The Government Accountability Office (GAO) released a report on February 16 that highlights the extent to which 2005 disaster programs funded by federal dollars disproportionately favored homeowner assistance over rental repair and broad funding delays contributed to the slow pace of recovery. Based on examination of 10 key housing recovery programs, the GAO concludes that similar problems will repeat in future disasters should no federal action occur.
Titled Disaster Assistance: Federal Assistance for Permanent Housing Primarily Benefited Homeowners; Opportunities Exits to Better Target Rental Housing Needs, the report specifically looks at the states of Louisiana and Mississippi following hurricanes Katrina and Rita. Though the number of homeowner units damaged by the storms was greater in both cases, each state saw a larger percentage of its rental stock damaged. In the three most impacted counties of Mississippi, for example, 80% of the rental stock sustained damage, compared to 64% of homeowner units. Yet both states initiated homeowner repair programs first and allocated them a larger proportion of federal assistance.
Approximately $13 billion in federally funded programs provided funding to 62% of the 489,000 homeowner units damaged in the two states combined, while that was true for only 18% of the 247,000 damaged rental units that shared a pot of approximately $1.8 billion. Due to this discrepancy, demand for small rental repair assistance provided through the states far exceeded what the distributions could fund, by eight times in Louisiana and two times in Mississippi.
The report puts considerable focus on use of disaster Community Development Block Grant (CDBG) funds, as these funds represented by far the single largest investment in permanent housing recovery, and notes that both states took much longer to use these funds for rental repair. Mississippi began its homeowner program eight months after Hurricane Katrina, but did not launch a rental repair program for two years. Owners of rental units then waited a median of 405 days for their grants to close, while homeowners waited 240 days. In Louisiana those program initiation timeframes were one year and 17 months, respectively, and median waits for rental property assistance were even longer, 494 days, compared to homeowners, 245 days.
In offering possible Congressional action, the report mentions specific federal direction to determine disaster CDBG fund distribution between homeowner and rental activities. In order to best guide states in that process, the GAO suggests that Congress could require HUD to develop an appropriate formula. Unfortunately, the report does not offer concrete recommendations for how to ensure that rental repair programs appear as quickly as those for homeowners.
More generally, the GAO finds that Congress and the Administration should keep working to determine whether CDBG is the appropriate primary program for disaster housing recovery. The report mentions that “broad discretion under CDBG” allowed states to distribute assistance in a way that underfunded rental repair. Advocates have long argued that flexibility provided under disaster CDBG funds is a big concern and that another federal program, such as HOME, might be a better choice for disaster housing recovery.
To address funding delays that plagued both homeowner and rental property owners after the 2005 hurricanes, the report calls for the federal government to clarify guidance on, eligible uses of, and application processes for all federally funded programs, as well as requiring program designs that allow for upfront funding. The GAO also suggests that grant amounts should be based on repair costs, not pre-storm home values, in order to tackle problems with funding gaps in many programs, all recommendations that echo those of advocates.
The report is available at: http://www.gao.gov/new.items/d1017.pdf