[Senate Hearing 109-980]
[From the U.S. Government Publishing Office]
S. Hrg. 109-980
REBUILDING NEEDS IN
KATRINA-IMPACTED AREAS
=======================================================================
HEARING
before the
COMMITTEE ON
BANKING,HOUSING,AND URBAN AFFAIRS
UNITED STATES SENATE
ONE HUNDRED NINTH CONGRESS
SECOND SESSION
ON
REBUILDING NEEDS IN HURRICANE KATRINA-IMPACTED AREAS, FOCUSING ON THE
FEDERAL RESPONSE TO THE HURRICANES IN THE GULF OF MEXICO, INCLUDING
ONGOING EFFORTS TO ASSIST AFFECTED FAMILIES AND INDIVIDUALS IN FINDING
BOTH SHORT-TERM AND PERMANENT HOUSING, AND THE OVERALL PROGRESS OF THE
RECOVERY EFFORTS IN THE FIVE AFFECTED STATES
__________
FEBRUARY 15, 2006
__________
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Affairs
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COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS
RICHARD C. SHELBY, Alabama, Chairman
ROBERT F. BENNETT, Utah PAUL S. SARBANES, Maryland
WAYNE ALLARD, Colorado CHRISTOPHER J. DODD, Connecticut
MICHAEL B. ENZI, Wyoming TIM JOHNSON, South Dakota
CHUCK HAGEL, Nebraska JACK REED, Rhode Island
RICK SANTORUM, Pennsylvania CHARLES E. SCHUMER, New York
JIM BUNNING, Kentucky EVAN BAYH, Indiana
MIKE CRAPO, Idaho THOMAS R. CARPER, Delaware
JOHN E. SUNUNU, New Hampshire DEBBIE STABENOW, Michigan
ELIZABETH DOLE, North Carolina ROBERT MENENDEZ, New Jersey
MEL MARTINEZ, Florida
Kathleen L. Casey, Staff Director and Counsel
Steven B. Harris, Democratic Staff Director and Chief Counsel
Mark A. Calabria, Senior Professional Staff Member
Mark Oesterle, Counsel
Jonathan Miller, Democratic Professional Staff
Alex Sternhell, Democratic Professional Staff Member
Joseph R. Kolinski, Chief Clerk and Computer Systems Administrator
George E. Whittle, Editor
(ii)
?
C O N T E N T S
----------
WEDNESDAY, FEBRUARY 15, 2006
Page
Opening statement of Chairman Shelby............................. 1
Opening statements, comments, or prepared statements of:
Senator Dodd................................................. 3
Senator Allard............................................... 4
Senator Menendez............................................. 6
Senator Bunning.............................................. 7
Senator Bayh................................................. 7
Senator Stabenow............................................. 8
Senator Sarbanes............................................. 9
Senator Reed................................................. 29
WITNESSES
Mary L. Landrieu, a U.S. Senator from the State of Louisiana..... 9
David Vitter, a U.S. Senator from the State of Louisiana......... 12
Richard Baker, a U.S. Representative in Congress from the State
of
Louisiana...................................................... 14
Alphonso R. Jackson, Secretary, U.S. Department of Housing and
Urban Development.............................................. 22
Prepared statement........................................... 56
Response to written questions of:
Senator Menendez......................................... 73
Senator Sarbanes......................................... 73
Senator Reed............................................. 79
Donald E. Powell, Federal Coordinator, Office of Gulf Coast
Rebuilding..................................................... 37
Prepared statement........................................... 60
Response to written questions of:
Senator Sarbanes......................................... 89
Senator Reed............................................. 91
David Garratt, Acting Director of Recovery, Federal Emergency
Management Agency, U.S. Department of Homeland Security........ 40
Prepared statement........................................... 63
Martin J. Gruenberg, Acting Chairman, Federal Deposit Insurance
Corporation.................................................... 42
Prepared statement........................................... 66
Response to written questions of Senator Reed................ 110
Herbert Mitchell, Associate Administrator, Office of Disaster
Assistance, Small Business Administration...................... 45
Prepared statement........................................... 70
(iii)
REBUILDING NEEDS IN
KATRINA-IMPACTED AREAS
----------
WEDNESDAY, FEBRUARY 15, 2006
U.S. Senate,
Committee on Banking, Housing, and Urban Affairs,
Washington, DC.
The Committee met at 10:03 a.m., in room SD-538, Dirksen
Senate Office Building, Senator Richard C. Shelby (Chairman of
the Committee) presiding.
OPENING STATEMENT OF CHAIRMAN RICHARD C. SHELBY
Chairman Shelby. The hearing will come to order.
Before we turn our attention to discussing the rebuilding
needs of areas impacted by Hurricane Katrina, I would like to
take a few minutes and highlight how troubled I am by some of
the reports of the massive amounts of fraud and waste
associated with disaster assistance to hurricane victims.
While recognizing the dilemma of acting quickly, I believe
we must do more to minimize the opportunity for fraud. That
said, I think these troubling events also underscore the fact
that disasters often bring out the best and worst of human
behavior. While in the face of tragedy, many people rose to the
challenge and performed countless acts of sacrifice and
assistance. Others chose a lesser path and took advantage of
the victims and those trying to assist them. Unfortunately, we
have seen that such greed and mismanagement did not end in the
immediate aftermath of the hurricane. We are still hearing that
there are some preying on the victims of Katrina through rent
gouging and construction scams. Additionally, many still fall
through the cracks of an often too uncaring and unresponsive
bureaucracy.
At this point, the fraud, waste, and abuse compound the
difficulties of those who have survived this tragedy by making
it harder for them to repair and to move on.
Going forward, we need to take a measured approach to
ensure that we do best to prevent any further fraud, so that we
can meet the commitments we have made to help the victims
recover.
Our first priority in this effort is to determine what
steps have been taken to this point, as well as to assess the
nature of the region's remaining needs. Beyond the particular
facts associated with the Gulf Coast, today's hearing also
offers the Committee an opportunity to examine the respective
roles of the State, local, and Federal Government, as well as
the principles of disaster assistance and recovery.
Perhaps the most important lesson from the overall initial
response to Hurricane Katrina was a lack of clear lines of
responsibility. Without such clear responsibility, it is all
too easy to simply point fingers. I believe it is vital we do
not make the same mistake in rebuilding the Gulf region.
In the process of rebuilding, it is also critical to not
lose sight of what cannot be rebuilt. Hurricane Katrina claimed
over 1,000 lives. We can and must assure that rebuilding does
not continue to encourage families to live in harm's way. Thus,
to simply rebuild the Gulf region as it was, whether lives
remain at risk, I think would be a tremendous mistake.
As this Committee moves forward in evaluating the programs
under our jurisdiction, I hope to establish on the record a
clear accounting of where and how existing funding is being
spent. To this end, the Committee continues to examine the
National Flood Insurance Program. Over $23 billion in flood
insurance payouts will go to rebuilding homes in the Gulf
States. In addition, $11.5 billion in Community Development
Block Grants have been appropriated to assist in rebuilding.
I believe it is the responsibility of this Committee to
closely examine how those funds are being used, and assure that
they are reaching the intended recipients effectively.
While this Committee retains primary jurisdiction over
housing and community redevelopment, a variety of programs
outside this Committee's jurisdiction will play significant
roles in rebuilding the Gulf. Included in these are the over $1
billion in low income tax credits recently allocated to the
Gulf States. In addition, SBA's Home Disaster Loan Program is
an important tool for helping families to rebuild their homes.
Rather than acting in a piecemeal fashion, I hope this
Committee will look at the various tools for rebuilding in a
holistic manner.
Guiding these decisions should be the individual choices of
families displaced by Hurricane Katrina. Federal assistance to
rebuild must be focused upon helping those who cannot help
themselves. Federal assistance should also support the
functioning of the private market.
I believe efforts to superimpose a one-size-fits-all
centralized solution would do more harm than good. We must bear
in mind that the policy choices we make today will have real
long-term consequences, not only for the Gulf States, but also
for future disaster recovery efforts.
We will begin our hearings on Katrina rebuilding with a
very distinguished panel of witnesses, and I would like to
welcome all of our witnesses to the Committee. Our first panel
this morning includes our colleague, Senator Mary Landrieu, our
colleague, Senator David Vitter, and Congressman Richard Baker.
I want to welcome all of them to the Banking Committee.
Our second panel will be HUD Secretary Alphonso Jackson.
And our final panel will be Mr. Donald Powell, the Federal
Coordinator of the Gulf Coast Rebuilding; Mr. David Garratt,
Acting Director, Recovery Division, FEMA; Mr. Martin Gruenberg,
Acting Chairman, Federal Deposit Insurance Corporation, and Mr.
Herbert Mitchell, Associate Administrator for Disaster
Assistance, Small Business Administration.
Senator Dodd, do you have an opening statement?
STATEMENT OF SENATOR CHRISTOPHER J. DODD
Senator Dodd. Thank you, Mr. Chairman. Let me begin by
thanking you for holding this hearing. Obviously, as a Senator
from Alabama, you have more than just an intellectual interest
in the subject matter here.
I want to thank our three colleagues, not only for being
here today, but also for your tireless efforts. I have not had
a conversation with Mary Landrieu in the last 6 months where
this has not been the number one item she talks about. David
and I do not know each other as well, but I know he feels
similarly strongly about this issue and the importance of
getting it right.
I am hoping, Mr. Chairman, that what you are doing here
today will provide that renewed sense of energy about what we
need to do to get moving here. This issue not only needs to be
on our agenda, in my view, but also it needs to be at the top
of our agenda. This could happen anywhere in our country. It
happened to hit the Gulf States. But it could easily have been
New England, it could have been the center part of the country
as well.
I remember when I went down for the first time to pay a
visit right after Hurricane Katrina with a group of colleagues
here, we were in Pass Christian in Mississippi, and it was
devastated. Obviously, there was not a building standing in
that community, just leveled. The Mayor of Pass Christian came
up to me, and we were talking, and he asked me where I was
from. I told him Connecticut. He told me a compelling story.
Right after the hurricane, he went back and was standing there,
and a car pulled up in Pass Christian. A couple of people with
hair like Jim Bunning's and mine got out of the car, and the
Mayor asked them what he could do for them. They said, ``We are
from Windsor, Connecticut and we heard about what happened down
here.'' Retired people, got in their car and drove down to
Mississippi, and got out of the car and said, ``How can we
help?''
I suspect while not every American obviously is going to be
able to do that, those are the sentiments I think of all of us
here. I would like to think that if something like this
happened in my State, that a car might pull up from Louisiana
or Mississippi or Alabama, and say, ``How can we help?''
I feel very strongly that this is something we really need
to weigh in on and have a sense of urgency about it so we get
it right. There is this eerie reaction I am having that this
rebuilding program is the same response we got at the time that
the levees broke, that we are dragging our feet along here,
this bureaucratic kind of stumbling, rather than getting to
this issue. It is important, not just for the millions of
people who have been adversely affected by this, but getting
this right is going to be critically important for the rest of
our country, because how we do this will set, in a sense, the
model on how we can deal with other future problems that we may
face along a similar vein.
Mr. Chairman, I am very grateful to you for doing this
today. We need to worry about some short-term needs here,
immediately. There are some long-term problems. I am with you,
the Government Affairs Committee and others are doing a good
job, I think, of going back and reviewing what happened at the
time, and we need to talk about the future now, what can be
done. But you are going to have in just a matter of days here,
we have literally thousands of people that are being put out of
hotels, the headlines and so forth. Where are they going to go?
Are they going to get any kind of assistance at all or support?
The rebuilding of homes, I think there are some 420,000, I
read, homes in Louisiana alone that are probably uninhabitable,
going to have to be rebuilt. That number may be low. I do not
know.
It seems to me we have to have a heightened sense of
urgency about this. I do not think that has been the sense. I
say with all due respect to those in charge--and I am anxious
to hear today what they are going to do in the short-term--
long-term I am interested as well--but there are some immediate
problems that need to be addressed immediately. And I am again,
very grateful to you, Mr. Chairman, for holding the hearing,
and very grateful again for our colleagues and their
willingness to weigh in as heavily as they have on this issue,
and I look forward to doing what we can. This is a job we
really have to put at the top of our agenda.
Chairman Shelby. Senator Allard.
STATEMENT OF SENATOR WAYNE ALLARD
Senator Allard. Thank you, Mr. Chairman. I would like to
join you and the rest of the Committee Members in welcoming the
first panel here. I know that it has been a challenge the last
number of months because of Hurricane Katrina.
I had an opportunity to serve on some committees with
Senator Landrieu and Senator Vitter, and then, Congressman
Baker, served with you over in the House. It is good to see you
here.
I know that a lot of the meetings I have been in, Senator
Vitter has constantly reminded us of the challenges, the
suffering, and the problems that we are having down there as a
result of Hurricane Katrina. I have had an opportunity to get
down to that area myself, and have seen the devastation from
the hurricane.
So, Mr. Chairman, I would like to thank you for holding
this hearing, and particularly, I would like to thank you for
taking a positive approach to the needs of the Gulf Coast area.
We are focusing on long-term solutions, like Senator Dodd
mentioned, short-term issues and whatnot I think are being
pretty well-covered in other committees.
As we all know, following the devastation caused by
Hurricane Katrina, Federal, State, and local officials did a
number of things that could have been improved upon. They also
did a number of things right. Certainly it is important to
examine what happened so that we can learn for future
disasters. However, some people have gotten trapped in the
blame game, and so they are intent on fixing blame for what
happened, but they are ignoring the present and future needs of
the Gulf Coast.
Instead of pointing fingers, Chairman Shelby's leadership
will allow this Committee to take the steps necessary to
actually help those constituents, as well as others affected by
Hurricane Katrina. I share his desire to move forward in a
positive, productive manner. Toward that end, I have introduced
the Hurricane Katrina Recovery Homesteading Act of 2005, Senate
Bill 2088, modeled on the United States 19th century
homesteading initiatives and similar urban programs in the
1970's.
This legislation will help us begin to rebuild the Gulf
Coast area destroyed by the hurricane and flooding, providing a
fresh start for families victimized by this tragedy. I am
pleased to be joined in this effort by my Banking Committee
colleagues, Senators Enzi, Sununu, and Dole, as well as Senator
Vitter.
The new Urban Homesteading proposal will serve several
purposes. First, it is an initial step toward rebuilding and
revitalizing the hurricane ravaged Gulf Coast. Second, the new
Urban Homesteading Initiative will be one way to begin to
address the housing needs of those displaced by Hurricane
Katrina. Third, the Hurricane Katrina Recovery Homesteading Act
is a productive way of dealing with government-owned
properties.
I would like to briefly describe how the initiative will
work. I am pleased it is based on a Federal-local partnership,
as well as a partnership between Government, nonprofits, and
private sector. HUD will identify potential government-owned
property for transfer without cost to units of local
government. The local government would establish an equitable
procedure for selecting low-income families affected by the
hurricane for participation. HUD and the local government would
work with partners such as Habitat for Humanity, mortgage
lenders, and others to help the new urban homesteaders find
resources to construct their new homes.
Participating families must agree to occupy the property
for 5 years as the principal residence, to bring the property
up to health and safety codes within 1 year, and to build a
house to applicable code standards within 3 years. They must
also agree to periodic compliance inspections. In exchange, the
family would receive title to the property. Obviously, the
recent flooding raised very important safety concerns, and my
bill takes that into account.
The last thing we want to do is to put a low-income family
in harm's way in an effort to help them back on their feet. The
Urban Homestead Initiative specifies that when determining the
suitability of a property for inclusion in the program, the
Secretary shall not endanger the health or safety of the
individuals living in or near the home.
I would like thank President Bush and Secretary Jackson for
working with me on this effort. I hope that my Banking
Committee colleagues will join me as a cosponsor in this effort
to being to address some of the needs of the Gulf Coast area.
Frankly, I can think of no reason we should not do this. We
should not delay desperately needed assistance simply because
it will not meet all existing and future needs. To the families
that this bill can help, it will be very worthwhile. I am
hopeful that the Committee will take up my bill in the near
future.
Thank you, Mr. Chairman, for holding this hearing, and I
looked forward to working with you on the Urban Homestead
Initiative, as well as other proposals to address the
rebuilding needs of the Gulf Coast.
Chairman Shelby. Senator Menendez.
STATEMENT OF SENATOR ROBERT MENENDEZ
Senator Menendez. Thank you, Mr. Chairman. I appreciate you
having this hearing and the spirit in which you are doing it. I
appreciate Senator Landrieu, who has, in my short time here,
made it her business and her advocacy to let me know about the
challenges that the residents of her State are facing as a
consequence of Hurricane Katrina, and she has done such a
fantastic job, at least in our caucus, of letting us all know
of these challenges.
Mr. Chairman, 7,000 evacuees from Louisiana came to New
Jersey after Hurricane Katrina. Many are still there. Some of
them still face some enormous challenges. They have found a
hospitable State, but home is still Louisiana, not New Jersey,
and they want to return.
There was a recent report that I think speaks about some of
the challenges these individuals are facing, talk about two
sisters, one who was a former credit analyst, who exhausted her
savings, spent what was left of her 401(k) retirement. Her
sister ended up in two hospital emergency rooms, the result of
an extremely poor diet. They are stuck in a cycle in which they
are stranded with little cash in a hotel in Morris Plains, New
Jersey, that is now paid for by FEMA. They cannot move out of
the hotel because FEMA has been slow to provide them with
rental assistance that will help them land an apartment. And to
use one of the sister's words, ``It is a nightmare that will
not end. It is degrading having to beg and even begging gets
you nowhere.''
So those are individuals who, obviously, are seeking to go
back home, and have found themselves in a cycle in which they
cannot simply break out of it, even though they had gainful
employment when they were in Louisiana.
It has been 6 months since the Gulf Coast was hit, and in
another 6 months it has the potential of being hit again. So
the timing of his hearing could not be more propitious because
we have to figure out how we meet the challenges so that the
next season does not create a blow to New Orleans and to
Louisiana that you simply cannot recover from.
In that respect, I think all of us have to understand that
there but for the grace of God, go I. And the reality is, is
that we must learn--and this is not about finger pointing--but
it is about learning what we in fact did not achieve
successfully, so that we can learn from that and be able to
resolve the deficiencies in our ability to respond, whether it
be in Louisiana or in any other part of the country. I do not
look at the questions of what has gone wrong as ascribing
blame, as much as understanding what is wrong that needs to be
fixed in a structure that will be called undoubtedly again to
respond to the residents of our country.
If there is one thing that the government, certainly the
Federal Government, is responsible for, is the safety of its
citizens, regardless of how that safety might be endangered.
While we have supplementals, we clearly have a long way to go,
and I am looking forward to all of our colleagues, Senator
Vitter as well as Congressman Baker, their testimony, because
they are on the ground firsthand.
Thank you, Mr. Chairman.
Chairman Shelby. Thank you.
Senator Bunning.
STATEMENT OF SENATOR JIM BUNNING
Senator Bunning. I will try to be short, Mr. Chairman.
Thank you for holding this hearing.
First of all, welcome classmate Baker. We came into the
House together, so I have an unusual alliance with him, and my
two colleagues from the Senate. If I have heard anything out of
your mouth in the last 6 months, it is about the problems on
the Gulf Coast. That is besides other things, but mainly those.
This hearing is very important to the point of moving
forward. We know what we have down there. We know that the
service immediately following and continuing was inadequate,
but we have to get on with the lives of many people and the
reconstruction of the coast.
I read yesterday in the paper they are talking about Mardi
Gras in New Orleans. I did not think they would ever have Mardi
Gras in New Orleans, and I am so happy that they are going to.
We have a problem with our flood insurance program, and we have
had hearings on that, and we are trying to get that
reconstructed to the point where the Federal Government can
have a flood insurance program that is viable and it pays for
itself. Obviously, it did not work this time, even though we
tried to update it just 2 years ago.
The whole point of this hearing, I hope, will be to move
forward rather than to look backward, and to see what we can do
in the future to prevent the mistakes of the past, and really
work to relieve the suffering and pain that the people of that
are presently involved in, and will continue to be involved in
until we get it reconstructed as we want it.
So, Mr. Chairman, I yield the rest of my time.
Chairman Shelby. Senator Bayh.
STATEMENT OF SENATOR EVAN BAYH
Senator Bayh. Thank you, Mr. Chairman, for holding this
hearing, and I too want to welcome our panel members, Senator
Vitter and Senator Landrieu.
Senator Bunning, I have had a similar experience to yours.
Senator Landrieu and I talk from time to time because we have
been friends over the years. We have children of about the same
age, and I always say to her, ``Mary, how are the kids?'' She
said, ``Fine, Evan, but what are we doing about New Orleans?''
And rightfully so. I mean, all of these individuals have been
champions for their people in times of distress, and that is
why we are all here, so I compliment you for taking this issue
on so aggressively and coming before us today.
In the long, unfortunate catalog of human tragedy, New
Orleans is going to occupy a prominent place. There is not much
we can do to control Mother Nature, but there is a lot we can
do to control how we respond to it. As I think we all
recognize, the response so far has been terribly inadequate. We
need a new sense of urgency, a new sense of competence, and I
think that is what your initiative brings to the table here.
Mr. Chairman, during my previous life as Governor of our
State, 88 of Indiana's 92 counties were declared disaster areas
at some point in time, floods, tornadoes, ice storms. Nothing
approaching the magnitude of what hit New Orleans, but we know
a little bit about coming together and getting the job done,
and that is why I think your idea is an excellent one. It
brings a scope and a commitment that is necessary to tackling
this problem, to giving people hope, to getting on with
restoring the city.
If I could make just one modest suggestion. I know as this
legislation goes forward, you will be tweaking it here or
there. I had heard concerns from less fortunate individuals
that if they are not given a place, they are wondering will
they ever get home? And we have to make sure we reassure them
about that and that there is a low-income housing component of
some kind that addresses those concerns, but the overall idea,
as I said, the urgency, the scope that is brought to this, plus
including the public and the private sector together. We have
had some pretty good experiences with public/private
partnerships in Indiana, and I think that is what you envision
here.
I laud you for this. I support you for this. Let's go get
the job done. I think that is what the people are looking for.
Thank you, Mr. Chairman.
Chairman Shelby. Senator Stabenow.
STATEMENT OF SENATOR DEBBIE STABENOW
Senator Stabenow. Thank you, Mr. Chairman.
Welcome to my colleagues who have been working so hard.
Senator Landrieu, I know every day I think we talk on the floor
of the Senate about what you are addressing.
Senator Vitter, thank you so much, both of you as a team.
And Congressman Baker, welcome. It is good to see a former
colleague.
This is such an important topic, and I think that is
really, in addition to the efforts that you are focused on,
really about a larger message, and in terms of our Nation's
response to thousands of people who want their lives back. And
we have over 2,000 of those individuals in Michigan that our
communities, our families, our churches have reached out to
help, and will continue to do that until the job gets done and
they get to go home.
I was, frankly, disappointed that in the present State of
the Union only 7 lines were given to Katrina reconstruction, 7
lines, that failed to mention the 350,000 displaced families
that were denied vouchers, the 693,000 families whose rental
assistance has not been extended into the new year. Also
missing were the 4,500 evacuees who will be forced out of their
hotels in exactly 2 weeks, some in Michigan, and the 100,000
registered voters who are temporarily displaced, many may not
be able to vote in the April elections. Seven lines, I am sure
you would say does not capture what is really going on for each
of you, and what is going on for your communities, and how
important it is that people be able to return to their
communities.
I know that you have excellent ideas, and I support those
for what needs to be done. I also know that each of my
colleagues would say that things have not moved fast enough for
the families involved and need our help. The truth is, many
people needed our help before the floods, as well as needing
our help now.
So, I welcome you to the Committee. I hope that we are
going to have the sense of urgency that I know each of you feel
every day with your own families, and the families that you
represent and that we will be committed to get the job done for
a group of Americans who have gone through a horrendous
tragedy.
Thank you.
Chairman Shelby. Senator Sarbanes.
STATEMENT OF SENATOR PAUL S. SARBANES
Senator Sarbanes. Thank you very much, Mr. Chairman.
First of all, I want to welcome our colleagues here. I know
how intense and consistent the concern and interest of Senator
Landrieu, Senator Vitter, and Congressman Baker, as well as the
other members of the Louisiana delegation, and the Mississippi
and Alabama delegations in the Congress has been with respect
to the hurricanes which struck the Gulf Coast.
The President, when he went to New Orleans on September 15,
said, ``We will do what it takes. We will stay as long as it
takes to help citizens rebuild their communities and their
lives.'' I think we are still struggling with giving reality to
that rhetoric, and I am hopeful that this hearing, Mr.
Chairman, will be a very important step on the path of really
coming to grips with this situation.
One of the great cities of our country which has been
devastated. A city of great historical significance and
continued economic significance. It is the gateway from the
Midwest in terms of moving goods out into international
commerce. There is a huge energy industry focused in this area,
and so the economic underpinnings in many respects remain. They
can say, well, New Orleans is tourism, but that tourism is
built on something else that is of a significant and lasting
economic consequence for the Nation.
The Congress has been trying to put money in there. We need
to find the framework within which all of this operates, and I
know that is what we are going to, in part, be hearing about
from our colleagues here today.
Mr. Chairman, I want to commend you for holding this
hearing. I think it is extremely important and I do want to
recognize the efforts that our colleagues have been making with
respect to the situation that exists along the Gulf Coast.
Thank you very much.
Chairman Shelby. We will start with you, Senator Landrieu.
STATEMENT OF MARY L. LANDRIEU
A U.S. SENATOR FROM THE STATE OF LOUISIANA
Senator Landrieu. Thank you, Mr. Chairman. I thank all of
the Members of this Committee for your opening statements of
concern and observation and direction. Each of you hit on a
extremely important part and facet of the great challenge that
is before us.
We are not here to point blame, but to point the way ahead,
which is for us the most important, to find a way ahead for New
Orleans, for the region, for South Louisiana, and frankly, for
the Gulf Coast. While some comments were made--and I will say
briefly before I get into my statement--on urban homesteading,
which are appreciated by my colleague, Senator Allard, let me
reiterate that neighborhoods of million dollar mansions were
washed away, neighborhoods with $500,000 homes of middle-income
families were washed away, and low-income neighborhoods were
washed away. So we need a very comprehensive approach.
As one of my colleagues said, this is not just--I think it
was Senator Menendez--this is not just about, Mr. Chairman,
what we need to do today for New Orleans and the region, but
this is about laying a framework down that could be available
for the next time this happens. Let me rest assured, it will
happen again somewhere, maybe not the same. So it is about
designing something that works for the near future and the
long-term.
When I speak about the city which I have represented
proudly for many years, let me be clear that I am speaking
about a region of over 2 million people in South Louisiana that
has about 2.5 million people. We were hit, not by one storm,
but by two, Katrina on the southeast, Rita on the southwest,
and literally from Pass Christian to Bogalusa--I am sorry--from
Pascagoula to Beaumont, there is devastation along the Gulf
Coast, large cities, small cities, and villages. So let me get
into my remarks.
I think it would be appropriate, since this is
unprecedented in the Nation's history, to go back a little ways
and then come forward. One hundred ninety-eight years ago,
every public building in this city was razed to the ground by
invading soldiers of the British Army. Imagine the questions
that must have occurred to Members of Congress at that time.
Should we rebuild? Where should we rebuild? Are we too close to
the water? Are we too much of a target for the British Navy?
Where should we go, higher, lower? I understand those questions
are important, but they were answered, and in the true American
spirit, President Madison did what every American President has
done before, and hopefully every one in the future, they
committed themselves to rebuilding with a spirit of optimism
and hope, and they built better, stronger, and smarter, and
that is what we intend to do in this region.
MIT Professor Lawrence Gale's recent book, ``The Resilient
City,'' he notes that in ancient times this planet was dotted
with lost cities. These were places that civilizations
literally abandoned after natural disasters. However, in the
last 200 years, I would like this Committee to note, every
major city that has experienced catastrophic disaster has been
rebuilt. In many cases, this includes cities which have
actually experienced worse devastation than New Orleans. They
include places like Warsaw, Poland, where 80 percent of its
buildings were left in rubble at Hitler's orders, and 800,000
of its 1.3 million residents were killed or murdered by the
Nazis. Yet a decade later, it was a city of over 1.3 million
people again.
Many cities in China, one in particular, Tangshan China,
experienced the worst urban earthquake on record, killing as
many as a half a million people. Ninety seven percent of its
residential buildings were destroyed, and 78 percent of its
industries were ruined. Yet 10 years later, that city had
returned larger and more populated than before.
And finally, closer to home, a few decades ago, Galveston,
Texas was all but destroyed after a hurricane put a 16-foot
storm surge over the 9-foot high island. Six thousand to 8,000
of the city's 37,000 residents were left dead. But Galveston
recovered. Over the next 11 years, the city, including a 3,000
ton church, was raised by as much as 17 feet and sheltered by a
seawall because the people of Galveston refused to give up.
Mr. Chairman, I note these examples in the history to say
that New Orleans and South Louisiana will be rebuilt. The
Nation, this region deserves to be rebuilt, not only because of
the people that live there, but also the mighty and spectacular
contribution that has been made by this region to the
development of this Nation and its continued impact, and as
Senator Sarbanes has said, on the economic vitality of this
Nation, and its essential strategic location at the mouth of
the Mississippi River.
My colleague, Congressman Baker, has pointed a way forward,
and I support his way. I understand that we may need
suggestions and modifications. We are most certainly here
before this Committee to humbly say that we will take all and
every reasonable suggestion.
There are several key virtues of the Baker plan that I
believe need to be incorporated into any plan. First, it is a
collaborative approach. It is a framework. It takes
representations from all levels of government, which, believe
me, Mr. Chairman, we will need the best at the Federal, State,
and local level to get the job done. It mandates planning and
institutes a mechanism for everyone to be heard, while creating
a unified vision for redevelopment.
Second, the bill treats both mortgage lenders and
homeowners equitably. Congressman Baker has been very
scrupulous in keeping his eye on the target. Our objective is
to help families, homeowners, and people in need, not just
institutional investors. So under his legislation, homeowners
would be guaranteed a return on their pre-Katrina equity, and
mortgage lenders would be required to absorb their fair share
of the losses.
Finally, the Baker bill would provide stability, certainty,
while giving local planning agencies a realistic timeframe to
develop a comprehensive plan for rebuilding the region. One of
the greatest dangers the city and region now face is a rush to
create uncoordinated plans, instead of doing true strategic
thinking, and without the benefit of analysis that would help
drive what really needs to be done, not only to keep people
safe, but to also keep this region the vital, economic center
it is for the Gulf Coast and the Nation.
In this sense the disaster in the New Orleans region is
very different from along the Gulf Coast of Mississippi, which
let me say for the record, we love just as dearly. But you can
tell where the danger is going to come from. It is going to
come from the Gulf. It is going to come off of that water. You
can define it a lot better than when you have a city and region
like New Orleans that lives between many bodies of water and
sits low like the Netherlands has sat for over 1,000 years, may
I say, 21 feet below sea level, not the 5 or 8, and they have
successfully managed those ever-present challenges.
Mr. Chairman, it is easy to forget, when we talk about
facts and figures and process and government that we are
talking about people's lives. As Senator Stabenow has so
eloquently said, Louisiana has 650,000 displaced people from
the storm. The only thing that compares in this country to this
mass displacement was the Civil War. We have lost over 217,000
homes. That means a lot of lives that have to get started over.
As I conclude, let me say, it is not just homes. In one
weekend people lost their homes, their businesses, their
churches, their synagogues, and their schools, and it deserves
more than a few lines in a State of the Union. It deserves more
than a few old programs that are on the shelf, taken down to
see what will work and what will not work. It takes a
coordinated effort.
Congressman Baker, I commend him for bringing this bill
forward. I am proud that Senator Vitter and I put a companion
bill in the Senate to work until we find solutions.
I thank this Committee for giving this issue its full
attention, and the catastrophe warrants such a focused
attention.
Thank you, Mr. Chairman.
Chairman Shelby. Thank you, Senator.
Senator Vitter, before I call on you, I just want to
acknowledge the article that you penned for the Washington
Post, ``The Path to Louisiana's Footprint.'' That is a very
thoughtful article. I would expect nothing less from you, a
Rhodes scholar though. Thank you.
Senator Vitter.
STATEMENT OF DAVID VITTER
A U.S. SENATOR FROM THE STATE OF LOUISIANA
Senator Vitter. Thank you, Mr. Chairman, and Ranking Member
Sarbanes, and all of the Members of this Committee, for this
important hearing on the rebuilding needs in Katrina-impacted
areas. I am also honored to be joined by my colleagues, Senator
Landrieu and Congressman Baker.
I wanted to focus on two things, first, why I also strongly
support the Baker bill, and why it is a very important
mechanism that can help us move forward in the rebuilding
process; and second, and just importantly, really, the subject
of that op-ed which you just held up, which is why I think we
are in a bit of a log jam, and how we break through that
log jam in a positive way and move forward, using the mechanism
of the Baker bill or something similar.
First of all, let me reiterate very clearly, that I am very
supportive, along with Senator Landrieu, of Congressman Baker's
bill, H.R. 4100. Of course, we have a Senate companion bill
before you, S. 2172. And very broadly speaking, I am supportive
of it for two important reasons. First of all, it gives some
financial recovery and sense of hope to tens of thousands of
people, many of whom lost everything they own on this earth,
others of whom lost so much through absolutely no fault of
their own. And it is really even worse than simply not being
through any fault of their own, most of them lost this not
because of a natural disaster but because of a man-made
disaster.
What do I mean by that? I mean that the great majority of
the catastrophic flooding in New Orleans occurred not from
levees being overtopped by water coming over the levees, but by
failures of those levees due to fundamental design flaws of the
U.S. Army Corps of Engineers. That is beyond dispute at this
point, and the Baker bill helps make those people at least
semi-whole.
The second reason I am supportive of the mechanism is that
it puts a mechanism in place that can help jump-start the
redevelopment of entire devastated neighborhoods, in which,
quite frankly, redevelopment will be problematic at best if it
just depends on individual decision. No one individual
homeowner, for instance, wants to go way out on a limb, having
no idea who is following him or not following him in a
completely devastated area. There needs to be some more
coordinated approach, and the Baker bill is a mechanism that
offers that.
Let me move on to the second topic I want to touch on, and
again, it is really the heart of the op-ed which you mentioned,
and it is why I think we are at a bit of an impasse over the
Baker bill, but really more broadly, over the rebuilding
effort. I believe it largely comes down to this: I think a lot
of the hesitation has to do with what many people in the
Administration and in Congress and around the country feel is
the lack of a clear rebuilding plan.
President Bush on January 27, stated, ``The plan for
Louisiana hasn't come forward yet, and I urge the officials,
both State and city, to work together so we can get a sense for
how they are going to proceed.'' And February 2, in a op-ed
piece, Donald Powell, who you will hear from, wrote, that the
Baker bill ``is not a long-term plan'' that includes ``key
elements, among them decisions on where and where not to
rebuild.''
Now, as you can probably guess, many in Louisiana took
great offense at these comments. A lot of people said the Baker
bill is our plan, and we have numerous planning commissions at
work on things like the footprint question, where and where not
to rebuild. I think one thing all of us, including all of us in
Louisiana, have to understand is that the Baker bill is a great
mechanism to go forward, but that is not the same as a
substantive plan making the substantive decisions about what is
going to happen and where it is going to happen, where and
where not to rebuild. And I think that is what so many people
in Washington and around the country are looking for. They do
not want to see numerous planning commissions. They want to see
a single substantive plan. They do now want to listen to a
footprint discussion. They want to see a footprint, and one
that does not include areas that are likely to suffer
catastrophic flooding again.
