The Role of HUD Housing Programs in Response to Hurricane Katrina

Congressional research reportDec 15, 2011

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The Role of HUD Housing Programs in

Response to Hurricane Katrina

name redacted

Specialist in Housing Policy

name redacted

Specialist in Housing Policy

name redacted

Analyst in Federalism and Economic Development Policy

December 15, 2011

Congressional Research Service

7-....

www.crs.gov

RS22358

CRS Report for Congress

Prepared for Members and Committees of Congress

The Role of HUD Housing Programs in Response to Hurricane Katrina

Summary

The catastrophic devastation wrought by Hurricane Katrina in late August 2005, and to a lesser

degree, Hurricanes Wilma and Rita, led to the displacement of hundreds of thousands of families.

Following the storm, the Federal Emergency Management Agency (FEMA) took primary

responsibility for meeting the emergency housing needs of displaced families. The Department of

Housing and Urban Development (HUD), the nation’s housing agency, also played a role. HUD

modified its existing grant programs—primarily through waivers—to make them more flexible

for communities wishing to serve displaced families. The department also took steps to aid

displaced families that had been homeless or receiving HUD assistance prior to the storm by

developing a new voucher program, and by issuing guidance to lenders offering protections for

homeowners with FHA-insured mortgages. Finally, Congress has used HUD programs,

particularly the Community Development Block Grant (CDBG) program, as a conduit for

providing relief and recovery funds to devastated communities. This report details HUD’s efforts

to provide assistance to affected families and communities immediately after the storm and in the

initial rebuilding stages. It will not track HUD’s role in the longer-term rebuilding of the

devastated areas.

Congressional Research Service

The Role of HUD Housing Programs in Response to Hurricane Katrina

Contents

Grant Programs................................................................................................................................ 1

Assisted Housing ............................................................................................................................. 1

Mortgage Insurance Programs ......................................................................................................... 2

CDBG Supplemental Appropriations .............................................................................................. 4

Developments .................................................................................................................................. 6

Tables

Table 1. Allocation of CDBG Disaster Relief Assistance Following

Hurricanes Katrina, Rita, and Wilma............................................................................................ 5

Table 2. Hurricanes Katrina, Rita, and Wilma Disaster Relief Funding.......................................... 6

Table 3. HUD Supplemental Appropriations for Hurricane Katrina Disaster Relief....................... 7

Contacts

Author Contact Information............................................................................................................. 9

Acknowledgments ........................................................................................................................... 9

Congressional Research Service

The Role of HUD Housing Programs in Response to Hurricane Katrina

Grant Programs

As in past disasters, the Secretary of HUD issued a number of waivers to permit local

communities to redirect their existing HUD housing and community development grant funds to

meet their emergency needs shortly after the storm.1 Waivers were issued for the Community

Development Block Grant (CDBG) program2, the HOME Investments Partnerships Program

(HOME), the Emergency Shelter Grants Program (ESG), and the Housing for Persons with AIDS

Program (HOPWA). Waivers issued ranged from extensions in the amount of time grantees had to

spend their funds to easing of benefit eligibility requirements. HUD also issued $2 million in base

program funding as “Imminent Threat” funding to Indian Community Development Block Grant

recipient communities affected by the storm.3

Assisted Housing

The Administration was proactive in making existing housing programs and assistance available

to victims of Katrina. Immediately after the storm, HUD created a toll-free number that allowed

displaced HUD-assisted families (e.g., public housing residents and Section 8 rental housing

voucher holders) to reestablish their benefits. In conjunction with that number, HUD identified a

number of vacant units across the country in which to house displaced tenants, both formerly

assisted and unassisted. HUD also issued a notice summarizing waivers available to public

housing authorities (PHAs), including suspensions of reporting deadlines, loosening of quality

standards and income determination rules, and increases in subsidy limits for public housing

authorities affected by the storm.4 The department also made emergency capital reserve funds

available to local PHAs to repair damaged public housing units.5

FEMA-HUD Joint Initiative.6 On September 24, 2005, the Secretaries of HUD and Homeland

Security announced a joint transitional housing assistance initiative for Hurricane Katrina

evacuees.7 The initiative provided two types of assistance, both funded by emergency funds

provided to FEMA in a supplemental appropriation shortly after the storm. The first was a type of

individual and household grant administered by FEMA. Displaced homeowners and renters

(except for HUD-assisted renters) received a cash grant of $2,358 to be used for housing-related

expenses. The amount was meant to represent three months of housing costs and was calculated

For a list of waivers issued, see http://www.hud.gov/katrina/proguidance.cfm.

