Report shows Katrina victims in poorer areas were shorted thousands in federal rebuilding relief

A recent report from ProPublica, a nonprofit news organization, reveals data showing that some of the hardest-hit victims of Hurricane Katrina were shortchanged tens of thousands of dollars on average by a federal program meant to help residents to rebuild.

ProPublica, in partnership with New Orleans media outlets the Times-Picayune, the Advocate and WWL-TV, investigated almost 92,000 statewide grants from the Road Home program. The program was funded by the federal government to provide grant money to aid Louisiana residents, with New Orleans the biggest beneficiary, in rebuilding or selling homes severely damaged by the 2005 storm. A total of $3.3 billion was awarded citywide.

According to the National Weather Service, at least 80% of New Orleans was under floodwater on Aug. 31, 2005, days after the hurricane made landfall, largely as a result of levee failures from Lake Pontchartrain. The disaster damaged about 70% of the city’s occupied housing, with an estimated 134,000 units destroyed by the storm.

The report exposes how the lowest-income households — those with a median income of $15,000 or less — missed out on an average of $18,000, which meant that while some households were able to rebuild quickly, others never recovered.

It says residents in the most impoverished areas in New Orleans had to cover 30% of their rebuilding costs after Road Home grants, Federal Emergency Management Agency aid and insurance. In areas where the median income was more than $75,000, households were responsible for 20%.

The analysis points to one major culprit: the faulty grant calculation formula. Each federal grant was based on a home’s pre-storm value or on the repair costs — whichever was less. The report shows that this method did not fare well for those living in poorer areas because the value of most of the homes was lower than the cost of rebuilding them, which resulted in the grants not being sufficient to cover all repairs. But for people in wealthier areas, the cost to rebuild was lower than their home values, so the grants they received covered most of their rebuilding costs.

The method disproportionately hurt Black residents — who resided predominantly in the poorer areas — because their homes tended to be valued for less. Housing advocates say the program’s shortcomings stem from its failure to prioritize people’s needs and acknowledge systemic bias in U.S. housing policy.

“When the state officials and outside consultants went to design the program, they didn't recognize their underlying bias,” Andreanecia Morris, the president of the Greater New Orleans Housing Alliance, told Yahoo News. “They started from a place of ‘Well, we want to get you back in your house. We acknowledge that this is damaging and it's horrible that it happened to you, but we don't want to give you too much.’ It's rooted in the stereotypes of the welfare queen and the model minority. These folks didn't understand that their bias was blinding them and telling them that what they were doing was good enough, when nothing could be further from the truth.”

The report notes the stark contrasts in two New Orleans neighborhoods: Lakeview, a predominantly white area with higher-income households and higher home values, and Gentilly Woods, an area where more than two-thirds of the residents are Black. The homes in both neighborhoods were situated below sea level on swampland near Lake Pontchartrain with similar post-World War II construction and were pummeled by floodwaters after the levees broke.

After the storm, the average Lakeview home was appraised by Road Home at $326,000, with an average repair cost of $286,000. According to the news organizations’ analysis, based on the repair cost the average homeowner received 83% of what was needed to rebuild.

The average property in Gentilly Woods was appraised at $121,000, with an average of $203,000 in rebuilding costs. Due to the grant formula, the average homeowner ended up with just 73% of what was needed to rebuild.

According to a state analysis in 2010, 25,000 New Orleans homeowners received a total of $1.2 billion less from Road Home because their grants were calculated using pre-storm values rather than the cost of damage. If properties in the lowest-income sections of the city had been covered at the same rate as the wealthiest, each of those households would have received about $18,000 more on average.

The report states that for a homeowner in impoverished areas in New Orleans, it would have taken more than 43 months with the average annual salary to pay the cost of repairs not covered by Road Home, FEMA and insurance, compared with less than eight months in more affluent areas.

As a result of the program’s inequities, activists and real estate experts demanded answers and action at meetings held by the Louisiana Recovery Authority, which designed and ran the Road Home program. Local and national civil rights groups and some African American homeowners in New Orleans filed a class-action lawsuit against the Department of Housing and Urban Development and the LRA in 2008, claiming that the program discriminated against African American homeowners in New Orleans.

Louisiana and HUD eventually settled the lawsuit, with the state agreeing to allocate $62 million for another program. That program was for people who made too much money to qualify for additional grants but needed more assistance, which ProPublica called “a drop in the bucket.”

Andy Kopplin, the LRA’s first executive director, defended the agency, saying state officials tried to steer more money to poorer homeowners through the second grant program. But he also acknowledged to ProPublica and its partner news organizations in a written statement that the analysis showed that low- and middle-income households should have received more. He called it “upsetting to those of us who were working to create more equitable outcomes and especially to those families who needed and deserved more resources for their recovery.”

LRA board member Walter Leger told the news organizations that the state should seek more federal aid from Congress to fill the gaps — citing the findings of disparities in the analysis — and called the program’s method of using property values to determine rebuilding assistance a “misstep.”

Leger said he took complaints about the grant calculation method to HUD and asked it to use higher repair estimates instead, but the agency denied the request.

Louisiana state officials said changes were made to increase grants for all applicants after the program launched, like factoring land value into appraisals and increasing rates for repair estimates.

In 2007, state officials created another grant for less affluent homeowners whose initial grants didn’t meet their repair estimates, allowing Louisiana to meet a HUD requirement to pay at least half the grant money to low- and moderate-income households.

Yahoo News contacted the Louisiana Recovery Authority for comment, but it has not yet responded.

The spotty recovery from Katrina, which caused a severe housing crisis in Louisiana, has changed the landscape of cities like New Orleans, with many areas still not redeveloped. Morris of the Greater New Orleans Housing Alliance described the housing crisis as a hole that New Orleans is still trying to dig itself out of.

“To this day, there are people who haven't been able to come home,” she said. “There are people who died. There are people who have lost homes that they owned for generations who are now going to be renters. There are people who are homeless now. There are people who were able to make a choice because they have the wherewithal and some additional resources to choose to go somewhere else, but they also lost their community.”

Morris added that 60% of the homes owned by Louisiana residents pre-Katrina were worth $100,000 or less, which aligned with the household’s income. But today’s tumultuous housing market, due to inflation, rising interest rates and increased costs for building materials, creates even more challenges to bring the community of New Orleans back to the pre-Katrina era.

“Now we have a real estate market wildly out of whack with what people make, even in a way that’s different from a lot of other communities that are also struggling with affordable housing because of Katrina,” she said. “We still haven’t recovered from that. We’re no longer growing. We’re still down over a hundred thousand people, mostly African American. Now we’ve gotten to the point where we’re not growing anymore. We’re losing population.”