For all but a small minority of the 130,000 Louisiana homeowners who reached out to it, the state’s $10 billion Road Home rebuilding program left them with what it was supposed to: a reconstructed house or money to buy a new one, even if there were potholes and detours on the road to recovery.
Steve Donahue’s story is a case in point. Thanks to a $145,000 Road Home grant and his refusal to be brushed aside, Donahue, a double amputee with diabetes, rebuilt the home his grandfather left him, raised it 10 feet in the air and installed wheelchair ramps and an elevator.
For weeks, he hurled himself up a ladder, stumps dangling, so he could get into his newly elevated, gutted house, where he would scoot along on a skateboard to nail down joists and floorboards — all the while wondering whether he would ever be reimbursed for the costs because of a bureaucratic tangle among federal agencies.
Donahue said he has yet to shake the scars from his experience, in part because he’s still not done haggling with government officials over things like energy efficiency ratings and proper vent sizes.
“It’s more than the money. It’s the hoops we had to jump through to do it,” he said.
The wealth of stories like Donahue’s — featuring inadequate grants, calculation errors and endless red tape — may be why Louisiana’s signature rebuilding program has something of a paradoxical legacy.
With a decade in the rearview mirror, the Road Home is remembered in the popular imagination mostly for the pain that it caused. But it is also the reason that tens of thousands of property owners are back in homes that are newly renovated and, in many cases, safer than before.
The Road Home paid 130,000 homeowners a total of $9 billion, and 119,000 of those recipients promised to rebuild and reoccupy their homes within three years. The question was whether they would.
It turns out almost all of them have. State officials say fewer than 7,000 grantees, or about 6 percent, have failed to meet their obligations.
“The Road Home had a huge impact in the return of (New Orleans) and coastal Louisiana to what it is today,” said Pat Forbes, director of the Office of Community Development, the state agency overseeing the Road Home. “I mean, I just don’t think we would be here without the Road Home program.”
Series of challenges
The Road Home went through a series of challenges in its first two years that added to the perception that it was far too slow. First, Democratic Gov. Kathleen Blanco delayed its launch by about six months while she sought more money from Congress. Meanwhile, Mississippi’s powerful Republican leadership got the GOP-controlled Congress to give that state $5 billion, nearly as much money as Louisiana got, even though the property damage in Louisiana was about three times as extensive.
Mississippi tailored its program to cover only those properties that flooded outside the flood zone, leaving the state extra money to pursue various economic development projects. Because Louisiana had so much more damage, the $6 billion it got initially to cover all types of housing and community recovery wasn’t even close to enough for the comprehensive home-rebuilding program Blanco wanted.
When Louisiana finally got a second tranche of money and the $7.5 billion Road Home Program got started, Blanco sowed unrealistic expectations, promising awards in late 2006, about four months before they actually started flowing. Homeowners complained that they were fingerprinted and otherwise treated like criminals.
Policies changed rapidly as the Louisiana Recovery Authority learned about unanticipated issues, such as houseboats and trailer homes being ineligible, a faulty appraisal method that affected award calculations and a funding shortfall that for months prevented the Road Home from paying elevation and storm-proofing grants.
“It was like a ship sailing and it was underway without having been completed. You know, because we were in such a rush to try to help people,” said lawyer Walter Leger, who was selected by Blanco to lead the Louisiana Recovery Authority’s Housing Committee because his Arabi home was destroyed by 14 feet of water.
At the time, grant applicants saw no sense of urgency on the part of the state. Instead, they saw that the program administrator, Virginia-based ICF International, had a $756 million time- and materials-based contract with no deadlines to pay grants. The state had to add benchmarks under intense public pressure, even as ICF stock went public and executives collected massive bonuses.
“They were more interested in seeing how long it would take because they were going to get paid whether they gave out the money or not,” Donahue said.
The New Jersey comparison
Leger was no fan of ICF, either, but he and Forbes both say a little perspective is in order: The Road Home’s positive impact may be most easily measured against New Jersey’s Hurricane Sandy relief effort.
In its first two years, between the first and the third anniversaries of Hurricane Katrina, the Road Home paid 117,000 homeowners a total of $7 billion. At its two-year mark in May, New Jersey’s Rehabilitation, Reconstruction, Elevation and Mitigation (RREM) program had paid just $450 million to 6,300 homeowners, even though 15,000 New Jersey homeowners have applied for a pot of $1.1 billion.
That means RREM has helped about 5 percent as many people as the Road Home did in the same length of time.
While only a fifth as many houses were damaged or destroyed in New Jersey, and the RREM program has a budget one-tenth the size of the Road Home’s, the grants in each program have the same $150,000 cap and use a similar calculation method.
And both were administered by the same two private firms: ICF and a Louisiana-based company called Hammerman & Gainer, also known as HGI Catastrophe Services, which came out of nowhere during the Road Home effort to emerge as a major national player in disaster work.
About 15,000 New Jersey homeowners applied for aid, but only 8,700 homes remain in the program, reportedly because of frustration with the state-monitored construction process. The Asbury Park Press reported that fewer than 1,000 damaged homes had been rebuilt by May.