For a discussion of the use of CDBG funds after a disaster, see CRS Report RL33330, Community Development Block

Grant Funds in Disaster Relief and Recovery, by (name redacted).

HUD Press Release, HUD Katrina Accomplishments—One Year Later, available from HUD’s website at

http://www.hud.gov/news/katrina05response.cfm.

A description of temporary waivers is available at http://www.hud.gov/offices/pih/publications/

katrinapihadminwaiv.pdf.

HUD issued a grant of $21.8 million to the Housing Authority of New Orleans and a grant of $7 million to the Biloxi

Mississippi Housing Authority. HUD Press Release, HUD Katrina Accomplishments—One Year Later

http://www.hud.gov/news/katrina05response.cfm.

For an expanded discussion, see CRS Report RL33173, Hurricane Katrina: Questions Regarding the Section 8

Housing Voucher Program, by (name redacted).

FEMA Press Release DHS-05-09-24, US Government Announces A Comprehensive Transitional Housing Assistance

Program For Katrina Evacuees, September 24, 2005.

Congressional Research Service

The Role of HUD Housing Programs in Response to Hurricane Katrina

using the national average fair-market rent (FMR) for a two-bedroom apartment. The assistance

could be extended for up to 18 months.

Second, for families who were homeless or receiving HUD assistance before the storm, FEMA

initially provided funding to HUD, through a mission assignment, to administer the HUD Katrina

Disaster Housing Assistance Program (KDHAP). It provided ongoing rental assistance, for up to

18 months, to displaced HUD-assisted renters (including Section 8 voucher holders, families who

had lived in public housing, and families who had lived in other forms of HUD-assisted rental

housing) and displaced homeless8 families. It was administered by local PHAs and was calculated

at 100% of the local area FMR. Families were required to pay any difference between the rental

assistance amount and the actual rent for the unit they selected. This program had no income

eligibility or targeting requirements, and families’ eligibility was determined after they registered

for FEMA assistance and contacted HUD.

Disaster Voucher Program. Language included in the FY2006 Defense Appropriations Act (P.L.

109-148) transferred $390 million in FEMA funds to HUD to administer a modified form of

KDHAP called the Disaster Voucher Program. The act also included administrative provisions

permitting housing authorities to combine their public housing and Section 8 voucher funds, and

directed the Secretary, to the extent feasible, to preserve all assisted housing damaged by the

storm.

Mortgage Insurance Programs

On August 31, 2005, HUD issued mortgagee letter 2005-33,9 reminding HUD-approved lenders

that when the President declares a disaster, as in the case of Hurricane Katrina, it automatically

triggers certain procedures with regard to FHA-insured mortgages in the affected areas. The

following procedures become effective for one year from the date of declaration: (1) a

moratorium on foreclosures for 90 days from the date of declaration10; (2) lenders are encouraged

to offer special forbearance, mortgage modification, refinancing, and waiver of late charges to

affected borrowers; (3) families whose residences were destroyed or severely damaged are

eligible for 100% financing under the Section 203(h) program for the cost of reconstruction or

replacement; (4) damaged properties become eligible for Section 203(k) financing, under which

costs to purchase and rehabilitate the property are included in one loan and HUD waives the

requirement that the property has been completed for more than one year prior to application for

the mortgage; (5) underwriting guidelines are relaxed to permit disaster victims to qualify for

loans even if their total monthly debt, including the proposed mortgage, would equal 45% of

gross income; and (6) lenders must ensure that hazard claims are expeditiously filed and settled,

and lenders may not retain hazard insurance proceeds to make up an existing arrearage without

written consent of the borrower.