I think there are other things that the President and
people up here have to understand too. They have to understand
that this is not as simple as saying you cannot build in a
floodplain. The White House is built in a floodplain. It is not
as simple to say you cannot build below sea level. If you say
that, the country will have to sacrifice a vitally important
energy hub and port system. Most of all, they have to
understand what I said a few minutes ago, that the great
majority of New Orleans catastrophic flooding occurred because
of breaches in levees that were not overtopped by water, but
rather, that failed from below because of gross design mistakes
of the U.S. Army Corps of Engineers.
If you put all of this together, what is the plan for
moving forward and breaking through this impasse? I believe
that it demands action from both sides. First, the Governor of
Louisiana, the Mayor of New Orleans, parish presidents, all of
their commissions must produce one single, fully fleshed-out,
detailed substantive plan. This cannot just be another request
for billions in Federal assistance amidst vague discussion of
the tough local issues, but a specific plan that addresses
those issues head on, including the footprint question. In
other words, a denser New Orleans with a smaller footprint, but
also one that can accommodate everyone who wants to return, and
that can be defended against future hurricanes at significant
but manageable expense.
This plan should also detail bold reforms, such as
replacing the failed Orleans Parish Public School system with a
diverse collection of charter schools, and replacing the
outdated charity hospital system with coverage that offers the
needy solid, preventative, and other care through numerous
providers. That is the Louisiana side.
But what about the Federal side? Well, for its part, the
Bush Administration and Congress must endorse this general path
now to encourage bold, courageous Louisiana decisions, and this
endorsement must mean that we will take the lead in funding a
responsible plan once it is produced. The $6.2 billion in CDBG,
block grant funding approved in December, is a real
downpayment, but additional Federal dollars will be needed to
buy out areas that can be converted to natural flood basins,
and to help rebuild others. This could be done through the
Baker bill or some modification of it, perhaps a State Baker
bill with Federal funding.
Up to now, the difficult footprint discussion has been
framed almost entirely in terms of some people not being able
to return to their neighborhoods, but the path I am suggesting,
using the Baker bill or something similar as a mechanism, would
offer these residents much greater financial recovery through
buyouts that they could possibly enjoy otherwise, coupled with
the ability to rebuild their lives in nearby parts of a safer,
stronger community.
As difficult a path as this is, I truly believe that the
people will accept it in Louisiana and across the Nation. The
real question is, will the Louisiana and national politicians?
Let me end on a very hopeful note. I believe we are seeing
movement down this path on both sides. I am very hopeful that
in the very near future, we will have some very positive
progress involving increased additional support for housing and
other needs on the ground in Louisiana. If we do that--and I am
hoping we will--I hope that will be coupled with the
culmination of a lot of work going on in Louisiana to produce
that single, unified, bold plan that can gain the confidence of
people here in Washington and around the country. I believe
that is the combination that can allow us to move forward
through the mechanism of the Baker bill or something very
similar.
Thank you very much, Mr. Chairman.
Chairman Shelby. Thank you.
Congressman Baker.
STATEMENT OF RICHARD BAKER
A U.S. REPRESENTATIVE IN CONGRESS
FROM THE STATE OF LOUISIANA
Representative Baker. Thank you, Mr. Chairman. I want to
express my deep appreciation to you. I came to you in the
hurried moments of last session, asking you to consider a
legislative matter. You indicated to me that it was important
to you, that you would make it a priority and that early this
year you would convene a hearing to consider the subject
matter, and for that commitment and your honoring of that
commitment, I want to express my deep appreciation to you,
understanding the many demands made on the Committee's time.
To the Members here present, I wish to express my deep
appreciation for your kind interest and continuing courtesies
that have been extended. It is clear that we are in a
circumstance not of our making of enormous complexity, and
resolution is not going to be easily attained.
Having said that, the American taxpayers have been
extraordinary by actions of this Congress. The amount of funds
made available to us so far in the Gulf Coast have truly been
extraordinary, either by taxpayer appropriation or by
charitable contribution. It is amazing to watch this country
work when they sense true and honest need.
I would like to speak just for a moment in very general
principles about the proposal the Senators have introduced, and
the one that I have introduced, only as to its operative
intention, not as to detail. But certainly, if Members wish to
engage in questions concerning that, I would welcome your
interest in the matter.
The difficulty we face is that we need some aggregating
entity. We need an ability to get into subdivisions and
communities and get title to property so that it can be swept
clean. Once done, the property then can be readied for sale
into the private market, the proceeds of which, I feel, would
be highly appropriate to go back to the American taxpayer. It
is the first time to my knowledge, in response to a natural
disaster, that the recipient victim is suggesting the taxpayer
should share in the upside benefit of any speculative
environment which may result. I do believe, because of the
necessary economic function within the region, from oil and
gas, to exporting 65 percent of the Nation's grains, to the
seafood industry, to a whole host of other assets, people will
return. People will live there because they are jobs of
necessity. But that means children must go to school. It means
firemen must be on duty. It means police must be ready to
respond.
How does one begin when you look across Lakeview with truly
700,000, 800,000 homes as far as the eye can see, but you can
look in the front elevation, look out the back, look through
the back elevation of a house in the next lot, out the front
door on the next street, and look as far as you choose to look.
Much has been lost more than just homes and structures. Hope is
on the border of being lost. Who goes back first? Does the
fireman move into his house? Where does he buy gas for his
vehicle? Where do his kids go to school? Where does the family
shop for groceries?
We must have a plan of community restoration, where we all
go back hand-in-hand all together. We are not asking the
Federal Government to make whole people who moved into a
floodplain and who had the misfortune to be caught short
because the insurance was either lacking or less than the
financial obligations for which they were owed. Under the
proposal we are suggesting you consider, everybody loses. The
homeowner loses. The banks lose. Certainly, the Federal
taxpayer will lose. But we are hoping to offset the scope of
that loss by the sale of reclaimed properties into the market,
and give those proceeds to the American taxpayer for their
generosity in providing us a bridge loan. They are going to
help us out when we are a little short.
Second, going forward, I am not suggesting--and I know
neither Senator has suggested--that we build unwisely.
Certainly, we should build to hurricane-proof standards.
Certainly, we should have areas where we closely and carefully
evaluate the advisability of rebuilding. Certainly, Senator, I
want to join with you. If it could be made part of this
proposal, I pledge to you my support in looking at the
advisability of how our flood insurance premium system works.
It should be, as close as possible, actuarially sound. We
should not have someone who owns a second home in the panhandle
of Florida that is looking out at the water break on a sandy
beach at Destin, paying $494 a year for Federal protection from
damage accruing to that multithousand dollar home. That is not
right.
Now, this is a painful offer. This is not something that I
run for reelection on, saying, ``Let us go home and raise flood
insurance premiums, Senator.'' So my heart is here fully
committed to this.
I am also suggesting that as we make those reforms, we need
to provide a mechanism of hope for this important economic
center of our country. Now, once we aggregate the land and sell
it back to the developers for future development, one might
say, well, that is a top-down approach. The President's has
been insistent on a bottom-up approach. Legislation provides
for local planning councils. Under the terms of the bill, money
cannot be spent that is inconsistent with the plan developed at
the local level. We do not go in and march on communities as a
Federal enterprise, saying, ``We are here to help you.'' You
have to pass a resolution at the local level, city council,
parish governing authority, and say, ``Please come on in, we
want your help.''
So it is a negotiated process led at the local level by
planning, invited in by the local governing authority, and we
come in and acquire properties, take the bank out, and leave
the homeowner with a small amount of cash and no mortgage
obligation.
How does that work? For a $200,000 home. Let's assume you
have $150,000 mortgage. Under the terms of the bill as
currently constructed, we would offer the homeowner $30,000
cash, and we relieve the bank of its financial obligations by
paying it 60 percent maximum, would be $90,000 to the lending
institution. Had not been widely noted, but it is important to
note, I think, in fairness to this Committee, the bill
prohibits the acquisition of properties from lending
institutions which are the result of foreclosure. We do not
want to incent social behavior that is not consistent with the
recovery. So we are suggesting that where lending institutions
work with us, provide longer forbearance, that there is an
upside to them as well. If they choose to hold onto that
property, we provide a mechanism for a partnership arrangement
under the redevelopment proposal, where we do not pay you
anything, but in the course of the clean-up, we will sweep the
lot clean, and we will transfer back to you the surface rights
of that tract once it is improved, but you have to pay us your
pro rata cost of the clean-up. But you can hang onto that
property throughout the duration if you choose to have your lot
back in your community the way it was prior to the storm, and
then you build your own home, because we did buy you out.
We have tried to give every possible consideration some
answer. One of the most disturbing would be for those low-
income individuals who were displaced by the storm, and
surprisingly to many people--not to me--in the lower Ninth
Ward, the absolute outright homeownership right was 43 percent,
meaning 43 percent of the occupants of the Lower Ninth owned
their home outright. Many had no insurance. Why should they be
displaced by the storm, and even if redevelopment occurs, not
allowed to come back? That is why we have had some controversy
on the House side, a provision that allows for an individual to
exercise a specifically limited timed option. So if you do not
believe the Government--there are some people out there,
amazingly enough, who do not believe the Government--and you
want to come back and look and see what the deal really looks
like, you will be given a brief window, and if you want to
repurchase your lot, for which you were paid a fee, you have
the right to do so. Even more importantly, the option is
negotiable. You can sell the option to somebody else. My view
is that money is somewhat helpful as a cure to poverty. Let
people make some money as the recovery goes forward.
I am not suggesting this plan is perfect. Since I discussed
it with you, Senator, in December, there have been a number of
modifications. Ms. Landrieu and Mr. Vitter have worn me out
with modifications. I think my name is modification.
[Laughter.]
And I am not here to say to you that what we have before
the Committee today is the plan. But I will suggest, and I
hope, in a manner that you will understand I hold quite
strongly, I am a former real estate guy, I am a former home
builder. Before I lost my mind and came to Congress, I did that
full time.
If we let this go to normal market process, where we go
through foreclosure cycle, speculators have signs up already,
``I buy houses. Call me.'' They are preying on the elderly.
They are preying on the uneducated. They are preying on the
desperate. And they are going to pay them cents on the dollar
and ride it out, because they know, they know that this great
city will come back, and it is going to come back at a value
and a level nobody can appreciate today. The question is, is it
going to take months? Is it going to take years, or is it going
to take decades?
And in the course of that consideration, I would point out
there are much more cost-beneficial ways to manage the
resolution. Sure, it requires work. We would take on Federal
responsibility for its failure. But if we do it right, we can
minimize the adverse impact on the taxpayer, we can give a city
back its culture, and we can give people hope. They need hope,
Senator. They need to know that something is going to be done.
Doesn't have to be done tomorrow, but it has to be done.
Thank you Mr. Chairman.
Chairman Shelby. Thank you.
Any questions of this panel?
Senator Dodd.
Senator Dodd. First of all, congratulations to all three of
you here, and I gather we do not have a bill that has been
written up yet in the Senate?
Senator Landrieu. We do.
Senator Dodd. I want to take a look at it, but I am very
intrigued by what you just said. I think it is very creative,
and I want to commend you, Congressman Baker, for a very
thoughtful approach, imaginative approach on this, and I am
very excited about it. I will be talking with my two colleagues
here about it as well, more modifications, not what you want to
hear about. I love your presentation. I think it is very, very
thoughtful.
Why did the Administration just reject this? It seems to me
they may have some ideas they want to bring to it, maybe want
some modifications themselves, but why would you reject what
sounds to me like a very reasoned, well-thoughtout proposal
here that would bring us all together, and particularly the
notion of hope, I think, and creative.
Chairman Shelby. Senator Dodd, as you know, the
Administration will testify in just a few minutes.
Senator Dodd. But I am curious about the Congressman, about
his analysis of why the rejection.
Representative Baker. Even as I came to the Chairman it
was--I fully focused on the House consideration only. We were
fortunate to get a bill out of House Financial Services by a
50-9 vote, bipartisan. When I came to the Chairman, it was a
very new topic on a very complicated problem, and he suggested
we need some time for Senators to review it and come to a
better understanding before we act on it, and I certainly
understand that.
In the case of the Administration, I want to compliment Mr.
Powell. We have worked, over the past few months, for many
hours, trying to come to some agreement on how to proceed. Much
of what the Administration's views would be--and I hope I am
not inappropriate to characterize it--is we have a response
mechanism in place, which we feel, if properly funded and
supervised, can give the people of Louisiana the assistance
they need much more quickly. I will say, in their defense and
in some criticism of my own approach, to get the corporation
created, to appoint the board, to have staff capable of going
out and running down the mortgage obligations and finding out
who the true owner is if they happen to live in Wisconsin or
wherever. It is going to take time.
So if one is focused on immediate response, although I am
not all that excited about--I do not think my colleagues are--
with the cruise ship FEMA trailer response--I am saying to you
that doing something now is the right thing to try to do. This
is a grander, longer term--the one dispute I will have with the
characterization of the approach is it is a long-term plan, it
is a very long-term plan. If there is any problem with it, it
is a really long-term plan.
Senator Dodd. You are not suggesting this is an either/or
situation. Obviously, there are immediate needs that need to be
addressed, which I think all of us would like to see us do
something about. What you have created or at least envisioned
here is some longer-term proposal. Senator Bayh, I think,
raised earlier the question of some low income issues and so
forth. There are some immediate issues, but I do not know how
that should be in conflict necessarily.
Representative Baker. I would defer to the Committee's
judgment on that matter. I am very concerned that as we
repeatedly come to this Congress and ask for assistance, that
at some point people are going to say enough is enough. My
sense of urgency was to offer this as the initial response. I
know there is under consideration, for example, an $18 billion
supplemental. I do not know the allocation of those resources.
I do not know what is intended for that. I am hopeful my two
Senate colleagues will have a significant hand in making that
determination. I do not serve on appropriations. I am just a
banking guy, so I am really reliant on your leadership and
those of my two Senators to help us navigate.
Senator Dodd. Let me ask our colleague, Senator Landrieu
about this. We have talked about this, in fact, I think in our
trip when we went down to Coretta Scott King's funeral
together. We talked about this, and you told me about this idea
and proposal. Tell me what your visions are of all this.
Senator Landrieu. Let me add my comments to that very
important question, why the Administration to date has opposed
this concept. It is not because Congressman Baker is not
willing to talk, but he needs somebody to talk to. They have
mischaracterized this as a big Government approach, and nothing
could be further from the truth. It allows the Federal
Government to do what only the Federal Government can do, which
is step up and create a secure framework in order for the
private sector to work, and in order for many local
governments--it is not just one. These are--I do not have the
full number. If my staff will tell me, but I would say,
estimate it is over 60 to 65 counties and parishes that were
affected.
The way the Baker bill is now drafted is for Louisiana
only, but let me go on record to say this has great merit for
Mississippi and Louisiana, should they choose. They have
decided they did not want to, so we had to kind of proceed by
ourselves, alone, but it is not meant to exclude them. But only
the Federal Government, Senator Dodd, can create this framework
in order for the private sector to be maximized. Otherwise, as
Congressman Baker said, speculators will rule.
Now, let me say I have no problem with people making a
profit. I understand that is the way this Government operates,
but I think given what Senator Vitter said about thousands of
homeowners who saw their property destroyed, not because they
did not pay their taxes, stay out of trouble, send their kids
to school, but because our levees broke. We have more of an
obligation to help them have a fighting chance to get back to
the neighborhoods that they loved so well, whether it is the
Ninth Ward or Lakeview, et cetera.
I think the Administration has a lack of understanding of
the magnitude, which they have not demonstrated, at least to
this Senator, that they quite grasp yet. They think it is a
Government approach, when it is exactly the opposite. And they
have said it is too expensive. Let me, for the record, say that
according to Congressman Baker and what he has worked out, if
it is done properly and we are careful with the taxpayer money,
we might make money for the taxpayer. I do not want to over
promise, but I think a careful review will show that over time
we could maybe break even because the property is devalued now.
But if we all work to increase the value of this great region
with homeowners and families sharing that rise up, taxpayers
may be able to actually create something that would not,
Senator Shelby, be a drain like the flood insurance program,
like some of the other things we have done.
Chairman Shelby. Senator Sarbanes.
Senator Sarbanes. I just wanted to follow up on what
Senator Landrieu said about the levee breaking. Who was
responsible for the levee? Who built the levee and who
sustained the levee?
Senator Landrieu. Senator Vitter can give you more detail.
He is on the oversight committee. I am on the funding
committee. But the bottom line is these are Federal levees that
were built with Federal funding with a local match. The
maintenance of the levees is distributed between the locals and
the State, but there is no question--because several studies
have now been conducted--that it was a gross failure of design
of Federal levees that broke and flooded areas that have never
been flooded before.
Having said that, let me ask Senator Vitter to fill in
because he is on committee.
Senator Sarbanes. I think Senator Vitter--is that right?
Senator Vitter. Yes, that is exactly right. In terms of the
design and construction, the lead is always the U.S. Army Corps
of Engineers. Now, maintenance is more, not exclusively, but
more a local matter. But when you look at the specific breaks
we are talking about, I think it is absolute universal
consensus that they were 98 plus percent caused by fundamental
design flaws. That is the Corps and its contractors.
If I could just briefly answer Senator Dodd's question as
well.
Senator Dodd. This is great. You did a good job with this
piece, by the way.
Senator Vitter. I appreciate it. I wanted to go back to
that quickly. You said why is the Administration opposed to
this? I do not want to speak for the Administration--and they
have mentioned a bunch of things--but I think a key, not only
there, but also up here in general, is people wants to see what
the substance of the rebuild plan is. Congressman mentioned,
appropriately, this local planning work that is ongoing.
Basically, I think a lot of people want to see the result of
that before they sign the check or pass the bill, and that is
what I am suggesting, that we just marry up. So let people see
the result of that, or create a mechanism that everything is
contingent on that confidence inspiring plan.
Senator Dodd. Let me just react quickly to that, and ask
Senator Landrieu this. My only concern with that would be that
asking that many local entities, all the people at the local
level in Louisiana to come together on one plan to precede
this, my suggestion would be--just on reacting--you do the
Baker-Landrieu-Vitter plan, get this thing moving, you will
then get the reaction at the local level. That would be my
assumption here. I think waiting for this to occur
simultaneously is, I think, dreaming.
Senator Landrieu. Could I add something to that, if I
could, Senator Dodd? I do not disagree with what Senator Vitter
said about the importance of having coordinated plans at the
local level, but I do want to strongly agree with what you just
said. This is a chicken or egg situation, and to expect these
parish governments from the last 6 months, that have no idea
what FEMA will reimburse them for and under what conditions and
how quickly, they have no idea how much money they have to work
with, they have no budgets to work on. Seventy-five percent of
their operating budgets were swept out from under their feet.
They do not have fire trucks. Police officers do not have
houses. Teachers have no schools to teach in. Nineteen
hospitals were shut down and 6 universities. To ask these
communities to come up with a great plan that everybody signs
off on and thinks is great, and then march themselves to
Washington before they can get help is ludicrous. It will not
happen and it cannot happen.
Now, we are not asking for a bailout. The Federal
Government should set up a framework, which is what the magic
of the Baker bill is. It is not perfect. We have never done it
before. How could it be perfect? We do not know. But it is a
framework in order for these communities to get a sense of what
might be available. Then they can talk about what they might
do. So there is some urgency, and I hope this Committee will
take a close look, and not just go with the Administration
line, which is just throw more money down there and think
something magically is going to grow like a garden in order.
Senator Vitter. I think there is a way to do both. The way
is for us to lead up here in Washington, the Administration,
Congress, and create a mechanism to move forward, and a
commitment, and all of it is contingent on a clear plan being
developed from Louisiana and married to that. And things do not
happen, the money is not spent, the money is not disbursed
until that happens.
Senator Dodd. Got to start here. though. I think you have
to start here first.
Senator Vitter. Well, I am actually hopeful we are going to
embark on that path. I am hopeful that at the Federal level we
are going to have a breakthrough soon either with the Baker
bill or a modification of it or increased Federal commitment,
and then that has to be married with that vision and detailed
plan from Louisiana.
Representative Baker. Senator, if I may, just to point out
that the construct of the corporate organization will take a
while. It certainly could be another component of the bill to
require at some point, maybe not a systemwide storm damaged
impact area, but at least at the parish level a recommendation
for consideration be developed over the next 6, 8, 10 months
while this is all being stitched together. That certainly is
attainable, and I do not expect people at your level to
appropriate money not really knowing where it is going to wind
up.
At the same time, I want to hit something that has come up
in press reports about the spending level, somewhere $100
billion figure came from; for a while it was down at $85
billion. This proposal has morphed over time. There is a cap in
the bill today at $30 billion that was adopted in the House.
Since that time, I think we could get that figure below $20
billion, because an operating line of credit at $20 billion
would fund this corporation quite adequately. And then with the
sale of assets going forward, we would be in pretty good shape.
So, I do not want the dollar bill consideration to be the basis
on which the Committee would reject the proposal.
Senator Dodd. Thank you. I apologize taking so much time.
Chairman Shelby. I have a question, Congressman Baker. I
hope you are not contemplating by this plan to build back in
areas that we have reason to believe will flood again, and put
money in those areas, because if you do, a lot of us would not
want to be part of that. But we do want to be part of something
to rebuild the area the right way.
Representative Baker. Yes, sir. I think reasonable people
can agree that the structures themselves should be to some
predetermined hurricane standard, that where the structures are
located needs to be carefully constrained, that where we have
people still in the floodplain behind levees, their premiums
for their flood insurance reflects the risk associated with it.
I think we would take any guidance, Senator, that you would
choose to require of us, understanding that those same
constraints might be applicable one day to the good people of
Alabama.
[Laughter.]
Chairman Shelby. I think they should be. I thank all of you
here this morning. We appreciate your appearance and your
contribution.
Senator Landrieu. Thank you.
Senator Vitter. Thank you.
Representative Baker. Thank you.
Chairman Shelby. We will go to our second panel. Our second
panel will be the Secretary of Department of Housing and Urban
Development, Alphonso Jackson.
Secretary Jackson, welcome again to the Committee. You are
no stranger to the Banking Committee. We welcome you again, and
we understand you are on a tight schedule, and we will try not
to keep you any longer than you can stay.
Secretary Jackson. Thank you, Mr. Chairman.
Chairman Shelby. Your written statement will be made part
of the record in its entirety. You proceed as you wish.
STATEMENT OF ALPHONSO R. JACKSON, SECRETARY,
U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
Secretary Jackson. Thank you so much.
Mr. Chairman, Ranking Member Sarbanes, and distinguished
Members of the Committee, it is a privilege to appear before
you today.
I would like to say a few words about HUD's overall
responsibility to the devastation in the Gulf Coast, and then
specifically highlight the efforts of us through mortgage
assistance, Community Development Block Grants, rental
assistance, and fair housing enforcement.
Immediately after Katrina made landfall, I established a
Disaster Response team within HUD to tap the Department's
expertise in all of its program areas, and I am proud to report
that when the call went out for HUD volunteers, hundreds of
HUD's employees stepped forward. By early September, we
identified nearly 6,000 vacant HUD-owned properties in 11
nearby States that could be provided, rent-free housing for
evacuees for up to 18 months. To date, 2,300 of these homes
have been repaired and made available to these families. More
than 1,000 are currently occupied, and another 800 families are
in the process of moving in. Of the remaining HUD-owned homes,
those that can be made habitable will be offered to families
rent free after they are repaired, or be sold at a discount to
those evacuees who want to purchase them.
Immediately after Hurricane Katrina I imposed a 90-day
foreclosure moratorium to help all FHA-insured homeowners who
found that they could no longer pay their mortgage. Right
before Thanksgiving, as the initial 90-day moratorium was about
to expire, it was clear that the people needed more time, and I
extended the moratorium another 90 days.
But recognizing that many FHA-insured families still needed
help, we did something extraordinary. HUD announced a Mortgage
Assistance Initiative. HUD has made funds available to pay the
mortgage of certain eligible families insured by FHA for up to
one year. These payments constitute an interest free loan.
These families are not required to pay back this loan until
they sell their house, refinance their first mortgage, or pay
off their preliminary home loan. We are cutting red tape and
allowing State and local leaders to put the funds to work as
quickly as possible.
Since the storm, HUD's Office of Community Planning and
Development has issued more than 40 waivers to its normal
program rules. When Congress appropriated $11.5 billion to the
Community Development Block Grant fund to 5 Gulf Coast States,
it asked HUD to develop a method of allocating the monies. The
law required that we target the assistance to the most impacted
and stressed area within those States. The decision as to how
we allocated the block grant funds was wrenched with particular
sensitivity to the utmost housing needs in the area of
concentrated housing destruction.
I believe that HUD has both satisfied, Mr. Chairman, the
spirit and the letter of the law in allocating these funds.
More than a million homes were damaged in these five States.
Upon inspection, FEMA classified over 300,000 of these homes as
having major or severe damage. Those homes were concentrated in
various States as follows: 67 percent in Louisiana, 21 percent
in Mississippi, 7 percent in Florida, 4 percent in Texas, and 1
percent in Alabama. Within HUD's own FHA portfolio in these
States, nearly 17,000 homes suffered significant damage. Of
those properties 56 percent are in Louisiana, 40 percent in
Mississippi, 2 percent in Florida, 1 percent in Texas, and 1
percent in Alabama.
Congress required that HUD not allocate more than 54
percent of the block grant fund to any one State. Under this
cap, the State of Louisiana was allocated $6.2 billion. By any
measure, the greatest need in Louisiana is in New Orleans.
Nearly 90 percent of the Louisiana housing damage occurred in
the metropolitan area of New Orleans.
Rental assistance. Although it is FEMA's core mission to
provide emergency assistance to those adversely affected by
natural disasters, HUD has worked in partnership with FEMA to
address the immediate housing needs of displaced families. In
fact, on September 23, Secretary Chertoff and I announced the
Katrina Disaster Housing Assistance Program, better known as
KDHAP. I think it is important to point out that HUD's mission
assignment for FEMA was, and still is, to help individual
families who received HUD-funded rental assistance prior to
Hurricane Katrina.
Recently, Congress appropriated $390 million directly to
HUD to fund the Disaster Voucher Program that will expand the
assistance to include those directly affected by Rita and
Wilma, but again, the rental assistance is only available to
persons who previously had HUD assistance. HUD's Office of
Public and Indian Housing is also working closely with the
public housing authorities to help find housing for our clients
independent of the Disaster Relief Program. Approximately
15,000 families are currently enrolled and receiving rental
assistance through HUD's mission assignment from FEMA.
Fair housing. Our Office of Fair Housing and Equal
Opportunity is diligently working in the Gulf Coast region to
make sure that those families who were victimized by these
hurricanes are not victimized again by landlords who will
illegally deny them housing.
In conclusion, Mr. Chairman, Ranking Member Sarbanes, and
Members of the Committee, all of us have been working on the
ground in the hurricane ravaged area now, and the damage is
clearly heartbreaking. I can assure you the people of HUD will
always remember that they come to work, not merely to do a job;
we know that we are serving our fellow human beings with real
faces and very pained stories. Within the limits of the mission
assigned to HUD by Congress, the HUD team will do whatever it
takes to help people find housing that they need, to help
communities help themselves rebuild.
I want to thank you very much for giving me this
opportunity, and I will be willing to answer any questions.
Chairman Shelby. Thank you, Mr. Secretary. I have a number
of questions. I will try to run through them. If you cannot
answer them now, if you will answer them for the record, and
help us build this record.
Secretary Jackson. Sure.
Chairman Shelby. With a large share of the housing in
Katrina-impacted areas either destroyed or uninhabitable, as
you mentioned, there have obviously been tremendous pressures
on the rental market, what is left of it. The Committee has
heard a variety of instances, Mr. Secretary, of rent gouging,
often seeing rents double or triple beyond their pre-Katrina
values only 6 months previously. Is this something that HUD has
been seeing as well? Does there appear to be rent gouging in
areas in Louisiana, New Orleans area, and also Houston or
Dallas? If it is in fact occurring, what can HUD do to moderate
this?
Secretary Jackson. We have seen rent gouging, especially
around Baton Rouge and those areas. We sent our team of fair
housing equal opportunity immediately down to make sure that
this was stopped.
In Houston, Dallas, that has not been the case. They have
been extremely willing to work with us to find housing, and it
is still very moderate. The fair housing market has not been
enhanced very much in those areas. But we saw it exacerbated
tremendously in and around the Baton Rouge area.
Chairman Shelby. Secretary Jackson, will HUD's plans for
rebuilding public and assisted housing take into consideration
the risk of future flooding at any specific location? In other
words, of the Nation's entire stock of public and assisted
housing, do we have any sense of how much of that stock is
located in a floodplain or subject to great risk from other
natural disasters such as earthquakes?
Secretary Jackson. I can tell you in a number of cities,
the way we built public housing back in the 1930's and 1940's
were located in floodplains. Of late, that has not been the
case. We believe that clearly--and I have had a number of
conversations with the Governor of Louisiana, with the Mayor
New Orleans, with the Governor of Mississippi, and we are
exploring ways first to make sure that we first shore up the
levees, second, that we build the kind of housing that if we
have this kind of storm again can withstand it. We have not
done that in the past. If you will remember, Mr. Chairman, in
Florida we have done some experimental housing which withstood
hurricanes, and was easy to clean out. We will continue that.
But President Bush has made it very clear we are not going
to impose our will on any of the States, we are going to work
in tandem with them to make sure that they know that we are
there and we are going to assist them. We have sent our college
of experts into Mississippi, into Alabama, and into Louisiana,
to work with the Governors, to try to decide how best to
rebuild those States.
Chairman Shelby. But you are hoping not to repeat the same
mistakes, are you not?
Secretary Jackson. Absolutely. It is important that we look
at where we build public housing from this point on in this
country.
Chairman Shelby. You referenced this earlier. Congress
appropriated $11.5 billion in Community Development Block Grant
funding to assist in the rebuilding of the Gulf area. There is
a lot of flexibility here, as you well know. Secretary Jackson,
could you for the record, share with the Committee what the
overall plan is at the moment for using the recently
appropriated Community Development Block Grants and how you
will coordinate this with the impacted States?
Secretary Jackson. What we have asked each Governor--and we
have had conversations with each Governor--is to submit us a
plan. Your instructions are very clear, that this money should
be used basically to rebuild those respective areas. We are
expecting the Governors to send us a plan very soon. Then we
will sit down, discuss those plans and work with them. We have
had tremendous and positive dialogue with Governor Barbour,
Governor Riley, and Governor Blanco, and we expect to see those
plans very soon, and we are going to move very, very quickly
and judiciously to begin to operate.
Chairman Shelby. So you will be closely monitoring the use
of these funds, because you are talking about at the moment
$11.5 billion is a lot of money.
Secretary Jackson. I can assure you we are going to
monitor, because in the final analysis, you all are going to
hold me responsible if it is not spent wisely.
Chairman Shelby. Thank you. The use of vouchers, you have
had a lot of experience in this area. In the aftermath of
Hurricane Katrina, there was perhaps no greater issue than
finding housing for displaced families, probably still is. The
principal form of disaster housing assistance is the Stafford
Act's 408 assistance. Some have suggested instead of using
vouchers in the existing public housing network for disaster
assistance. I believe your experience in having run--was it the
Dallas Housing Authority?
Secretary Jackson. Yes.
Chairman Shelby. Gives you perspective on this issue, as
the Dallas Housing Authority historically, has a turnover, I
understand, of about 1,000 vouchers per year?
Secretary Jackson. That is correct.
Chairman Shelby. Do you believe you would have the capacity
at HUD to process close to, say, 100,000 vouchers in a matter
of weeks?
Secretary Jackson. Not at this present time, no. We cannot
do that. I think that what we have done in the last 12 to 14
weeks in housing some 7,500 of those displaced persons, plus
giving vouchers to another 7,500 has been done very
expeditiously, and in fact, I must say to you, without the
support and help of Texas specifically, and many other States,
this could not have been done so quickly.
Chairman Shelby. I just want to reference the Low Income
Housing Tax Credit that you are very familiar with. Congress
recently allocated over $1 billion in additional low income
housing credits to States impacted by Hurricane Katrina. This
additional funding will be used to rebuild rental housing
destroyed by Katrina, is my understanding.
Secretary Jackson. That is correct, on top of the $11.5
billion. That is not in addition to, that is on top.
Chairman Shelby. Traditionally, a lot of the tax credit
properties have tended to be large urban apartment complexes.
Most renters in the Gulf States live in single-family homes or
smaller apartment buildings. What plan do you have at HUD to
work with the State housing finance agencies in assuring that
the new tax credit developments, $1 billion, will meet the
needs of displaced families? It looks to me like that is where
you should target.
Secretary Jackson. Again, we have asked the State and the
local officials, the parish officials, to come together--and I
know it has been said it is very difficult to get them to come
together. But I think if we are going to do this logically and
in an expeditious manner, they are going to have to come up
with a plan as to how best we can serve each one of those
communities but yet not leave one of those communities behind.
Chairman Shelby. But you cannot have every community come
out with a plan, can you, Secretary Jackson, where the Federal
Government is the big payor here?
Secretary Jackson. No, but once we give the low income tax
credit, the State is the allocator of those dollars. And so
what we are asking them again to do is to get with their local
parish, their local cities, and come up with a plan that they
can address.
We will allocate the dollars as you have asked us to do,
but in the end--and I think President Bush has made this very
clear--we are not going to dictate to any one of those States
how to utilize their money, either the Community Development
Block Grant or the low income tax credit. But we are going to
be there to augment and work with them to see if we can speed
up the process, because we are very sensitive to the needs of
those persons who have been displaced to get back to where they
want to be. Many of the people of late--and I will tell you
this: Surprisingly, but very pleasing, according to what the
President said, many of the people now want to come back home,
and we want to do everything in our power to help them get
back.
Chairman Shelby. But you do not want to build again in
harm's way, do you?
Secretary Jackson. Absolutely not, and I do not think the
Governor and the mayors of those cities want to do the same
thing.
Chairman Shelby. Thank you.
Senator Menendez.
Senator Menendez. Thank you, Mr. Chairman.
Mr. Secretary, I appreciate your testimony, and while it
focused on HUD's response, I want to talk about where we go
from here. And I also listened intently to your answers to the
Chairman's questions, and I also appreciate the view of the
Administration not dictating. But while we do not dictate, I
also hope that we ensure that one of the great aspects of New
Orleans and Louisiana was a multiracial society in which all of
the elements of society we have in America were represented
there. And, you know, we can ultimately have a plan that does
not give us the opportunity for all of the residents that you
just talked about going back to get back.
Secretary Jackson. Sure.
Senator Menendez. And so there is a balance between
dictating and ensuring certain things, and that is what I want
to pursue.
As I understand it, there are 100,000 public housing units
that were destroyed in Louisiana by both Hurricanes Katrina and
Rita.
Secretary Jackson. No, not 100,000.
Senator Menendez. How many were there?
Secretary Jackson. Just about 10,000.
Senator Menendez. Ten thousand?
Secretary Jackson. Well, not 10,000. We had to evacuate
all, but we had probably of that number, about 3,000 that
really suffered tremendous damage in the flood.
Senator Menendez. So all the other units presently are
inhabited by individuals?
Secretary Jackson. Not necessarily so because of the rain,
the problem with mold, the problem with a number of other
issues that we are trying to get them habitable.
Senator Menendez. So 3,000 were roughly destroyed beyond
repair?
Secretary Jackson. Not beyond repair, but needed
substantial repair.
Senator Menendez. Substantial repair. How many units exist
in which they are vacant because mold or whatever other
circumstances that are less than the substantial repair of the
3,000?
Secretary Jackson. A number of the units right now, and I
cannot give you that number.
Senator Menendez. Could you give the Committee that through
the Chair?
Secretary Jackson. Yes, we have a number.
Senator Menendez. I would appreciate it, because part of
the challenge, it seems to me, is what do we do with that part
of the society that were living in public housing.