“Even though we attempted to help them out and give them the lessons learned, our program was still more efficient than what they’re doing right now with Sandy,” Leger said, noting that Louisiana didn’t have the benefit of a road map the way New Jersey did.
Leger believes Road Home recipients who had good experiences have kept quiet because so many people had horror stories.
“People tell me good stories (about the Road Home) all the time, but I think, to some degree because of the criticism of the program, people that it worked for smoothly don’t like to talk about it because they feel like they got special attention,” he said.
Examples of success
They are hard to find, but a few grant recipients are willing to talk about their good fortune.
Louis Koerner, an attorney whose Garden District home burned during the chaos after the storm, started with a typically frustrating Road Home experience, having to resend the same paperwork and trying to challenge an incorrect appraisal. Luckily, he wasn’t dependent on the Road Home grant to rebuild.
Still, he was persistent. In August 2008, Koerner went to a Road Home office in New Orleans East to talk to a live person. It took four hours to see someone, but when he did get help from a Road Home employee named Dianne Brock, everything changed.
“When she came back and told me I was getting $76,000, if I had false teeth, they would have fallen out,” Koerner said. “I had no idea how I ended up with so much money.”
Val Vanney Jr. was even more grateful for his grant, and he had a far easier time getting it. He was able to sit with program agents in December 2006, and by May 2007, he had his check. A year later, his Slidell home, which had been inundated with 6 feet of water from Lake Pontchartrain, was completely fixed.
He didn’t have flood insurance because he had no mortgage requiring him to carry it. After the home survived both Hurricane Betsy and Hurricane Camille, two superstorms of the 1960s, Vanney didn’t think it would ever flood.
“Not having flood insurance, I felt very lucky to get” the Road Home grant, he said. “If you done things right and followed the procedures, I don’t know how you could have any problems. A lot of people was in a state of shock, so maybe they wasn’t doing what they should do. Maybe they was too anxious.”
But once he got the money, Vanney had clear advantages. He was a licensed contractor, so he was able to do the work himself. And because his house was paid off, he didn’t have a lender trying to grab the Road Home check when it arrived.
Those two bugaboos — contractor fraud and forced mortgage payoffs — probably would have been rare under Blanco’s original design for the Road Home, which paid grants in installments as construction stages were completed. The former governor said banks had agreed not to call their loans while work was being done, and contractors wouldn’t have been able to collect more than a third of the grant money upfront.
But just when grant payments started taking off in March 2007, the Bush administration swooped in and forced Blanco to change the fundamental design of the program — from a phased reconstruction program to a simple grant program that doled out lump-sum checks upfront.
“It was the defining moment to erode the actual intention” of the Road Home program, said Blanco, who believes partisan politics on Bush’s part caused the sudden change in HUD’s position.
Blanco became suspicious when Bush’s political guru, Karl Rove, got involved. She sensed the Republican administration orchestrated the about-face at HUD and was trying to help GOP-run Mississippi and hinder Democratic leaders in Louisiana. She decided not to seek re-election just a few days after the Road Home bombshell. Leger speculated the move also was intended to hurt Democratic Sen. Mary Landrieu ahead of her 2008 campaign.
At the time, homeowners cheered the idea that they could collect grants upfront and hoped it would limit red tape. Blanco said she knew it actually would make rebuilding harder for many by opening the door to contractor fraud and the simple human impulse to spend the cash on other needs.
To keep the money tied to rebuilding, the state created covenants that homeowners signed when they got the money, promising to reconstruct and reoccupy their homes within three years.
But there were no longer any built-in protections from contractors and lenders.
There are still hundreds of homeowners without homes because of these issues, and they were prevalent enough for the state to dedicate millions of Road Home dollars to paying replacement grants to victims of fraud.
Housing advocate M.A. Sheehan tried to help Donna Bartholomew get back into her family home in the 6th Ward after her contractor made off with $60,000 of her Road Home grant. But Sheehan said Bartholomew was still $45,000 short when she died in December.
Demetra Dixon said she can’t rebuild her home in the 9th Ward because her mortgage company took her Road Home grant. She was approved for a $59,000 replacement grant, but she said it’s not enough anymore because she spent $50,000 over the years paying rent for her interim housing.
“I think 10 years is too long to wait to get back in your house,” Dixon said. “Our voice will be heard because we need our homes back.”
The Road Home’s grant formula also played a major role in leaving many homeowners short. First, awards were capped at $150,000 because Blanco wanted the program — which began with $7.5 billion and was increased by $3 billion when the Congress turned Democratic — to cover both wind-damaged homes and those flooded by levee failures in equal measure.
“It wasn’t just Rita vs. Katrina and it wasn’t just federal levee failures vs. storm surge. It was that we were trying to rebuild Louisiana,” Leger said. “People who had insufficient wind insurance — they should be protected as well. I mean, the term was used: There shouldn’t be ‘discrimination’ between wind and flood.”