Homeless families were eligible if they had been living in an affected area in the week immediately prior to the

hurricanes, and either sleeping in a place not meant for human habitation or residing in an emergency shelter,

transitional housing or housing provided through the HUD homeless programs; their homeless status had to be

confirmed by housing or homeless services providers.

Available at http://www.hudclips.org/sub_nonhud/cgi/pdfforms/05-33ml.doc.

HUD Mortgagee letter 2005-45, issued November 22, 2005, extended this deadline for many areas affected by

Katrina through the end of February 2006.

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The Role of HUD Housing Programs in Response to Hurricane Katrina

The Section 203(h) program is available for borrowers who already own homes in the affected

area. The loans are limited to the FHA loan limit for the area, subject to the provision that the

loan may not exceed 100% of the appraised value of the property. In some cases it may not be

possible to obtain 100% financing. It may often be the case that the cost to repair or replace the

property exceeds the appraised value of the property. This is the reason that most lenders require

borrowers to obtain hazard insurance that covers the replacement cost of the property instead of

its appraised value. The Section 203(k) program permits borrowers who do not already own

homes to purchase and rehabilitate properties in the area that are either abandoned by owners, or

are being sold by owners who do not want to repair them and remain in the area. The current FHA

underwriting guidelines provide that a prospective borrower’s total debt, including the proposed

mortgage payment, may not exceed 41% of the borrower’s gross monthly income. In recognition

of the fact that borrowers in these programs (§203 (h) and (k)) may have to incur debt to replace

personal property, the underwriting guidelines are relaxed to permit loans to borrowers whose

total debt is up to 45% of gross monthly income. The limit may even be exceeded if justified by

compensating factors.

On December 5, 2005, HUD announced the Mortgage Assistance Initiative (MAI), under which

HUD will make mortgage payments for up to 12 months on behalf of borrowers who have FHAinsured mortgages on their homes and who have been displaced or are unemployed because of the

recent disasters. Eligible borrowers must: (1) have homes that are repairable and are located

within parts of Alabama, Florida, Louisiana, Mississippi, or Texas declared eligible for individual

assistance as a result of Hurricanes Katrina, Rita, or Wilma; (2) have missed between four and 12

payments on an FHA-insured home loan; (3) be temporarily unable to make mortgage payments

but have the expectation to resume full mortgage payments; and (4) the homes must be the

primary residences of the borrowers and the borrowers must be committed to continued

occupancy of the properties as primary residences. No interest is charged on the MAI loans, and

repayment is not required until the original FHA-insured loans are repaid. The program is

scheduled to expire18 months after it began, and is expected to assist about 20,000 families.11

FHA notes that more than 52,000 FHA-insured loans were delinquent due to the storms.12

In April 2005, before Hurricane Katrina struck, HUD augmented its existing 203(k) program by

announcing the “Streamline(k) Limited Repair Program” to facilitate the purchase of properties

needing minor rehabilitation (HUD Mortgagee Letter 2005-19). Eligible properties were those

needing repairs costing at least $5,000 but not more than $15,000. The program was amended in

December to, among other changes, eliminate the minimum repair cost, increase the maximum

repair cost to $35,000, and make lead-based paint stabilization an eligible work item (HUD

Mortgagee Letter 2005-50). The Streamline(k) program is not directed specifically at properties

damaged by Katrina, but could facilitate the purchase and repair of such properties that meet

program requirements.

“HUD Announces Mortgage Assistance for Disaster Victims: $200 Million Initiative Designed to Rebuild Lives and

Communities,” HUD No. 05-164, available at http://www.hud.gov/news/release.cfm?content=pr05-164.cfm.

Leslie Eaton, “Mortgage Aid Set for 20,000 Storm-Hit Homes,” New York Times, December 6, 2005.