Secretary Jackson. We are really making every effort,
Senator, to bring them back. We have brought back now about
700, and we are doing everything in our power to clean up the
units.
One of the things I did not want to do is put people in
units that were sub-standard. Many of the units, when we took
over the housing authority, had been sub-standard for 20 years,
and it is important to understand that we had almost 10,000
units. But about 6,000 were habitable, and 4,000 had basically
been unhabitable for more than 15 years.
So we are in the process of totally revitalizing the
housing market in the city of New Orleans at this point.
Senator Menendez. Well, that is good news. I am glad to
hear that we are not going to put people in sub-standard
housing. Now the question becomes: What is it that, while not
dictating, is HUD's plan to make sure that those who were in
some form of public housing now will be able to come back,
hopefully in better housing than they had, using this
catastrophe and maybe turning it into a more positive
consequence? What is the expectation? For example, does HUD
plan to seek the replacement of all of those public housing
units that you described, the 3,000 that were significantly
affected plus the others that had some degree of affect? And if
so, are you seeking a supplemental for that?
Secretary Jackson. No, because we have insurance, we have
other ways of doing that. We have houses that we have just
finished, like Desire that was totally submerged. But we have
some that clearly we had on the drawing board to totally rehab,
reconfigure. And we are still moving in those directions to do
that.
Now, those that are not presently on the drawing board, we
are going in and fixing those up completely so that people can
move back in. But we have a plan, which we have a team of
receivers in now, that we have talked about how we are going to
revitalize all of the housing that exists for public residents
in New Orleans.
Senator Menendez. Is this plan available so that the
Committee could review it?
Secretary Jackson. Absolutely.
Senator Menendez. I would appreciate your submitting it
through the Chair to the Committee.
Secretary Jackson. Sure.
Senator Menendez. Last, let me ask you, with reference to
as you create the opportunity to take the disaster and turn it
into something good and not put people back in sub-standard
housing but still to provide a significant element of society
that may not have, at least at this point, the opportunity for
homeownership, do you see, for example, a HOPE VI-type of
opportunity here? It has in my own State of New Jersey
transformed the lives of people who were in public housing, in
sub-standard housing, into a sense of neighborhood and economic
empowerment. Do you see that as a potential model here in
Louisiana?
Secretary Jackson. New Orleans has a number of HOPE VI that
they are utilizing. In fact, when I talked to you about Desire,
Desire was one. When I talked to you--I am trying to think of
the one that was also underwater. What was it? Florida was HOPE
VI at the same time, and we are going right back in now and
revitalizing those at this point in time.
Senator Menendez. We will need some help because the
President's budget zeroes out HOPE VI.
Secretary Jackson. I understand.
Senator Menendez. And that is not much hope. So hopefully
we can change that.
Thank you, Mr. Chairman.
Chairman Shelby. Thank you.
STATEMENT OF SENATOR JACK REED
Senator Reed. Thank you very much, Mr. Chairman and Mr.
Secretary.
Initially, HUD estimated that approximately 65,000 families
would be eligible for the Katrina Disaster Housing Assistance
Program. HUD staff have stated that 15,100 people are receiving
these vouchers and 7,200 have executed leases. The number of
families seems exceptionally low, basically 50,000 families
that have not been reached or accommodated. You have received
$82 million in mission assignment from FEMA as well as $390
million from Congress.
Given that only 7,200 families have been leased up, it
appears that much of these funds will go unspent. How much have
you spent on the KDHAP--however you pronounce it?
Secretary Jackson. KDHAP.
Senator Reed. KDHAP.
Secretary Jackson. I cannot tell you now at that point, but
your figures are absolutely correct, Senator. We started out
with what we perceived as about 64,000 people, but after our
evaluation with FEMA, we brought it down to about 32,000 people
and then brought it down to about 24,000 people, is what FEMA
told us we had--what they were allocating us to serve. And we
are making every effort to serve that number of people today.
But when you say we estimated, no, we thought there were
64,000, but after talking with FEMA, who was the first
responder, they came to the conclusion that it was really about
24,000.
Senator Reed. It appears to me that these 65,000 families
were receiving assistance before the storm. Is that correct?
That is the basis of the initial estimate?
Secretary Jackson. Senator, that was the initial belief,
that there were 65,000 families. That is initially what was
conveyed to us. After scrubbing what they perceived as the
list, FEMA has said that it was about 32,000 families that were
eligible based on being public housing residents, 202, 811, or
Section 8 recipients.
Senator Reed. It would seem to me that HUD would have this
initial information themselves, that you would know--FEMA would
be considered out of the loop when it comes to how many people
have housing assistance in Louisiana, Mississippi, and Alabama,
that you would know this.
Secretary Jackson. No. No, that is not what I am saying,
Senator. I am saying to you that we agree with you. That was
our postulation. But FEMA is the first responder.
Senator Reed. Right.
Secretary Jackson. They allocated the names of the persons
who we were to serve, and we were basically working with the
interagency agreement to serve that. We have had discussions
about, but that is the number that has been conveyed to us.
Senator Reed. I appreciate that, Mr. Secretary, but what it
seems is there is a possibility that it could be 50,000
families that were receiving assistance, according to your
records, prior to the storm. And now only 15,000 have been
identified, 7,200 have actually got leases that are supported
by HUD funding. Have we lost 50,000 families?
Secretary Jackson. I hope we have not, but I am saying to
you--I understand your question very well.
Senator Reed. What efforts are you making, Mr. Secretary?
Secretary Jackson. We have made efforts. We have gone to
the hotels, we have been going around cities to find these
people, and we have been conveying it to FEMA.
Senator Reed. FEMA has not exactly the best track record
when it comes--so relying on their estimates, I think it might
be an invitation to have a lot of Americans out in the cold,
literally, or at least the wet and rainy weather of the last
several days down there.
Secretary Jackson. And I understand what you are saying,
but under the Stafford Act, FEMA is the first responder.
Senator Reed. I understand that. But under the principle
that we have to help these people, I suspect HUD should step up
a little bit more and find out what happened to 50,000
families.
Secretary Jackson. We are doing everything in our power,
but if we are going to change the process, that is in your
hands, not in ours.
Senator Reed. Let me change gears slightly. Do you have a
timeline, Mr. Secretary, for when the public housing stock will
become reconstructed, public, assisted housing, FHA-supported
housing? Do you have a timeline? And how does that compare with
the private renter and owner-occupied housing?
Secretary Jackson. I cannot tell you how it compares with
the private, but I can tell you that Mayor Nagin has been
working very well with us, and we are using a timetable in
conjunction with his staff and the receiver staff that we have
there. We have started the process on a number of units,
rehabbing them, bringing them back online as quickly as
possible. But we have some concerns that have been raised by
you and by the Senators and Congress people before. Do we build
before the levee is secured? Do we build after the levee is
secured? And that is a decision, if the mayor makes tomorrow to
do it, we will do it tomorrow. But it is his decision. We are
not going to preempt his decision. And in many cases, he has
been working very well with us, I have to tell you that. And we
are making great headway in revitalizing and restructuring a
lot of the public housing developments and putting people back
into Section 8.
When you talk about multifamily, our Assistant Secretary
just met with owners of multifamily housing, 202's, 811's, and
they are in the process of moving very quickly to get people
back in homes. We are doing everything to get those persons who
want to return back.
Senator Reed. Thank you, Mr. Secretary. Let me associate
myself with the comments by Senator Menendez about the proposed
cuts to the HOPE VI program and to the CDBG funding. Whatever
we have appropriated in the past, these funds can be very
useful in terms of continuing the momentum. That is one concern
we have: First, getting it going, and then, second, once we
have got some momentum, sustaining that momentum. And without
CDBG in the years ahead that could be applied to these areas
and with the demise of HOPE VI--which this to me would be a
perfect place for HOPE VI projects where you are actually going
in and creating mixed-income developments that would literally
rebuild previous public housing. And my understanding of HOPE
VI is, you know, you really go in and you eliminate old public
housing and then you build this new mixed-income--and we have a
great example up in Newport, Rhode Island. Well, the first step
Mother Nature has taken care of first us.
Secretary Jackson. Right.
Senator Reed. Now, we have the perfect place to do this,
and this program is scheduled for total elimination. Not just
for the Gulf Coast but for the rest of the country, I think it
is an important program. And, again, I think Senator Menendez's
concerns are appropriate in terms of both these programs.
Secretary Jackson. Let me say this: As you know, we have
implemented at your directions the Community Development Block
Grant funds to the five States that you told us to. Also, I
think we have had this discussion before about the HOPE VI.
When you look at the amount of money that we have allocated
over the last 20 years and the amount of units and cities that
have appropriated that money in a timely manner, it is clear to
me that those cities who have done well, like you talk about
Providence, Dallas, Charlotte, or even New Orleans--New Orleans
and Desire--the best example I can give you is Desire. Until we
took over New Orleans, Desire had been on the drawing board for
20 years with the HOPE VI, and nothing had happened. We came in
and working with the mayor and through a receivership and made
it happen. I think to date we have only had--of the 200 or so
HOPE VI allocated, we still only had about 35 that have been
completed in the last 20 years. And my position is, my
suggestion before to the President and to everyone else is the
program is not working like it was intended to work, and we
cannot keep funding programs if we are not developing.
Now, getting back to Community Development Block Grants, it
has worked very well, and we are going to continue to fund it,
and we are going to continue to work with cities, because I
think it is appropriate. But we must gear the money and the
block grant programs to those cities and those communities that
are most in need. And I think in this case, clearly, all five
of those States fit that category.
Senator Reed. Well, I think they do, but I think most
cities would claim that they have a certain degree of need.
Mr. Chairman, you have been very kind. I believe Senator
Sarbanes is going to return in a few moments, and I have one
other question.
Chairman Shelby. Go ahead.
Senator Reed. Thank you, Mr. Chairman.
I am also concerned, Mr. Secretary, about the timing issues
associated with HUD grant programs to the affected areas.
Section 8 public housing programs, homeless programs, and
others may experience reductions because of reduced numbers of
clients, tenants, and program staff unless HUD takes some
action to ensure that funding is based on pre-Katrina
population. These cuts in funding are likely to occur just as
people are starting to return to the affected communities,
creating another crisis.
Essentially these population-related programs in terms of
staffing and support, you could find yourself, if you use
existing figures because of the depopulation, underfunding at
just the time people are coming back in. How are you going to
deal with that?
Secretary Jackson. We have not taken any money from the New
Orleans Housing Authority. The vouchers are still there because
we are using KDHAP and then we will use the disaster vouchers.
So that is not an issue.
The 202's are still in place, the 811's are still in place.
I do not see a cut in funds. In fact, we allocated $1.2 billion
more for Section 8 in this budget than we had last time, so I
am not sure exactly what you are asking. I do not think New
Orleans is going to suffer. Right now, many of the vouchers are
basically in limbo because people are using other means of
housing around the country.
Senator Reed. What about program staff ? In terms of if
this takes several years to get back up to a critical mass,
will you have pressures on your program staff to cut back in
those areas? Or will you be perhaps even putting more in? What
is that situation?
Secretary Jackson. To be very honest with you, Senator
Reed, I have not given that thought, because our thoughts have
been first to get people housed who want to get housed. And I
will give that a thought and get back with you. I had not
thought about that.
See, presently, from my understanding, the staff at HANO
has been paid, and many of them have not been in the city. But
people who are concerned about not paying them with the--if we
did not pay them, the chances of them returning might not be
great. So many of the people are now returning. So for 3 or 4
months, they were paid but they were not there because of the
flood.
So, I guess if I answer, I do not think that is a problem
because they are returning now.
Senator Reed. Thank you, Mr. Chairman. I do think, though,
that Senator Sarbanes is en route.
Chairman Shelby. He is on his way, I understand.
Senator Reed. Thank you.
Chairman Shelby. Mr. Secretary, the Community Development
Block Grant program seems to me is a step in the right
direction down there. This would be under your supervision and,
of course, our oversight.
Secretary Jackson. That is correct.
Chairman Shelby. Have you thought about expanding that?
Have there been any suggestions on that? I think we have heard
Congressman Baker's plan, Senator Landrieu's, Senator Vitter's
here this morning. I do not think there is any plan that cures
everything in New Orleans, but I think we all want to help. But
we want to make sure that money is spent well. We want to make
sure that money is used for the right reason. And I personally
want to make sure, if I can, as much as I can, that we do not
rebuild in harm's way. Whether it is in Lakeview--is that an
area down there, the upper-income area?--or whether it is in
the Ninth Ward, it does not matter to me.
Secretary Jackson. That is correct.
Chairman Shelby. I just think that is foolish on our part,
trying to help people and also protect the taxpayer.
Secretary Jackson. I think, Mr. Chairman, that we at HUD
understand the needs of the people and the affected area. And I
can tell you, we share the common goal of Congressman Baker to
provide effective and responsible support for the region. If we
did not, clearly, we would not have allocated $6.2 billion. I
think they have monies to start doing exactly what they were
talking about. The key to it is all they have to do is submit a
plan. And I think if they demonstrate submitting a plan and
began to work, you will be amenable to adding more money.
Chairman Shelby. What is the holdup on the plan? This is 6
months now. We are in the sixth month since the disaster. What
is the holdup? Is it petty politics?
Secretary Jackson. You know, I do not know. I know you have
allocated the money, and we have asked them to submit a plan.
And I have talked to the Governor, and she said she is going to
submit us a plan. We have the plan and the process.
Chairman Shelby. Okay.
Secretary Jackson. So my position is that--I have heard it
said, ``Well, we cannot get started.'' The money is there. They
can get started. And if they demonstrate that the money is
being spent wisely and judiciously to bring people back, then I
am convinced you will allocate more money.
Chairman Shelby. But we cannot just allocate money without
a plan, and without a plan that makes sense.
Secretary Jackson. I agree.
Chairman Shelby. A plan that will work and will help people
now and in the long-run. Is that correct?
Secretary Jackson. That is correct, because in the end, if
the money is not allocated properly or not spent properly, you
are going to look to me and GAO is going to look to me and ask
me why didn't I make sure the money was spent properly.
Chairman Shelby. That would be our responsibility.
Secretary Jackson. That is right. And as you asked us with
the Lower Manhattan Development Corporation, we have made sure
that that money was spent properly by audits every 3 months,
having the Inspector General go in, and we will do the same
thing in the Gulf region.
Chairman Shelby. Thank you.
Senator Sarbanes.
Senator Sarbanes. Thank you very much, Mr. Chairman.
Secretary Jackson, members of our staff recently toured the
devastated areas down there. One of the reports they brought
back was the failure of HUD and the Housing Authority to work
together to take action to preserve some of the public housing
stock. Let me give you a very specific example: The Lafitte
Housing Development survived the hurricane apparently pretty
well. They suffered about 12 inches of flooding, but otherwise
it was undamaged and, in fact, people were coming--nonresidents
were coming trying to get shelter at that particular housing
project.
But no one moved in to do anything about cleaning up the
situation, so the mold took over. And now they have floor-to-
ceiling mold. Now we have a really big problem.
How did this happen? How did we let it just get out of hand
like that?
Secretary Jackson. We did not let it get out of hand. The
mayor is the mayor of that city, and he made a decision that he
did not want people back, nor did he want us in that area. The
moment he has permitted us to do that, we have gone in and
worked with the Housing Authority. The Housing Authority and I
are not in conflict. In fact, Senator Sarbanes, the Housing
Authority is in receivership. We are controlling it, so we
cannot be in conflict.
Also, we agree with you that the Lafitte mold problem has
been a problem, and we are cleaning it up right now, bringing
people back.
Senator Sarbanes. No, I want to know why was a little
problem allowed to become a very big problem?
Secretary Jackson. That is very simple.
Senator Sarbanes. The mayor would not let you go in and
deal with a little problem?
Secretary Jackson. That is right. It sat there a week under
water. So, clearly, mold was going to set in. And the moment we
had the opportunity to go in, which was about 3 weeks later,
which he said, we began the cleaning process.
So if you are saying did we have control, no, because the
mayor was controlling the city.
Senator Sarbanes. So he would not allow you in in order to
clean it up?
Secretary Jackson. That is right, because it was flooded
and we had to let the water recede. The same thing happened in
Desire. The same thing happened in Florida. We could not go
into those areas until the water receded.
Senator Sarbanes. And you were in there as soon as the
water receded?
Secretary Jackson. Yes, we were.
Senator Sarbanes. Or the mayor still kept you out?
Secretary Jackson. No. We were in there. But the mayor made
it clear that he did not want people in certain areas of New
Orleans, and we did not go in.
Senator Sarbanes. Well, you have given us a pretty good
factual exposition for examination, and we will examine it very
carefully.
Secretary Jackson. And please do.
Senator Sarbanes. Now, there have been reports that because
of the limited housing stock in New Orleans, rents have risen
dramatically, but HUD has not increased the fair market rent
which guides how much voucher holders receive in rental
assistance. It also guides what FEMA can provide in housing
assistance. So it is not just solely a HUD-related problem
because others use that standard for various aspects of their
program.
What can we do to address this fair market rent problem in
the impacted areas so they more accurately reflect current
rental conditions?
Secretary Jackson. I am not sure, Senator, who gave you
that information. First of all, it has been difficult for us to
find apartment complexes in and around New Orleans. Had they
said that we had a problem in and around Baton Rouge, they
would be absolutely correct, and we have sent our Fair Housing
Equal Opportunity people in there to make sure that these
residents in and around Baton Rouge are not gouged. But that
has not been a substantial problem in and around New Orleans,
not since the flood, because many of the residents have not
been able to go back. And, in fact, that is why the mayor and
many of the parish presidents have asked for trailers to come
in because they do not have enough rental apartments in and
around to be utilized.
Second, that is why we met with many of the owners of our
multifamily properties, because they were submerged in water,
and they are getting in the process of redoing those
apartments. So if the person had said that we have a problem in
and around Baton Rouge, I would agree with you, and we have
been very active in making sure that that is addressed.
Senator Sarbanes. You have addressed the fair market rental
problem there?
Secretary Jackson. Yes, we have.
Senator Sarbanes. Okay. Now, let me ask you, we passed in
the Senate emergency voucher legislation. The thinking was that
we would provide these emergency housing vouchers. The
Administration could then move with those housing vouchers and
get people into housing. I mean, there is not much housing
there, but in other parts of the country. So they could get
them out of temporary housing and into more permanent housing.
The private sector had come along and said, you know, we
are doing surveys of our ownership, the multifamily people, the
apartment owner people, and we are ready to provide a list of
available opportunities. The Administration did not support
that in the House side, and it died over on the House side.
Why did you let a possibility for something that clearly
could produce, we think, good, quick results to falter?
Secretary Jackson. Because you all had allocated billions
of dollars through FEMA, which we had an interagency agreement
with to provide our public housing, Section 8, 202, 811 people
with apartments around the country, and we did that.
Senator Sarbanes. Yes.
Secretary Jackson. So we did not--I cannot tell you why it
has died, but I can tell you we had money, whether it is
Philadelphia--and I went to a number--Houston. We have people
housed right now in KDHAP. That is Federal money that is up to
18 months, and once that is done, they are going to the
disaster funds that you have allocated just lately of $360
million.
Senator Sarbanes. But those were for people already
receiving that form of assistance, correct?
Secretary Jackson. That is correct, from New Orleans and
the Gulf area.
Senator Sarbanes. What about people who were not already
receiving that form of assistance but are in dire circumstance
and, if fed into the voucher program, it would have met their
needs?
Secretary Jackson. That is the responsibility of FEMA, not
ours.
Senator Sarbanes. Did you suggest to anybody that you all
could get in there and do a good job of this? That is what we
said on the floor. If you go back and look at some of the
discussion, without casting invidious comparisons to FEMA, some
nice things were said about HUD's ability to work this Section
8 voucher program.
Secretary Jackson. And we appreciate that. I have made
strong suggestions, but I think the key to it is, as I just
said, I think to Senator Reed or Senator Menendez, that has to
be changed. The Stafford Act has to be changed. The Stafford
Act is clear. FEMA is the first responder, and we have an
interagency agreement to work with them. And those persons who
they designated for us to house, we have housed.
Senator Sarbanes. I think the FEMA person is going to be
before us shortly. Is that right, Mr. Chairman?
Chairman Shelby. That is my understanding.
Senator Sarbanes. Thank you very much, Mr. Secretary.
Secretary Jackson. Thank you, Senator.
Chairman Shelby. Senator Reed, do you have any questions?
Senator Reed. I do not, Mr. Chairman. Thank you.
Chairman Shelby. Mr. Secretary, I know you are on a busy
schedule and you have to catch a plane. We appreciate your
candor with us, and we will continue these hearings. As you
will probably realize, we are going to bring in the local and
State people and see what their perspective is on all this as
soon as we get back from our recess and schedule this. And I
know you will be watching that, too.
When you get a specific plan, a workable plan, I hope you
will share that with the Committee.
Secretary Jackson. I surely will, because Senator Reed and
Senator Menendez----
Chairman Shelby. Absolutely.
Secretary Jackson. Thank you.
Chairman Shelby. Thank you, Mr. Secretary.
Chairman Shelby. Our third panel will be Mr. Donald Powell,
the Federal Coordinator of Gulf Coast Rebuilding, no stranger
to this Committee; he was Chairman of the Federal Deposit
Insurance Corporation; Mr. David Garratt, Acting Director,
Recovery Division, Federal Emergency Management Agency; and Mr.
Martin Gruenberg, Acting Chairman, Federal Deposit Insurance
Corporation, no stranger here; Mr. Herbert Mitchell, Associate
Administrator for Disaster Assistance, Small Business
Administration.
Gentlemen, we appreciate all of your patience here today.
We think this is a very important hearing. We will have more,
as you can tell we will need, to better understand the program,
to make sure we are informed as to the possibilities and
probabilities of what we can help you do and do it right.
All of your written testimony will be made part of the
record in its entirety, and if you will briefly sum up whatever
you want us to hear here today. Mr. Powell, we will start with
you. Thank you, and welcome back to the Committee.
STATEMENT OF DONALD E. POWELL
FEDERAL COORDINATOR,
OFFICE FOR GULF COAST REBUILDING
Mr. Powell. Thank you, Mr. Chairman, Ranking Member
Sarbanes, and Members of the Committee. I appreciate your
asking me to appear before you today.
In the aftermath of one of the most powerful and
destructive natural disasters in our Nation's history,
President Bush created the Office of the Federal Coordinator
for the Gulf Coast Rebuilding and asked me to head it within
Secretary Chertoff's DHS. I knew it would not be easy, and that
is an understatement. But the work is very important to the
people of the Gulf Coast, as well as our Nation as a whole. The
President remains steadfastly committed to supporting the local
recovery and rebuilding efforts in the most responsible and
effective way possible.
In this role, I am tasked with coordinating the long-term
Federal rebuilding efforts by working with State and local
officials to reach consensus on their vision for the region.
Today, I plan to outline the progress we have made in the Gulf
Coast region, and by region I mean not just New Orleans but the
entire Gulf Coast, from East Texas to Florida.
The entire Gulf Coast region is of great historical,
cultural, and economic importance to this country, and we will
make sure that these Americans get back on their feet and
rebuild their lives. Whole communities have been ravaged by
Katrina and Rita, but I am confident that together we will
ensure that these Americans get back on their feet and rebuild
their lives. My fundamental job is to work with the people on
the ground to identify and prioritize the needs for long-term
rebuilding.
The President has made it abundantly clear that the vision
and plans for rebuilding the Gulf Coast should come from the
local and State leadership, not from Washington, DC. Rebuilding
should not become an exercise in centralized planning. It is my
belief that if the Federal bureaucrats determine the path of
rebuilding, local insight and initiative will be overrun and,
therefore, local needs overlooked. If the heavy hand of the
Federal Government impedes the private sector's proven ability
to speed the recovery, it will take longer and be more
expensive to rebuild.
President Bush has made a commitment that the Federal
Government would be a full partner in the recovery and the
rebuilding of the areas devastated by Hurricanes Katrina and
Rita, and he is keeping that promise. To date, the Federal
Government has already committed over $87 billion for the
recovery effort, and another approximately $18 billion is being
requested in the upcoming 2006 supplemental package, which
would bring the total Federal commitment to over $100 billion.
Those are real taxpayers' dollars being used every day for
short- and long-term housing, economic development and job
creation, loans to businesses and homeowners, aid to farmers,
schools, and infrastructure projects, like the levees, roads,
bridges, and the ports.
I was a community banker for close to 40 years before I
came to Washington, so I understand the importance of a
fiduciary. And we must all work together to be good stewards of
the substantial amounts of money that have been and will
continue to be spent on this effort. Each of you and all
Members of Congress have an important role in protecting the
health of the American tax dollars. If Americans see their tax
dollars being ill-spent, their critical support for the relief
and recovery effort in the Gulf will wane. It is my duty to
ensure that any plans or strategies are conducive to the
prudent, effective, and appropriate investment of the taxpayer
dollar. That is why we have always said it is important for
State and local leaders to have a solid plan in place for use
of the rebuilding funds.
When I made my first trip to the Southeast Louisiana region
last fall, I asked everyone I visited with, ``What are the
three most important issues?'' The answer time and again was,
``Levees, levees, levees.'' So, I went back to Washington and
told the President what I had heard and saw, and that safety
was the first critical issue that needed to be tackled as part
of the long-term rebuilding in the New Orleans area. People
must feel safe and secure in their decision to come back--
whether as a resident or a business owner.
The President responded quickly to this need and requested
Congress to double the Federal commitment to $3 billion to make
the levees that surround the New Orleans area stronger and
better than ever before. Besides returning the levee system to
better than pre-Katrina levels before next hurricane season,
the President's request to Congress also included the addition
of floodgates and pumping stations to interior canals,
selective armoring of levees, the initiation of wetlands
restoration projects, and additional storm-proof pumping
station. I receive routine briefings from the Army Corps of
Engineers, and they are on track to meet their deadline to
repair the damage from Katrina and to improve design flaws
before the beginning of next hurricane season.
I knew our next focus needed to be housing. Throughout the
Gulf Coast, people are worried about where to live, where to
rebuild, and to what building code. Late last year, Congress
set aside $11.5 billion in Community Development Block Grant
funds for the Gulf Coast. The CDBG program is a well-tested
mechanism that provides States with great flexibility in how
funds may be spent. CDBG allows those closest to the problem to
make direct grants. In fact, that is the greatest attribute of
the CDBG funds: They allow the State leaders, those closest to
the local issues, to make the decisions on where to best use
the money.
Just last week, the Louisiana Legislature submitted its own
legislation to use CDBG monies and other Federal assistance to
create a housing corporation on the State level. My office is
currently working with the State on that plan. We believe that
it may be a more workable solution than H.R. 4100, a bill that
would create a Federal bureaucracy and put Uncle Sam in the
real estate business, a plan that we did not support. Let us be
clear, and you have my promise here: If after spending all the
allocated Federal funds there remain unmet needs, I will come
back to Congress and ask you to help ensure that additional
resources are available and needs are met.
Of course, there is no need for housing if there are no
jobs or the economy grows stale. That is why at the end of
2005, the President signed into law the Gulf Opportunity Zone
Act. The legislation, providing approximately $8 billion in tax
relief over 5 years, will help revitalize the region's economy
by encouraging businesses to create new jobs and restore old
ones. Here are just a few aspects of the GO Zone: Tax-exempt
bond financing for both residential and nonresidential
property; changes to the low-income housing credit; bonus
depreciation; expensing for certain demolition and clean-up
costs. Simply put, this law renews businesses, rebuilds homes,
and, more importantly, restores hope.
Other parts of the Government have been working to help get
the economy back on its feet. For example, the SBA has adopted
and ramped up its capacity in order to provide loans and
working capital to small businesses and families. SBA disaster
loans provide vital low-cost funds for homeowners, renters, and
businesses to cover uninsured disaster recovery costs as well
as loans for the working capital needs of businesses affected
by the disaster. Since last year's hurricanes, SBA's Disaster
Loan Program has approved over $4.3 billion in disaster loans
to over 60,000 homeowners, renters, and businesses affected in
the region. Given SBA's ongoing commitment to small business
owners in this region, it is imperative that Congress approve
any monies to SBA in the upcoming 2006 supplemental package.
Workforce development will also be critical to long-term
economic security. The Secretary of Labor and I attended a
meeting in December 2005 with the President, labor leaders,
civil rights groups, and business associations to discuss
workforce initiatives and overall employment issues facing the
region. She and I tasked those leaders with devising a plan to
prepare the workers of the region for the future of the Gulf
Coast economy. We recently completed the plan and look forward
to implementing the program in May of this year in New Orleans.
Our goal is this: We want to help create as many jobs as
possible in the Gulf Coast and prepare its residents to fill
those jobs. We will continue to work to help make the Gulf
Coast not just a great place to live, but also a great place to
invest and to do business.
Let me close by saying that the Federal Government will
continue to help strengthen, but not replace, State and local
government or private initiatives. We will continue to help
that our fellow citizens meet the challenges of reconstruction
and rebuild their lives and communities for the years to come.
There is no doubt that a tremendous amount of work is still
ahead of us, and we are heartened and encouraged by the
progress made. I look forward to continuing to work with the
leaders in Alabama, Louisiana, Mississippi, Texas, and Florida
in the days, weeks, and months ahead to assist in the
implementation of their respective visions while also serving
as a good steward of the taxpayer dollars, which the
distinguished Members of this panel, along with your
colleagues, have helped secure.
The residents of this area and the President agree on this.
Failure is not an option. Working together, we can return the
Gulf Coast to its rightful place in the American landscape.
While the hurricanes caused much tragedy, I believe, as my
father used to say, ``Good things can come from bad.'' It is
too important a task not to do it right.
Mr. Chairman, this concludes my testimony. Thank you.
Chairman Shelby. Mr. Garratt.
STATEMENT OF DAVID GARRATT
ACTING DIRECTOR OF RECOVERY,
FEDERAL EMERGENCY MANAGEMENT AGENCY,
U.S. DEPARTMENT OF HOMELAND SECURITY
Mr. Garratt. Thank you, Chairman Shelby and Ranking Member
Sarbanes. I am David Garratt, the Acting Director of Recovery
at FEMA, and I am representing Secretary Chertoff and Acting
FEMA Director David Paulison. It is my honor to appear before
this Committee to summarize and discuss our emergency
sheltering and housing efforts in support of Hurricane Katrina
and Rita victims, as well as our overall efforts to contribute
to the rebuilding of the Gulf Coast.
We at the Department of Homeland Security and FEMA
appreciate your interest in the housing challenges presented by
the scope and scale of these unprecedented disasters. I think
we all recognize that these hurricanes, and Katrina in
particular, have thoroughly tested the capabilities of impacted
State and local governments, FEMA, the Department, and the
Nation, including the many States and communities nationwide
who are hosting displaced victims and evacuees from the
affected Gulf region. And yet while these events have tested
our plans and processes as never before, FEMA's sheltering and
housing programs have provided or facilitated the means for
hundreds of thousands of evacuees to quickly secure interim
accommodations, even as we continue to fund and facilitate an
aggressive strategy to transition those individuals and
families into longer-term, and more stable, housing solutions.
It has been a challenging time--nearly 6 months since
Hurricane Katrina made landfall--for victims, communities,
States, voluntary agencies, and the Federal Government alike.
And while we have made significant strides in addressing the
pressing housing needs of victims across the country, many
challenges and difficult decisions remain. Nevertheless, we
have been and remain committed to helping households recover
and reestablish themselves.
Recognizing that the road to recovery required that we
remove families from congregate shelter environments as quickly
as possible, FEMA authorized States, within days of Hurricane
Katrina's landfall, to relocate families to hotel and motel
rooms. At the same time, the American Red Cross initiated a
similar hotel/motel subsidy program, as authorized by a
statement of understanding with FEMA. Together, FEMA, the
States, and the American Red Cross facilitated the relocation
of thousands of families to more private and humane living
conditions. In late October 2005, FEMA agreed to assume
responsibility for funding the hotel/motel subsidies of those
households placed by the American Red Cross, which has been,
and remains, a stalwart and dependable partner of FEMA and the
Federal Government in disaster response and recovery
operations.
Throughout the intervening months, we have worked with more
than 7,500 hotels and funded over 3 million room nights.
However, nearly 6 months removed from Katrina landfall, the
time has come to end the sheltering phase of the recovery and
complete the transition of Katrina and Rita evacuees to more
stable temporary housing and, where feasible, permanent
housing. For many, this will be a difficult transition, as not
every household will be eligible for Federal assistance, nor
will every household be able to immediate return to their
predisaster homes or hometowns. Nevertheless, during this
period we have diligently and ceaselessly, using community
relations and voluntary outreach teams, made repeated efforts
to contact every victim registered and subsidized in every
single hotel or motel room across the United States, to make
sure every hotel and motel occupant household has every
opportunity to take advantage of all available transition
assistance.
One of the biggest challenges facing the recovery effort is
finding and securing sufficient rental assets to meet the huge
demands created by this mass exodus of evacuees. Fortunately,
numerous dwellings have been made available by other Federal
agencies. To date, over 11,000 evacuee households have been
placed in Federal housing resources across the Katrina-Rita
impact areas. For example, the U.S. Department of Agriculture
has made thousands of such dwellings available. In Louisiana
alone, 1,100 families have been placed in USDA houses. We have
also entered into an interagency agreement with the Department
of Veterans Affairs to make their unsold housing units
available for evacuee rental and are actively pursuing a
similar arrangement with Fannie Mae.
In addition, the U.S. Department of Health and Human
Services recently announced $550 million in funding to the 50
States and the District of Columbia for additional hurricane
relief. These funds will come from the Social Services Block
Grant program administered by HHS' Administration for Children
and Families. They will be given to States to provide health
care, mental health, and social services, as well as for the
repair, renovation, and construction of facilities providing
those services to victims of Hurricanes Katrina, Rita, and
Wilma.
We have been collaborating closely with HUD from the outset
of this event, working together to reconcile and apply our
respective authorities and capabilities to provide maximum
benefit to those most in need of housing assistance. In
addition to partnering with the Department of Homeland Security
and FEMA through their KDHAP program, HUD has made repossessed
houses available to FEMA-eligible disaster households and has
placed hundreds of disaster victims in houses in the four-State
area, including 207 families in Texas alone. Today, both here
and in the field, HUD teams and personnel continue to work
closely with FEMA to identify and assist eligible disaster
victims, wherever they may be.
HUD also recently announced its plan to allocate $11.5
billion in disaster funding among five Gulf Coast States
impacted by Hurricanes Katrina, Rita, and Wilma. The emergency
funding is provided through HUD's Community Development Block
Grant program to specifically assist Louisiana, Mississippi,
Florida, Alabama, and Texas in their long-term recovery
efforts. This along with HUD's Disaster Voucher Program,
created through a $390 million supplemental appropriation in
the Department of Defense Appropriations Act of 2006, will
provide ongoing temporary rental assistance for people
displaced by Hurricanes Katrina and Rita who at the time lived
in public housing, had a voucher, or were homeless.
While transitioning so many displaced households into
temporary housing has been and will continue to be a challenge,
FEMA and its partners at every level of government and within
the private sector are committed to work together to find
timely and equitable solutions.
Recognizing the immense scale and complexity of the long-
term recovery challenges and considerations facing the Gulf
Coast, the President established the Office of the Federal
Coordinator for Gulf Coast Rebuilding and appointed Chairman
Powell to lead that organization's efforts. To help ensure that
the Department of Homeland Security and FEMA are coordinating
fully with Chairman Powell, and that maximum collaboration
takes place between our organizations, FEMA recently appointed
Mr. Gil Jamieson as the Deputy FEMA Director for Gulf Coast
Recovery. In this role, Mr. Jamieson will oversee FEMA recovery
operations across the Gulf States and will be coordinating
closely and routinely with Chairman Powell and his staff.
