When Hurricane Katrina struck the Gulf Coast, the devastation took a disproportionate toll on renters. According to a study (pdf) by Brown University sociologist John Logan, 45.7 percent of homes in storm-wrecked areas were occupied by renters, compared to 30.9 percent of homes in undamaged communities. But when Louisiana, where most of the damage occurred, launched its $7.5 billion Road Home rebuilding program last year, it focused solely on owner-occupied housing.
Seventeen months after the storm, that's finally about to change. Yesterday the state rolled out its Road Home program for small rental properties, with plans to distribute a total of $869 million to finance the repair and reconstruction of about 18,000 rental properties out of the 82,000 damaged or destroyed by Katrina and Rita. The program, though modest, will rightly focus on providing affordable rents to working families, according to an announcement on the program's Web site:
Participating property owners will be required to accept limits on the rents they charge and the incomes of the tenants they select. The amount of financing will be provided in three tiers based on the income level of the tenants to be served. The highest amount of funding per unit will be available to property owners who agree to offer the lowest rents. Awards are offered as no interest, no payment, forgivable loans, due only upon resale of the property or failure to comply with the rent restrictions and household incomes.
The funds available through the Rental program will not be able to provide every small-scale property owner with enough money for the repair or reconstruction of their rental properties, but it will spur development of quality rental units in the most heavily damaged areas.
In New Orleans, for example, landlords will be able to get as much as $47,000 to repair a two-bedroom property and charge $590 in rent if the occupant makes less than $26,125, about half the local median income. But if the renter makes $41,800 or 80 percent of the median, the landlord can borrow only up to $16,500 for repairs and charge $940 a month in rent.
Sounds good, right? But there's a catch: The same private contractor widely criticized for the glacial pace of its assistance to homeowners will also be in charge of disbursing the rental rebuilding funds.
ICF International of Fairfax, Va. will collect $756 million to manage the program, the New Orleans Times-Picayune reports. But the company has already come under fire for its failure to deliver financial assistance to homeowners promptly. Though it began distributing aid in August of last year (a month before issuing its initial public stock offering) and has received more than 103,000 applications, it has scheduled or held only 391 loan closings to date, according to its own program statistics. The loans on average have been about $80,000, but some have been as low as $10,000.
The company has been understaffed and has consistently underestimated the magnitude of the job it's taken on, according to a recent Times-Picayune investigation:
One homeowner griped that he showed up for his appointment with a housing adviser in New Orleans only to be told he wasn't on the list, and neither were nine other people who came that day -- including two families who had flown in from other states. He said he and several other applicants got in only after complaining to the media.
An elderly man and his wife claimed that in the middle of their appointment, a security guard evicted them from the Baton Rouge service center telling them their application was terminated and they should never return. The homeowner told a state legislator that he and his wife were "humiliated" at being treated like "common criminals."
Extravagant spending on the company's part has been another concern. Under the contract, ICF's lawyers make $375 an hour, which is much more than private attorneys working on a state contract earn, the Washington Post reports. The contract also allocates $19 million for travel expenses without requiring the firm to account for it.
In December, the Louisiana legislature approved a non-binding resolution calling on Gov. Kathleen Blanco (D) to terminate ICF's contract. But in a response statement (Word) issued by ICF, Blanco said the remedy was "to move faster, not start over from scratch." In fact, under the terms of the ICF contract, the state is pretty much stuck with the deal, with no significant penalties available for poor performance.
And there are already some signs of trouble brewing with the rental program. Earlier this month, ICF pledged to adequately staff the program with 170 employees, but it has already knocked that number down by 50, according to the Times-Picayune. Given that the Road Home contract is expected to make up about 40 percent of the company's total revenue, ICF has an obvious motivation to keep its program administration costs low.
Earlier this month, the Baton Rouge Advocate reported that Blanco was considering taking the small rental repair program away from ICF. Obviously, that didn't happen. The governor's inability to force the company to do right by the people of her state or face meaningful consequences illustrates clearly how the privatization of disaster reconstruction is enriching corporations while failing to hold them accountable to the taxpayers who foot the bills.