Hurting the poor
The federal government also prohibited grants exceeding the value of a property, so Road Home tied its calculations to a home’s prestorm value rather than the often higher cost of actually rebuilding. That created a situation where those who owned homes in poor neighborhoods with depressed values got less than those with equally damaged houses of the same size and quality in nicer areas — even though the two homes would, in theory, cost the same to rebuild.
Because predominantly black neighborhoods tended to have lower home values, the formula spawned a racial discrimination lawsuit, which was later settled. As part of the settlement, the state agreed to create additional grants to cover shortfalls for people affected by depressed neighborhood values. In 2010, the federal judge handling the case said the Road Home probably was $1.2 billion short of having enough to fulfill its mission.
“It doesn’t surprise me that a federal judge has decided that the Road Home program may have been $1.2 billion short,” New Orleans Mayor Mitch Landrieu said at the time. “I’ve yet to meet very many people who were made whole by the program.”
The program’s last big remaining problem is enforcing the rebuilding covenants. For years, there was little faith the state could hold homeowners to them. Forbes said there is still a lot of work to do, but he believes the state’s rebuilding tally proves the covenants largely worked.
“Yes, it carries with it at the end this baggage of how do we ensure compliance,” Forbes said. “Well, I think there was a risk taken then, and look how it’s paid off: 94 percent rebuilt.”
The state has sent more than 36,000 grant recipients collection letters, for alleged overpayments, duplication of insurance proceeds or failure to comply with the covenants.
The state already has clawed back $75 million from 6,600 homeowners. But that leaves 30,000 cases open for potential grant recovery, including nearly 7,000 for homes that weren’t rebuilt.
Elevation, rental debacles
Another 17,000 homeowners received $30,000 elevation incentive grants as a part of their Road Home award and never raised their houses or raised them without restoring the living area, the state says. Those numbers are more indicative of an effort that was troubled from the start and only got worse.
Because the Road Home elevation grants were not enough to lift most houses, FEMA offered an offshoot program with additional grants of up to $100,000. But it barely paid out any money until 2010; when the spigot finally opened, the program was beset by contractor fraud and shoddy work. It got so bad that Gov. Bobby Jindal had to order new controls and homeowner protections in late 2011.
The $650 million in supplemental FEMA elevation grants covered only 10,500 homeowners, excluding more than 10,000 qualified applicants, according to the state’s top official over the program, Craig Taffaro.
Forbes said HUD is letting the state backfill the Road Home portion of the elevation grants with new awards if homeowners can prove they used the $30,000 on rebuilding their homes, but few can produce the required receipts.
Housing advocates say HUD should let homeowners sign sworn statements instead.
“HUD says, ‘Give us the receipts,’ ” said Viola Washington, who teamed with Sheehan in June to ask HUD for policy changes. “We’re saying, 10 years later, we don’t have the receipts. We want to do a self-certification.”
But elevation wasn’t even the most disappointing Road Home program; that was the one created to help mom-and-pop landlords restore their rental properties after the storm. It was launched in February 2007, with state Sen. Derrick Shepherd promising it would be far smoother than the homeowner program.
Two years later, Shepherd was in federal prison for an unconnected money laundering scheme, and the so-called Small Rental Property Program was hemorrhaging money and participants.
It was designed to dole out $860 million to restore 18,000 rental units. But it wound up doing a fraction of that, paying 4,500 landlords $435 million to create affordable units for low- to moderate-income families. The compliance rate is only 60 percent, according to state figures.
Still, Forbes sees a silver lining.
“Yeah, there are problems, and we’re going to have to take properties from people and we’re trying to collect money from people in the Small Rental Program, but we also created thousands and thousands of affordable and deeply affordable units that are going to be that way for years to come,” Forbes said.
But many rental properties never got put back into commerce — one of many factors leading local rents to skyrocket — and Leger sees a missed opportunity.
“At the very beginning, what we suggested is, rather than bring in FEMA trailers, let’s take that money it would cost to give someone a FEMA trailer and use that to redevelop some of the rental properties,” Leger said. “But in Washington, they seemed more concerned with selling FEMA trailers than rebuilding our homes.”
Still trying to help
Forbes said the state is still trying to help anyone who can show they are actively trying to rebuild from Katrina. That includes tapping into the remaining $119 million in Road Home money to get people over the hump with construction funds, then monitoring and managing the rebuilding work — much the way the program was originally designed.
“We don’t expect all of those to rebuild, to even want to rebuild necessarily,” Forbes said. “A lot of folks have gone; a lot of folks we can’t reach anymore. But we do expect that ... several hundreds of those folks still want to get home, and we still have tools that will be able to help them do that.”
Homeowners who agreed to rebuild but failed to do so also have the option of switching to a buyout grant and turning their property over to the Louisiana Land Trust, which in turn gives the properties to local redevelopment agencies. A handful of homeowners have been doing that each week, according to the Road Home’s public reports.
Don’t expect Donahue to celebrate any of the Road Home’s successes, though.
“Some of (the homeowners) came out way ahead and whatnot,” he said. “And hey, I’m happy for them. … Fine. And I’m having to fight for every little nickel I can get? Oh, well. I’m finished fighting for the nickel.”