We all realize that this road to recovery will be a long
one, fraught with challenges and frustrations along the way.
Nevertheless, this Agency, this Department, and this
Administration remain committed to the mission: The successful
restoration of a socially and economically vibrant Gulf Coast.
Thank you. I am prepared to answer any questions you may
have.
Chairman Shelby. Mr. Gruenberg.
STATEMENT OF MARTIN J. GRUENBERG
ACTING CHAIRMAN,
FEDERAL DEPOSIT INSURANCE CORPORATION
Mr. Gruenberg. Thank you, Mr. Chairman, Senator Sarbanes,
Members of the Committee. I appreciate the opportunity to
testify on the efforts of the FDIC and the other Federal
regulatory agencies to respond to the impact of last year's
devastating hurricanes on federally insured financial
institutions and their customers in the Gulf Coast region.
Before I begin, I would like to express the gratitude of
the FDIC to the Committee for the enactment of the deposit
insurance reform legislation. The FDIC believes that the
legislation will result in a more safe and sound deposit
insurance system, and we understand it would not have occurred
without your leadership and support.
I would also like to acknowledge former FDIC Chairman
Powell's critical role in that effort.
Chairman Shelby. Thank you.
Mr. Gruenberg. Mr. Chairman, in December, I traveled with
FDIC staff to New Orleans and Mississippi. We met with local
financial institutions, the State banking commissioners, and
local community group leaders. As many have observed, it is
difficult to appreciate the challenge confronting the Gulf
Coast region until visiting the area and seeing firsthand the
scale of the damage. It is also impossible for me to visit the
area and witness the determination of the local financial
institutions and community leaders to rebuild their communities
without feeling a renewed sense of the obligation of the FDIC
and the other Federal financial institution regulatory agencies
to do all we can to assist them in that effort.
I will briefly summarize my written testimony, which
reviews the actions taken by the FDIC and other regulatory
agencies following the storms. I will also provide the FDIC's
current assessment of the impact of the hurricanes on the
condition of the federally insured financial institutions in
the region and discuss outreach efforts planned in the near-
term.
Chairman Shelby. The full statement will be made part of
the record. Yes, we need to move on.
Mr. Gruenberg. At the outset, I want to point out that much
of the work of the FDIC described in the written testimony took
place when Chairman Powell was Chairman of the FDIC. We wanted
to acknowledge that as well.
When Hurricanes Katrina and Rita hit the Gulf Coast, they
impacted the operations of at least 280 financial institutions,
with 120 of these institutions headquartered in the 49 counties
and parishes in Alabama, Louisiana, and Mississippi designated
by FEMA as eligible for individual and public assistance.
Similar to other sectors of the Gulf Coast economy, financial
institution facilities were destroyed, communication and data
processing capabilities were disrupted, and financial
institution employees saw their homes destroyed or inundated
with flood waters.
In the aftermath of the storms, the FDIC, along with the
other State and Federal agencies, were committed to doing
everything possible to preserve public confidence in the
financial system and restore essential financial services. The
agencies immediately began working with financial institutions
to help them resume operations and with customers to
communicate accurate information about their institutions and
how they could get needed cash.
From the outset, the agencies recognized that we were
dealing with extraordinary circumstances. Immediately after
Katrina made landfall, the agencies urged financial
institutions to be flexible with borrowers experiencing
disruptions due to the storm. During the past 6 months, the
agencies have encouraged financial institutions to work with
borrowers by deferring loan payments, extending repayment
terms, restructuring loans, easing terms for new loans, and
providing short-term loans for living expenses until insurance
proceeds are received.
Historically, no financial institutions are known to have
failed as a result of natural disasters. In fact, community
financial institutions traditionally have played a critical
role serving the areas most severely affected by the
hurricanes. However, due to the scale of destruction left by
these storms, it remains difficult to determine the
applicability of experiences from previous disasters to the
current situation.
The 120 insured institutions headquartered in the 49
designated disaster counties and parishes are relatively small
community financial institutions. According to financial data
for these institutions, about three-quarters of them hold less
than $250 million in assets, and only five have assets greater
than $1 billion.
Although most of these 120 institutions were financially
strong before the hurricanes, financial results to date do not
yet provide a clear picture of the full effects of the storms
since many of the institutions in the area continue to extend
loan deferrals and are still communicating with customers to
develop long-term rebuilding plans. Nevertheless, recent
financial results provide some indications of how the
institutions may be reacting and adjusting to the effects of
the hurricanes. Post-hurricane data reveal that a number of
institutions operating in areas hit hard by Katrina are moving
fairly aggressively to build loan loss allowances and
experienced a pick-up in charge-off rates. Consistent with
this, 20 institutions reported net operating losses for the
fourth quarter. Despite these losses, all institutions remained
``well-capitalized'' or ``adequately capitalized,'' reflecting
the strong capital positions of most institutions prior to the
hurricanes. Liquidity for most of the institutions also remains
strong.
Looking ahead, there is considerable uncertainty regarding
the prospects for the institutions most directly affected. Over
the medium-term, the greatest source of uncertainty is the
effect of the hurricanes on credit quality. Over the longer-
term, the prospects for these institutions will be determined
largely by the economic prospects of the communities they
serve.
With respect to credit quality, the outlook for each
institution will depend on a variety of currently unknown
factors, including reimbursement amounts and timing of
insurance proceeds, borrowers' repayment capability, collateral
protection, and the availability of financial assistance
programs. The FDIC is utilizing both supervisory outreach and
data analysis to assess the extent to which the insured
institutions in the region may experience medium- to long-term
credit quality and profitability issues.
The FDIC and other agencies contacted all 120 insured
institutions previously mentioned in the aftermath of the
hurricane. During December 2005, examiners from the FDIC and
other agencies also visited many of these insured institutions.
Beginning in January, the agencies resumed their comprehensive
examination programs that were suspended at the time of the
storms.
In addition to this type of supervisory analysis, the FDIC
is conducting off-site research utilizing mapping tools and
data from a variety of sources to provide us with additional
information.
As a result of these efforts, we have narrowed our focus
from the initial group of 120 institutions to a small group of
institutions, which we will continue to monitor most closely.
As suggested earlier, the prospects for the financial
institutions most affected will depend in large measure on the
efforts underway to rebuild and revitalize the communities they
serve.
Mr. Chairman, with one last note, if I may, in addition to
the regular supervisory activities of the agencies, the
agencies are hosting a forum in New Orleans on March 2-3. ``The
Future of Banking on the Gulf Coast: Helping Banks and Thrifts
to Rebuild Communities'' will focus on short- and long-term
challenges facing banks and thrifts operating in areas affected
by the hurricanes and ways to help these institutions rebuild
their communities. The agencies are inviting to this forum
executives from all the community financial institutions in the
region, the larger regional financial institutions, as well as
a number of large institutions from around the country with
operations that are national in scope. State banking
supervisors and other Federal Government agencies will also
participate in the forum.
The purpose is to encourage partnerships between the large
and the smaller institutions, which will be, we believe, both
to their mutual benefit and to the development of the economy
of the region.
Thank you very much, Mr. Chairman.
Chairman Shelby. Mr. Mitchell, if you would just briefly
sum up your testimony.
STATEMENT OF HERBERT MITCHELL
ASSOCIATE ADMINISTRATOR,
OFFICE OF DISASTER ASSISTANCE,
SMALL BUSINESS ADMINISTRATION
Mr. Mitchell. Certainly, Mr. Chairman, and Senator
Sarbanes, thank you for the opportunity to appear here today.
My name is Herb Mitchell. I am the Associate Administrator for
Disaster Assistance at the Small Business Administration.
The SBA Disaster Assistance Program, administered by the
Office of Disaster Assistance, is the primary federally funded
disaster assistance loan program for funding long-term recovery
for renters, homeowners, and nonagricultural businesses. It is
the only program at SBA that is not limited to small
businesses.
Hurricanes Katrina and Rita unleashed an unprecedented
tragedy on the Gulf Coast, demanding an unprecedented response
from the Federal Government, including SBA. The numbers,
obviously, that we have seen in this disaster have just simply
been staggering. We have not seen anything like it in the
history of the Disaster Loan Program. In the first 70 days
after Katrina hit, SBA received over 220,000 disaster loan
applications, and as of this week, we have received 375,000
applications from victims in the Gulf Coast.
To put this in perspective, after the four hurricanes in
2004, SBA only received a total of 202,000 applications. That
number is approximately one-half of what we ultimately expect
to receive as a result of Hurricane Katrina.
The disaster affected an area of more than 90,000 square
miles and five States. We have mailed, in response to those who
have registered with FEMA over, 2 million applications. And
just to put it in perspective again, the largest previous
disaster we responded to being the Northridge earthquake, we
received 250,000 applications over a period of 18 months. To
date, after 6 months, we have already received 375,000
application, and the expectation is that it will exceed 400,000
by the deadline of March 11.
Despite the damage that occurred and the volume of
applications that we have received, in the first 88 days,
approximately 90 days from the time of the declaration to that
point, we had approved $1 billion in disaster loans. But we
certainly have put a lot of things in place to expedite the
process, bringing on almost 3,200 employees. At the time we had
about 800 employees, we are now well over 4,000. In 28 days, we
approved the next billion; in 17 days we approved another
billion. And it is basically going at a pace of almost every 10
to 15 days an additional $1 billion is being approved through
the Disaster Loan Program.
Due to the improvements in the loan processing
capabilities, the SBA is well-prepared to continue to respond
to the victims in the Gulf. We have completed over 90 percent
of the property damage inspections that we need to do. We have
completed 247,000 inspections. We have completed close to 85
percent of the business applications. Those businesses
requesting assistance only for working capital, well over 90
percent of those applications have been completed. And we are
certainly well on our way to completing the remainder
applications from homeowners and renters as well.
With that, I would certainly be glad to answer any
questions that you have.
Chairman Shelby. Thank you very much. Mr. Powell, would you
very briefly share with the Committee what do you see as the
respective roles of the State, local, and Federal Government in
rebuilding the Gulf area?
Mr. Powell. I think the roles of the State and local
governments are paramount. As I mentioned in my testimony, I
think the plans for rebuilding the Gulf Coast area must be
theirs, and the Federal response is to understand those plans,
understand the strategies to implement those plans, and the
cost associated with it.
Chairman Shelby. Why is it taking so long to put a plan
together?
Mr. Powell. I think Mississippi has a plan.
Chairman Shelby. Let us just focus on Louisiana, then we
will go to Mississippi.
Mr. Powell. Okay. In Louisiana, you have a large
metropolitan area, and you have parishes that have presidents
that are responsible to the people, and they have council
members. The politics of Louisiana is somewhat unique, and the
people are very engaged on the local level, and you have
competing demands as well as you have the State legislature,
you have the north and the south, and you have also the
southeast. So it is a more complex issue. You have a large
metropolitan area and you have these parishes that are unique
by their very nature, and they have individual and distinctive
needs.
Chairman Shelby. But is not the common denominator that has
to come with any plan, it has to be a viable plan, it has to
make a lot of sense. It cannot just be 100 plans.
Mr. Powell. That is true. That is my job. I have met with
all those people, and encouraged them, Mr. Chairman, to come
with one plan, one vision, one spirit for rebuilding their
areas, and I am convinced--and I have listened to a lot of
people and I have talked to a lot of people--that first of all
they have some plans that are being developed, that we will
have one coordinated plan in a very short order.
Chairman Shelby. That plan, I hope, is not going to
encourage people to build back in a flood area or an area that
is more than likely to flood where the taxpayers will be the
risk again as the people will be at risk.
Mr. Powell. The people of Louisiana understand that, but it
must be their plan, and they must plan for their individual
neighborhoods. I think that is a very important element of it,
but they understand they do not want people rebuilding in
harm's way. The cost of that associated with is important, but
there are unique challenges with all of those. Again, I am
convinced that the people will come together with one plan.
Chairman Shelby. Mr. Gruenberg, to what extent did FDIC-
insured institutions in Katrina-impacted areas comply with the
flood insurance program's mandatory purchase requirements, if
you have that? If you do not, you can furnish it for the
record. Go ahead.
Mr. Gruenberg. Mr. Chairman, for the FDIC-supervised
institutions, our examiners do review that as part of a
compliance review for every institution. Based on the reports
we have, it appears that most institutions are generally
complying with the requirements.
Chairman Shelby. What does generally complying mean?
Mr. Gruenberg. It means in the exams they have programs for
implementation and they are meeting the requirements of the
programs, which is not to say that every loan they make is in
compliance, and I think to the extent you want to know is every
loan in compliance, that is something we would have to----
Chairman Shelby. Can you get that information for the
Committee?
Mr. Gruenberg. We will try to do that.
Chairman Shelby. Would that be hard to get?
Mr. Gruenberg. It may be difficult, but we will make an
effort because it is an----
Chairman Shelby. Important for you to know too.
Mr. Gruenberg. It is an important issue. I can tell you,
Mr. Chairman, when we went down to Mississippi and New Orleans,
one of the local bankers in Mississippi mentioned that 3 months
before the hurricane he had a compliance exam, and the agency
required him to comply with the flood insurance. And he was
upset at the time, but he was less upset when we saw him down
in Mississippi.
Chairman Shelby. Mr. Powell, I think you--and I may have
cut you off, I did not mean to. You were going to say something
about the Mississippi plan. Is it different from the Louisiana
plan? Are they progressing or what?
Mr. Powell. Yes. I think the plans for rebuilding in
Mississippi is somewhat further along. Again, the devastation
was just as severe.
Chairman Shelby. We have seen.
Mr. Powell. But the complexity of Mississippi along the
Gulf Coast, those plans are being developed and have been
developed, and they are implementing those plans. I know that I
am going to be in Gulfport next week, and Gulfport is an
example where they are going to sit down with citizens in
Gulfport and visit with architects about rebuilding. So their
rebuilding is further along. They are down the road.
Chairman Shelby. The Committee has seen a variety of
statistics on insurance coverage in areas impacted by Hurricane
Katrina. I understand that the majority of Louisiana homeowners
that were impacted had some form of insurance, either flood or
hazard insurance. Mr. Powell, do we have any sense of the
extent of individual insurance coverage in Louisiana? Did most
insured households simply insure up to their mortgage, or did
most have coverage beyond their mortgage amount? Do you have
that information?
Mr. Powell. I can get you that information, Mr. Chairman.
We will be happy to supply that information to you.
Chairman Shelby. Mr. Mitchell, you are here on behalf of
the Small Business Administration. The Committee has heard from
several displaced families about their difficulty in qualifying
for an SBA Disaster Home Loan. Could you describe to the
Committee the relevant underwriting standards for the Disaster
Home Loan Program? What are the most frequent reasons for a
loan being denied?
Mr. Mitchell. Certainly, we can get you all of the denial
reasons and those stats. But basically there are three
components to the SBA Disaster Loan, Obviously, one is
eligibility in terms of being in a declared area and having
eligible damage that is uninsured or underinsured. The primary
two areas that we look at in underwriting are whether or not
you have the ability to repay the loan, and that there is
sufficient cashflow to pay some amount. And unlike standard
lending, we have a flexibility to go as high as 30 years
regardless of what we are funding. We can do a $5,000 loan for
personal property for up to 30 years if that is all you can
afford to pay. So we have that flexibility.
The third aspect is satisfactory credit. The majority of
the declines that we have seen so far has been almost 3-to-1
for unsatisfactory credit history. Generally, it is about half
and half of lack of ability to repay and credit, but in this
disaster it has been unsatisfactory credit history, at least of
those that we have processed so far. It has been 3-to-1
unsatisfactory credit.
Chairman Shelby. Do you bend over to try to make a disaster
loan, assuming there is merit to the----
Mr. Mitchell. Absolutely. What we try to do is to make sure
we understand the reasons for the credit history. Obviously, if
it is related to circumstances beyond their control, certainly
we have the flexibility to move forward on that.
There are some things, obviously, in law that we cannot
overcome unless it is worked out, for example, if you are
delinquent on your taxes, Federal debt, or child support
payment. Those things need to be worked out. You need to have a
payment plan in place and bring that to a satisfactory point
before we can move forward with a loan.
Chairman Shelby. How many loans have you actually made,
say, in Louisiana and Mississippi and even Alabama, which we
were impacted some thus far?
Mr. Mitchell. Louisiana, we have approved 35,000
applications----
Chairman Shelby. So, 35,000 SBA applications; is that
right?
Mr. Mitchell. In Louisiana.
Chairman Shelby. That is a lot.
Mr. Mitchell. In Mississippi, the approvals are--and I am
rounding off--20,000. And in Alabama, they are a little under
2,000.
Chairman Shelby. The Flood Insurance Program presently
requires that preflood insurance, you know, pre-FIRM houses
that suffer 50 percent or more damage must be rebuilt to meet
the current flood insurance mitigation requirements. There have
been some anecdotal reports that people in New Orleans with
severely damaged homes, some, have had the damage purposely
assessed at less than 50 percent, in other words, to game the
system, to avoid meeting the mitigation requirements as part of
their rebuilding efforts.
Are any of you panelists--and we will start with Mr.
Powell--aware of such efforts, and if so, what are you doing
about it?
Mr. Powell. I have heard the same thing you have heard, Mr.
Chairman, and I visited with the parish presidents about that
issue, and the mayor, and made them aware of our concerns about
that.
Chairman Shelby. So you believe it is happening, do you
not?
Mr. Powell. I do.
Chairman Shelby. Mr. Gruenberg, what about you? You have
any information?
Mr. Gruenberg. Mr. Chairman, I do not believe we do have
any information on that issue.
Chairman Shelby. Mr. Garratt, do you know?
Mr. Garratt. Just anecdotal reports, sir, but I do know
that our Mitigation Director, Mr. David Marstad, is taking them
seriously, and he has been working with the Joint Field Offices
to make sure----
Chairman Shelby. But that would undermine our whole plan,
would it not, if we let that go on?
Mr. Garratt. Yes, sir.
Chairman Shelby. Because that goes to the integrity of the
whole plan.
Monday's Times-Picayune, the New Orleans paper, reported
that the five most impacted parishes had reached an agreement,
Mr. Powell, on a buyout plan similar to that proposed for
Mississippi. Have you any details of this plan, and what is the
Federal role in this plan?
Mr. Powell. Yes, sir. I have visited with the Mayor of New
Orleans, and received a report about that meeting. The plan, I
have not read the plan in detail, but I know the general
requirements of the plan, and believe it is a plan that they
together will be working with the LRA, the State essential
planning system, and hopefully, in very short order will come
with a consensus of that plan with the LRA.
Chairman Shelby. Senator Sarbanes.
Senator Sarbanes. Thank you very much, Mr. Chairman.
First of all, I want to say that we are pleased to have Don
Powell back before the Committee.
I thought the testimony of the two Louisiana Senators,
Senator Landrieu and Senator Vitter, and of Congressman Baker,
was very powerful testimony at the outset of this hearing. It
is not quite clear to me why the Administration is so resistant
to the concept of the bill they have put in in order to address
this problem. I am prompted to focus on this because of this
letter that was sent to President Bush, which I assume you have
seen, by the three former Republican Governors of Louisiana,
Mike Foster, Buddy Roemer, and David Treen on February 1.
In that letter they say, ``The bottom line is this: It is
difficult to understand how Louisiana rebuilds if its landscape
is littered with the remains of over 200,000 unusable homes and
business properties. Something eventually has to be done about
them, or else the alternative is that they lie like ruins, tied
up in a legal mess, impenetrable to the private market for
years to come.'' And the Vice President of the Mortgage Bankers
Association has echoed this concern, citing fears of widespread
foreclosures and abandoned properties.
I thought our three colleagues this morning focused on that
very well. You have an incredibly complex problem in New
Orleans and its environs. You have a serious problem elsewhere,
but the complexity of it, I do not think is at the same level.
How do you get this going if you cannot move in with a
framework and a plan that gives everyone confidence in terms of
what is going to happen, and enables people to make
calculations about their individual investment decisions or
business investment in the context of a framework that is
responsive to the problem? I do not see how we get there
otherwise. The situation will just continue to fester, will it
not?
Mr. Powell. Senator, it is complex. It is very complex. As
I said in my testimony, the most important thing after going,
especially in Louisiana, to the people of Louisiana was safety,
and that is the reason we addressed the levee situation first.
And there is something like $3 billion that the President
requested of the Congress to speak to the levee situation. So
safety was the most important thing.
And also, as I said in my testimony, housing then becomes I
think the second most important thing. Jobs are important.
Health care is important. Education is important, as is the
housing issue. I have had a lot of meetings about housing, and
I have had constant dialogue with leaders in the area, in the
State, city, the parishes, former elected officials, elected
officials, business people, community leaders, about all of the
housing issues. We have data about the housing situation.
I think the first thing we attempted to do was agree upon
the data, how many homes were destroyed. In working with the
State officials, the LRA, we have consensus about data, about
how many homes where they were located were destroyed. Then I
too have worked and have the utmost respect with Congressman
Baker. I worked with him when I was at the FDIC, and we have
had lots of discussions about how best to address this whole
housing issue.
I have been encouraged with the recent dialogue with the
people on the ground and the LRA specifically about what plans
they would have to meet the needs of these homeowners whose
homes were devastated, together with also the needs of renters,
people that did not own their homes but were housed in some of
these areas. So, I have had lots of dialogues. In fact, we are
in the process of briefing Congress on some details of
recommendation in this supplemental that hopefully will be
released very shortly.
As you know there has been, to Louisiana specifically, $6.2
billion in CDBG money, and hopefully in the supplement there
will be some additional funds coming to meet some of those
needs.
So it is a complex issue, and it is an important issue that
they begin to rebuild. But I believe that the vehicle of the
CDBG monies will meet those needs.
Senator Sarbanes. It is not just the money, it is the
framework within which all of this is done.
Mr. Powell. Yes.
Senator Sarbanes. Which provides the necessary assurances
to the private sector for them to start putting in their money.
It seems to me that is the missing linchpin at the moment, and
it would seem to me the Administration should be working more
closely with our colleagues that we heard from at the opening
of this hearing, to see if they cannot develop a common
approach in that regard?
Mr. Powell. I am in constant dialogue, and our staff is in
constant dialogue with the three Members of Congress, and for
that matter, the entire Louisiana, Mississippi, Alabama, all
the delegation of the affected area. We talk to them a lot.
Business has the same interest that individual citizens do.
They want to make sure their people are safe, the levees. They
want to make sure there is housing for those people. They want
to make sure that the infrastructure is up and going, city
government, fire protection, police protection, criminal
justice system, education system, health system. So we are
working on all of those fronts and coordinating that.
We also are reaching out to business. As I mentioned in my
testimony, we are talking about a job training program, where
the local people will be properly trained to meet the job
requirements of that area. The Secretary of Commerce and I will
be hosting a forum in about 30 days, where we are going to
invited Fortune 500 companies to come to New Orleans to look
for themselves about the unique opportunities that they will
have to expand their business. So there is lots of fronts, but
this housing issue, as I mentioned, is a very important
component of that.
Senator Sarbanes. Mr. Garratt, The New York Times had a
story a couple of days ago. Mobile homes worth hundreds of
millions of dollars are deteriorating in a muddy field in
Arkansas, may never be used to house victims of Hurricane
Katrina. And the Inspector General of the Department of
Homeland Security, in his testimony earlier this week before
the Senate Homeland Security and Governmental Affairs Committee
said, ``At one emergency housing site in Arkansas, there are
10,777 manufactured homes, costing approximately $301.7
million, sitting on runways and open fields. Since they are not
properly stored, the homes are sinking in the mud, and their
frames are bending from sitting on trailers with no support.
FEMA is now in the process of installing jacks under the
manufactured homes to help steady the frames. As of January
2006, none of the manufactured homes stored at Hope, Arkansas,
have been moved out of house evacuees.''
What is going on? This is a pitiful account. Is it
factually correct?
Mr. Garratt. No, sir, it is not.
Senator Sarbanes. In what way is it not factually correct?
Mr. Garratt. FEMA was as surprised by that New York Times
article as we were by the IG report, and we immediately asked
our logistics staff to either validate or invalidate both
reports. We have asked them to do that twice in the last 2
days. We have 10 full-time staff at that Hope, Arkansas site to
provide maintenance and to provide caretaking for those mobile
homes. And their report back is that none of the mobile homes
are unusable. None of the mobile homes are sinking in mud.
There have been instances, for example, of flat tires, but all
of the mobile homes are fully usable.
We do recognize that there is a potential over time,
because those mobile homes are on a surface that could be
susceptible to the weather, that we are going to, and have
obligated funding to provide a crushed gravel surface over that
entire area to remedy that potential problem, but at this time
we cannot and do not validate those stories, with one
exception. And that would be the observation that these mobile
homes may not ever be used to support Hurricane Katrina
victims. It is possible that many of these mobile homes will
never be used to support Katrina victims.
Senator Sarbanes. Are there almost 11,000 mobile homes
there on that site?
Mr. Garratt. Yes, sir, those figures were correct. I think
it is 10,700 plus.
Senator Sarbanes. Did they cost over $300 million?
Mr. Garratt. Let me check that figure sir, and if I
cannot----
Senator Sarbanes. And you say the Inspector General, when
he says they are not properly stored and some are sinking in
the mud and their frames are bending?
Mr. Garratt. Not validated by our logistics staff, sir.
Senator Sarbanes. Is FEMA in the process of installing
jacks under the manufactured homes to help steady the frames?
Mr. Garratt. We are installing jacks in some instances,
yes, sir.
Senator Sarbanes. Why are you doing that if the frames are
not bending from sitting on trailers?
Mr. Garratt. That is a good question. I would say that it
is probably preventive in most cases or it is recognition that
there is a potential, because of how the individual mobile
homes are situated on the terrain, but in terms of actual
damage that has rendered any of those mobile homes unusable,
that has not occurred. All of the mobile homes at that site are
fully usable, and we expect this 10-percent maintenance crew
that is there to do exactly that preventive maintenance.
Senator Sarbanes. What is going to happen to these homes?
Mr. Garratt. Those 10,700 mobile homes, plus the additional
mobile homes which will be arriving at that site, if we do not
use those in response to the impacted areas in Louisiana and
Mississippi and Alabama and Texas, we will have those mobile
homes ready for the 2006 hurricane season.
The reason that those mobile homes have not been used to
the extent that we had initially hoped is that the front end of
the disaster, back in very late August as Hurricane Katrina was
approaching, we established a housing area command in the AOR,
in the area of responsibility. The purpose of that housing area
command was to begin identifying the potential housing needs
that were going to result from Hurricane Katrina, in what we
expected to be, and what ended up being an unprecedented amount
of devastation. They went out and began identifying prospective
candidate group sites, as well as individual sites throughout
the area, and immediately began ordering both travel trailers
and mobile homes based on the anticipated need for those mobile
homes. And we wanted those manufactured housing units rolling
in even as we were engaged in the response side of this,
because we wanted to be able to begin providing those as soon
as possible.
As it turns out, the vast majority of the devastation took
place in floodplain areas, and the need for mobile homes, which
we cannot place in a floodplain, was far less than the need or
the desire for travel trailers.
Nevertheless, we have in place a policy that says if
someone desires manufactured housing in the area, if they are
eligible for that, and if that site will support a mobile home,
then that is what we will provide them, a mobile home. In those
instances--and these are the majority--where a mobile home is
not authorized because of floodplain restrictions, then we will
provide a travel trailer.
As a result of all of this, we have an excess of mobile
homes, but that excess--we hope that excess is never used, but
if in fact that excess is needed in 2006, again, the excess
which we cannot use in support of Hurricane Katrina and other
disasters, that will be available.
Senator Sarbanes. It is enough to make you weep, just
listening, I have to tell you. I mean it is really very
depressing.
Chairman Shelby. Waste.
Senator Sarbanes. They had the Inspector General in front
of the other committee, and they asked him about these things,
and he went on and he said this about selling some of them as
surplus property. ``What kind of return can you expect on
that?'' ``It is certainly not going to be very high,'' he
responded, ``given the way they were being stored at a spot
where some were sinking into the mud. Some of the trailers that
we inspected are actually warping, have lost wheels, and some
have been cannibalized, parts taken out, and we do not even
know where the parts are right now, so their value is going to
decrease tremendously.''
Now you are saying that is all make believe; is that right?
Mr. Garratt. No, sir. I am saying that parts may have been
cannibalized from one mobile home to be used on another one,
that is entirely possible. It is entirely possible that mobile
homes have been delivered that sustained some damage during the
delivery process. What we are saying to that is, as a result of
the storage at the Hope, Arkansas site, that none of the mobile
homes have sustained damage as a result of that storage.
Senator Sarbanes. Let me ask you this question. I have been
concerned by FEMA's insistence on making decisions about
eligibility for housing assistance on a case-by-case basis
instead of putting out clear and transparent guidance. Congress
included in the appropriations bill, the conference report, the
following directive, ``The Conferees are concerned with the
lack of guidance on housing assistance. Within 2 weeks from the
date of enactment of this Act, the Director of FEMA shall issue
guidance used to determine continued eligibility for housing
assistance under the Section 408 Program. Consistent with
current FEMA regulations, such guidance shall include the
extension of assistance if the recipient is unable to afford
local housing at the fair market rent level.''
The two-week deadline painted in that legislation, passed
on January 13, and no guidance has been issued yet. When will
FEMA issue the guidance?
Mr. Garratt. We did respond to that report, sir, and we did
provide a response back to the Senate to that request.
In terms of the guidance that we are operating under for
making eligibility determinations, that is the guidance--we
operate under the----
Senator Sarbanes. The lights seem to go out when FEMA
testifies. That is pretty symbolic, I guess.
[Laughter.]
Mr. Garratt. We made an initial response to the Senate.
Senator Sarbanes. I am sure it was by accident.
[Laughter.]
Mr. Garratt. We subsequently had discussions with members
of the Senate staff. They asked us to revisit that and come
back with another response, which we have virtually completed.
It is far more detailed, and it will be answering a number of
the questions that they had questions about regarding our
initial submission.
Senator Sarbanes. What is going to happen to the people in
New Orleans now who have been moved out of the hotels and the
boats, the ships, in terms of where are they going for housing
now?
Mr. Garratt. A number of different options exist for those
individuals. For individuals who have received or will be
receiving a travel trailer, mobile home, they will be moving
from hotels and motels into those travel trailers and mobile
homes, and our Joint Field Office staff is working to match
individuals up from hotels and motels as well as cruise ships
into alternative temporary housing solutions.
Senator Sarbanes. For what period of time do you provide
some assurance on the housing? Three months; is that right?
Mr. Garratt. What we provide is, when we provide rental
assistance, rental assistance in 3-month increments. We can
provide assistance for up to 18 months.
Senator Sarbanes. Well, now, that is one of the problems.
How is a landlord going to deal with these 3-month increments?
Some have suggested that you should be providing at least a
year so there is some stability in the leases, and also people
can plan their lives and the lives of their children and their
families in a more rational way. How do you do it on this 3-
month basis?
Mr. Garratt. How does an individual obtain a lease when
they are only receiving rental assistance in 3-months
increments?
Senator Sarbanes. Yes.
Mr. Garratt. What we have found is that an awful lot of
individuals are able to obtain leases based on the rental
assistance, based on income that they are getting from jobs,
supplementing their rental assistance. We have found that this
is an anecdotal--the majority of individuals who we provide
rental assistance to are, in fact, able to find temporary
housing, in apartments or in other types of temporary housing,
including travel trailers, mobile homes. And we are also taking
some initiatives in New Orleans to address that issue from a
rehabbable apartment standpoint. For example, we are
encouraging apartment owners who have apartments that are not
suitable for habitation now but with some minimum modest amount
of rehabbing, they can make those apartments available. And we
are guaranteeing those apartment owners that if they will
invest their money and rehab those apartments, we will
guarantee them that someone will lease those apartments from
them for up to a year to encourage them to bring those units in
New Orleans online and make additional housing available for
evacuees.
Senator Sarbanes. Now, do you do that on a case-by-case
basis? Or have you issued guidance to that effect? If I am a
landlord in that situation, do I have to come in and get my
specific proposal approved by FEMA? Or is there a standard
policy that tells me and all other landlords roughly similarly
situated that we can move ahead?
Mr. Garratt. Yes, sir, there is. We have worked out a
contract arrangement with Corporate Lodging Consultants.
Corporate Lodging Consultants will visit the apartment owner,
explain the terms of the program, the fact that they are going
to have to bring this up to a level of habitability that is
certified by FEMA, that it meets certain standards. And once
they do that, and if they do that within the time that they
agree to do that, we will guarantee that we will be putting an
individual who is eligible for financial assistance from FEMA
into that apartment for 12 months.
Senator Sarbanes. All right. Thank you, Mr. Chairman.
Chairman Shelby. I want to thank the panel, but I have an
observation. I do not know if you would share this. But before
we spend a lot of money in New Orleans, it seems to me we have
to strengthen the levees. We have to protect what we can
protect there in a meaningful way. Do you agree with that, Mr.
Powell?
Mr. Powell. Yes, sir.
Chairman Shelby. Mr. Garratt, what about you?
Mr. Garratt. Yes, sir.
Chairman Shelby. Mr. Gruenberg? All of you.
We know you are not the Corps of Engineers, but we would be
interested in probably hearing from them as to the status of
their strengthening of the levees, because there are all kinds
of stories. I know Senator Vitter was quite clear here today--
and some of you heard it--that the Corps was not up to their
job, and perhaps some local people were not up to their job.
Thank you very much for appearing here today.
[Whereupon, at 1:08 p.m., the hearing was adjourned.]
[Prepared statements and response to written questions
supplied for the record follow:]
PREPARED STATEMENT OF ALPHONSO R. JACKSON
Secretary, U.S. Department of Housing and Urban Development
February 15, 2006
Introduction
Mr. Chairman, Ranking Member Sarbanes, and distinguished Members of
the Committee, it is a privilege to appear before you today.
The purpose of my testimony this morning is to share with you the
Department of Housing and Urban Development's immediate response to the
hurricanes in the Gulf of Mexico, our ongoing efforts to assist
affected families and individuals--people who have lost so much, too
often everything--in finding both short-term and permanent housing, and
the overall progress of the recovery efforts in the five affected
States.
HUD has worked closely with FEMA, the Department of Agriculture,
the Department of Veterans Affairs, the Department of Health and Human
Services, and others to get immediate housing assistance to those who
have been displaced and uprooted by the recent hurricanes. As I am sure
you can fully appreciate, the challenges HUD has faced are truly
unprecedented, but we have worked as we have never worked before and as
you will soon see our response has been equal to the difficult task at
hand. Furthermore, we continue to satisfy the different housing
missions assigned to us.
In my presentation to the Committee, I intend to summarize the
immediate steps taken by the Department in the days and weeks following
Hurricane Katrina, as well as to provide a detailed summary of the
actions taken by individual HUD program offices to assist in the
recovery efforts. I also intend to discuss how our
Department is assisting those HUD-assisted families who were impacted
by Hurricanes Katrina, Rita, and Wilma. And I will update the Committee
on HUD's execution of the recently enacted supplemental Community
Development Block Grant (CDBG) funds.
Hurricanes Katrina, Rita, and Wilma are thoroughly testing all of
us and the President has directed Federal agencies to adapt to the
extraordinary challenges presented by one of the most extensive series
of disasters in our nation's history.
Immediate Actions Taken by HUD
Prior to Hurricane Katrina's landfall on August 29, 2005, I
established a working group to prepare for the possible problems that
could arise from this powerful hurricane.
As soon as the level of Katrina's destruction was understood, I
established HUD's Hurricane Recovery and Response Center (HRRC). This
emergency management center served as a command post for HUD efforts
and was staffed with housing and community development professionals
from every program office within the Department. This Center reported
directly to me and operated out of HUD Headquarters. Shortly after its
inception, the HRRC directed HUD's field offices to conduct a
nationwide survey of vacant rental housing units in HUD's portfolio.
