Repair and Replacement of Affordable Housing Lags in Mississippi's Post-Katrina Recovery

Affordable housing recovery in three coastal counties in Mississippi heavily damaged by Hurricane Katrina lags behind the pace of the rest of the housing market in the region, according to a RAND Corporation study released today.

While construction permits had been issued as of July for approximately 60 percent of the housing damaged by the hurricane, repair and replacement of multi-unit housing significantly lags behind repair and replacement of single-family homes, according to this study from the RAND Gulf States Policy Institute.

This gap has seriously worsened the pre-Hurricane shortage of affordable housing in Hancock, Harrison and Jackson counties, researchers say. The problem makes it particularly difficult to attract the construction laborers and other workers needed to rebuild the region's devastated infrastructure, the report says.

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

“The study provides Mississippi with insights and guidance that will help keep us focused on rebuilding the communities devastated by Hurricane Katrina,” said Chris Wilson, president of the Mississippi Association of Realtors, which together with the National Association of Realtors was one of the principal sponsors of the report.

“Transparency and accountability are the essential hallmarks of an equitable recovery process,” said Bernadette Orr, Gulf Coast Recovery Program Manager for Oxfam America. “The information in this report is a crucial tool for residents of Mississippi's Gulf Coast to be empowered in the process to help plan and rebuild their communities.”

RAND researchers found, not surprisingly, that housing that sustained only limited or moderate damage is being rebuilt faster than units that were severely damaged. This is due to the high cost of repairs, a backlog in the construction market, and difficulties homeowners and landlords face in obtaining financing for repairs and reconstruction, McCarthy said.

Recovery efforts for all housing types are expected to take at least three more years and cost a total of more than $4 billion, according to the study.

Access to financing appears to be the single biggest obstacle to the recovery effort, researchers say. Although there are many financial sources, including insurance, Mississippi Homeowner Assistance Grants and government loans, gaps remain and particularly affect landlords of multi-family rental properties and un- and under-insured households that suffered major damage.

Hancock, Harrison and Jackson counties were the hardest-hit by the hurricane in August 2005. About 60 percent of the region's housing stock was damaged and affordable housing – in short supply before the storm – has become even scarcer.

McCarthy and co-author Mark Hanson found that since the storm, residents have faced a 20 percent increase in rents and a drop in employment, in addition to the fact that 20 percent of the total housing stock was not merely damaged, but destroyed.

Katrina not only destroyed and damaged buildings, it also damaged the region's infrastructure, economy and such public sector institutions as medical facilities, schools and government offices. Solving the affordable housing problem will require replacing the jobs and wages that were lost following the storm, but that requires that there be a supply of affordable housing for those employees, McCarthy said.

McCarthy said leaders also should be careful that pressure to speed recovery efforts does not disrupt mitigation efforts designed to protect the region from future storms.

Rebuilding efforts that occurred after Hurricane Camille devastated the Gulf Coast in 1969 put speed over mitigation measures. One positive post-Katrina sign is that the Mississippi Homeowners Grant Program requires recipients to comply with new and stricter building codes, including elevation requirements, and the purchase of floodplain insurance.

However, stricter zoning regulations and other “smart growth” principles have increased the cost of rebuilding. If housing prices in the region continue to increase, political pressure may build to dispense with those measures in favor of more rapid and inexpensive construction, McCarthy said.

RAND researchers examined U.S. Census Bureau data to describe the housing market before the storm, Federal Emergency Management Agency and U.S. Army Corps of Engineer data to describe the damage done by the storm, and building permits data to examine recovery in the two years after the storm.

The RAND Gulf States Policy Institute served as advisors to Mississippi Governor Haley Barbour's Commission on Recovery, Rebuilding and Renewal in 2005 and 2006. This study, “Post-Katrina Recovery of the Housing Market Along the Mississippi Gulf Coast,” was sponsored by: Oxfam America, a nonprofit organization that works to end global poverty; a private donor; the Mississippi Association of Realtors; and the National Association of Realtors.

The RAND Gulf States Policy Institute is helping government, nonprofits and the private sector develop a long-term vision and strategies for building a better future for Louisiana, Mississippi and Alabama in the wake of Hurricanes Katrina and Rita. The goal of RGSPI is to assist in long-term recovery efforts by providing evidence-based policy research and guidance to speed regional recovery and growth.

RGSPI is a collaboration between RAND, including the Pardee RAND Graduate School, and seven universities in the Gulf States region: Jackson State University, Tulane University, Tuskegee University, University of New Orleans, University of South Alabama, University of Southern Mississippi, and Xavier University of Louisiana.

The study is available at www.rand.org.