by the hurricanes, interviewed the administrators of the programs we  reviewed, interviewed organizations that worked with disaster victims to  obtain permanent housing, and analyzed data on the timeliness of funding  availability and application processing. To describe the timeliness of  funding availability, we interviewed program administrators, reviewed  prior GAO and other reports, and obtained documentation of the dates on  which HUD accepted plans for CDBG-funded programs. Also, in  examining application processing times for CDBG-funded programs, we  obtained data from program administrators on each loan or grant  awarded. We determined the median number of days between the date the  application was received by the state and the date funds were awarded  (for the homeowner programs) or the closing occurred (for the small  rental programs). We excluded outliers and records with missing data to  determine the median number of days elapsed between these points.  Further, we summarized available information from program  administrators and other reports on factors that may have contributed to  processing delays.
To identify potential options for mitigating the challenges we identified,  we reviewed recommendations in studies and reports, suggestions from  program administrators and organizations that worked with disaster  victims to obtain permanent housing, and information on the  congressional intent of post-disaster housing assistance, including the  Stafford Act and FEMA’s Disaster Housing Strategy. We discussed these  options and their potential limitations.
section_title: Appendix II: Homeowner Programs Funded through the Community Development Block Grant Program
subsections: section_title: Road Home Homeowner Program (Louisiana)
paragraphs: The Louisiana Road Home Homeowner Program was designed to provide  a one-time compensation grant payment, up to a maximum of $150,000, to  eligible homeowners whose primary residence was damaged by the 2005  Gulf Coast hurricanes and who wished to (1) repair or rebuild their home,  (2) purchase another home in Louisiana, or (3) sell their home and  relocate outside of the state. After the 2005 Gulf Coast hurricanes,  Congress made $13.4 billion available to Louisiana for disaster recovery.  Louisiana allocated $11.5 billion of these funds to the Road Home  Homeowner Program. To award assistance, the Office of Community  Development (OCD) reviewed applications to determine and verify  program eligibility. After an application was received and determined to be  preliminarily eligible, the OCD conducted an on-site evaluation. After this  evaluation, grant calculations were conducted based on the lesser of either  the property’s pre-storm value or the estimated cost of damage to the  property. A final determination of eligibility was also made. Other  assistance received—such as insurance proceeds or assistance from the  Federal Emergency Management Agency (FEMA) or the Small Business  Administration (SBA)—was deducted from the final grant amount  awarded.
The OCD also offered an Additional Compensation Grant up to a  maximum of $50,000 to eligible homeowners who had a household income  of 80 percent of the parish median income or less. The Additional  Compensation Grant was intended to assist with any gap between the  estimated cost of damage and the amount(s) the homeowner received  from the Road Home compensation grant and other assistance.
section_title: Homeowner Assistance Program (Mississippi)
paragraphs: The Mississippi Homeowner Assistance Program was designed to provide  a one-time grant payment, up to a maximum of $150,000, to eligible  homeowners who lived outside of the flood plain and suffered flood  damage to their primary residence as a result of Hurricane Katrina. After  the 2005 Gulf Coast hurricanes, Congress made $5.5 billion available to  Mississippi for disaster recovery. Mississippi allocated $1.96 billion for this  program. To award assistance, the Mississippi Development Authority  accepted applications during its open application period to determine  program eligibility. Once eligibility was established, grant calculations  were conducted based on the largest of the following values: (1) the pre- Katrina insured value adjusted by an inflation factor of 35 percent; (2) the  damage amount estimated by SBA, not to exceed 135 percent of the  insurable value; or (3) the Mississippi Development Authority damage  assessment cost to repair. Once the homeowner was determined to be  eligible, funds were made available to the homeowner through a closing  process using a mortgage lender or escrow or closing agent, or potentially  by electronic funds transfer. In exchange for the grant payment, a  qualifying homeowner had to agree to a covenant on their property that  established building code, flood insurance, and elevation requirements for  them or any future owner of the land.
The Mississippi Development Authority later expanded the Homeowner  Assistance Program applicant pool by implementing a second phase  (Phase II). Phase II offered up to a maximum of $100,000 in grant  assistance to homeowners who resided inside or outside of the flood plain  and who had a household income at or below 120 percent of the area  median income.
section_title: Appendix III: Small Rental Housing Programs Funded through the Community Development Block Grant Program
subsections: section_title: Road Home Small Rental Property Program (Louisiana)
paragraphs: The Louisiana Road Home Small Rental Property Program was designed to  provide gap financing to small rental property owners in the form of  forgivable loans for the repair of rental units. The restored units must be  offered at affordable rents to income eligible renters. After the 2005 Gulf  Coast hurricanes, $751 million was made available through the small rental  program. To award assistance, the Office of Community Development  (OCD) accepted and reviewed applications during two rounds of funding.  OCD verified basic eligibility information and then scored and ranked  eligible applications. OCD then conditionally awarded loan assistance to  applicants with the highest scores. Applicants who ranked below the cut- off point could apply for a later round of funding. After an applicant was  conditionally awarded assistance, OCD completed verification of eligibility  and issued a loan commitment letter to the applicant. OCD disbursed the  award at closing, after the units were repaired and income eligible tenants  were identified. Only owner occupants of three- and four-unit properties  who received compensation for their home were required to deduct other  benefits—including insurance payments, assistance from the Federal  Emergency Management Agency (FEMA), assistance or funds from the  Small Business Administration (SBA)—from their award.