The HRRC proved to be an effective communications tool during the
emergency phase of the disaster, allowing every HUD program to
coordinate from one central location. Once we moved into the recovery
and rebuilding phase, however, Deputy Secretary Roy Bernardi and I
replaced the HRRC with the HUD Assistance and Recovery Team (HART).
This team of senior department officials continues to be
responsible for coordinating all HUD deployment with FEMA and ensuring
that program offices are fulfilling their mission as well as
coordinating policy decisions.
In addition, through our FEMA mission assignment, nearly 100 HUD
employees were deployed to disaster recovery work in the Gulf Coast
region within 2 weeks of Katrina's landfall. Some worked closely with
FEMA and supported their response efforts, while others worked to
address the region's exponentially growing housing needs. These HUD
specialists brought years of experience in reconstruction and community
planning to the region.
Within this mission assignment, in conjunction with FEMA, we
established the Joint Housing Solutions Center (JHSC), located in Baton
Rouge, Louisiana. The Joint Housing Solutions Center focused on
combining Federal resources with private sector, nonprofit, and faith-
based efforts. These pooled resources were then offered to local and
State governments, as well as community stakeholders, to assist them in
their efforts to place evacuees in temporary housing.
Recently, in response to concerns about the living conditions in
temporary travel trailer communities, the JHSC developed plans for
Transitional Communities where travel trailers would be incorporated
with a supportive neighborhood structure. The footprint of these
communities and the utilities and streets developed to support them
will subsequently support the development of permanent affordable
housing when the temporary trailers are removed.
Governor Barbour of Mississippi has endorsed the Transitional
Community design, and all temporary trailer facilities in that State
will now utilize the Transitional Community concept. This is just one
example of the way in which the JHSC continues to be a vehicle for
bringing together a broad array of resources and focusing them on the
long-term recovery of housing in the region.
In September, HUD worked with other organizations to set up ``one-
stop'' centers in major shelters across the Nation--from the Reunion
Arena in Dallas to the DC Armory here in Washington. These centers
allowed HUD officials to meet one-on-one with evacuees and determine
how the Department could assist them in finding housing in their host
city. In the first few weeks after Katrina hit, we placed nearly 10,000
families in subsidized units. To date, HUD employees in 20 cities
across the country continue to serve evacuees.
On September 12, 2005, HUD and FEMA signed an Interagency Agreement
that set forth the conditions for the transfer of HUD-owned properties
held off the market and made available for lease to displaced families.
This agreement identified more than 6,000 single-family homes within a
500-mile radius of declared disaster areas. Despite the fact nearly
every one of these homes required significant repairs and were spread
across an 11 State area, more than 1,000 families have moved in and
another 800 are in process. The remainder of the homes will be offered
to evacuees either as temporary housing or through a discounted sale
program.
Shortly after Hurricane Katrina hit the Gulf Coast, I reached out
to the United States Conference of Mayors and the National Association
of Counties to seek their support in finding more housing opportunities
for hurricane victims. The response to this call to action has been
tremendous from across the country--including Detroit, Philadelphia,
Allegheny County (PA), and Miami-Dade County. Each of these communities
opened its doors to more than 1,000 displaced individuals.
Our efforts to respond to the immediate aftermath of Hurricane
Katrina were extensive, and I will now turn to specific actions taken
by HUD's program offices.
Actions by Program Offices
Office of Community Planning and Development
Senior officials in HUD's Office of Community Planning and
Development (CPD) gathered to explore ways to help the affected
communities. Based on past experience, we knew CPD programs--especially
CDBG and HOME--have been especially effective in addressing both the
immediate and long-term recovery needs that arise from natural
disasters. On September 5, 2005, Assistant Secretary Pamela Patenaude
began issuing a series of waivers to streamline our existing grant
programs so grantees could reprogram their existing HUD funds for
disaster relief. To date, CPD has issued more than 40 waivers affecting
existing normal program requirements to its normal program
requirements. CPD has also given special attention to the opportunity
to meet the needs of persons who were homeless before the hurricanes,
and to homeless programs funded by the Department whose operations were
affected.
CPD also reached out to Governors Blanco, Barbour, and Riley to
offer them the support and flexibility they needed to retarget their
resources to better assist their communities. In response to a request
from Governor Blanco, we issued a series of waivers in the CDBG and
HOME programs. The HOME program waived requirements to allow for
source-certification of income and elimination of the match
requirement. These waivers provided greater flexibility in the use of
HOME and American Dream Downpayment Initiative funds to help low-income
Louisianans receive tenant-based rental assistance, and rehabilitate
and buy homes. They also offer the same flexibility to Governors
Barbour and Riley.
CPD also issued a series of waivers for the CDBG program, the
Emergency Shelter Grants program, and the Housing Opportunities for
Persons with AIDS program to make them more responsive to the immediate
needs of the affected communities. The City of Houston, which received
thousands of evacuees from New Orleans, was the first to ask for a
waiver of CDBG's 15 percent cap on public services. This request was
granted for Texas and the 4 other affected States, providing
communities more flexibility to help their citizens. We also simplified
the citizen participation requirements to give communities more options
on how to refocus their programs to meet their changed environment and
needs. At the request of specific communities, we also waived a number
of other requirements including: Allowing presumption of low- and
moderate-income benefit in certain circumstances in CDBG; extending
deadlines for reporting submissions; and extending the deadline for
spending funds in order to give affected communities time to consider
their needs and options after the disaster. To help Gulf Coast
communities develop long-term affordable housing plans and respond to
the needs of local community housing development organizations and
homeless providers, we are providing technical assistance through HUD
field offices and HUD-contracted technical assistance providers such as
the College of Experts.
Most recently, CPD has been at the forefront of the Department's
efforts to administer the $11.5 billion in CDBG disaster funding
approved by Congress and signed into law by the President on December
30, 2005. On January 25, 2006, HUD announced the allocations for the
five affected Gulf States, and on February 13, 2006, HUD published in
the Federal Register guidance on how each of the States is to submit an
Action Plan for disaster recovery on the uses of the grant funds to
assist with long-term recovery and infrastructure restoration.
Our overriding goal is to make sure the funding provided by
Congress is swiftly made available to the States for their recovery
efforts, and that the funding is used in a manner consistent with the
intent of Congress and in the context of the comprehensive
reconstruction plans being developed by each of the five States.
Office of Housing
In the Office of Housing, FHA immediately urged approved lenders to
provide forbearance to FHA borrowers displaced by the storm and unable
to make regular monthly payments. HUD took the lead in providing the
first 90-day foreclosure relief for FHA borrowers in presidentially
declared Major Disaster Areas affected by Hurricanes Katrina, Rita and
Wilma. On November 22, 2005, Housing Commissioner Brian Montgomery and
I extended foreclosure moratoriums in those counties declared eligible
for individual assistance as a result of Hurricanes Katrina and Rita
for an additional 90 days to February 28, 2006. The extended
foreclosure relief will provide mortgagees additional time in which to
confirm the mortgagor's intention and ability to repair the home,
resume regular mortgage payments and retain homeownership.
On December 1, 2005, the Department announced an additional
homeownership retention initiative to help homeowners with FHA-insured
mortgages who are unable to maintain their payment obligations due to
hurricane-related property damage, curtailment of income or increased
living expenses. Under the initiative, FHA will advance mortgage
payments for up to 12 months for eligible borrowers who are committed
to continued occupancy of their homes as a principal residence and are
expected to have the financial capacity to repair storm damage and
resume making full mortgage payments within a 12-month period. This
unprecedented mortgage relief is expected to help several thousand
families to remain homeowners while they concentrate on repairing their
homes, finding jobs, and putting the pieces of their lives back
together.
In addition, I have personally encouraged lenders to undertake
actions such as mortgage modification, refinancing, and waiver of late
charges for those homeowners in the Katrina disaster area and to
refrain from reporting derogatory credit information to credit bureaus.
Office of Public and Indian Housing
The Office of Public and Indian Housing (PIH) has issued guidance
to the Nation's more than 3,000 Public Housing Authorities (PHA's) on
how to assist public housing residents displaced by Hurricane Katrina.
Titled ``Guidance for Public Housing Agencies in Assisting Families
Displaced by Hurricane Katrina,'' this document has been posted on
HUD's website and distributed to every PHA and HUD field office.
HUD's KDHAP is providing housing vouchers for evacuee households
that were previously receiving public housing and other HUD housing
assistance, including persons experiencing homelessness. Under KDHAP,
participating individuals and households are eligible to receive rental
assistance payments for up to 18 months. These payments are calculated
at 100 percent of the fair market rent in any community in the country
the evacuee selects, from Portland, Maine to Portland, Oregon. I am
pleased to say that nearly 15,000 families have received KDHAP
vouchers. With the additional $390 million in funds awarded by Congress
in 2005, thousands more HUD-assisted families and individuals who were
homeless in the affected areas prior to Katrina will be eligible for
assistance.
HUD has now verified which vacant public housing units are in
livable condition and available to house evacuees. To accomplish this,
our field office staff contacted every PHA in the Nation to identify
the number of public housing units currently available, those that
could be made ready for occupancy in 5 to 7 days, and the number of
available vouchers. As a result, HUD has identified more than 39,000
vacant public housing units and available vouchers nationwide.
HUD's Office of Native American Programs (ONAP) has consulted with
every tribe affected by Hurricane Katrina. The Chitimacha Tribe of
Chareton, Louisiana and the Tunica-Biloxi Tribe of Marksville,
Louisiana are now housing displaced tribal families evacuated from New
Orleans and coastal Mississippi. The Chickasaw Nation Housing Division,
located in Ada, Oklahoma, is housing displaced families in various
sections of their service area, most of whom are not tribal members.
Indian Community Development Block Grant (ICDBG) Imminent Threat
funds in the amount of $2.4 million are currently available for
distribution to tribes affected by Hurricane Katrina. Requests are
being processed for each tribe in need of assistance in the amount of
$425,000 per tribe. These funds become available on a first-come,
first-serve basis as soon as the request is received and approved by
HUD.
The Public Housing Capital Fund has a Reserve for Emergencies and
Natural Disasters in the amount of $29.7 million for fiscal year 2005.
These funds can only be used to repair and replace existing public
housing that was directly affected by Hurricane Katrina. PHA's must
submit applications to HUD for these funds. The Housing Authority of
New Orleans (HANO) received a $21.8 million grant from the Capital Fund
Reserve for Emergencies and Natural Disasters, which was approved on
September 28, 2005. This request was for a preliminary grant until a
full assessment of the damage and the cost to repair and/or replace its
public housing inventory is completed. These funds will be primarily
used to: Make minimal repairs to four properties to make them
habitable; secure uninhabitable properties; and pay relocation costs
for displaced families.
PIH awarded a contract for general disaster assistance within 3
days of Hurricane Katrina. The contract covers: Assessment of damage;
general assistance to HUD staff, PHA's, and residents; assistance in
facilitating communication and transportation among HUD and PHA staff
and other service providers; assistance in identifying and coordinating
temporary shelter for flood victims; assistance in coordinating social
services and other special needs activities for elderly, disabled, and
others; assistance in facilitating space to coordinate HUD response
activities; and other emergency activities as identified by site
visits.
PIH set up two hotlines within days of Hurricane Katrina. The first
hotline is for PHA's to verify the status of persons claiming to be
displaced public housing residents or voucher holders. The second
hotline is for public housing residents or voucher holders that need
assistance and information on available public housing.
HUD assisted the Housing Authority of New Orleans, which has been
under HUD receivership since February 2002, in quickly setting up
headquarters operations in Houston, and a satellite office in Dallas.
We worked closely with the Houston Housing Authority, which provided
extensive facilities and assistance to HANO. As a direct result, HANO
was able to set up a booth in the Houston Astrodome to process
residents and voucher holders within the first week.
Notice of a broad regulatory waiver process was published in the
Federal Register on October 3, 2005. The PIH waivers facilitate the
administration of properties in the Hurricane Katrina declared disaster
areas and relieve PHA's affected by the hurricane or assisting in
hurricane relief of numerous administrative requirements. In all, 23
items can be suspended or requested for expedited waiver. Waivers
include such items as: The granting of time extensions for submitting
verification information; the use of previous year Public Housing
Assessment System scores for certain PHA's; the deferral of Section
Eight Management Assessment Program requirements for 1 year; and the
lifting of cost limitations for public housing until new total
development costs are published. An expedited electronic submission
system has been set up to receive notifications and requests.
Fair Housing and Equal Opportunity
One of our Department's top goals is to ensure people have access
to affordable housing free from discrimination. Immediately following
Hurricane Katrina, our FHEO office deployed staff to Baton Rouge, and
later to Mississippi, to assist Gulf Coast evacuees who had reported
housing discrimination. Our staff obtained immediate relief for people
facing discrimination before there was a need to file formal
complaints. For example, staff helped open a mobile home community to
families with children after receiving a complaint that the park was
unlawfully excluding them. As of February 1, 2006, HUD has received 94
formal complaints of post-hurricane discrimination.
To help raise awareness of housing discrimination--especially
discrimination experienced by victims of recent hurricanes--HUD
launched a series of print and broadcast public service announcements
that make this case in a very compelling way.
In addition, HUD worked with FEMA to create new design
specifications for fully accessible manufactured housing to ensure that
temporary housing is available for people with disabilities, we held
seminars in Louisiana and Mississippi to make certain that all new
multifamily housing complies with Federal requirements for disability
accessibility, and we also provided additional funding to private fair
housing groups and State fair housing agencies in the affected region
to assist them in responding to the fair housing needs of evacuees.
Center for Faith-Based and Community Initiatives
The Center for Faith-Based and Community Initiatives has been an
active participant with the rest of the Department in responding to the
hurricanes. The Center published on the web and in hardcopy the
Disaster Recovery Toolkit. It has
expanded its affordable housing pilot project to include Houston and
Tampa. The Center holds weekly teleconference calls with HUD's 10
regional faith-based and community liaisons to better coordinate the
Center's national resources and disseminate relevant information from
the daily HART calls. The calls serve as a forum in which to exchange
information about successful local public-private partnerships to
assist evacuees, and to help the liaisons prepare their local faith-
based and community organizations for assisting those evacuees who will
have to leave their current locations for more permanent housing once
FEMA subsidization of hotel lodging comes to an end.
The Center has also contacted nearly 20,000 faith-based and
community organizations to recruit their engagement in the Department's
KDHAP enrollment efforts. The Center's Region IV Regional Faith-based
and Community Liaison has been detailed to the Joint Housing Solution
Center in Baton Rouge, in order to engage faith-based and community
organizations in constructing or rehabilitating 60,000 units of
housing. That regional liaison also spearheaded an innovative,
comprehensive approach to securing housing, as well as furnishing,
employment, and transportation for evacuees establishing new domiciles,
all in conjunction with the National Association of Real Estate
Brokers, its Women's Council, and other faith-based and community
organizations. The Center is studying ways of replicating this model
wherever groups of temporarily housed evacuees may relocate.
Conclusion
I want to conclude by saying a word about the 85 HUD employees
previously located in our New Orleans Field Office. I am both relieved
and pleased to say that we have been in close contact with all of them
over these last 5\1/2\ months. I am proud to report that as of February
6, 2006, 56 members of our New Orleans field office staff have returned
to work in that office. Their courage and tenacity are truly
inspirational. But I have to say that the dedication and commitment of
the entire HUD family to assist those in need has been equally
inspirational.
Thank you.
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PREPARED STATEMENT OF DONALD E. POWELL
Federal Coordinator, Office for Gulf Coast Rebuilding
February 15, 2006
Chairman Shelby, Ranking Member Sarbanes, and Members of the
Committee, I am pleased to appear before you today as the Federal
Coordinator for Gulf Coast Rebuilding to discuss the progress we have
made in the Gulf Coast region and the challenges and opportunities we
face in the intermediate recovery and long-term rebuilding effort.
In the aftermath of one of the most powerful and destructive
natural disasters in our Nation's history, President George W. Bush
created the Office of the Federal Coordinator for Gulf Coast Rebuilding
by Executive Order 13390 to be housed under DHS and Secretary Chertoff.
I was charged by the President to coordinate the long-term Federal
rebuilding efforts by working with State and local officials to reach
consensus on their vision for the region.
Let me begin by telling you it is a great honor to have been
appointed by the President to this very important post. He is committed
to doing whatever it takes to support the recovery and rebuilding
efforts of Alabama, Florida, Louisiana, Mississippi, and Texas along
the Gulf Coast. The entire Gulf Coast region is of great historical,
cultural, and economic importance to this country, and we will make
sure that these Americans get back on their feet and rebuild their
lives. Whole communities have been ravaged by Katrina and Rita, but I
am confident that together we will see a better tomorrow for our fellow
Americans in these affected areas.
Our job is to work closely with people on the ground to identify
and prioritize the needs for long-term rebuilding. We then communicate
those realities to the decision makers in Washington, and advise the
President and his leadership team, including Secretary Chertoff, on the
most effective, integrated, and fiscally responsible strategies for a
full and vibrant recovery.
The President has made it abundantly clear that the vision and
plans for rebuilding the Gulf Coast should come from the local and
State leadership, not from Washington, DC. Rebuilding should not become
an exercise in centralized planning. If Federal bureaucrats determine
the path of rebuilding, local insight and initiative will be overrun
and local needs overlooked. In addition, if the heavy hand of Federal
Government impedes the private sector's proven ability to speed the
recovery, it will take longer and be more expensive to rebuild.
President Bush made a commitment that the Federal Government would
be a full partner in the recovery and rebuilding of the areas
devastated by Hurricanes Katrina and Rita, and he is keeping that
promise. The Federal Government has already committed more than $87
billion for the recovery effort, and the President's 2007 budget
estimates that an additional $18 billion will be included in an
upcoming 2006 supplemental package, which would bring the total to well
over $100 billion. That figure does not include the tax relief of the
GO Zone legislation, which will be approximately $8 billion. Markets
must be encouraged and allowed to work properly without interference
from government. Money spent should not compete with or hinder private
sector involvement but, rather, serve as a catalyst to encourage
growth. We also understand the importance of being good stewards of the
substantial amounts of money that have been, and will continue to be,
spent on this effort. The Administration has put into place financial
management practices and has enhanced audit and investigative resources
for the Inspectors General to safeguard Federal spending. We also call
on the Congressional oversight and accountability mechanisms in place
to assist in the fiduciary protection of the American
taxpayer. If Americans see their tax dollars being ill-spent, their
support--which is critical--will wane. It is my duty to ensure that any
plans or strategies are conducive to the prudent, effective, and
appropriate investment of taxpayer dollars.
Recovery Assistance
Hurricanes Katrina and Rita left many of our fellow citizens
stunned and uprooted The Federal Government has and will continue to
support evacuees through direct financial assistance and temporary
housing. This Administration believes in the government's duty to
provide resources and support on behalf of the American people, and to
rally this Nation's armies of compassion
As of February 2, 2006, FEMA had provided the following direct
financial and housing assistance:
136,502 mobile homes and travel trailers have been purchased
for a total cost of $2.5 billion (as of February 2).
74,189 mobile homes and travel trailers are occupied (as of
February 2).
6,292 mobile homes and travel trailers are ready for occupancy
but are vacant (as of February 2).
$5.1 billion in assistance to 1,044,916 applicants under the
Individual Housing Program (IHP) for Katrina in all states (as of
February 7).
1,704,006 FEMA registrations from Hurricane Katrina declared
disasters--LA, MS, AL (as of February 7).
In addition to housing assistance, FEMA has also assisted in the
disposal of over 62 million yards of debris, or over 60 percent of the
total amount to be removed from the affected area.
Levees
When I made my first trip to the Southeast Louisiana region I asked
everyone I visited with, ``what are the three most important issues?''
The answer, time and again, was ``Levees, levees, levees.'' The
President agrees that public safety is the most critical part of long-
term rebuilding in that area. People must feel safe and secure in their
decision to come back--whether as a resident or a business owner.
The President responded quickly by asking Congress to authorize his
$3.1 billion commitment to make the levees that surround the New
Orleans area stronger and better than they had ever been before. In
addition to returning the levee system to pre-Katrina levels before
next hurricane season, the President's request to Congress also
included the addition of flood gates and pumping stations to interior
canals, selective armoring of levees, the initiation of wetlands
restoration projects, and additional storm-proof pumping stations. I
receive routine briefings from the Army Corps of Engineers and they are
on track to meet their deadline for pre-Katrina strength before the
beginning of the next hurricane season.
Housing
After the Administration made its commitment to rebuild the levees
stronger and better, the next issue on the minds of the people of the
Gulf Coast was housing. As a part of the DOD reallocation, Congress set
aside $11.5 billion in Community Development Block Grant (CDBG) funds
for the Gulf Coast. The CDBG program is a well-tested mechanism that
provides States with great flexibility in how funds may be spent. The
$11.5 billion given by the Department of Housing and Urban Development
(HUD) is the full amount appropriated by Congress for CDBG in the
disaster supplemental, enacted December 30, 2005. These funds will be
available once each State submits a detailed plan to the Federal
Government outlining its use of the funds. The greatest attribute of
the CDBG funds is that they are flexible and allow the State leaders--
those closest to the local issues--to make the decisions on where best
to use the money.
The housing issue is of paramount importance. Many have spoken
about H.R. 4100, the Louisiana Recovery Commission (LRC). The
Administration shares the goal of rebuilding Louisiana and the Gulf
Region and we are grateful to Congressman Baker's leadership on this
important issue; however, we support CDBG monies as the most efficient
funding instrument in recovery funding. In fact, the Louisiana
legislature is currently reviewing a proposal that would use CDBG
monies and other Federal assistance to create a similar housing
corporation on the State level. I look forward to working with the
State on that plan. However, if after spending all the allocated
Federal funds there are remaining unmet needs, we will continue to work
with Congress to help ensure that additional resources are available
and needs are met.
Economy
The President, along with Congress, has also been mindful about the
renewal of the region's economy. At the end of 2005, the President
signed into law the Gulf Opportunity Zones Act (or GO Zones). This
legislation, providing approximately $8 billion in tax relief over 5
years, will help revitalize the region's economy by encouraging
businesses to create new jobs and restore old ones. Some of the
principal provisions within the Gulf Opportunity Zone Act of 2005
include tax-exempt bond financing for both residential and
nonresidential property, changes to the low income housing credit,
bonus depreciation, expensing for certain demolition and clean-up
costs, just to name a few. Simply put, this law renews businesses,
rebuilds homes, and restores hope.
In the affected area, the Small Business Administration (SBA) has
adapted and ramped up its capacity in order to provide loans and
working capital to small businesses and families. Small Business
Administration disaster loans provide vital low-cost funds to
homeowners, renters, and businesses to cover uninsured disaster
recovery costs as well as loans for the working capital needs of
businesses affected by disasters. Since last year's hurricanes, SBA's
Disaster Loan Program has approved over $4.3 billion in disaster loans
to over 60,000 homeowners, renters, and businesses along the Gulf
Coast. Given SBA's ongoing commitment to small business owners in this
region, it is imperative that Congress approve any monies to SBA in the
upcoming 2006 supplemental package.
Workforce development will also be critical to long-term economic
security. Secretary of Labor Elaine L. Chao and I attended a meeting in
December 2005 with the President, labor leaders, civil rights groups,
and business associations to discuss workforce initiatives and overall
employment issues facing the region. We tasked those leaders with
devising a plan to prepare the workers of the region for the future of
the Gulf Coast economy. We recently completed that plan and look
forward to implementing the program in May 1, 2006 in New Orleans. We
want to help create as many jobs as possible in the Gulf Coast and
prepare its residents to fill those jobs. To do this, we have set an
ambitious goal that we are committed to achieving--this public/private
initiative will train 20,000 new workers for careers in construction
and skilled trades by the end of 2009. We will continue to work to help
make the Gulf Coast a great place to invest, do business, and live.
Conclusion
President Bush is committed to rebuilding the Gulf Coast. The
Federal Government will continue to facilitate and help strengthen, but
not replace, State and local government or private initiatives and we
will help our fellow citizens meet the challenges of reconstruction and
rebuild their lives and communities for the years to come. The
residents of this area and the President can agree on this: Failure is
not an option.
There is no doubt that a tremendous amount of work is still ahead
of us but we are heartened and encouraged by the progress made. We are
proud of the work that has been accomplished to date on both the State
and Federal level. We look forward to working with leaders in Alabama,
Florida, Louisiana, Mississippi, and Texas in the days, weeks and
months ahead to assist in the implementation of their respective
visions while also serving as a good steward of taxpayer dollars, which
the distinguished members of this panel, along with your colleagues,
have helped secure.
Mr. Chairman, this concludes my testimony. Again, I appreciate this
opportunity to appear before you as the Federal Coordinator for the
Gulf Coast Rebuilding. I am prepared to respond to any questions that
you may have.
Thank you.
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PREPARED STATEMENT OF DAVID GARRATT
Acting Director of Recovery, Federal Emergency Management Agency
U.S. Department of Homeland Security
February 15, 2006
Good morning Chairman Shelby, Ranking Member Sarbanes, and
Committee Members. I am David Garratt, the Acting Director of Recovery
at FEMA, and am representing Secretary Chertoff and Acting FEMA
Director Paulson. It is an honor to appear before this Committee to
summarize and discuss our emergency sheltering and housing efforts in
support of Hurricane Katrina and Rita victims, as well as our overall
efforts to contribute to the rebuilding of the Gulf Coast.
We at the Department of Homeland Security and FEMA appreciate your
interest in the housing challenges presented by the scope and scale of
these unprecedented disasters. I think we all recognize that these
hurricanes, and Katrina in particular, have thoroughly tested the
capabilities of impacted State and local governments, FEMA, the
Department, and the Nation, including the many States and communities
nationwide who are hosting displaced evacuees from the affected Gulf
Region. And yet, while these events have tested our plans and processes
as never before, FEMA's sheltering and housing assistance programs have
provided or facilitated the means for hundreds of thousands of evacuees
to quickly secure interim accommodations, even as we continue to fund
and facilitate an aggressive strategy to transition those individuals
and families into longer-term, and more stable, housing solutions.
It has been a challenging time--nearly 6 months since Hurricane
Katrina made landfall--for victims, communities, States, voluntary
agencies, and the Federal Government alike. And, while we have made
significant strides in addressing the pressing housing needs of victims
across the country, many challenges and difficult decisions remain.
Nevertheless, we have been, and remain, committed to helping
households recover and re-establish themselves. I would like to outline
the assistance programs--under the Robert T. Stafford Disaster Relief
and Emergency Assistance Act--that FEMA continues to provide in support
of both sheltering and housing needs.
Under our public assistance program, authorized by Section 403 of
the Stafford Act, FEMA is authorized to reimburse States for emergency
protective measures, including emergency sheltering. Typically, these
costs are reimbursed only for those States directly affected by the
disaster. However, the scale of the evacuation prompted by Hurricane
Katrina required a more expansive approach. To encourage States outside
of the hurricane-affected area to accept and assist the hundreds of
thousands of evacuees from the Gulf Region, the President responded to
gubernatorial requests by declaring emergencies for 44 States and the
District of Columbia. These emergency declarations had the effect of
reassuring those States that their sheltering costs would be
reimbursed, as well as provided the means for States to transition
these evacuees out of shelters and into longer-term temporary housing.
This latter capability has provided an invaluable bridge to our longer-
term housing strategy, as it allows jurisdictions--on a reimbursable
basis--to arrange short-term lease apartments for evacuees, allowing
them to move out of transitional shelter environments, such as hotels,
and into more stable temporary housing.
Another form of sheltering assistance that, traditionally, is
rarely, and then only briefly implemented in disasters, is hotel/motel
subsidies. However, in response to Hurricane's Katrina and Rita, this
assistance mechanism has been center stage.
Recognizing that the road to recovery required that we remove
families from congregate shelter environments as quickly as possible,
FEMA authorized States, within days of Hurricane Katrina's landfall, to
relocate families to hotel/motel rooms. At the same time, the American
Red Cross initiated a similar hotel/motel subsidy program, as
authorized by a statement of understanding with FEMA. Together, FEMA,
the States, and the American Red Cross facilitated the relocation of
thousands of families to more private, and humane, living conditions.
In late October 2005, FEMA agreed to assume responsibility for funding
the hotel/motel subsidies of those households placed by the American
Red Cross, which has been, and remains, a stalwart and dependable
partner of FEMA and the Federal Government in disaster response and
recovery operations.
Throughout the intervening months, we have worked with more than
7,500 hotels and funded over 3 million room nights. However, nearly 6
months removed from Katrina landfall, the time has come to end the
sheltering phase of the recovery, and complete the transition of
Katrina and Rita evacuees to more stable temporary housing, and where
feasible, permanent housing. For many, this will be a difficult
transition, as not every household will be eligible for Federal
assistance, nor will every household be able to immediately return to
their pre-disaster homes, or hometowns. Nevertheless, during this
period, we have diligently and ceaselessly, using community relations
and voluntary outreach teams, made repeated efforts to contact every
victim registered and subsidized in every single hotel or motel room
across the United States, to make sure every hotel and motel occupant
household has every opportunity to avail themselves of all available
transition assistance.
First, and most importantly, every household must register with
FEMA to receive FEMA housing assistance. Registration can be
accomplished either on-line, or through our 1-800 numbers. FEMA's
ability to process registrations in a timely manner is second to none.
Following Hurricane Katrina, FEMA processed over 100,000 registrations
across a single 24-hour period, more than doubling any previous
disaster single-day registration record. The Individuals and Households
program (IHP) provides financial help or direct services to U.S.
citizens, non-citizen national, or qualified aliens whose primary
residence was damaged as a direct result of a presidentially declared
disaster when they are unable to meet these needs through other means.
Even if a registered individual or household is ultimately determined
to be ineligible for FEMA assistance, we can refer them to other
sources of potential assistance, such as voluntary agencies or the
Department of Housing and Urban Development's Katrina Disaster Housing
Assistance program, or KDHAP. Under the supplemental budget, KDHAP is
succeeded by the Disaster Voucher program (DVP) under which public
housing authorities will assist individuals or households who were
displaced residents of a HUD program or homeless at the time of the
disaster.
While Section 403 of the Stafford Act, as I have described,
supports sheltering activities, FEMA's Housing Assistance Authorities
are covered under Section 408 of the Stafford Act. I would like to
briefly describe the components that make up our housing assistance
programs.
Under Section 408 of the Stafford Act, FEMA is authorized to
provide: Rental assistance; home repair assistance; home replacement
assistance; direct housing; and other needs assistance, the latter is
designed to assist with necessary expenses and serious needs, including
personal property losses. I will discuss each briefly.
Under the Transitional Housing Assistance program, FEMA has
provided, as of February 10, rental payments to more than 675,000
applicants, totaling more than $1.6 billion. In providing this rental
assistance, we are aware that many displaced households received their
checks, or deposits to their bank accounts, before receiving mailed
guidance and instructions detailing the intended use of the funding,
and procedures for receiving subsequent rental assistance. Accordingly,
FEMA will recertify year and continue to provide rental assistance in
3-month increments--for as long as households qualify year for such
assistance. This accommodation applies only to the initial
recertification of rental assistance. Subsequent recertifications will
require necessary rent receipt documentation. I think it is important
to note that FEMA is prohibited by law from duplicating assistance.
Therefore, if a disaster victim has an insurance policy that provides
alternate living expenses, we will not duplicate that aid unless their
settlement is delayed. In such cases, applicants are advised they will
be required to return the duplicated assistance to FEMA following
settlement. Similarly, if victims are receiving other forms of housing
support that obviate the need for our assistance, we will not knowingly
duplicate that aid. We will also, as a standard part of our
recertification process, validate that the applicant is pursuing a
permanent housing strategy, to include economic self-sufficiency.
FEMA is authorized to pay up to $5,200 in home repair assistance to
eligible victims of Hurricanes Katrina and Rita. Repairing a home to
make it livable, where that option exists, is a preferred remedy, as it
keeps people in their homes, in their communities, and is cost-
effective. To date, we have provided more than $335 million in home
repair payments to victims of Hurricanes Katrina and Rita, helping make
nearly 175,000 homes habitable across the Gulf Region. In addition,
under the public assistance program, we have provided or installed
plastic sheeting or tarps on nearly 150,000 roofs in the Gulf Region,
enabling those residents to continue living in their homes even as they
pursue permanent repairs.
FEMA is also authorized to pay up to $10,500 in home replacement
assistance to eligible applicants. Thus far, in Alabama, Louisiana,
Mississippi, and Texas combined, we have provided more than $270
million to over 27,000 households to help them replace their destroyed
housing. Note that neither of these forms of assistance is designed to
take the place of, or substitute for insurance, nor are they designed
to cover all disaster-related losses. Consequently, the assistance we
provide is not as comprehensive as an insurance policy.
As I noted earlier, the scope and scale of devastation from these
two hurricanes eliminated the home repair option for many households.
In addition, home repair does not apply to renters, who nevertheless
have the same need for temporary housing assistance. For both these
types of households, FEMA offers two forms of interim housing
assistance: Rental assistance--in the form of financial assistance paid
directly to an eligible applicant, and direct housing assistance--in
the form of a dwelling provided by FEMA to an eligible applicant.
Direct housing assistance can be provided--for up to 18 months from
the date of the declaration--either in the form of direct leases (such
as apartments), or through the provision of manufactured housing. The
latter option is available only in the impacted States, where existing
housing stock has been destroyed or rendered uninhabitable. This lack
of fixed housing stock is particularly acute in the States of Louisiana
and Mississippi, where manufactured housing is the only currently
available temporary housing solution for disaster victims who wish to
be close to home, close to their jobs, close to their families, or
close to their childrens' schools.
While manufactured housing can provide a timely and effective
temporary solution for critical and immediate housing problems, we also
recognize that large group sites can create social challenges and
logistical problems. Accordingly, we strongly encourage, wherever
possible, that manufactured units be placed on private property--such
as a family driveway--so that disaster victims can remain in their
communities as they begin the long process of rebuilding their homes
and their lives.
However, when it becomes necessary to develop group manufactured
housing sites--and it is absolutely necessary for many communities
across the Gulf Region--our preference is to place such units on
previously developed commercial sites, since they already have the
infrastructure necessary to support timely installation and occupancy.
However, in those areas where the lack of infrastructure and/or
capacity prevents use of private or commercial sites, we are actively
building sites--with the necessary infrastructure--to support
manufactured housing communities. Again, recognizing that manufactured
housing communities can, over time, present social challenges, the size
of such developments is limited if a larger concentration of
manufactured housing units is proposed, this siting must be
specifically approved by DHS, and the State and local governments.
As of February 10, 2006, we have more than 75,000 manufactured
units occupied in the Katrina and Rita impacted States. The
overwhelming majority of these units are travel trailers. Trailers are
utilized with far greater frequency because they are movable, and thus
can be employed in low-lying areas where installation of a mobile home
is prohibited due to the risk of further flooding. In addition, they
are smaller and can be parked on property owned by a homeowner, while
that household works to repair their damaged structure.
One of the biggest challenges facing the recovery effort is finding
and securing sufficient rental assets to meet the huge demands created
by the mass exodus of evacuees. Fortunately, numerous dwellings have
been made available by other Federal agencies. To date, over 11,000
evacuee households have been placed in Federal housing resources across
the Katrina-Rita impact areas. For example, the U.S. Department of
Agriculture has made thousands of such dwellings available. In
Louisiana alone, 1,100 families have been placed in USDA houses. We
have also entered into an interagency agreement with the Department of
Veterans Affairs to make their unsold housing units available for
evacuee rental, and are actively pursuing a similar arrangement with
Fannie Mae.
