Road Home Homebuyers’ Subsidy Hits Snag

by The Times-Picayune
Friday January 04, 2008, 1:01 PMBy David Hammer

An effort to move $75 million out of what was called an “undersubscribed” rental recovery program and into a subsidy to promote homeownership derailed Friday when questions arose as to whether the assistance to landlords had run its course.

The Louisiana Recovery Authority’s housing task force entered Friday’s meeting planning to take money from the slow-moving small rental repair program to start helping lower-income renters become homeowners. The soft-second mortgage program had been endorsed by the city of New Orleans and others as an innovative way to make sure that thousands of homes abandoned after the storms would be redeveloped and occupied by owners.

But Donald Vallee, head of the New Orleans Landlords Association, said that would be a mistake.

“We had 82,000 rental units damaged by this storm, but we only have enough money (in the rental program) for 12,000-18,000 units, and now all of a sudden we’re saying we’re done? We’re not done,” Vallee said.

After two rounds of awarding money to small-time landlords for repairs on units they will make available for reduced rents, the Road Home small rental repair program has nearly $100 million left from an original budget of $869 million. But none of the landlords have actually received any money because the awards aren’t paid until repairs are completed and low-income renters sign leases.

Housing task force Chairman Walter Leger said the program was “undersubscribed” and called for $75 million to be redirected for soft-second mortgages, forgivable loans to help working families buy about 1,500 of the homes that parishes hope will be built on properties the state purchased through the Road Home homeowners program.

But after Vallee’s testimony, task force members began to question the wisdom of starting an untested subsidy without knowing how successful the small rental program can be. Also, Calvin Parker, head of rental programs for the state Office of Community Development, warned that “sticky rules” at the federal level could prevent taking money that Congress approved for families making less than $42,000 and moving it to a soft-second mortgage program that would expand to families making as much as $63,000.

Task force member John Smith, a North Shore banker, stepped in to have any decision delayed. The task force voted to gather more information over the next 60 days, and also asked the rental program to avoid launching any more rounds of awards during that time.

Keeping the focus on renters, the task force heard about a potential problem with moving storm victims out of group trailer sites and into rental apartments. The Louisiana Family Recovery Corps, a nonprofit agency that’s been working with the state to help families set up new lives when they return home, is running out of money, according to its executive director, Raymond Jetson. The Family Recovery Corps has been helping with living expenses using Social Services Block Grants, but says the money will run out in June.

His agency has found that renters returning to New Orleans and other areas in Louisiana are getting help from FEMA and other agencies with moving expenses, but cannot afford to furnish their new apartments or to pay bills once they’ve moved in.

“Our concern is there’s not a coordinated effort in place,” Jetson said. “What we have called case management is really about moving them out so we can declare success for those doing the moving rather than for the affected families.”

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