Posted by
Larry S. Mcdaniel on Tuesday, November 25, 2008 6:14:46 AM
The four-unit shotgun house that Sandra Marshall bought after
decades of double shifts has sat untouched since the flooding of
Hurricane Katrina, while nearly $850 million in federal aid for her and
thousands of other mom-and-pop landlords sits on a bureaucratic
shelf.
"I have old tenants calling me all the time
asking when I'm going to get the place back up and running. I wish I
knew," said Marshall, 56, who worked days as a postal clerk and nights
as a housekeeping manager to buy her property.
She
has applied for a repair loan from the nearly forgotten Louisiana Small
Rental Property Program, created in the aftermath of Katrina to provide
financial help to as many as 13,000 live-in owners of the shotgun and
cottage conversions that kept rents cheap here for
generations.
So far, it has put money in the hands of
only 352 landlords. The hurdles have been its flawed implementation,
limited financial resources among applicants, and lately, the national
credit crunch. Now, the state is seeking to overhaul the program and
divert the funds.
Housing advocates say the program's
failure has contributed to a 40-percent spike in rents citywide. That
has forced the federal government to pour even more Band-Aid relief
into the recovery, including a $28-million-a-month Disaster Housing
Assistance Program that helps 31,000 families pay the inflated
rents.
"The rental market in New Orleans will never
be the same," said Annie Clark, co-author of a New Orleans housing
report released in August by the research group
PolicyLink.
The failure of the small rental program
is one reason why, three years after Katrina, many blue-collar New
Orleans residents find themselves no longer able to afford life in
their beloved hometown. It also illustrates how the billions of
taxpayer dollars thrown at the hurricane recovery effort have yielded
limited progress.
The rental program was launched
under former Gov. Kathleen Blanco as a companion to the $10.3 billion
Road Home program, which has issued 120,000 rebuilding grants to Gulf
Coast homeowners despite its own persistent errors and bureaucratic
delays.
But if the Road Home has moved glacially, the
Small Rental Property Program is dead in the
water.
Unlike the Road Home, which grants money up
front, the rental program works on reimbursements. Landlords who own
rental properties with a maximum of four units are given a "commitment
letter" that states the amount of aid they qualify for, which they must
take to the bank as collateral for a loan. The loans are forgivable if
the landlords rent their property below market rates. But they must get
the loan first, and that's the rub.
Banks, lacking
confidence in the program, have ignored the commitment letters. The
financial crisis has magnified the problem, and now none of the 13
lenders recommended by the program use a letter as
collateral.
"Basically, it's no more than a piece of
paper," said Wayne Turner, of Mortgage Market Inc. in nearby Metairie,
one of the 13 lenders contacted for this story.
Other
lenders said many of the landlords relied on their renters as a main
source of income and did not have the credit to receive a loan even
before the financial downturn.
Bradley Sweazy, state
supervisor of the rental program, acknowledged the problem with
banks.
"A lot of times you look at a property owner
as someone with the financial record," needed to qualify for a loan he
said. "The small mom and pops didn't have the same finance ability as
was thought."
State records show the Small Rental
Property Program did not issue a single rebuilding grant in its first
year.
Like the larger Road Home program, the rental
effort is run by Fairfax, Va., contractor ICF International, and
overseen by the Louisiana Recovery Authority, the state's hurricane
rebuilding arm.
ICF spokeswoman Gentry Brann referred
inquiries to the LRA, where spokeswoman Christina Stephens said the
program suffered from a computer system that limited caseworkers'
ability to update and examine files.
"They were
building the ship while you sailed it," Stephens said. "They were
developing software as the program moved
forward."
Still, the Road Home Web site
optimistically states: "the Rental program has nearly $594 million in
outstanding conditional awards, which will produce 12,792 units,
including 10,951 affordable rental units in a total of 6,835 rental
properties."
Sweazy and Stephens said the numbers
reflect commitment letters, not aid actually given to
landlords.
The most direct measure of the program's
impact is the number of grants issued, found in monthly progress
reports by the state. That number was 352 in the most recent report at
the beginning of November, accounting for about $23 million in the
hands of Katrina victims. That leaves $846 million of the $869 million
allocated to the rental program in traction.
Ideas
abound for what to do with that money.
The state is
now trying to divert about $115 million into programs for low-income,
first-time homeowners. Sweazy said other possible uses include cutting
out bank middlemen and giving money directly to landlords; a rent
stabilization program; or having the government buy up the properties
and sell them off to developers who commit to build affordable
housing.
But the U.S. Department of Housing and Urban
Development has strict guidelines for how the money can be used,
including a requirement that 50 percent be spent on lower-income
applicants, and one that prohibits a "duplication of benefits" with
other recovery efforts, meaning Sweazy's idea of giving the money
directly to landlords could face obstacles because it would mirror the
upfront grants of the Road Home.
Critics also caution
against creating another program that would take months to administer,
while the gutted rentals contribute to blight across the
city.
None of the proposals will help Marshall any
time soon.
Her credit scores are too low to qualify
for a loan that will cover the $180,000 in repairs contractors say her
property needs.
So she lives in the restored front
living room of her property in the spottily rebuilt Gentilly neighborhood.
The rest of her owners' quarters and the apartments remain gutted from
a storm that hit 39 long months ago.
"I'm in limbo,
after all I put into buying this place," Marshall
said.