In addition, the U.S. Department of Health and Human Services
recently announced $550 million in funding to the 50 States and the
District of Columbia for additional hurricane relief. These funds will
come from the social services block grant (SSBG) program, administered
by HHS' Administration for Children and Families (ACF). They will be
given to States to provide health care, mental health, and social
services, as well as for the repair, renovation, and construction of
facilities providing those services to victims of Hurricanes Katrina,
Rita, and Wilma.
We have been collaborating closely with HUD from the outset of this
event, working together to reconcile and apply our respective
authorities and capabilities to provide maximum benefit to those most
in need of housing assistance. In addition to partnering with the
Department of Homeland Security and FEMA through their KDHAP program,
HUD has made repossessed houses available to FEMA-eligible disaster
households, and has placed hundreds of disaster victims in houses in
the 4-State area, including 207 families in Texas alone. Today, both
here and in the field, HUD teams and personnel continue to work closely
with FEMA to identify year and assist eligible disaster victims,
wherever they may be.
HUD also recently announced HUD's plan to allocate $11.5 billion in
disaster funding among 5 Gulf Coast States impacted by Hurricanes
Katrina, Rita, and Wilma. The emergency funding is provided through
HUD's Community Development Block Grant (CDBG) program to specifically
assist Louisiana, Mississippi, Florida, Alabama, and Texas in their
long-term recovery efforts. This along with HUD's Disaster Voucher
program (DVP), created through a $390 million supplemental
appropriation in the Department of Defense Appropriations Act of 2006,
will provide ongoing temporary rental assistance for people displaced
by Hurricanes Katrina and Rita who at the time lived in public housing,
had a voucher, or who were homeless. KDHAP rental assistance, funded by
FEMA and operated by HUD.
While transitioning so many displaced households into temporary
housing has been--and will continue to be--a challenge, FEMA and its
partners at every level of government and within the private sector are
committed to work together to find timely and equitable solutions.
Our voluntary partners are an invaluable part of meeting the
challenge of housing applicants. One example of the critical role of
the voluntary agency community is our continued partnership with the
National Voluntary Organizations Active in Disaster (NVOAD) and our
work with one of their member agencies: UMCOR--the United Methodist
Committee on Relief. UMCOR, through a $66 million dollar grant provided
from international donations, is helping FEMA and the States identify
and provide intensive case management assistance to those evacuees
facing the toughest of circumstances in re-establishing their lives and
livelihoods, including those evacuees who are not eligible for FEMA
financial assistance or have exhausted that assistance. As our casework
partner, UMCOR is helping such families find housing, find jobs, and
learn to handle their finances, as well as cope with the many
challenges of integrating into a new--or devastated--community. To
accomplish this mission, UMCOR is fielding 600 case managers, as well
as leveraging 2,400 volunteer case managers, to provide comprehensive
assistance to over 100,000 households in need.
Recognizing the immense scale and complexity of the long-term
recovery challenges and considerations facing the Gulf Coast, the
President established the Office of the Federal Coordinator for Gulf
Coast Rebuilding, and appointed Chairman Powell to lead that
organization's efforts. To help ensure that the Department of Homeland
Security and FEMA are coordinating fully with Chairman Powell, and that
maximum collaboration takes place between, FEMA recently appointed Mr.
Gil Jamieson as the Deputy FEMA Director for Gulf Coast recovery. In
this role, Mr. Jamieson will oversee FEMA recovery operations across
the Gulf States, and will be coordinating closely, and routinely, with
Chairman Powell and his staff.
In summary, as of early February, FEMA has spent over $6.1 billion
on assistance for over 1.4 million disaster victims. As this difficult
recovery phase continues, so too does our relentless commitment to the
victims of these disasters, and to the States and cities who are
helping to house and care for them. At the same time, we continue to
seek alternative housing solutions in the impacted areas, to afford as
many displaced victims as possible the opportunity to return home, as
quickly as possible.
We all realize that this road to recovery will be a long one, and
fraught with challenges and frustrations along the way. Nevertheless,
this Agency, this Department, and this Administration remain committed
to the mission: The successful restoration of a socially and
economically vibrant Gulf Coast.
Thank you. I am prepared to answer any questions you may have.
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PREPARED STATEMENT OF MARTIN J. GRUENBERG
Acting Chairman, Federal Deposit Insurance Corporation
February 15, 2006
Chairman Shelby, Senator Sarbanes, and Members of the Committee, I
appreciate the opportunity to testify on the efforts of the Federal
Deposit Insurance Corporation (FDIC) and the other Federal regulatory
agencies to respond to the impact of last year's devastating hurricanes
on federally insured financial institutions and their customers in the
Gulf Coast region.
In December, I traveled with FDIC staff to New Orleans and
Mississippi. We met with local financial institutions, the State
banking commissioners, and local community group leaders. As many have
observed, it is difficult to appreciate the challenge confronting the
Gulf Coast region until visiting the area and seeing first hand the
scale of the damage. It is also impossible to visit the area and
witness the determination of the local financial institutions and
community leaders to rebuild their communities without feeling a
renewed sense of the obligation of the FDIC and the other Federal
financial institution regulatory agencies (Federal regulatory agencies)
to do all we can to assist them in that effort.
My testimony will review the actions taken by the FDIC and the
other Federal regulatory agencies immediately following the storms to
maintain confidence in the region's financial institutions, as well as
interagency actions during the past 6 months to assist institutions and
individuals affected by the hurricanes. I also will provide the FDIC's
current assessment of the impact of the hurricanes on the condition of
the federally insured financial institutions (financial institutions)
in the region, and discuss outreach efforts planned in the near-term.
At the outset, I want to point out that much of the work of the
FDIC that I will describe today took place under former FDIC Chairman
Donald Powell. He deserves great credit for his leadership of the FDIC,
as well as for his current leadership as Federal Coordinator of Gulf
Coast recovery efforts.
Federal Regulatory Agency Actions Following the Storm
When Hurricanes Katrina and Rita hit the Gulf Coast, they impacted
the operations of at least 280 financial institutions, with 120 of
these institutions headquartered in the 49 counties and parishes in
Alabama, Louisiana, and Mississippi designated by the Federal Emergency
Management Agency (FEMA) as eligible for individual and public
assistance. Similar to other sectors of the Gulf Coast economy,
financial institution facilities were destroyed, communication and data
processing capabilities were disrupted, and financial institution
employees saw their homes destroyed or inundated with flood waters.
In the aftermath of the storms, the FDIC along with the other State
and Federal regulatory agencies \1\ were committed to doing everything
possible to preserve public confidence in the financial system and
restore essential financial services. The agencies immediately began
working with financial institutions to help them resume operations and
with customers to communicate accurate information about their
institutions and how they could get needed cash. The agencies'
communication initiatives included contacting financial institutions,
connecting customers to their institutions and coordinating supervisory
oversight programs. To facilitate communication, the FDIC and the other
Federal regulatory agencies issued a number of press releases related
to the Gulf Coast hurricane recovery. A list of these press releases is
attached as Appendix A.*
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\1\ Federal regulatory agencies included the Board of Governors of
the Federal Reserve System, Office of the Comptroller of the Currency,
Office of Thrift Supervision and National Credit Union Administration.
State regulatory agencies include supervisory authorities in Alabama,
Louisiana, and Mississippi, as well as the Conference of State Bank
Supervisors.
* Held in Committee files.
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One of the first steps the FDIC took following Katrina's landfall
was to create an internal FDIC Hurricane Task Force (Task Force) to
coordinate the efforts of the units of the Corporation around the
country and ensure prompt sharing of accurate information among staff,
other regulators and consumers. The Task Force oversaw efforts to
identify insured institutions experiencing service interruptions and
assist those institutions to resume operations. The FDIC and other
regulatory agencies immediately contacted management officials from the
affected institutions to assess their operational status. The agencies
quickly determined that some institutions were finding it difficult to
operate branch offices and process electronic transactions, including
automated teller machine (ATM) transactions. Fortunately, due to
disaster preparedness procedures that all insured institutions are
required to have in place, most institutions resumed operations within
hours or a few days, using facilities that were not severely damaged,
establishing temporary locations, or sharing facilities and even
employees in order to provide services to areas where facilities were
heavily damaged. For example, one institution shared a branch in the
Jefferson Parish of New Orleans with five competitors to minimize
disruptions to local customers.
The FDIC also worked to connect customers with their financial
institutions while at the same time maintain public confidence in the
financial industry. We immediately established a 24-hour consumer
hotline to answer questions about contacting financial institutions,
including questions about accessing accounts, replacing lost records,
obtaining replacement ATM cards, and processing direct deposit
payments. The FDIC also updated its website with information about
financial institutions operating in the affected areas along with
customer service and branch contact information. The FDIC consistently
emphasized that deposit insurance remained in force, financial
institution customers' money was safe, cash was available, and
consumers should be vigilant about the potential for theft and scams.
From the outset, the Federal regulatory agencies recognized that we
were dealing with extraordinary circumstances that required flexibility
in the application of financial institution rules and regulations.
Immediately after Katrina made landfall, the agencies urged financial
institutions to be flexible with borrowers and others experiencing
disruptions due to the storm. This was followed by a series of
advisories providing guidance and information to financial institutions
and their customers. During the past 6 months, the Federal regulatory
agencies have encouraged financial institutions to work with borrowers
by deferring loan payments, extending repayment terms, restructuring
existing loans, easing terms for new loans (including the ability to
skip some payments), and providing short-term loans for living expenses
until insurance proceeds are received. The agencies sponsored several
public service announcements encouraging individuals affected by the
storms to contact their lenders. Only through keeping the lines of
communication open will financial institutions determine how they can
help individuals recover from this natural disaster without impairing
the individuals' credit ratings or weakening the financial viability of
the institutions. A list of all FDIC Financial Institution Letters
providing advisory guidance regarding the Gulf Coast hurricanes is
attached as Appendix B.*
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* Held in Committee files.
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In addition, on September 19, 2005, the Federal Financial
Institutions Examination Council (FFIEC) formed the Katrina Working
Group (Working Group). Made up of senior supervisory staff from all
FFIEC member agencies \2\ and the Mississippi Banking Commissioner,\3\
the Working Group continues to address supervisory policy issues
emerging from the disaster. The Working Group established a frequently
asked questions board on the FFIEC website and directed the publication
of examiner guidance to ensure consistent treatment of affected
institutions, regardless of charter. The Working Group continues to
meet with key financial institution organizations and consumer groups
to strengthen communication among all affected parties. This group also
is identifying and assessing the flexibilities available to the FDIC
and other Federal regulatory agencies to assist financial institutions
affected by the disaster. Where possible, the Federal regulatory
agencies have modified regulatory requirements and procedures to
facilitate the recovery of institutions affected by the storms. For
example, the agencies simplified several application and filing
requirements including branch closings and relocations.
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\2\ Board of Governors of the Federal Reserve Board, Comptroller of
the Currency, FDIC, National Credit Union Administration, and Office of
the Thrift Supervision.
\3\ The Mississippi Commissioner is representing the FFIEC's State
Liaison Committee.
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Impact of the Hurricanes on Financial Institutions
The economic toll of Hurricanes Katrina and Rita is unprecedented
in U.S. history and the recovery will take an extended time. Much of
the damage was caused by flood or storm surge, and the greatest
economic losses are centered in Louisiana and Mississippi.
Historically, no financial institutions are known to have failed as
a result of past natural disasters. In fact, community financial
institutions traditionally have played a critical role serving the
areas most severely affected by the hurricanes. However, due to the
scale of destruction left by these storms, it remains difficult to
determine the applicability of experiences from previous disasters to
the current situation.
The 120 insured institutions headquartered in the 49 designated
disaster counties and parishes are relatively small community financial
institutions. According to financial data for these institutions, about
three-fourths of them hold less than $250 million in assets, and only
five have assets greater than $1 billion. Eighty seven of these 120
institutions obtain 100 percent of their deposits within the disaster
counties, and only 5 receive more than half their deposits outside the
area. These institutions have a long history of lending in their local
communities and are heavily invested in local real estate with
residential and commercial real estate loans representing more than 60
percent of their combined loan portfolios. As a result, not only does
the local population rely heavily on these institutions, but the
prospects of these 120 institutions, 94 located in Louisiana, 17 in
Mississippi, and 9 in Alabama, are closely linked to the health and
vitality of the local economies.\4\
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\4\ For further information, see the Winter 2005 issue of FDIC
Outlook, ``In Focus This Quarter: A Preliminary Assessment of the
Effects of Recent Hurricanes on FDIC-Insured Institutions,'' and in
particular ``Financial Characteristics of Banks Affected by Katrina.''
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Although most of these 120 institutions were financially strong
before the hurricanes, financial results to date do not yet provide a
clear picture of the full effects of the storms since many of the
institutions in the area continue to extend loan deferrals and are
still communicating with customers to develop long-term rebuilding
plans. Nevertheless, recent financial results provide some indications
of how the institutions may be reacting and adjusting to the effects of
the hurricanes. Post-hurricane data reveal that a number of
institutions operating in areas hit hard by Katrina are moving fairly
aggressively to build loan loss allowances and experienced a pick-up in
charge-off rates. Consistent with this, 20 institutions reported net
operating losses for the fourth quarter. Despite these losses, all
institutions remained ``well-capitalized'' or ``adequately
capitalized,'' reflecting the strong capital positions of most
institutions prior to the hurricanes. Liquidity for most of the
institutions also remains strong.
Looking ahead, there is considerable uncertainty regarding the
prospects for the financial institutions that are most directly
affected by the hurricanes. Over the medium-term horizon, the greatest
source of uncertainty and concern is the effect of the hurricanes on
credit quality. Over the longer-term horizon, the prospects for these
financial institutions will be determined largely by the economic
prospects of the communities they serve.
With respect to credit quality, the outlook for each institution
will depend on a variety of currently unknown factors, including
reimbursement amounts and timing of insurance proceeds, borrowers'
repayment capability, collateral protection, and the availability of
financial assistance programs. The FDIC is utilizing both supervisory
outreach and data analysis to assess the extent to which insured
institutions in the region may experience medium- to long-term credit
quality and profitability issues.
Our supervisory outreach started immediately after Hurricane
Katrina. The FDIC and other agencies contacted all 120 insured
institutions previously mentioned. Among the subjects we discussed with
the institutions' management were the degree to which there was a
significant decline in population in the institutions' trade area;
notable personnel shortages caused by employee relocations; extensive
commercial or residential lending activities within designated disaster
areas; and substantial structural or contamination damage to financial
institution facilities. This helped us gain some basic information to
identify which financial institutions should receive the most
supervisory attention.
During December 2005, examiners from the FDIC and the other
agencies visited many of these insured institutions. At these meetings,
the agencies asked bank management more detailed questions related to
the degree to which borrowers in the affected area had been contacted,
to what extent they were covered by insurance, and to what extent they
knew if their customers were capable of repaying their loans. Beginning
in January, the agencies resumed their comprehensive examination
programs that were suspended at the time of the storms.
In addition to this type of supervisory analysis, the FDIC is
conducting off-site research utilizing mapping tools and data from a
variety of sources to provide us with additional information. This
analysis involves using data from FEMA on damage assessments and flood
insurance coverage, along with data on financial institution loan
levels and deposits. We are working with other government entities and
organizations to research sources of information that will help
identify institutions with significant loan exposures in areas of the
Gulf Coast most severely damaged by the hurricanes. We then use off-
site stress testing tools to determine how vulnerable these
institutions may be to medium- to longer-term credit weakness under
various scenarios. Our analysis is ongoing, and we plan to share the
analysis with the insured institutions.
As a result of these efforts we have narrowed our focus from the
initial group of 120 institutions to a small group of institutions,
which we will continue to monitor the most closely. As suggested
earlier, the prospects for the financial institutions most affected
will depend in large measure on the efforts underway to rebuild and
revitalize the communities these institutions serve.
Next Steps
In addition to their regular supervisory activities, the Federal
regulatory agencies are hosting a forum in New Orleans on March 2 and
3. The Future of Banking on the Gulf Coast: Helping Banks and Thrifts
to Rebuild Communities will focus on short- and long-term challenges
facing banks and thrifts operating in areas affected by hurricanes and
ways to help these institutions rebuild their communities. The agencies
are inviting to this forum executives from all the community financial
institutions in the region, the larger regional financial institutions,
as well as a number of large institutions from around the country with
operations that are national in scope. State banking supervisors and
other Federal Government agencies will also participate in the forum.
The forum will promote an exchange among Gulf Coast community
financial institutions, national and regional institutions, and Federal
agencies involved in the
rebuilding effort. Executives from community financial institutions
will have an opportunity to discuss their experiences, the challenges
they face, and the ways that banking and governmental organizations can
collaborate to address these challenges. Executive officers of larger
financial institutions from across the region and the country will
discuss ways they may be able to help local financial institutions meet
the needs of consumers and businesses. Possible support that large
institutions may be able to provide community institutions include
operational assistance such as accounting or computer programming, loan
participations and purchases, and noncontrolling capital investments.
They will have the opportunity to explore with the community financial
institutions potential partnerships to revitalize and stabilize damaged
communities through the financing of housing and business development,
infrastructure improvements, and community services.
To ensure that these initiatives continue, one outcome of the forum
will be to establish a task force or working group comprised of
representatives of local community financial institutions and larger
regional and national financial institutions to facilitate ongoing
working partnerships.
Conclusion
Since the hurricanes first struck the Gulf Coast area last summer,
the resiliency of the local community financial institutions most
impacted by the storms has been impressive. The Federal regulatory
agencies are fully engaged with financial institutions in the region to
ensure that the adverse impact on the industry and their customers is
minimized to the extent possible. However, additional challenges for
community financial institutions in the disaster area may lie ahead.
Given the many uncertainties at this time, it is too early to determine
what impact the disaster will have on the long-term condition of these
institutions. We will continue to monitor closely the condition of the
affected financial institutions and will work closely with their
management so that we can appropriately address the challenges that
will likely arise in the future as this region recovers.
----------
PREPARED STATEMENT OF HERBERT MITCHELL
Associate Administrator, Office of Disaster Assistance
Small Business Administration
February 15, 2006
Good Morning Chairman Shelby, Ranking Member Sarbanes and
distinguished Members of this Committee. Thank you for inviting me to
discuss the continuing efforts of the Small Business Administration's
Office of Disaster Assistance to provide relief to the victims of
Hurricane Katrina. My name is Herb Mitchell, I am the Associate
Administrator for Disaster Assistance at the SBA.
The SBA Disaster Assistance Program, administered by the Office of
Disaster Assistance, is the primary federally funded, disaster-
assistance loan program for funding long-term recovery for renters,
homeowners, and nonagricultural businesses.
Hurricanes Katrina and Rita unleashed an unprecedented tragedy on
the Gulf Coast, demanding an unprecedented response from the Federal
Government, including the SBA. The numbers are staggering. In just the
first 70 days after Katrina hit, SBA received over 220,000 disaster
loan applications; and as of this week, the SBA has received over
375,000 applications, from victims in the Gulf Coast.
To put this in perspective--after the four hurricanes in 2004, SBA
received a total of 202,000 applications. That number is approximately
one-half of what we ultimately expect to receive as a result of
Hurricane Katrina.
The disaster affected an area of more than 90,000 square miles and
five States; we have mailed out millions of applications to home and
business owners in the Gulf Coast. Previously, the largest disaster SBA
has dealt with, the Northridge Earthquake, where 250,000 applications
were received over an 18 month period. That is a huge number and we
have easily surpassed that in this disaster. We very well may double
that number as we continue to receive new applications every day.
To date, of the total applications received, nearly 90 percent are
from homeowners. The remainder of applications are from businesses of
all sizes in the Gulf Area. This is a monumental change from previous
disasters. Typically, we see 3 in 4 applications being placed by
homeowners, but during this disaster that number has increased
dramatically to 8 in 9.
Despite the massive disaster and unprecedented volume of
applications, the SBA has responded. In 88 days, the SBA approved its
first billion dollars in disaster loans; since then it took the SBA
only 28 days to approve the second billion dollars, and just 17 days to
approve the third billion dollars. And as of today we have approved
over $4.3 billion dollars in disaster loans to over 60,000 homeowners,
renters, and businesses along the Gulf Coast. I credit this incredible
volume of loans being approved with the increased manpower, efficiency,
and capacity building of our processing systems, and the ability to now
reach parts of the region that were previously inaccessible.
We have gone from 880 to over 4,000 employees. Our approval systems
and processes have been ramped up to accommodate the extremely large
volume of loan applications.
Due to the improvements in loan processing capabilities, the SBA is
prepared to handle the next disaster. Prior to Hurricane Katrina, the
SBA used Northridge Earthquake as the worst-case-scenario in which to
base its models to prepare for future disasters. The disaster and
response triggered by Hurricane Katrina will replace the Northridge
earthquake as the basis for future preparations.
Chairman Shelby, I appreciate the opportunity to testify before you
today. I look forward to answering any questions that you or your
fellow Committee Members might have.
General Comment about the Data Used to Respond to Questions by
Alphonso R. Jackson
As you know, many of the questions from the Committee
relate to the extent of damage to assisted housing units and
HUD's estimated demand for disaster voucher program (DVP)
assistance as a result of Hurricanes Katrina and Rita.
To place the answers into context, we want to make clear
that several different sources of data are used to answer the
questions and the differences in the data sources will explain
differences in unit counts. The data sources are:
(1) FEMA Individual Assistance registrant information,
including unit inspection data, matched to the Social
Security Numbers of tenants of assisted housing (Vouchers,
Public Housing, Project-Based Section 8, Section 236,
Section 202, Section 811). These data allow for a direct
comparison of damage to occupied housing units across all
of HUD's programs. These data are also comparable to
previously released data on the extent of damage to all
housing units affected by the disaster
(http://www.dhs.gov/interweb/assetlibrary/
GulfCoast_HousingDamageEstimates_02l206.pdf).
The FEMA data are useful for measuring likely demand relative
to current take-up for the DVP program and an overall
discussion of how the disasters affect the affordable
housing stock overall, including units occupied by voucher
households.
They are not as useful for determining the exact impact of
the storms on public and assisted housing units because (1)
they only reflect occupied units and (2) they lump units
into only three broad categories of minor, major, and
severe damage. More detailed and comprehensive inspections
are required to assess the full extent of damage incurred
by individual public and assisted housing developments.
(2) Housing Authority of New Orleans (HANO) direct inspections
and cost estimates. HANO was the largest housing authority
to be substantially affected by Hurricane Katrina. At the
time Katrina struck, only 5,167 of the 7,100 HANO public
housing units were occupied. The FEMA data above only
report on occupied units. HUD's direct inspection reflects
development-level inspections for all 7,100 units plus a
substantial number of units under development at the time
of the storm. The data on extent and type of damage to each
development includes the estimated cost to repair.*
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*Held in Committee files.
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(3) Other affected PHA's in Mississippi and Louisiana. HUD
conducted phone surveys of all housing authorities in the
affected areas to determine the extent of damage. Housing
authorities provided preliminary assessments of their
damage based on either visual inspections or more thorough
inspections. Specific estimates from insurance adjusters
and contractor bids are just now being developed and are
not available yet for this analysis.
(4) Privately Owned Multifamily Insured and Assisted Housing
Units. After Hurricanes Katrina and Rita struck, the
Department immediately initiated its damage assessment
protocol and process for all HUD-assisted properties
(including the senior and disabled housing) in the affected
areas. The process included initial telephone assessments
(both of the physical plant as well as the status of the
residents) within the first week of the disaster, followed
by physical site visits to the properties receiving
moderate to severe damage and subsequent individual
meetings with each owner to discuss the repairs,
rehabilitation, or rebuilding of the property. The
Department has completed all site visits and has commenced
meetings with the property owners. As with the public
housing assessments, these estimates are based on damage to
the developments in total and do not categorize individual
units in the development as having minor, major, or severe
damage.
RESPONSE TO WRITTEN QUESTIONS OF SENATOR MENENDEZ
FROM ALPHONSO R. JACKSON
Q.1. It was mentioned that 10,000 public housing units were
destroyed and 3,000 needed substantial repair, but how many
public housing units have mold and water damage?
A.1. See response to question 1 of Senator Reed concerning the
assessment of damage to public housing, including conditions
related to mold and water damage.
Q.2. Please make available the plan for rebuilding the public
housing units.
A.2. See response to question 2 of Senator Reed concerning the
plan for rebuilding public housing units.
RESPONSE TO WRITTEN QUESTIONS OF SENATOR SARBANES
FROM ALPHONSO R. JACKSON
Q.1.a. HUD initially estimated that 65,000 families would be
eligible for the Katrina Disaster Housing Assistance Program
(KDHAP), based on the number of families who were in HUD-
assisted housing prior to Hurricane Katrina. At the hearing we
held on February 15, 2006, you indicated that somewhere between
24,000 and 32,000 families were eligible for KDHAP assistance.
How many families in the affected areas were in HUD-
assisted housing or had HUD assistance prior to Hurricane
Katrina? Please provide the numbers by program.
A.1.a. HUD has been making data available to the Committee on
likely demand for KDHAP/DVP assistance based on the best
available information at the time. Immediately after the
Hurricane Katrina struck, HUD lacked information on individual
household needs. As such, HUD's initial estimate of 103,000
affected assisted households was based on the number of HUD-
assisted households in the counties within the FEMA designated
areas for individual assistance. Not every assisted household
in those counties were actually affected or displaced by the
disaster.
When HUD was able to match its records on household
receiving assistance to the total number of FEMA registrant
households, it resulted in a more refined estimate of 65,000
eligible families. At the time, the registrant data did not
have information on the extent of unit damage for individual
households.
As of February 12, FEMA had conducted housing unit
inspections for most registrant households. In addition, DVP
funds will be made available to assist predisaster voucher
families that have returned to the most heavily impacted areas
of Louisiana and Mississippi, thereby freeing-up voucher
funding for combination with public housing funding, pursuant
to the Section 901 of the Department of Defense Appropriations
Act 2006. HUD's current low-end assessment of demand for the
DVP, by assisted housing program is based on the following:
As PHA's are permitted to substitute DVP assistance for
regular voucher assistance to facilitate reconstruction of
their public housing, the number of eligible recipients will
increase, possibly to as many as 32,000 units.
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\1\ HUD assumes that households that registered and had minor or no
damage and have not yet applied for KDHAP assistance have returned to
their unit. Analysis of the FEMA registrant data tends to confirm this.
Most households in housing units with primarily minor damage have the
same ``current address'' as ``damaged address.'' For those with minor
damage and a different current address, we assume they have returned
home as well and have had no reason to contact FEMA that would result
in their current address being updated.
Q.1.b. HUD staff have indicated that just over 15,000 families
are receiving KDHAP/DVP assistance, and less than 8,000 have
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leased apartments. Is this correct?
A.1.b. This number changes daily. As of March 8, 17,260
families had been referred to PHA's for admission. Just 10 days
later, as of March 18, 2006, approximately 20,600 families had
been referred to PHA's for admission to the DVP, and more than
12,350 of those families had leased units.
Q.1.c. Has HUD cross-referenced its list of families who were
receiving HUD assistance prior to Katrina with FEMA's database
of registered families to ensure that they are all receiving
some form of housing assistance? If not, how does HUD know that
all families are in stable housing situations? If HUD has
cross-referenced HUD data and FEMA data, please provide
information on how many formerly HUD-assisted households are
being assisted by FEMA, and how many were not found in FEMA's
database.
A.1.c. Yes, HUD did match FEMA-registered families against the
HUD databases for assisted families, rent roll data, and other
information sources to verify that the families received HUD
assistance prior to Hurricane Katrina. That matching allows us
to determine, as shown on the table for question 1a, that as of
March 8, nearly 9,400 households were likely eligible for
KDHAP/DVP assistance and have not yet been referred. It should
be noted that some households may not have registered with FEMA
while others may not have had their unit inspected by FEMA. In
those cases, HUD's 9,400 estimate on unmet demand would likely
be low.
HUD interpretation of FEMA rental assistance data is that
among those that have registered and have a unit inspection
showing damage that is major or severe, 40 percent appear to
have received FEMA rental assistance since November 2005. HUD
continues to do outreach to locate other households who are
eligible. In just 10 days between March 8 and March 18, more
than 3,000 additional households were referred to PHA's for
admission to DVP.
Q.2. Please provide for each public housing development in New
Orleans, the most up-to-date estimate of damage, and when HUD
or housing authority staff began, or will begin, clean-up and
recovery. How much money is available to pay for the necessary
repairs for each: Public housing capital, operating and Section
8 funds?
A.2. Estimate of Damage. The estimated cost to repair the
damage to each of HAND's public housing developments are as
follows:
More detailed descriptions on development damage can be
found in Attachment 1: Housing Authority of New Orleans (HANO)
Modernization, Development, and Maintenance Status Report.*
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*Held in Committee files.
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Clean up and Recovery. Clean up and recovery efforts for
HANO have begun. While this will be a long, tenuous process,
the following highlights some recovery efforts.
Initial Assessments are complete. HANO has completed
the initial assessment of each HANO property. Families are
returning to the Guste, Fischer, and St. Thomas
communities.
Procurement process to obtain vendors is underway at
BW Cooper. HANO staff and contractors are preparing a
statement of work and bids proposals for a quadrant of BW
Cooper.
Initial damage assessment and cost estimates for
repair of units are complete for St. Bernard, Lafitte, and
Desire. HANO staff have drafted preliminary damage
assessments and cost estimates.
Efforts in progress to reoccupy units at Iberville.
The HANO modernization staff is making advancement in
preparing units for reoccupancy. Currently,
387 units cleaned and repaired, and
384 units currently under contract for cleaning or
unit restoration.
Work requests are prepared for CJ Peete. HANO staff
and contractors have prepared work orders to mitigate
damages at CJ Peete. HANO staff is poised to mobilize and
complete repairs to units.
Available Funds for Repairs. Finally, HANO has $45,8096,613
in public housing capital funds and $6,538,210 in public
housing operating funds for use in repairing pubic housing.
HANO's voucher renewal funding for calendar year 2006 is
$67,588,571.
Q.3. Please provide details on what HUD is doing to assess
damage to senior and disabled housing developments, and what
actions HUD is taking to ensure these populations have housing
to return to in the affected areas.
A.3. HUD is working with affected housing authorities and
private owners to assess the damage to all of the assisted
developments, including those serving senior and disabled
residents. The introduction to these questions discusses the
different approaches HUD is using to assess damage.
For privately owned multifamily assisted developments, the
Department has encouraged owners to maintain contact with their
residents (especially with the senior and disabled). Based on
our meetings with the owners held to date, the owners are aware
of the locations of the senior and disabled residents as many
were relocated by the owners to other projects or are living
with relatives.
The Department conducted a group meeting with owners and
managers of damaged properties on January 27 in New Orleans.
Owners learned about loans, grants, and other programs
available to assist in their rebuilding from HUD, SBA, FEMA,
and State agencies. The Department anticipates conducting more
meetings of this nature in the future and continues to meet
with the property owners to determine next steps in repairing,
rehabilitating, or rebuilding the projects.
The goal is to preserve these affordable housing units to
the greatest extent possible. The Department has encouraged the
lenders to provide the flexibility and give forbearance on
mortgage payments. For HUD-held projects, the Department is
providing the necessary flexibility, approving mortgage
forbearances and a moratorium on foreclosures when necessary to
ensure the owners have the time to develop a plan and procure
the required financing to complete the work. The Department
also has been encouraging and working with the State agencies
to provide funding to multifamily rental projects that are in
need of repair or rehabilitation. The residents have a right of
first refusal to return to the project. In meetings with the
owners of the senior and disabled housing to discuss the next
steps to address the physical needs of the project, the
Department is also addressing the status of the necessary
supportive services that are provided through the community
(hospitals, pharmacies, availability of personnel, etc.) to
ensure that those services will be available when the project
is ready for occupancy.
Q.4. Many HUD grants are based on population and need in the
community. I am concerned that funding in the affected areas
will be reduced as a result of population loss at the very time
that many residents are trying to return to their homes and
communities. What is HUD doing to ensure that funding for
hurricane impacted areas does not decrease?
A.4. HUD does look at the ``need in the community,'' and will
use all available resources to support the redevelopment plans
of the Gulf Coast communities. While population changes need to
be considered, the HUD is focused on restoring the housing
resources that existed prior to the hurricane, allowing
families to return.
Q.5. Please provide the most recent data on FHA-insured
multifamily housing. How many units existed in LA and MS, how
much damage was sustained, and what is the estimated cost of
clean-up and repair? Please provide the same information for
Section 8 developments.
A.5. Prior to Hurricanes Katrina and Rita, Louisiana had 407
properties with either multifamily mortgage insurance, project-
based assistance, or both. Those properties had 35,943 units.
Mississippi had 422 properties with 31,024 units.
As noted above, the Department made an initial
determination of developments with minor, moderate, or severe
damage by surveying property owners over the telephone. On-site
visits were then made to all of the developments with severe
damage and some of the developments with moderate damage. Those
on-site visits allowed for developing estimates of total cost
to repair for the developments with severe damage.
The table below shows the result of the telephone survey
and cost to repair information for properties with FHA
insurance and properties with assisted units. Since there is
overlap between these sets of properties, the table also
provides a total properties count. These inspection data
currently do not indicate what proportion of the units in a
property that received damage. However, by dividing the
estimated cost to repair by the total units in a property, it
can provide some information on the extent of damage. The per
unit cost of repair for Louisiana severely damaged developments
is more than three times that of Mississippi severely damaged
properties.
To date, the Department's focus has been on the properties
with severe damage and dealing with the owners to rebuild the
projects as soon as possible.
Q.6. I have heard reports that in Katrina affected areas,
decreased housing supply and other factors have resulted in
increased rents. Has HUD analyzed this and made changes to its
Fair Market Rents? If so, please provide us with details on
when FMR's were changed, for what areas, etc. If not, please
explain why no analysis and/or change in FMR's has occurred and
whether HUD will do such a review of current rents.
A.6. Both the Baton Rouge and New Orleans rental housing
markets experienced enormous impacts from Hurricanes Katrina
and Rita. In New Orleans, the impacts were a combination of
damage that made over half of the inventory uninhabitable and a
massive increase in demand for the remaining units. The Baton
Rouge rental inventory also had some damage, but the influx of
New Orleans evacuees had a far greater impact and virtually
eliminated vacancies.
Surveys of both rental markets show effectively no
vacancies. Operating and repair costs have increased and
insurance costs, which were already very high, are expected to
further increase this year. Apartment complex survey data
indicate that rents have increased 25-30 percent in New Orleans
and 15-20 percent in Baton Rouge. These results are supported
by extensive field work by HUD economists who have been
researching local market conditions. In a Federal Register
Notice published March 6, 2006, HUD increased Baton Rouge FMR's
by 25 percent and New Orleans FMR's by 35 percent. The FMR
increases provided are believed adequate to reflect current
market circumstances and should cover at least part of the
expected additional increases anticipated this year. The
Department will continue to monitor this situation and modify
FMR's if significant further rent increases occur. The
increased FMR's for Baton Rouge and New Orleans are displayed
below:
HUD is currently conducting rent surveys in Beaumont-Port
Arthur, Dallas, Jackson, Houston, Little Rock, San Antonio and
Shreveport, all of which are housing significant numbers of
Katrina evacuees. The objective is to determine if disaster
evacuees have reduced pre-Katrina vacancies enough to result in
measurable rent increases. FMR increases will be issued if
justified by the survey results for any of these areas.
RESPONSE TO WRITTEN QUESTIONS OF SENATOR REED
FROM ALPHONSO R. JACKSON
Q.1. How many public housing and privately owned multifamily
assisted units were damaged, and of these, how many received
major or severe damage? How many were destroyed? How many units
are currently occupied? (In your answer, please provide
separate data for the public housing stock and the privately
owned stock.)
