RAND Then and Now

Thinking Locally, Acting Locally

40 Years and Counting

60 Years of RAND: Ahead of the Curve

To commemorate the 60th anniversary of the RAND Corporation, which was established as a nonprofit institution in 1948, stories about “RAND Then and Now” will appear in RAND Review through 2008.

While much of RAND’s reputation has been built on thinking globally across a range of international security and foreign policy issues, RAND has also been thinking and acting locally in communities across the United States for nearly 40 years. From 1968 to 1975, the New York City — RAND Institute devised solutions to nursing shortages, helped reform rent control, and showed how to relocate fire companies and reallocate police personnel; it also made recommendations about how to screen children for lead poisoning, discovered the potential of “slippery water” (the term that the New York City Fire Department gave to water with polymers added to ease friction), and helped enhance water quality in Jamaica Bay. More recently, soon after the 1992 Los Angeles riots, RAND turned its attention to examining the urban problems faced by that city.

Continuing this tradition, RAND has created the RAND Gulf States Policy Institute, a collaboration between RAND and seven U.S. Gulf States universities, to offer policy guidance to speed regional recovery and growth following Hurricanes Katrina and Rita and to tackle the significant regional needs and issues that existed before the storms struck. First established in December 2005 within four months of the hurricanes, the institute now operates out of two offices: one in Jackson, Mississippi, and the other in downtown New Orleans, Louisiana.

The institute has provided the earliest reliable projections of population return to New Orleans, detailed how the hurricanes affected Louisiana public school students, gleaned lessons for water resource management from major historical floods, and offered several guidelines that are now being implemented by the New Orleans Police Department to enhance its recruitment, training, and retention. Two of the most recent studies provide a comprehensive analysis of Mississippi’s affordable housing crisis and assess wind insurance coverage post-Katrina. Expanded efforts to help improve mental health care in New Orleans have also just recently been inaugurated.

When It Comes to Affordable Housing in Mississippi, Katrina Has Made a Bad Situation Worse
Hurricane Katrina worsened the pre-hurricane shortage of affordable housing in Mississippi's three coastal counties -- Hancock, Harrison, and Jackson.
SOURCE: Post-Katrina Recovery of the Housing Market Along the Mississippi Coast, 2007.

Rebuilding Affordable Housing

While Katrina devastated all forms of housing on the Mississippi Gulf Coast, one of the hardest hit sectors was affordable housing: that which costs no more than 30 percent of a household’s monthly pre-tax income. Recovery of affordable housing units now lags behind the rest of the Gulf Coast housing market.

This lag has seriously worsened the pre-hurricane shortage of affordable housing in Mississippi’s three coastal counties — Hancock, Harrison, and Jackson — as shown in the figure. Prior to Katrina, there were more than 25,000 affordable rental units. About 6,000 of them sustained severe or moderate damage, leaving only about 19,500 habitable units — a decline of 23 percent. Although Harrison County lost the greatest number of units, Hancock County suffered the most thorough devastation, losing 74 percent of its stock.

Recovery efforts for all housing types are expected to take at least three more years and cost a total of more than $4 billion. Access to financing appears to be the single biggest obstacle to the recovery effort. Although there are many sources of financing, gaps remain. They particularly affect landlords of multifamily rental properties, along with uninsured and underinsured homeowners whose units suffered major damage.

As part of a vicious cycle, the affordable housing shortage makes it especially difficult for the coastal Mississippi counties to attract the construction laborers and other workers needed to rebuild the region’s devastated infrastructure, including its housing.

“The challenge for the region is to develop a balanced growth plan that provides housing for people at every income level,” said Kevin McCarthy, a senior social scientist at RAND who is lead author of the housing study. “There needs to be more affordable housing to create diversity in the economy and build a new, better Gulf Coast.”

Meanwhile, stricter zoning regulations and other “smart growth” policies have raised the cost of rebuilding. If housing prices in the region continue to rise, political pressure may build to dispense with those important measures in favor of more rapid and inexpensive construction, said McCarthy. He stressed the need to ensure that pressure to speed recovery efforts in the short term does not disrupt longer-term mitigation efforts designed to protect the region from future storms.

Getting Wind Insurance Since Katrina

Many businesses along the Gulf Coast have had a difficult time obtaining wind insurance since Hurricane Katrina and have often ended up paying more than twice as much for the insurance as they did previously. Gulf Coast businesses are also paying higher wind insurance deductibles while receiving lower limits on policy coverage.

Businesses have been increasingly unable to purchase coverage at all in the regulated insurance market, often resorting to state-run “residual” insurance markets that offer limited coverage to businesses unable to find insurance elsewhere.

“The plight of homeowners after Hurricane Katrina has received most of the attention,” said Lloyd Dixon, a RAND senior economist and lead author of the wind insurance study. “But business owners, especially of small businesses in the hardest-hit areas, had a difficult time finding wind insurance despite steep price increases, and some couldn’t get insurance at any price.”

“There needs to be more affordable housing to create diversity in the economy and build a new, better Gulf Coast.”

As wind insurance coverage limits have declined and deductibles have increased and the use of residual markets has risen, the risk has shifted in part from insurers to policyholders and taxpayers, including those not living in high-risk areas along the Gulf Coast. The RAND study calls for an evaluation of what government commercial wind insurance programs, if any, might be warranted given the turmoil following the 2005 hurricane season.

Overcoming Mental Trauma

As the Gulf States region continues to recover, it will grapple with longer-standing health and social problems that can put a damper on recovery. While some housing will be rebuilt and some businesses will get back on their feet — providing services and jobs to those who return — the people who live there will continue to suffer from the trauma associated with the hurricanes.

In the two years since Hurricane Katrina and the levee failures swamped New Orleans, the prevalence of mental illness has more than doubled in the city, with one-third of residents exhibiting symptoms of mental illness. Half of those cases qualify as moderate to severe.

This concern has led to a Robert Wood Johnson Foundation — funded project awarded to RAND and REACH-NOLA (Rapid Evaluation and Action for Community Health in New Orleans, Louisiana), a community-based participatory research and action partnership working to improve community health and access to quality health care in post-Katrina New Orleans. From its New Orleans office, RAND is working as one of the REACH-NOLA partners to develop improved, culturally appropriate mental health services in the city.

“New Orleans community members have faced increased stress since the hurricanes of 2005, while also having access to fewer mental health services,” said Benjamin Springgate, project director and an adjunct scientist at RAND. “Developing additional evidence-based services to promote emotional well-being and resilience is critical to long-term community recovery.”

As it has for nearly 40 years, starting with its work in New York City, RAND will continue its history of tackling comprehensive social problems that hit close to home. square

For more information:

Post-Katrina Recovery of the Housing Market Along the Mississippi Gulf Coast, RAND/TR-511-OA/MAR/NAR, ISBN 978-0-8330-4293-4, 2007.
Commercial Wind Insurance in the Gulf States: Developments Since Hurricane Katrina and Challenges Moving Forward, RAND/OP-190-ICJ, 2007.