Rebuilding Housing Along the Mississippi Coast: Ideas for Ensuring an Adequate Supply of Affordable Housing
May 15, 2006
Policymakers in Mississippi continue to look for ways to develop more affordable housing for residents displaced by Hurricane Katrina and for new workers. To support this goal, researchers from the RAND Gulf States Policy Institute studied Mississippi housing and recommended that policymakers implement innovative financing and home-ownership strategies, develop needed data, create capacity for coordinating the rebuilding, reduce costs with durable and energy-efficient homes, and balance short-term recovery goals with long-term risk-mitigation measures.
In August 2005, Hurricane Katrina compounded what was already a shortage of affordable housing in Mississippi's hard-hit coastal counties. Three years later, recovery is proceeding, but it is uneven and slow. Prior to the global economic crisis that began in the fall of 2008, the RAND Corporation estimated that, at the current pace, recovery will take at least another three years and cost an estimated total of more than $4 billion.
Before Katrina, one-third of the homes in Mississippi's coastal counties were occupied by renters, 40 percent of whom were spending more than one-third of their incomes on housing or were living in subsidized or public housing. Since Katrina damaged 60 percent of the region's housing stock, the supply of housing declined significantly at the same time that employment and incomes fell. As a result, the supply of affordable housing—housing options that meet minimum building codes and require no more than 30 percent of a household's gross annual income for rent or mortgage payments—declined significantly.
Not surprisingly, housing that sustained only limited or moderate damage is being rebuilt faster than units that were severely damaged. Repairs are costly, the construction industry is overburdened, and homeowners and landlords face difficulties in obtaining financing for repairs and reconstruction.
These are some of the findings from a 2006 study of the housing market in Hancock, Harrison, and Jackson counties (see the figure) conducted by researchers from the RAND Gulf States Policy Institute. Later in 2007, RAND reevaluated the recovery and described remaining obstacles and promising strategies in a second report. The summary of findings and recommendations presented in this research brief is intended to support efforts to rebuild the areas devastated by Hurricane Katrina and reduce the affordable-housing gap in all areas of the Gulf Coast.
In a review of similar disasters, RAND researchers found that affordable housing, especially affordable rental housing, is typically slower to recover than the rest of the market. As of 2007, this pattern was repeating itself in coastal Mississippi for several key reasons. First, many homeowners and landlords (and the renters who depend on them) did not have adequate (if any) insurance coverage to rebuild. Second, the repair and replacement of multi-unit housing significantly lagged behind that of single-family homes because landlords were relatively unfamiliar with financing and complicated redevelopment processes. Finally, higher insurance premiums (driven by higher risk exposure) have made it more difficult to offer housing at prices that meet the definition of affordable.
If these trends continue, a lack of affordable housing may prevent important segments of the workforce from returning to the region. This could constrain the area's economic recovery. However, if a significant and reliable source of additional financing is made available for a prolonged period, damaged homes can be repaired and new rental units built. This will help to replace the employment and wages that were lost in the storm and encourage a resident workforce by providing affordable housing.
The researchers recommended several preliminary but promising policy options for Mississippi and its coastal counties as they strive to increase the supply of affordable housing and support economic development. The state of Mississippi has already implemented some of the key recommendations.
In allocating recovery funds, the state can set permanent, regional affordability goals so that a significant portion of people can live in the communities in which they work. The state also can establish state and local housing trust funds to offset the decline in federal funding for low-income housing. In Mississippi, the trust funds might be financed with contributions from retail sales taxes, tourism, gambling, or oil-production activities. Other suggestions include the following:
Thinking long term, the state and its cities and counties might do the following:
The researchers recommend that the state reduce the damage caused by future storms by designing homes with higher safety standards and implementing local risk-mitigation measures.
The scale of the damage that Katrina caused means that recovery requires a huge range of resources. It needs not just labor and materials but also organizational skills to coordinate the efforts of public, private, and nongovernmental organizations. Recovery organizers should do the following:
Engaging community groups in rebuilding can support regional efforts to identify needs and channel funds to streamline rebuilding efforts, communicate needs to outside agencies, and support community development through local nonprofit housing corporations.
Most of these recommendations can be implemented by the state of Mississippi; by Hancock, Harrison, and Jackson counties; by the region's cities and towns; or by some combination of these. Others will require partnerships with federal agencies, nonprofit organizations, or private-sector participants. For example, state and local officials could implement land-use plans, environmental policies, and structural guidelines. Local officials, property owners, and developers could ensure that properties in the floodplain are elevated.
It is important to recognize the potential tensions between the short-term goal of a speedy recovery and long-term goals, such as the need to protect the housing stock from future storms. Katrina is not the first devastating hurricane to hit the Mississippi Gulf Coast, and it will not be the last. A successful approach to limiting future disasters in flood-prone areas combines integrated water management (for example, zoning that leaves otherwise valuable land uninhabited to serve as a buffer), building codes that minimize damage to existing structures, and comprehensive planning for future economic development. In contrast, adding structural barriers, such as levees, to enable increased development in flood zones often increases flood risk. 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 faster and less-expensive construction.
Policymakers at the state and local levels in Mississippi, as well as in Louisiana and Alabama, have an opportunity not only to expedite the short-term recovery process, provide displaced citizens with affordable housing, and mitigate the effects of future major storms—they can also create dynamic, diverse, and economically strong communities. If they succeed, Katrina will have provided an opportunity for creating an even more vital and sustainable future for the Gulf Coast.