Congressional Research Service

The Role of HUD Housing Programs in Response to Hurricane Katrina

CDBG Supplemental Appropriations

Congress enacted several emergency supplemental funding bills following the hurricanes, two of

which provided CDBG funds to affected communities.13 The Defense Appropriations Act for

FY2006 (P.L. 109-148) provided $11.5 billion for CDBG for “necessary expenses related to

disaster relief, long-term recovery, and restoration of infrastructure in the most impacted and

distressed areas” in the five states impacted by Hurricanes Katrina, Rita, and Wilma. The act

allowed

•

the affected states to use up to 5% for administrative costs;

•

HUD to grant waivers of program requirements (except those relating to fair

housing, nondiscrimination, labor standards, and the environment);

•

Mississippi and Louisiana, the most affected states, to use up to $20 million for

local community development corporations; and

•

the Governor of each state to designate multiple entities to administer either a

portion or all of a state’s share of the $11.5 billion.

The act also lowered the income targeting requirement for activities benefitting low- and

moderate-income persons from 70% to 50% of the state’s allocation; limited the maximum

amount of assistance any of the five states may receive to no more than 54% of the total amount

appropriated; and required each state to develop, for HUD’s approval, a plan detailing the

proposed use of funds, including eligibility criteria and how the funds will be used to address

long-term recovery and infrastructure restoration activities. On January 25, 2006, HUD

announced its allocation of the funds. Using data from FEMA and several other agencies, HUD

calculated the extent of each state’s unmet housing needs and areas of concentrated distress for

each of the five states.14 HUD allocated 55% of the funds based on each state’s unmet housing

needs and the remaining 45% on the degree of concentrated distress as measured by each state’s

share of damaged and destroyed housing stock, and business and infrastructure damage.

On February 13, 2006, HUD published a notice of allocations, waivers, and alternative

requirements governing the CDBG disaster recovery assistance. In addition to providing waivers

allowing the states to allocate funds to CDBG entitlement communities and directly administer

the program, the notice also included language stating that “Funds allocated are intended by HUD

to be used toward meeting unmet housing needs in areas of concentrated distress.”15 The language

included in the act did not restrict the use of these funds to unmet housing needs. Rather, the act

provided some level of flexibility allowing funds to be used for long-term recovery and

infrastructure restoration in the areas most affected by the Gulf Coast Hurricanes of 2005.

On June 15, 2006, the President signed P.L. 109-234, a second emergency supplemental

appropriations act, providing funds for Gulf Coast recovery efforts. The law included $5.2 billion

For more information on supplemental disaster funding, see archived CRS Report RS22239, Emergency

Supplemental Appropriations for Hurricane Katrina Relief, by (name redacted).

HUD, Jackson Announces Distribution of $11.5 billion in Disaster Assistance to Five Gulf Coast States Impacted by

Hurricanes, available at http://www.hud.gov/news/release.cfm?content=pr06-011.cfm.

Federal Register, Allocation and Common Application and Reporting Waivers Granted to and Alternative

Requirements for CDBG Disaster Recovery Grantees Under the Department of Defense Appropriations Act, 2006, Vol.

71, No. 29, February 13, 2006, p. 7666.

Congressional Research Service

The Role of HUD Housing Programs in Response to Hurricane Katrina

in additional CDBG assistance for the states of Alabama, Florida, Louisiana, Mississippi, and

Texas. It limited the amount that any one state could receive to $4.2 billion, and encouraged states

to target assistance to infrastructure reconstruction and activities that would spur the

redevelopment of affordable rental housing, including federally assisted housing and public

housing. The law contained provisions regarding the use and administration of funds, including

most of the provisions that applied to the funds authorized by P.L. 109-148, as well as provisions

that

•

required that at least $1 billion of the CDBG amount be used for repair and

reconstruction of affordable rental housing in the impacted areas;

•

ensured that each state’s plan gives priority to activities that support

infrastructure development and affordable rental housing activities;

•

required each state to file quarterly reports with House and Senate Appropriations

Committees detailing the use of funds;

•

required HUD to file quarterly reports with the House and Senate Appropriations

Committees identifying actions by the department to prevent fraud and abuse,

including the duplication of benefits; and

•

prohibited the use of CDBG funds to meet matching fund requirements of other

federal programs.