A.1. Using data from surveys of public housing authorities,
23,206 units sustained damage. Housing authorities report 716
units were destroyed. In the properties sustaining damage,
12,249 of the units were occupied as of March 10, 2006. It
should be noted that the term ``damaged'' has varied meaning,
ranging from minor damage (missing shingles, broken windows) to
severe damage (uninhabitable, complete gutting of unit needed).
Unit assessments of damaged/destroyed units in the Katrina-
impacted areas are continuing and the numbers reported to date
will change.
Using the data from a telephone survey of multifamily
property owners and on-site inspections of the developments
with severe damage, 7,487 units were in properties with modest
damage and 14,349 units were in properties with major/severe
damage or destroyed. Owners report 9,019 residents are
relocated as a result of damage.
Q.2. What is HUD's step-by-step plan to rebuild the public
housing and multifamily assisted housing stock in the
hurricane-affected areas (in your answer, please separate plans
for public versus private housing stock)? What is your timeline
for doing so? What steps will you take to avoid geographic
isolation and concentration of low-income households? Do you
anticipate changes in the number of units in this stock
compared to the pre-hurricane stock? If so, what types of units
will be increased or decreased in number? To what extent are
you coordinating with other agencies with regard to
environmental and infrastructure rebuilding?
A.2. Public Housing: Plans to rebuild pubic housing are locally
driven. PHA's will evaluate damage and make a determination on
the viability of the damaged units. PHA's are also filing
claims with their insurance carriers. Insurance reimbursements
will be the primary source of funding for repairs and
replacement of public housing damaged by Hurricane Katrina. To
assist the PHA's in their recovery efforts, the Department has
taken the following steps.
Awarded $29.7 million from the Capital Fund Reserve for
Emergencies and Natural Disasters to PHA's in the Gulf Coast
region during fiscal year 2005. These awards exhausted the
fiscal year 2005 Capital Fund Reserve and were made to PHA's in
the Gulf Region within several weeks of the disasters. As
mandated by Congress, HUD may only provide funding for
emergencies and natural disasters if there are appropriated
funds available from the Federal fiscal year in which the event
occurred. Currently, no other Capital Fund disaster assistance
is available for PHA's affected by Hurricane Katrina.
Provided technical assistance to PHA's in the impacted
area. HUD and contractor staff are working with housing
agencies to conduct physical needs assessments, complete
insurance applications, procure services to repair units, and
submit applications for various public and private resources.
Will permit combining voucher funding with public housing
funding. HUD will soon authorize certain PHA's in the most
heavily
impacted areas of Louisiana and Mississippi to combine voucher
funding and public housing for calendar year 2006 funding to
assist families who were receiving housing assistance under the
United States Housing Act of 1937 immediately prior to
Hurricane Katrina or Rita and were displaced from their housing
by Hurricanes Katrina or Rita. This combining of funds was
authorized by Section 901 of the Department of Defense
Appropriations Act 2006, (Public Law No. 109-148).
Multifamily Assisted: For the multifamily assisted housing
stock, the Department immediately initiated its damage
assessment protocol and process for all HUD-assisted properties
(including the senior and disabled housing) in the affected
areas. The process includes initial telephone assessments (both
of the physical plant as well as the status of the residents)
within the first week of the disaster, followed by physical
site visits to the properties receiving moderate to severe
damage and subsequent individual meetings with each owner to
discuss the repairs, rehabilitation, or rebuilding of the
property. The Department has completed all site visits and has
commenced meetings with the property owners.
The Department continues to meet with the property owners
to determine next steps in repairing, rehabilitation, or
rebuilding the projects. In addition, the Department conducted
a group meeting with owners and managers of damaged properties
on January 27 in New Orleans. Owners learned about loans,
grants, and other programs available to assist in their
rebuilding from HUD, SBA, FEMA, and State agencies. The
Department anticipates conducting more meetings of this nature
in the future.
The owner is responsible for developing a plan that
includes a work write-up, cost estimate, and identification of
sources of funds to pay for the work to be completed. HUD is
requiring that those plans be reviewed and approved by the
Department.
There is no definitive time frame for repairing the
properties. The Department is working with each individual
owner to develop the plan. The Department's goal is to repair,
rehabilitate, or rebuild these units as soon as possible but
owners are experiencing difficulties with insurance companies
regarding damage assessments and the amount of insurance
proceeds that is delaying these efforts. We are requesting
owners develop a secondary plan in the event insurance proceeds
are not forthcoming in a timely manner.
Q.3. Under Section 504 regulations, at least 5 percent of new
HUD housing must be accessible to persons with mobility
disabilities and another 2 percent must be accessible to
persons with sensory disabilities. However, according to census
data, many areas in the Gulf region have disability rates of
over 20 percent. Reports suggest that a large portion of the
accessible housing stock was destroyed or severely damaged
during the disaster, making it likely that the accessible,
affordable housing supply is inadequate to meet demand in the
region. What steps will HUD take to remedy shortages in
disabled and elderly housing? What is the timeline for
implementing these steps? What specific steps will HUD undergo
to require housing authorities to match persons with
disabilities and elderly with accessible units consistent with
individual needs? Will HUD enforce the Section 504 regulations
in the unfortunate event that housing authorities and local
jurisdictions in the Gulf region fail to honor their
obligations in terms of rebuilding accessible housing?
A.3. As housing in the Gulf Coast area is rebuilt following the
destruction caused by the hurricanes, one of the Department's
key concerns will be ensuring that such housing is rebuilt in
accordance with the accessibility requirements of Federal law.
All ground floor units of multifamily housing in nonelevator
buildings with four or more units must be built in compliance
with the accessibility requirements of the Federal Fair Housing
Act. In elevator buildings with four or more units of
multifamily housing, all units must meet the Fair Housing Act
accessibility requirements. Units subject to these
accessibility requirements, which apply to both public and
private housing, must be accessible to or adaptable for use by
individuals with disabilities.
In addition to the Fair Housing Act requirements, housing
built with Federal financial assistance and housing built by
State and local governments must comply with the accessibility
provisions of Section 504 of the Rehabilitation Act of 1973
(Section 504) and Title II of the Americans with Disabilities
Act (ADA). The regulations implementing those two statutes
require at least 5 percent of the units to be accessible to
persons with physical disabilities, including people who use
wheelchairs, and at least 2 percent of the units to be
accessible to persons with vision and hearing impairments, in
accordance with the Uniform Federal Accessibility Standards.
The Department has the authority to require greater percentages
of units to be accessible to persons with disabilities pursuant
to 24 CFR Sec. Sec. 8.22(c) and 8.23(c) if census or other
available data indicate a greater need for accessible housing.
The Assistant Secretary for Fair Housing and Equal
Opportunity will be working with the Assistant Secretary for
Public and Indian Housing and the FHA Commissioner to ensure
that plans for newly constructed and substantially renovated
public housing incorporates an appropriate number of accessible
units given the needs of persons with disabilities in the areas
served.
Q.4. Last week, HUD issued instructions to public housing
authorities on how to administer its voucher program for people
who were homeless prior to Katrina. Since 6 months have elapsed
since the hurricanes, how does HUD intend to reach those who
are eligible for assistance, but are now scattered across the
Nation?
A.4. The Office of Special Needs Assistance Programs (SNAP's)
used the Continuum of Care planning structure to inform
homeless service providers and other interested parties of the
availability of the Katrina Disaster Housing Assistance Program
(KDHAP) and the Disaster Voucher Program (DVP). CoC's both in
the affected areas as well as in areas where eligible
households relocated identified a single agency to act as the
gatekeeper or central administering agency for KDHAP. These
agencies used their CoC
networks to inform all stakeholders of the availability of
KDHAP and DVP and the respective application processes. SNAP's
and the Office of Housing Opportunities for Persons with AIDS
(HOPWA) used listserv postings and direct email contact to
alert service providers and other stakeholders of enhancements
and changes to KDHAP and DVP. Additionally, persons calling the
RCC numbers who were screened as homeless or in HUD special
needs housing prior to Katrina were transferred to a contractor
trained to collect additional information from the households
and submit their information directly to HUD for inclusion in
the DVP database.
Q.5. How many households in the hurricane-affected areas in
Louisiana, Mississippi, and Alabama were receiving assistance
from the following programs prior to Hurricanes Katrina and
Rita: Section 8 vouchers; Section 8 project-based; Section 202;
Section 811; Public Housing; and other types of assisted or
insured units (please specify number of households by program
type).
A.5.
Q.6. How many of the households you listed in each category in
Question 11 were displaced by the hurricanes? What source(s) of
data are you using to determine your answers to the previous
questions?
A.6. The number of households displaced changes on a daily
basis. According to FEMA inspection data, over 41,000
households receiving HUD assistance had some damage to their
housing unit. Most of these households, and households with no
damage at all, were likely displaced at some time prior and
shortly after the storm. Over time, many households have moved
back to their units, even if those units had minor damage.
Households most likely to
experience long-term displacement are those households in units
that experienced major or severe damage. These homes require
substantial repairs just to make them habitable. Matching the
FEMA inspection data to HUD's data shows approximately 15,199
previously occupied units in this category. In addition, as
property owners make repairs to units with minor damage, some
occupants are likely to be temporarily relocated when work is
underway. The table below provides FEMA Individual Assistance
damage inspection data by program.
Q.7. Regarding HUD's interim assistance for those displaced by
the hurricanes, how many households are receiving assistance
under the Katrina Disaster Housing Assistance Plan (KDHAP) or
its successor, the Disaster Voucher Program (DVP)? Of the
people receiving assistance under DVP (or KDHAP), what type of
housing
assistance did they previously receive? Of the people receiving
assistance under DVP, how many people were homeless? Initial
statistics suggest that the number of households eligible for
KDHAP and DVP is substantially greater than the number actually
receiving them. Eligible households that do not receive
assistance under these programs may have difficulty
reestablishing their housing assistance status in the future,
so it is particularly important that they be identified and
offered DVP assistance. What steps are you taking to locate
these households?
A.7. As of March 14, 2006, approximately 8,500 families were
receiving DVP assistance. The predisaster HUD assistance for
these families was primarily vouchers (6,450 families), public
housing (1,200 families), and multifamily housing programs (600
families). Twenty of the DVP participants were homeless prior
to the hurricanes. With respect to identifying families
eligible for the DVP and offering DVP assistance, HUD has
aggressively tried to locate these individuals through
postcards, phone calls, and placing key HUD staff in various
locations and Disaster Resource Centers. We are continually
trying to update invalid addresses and phone numbers to ensure
that we have the most current information on the
affected families for further contact. We are also working with
specific PHA's in the federally declared disaster areas to
identify families that have returned home to their predisaster
assisted housing. HUD' s response to question 1 of Senator
Sarbanes provides a detailed analysis of the likely unmet
demand for DVP assistance.
Q.8. In other disasters, the government has established a
centralized mechanism for families to receive information and
assistance regarding available safe rental units for voucher
holders and for those with FEMA rental assistance. Evacuees
have reported minimal mechanisms for receiving this type of
information. Aside from HUD's toll-free number for families
receiving HUD assistance, what other coordination is HUD
undertaking to provide support for locating decent housing? How
are displaced households tracked and informed of available
options?
A.8. HUD has facilitated housing vacancy information and
leasing assistance for the families eligible to participate in
the KDHAP and the DVP through several actions. For example,
eligible families advise a Referral Call Center (RCC) counselor
where they wish to receive housing assistance. The RCC
counselor calls the PHA in the area to which the family wants
to move to inquire whether there are vacancies in the unit size
the family needs. If suitable housing is not available, the RCC
counselor asks the family to select an alternate location.
After the family is referred to a KDHAP or DVP PHA, that PHA
provides extensive housing search assistance and landlord
outreach for the family.
HUD has also hired a contractor to conduct research and
post a listing of housing vacancies. The contractor is working
with apartment associations, owners, PHA's, HUD field offices
and others to identify vacancies in the locations where the DVP
families want to live. This vacancy information is posted on a
website accessible to the RCC and PHA's for use in assisting
families. Unfortunately, in the areas where many families want
to live such as New Orleans and Baton Rouge, there are little
to no rental housing vacancies. See also the response to
question 6 of Senator Sarbanes.
In addition, the Office of Housing has been contacting
owners of HUD-assisted housing throughout the country to
identify vacant units that could house evacuees. We have and
will continue to provide this listing to FEMA and other State
and local agencies that are placing evacuees in housing units.
We initially identified over 13,000 units in surrounding States
and approximately 42,000 units nationwide.
The Department is also in the process of establishing a
National Housing Locator that will assist in identifying vacant
units and will provide this service to individuals/families
looking for housing year around.
Immediately after Hurricane Katrina struck, the Department
worked with PHA's throughout the country to identify vacant
public housing units and available vouchers that could be
utilized for evacuees. As you know, PHA's are also
administering the KDHAP and DVP programs to provide temporary
housing assistance for the HUD-assisted families immediately
prior to Hurricanes Katrina and Rita.
The Department also placed several thousand families in
single-family HUD-owned homes in the surrounding States. The
Department assisted in getting the necessary income waivers for
the Low Income Housing Tax Credit projects so that evacuees
were able to relocate into units in those projects.
In addition, HUD established a Disaster Recovery Assistance
website, following the events of September 11, 2001, that
provides information on how HUD can provide critical housing
and community development resources to aid disaster recovery.
(See Overview of HUD Assistance for Disaster Recovery at
www.hud.gov/disarelf.cfm.) HUD's Disaster Recovery Teams are
located in offices throughout the country and the HUD Regional
Directors have the authority for coordinating HUD's disaster
relief efforts.
In September 2005, HUD worked with other organizations to
set up ``one-stop'' centers in major shelters across the
Nation--from the Reunion Arena in Dallas to the DC Armory here
in Washington. These centers allowed HUD officials to meet one-
on-one with evacuees and determine how the Department could
assist them in finding housing in their host city. In the first
few weeks after Katrina hit, we placed nearly 10,000 families
in subsidized units. To date, HUD employees in 20 cities across
the country continue to serve evacuees. FEMA's Disaster
Recovery Centers are readily accessible facilities or mobile
offices where applicants may go for information about FEMA or
other disaster assistance programs. DRC's played a significant
role in helping victims understand temporary housing options
and in the support of the overall housing mission. HUD worked
with FEMA in the affected areas to ensure that either HUD staff
or literature regarding HUD programs was available at both the
Disaster Recovery Centers and Joint Field Offices.
Through our multifamily assisted housing owners, the
Disaster Recovery Centers, the website mentioned above and the
PHA's, residents are being advised of the options available to
them regarding both temporary and permanent relocation.
Q.9. Many low-income renter households who met the eligibility
criteria for housing subsidies did not receive such subsidies
prior to Katrina. The hurricanes destroyed or damaged much of
the relatively cheap rental stock. Rental units constructed
post-Katrina (including tax credit units) are likely to have
higher rents that would be unaffordable to many of these low-
income households. Based on the Department's data on incomes in
renter households prior to Katrina and on the Department's data
for construction costs for standard quality units, what is your
best estimate on the likely increase in the severity of
affordability difficulties in rebuilt Katrina-affected areas?
What are your recommendations on addressing these affordability
issues?
A.9. Significant damage to the housing of low-income renters.
As the tables below show, Hurricanes Katrina and Rita caused
major or severe damage in Louisiana and Mississippi to over
265,000 housing units. Forty-four percent of the damaged
housing units were occupied by households with incomes less
than 50 percent of the area median income.\2\ Of the over
88,000 unassisted rental housing units to have major or severe
damage, approximately 61 percent were occupied by households
with incomes less than 50 percent of area median.
---------------------------------------------------------------------------
\2\ The determination of very low-income is based on both household
income and household size. For example, in the New Orleans Metropolitan
Area, a family of 3 with an income less than $22,950 is considered very
low-income (less than 50 percent of area median). A single person
household would have to have an income less than $17,850 to be
considered very low-income. The comparable poverty threshold for a
family of 3 is approximately $15,200 and for a single-person household,
$9,800.
---------------------------------------------------------------------------
Low rents but also low-incomes. The 2004 American Community
Survey shows that the median gross rent paid nationally was
$694. In Louisiana, it was $540 and in Mississippi it was $529,
more than 20 percent lower than the Nation. Incomes, however,
were similarly low. The 2004 median income nationally was
$44,684. In Louisiana, it was $35,110 and in Mississippi it was
$31,642, also more than 20 percent lower than the Nation.
What this means is that although rents were low, similarly
low-incomes left many households paying a high proportion of
their income for rent prior to Katrina. Special tabulations of
Census 2000 data found 47 and 44 percent of the very low-income
households in Louisiana and Mississippi overcrowded or paying
more than 50 percent of their income for rent. This rate of
overcrowding and cost burden for very low-income households was
somewhat lower than the national rate of 50 percent.
Low rents also means inadequate housing. Many households
also had inadequate housing. One function of low rents is that
houses are not maintained. The 2004 American Housing Survey for
the metropolitan areas of New Orleans, for example, found that
20 percent of renter households with incomes less than 150
percent of poverty \3\ had moderately or severely inadequate
housing.
---------------------------------------------------------------------------
\3\ One hundred fifty percent of poverty is roughly equivalent to
50 percent of median income in the New Orleans metropolitan area.
An opportunity to build better. While the disaster has had
a terrible impact on these communities and their residents, the
rebuilt housing can and should be better built than the pre-
Katrina housing it is replacing. It will be built to higher
codes and it will be built to better survive future flooding.
Data from the Small Business Administration on estimated costs
to repair the seriously damaged properties provides an average
repair cost of approximately $95,000. If mitigation expenses
add an average of $20,000 per unit, the average cost per
damaged unit is approximately $115,000. If all 88,000
unassisted pre-Katrina rental units that had serious damage
were repaired or replaced, the cost is estimated at $10.1
billion.
Many of the sources of funds for this rebuilding are
already in place. Insurance proceeds, FEMA mitigation funds,
Small Business Administration low-interest loans, Low Income
Housing Tax Credits, and Community Development Block Grant
funds are already available to begin this rebuilding effort.
The challenge ahead is to facilitate the efficient use of these
resources to ensure that the rebuilt homes are reasonably
affordable.
Predicting affordability needs post-Katrina. It is
difficult to predict affordability post-Katrina. Constrained
housing supply is likely to push the rents of unassisted
housing units up in the short to medium-term. At the same time,
constrained labor supply, due to the limited housing, is also
likely to push up incomes for households willing and able to
work. For employed households, this may result in a balance.
For households on a fixed income, however, any increase in
rent will impact them very hard. While decisions on how to
expend their Community Development Block Grant and Low Income
Housing Tax Credit funds are at the discretion of the State, we
will continue a dialogue with the States on what their plans
are to develop affordable housing for their low-income elderly
and disabled residents who wish to return.
RESPONSE TO WRITTEN QUESTIONS OF SENATOR SARBANES
FROM DONALD E. POWELL
Q.1.a. The Banking Committee has heard a great deal of
testimony in prior hearings about the important role public
transit plays in communities both as a provider of mobility and
as a catalyst for economic growth. This testimony suggests that
as the rebuilding of the Gulf Coast goes forward, those with a
role in the process should make sure that adequate transit is
included in the rebuilding plans. It does not matter which
areas are rebuilt if they are inaccessible. As Coordinator of
the rebuilding process, what are you doing to ensure that
transit is being fully integrated into the recovery plans?
A.1.a. In order to leverage fully and effectively the expertise
and resources of the Federal Government we have established a
system of Working Groups through the Office of the Federal
Coordinator for Gulf Coast Rebuilding (OFC). These Working
Groups are staffed by policy and programmatic experts drawn
from across the agencies and departments of the Federal
Government and tasked against eight subject areas essential to
Security, Community, and Economy. These eight groups are
Environmental Management, Public Safety, Housing, Healthcare,
Education, Critical Infrastructure, Community and Faith-Based
Organizations, and Economic Development.
We have been working with the U.S. Department of
Transportation (DOT) as a part of our Infrastructure Working
Group. This Working Group has articulated the guiding
principles that inform the Federal response in this area and
its members are working closely with local leaders and
decisionmakers to recognize the greatest challenges and highest
priority needs of the affected region.
From the immediate aftermath of Hurricane Katrina, the
Administration has utilized transit as a crucial part of the
recovery and rebuilding effort. In coordination with DOT and
the Federal Transit Administration (FTA), we have successfully
helped to reinitiate transit service and helped to plan the
future transit needs of the region.
FTA is administering a $47 million FEMA mission assignment
for emergency transportation services in Baton Rouge and New
Orleans which began on October 1, 2005, and extends through
June 30, 2006. FTA is also administering a $19 million mission
assignment with LADOT for rural transit services that was
awarded on January 19, 2006, and runs through June 30, 2006.
These mission assignments pay for passenger service,
operations, and maintenance of the transit system. The Federal
Aviation Administration is administering a mission assignment
that provides commuter bus service between Baton Rouge and New
Orleans.
In addition, FTA also implemented two FEMA mission
assignments for Mississippi worth a total of $2.4 million for
bus services. The assignments expired and the Mississippi
Emergency Management Agency did not ask FEMA for an extension.
As with Louisiana, these mission assignments paid for passenger
service, operations, and maintenance of the transit system.
With the FTA providing technical support, the New Orleans
Regional Transit Authority (NORTA) has restored limited service
on 28 (54 percent) of the 52 pre-Katrina bus routes and a part
of the streetcar lines within the City of New Orleans. NORTA is
also
operating in Baton Rouge to address the increased population's
transit needs due to the population relocation from the
hurricanes. Currently, NORTA carries approximately 17,000 daily
riders to jobs and services in Baton Rouge and New Orleans, as
well as supports New Orleans' reemerging tourist industry.
To assist the local authorities in expediting transit
projects, DOT deferred NORTA's local match requirement for
Federal transit funds for 5 years, allowing the agency to begin
buying supplies, repairing buses and equipment, and rebuilding
damaged streetcar lines using Federal transit money without
having to first secure local matching funds. DOT took a similar
action for Mississippi transit.
The FTA continues to work with the local authorities to
develop financing and construction plans for the rebuilding of
the local transit infrastructure. This includes the repair of
the New Orleans streetcar system and the repair and replacement
of transit buses.
The FTA also provides ongoing technical support to
stakeholders in the region to develop short- and long-term
transit plans for the Baton Rouge and New Orleans metropolitan
areas and the Gulfport Biloxi area. These discussions include
the feasibility of commuter rail operations between Baton Rouge
and New Orleans, streetcar extensions within the city of New
Orleans, and growth and development patterns arising from the
relocation of New Orleans residents after Hurricane Katrina.
The FTA has invested $1 million so far in transit planning for
these areas.
Q.1.b. Who are you working with from the transit sector in
planning for the rebuilding of the affected areas?
A.1.b. FTA is working with the transit systems in the affected
areas (NORTA in New Orleans and Coast Transit in the Biloxi/
Gulfport area), the State transportation agencies for rural
transit systems, and the metropolitan planning organizations
for regional transportation issues. Additionally, FTA has
brought in consultants to help support this work.
RESPONSE TO WRITTEN QUESTIONS OF SENATOR REED
FROM DONALD E. POWELL
Q.1.a. Before redevelopment of a viable economy may take place
in Katrina-affected areas on a large scale, a number of issues
must be addressed, such as long-term levee strength, flood
plain designations, debris clearance, job development, physical
infrastructure
improvement, housing, and social infrastructure enhancement
(including educational institutions, libraries, etc.). What
actions is the Gulf Coast Rebuilding Council taking to ensure
the serious health and safety concerns are resolved?
A.1.a. In order to leverage fully and effectively the expertise
and resources of the Federal Government we have established a
system of Working Groups through the Office of the Federal
Coordinator for Gulf Coast Rebuilding (OFC). These Working
Groups are staffed by policy and programmatic experts drawn
from across the agencies and departments of the Federal
Government and tasked against eight subject areas essential to
Security, Community, and Economy. These eight groups are
Environmental Management, Public Safety, Housing, Healthcare,
Education, Critical Infrastructure, Community and Faith-Based
Organizations, and Economic Development.
As a part of our Environmental Management Working Group we
have been working across the Federal Government and with State
and local officials to address the health and safety concerns
in the affected region. This Working Group's members are
working closely with local leaders and decisionmakers to
recognize the greatest challenges and highest priority needs of
the affected region.
The U.S. Environmental Protection Agency (EPA) has been
working extensively in the affected region since immediately
after Katrina. To date, EPA has completed, for areas under FEMA
Mission Assignments, over 50 percent of the household hazardous
waste collection in Louisiana and over 75 percent household
hazardous waste collection in Mississippi. Total obligations
from FEMA Mission Assignments by the EPA to meet the health and
safety concerns in the Gulf Coast region exceed $450 million.
The U.S. Department of Labor's (DOL) Occupational Safety
and Health Administration (OSHA) has provided technical
assistance at almost 16,000 worksites engaged in electrical
work, repair of power lines, tree trimming operations, roofing,
debris removal, demolition, and other response activities, and
has intervened directly to remove over 55,000 workers from
serious hazards. Under the Worker Safety and Health Annex to
the National Response Plan, OSHA is coordinating safety and
health assistance to Federal Agencies responding to the
hurricanes, including FEMA, U.S. Army Corps of Engineers, HHS,
and EPA. OSHA has collected and reported on more than 7,500
personal samples of workers' potential exposure to hazardous
materials during response and recovery operations. Through the
Annex, OSHA is working with the National Institute of
Environmental Health Science (NIEHS) to provide worker safety
and health training to the Federal assets involved in the
response. Together with the U.S. Department of Health and Human
Services' Substance Abuse and Mental Health Administration,
OSHA is coordinating psychological first aid for responders.
Q.1.b. Ensure the investment of private market actors, such as
lenders and developers?
A.1.b. While OFC cannot ensure the investment of private market
actors, we have been assisting the affected States as they
formulate their plans for the economic development of the
region. The role of the Federal Government in the return of
previous employers to the Gulf Coast, and in the attraction of
new industries and investment, is to rebuild stronger hurricane
protection; assist in the renewal of housing stock; create
strong incentives for the private market to participate in the
renewal of the region wherever appropriate; and support the
State in restoring basic services to its communities to attract
new workers and returning residents. At the end of 2005, the
President signed into law the Gulf Opportunity Zones Act (or GO
Zones). This legislation, providing approximately $8 billion in
tax relief over 5 years, will help revitalize the region's
economy by encouraging businesses to create new jobs and
restore old ones. Some of the principal provisions within the
GO Zone include tax-exempt bond financing for both residential
and nonresidential property, provision of 18 times the usual
amount of low-income housing tax credits, bonus depreciation,
and expensing for certain demolition and clean-up costs, just
to name a few.
In addition, to assist the States in their efforts to
rebuild and improve the economic framework the region, OFC has
been actively engaged in promoting the economic development of
the region. Chairman Powell has hosted several sessions with
potential invest mentors in the region. An additional meeting
to focusing on mortgage funding and investment in Louisiana is
planned for March 2006. Examples of specific meetings include:
Federal National Mortgage Association Meeting--January
3, 2006--To discuss housing and mortgage issues; and Fannie
Mae's efforts in the region since Hurricane Katrina.
Mississippi Lenders Meeting--February 17, 2006,
Jackson, MS--To discuss the administration of the $4.5
billion Community Development Block Grant housing funds.
Agenda items include: Grant Process, Application Process,
and the Mortgage Holder Process and involvement. The MDA
will present their plans and seek advice from attendees in
preparation for rebuilding some 35,000+ houses in
Mississippi. This meeting will include Governor Haley
Barbour and representatives from the Mississippi
Development Authority, Fannie Mae, MS Community Business
Center, Wells Fargo Home Mortgage, JPM Chase, Citigroup
Mortgage, Washington Mutual, Greentree Servicing, Trustmark
National Bank (Jackson), Peoples Bank of Biloxi, Hancock
Bank (Gulfport), Bancorp South (Tupelo), American General
Financial Services, and HUD.
Numerous meetings and detailed conversations on
related issues with other national lenders, including:
Countrywide Funding of Los Angeles, JPM Chase, Citibank,
and others.
The OFC staff has met with contractors, developers,
and community interest groups throughout the region,
including: ACORN, Habitat for Humanity, National Low-Income
Housing Coalition, Business Roundtable, KB Homes, Shaw
Group, Bechtel, Portland Cement Association, International
Union of Operating Engineers, Laborers' International Union
of North America, Iron Workers Union, International Union
of Painters and Allied Trades, U.S. Chamber of Commerce,
U.S. Black Chamber of Commerce and others.
Last, OFC is working with the U.S. Department of
Commerce on the upcoming ``Gulf Coast Business Investment
Mission,'' May 4-5, 2006, to highlight investment
opportunities in the Gulf Coast, including Federal GO Zone
tax incentives as part of an effort to promote economic
growth and job creation in the region following hurricanes
Katrina and Rita. The tour will target businesses looking
to make investments greater than $5 million in the region.
Initial reaction has been positive. Several outreach/
recruitment sessions are planned.
Q.1.c. Ensure employers return to the affected areas?
A.1.c. The role of the Federal Government in the return of
previous employers to the Gulf Coast, and in the attraction of
new industries and investment, is to rebuild stronger hurricane
protection; assist in the renewal of housing stock; create
strong incentives for the private market to participate in the
renewal of the region wherever appropriate; and support the
State in restoring basic services to its communities to attract
new workers and returning residents. At the end of 2005, the
President signed into law the Gulf Opportunity Zones Act (or GO
Zones). This legislation, providing approximately $8 billion in
tax relief over 5 years, will help revitalize the region's
economy by encouraging businesses to create new jobs and
restore old ones. Some of the principal provisions within the
GO Zone include tax-exempt bond financing for both residential
and nonresidential property, provision of 18 times the usual
amount of low-income housing tax credits, bonus depreciation,
and expensing for certain demolition and clean-up costs, just
to name a few.
As previously mentioned, in order to leverage fully and
effectively the expertise and resources of the Federal
Government we have established a system of Working Groups
through the Office of the Federal Coordinator for Gulf Coast
Rebuilding (OFC). The Economic Development Working Group has
articulated the guiding principles that inform the Federal
response, taken inventory of existing Federal programs and
funds available to the affected regions, and its members are
working closely with local leaders and decisionmakers to
recognize the greatest challenges and highest priority needs of
the affected region.
To help provide businesses with the skilled workers they
need when returning to the affected areas, the Department of
Labor's Employment and Training Administration (ETA) has
provided a total of $12 million to the States of Texas,
Alabama, and Louisiana to enhance their capacity to provide
training in industries such as construction, energy,
healthcare, transportation, and safety/security which are
critical to the economic recovery in the Gulf region.
ETA has also provided an additional $10 million to the
States of Louisiana and Mississippi through the Pathways to
Construction Employment Initiative that will help provide
employers with skilled workers in the residential, commercial,
industrial, heavy highway construction sectors, as well as the
heavy marine construction and shipbuilding sectors. As part of
these Pathways to Construction grants, industry partners will
conduct basic outreach in their local communities to increase
employer awareness of these programs.
In addition, DOL has provided assistance to the directly
affected Gulf States to (a) hire workers in temporary disaster
relief employment in coordination with FEMA in the disaster
area to assist in the clean-up, demolition, repair, renovation,
and reconstruction of damaged and destroyed public sector
structures, facilities, and lands within the disaster; (b) hire
workers to work on projects that provide food, clothing,
shelter, and other humanitarian assistance or other public
sector jobs; and (c) train those workers who do not have jobs
to return to in high demand occupations in order to provide a
skilled workforce for jobs with the returning employers. The
presence of a skilled workforce is an incentive for employers
to return to the affected areas.
Using National Emergency Grants (NEG) under the Workforce
Investment Act NEG Disaster Relief Employment Assistance
Program and the Flexibility for Displaced Workers Act (P.L.
109-72), more than $191.1 million was provided to States
directly impacted by the hurricanes including Alabama ($4
million), Louisiana ($62.1 million), Mississippi ($50 million),
and Texas ($75 million) for temporary disaster relief jobs to
assist in clean up activities and to train the affected workers
in high-growth demand occupations in order to create a more
skilled labor force. These funds are projected to assist
approximately 63,000 individuals. In addition, DOL awarded $16
million to evacuee States to assist more than 20,000 evacuees
by placing evacuees in temporary public sector employment,
working on projects that provide humanitarian assistance to
other evacuees, and providing training in high-demand
occupations. Since the recovery efforts in the Gulf Coast
region began, more than 48,200 individuals have been provided
either temporary jobs or other workforce services under the
National Emergency Grants, with almost 5,800 individuals
currently enrolled in temporary jobs. As of the last week in
March, over 3,800 hurricane affected workers were enrolled in
training programs in 9 States, with another State set to launch
a large retraining effort in the next few weeks.
Q.1.d. Ensure that housing will be sufficient for employees to
return to the affected areas?
A.1.d. In the short-term, the Federal Government through FEMA
is actively working to provide temporary housing relief to the
affected regions:
89,379 mobile homes and travel trailers are occupied
(as of March 10).
5,998 mobile homes and travel trailers are ready for
occupancy but are vacant (as of March 10).
$4.65 billion to 1,734,148 approved Individual
Assistance applicants for temporary housing (includes
rental assistance), expedited assistance, and personal
property, including $5.38 billion in assistance to
1,054,732 approved applicants under the Individual Housing
Program (IHP) for Katrina in all States (as of March 10).
For the longer-term rebuilding effort, a main principle
that guides our Office is that rebuilding should not become an
exercise in centralized planning. If Federal bureaucrats
determine the path of rebuilding, local insight and initiative
will be overrun and local needs overlooked. In that spirit,
each affected State has brought together their best and
brightest minds to create a plan that meets their respective
needs. Louisiana has formed the Louisiana Recovery Authority
and Mississippi has formed the Mississippi Development
Authority to formulate both a policy and a strategy for moving
forward. Each State organization has submitted a housing plan
for public comment, and Mississippi has already received a
``green light'' approval from HUD indicating that their plan is
heading in the right direction. Once both plans complete the
public comment period the final plan will be resubmitted to
HUD.
The $11.5 billion in Community Development Block Grant
(CDBG) funds which Congress set aside as a part of the Defense
Reallocation package in December 2005 is critical to the
support of those plans. In Louisiana, as we build the hurricane
protection system structurally stronger and better, we must
also allow the State to rebuild their housing stock in a safer
and smarter manner, protecting the lives and assets of their
residents. In order to meet the unique flood vulnerability
needs of Louisiana, the President has requested $4.2 billion in
additional Community Development Block Grant funds for
Louisiana, as a part of the recent Supplemental, to address its
plans for future flood mitigation measures to protect
residents, housing, and critical infrastructure.
Q.1.e. Ensure the improvement of physical infrastructure in the
area?
A.1.e. For the immediate term recovery of physical
infrastructure in the area, FEMA's Public Assistance Program
has been working to meet the needs of the affected area.
Overview of FEMA's Public Assistance Program
FEMA's Public Assistance Program provides supplemental
Federal disaster grant assistance for the repair, replacement,
or restoration of disaster-damaged, publicly owned facilities
and the facilities of certain Private Non-Profit (PNP)
organizations. Eligible PNP facilities must be open to the
public and perform essential services of a governmental nature.
Eligible PNP facilities generally include the following:
Medical facilities, such as hospitals, outpatient, and
rehabilitation facilities.
Custodial care facilities that provide institutional
care for persons who require close supervision and some
physical constraints in their daily activities.
Educational facilities, such as primary and secondary
schools, colleges, and universities.
Emergency facilities, such as fire departments, rescue
squads, and ambulance services.
Public utilities, such as water, sewer, and electrical
power systems.
Museums, zoos, community centers, libraries, homeless
shelters, senior citizen centers, shelter workshops, and
facilities which provide health and safety services of a
governmental nature.