In December 2008, OCD announced an additional option for program  participants, which provided up-front financing. The option was created to  increase the production of rental housing with Community Development  Block Grant (CDBG) funds and to accelerate the distribution of funds to  owners. In exchange for up-front financing, owners must provide  affordable housing once the property is repaired. According to OCD,  program participants were sent letters informing them of this option in  2009.
section_title: Small Rental Assistance Program (Mississippi)
paragraphs: Mississippi’s Small Rental Assistance Program was designed to provide  forgivable loans to small rental property owners in Hancock, Harrison,  Jackson, and Pearl River Counties for the repair of rental units as an  incentive to provide affordable rental housing to income-eligible renters.  After the 2005 Gulf Coast hurricanes, about $263 million was made  available through the small rental program. To award assistance, the  Mississippi Development Authority (MDA) accepted and reviewed  applications during two rounds of funding. MDA offered four types of loan  assistance: (1) rental income subsidy assistance, (2) repair or  reconstruction reimbursement for Katrina-damaged property, (3)  reconstruction or conversion reimbursement for non-Katrina damaged  property, and (4) new construction reimbursement. To apply for loan  assistance, applicants were required to complete an application, choosing  one of the four types of assistance. Once applicant eligibility was  determined, MDA contacted the applicant to schedule the closing. Upon  closing, applicants were given 24 months to complete all work on the  structure and obtain a certificate of occupancy. The loan was awarded in  two installments: half when the property owner provided a building  permit, and the remainder when the owner provided a certificate of  occupancy.
section_title: Appendix IV: Programs Funded through Tax Incentives
paragraphs: The Gulf Opportunity Zone (GO Zone) Act of 2005 included tax incentives  to assist recovery and economic revitalization for individuals and  businesses in designated areas in several states, including Louisiana and  Mississippi, following Hurricanes Katrina and Rita in 2005. The tax  incentives included in this review are extensions of existing federal tax  incentives, including low-income housing tax credits, tax-exempt private  activity bonds, and new markets tax credits.
subsections: section_title: GO Zone Low-Income Housing Tax Credits
paragraphs: The GO Zone Low-Income Housing Tax Credit (LIHTC) program was  designed to provide tax incentives to encourage the development of  affordable rental housing between 2006 and 2008 in the areas affected by  the 2005 Gulf Coast hurricanes. A $170 million allocation was made  available to Louisiana and $106 million was made available to Mississippi  to fund the development of affordable rental housing. To award the tax  incentives, the state housing finance agencies in Louisiana and Mississippi  used their existing procedures; they announced the availability of the  credits through qualified allocation plans, processed applications, and  competitively awarded credits in multiple funding rounds. During some  funding rounds, each state gave priority to projects proposed in the most  damaged counties.
Recipients of credits use them or sell them through an investment vehicle  to investors to obtain equity for the development of rental housing.  Investors receive a direct reduction in their tax liability. They can claim  GO Zone LIHTCs for eligible projects each year for 10 years from the time  the housing developments are placed in service. All of the GO Zone LIHTC- funded units must be in service before January 1, 2011.
section_title: GO Zone Tax-Exempt Private Activity Bonds
paragraphs: GO Zone Tax-Exempt Private Activity Bonds were made available to  governmental entities after the 2005 Gulf Coast hurricanes to help finance  the development of private facilities and activities, including single-family  and multifamily rental housing. Louisiana received $7.8 billion in GO Zone  Tax-Exempt Private Activity Bond allocation authority, and Mississippi  received $4.9 billion. In accordance with the GO Zone Act of 2005, in  Louisiana, the bond commission had the final authority to award GO Zone  bonds, and in Mississippi, which did not have a bond commission, the final  authority rested with the Governor. To award allocation authority, the  states of Louisiana and Mississippi accepted and reviewed applications  and allocated bond authority on a first-come, first-served basis.  Governmental entities issue the bonds, which are repaid by the borrowers’  payments on their loans. The GO Zone bonds allowed states to exceed  their annual state volume caps and could be used for a broader range of  facilities than tax-exempt private activity bonds, which are subject to  annual state volume caps. GO Zone Tax-Exempt Private Activity Bonds  must be used between 2006 and 2010.