On July 11, 2006, HUD announced that $4.2 billion of the $5.2 billion supplemental

appropriation for CDBG would be allocated to Louisiana, and on August 18, it announced how

funds would be distributed to the remaining states (see Table 1). HUD determined the distribution

of funds for Alabama, Florida, Mississippi, and Texas based on unmet need, analyzing data from

FEMA and the Small Business Administration. It then invited each state to provide their own data

on remaining recovery needs in order to make its decision.

Table 1. Allocation of CDBG Disaster Relief Assistance Following

Hurricanes Katrina, Rita, and Wilma

State

P.L. 109-148

P.L. 109-234

P.L. 110-116

Total

Alabama

$74

$21

$96

Florida

100

183

Louisiana

6,210

4,200

Mississippi

5,058

423

5,481

Texas

429

503

Total

11,500

5,173

3,000

13,410

19,673

Source: HUD news releases, July 11, 2006: http://www.hud.gov/news/release.cfm?content=pr06-079.cfm, and

August 18, 2006: http://www.hud.gov/news/release.cfm?content=pr06-099.cfm and Federal Register, Allocation

and Common Application and Reporting Waivers Granted to and Alternative Requirements for CDBG Disaster Recovery

Grantees Under the Department of Defense Appropriations Act, 2006, February 13, 2006, vol. 71, no. 29, p. 7666.

Congressional Research Service

The Role of HUD Housing Programs in Response to Hurricane Katrina

Developments

Two important developments related to HUD’s role in response to the 2005 hurricanes occurred

after the initial response period that is the focus of this report. First, in July 2007, FEMA

announced it would transfer responsibility for ongoing housing assistance for families displaced

by the 2005 hurricanes to HUD, noting HUD’s expertise in assisting families with long-term

housing needs through its existing infrastructure of PHAs. Additional funding related to this

added responsibility was provided to HUD in FY2008 and FY2009, as shown in Table 2 and

Table 3. Second, in November 2007 Congress provided another $3 billion in emergency

supplemental CDBG funding to Louisiana for its recovery needs (P.L. 110-116).

Table 2. Hurricanes Katrina, Rita, and Wilma Disaster Relief Funding

(in millions of dollars)

Public and

Indian Housing

P.L. 109-148

(FY2006)

390

P.L. 109-234

(FY2006)

CDBG

Permanent

Supportive

Housing

Inspector

General

Totals

11,500

11,890

5,200

P.L. 110-28

(FY2007)

P.L. 110-116

(FY2008)

3,000

P.L. 110-252

(FY2008)

3,000

P.L. 110-329

(FY2008)

150

P.L. 111-32

(FY2009)

30a

Program

Totals

$570

$19,700

$73

$20,350

Source: Compiled by CRS.

Note: The above funding only accounts for supplemental funding that was provided for disaster relief. HUD base

funding that was used for disaster relief is beyond the scope of this report.

The act amends P.L. 110-329 by replacing the $50,000,000 allocation provided in P.L. 110-329 with an

$80,000,000 allocation, for a net new appropriation of $30,000,000.

Congressional Research Service

Table 3. HUD Supplemental Appropriations for Hurricane Katrina Disaster Relief

Total funding: $20,350,299,500

Public Law

Funding

Intended Use of Funds

P.L. 111-32, Supplemental Appropriations Act, 2009

$30,000,000 (Tenant-Based Rental Assistance)

The act replaces a $50,000,000 allocation provided in P.L.

110-329 for project-based rental assistance with an

$80,000,000 allocation, and it designates all of the funding

for tenant-based rental assistance (vouchers) for areas

affected by Hurricanes Katrina and Rita. (123 Stat. 1908)

P.L. 110-329, Hurricane Disasters Assistance, 2008

$85,000,000 (Tenant-Based Rental Assistance)

Provides funding for permanent housing vouchers for

persons assisted under the disaster housing assistance

program whose assistance would otherwise end on

March 1, 2009.

$50,000,000 (Project-Based Rental Assistance)

$15,000,000 (Public Housing Capital Fund)

Provides funding for project-based vouchers for areas

impacted by Hurricanes Katrina and Rita.

