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NEW ORLEANS-On the third anniversary of Hurricane Katrina, and as Tropical Storm Gustav is now churning toward the Gulf of Mexico, the City of New Orleans is stymied in efforts to provide housing for residents. Scarcity of rental units is still an issue despite much-touted grants and programs like the Gulf Opportunity Zone Low-Income Housing tax credit and Road Home.

Sheila Crowley, president and CEO of the National Low-Income Housing Coalition in Washington, DC, says the situation is so bad that people are unable to move out of FEMA trailers and into rental units. “People have had to be moved into hotels from trailers because the trailers aren’t fit for habitation,” she also points out.

Nor is the problem confined to lower income renters. According to Washington, DC-based Policy Link’s report, “A Long Way Home: The State of Housing Recovery in Louisiana,” the news is dismal for renters of all classes. Many units are off line, with much of the stock either damaged or wiped out. As of last January, only 11% of the 24,600 rental units slated to receive federal assistance were available for occupancy. Furthermore, the number is far less than the actual number of units that were damaged or destroyed by Katrina.

Policy Link’s website calculates that 60,351 low-cost and affordable housing units were destroyed. The city’s inventory, at the time, was 86,520 units. High-end rentals fared a little better: 7,383 of 14,205 units were decommissioned by Katrina.

Annie Clark, program associate in Policy Link’s New Orleans office, says not only are funds standing in the way of reconstruction, but so are tax credits. “Developers used to be able to sell those credits to investors for around $1.30,” Clark tells GlobeSt.com. “But with the credit crisis, they’ve been selling for about 82 cents. As a result, developers haven’t been finding too many investors.”

Along with falling tax credits, tightening credit markets are wreaking havoc. “New Orleans isn’t immune to the credit issues that are going on in the rest of the country,” says Matt Schwartz, a principal with New York City-based Domain Cos. “We’ve seen a lot of developments that have been slow to get off the ground in New Orleans for the same reason it’s slow to get off the ground elsewhere.”

The developer has three mixed-use, mixed-income projects underway in the area’s Tulane Corridor: the 183-unit Preserve, 228-unit Crescent Club and 72-unit Meridian. The projects are anticipated to come on line before the year ends. “We’ve seen overwhelming demand,” Schwartz says.

Clark says another issue stemming from the credit problem is tied to the diverse housing stock. “Even before Katrina, we didn’t have a huge multifamily stock,” she explains. “Many of the buildings consist of four units or less and that’s the majority of our rental stock.”

Clark points out that many owners of rental properties are part-time landlords who haven’t been able to get financing to rebuild. “They can’t borrow in a traditional fashion because the assets they can borrow against aren’t there any more,” she explains.

Policy Link’s report does have some good news. There has been an increase in the number of closings for housing repair grants. Also, efforts by residential leadership and private groups have resulted in more resources being directed toward the most vulnerable tenants–the disabled and senior citizens.

Clark also says the state is trying to address issues for owners of three-plexes and four-plexes. “The problem is that the people have to get the money up front and then get reimbursed [by HUD],” she said. “But the state is trying to figure out some creative methods to get money to the people so they can start rehab up front.”

Crowley, though, has been impressed by the commitment of the new HUD secretary, Steve Preston, and his recognition of New Orleans’ housing problems. With Gustav getting ready to make its way into the Gulf of Mexico, she says “it’s my guess that the Bush administration will likely be more proactive than normal with another hit.”

And what will happen if Gustav does hit? Schwartz says the city is better prepared this time around if Gustav comes ashore. He says pre-storm preparations are in place.

“People have spent the past three years taking this seriously,” Schwartz stresses. “Depending on what happens, the city is, in many ways, being rebuilt a lot smarter than it was before.”

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