Data on the number of homeowner units funded through GO Zone Tax- Exempt Private Activity Bonds were not readily available from either state  program administrator. In Louisiana, 216 rental units were funded as of  December 2008, and GO Zone Tax-Exempt Private Activity Bonds were  not used to fund rental housing in Mississippi.
section_title: New Markets Tax Credits for the GO Zone
paragraphs: The New Markets Tax Credit program is designed to provide a tax  incentive to investors (including financial institutions, individuals, and  corporations) to invest in Community Development Entities, which then  reinvest the funds in qualified low-income community investments. Such  investments include, but are not limited to, residential projects. The GO  Zone Act of 2005 authorized $1 billion of special allocation authority to be  used for the recovery and redevelopment of the GO Zone. To award  assistance, the Community Development Financial Institutions Fund in the  Department of the Treasury evaluated applications for credit allocations  from Community Development Entities proposing activities in the GO  Zone. The Community Development Financial Institutions Fund also  allocated tax credit authority in 2006 and 2007.
According to our analysis of Community Development Financial  Institutions Fund data, 217 homeowner units and 493 rental units had been  funded with GO Zone New Markets Tax Credit allocation authority  through 2008. While about $28 million in authority was awarded for  homeowner units, it is not possible to determine the amount of authority  awarded for rental units that are funded as a part of mixed-use projects.
section_title: Appendix V: Home Disaster and Physical Disaster Business Loan Programs
paragraphs: The Small Business Administration (SBA) provides federal long-range  recovery funding after a presidentially declared or SBA-declared disaster  through the Disaster Loan Program. After the 2005 hurricanes,  homeowners could apply to this program for a Home Disaster Loan up to a  maximum of $200,000 for real estate repairs. Business owners (including  rental property owners) could apply for a Physical Disaster Business Loan  up to a maximum of $2 million for real estate and personal property.  Homeowners and business owners could use loan funds to repair or  replace damaged or destroyed real estate not covered by insurance or  other assistance. Business owners could also use loan funds for inventory,  supplies, machinery and equipment, and other business assets owned by  the business and not covered by insurance or other assistance. After the  hurricanes, SBA sent a loan application package to homeowners and  business owners that first registered with the Federal Emergency  Management Agency (FEMA) and met initial income eligibility criteria.
To make a disaster loan, SBA reviewed the loan application package, and  applicants were approved or denied based on their ability to repay the  loan and other criteria, such as credit history. After the application was  approved, SBA began the loan process, which included loss verification,  underwriting (which includes the decision to loan funds), approval,  closing for loan authorization and agreement, and initial disbursement.  SBA loan applications became available after the hurricanes occurred and  incremental application deadlines were determined for each state. For  Louisiana and Mississippi, the application period for Hurricane Katrina  was October 2005 through April 2006. For Louisiana, the application  period for Hurricane Rita was November 2005 through April 2006.
section_title: Appendix VI: Other Programs Reviewed
subsections: section_title: Capital Fund Emergency/Natural Disaster Funding
paragraphs: The Capital Fund Emergency/Natural Disaster Funding Program is  administered by the Department of Housing and Urban Development  (HUD) and is designed to provide grants to public housing authorities  (PHA) for the repair or replacement of public housing that is damaged or  destroyed by emergencies or natural phenomena, such as hurricanes,  flooding, or earthquakes. Congress appropriates funds to this program  each year. For 2005, a total of $29.7 million was appropriated for the  Capital Fund reserve. To award assistance after the 2005 Gulf Coast  hurricanes, HUD reviewed applications from PHAs and awarded grants on  a first-come, first-served basis. Grant funds pay for a PHA’s needs that are  in excess of its insurance coverage or other federal assistance, such as  assistance provided by the Federal Emergency Management Agency  (FEMA).
section_title: Hazard Mitigation Grant Program
paragraphs: The Hazard Mitigation Grant Program (HMGP) is administered by FEMA.  The HMGP provides grants to states, local governments, and Indian tribes  for long-term hazard mitigation projects following a major disaster  declaration. The program is intended to reduce the loss of life and  property in future disasters by funding mitigation measures. HMGP  funding is calculated based on the percentage of the funds spent on Public  and Individual Assistance for each presidentially declared disaster.  Generally about 12 months after a disaster, FEMA determines the amount  of HMGP funds to be allocated to each affected state.
To be eligible for HMGP assistance, a project must provide a long-term  solution to a specific risk, such as elevating a flood-prone property or  acquiring a flood-prone property for demolition or relocation. During the  recovery phase of a disaster, local jurisdictions select projects that could  reduce property damage from future disasters and submit grant  applications to the state, and the state submits applications to FEMA.