Provides funding for redeveloping public housing impacted

by Hurricanes Katrina and Rita. (122 Stat. 3599)

P.L. 110-252, Supplemental Appropriations Act,

2008

$73,000,000 (Permanent Supportive Housing)

Provides funds for 3,000 units of permanent supportive

housing to be administered by the Louisiana Recovery

Authority as part of its Road Home program. Allocates

$20 million for project-based vouchers, $3 million for the

administration of the project-based vouchers, and $50

million for grants under the Shelter Plus Care program.

(122 Stat. 2351)

P.L. 110-116, Road Home Appropriations under

Department of Defense Appropriations Act, 2008

$3,000,000,000 (CDBG)

Provides funding for the Road Home Program, through

the Department of Defense Appropriations for FY2008.

The funding will be provided as part of HUD’s Community

Development Block Grant. The funds can only be used to

cover costs associated with otherwise uncompensated but

eligible claims that were filed on or before July 31, 2007,

under the Road Home Program administered by the State

of Louisiana. (121 Stat. 1343)

P.L. 110-28, U.S. Troop Readiness, Veterans’ Care,

Katrina Recovery, and Iraq Accountability

Appropriations Act, 2007

$7,000,000 (Inspector General)

Provides funding for HUD’s Office of Inspector General to

ensure accountability in the use of Hurricanes Katrina and

Rita disaster relief funds. (121 Stat. 161)

CRS-7

Public Law

Funding

Intended Use of Funds

P.L. 109-234, Emergency Supplemental

Appropriations Act for Defense, the Global War on

Terror, and Hurricane Recovery, 2006

$5,200,000,000 (CDBG)

Makes emergency supplemental appropriations to HUD in

response to the consequences of Hurricanes Katrina, Rita,

and Wilma. CDBG disaster recovery funds were to be

allocated among the five states (Louisiana, Texas, Alabama,

Mississippi, and Florida) affected by the Gulf Coast

hurricanes of 2005; the amount that any one state may

receive was limited to $4.2 billion; states were encouraged

to target assistance to infrastructure reconstruction and

activities that would spur the redevelopment of affordable

rental housing, including federally assisted housing and

public housing. Requires each state to develop a HUDapproved recovery plan and to submit quarterly reports to

House and Senate Appropriation Committees.

(120 Stat. 472)

P.L. 109-148, Department of Defense, Emergency

Supplemental Appropriations to Address Hurricanes

in the Gulf of Mexico, and Pandemic Influenza Act,

2006

$11,500,000,000 (CDBG)

Provides CDBG funding for activities and necessary

expenses related to disaster relief, long-term recovery,

and restoration of infrastructure in the areas most

impacted and distressed by hurricanes in the Gulf of

Mexico in 2005 (Hurricanes Katrina, Rita, and Wilma) in

states for which the President declared a major disaster

under Title IV of the Robert T. Stafford Disaster Relief and

Emergency Assistance Act (42 U.S.C. 5121 et seq.).

(119 Stat. 2780)

$390,299,500 (Public and Indian Housing)

Provides $390 million in Public and Indian Housing funding

for housing vouchers directed towards HUD-assisted

households displaced by Hurricanes Katrina or Rita.

(119 Stat. 2779)

Source: Compiled by CRS; CDBG Supplemental Appropriations drawn from CRS Report RL33330, Community Development Block Grant Funds in Disaster Relief and

Recovery, by (name redacted).

CRS-8

The Role of HUD Housing Programs in Response to Hurricane Katrina

Author Contact Information

(name redacted)

Specialist in Housing Policy

/redacted/@crs.loc.gov, 7-....

(name redacted)

Analyst in Federalism and Economic Development

Policy

/redacted/@crs.loc.gov, 7-....

(name redacted)

Specialist in Housing Policy

/redacted/@crs.loc.gov, 7-....

Acknowledgments

(name redacted), former Analyst in Housing Policy, was an original co-author of this report. (name redacted),

Presidential Management Fellow, contributed to the updating of this report.

Congressional Research Service

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