Eligible Work
To be eligible, the work must be required as the
result of the disaster, be located within the designated
disaster area, and be the legal responsibility of an
eligible applicant. Eligible work is classified as either
emergency work or permanent work. Permanent work is work to
restore an eligible damaged facility to its predisaster
design. Work ranges from minor repairs to replacement.
Categories of permanent work include:
Roads, bridges and associated features, such as
shoulders, ditches, culverts, lighting, and signs.
Water Control Facilities including drainage
channels, pumping facilities, and the emergency repair
of levees. Permanent repair of Flood Control Works is
the responsibility of the U.S. Army Corps of Engineers
and the Natural Resources Conservation Service.
Public buildings including their contents and
systems.
Utility Distribution Systems, such as water
treatment and delivery systems; power generation
facilities and distribution lines; and sewage
collection and treatment facilities.
Public Parks, Recreational Facilities, and Other
Facilities, including playgrounds, swimming pools, and
cemeteries.
Administration of Funding
FEMA Public Assistance is provided in the form of project
grants which are awarded to the State. The State is responsible
for distributing funds to subgrantees. FEMA is working with
each of the impacted States and their local jurisdictions to
identify and submit applications for public assistance
projects.
Long-Term Rebuilding
OFC is focused on the long-term rebuilding of the region,
including infrastructure. The States plan to leverage CDBG
monies in addition to FEMA's Public Assistance Program to
ensure a safer and smarter rebuilding of the infrastructure
system. To date, $11.5 billion in CDBG funding has been
allocated to the Gulf States, and there is another $4.2 billion
which has been requested for Louisiana to address the unique
future flood mitigation needs of that State. We look forward to
working with the Department of Housing and Urban Development
and the affected region as they submit their plans for the use
of CDBG funding for housing and infrastructure.
Q.1.f. Ensure the enhancement of social infrastructure in the
area?
A.1.f. In our Office, we talk about the triangle of recovery:
Safety, Community, and Economy. Safety is the foundation, the
fundamental knowledge that a resident is physically secure from
the dangers of future storms and floods; and Community and
Economy on either side, the homes, schools, hospitals and
clinics, emergency services, community organizations, and
businesses that make up the critical underpinnings of a healthy
and vibrant society. Several of our Working Groups including
Healthcare, Education, and Community and Faith-Based
Organizations are specifically focused on the revival of the
social infrastructure of the region. Several of the components
of the overall Federal response to the social needs of the area
are outlined below:
Social Services
To respond to the human services and mental health needs of
individuals affected by the hurricane, the U.S. Department of
Health and Human Services (HHS) has awarded $550 million in
Social Service Block Grants. The funding will also provide
support to those lacking health insurance or adequate access to
care, and to health care safety net providers. Funding was
provided in varying amounts to all 50 States, with the majority
going to Louisiana (40 percent), Mississippi (23 percent),
Texas (16 percent), and Florida (10 percent).
Crisis Counseling
As part of an ongoing crisis counseling effort, FEMA has
provided $29 million to 29 States for the Immediate Services
Crisis Counseling Program. To date, Regular Services Crisis
Counseling grants have been approved for 18 States totaling
$23.3 million. The Crisis Counseling Programs hire and train
people locally to provide outreach to survivors of the
hurricanes who need mental health services. This outreach will
include mobile services in which trained workers go to the
places where disaster survivors are congregating, such as
shelters, disaster recovery centers, or temporary hotels, and
provide supportive contacts, educational materials, and brief
counseling services.
Temporary Assistance for Needy Families (TANF)
Over 30,000 families are being helped through HHS's
Administration on Children and Families (ACF) Temporary
Assistance for Needy Families (TANF) program by the provision
of short-term, nonrecurrent cash benefits to families who
traveled to another State from the disaster designated States.
The hurricane-damaged States of Mississippi, Louisiana, and
Alabama also received additional funding for the TANF program
to provide assistance and work opportunities to needy families
($69 million for loan forgiveness and $25 million in
contingency funds for State Welfare Programs).
Health Care Delivery and Hospitals
On September 1, 2005, Secretary Michael Leavitt of the
Department of Health and Human Services exercised his waiver
authority under Section 1135 of the Social Security Act. Under
this provision, the Secretary can waive or modify certain
Medicare, Medicaid, or State Children's Health Insurance
Program (SCHIP) requirements during certain emergencies to
ensure that sufficient health care items and services are
available to meet the needs of Medicare, Medicaid, and SCHIP
beneficiaries and that health care providers that furnish such
items and services in good faith may be reimbursed for them. On
Wednesday August 31, 2005, Secretary Leavitt notified the
Congress that he was invoking this authority, as a consequence
of Hurricane Katrina, in order to protect the health and
welfare of the public in areas impacted by this crisis.
To ensure that Medicaid and SCHIP beneficiaries would
receive necessary services, the Centers for Medicare and
Medicaid Services (CMS) took action under Section 1115 waiver
authority to provide flexibility and to effectuate the Section
1135 waivers through demonstration programs. Specifically, on
September 16, 2005, CMS released a State Medicaid Director's
letter and a Multi-State Section 1115 Demonstration Application
Template to provide Medicaid and SCHIP for evacuees of
Hurricane Katrina. Under these demonstrations, eligible
evacuees displaced from their homes were able to enroll to
receive services under the Medicaid or SCHIP programs in the
State where they are located.
The Deficit Reduction Act of 2005 (P.L. 109-171) (DRA)
signed into law by President Bush on February 8, 2006 provided
$2 billion for payments by the HHS Secretary to eligible States
for health care needs of areas affected by Hurricane Katrina.
Consistent with the authority in the DRA, on March 24, 2006,
Secretary Leavitt released $1.5 billion to the 32 States with
approved Katrina 1115 Demonstrations to help offset the medical
costs of caring for evacuees. The 32 States with approved
Katrina relief funds include: Texas, Alabama, Mississippi,
Florida, Idaho, Arkansas, District of Columbia, Georgia,
Tennessee, Puerto Rico, South Carolina, Indiana, Maryland,
Louisiana, Nevada, California, Ohio, Rhode Island, North
Carolina, Wyoming, Arizona, Massachusetts, North Dakota,
Delaware, Pennsylvania, Oregon, Iowa, Virginia, Minnesota,
Montana, Utah, and Wisconsin. The remaining balance of the
funds ($500 million) from the DRA will be used to cover future
costs for the States.
Within a week after Hurricane Katrina forced the closure of
the U.S. Department of Veterans Affairs (VA) Medical Center in
New Orleans, mobile health-care clinics from across the VA
system were deployed to the surrounding communities of Hammond,
LaPlace, and Slidell Louisiana. By December 2005, a floor of
the VA nursing home adjacent to the New Orleans Medical Center
was opened as a primary care clinic. Another floor is slated to
open with limited specialty care in late March. The mobile
clinics in the three surrounding communities are being replaced
with permanent community-based outpatient clinics (CBOC's).
Over 11,000 nonveterans
received humanitarian care in VA clinics as a result of the
quick deployment of CBOC's.
During the period of October 2005 through January 2006, new
and existing outpatient clinics in New Orleans, LaPlace,
Hammond, Slidell, and other locations in the New Orleans area
have treated approximately two-thirds of the number of veteran
patients treated during the same period last fiscal year, which
exceeded expectations. The VA is accelerating construction at
Biloxi to move all clinical and administrative functions from
the Gulfport Site to the Biloxi Campus. They are also
considering construction of a small CBOC on the Gulfport Campus
as well as interim projects for modular buildings on the Biloxi
Campus to meet space needs.
Education
Child Development and School Readiness (Head Start)
The Head Start program, which provides comprehensive child
development and school-readiness programs for low-income
children from birth to age 5, as well as pregnant women and
their families, received $90 million to cover the costs of
replacing or repairing facilities that were damaged or
destroyed by Hurricanes Katrina or Rita that are not covered by
insurance or FEMA. Another $15 million in funds also covered
the costs of serving approximately 4,800 evacuee children from
January 1, 2006, to the end of each grantee's current school
year (that is late May or early June).
K-12
Progress has been made on the 1,100 schools (public
and private) that were closed following the storms, leaving
372,000 students initially unable to attend school.
In Mississippi, 93 percent of schools have fully or
partially reopened.
In Louisiana, 79 percent of schools initially closed
have reopened.
In New Orleans, all 183 public and private schools in
New Orleans were initially closed after the hurricanes.
Now, 17 public schools (including 14 that now operate
as charter schools) have reopened. About 14 percent of the
pre-Katrina enrollment, or 8,303 students, are now
attending public schools in the city.
In the private sector, 37 of 54 schools operated by
the Archdiocese of New Orleans have now reopened in the
city and its environs.
Total public and private enrollment in the city equals
about 30 percent of the pre-hurricane level.
The U.S. Department of Education (ED) obtained a $1.4
billion special appropriation from Congress to meet K-12
hurricane-related needs, including $750 million to help
public and private schools along the Gulf Coast reopen,
$645 million to reimburse public and private schools that
enrolled students displaced by Katrina and Rita, and $5
million for the education of students made homeless by the
storms.
ED provided more than $20 million through a special
charter school grant to Louisiana to assist in opening or
reopening charter schools in order to serve children
affected by the hurricanes. This has helped public schools
in New Orleans expedite their reopening process by
reopening as charter schools.
ED launched a website, Hurricane Help for Schools
(www.hurricanehelpforschools.gov), to serve as a nationwide
clearinghouse resource for schools to post their needs so
Americans can help meet them. To date, more than 650
matches between needs and contributions have been made
through the site.
Higher Education
Post-secondary institutions on the Gulf Coast are also
recovering.
Twenty four of 30 institutions of higher education
in Louisiana have now reopened.
This figure includes 10 of the 15 that were closed
in New Orleans.
Two-thirds of post-secondary students in New
Orleans have returned to class.
Both of Mississippi's closed post-secondary
institutions have reopened.
ED received $200 million to help post-secondary
institutions in Mississippi and Louisiana recover from
the hurricanes to compensate colleges that took in
displaced students. In addition, the Department has
distributed $18 million of unused Federal campus-based
student aid funds distributed to severely affected
colleges.
Department of Labor
In October 2005, the Employment and Training Administration
awarded $125 million to 70 community colleges competing for the
President's Community-Based Job Training Grants. As part of the
national response to Hurricane Katrina, the department gave
preference to competitive applications from Gulf Coast and
Southeast colleges whose programs will be critical to
rebuilding the regional economy.
Also, how would the failure to resolve these issues
affect the timing of reconstruction? In particular,
will the need to resolve such issues affect whether it
will be possible for affected States to use their extra
tax credit allocations in the time required to do so?
We are working within the Federal Government and with the
affected States on addressing rebuilding issues in the most
effective, appropriate, responsible, and timely manner
possible. However, a rebuilding of this magnitude has to be
measured in terms of years, not days. Should there be
additional needs which are the result of the time needed to
rebuild, or other issues, we will continue to work with the
States on addressing those needs.
Q.2. The Administration's approach to recovery has stressed the
role of State and local governments. CDBG allocations will be
critical to the recovery process. To what extent will States
make decisions about CDBG allocations and to what extent will
localities make these decisions? How will the localities' plans
be coordinated to avoid a fractured approach to regional
rebuilding?
A.2. As previously stated, one of the main principles which
guide our office is that rebuilding should not become an
exercise in centralized planning. The affected Gulf Coast
States share our view that recovery must be led by a locally
driven community planning process. The goal of all involved
States is to empower local communities to develop strategies
for their bold long-term community recovery plans and to ensure
that they are coordinated into regional plans. Recovery
planning starts from the local level and is coordinated into an
overall State plan.
Q.3. Long-term levee strength can be expected to be a
particularly important factor in determining the nature of
long-term redevelopment, as you said in your statement. What
differences would you anticipate in the nature of
reconstruction and in population return if the levees are
rebuilt to withstand a Category 3 hurricane versus being
rebuilt to withstand a Category 5 hurricane?
A.3. The President has stated emphatically that public safety
is the most critical part of long-term rebuilding in the area.
People must feel that there is adequate commitment and planning
for hurricane protection before they can make their decision to
return--whether as a resident, a business owner, or both. The
meteorological term ``category'' has many components, and is
not technically applicable to the engineering design of levees
or other hurricane protection elements. Our goal is to ensure a
safer hurricane protection system, which will protect the city
and the region from any future catastrophic disaster.
To accomplish this goal, the President responded quickly by
asking Congress to authorize his $3.1 billion commitment to
make the hurricane protection system that surrounds the New
Orleans area structurally stronger and better. In his recent
supplemental request to Congress, the President has included a
request for $1.46 billion for the addition of flood gates and
pumping stations to interior canals, selective armoring of
levees, the initiation of wetlands restoration projects, and
additional storm-proof pumping stations. I have personally
visited the levees with General Strock and I also receive
regular updates from the Army Corps on their progress.
The structural restoration progress of the Army Corps of
Engineers is impressive to date. All contracts for restoration
work have been awarded and the work is 45 percent complete.
Approximately 100 miles of levees have been repaired/completed
and the Army Corps of Engineers is on track to meet the
Administration's commitment of repairing the damaged levees to
pre-Katrina levels by June 1. This work, including the
improvements included in the supplemental and an on-going study
about the long-term goals of levee construction, will make the
levee system structurally stronger than it was before the
storm.
Q.4. Many households in hurricane-affected areas were poor.
Even if these properties were insured, the owners may lack the
necessary resources to rebuild should they desire to do so. How
many low-income and very low-income people sustained severe
damage to their homes? For these people, how many had
insurance? Do you or any other Federal, State, or local
agencies have plans to provide such households with financial
assistance for repair or rebuilding? If so, what are these
plans?
A.4. Using self-reported data from FEMA registrants, we have
categorized the impacted households by income. A high number of
low-income households were impacted by the disaster. The table
below provides a summary by the categories you requested. Among
owner-occupants with major or severe damage, approximately
54,745 are very low-income, 60 percent of whom are uninsured.
An additional 34,666 homeowners were between 50 and 80 percent
of median income and 44 percent of those were uninsured.
Approximately 66,422 of the renters whose homes were seriously
damaged were very low-income.
It is important to note, however, that comparing these data
to Census 2000 data suggests the income reported to FEMA by
registrants may understate the true total household income of
FEMA registrants prior to the hurricanes.
As previously stated, one of the main principles which
guide our office is that plans for rebuilding should be created
by the local people in the affected States, not in Washington,
DC. Louisiana has formed the Louisiana Recovery Authority and
Mississippi has formed the Mississippi Development Authority to
formulate both a policy and a strategy for moving forward. Each
State organization has submitted a housing plan for public
comment, and Mississippi has already received a ``green light''
approval indicating comfort from HUD that their plan is heading
in the right direction. Both of these plans provide
compensation to address the housing needs of homeowners of
every income level in the affected region.
The Louisiana Recovery Authority (LRA) is creating a plan
for reviving the city's rental market to provide needed homes
using Federal Community Development Block Grant funding. LRA
officials have also indicated they plan to use $1.75 billion
from expected Federal community development block grants to
help landlords renovate or rebuild properties damaged by
hurricanes Katrina and Rita, with a mix of low-interest loans
and low-income housing tax credits likely to be used. We expect
plans for other States to address these needs are forthcoming.
Q.5. What are your current plans for assisting households who
were living in a 100-year floodplain but did not have flood
insurance? What are the policy justifications for these plans?
A.5. Any decision to assist such households would be a State
determination, based on State policy justifications. As
previously stated, one of the main principles that guide our
office is that plans for rebuilding should be created by the
local people in the affected States, not in Washington, DC.
Each State organization has submitted a housing plan for public
comment, and Mississippi has already received a ``green light''
approval indicating comfort from HUD that their plan is heading
in the right direction.
Q.6. To date, what steps have been taken to ensure that persons
with disabilities and seniors, as well as disability and senior
advocacy communities, are represented on State and local
planning and rebuilding commissions, as well as in the
development of consolidated plans?
A.6. As previously stated, one of the main principles which
guide our office is that rebuilding plans should be created by
the local residents of the Gulf Coast. The affected States have
reached out to all communities, including seniors and people
with disabilities, for participation on rebuilding commissions
and for input in construction of State plans.
Q.7. The Urban Institute has stated, ``With the city's plans
for long-term housing construction still up in the air and no
agency helping evacuees find jobs that will provide steady
incomes, 18 months of housing assistance may not be enough for
many families.'' What planning has occurred (either by your
office, by other Federal agencies, or by local and State
agencies) to address the issues expressed in the Urban
Institute's statement?
A.7. We are working with closely with State and local leaders
to support them in developing comprehensive solutions to the
most critical issues facing the recovery of the Gulf Coast,
including housing, job training and economic development. We
are also working within the Federal Government on addressing
rebuilding issues in the most effective, appropriate,
responsible, and timely manner possible. We recognize the
complex and challenging situation that the devastation of
housing stock has created in the affected region, and we
continue to work with the States on addressing any additional
needs.
Department of Labor
The Department of Labor has provided National Emergency
Grants (NEG) under the Workforce Investment Act NEG Disaster
Relief Employment Assistance Program and the Flexibility for
Displaced Workers Act (P.L. 109-72). More than $191.1 million
was provided to States directly impacted by the hurricanes
including Alabama ($4 million), Louisiana ($62.1 million),
Mississippi ($50 million), and Texas ($75 million) for
temporary disaster relief jobs to assist in clean up activities
and to train the affected workers in high-growth demand
occupations in order to create a more skilled labor force.
These funds are projected to assist approximately 63,000
individuals. In addition, DOL awarded $16 million to evacuee
states to assist more than 20,000 evacuees by placing evacuees
in temporary public sector employment, working on projects that
provide humanitarian assistance to other evacuees, and
providing training in high-demand occupations. Since the
recovery efforts in the Gulf Coast region began, more than
48,200 individuals have been provided either temporary jobs or
other workforce services under the National Emergency Grants,
with almost 5,800 individuals currently enrolled in temporary
jobs. As of the last week in March, over 3,800 hurricane
affected workers were enrolled in training programs in 9
States, with another State set to launch a large retraining
effort in the next few weeks.
To help provide workers training in skills required by
employers returning to the hurricane impacted areas, the
Department of Labor's Employment and Training Administration
has provided a total of $12 million to the States of Texas,
Alabama, and Louisiana to enhance their capacity to provide
training in industries such as construction, energy,
healthcare, transportation, and safety/security which are
critical to the economic recovery in the Gulf region. The
majority of funds will be focused on actual training for
hurricane impacted individuals. The training is designed to be
short-term and flexible, and to link to opportunities for
additional training and/or career pathways in these critical
industries.
ETA has also provided an additional $10 million to the
States of Louisiana and Mississippi through the Pathways to
Construction Employment Initiative that will help provide
employers with skilled workers in the residential, commercial,
industrial, heavy highway construction sectors, as well as the
heavy marine construction and shipbuilding sectors. In each
State, the Pathways to Construction Employment Initiative will
have four primary components: establishment of Reconstruction
Centers of Excellence, career awareness and outreach
activities, assessment and access to basic skills training, and
pathways to employment. These funds are in addition to the
formula funds awarded to States annually to provide employment-
related services for adults, dislocated workers, and youth
under the Workforce Investment Act (WIA).
Additionally, in the State of Mississippi, ETA has expanded
a partnership with Manpower, Inc., to help Mississippi workers
displaced by Hurricane Katrina find new jobs. The initiative
will leverage the resources and reach of One-Stop Career
Centers and Manpower, Inc. to deliver employment and training
services that meet evacuees' long-term career needs.
Q.8. In a Washington Post editorial, you stated that low-income
tax credits would assist the reconstruction of multifamily
housing. However, these tax credits promise to help rebuild
less than 15 percent of the affordable housing units that
Katrina and Rita destroyed and they will presumably take years
to implement. How will you address the housing needs of renters
after FEMA's 18-month assistance has ended? How will you
address the housing needs of renters in the long-term?
A.8. As previously stated, one of the main principles which
guide our office is that plans for rebuilding should be created
by the local people in the affected States, not in Washington,
DC. The Louisiana Recovery Authority (LRA) is creating a plan
for reviving the city's rental market to provide needed homes.
LRA officials have also indicated they plan to use $1.75
billion from expected Federal Community Development Block
Grants to help landlords renovate or rebuild properties damaged
by hurricanes Katrina and Rita, with a mix of low-interest
loans and low-income housing tax credits likely to be used. We
expect plans for other States to address these needs are
forthcoming.
To assist State and local officials as they implement plans
to address the needs of residents, HUD and the U.S. Department
of Agriculture have taken the following actions:
15,000 HUD-assisted or homeless families are receiving
up to 18 months of housing assistance through the Katrina
Disaster Housing Assistance Program (KDHAP), administered
by the HUD and the U.S. Department of Homeland Security
(DHS).
More than 6,000 single-family homes within a 500-mile
radius of the declared disaster areas have been identified
and HUD has either repaired these homes or is currently in
the process of repairing them; more than 1,000 families
have been able to move back in, with another 800 in
process. Once repaired, the remainder of these homes will
be offered to evacuees either as temporary housing or for
purchase through a discounted sale program.
HUD has placed a moratorium on foreclosures of FHA-
insured homes until June 30, 2006. The extended foreclosure
relief will provide mortgagees additional time to confirm
the mortgagee's intention and ability to repair the home,
help them resume regular mortgage payments and retain their
homeownership.
HUD's Mortgage Assistance Initiative is assisting
homeowners with FHA-insured mortgages who are unable to
maintain their payment obligations due to hurricane-related
property damage by advancing their mortgage payments for up
to 12 months. This unprecedented mortgage relief is
expected to help several thousand families remain
homeowners while concentrating on repairing their homes,
finding jobs, and putting the pieces of their lives back
together.
HUD's Section 203(k) loan program is enabling
homebuyers and homeowners with damaged or destroyed homes
to finance, through a single mortgage, both the purchase
and/or refinancing of their house and the cost of its
rehabilitation. It also allows homeowners with damage to
finance the rehabilitation of their existing single-family
home. This program encourages lenders to make mortgages
available to residents of disadvantaged neighborhoods and
to borrowers who would not otherwise qualify for
conventional loans on affordable terms.
HUD's special mortgage insurance program, designed to
assist disaster victims (under Section 203(h) of the
National Housing Act), is allowing 100 percent financing
for individuals or families whose residences were destroyed
or damaged to such an extent that reconstruction or
replacement is necessary.
HUD has been issuing a series of waivers to streamline
existing grant programs so grantees can reprogram existing
HUD funds for disaster relief. The City of Houston, which
received thousands of evacuees from New Orleans, was the
first to ask for a waiver of CDBG's 15 percent cap on
public services. This request was granted for the states in
the Gulf region, providing communities more flexibility to
help their citizens.
HUD launched the Universities Rebuilding America
Partnership (URAP) program in an effort to empower college
and university students to utilize their talents to help
rebuild the impacted communities. In partnership with the
Corporation for National and Community Service, HUD
announced these two grant programs totaling $5 million.
In order to ensure access to affordable housing free
from discrimination, HUD's Office of Fair Housing and Equal
Opportunity deployed staff to assist evacuees reporting
housing discrimination.
As previously discussed, HUD will administer $11.5
billion in supplemental funding for the disaster areas
through HUD's Community Development Block Grant (CDBG)
program. In addition, the President has asked for another
$4.2 billion in CDBG funds for Louisiana's unique
mitigation needs.
USDA is assisting rural families with funds to rebuild
and repair their damaged homes. Approximately $20 million
is being made available for grants, $210 million for direct
loans, and $1.3 billion for guaranteed loans.
Q.9. Much of the attention on housing recovery has focused on
homeowners. However, a high percentage of rental units also
sustained serious damage and renter households have less
influence over the process that leads to unit repair and
replacement. How do you expect the timeline for rental housing
recovery to compare to that for owner recovery? How do you
expect the timeline for affordable housing recovery to compare
to that for other rental housing? What mechanisms will be put
in place to track rental households and inform them of their
options as repair and rebuilding of rental units proceeds? Will
there be a means by which displaced renter households can
provide input into the redevelopment of their units and
communities?
A.9. As previously stated, one of the main principles which
guide our office is that rebuilding plans should come from the
local people in the affected areas of the Gulf Coast. The
Louisiana Recovery Authority (LRA) is creating a plan for
reviving the city's rental market to provide needed homes. LRA
has also indicated they plan to use $1.75 billion from expected
Federal Community Development Block Grants to help landlords
renovate or rebuild properties damaged by hurricanes Katrina
and Rita, with a mix of low-interest loans and low-income
housing tax credits likely to be used. We expect plans allowing
other States to address these needs are forthcoming.
Q.10. Financial institutions and the Mortgage Bankers
Association have recommended financial counseling for the
evacuated families. Does the Administration plan on providing
financial counseling to those Katrina and Rita affected?
A.10. The Administration is actively engaged in an effort to
provide financial counseling to those in the affected region.
Several of these initiatives are described below:
IRS
As a part of these efforts, the Internal Revenue Service
recently announced an agreement with two tax professional
associations to assist taxpayers impacted by Hurricanes
Katrina, Rita, and Wilma. Volunteers at IRS' Volunteer Income
Tax Assistance (VITA) and Tax Counseling for the Elderly (TCE)
sites are now able to refer hurricane-affected taxpayers
needing help with relatively complex tax issues to
participating members of the American Institute of Certified
Public Accountants (AICPA) or the American Association of
Attorney-Certified Public Accountants (AAA-CPA) for free return
preparation assistance.
SBA
Louisiana
SCORE, Small Business Development Center (SBDC), and SBA
District Office personnel have been very active in the
financial counseling area. The SBA District has conducted
financial workshops in the cities of Kenner (New Orleans
airport area) and New Orleans' civic center with over 500
attendees. In the cities of Baton Rouge and Lafayette, the SBA
has conducted lending workshops in partnership with the
Louisiana Economic Development Department. The SBA has also
conducted ``Back-To-Business'' workshops in Lake Charles and
Alexandria and a faith-based business workshop in the city of
Hammond. SBA Government Contracting programs include financial
components to each of its training programs. This has included
one-on-one counseling to 100 businesses and contractors and a
seminar in New Orleans with approximately 500 small businesses
in attendance.
SBDC's have provided one-on-one counseling to 649
individuals and have conducted 64 training events with over
1,424 attendees.
SBA is a founding partner of the Urban Entrepreneur
Partnership (UEP), which will be providing the full spectrum of
training and counseling services to all 8(a) companies located
in the affected areas of the Gulf. The Partnership was
announced by President Bush at the July 2004 National Urban
League annual conference in Detroit, Michigan and launched at
the National Press Club in October 2004. The UEP is a
partnership between the White House through the Small Business
Administration and Minority Business Development Agency, the
National Urban League, the Ewing Marion Kauffman Foundation,
and the Business Roundtable. The UEP combines private and
public sector resources to foster minority entrepreneurship,
business development, and job creation in historically
neglected and economically underserved urban areas nationwide.
Mississippi
Soon after Katrina hit on August 29, counseling was
provided throughout Mississippi to disaster (business) victims
by the Mississippi Network of Small Business Development
Centers at shelters and in bank branch offices offered by SBA
lender Hancock Bank, who provided office space to help disaster
victims with loan applications. The bank branch offices were
set up as Business Assistance Centers and they opened in early
September and closed in early December.
Alabama
The SBA conducted a week long financial counseling seminar
in Mobile in November right after the storm as part of its
business disaster assistance event with the Mobile Chamber of
Commerce. Also, the SBA conducted a 2-day seminar in Birmingham
in early December, where financial counseling was part of the
program. The SBA had a 2-day event in Huntsville, sponsored by
the Huntsville Times, Huntsville Chamber, TVA, and NEAR.
Commercial Financial counseling, run by SBA resource partners
was part of the program as well.
The SBA has small business lending clinic, where financial
counseling will be available March 16 in Mobile. There will be
financial counseling seminars at the Mitchell College of
Business, in Mobile May 9, July 11, September 12, and November
11.
In the Birmingham SBA District office, financial counseling
clinics are held the second Tuesday of each month.
By request any business in the disaster affected region can
request one-on-one counseling from the Baldwin County SCORE,
Mobile City SCORE, South Alabama Women's Business Center, and
USA SBDC. The Women's Business Center conducts business
accounting and capital management counseling every month in
partnership with the Business Innovation Center in Mobile (the
city business Incubator).
The SBA has not done any personal financial counseling to
any individuals in Alabama unless they are small business
owners.
Houston, Texas
The Houston District Office and members of the Houston
Association of Government Guaranty Lenders (HAGGL) provided
business consulting as active participants in two Katrina
Business Owners Resource Fairs held in September, the City of
Houston Mayor's Disaster Relief Job Fair held at the George R.
Brown Convention Center in October, and two events for the
Southeast Texas Hurricane Recovery Conference held in Groves
and Sabine Pass in February. The Houston SBA District Office
has also provided business consulting while participating in
contracting opportunity conferences with Exxon-Mobil and the
SBA NASA/JSC-based procurement center representative, and
Katrina/Rita recovery job fairs held by the University of
Houston-Small Business Development Center and Houston Community
College. In addition, members of HAGGL participated in disaster
recovery meetings held by Lamar State College-Orange in
October. The Houston SBA District Office has incorporated
disaster recovery consulting into its ongoing 8(a) business
matchmaking and 7(a) guaranty lending events. The SBA also
provided disaster recovery information to HAGGL members in
addition to continuous encouragement for them to promote the
Gulf Opportunity pilot loan program. In addition, the City of
Houston Mayor's Katrina/Rita Working Group meeting is to be
Monday morning, March 20.
DOL
The Employment and Training Administration funded the
Hurricane Reintegration Counselor Initiative, which currently
is funding 155 highly trained social worker/counselors in the
Nation's One-Stop Career Center delivery system. The counselors
provide intensive career counseling directly to Hurricane
evacuees in One-Stop Career Centers, evacuee centers, or other
facilities with high concentrations of evacuees.
Evacuees in need of financial services are referred to
resources available within the community. These services could
be those funded through FDIC or the Internal Revenue Service,
which have on-going training opportunities through the One-Stop
Career Center system.
Twelve States (Arkansas, Alabama, Florida, Georgia,
Kentucky, Louisiana, Missouri, Mississippi, Oklahoma,
Tennessee, Texas, and Virginia) were selected to participate in
the Initiative due to their concentration of individuals
displaced by the hurricanes.
In addition, on the Hurricane Recovery Website,
www.servicelocator.org/hurricaneservices, counselors are
provided with resources related to personal financial
management. This tool contains an array of information to
assist evacuees with their financial needs.
A fact sheet is also available at http://www.dol.gov/opa/
hurricane-fs2.htm.
In addition, the Department of Labor has also provided
National Emergency Grants (NEG) under the Workforce Investment
Act NEG Disaster Relief Employment Assistance Program and the
Flexibility for Displaced Workers Act (P.L. 109-72). More than
$191.1 million was provided to States directly impacted by the
hurricanes including Alabama ($4 million), Louisiana ($62.1
million), Mississippi ($50 million), and Texas ($75 million)
for temporary disaster relief jobs to assist in clean up
activities and to train the affected workers in high-demand
occupations in order to create a more skilled labor force.
These funds are projected to assist approximately 63,000
individuals. In addition, DOL awarded $16 million to evacuee
States to assist more than 20,000 evacuees by placing evacuees
in temporary public sector employment, working on projects that
provide humanitarian assistance to other evacuees, and
providing training in high-growth demand occupations. Since the
recovery efforts in the Gulf Coast region began, more than
48,200 individuals have been provided either temporary jobs or
other workforce services under the National Emergency Grants,
with almost 5,800 individuals currently enrolled in temporary
jobs. As of the last week in March, over 3,800 hurricane-
affected workers were enrolled in training programs in 9
States, with another State set to launch a large retraining
effort in the next few weeks.
FEMA/HOPE Coalition America
In coordination with the U.S. Department of Homeland
Security's Federal Emergency Management Agency (FEMA), Project
Restore HOPE is offering free financial counseling and
resources, economic assistance and budgeting advice to
hurricane victims. These services are being delivered through
one-on-one counseling in disaster-affected communities, at FEMA
Disaster Recovery Centers, online and by phone from new call
centers in Poway, California, and Dallas, Texas. The
initiative, created by HOPE's economic emergency response
division HOPE Coalition America (HCA--a partner of FEMA),
provides disaster survivors with free financial counseling and
advice through one-on-one counsel, financial help lines and
online case management, facilitating their return to normalcy.
Volunteers include professionals from the banking and financial
services, insurance, and other industries.
RESPONSE TO WRITTEN QUESTIONS OF SENATOR REED
FROM MARTIN J. GRUENBERG
Q.1. Foreclosures in the hurricane-affected areas significantly
increased in the third quarter of 2005. What is the likely
scale of foreclosure over the next 2 years and how will large
scale foreclosure affect rebuilding efforts?
A.1. It is difficult to estimate the likely scale of
foreclosures over the next 2 years and the impact of
foreclosures on rebuilding efforts. While foreclosures have
risen in the hurricane-affected States, we do not have specific
information from the affected areas showing a clear relation
between the rise in third quarter 2005 foreclosure rates and
the hurricane. Some of the increase may actually relate to the
recent change in the bankruptcy laws. Our previous experience
with natural disasters suggests that bankruptcy filings in the
affected areas did not significantly rise until 2 to 3 years
after the disaster. In addition, insured institutions have been
actively working with their customers by deferring loan
payments, extending repayment terms, and restructuring existing
loans, where appropriate. The Federal banking agencies will
continue to encourage financial institutions to work with
borrowers affected by the hurricanes. Area rebuilding efforts
will most likely be impacted by general business conditions,
Federal Government assistance, the availability of jobs,
potential changes in building codes, and any environmental
problems that need to be resolved.
Q.2. Financial institutions and the Mortgage Bankers
Association have recommended financial counseling for the
evacuated families. What is the most effective means for
providing such counseling to Katrina- and Rita-affected areas?
A.2. Effective means for providing financial counseling include
one-on-one financial counseling and family based counseling.
Personal interaction is often the most effective way to convey
information and bring about a change in behavior. The FDIC is
currently partnering with community organizations, such as
Neighborhood Housing Services, Neighborhood Development
Foundation, Southern Mutual Self Help Association, New Hope
Community Development Corporation, and other community groups
and financial institutions to deliver Money Smart \1\ and
related group instruction, as well as individual counseling
assistance, to consumers in areas damaged by Hurricane Katrina
and the areas to which evacuees were relocated. Through these
collaborations partnership staff members provide financial
counseling, guidance, and assistance in local offices
throughout the Gulf Coast States, in disaster recovery centers,
and by phone to those affected by the storms.
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\1\ In 2001, the FDIC created Money Smart, a training program to
help adults outside the financial mainstream enhance their money skills
and create positive banking relationships. The Money Smart curriculum
helps individuals build financial knowledge, develop financial
confidence, and use banking services effectively.
Q.3. In the best case scenario, what percentage of small
financial institutions do you expect to go out of business
because of the hurricanes? What percentage do you expect in the
worst-case scenario? How would each scenario affect rebuilding
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efforts and the Gulf economy?
A.3. It is very difficult to make any kind of predictions about
the future prospects of financial institutions affected by the
hurricanes because of the large number of variables involved in
rebuilding and revitalizing the communities they serve. As
stated in my written testimony, over the medium-term horizon,
the greatest source of uncertainty and concern is the effect of
the hurricanes on credit quality. Over the long-term horizon,
the prospects for these financial institutions will be
determined largely by the economic prospects of the communities
they serve. The headquarters of 120 institutions are in the
designated disaster counties and parishes. Through the
supervisory efforts of Federal and State regulatory agencies,
we have narrowed our focus from the initial group of 120
institutions to a small group of institutions, which we will
continue to monitor more closely. The FDIC is committed to
doing everything possible to assist these institutions to meet
the challenges ahead and contribute to the recovery of the Gulf
Coast region.