FEMA conducts a final eligibility review to ensure compliance with federal  regulations. FEMA generally requires states to submit their project  applications within 12 months of the date the disaster was declared.  However, after the 2005 Gulf Coast hurricanes, FEMA provided a number  of deadline extensions for Louisiana and Mississippi, with the final  deadline for Mississippi set at June 30, 2009, and at October 30, 2009, for  Louisiana.
section_title: Individuals and Households Program: Repair or Replacement Assistance
paragraphs: The Individuals and Households Program (IHP) makes grants and direct  services available to disaster victims. Several types of assistance are  available through IHP, including Repair Assistance and Replacement  Assistance. Repair and Replacement Assistance was available for the  repair of homes to safe and sanitary living conditions, and to help replace  disaster-damaged homes. Following Hurricanes Katrina and Rita, the  maximum allowance for repair assistance was $5,200 and the maximum  allowance for replacement assistance was $10,500.
FEMA reviews applications and conducts property inspections to  determine eligibility and grant amounts. Generally, FEMA accepts  applications for 60 days from the disaster date, but the application period  was extended to April 2006 after Hurricanes Katrina and Rita. To be  eligible for assistance, the applicant must be a U.S. citizen, a non-citizen  national, or a qualified alien, and must have owned a home in a  presidentially declared disaster area.
section_title: Long Term Workforce Housing (Mississippi)
paragraphs: The Long Term Workforce Housing Program was designed to provide  grants and loans to local units of government, nonprofit organizations, and  for-profit organizations to develop permanent affordable housing for  homeowners and renters in Hancock, Harrison, Jackson, and Pearl River  counties. For this program, housing must benefit those who earn 120  percent of area median income or less. The state of Mississippi made $350  million of its disaster Community Development Block Grant funds  available for this program. To award the assistance, the Mississippi  Development Authority reviewed proposals from applicants, evaluated  them based on specific selection criteria, and awarded funds to the highest  scoring applicants. The selected projects were projected to produce  approximately 5,850 affordable homeowner and rental units.
section_title: Public Assistance for Permanent Work
paragraphs: FEMA’s Public Assistance for Permanent Work Program can be used to  provide state and local governments, including PHAs, with grants to  restore damaged facilities, through repair or restoration, to their pre- disaster condition.  To award assistance, FEMA reviews requests for  assistance and awards grants to states. Grant amounts are generally  determined by evaluating repair costs and reducing grant amounts by the  amount of funding awarded or anticipated to be awarded by other sources  (such as assistance from other federal agencies or insurance settlements).  States are then responsible for notifying applicants that funds are available  and for disbursing those funds, generally on a reimbursement basis. While  Public Assistance generally provides 75 percent of repair costs, the cost  share for projects related to Hurricanes Katrina and Rita has been adjusted  to provide 100 percent of federal funding.
PHAs that did not qualify for assistance for permanent restoration costs  from HUD under the Housing Act of 1937 were able to apply directly to  FEMA for permanent restoration work. Such work could include repairs to  PHA-owned rental units.
Data on the number of units funded and completed with Public Assistance  Funds for Permanent Work were not available from FEMA. According to  the Housing Authority of New Orleans, which received the largest  obligation of funds, no units had been funded or completed as of August  2009. According to the Region VIII Housing Authority in Mississippi, the  only PHA in Mississippi that was awarded funds, 24 units were funded and  completed in 2006.
section_title: Public Housing Program (Mississippi)
paragraphs: The Mississippi Public Housing Program was designed to provide grants to  PHAs for the repair or replacement of public housing that was damaged by  Hurricane Katrina. The state made $105 million of its disaster Community  Development Block Grant funds available for this program. To award  assistance, the Mississippi Development Authority reviewed applications  from PHAs and determined award amounts based upon documentation of  damage and funding the PHA received or expected to receive from  insurance or from the Capital Fund for Emergency/Natural Disaster  Funding Program. According to the Action Plan for this program, funds  were to be made available to eligible PHAs when construction  commenced, and would be paid on a “draw down” basis as the obligation  to pay occurred. According to the Mississippi Development Authority, $48  million had been awarded to five PHAs for the funding of 1,594 public  housing units as of December 2008. As of August 2009, 1,210 public  housing units were complete and in service.
section_title: Appendix VII: Rental Units Funded and Completed
paragraphs: Apr. 2009 Aug. 2009 Apr. 2009 Aug. 2009  and complete as of August 2009.
This table includes units funded by a $15 million appropriation for the redevelopment of permanent  housing damaged by Hurricane Katrina. HUD awarded these funds to the Housing Authority of New  Orleans.
section_title: Appendix VIII: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact
section_title: Staff Acknowledgments
paragraphs: Major contributors to this report were Daniel Garcia-Diaz, Assistant  Director; Vanessa Dillard; Shamiah Kerney; and Lisa Moore. Johnnie  Barnes, Cindy Gilbert, Thomas Gilbert, John McGrail, John Mingus, and  Jennifer Schwartz also made key contributions to this report.