Sunday, March 26, 2006

Raise, And Be Healed!

The flooding of New Orleans and the revised FEMA flood maps may well bring an age-old constrctuction method back to life.

Slab-on-grade construction only became fashionable in the city during the post-World War II years, when builders and residents decided the city's defenses -- which by then included levees, screw pumps and drainage canals -- could hold back the forces of nature. Slab homes were cheaper to build and less drafty along the floors, among other advantages.

Yet in post-Katrina New Orleans, amajor question facing the city as it struggles to rebuild is: Whither the slab house?
I posted my thoughts on this back in December.
The popularity of the ranch house is due in part because of the cost savings involved by substituting materials cost for labor cost as a result of the changing labor market immediately after World War II. Rule of thumb is that labor cost is twice that of materials cost.
But as usual, the federal government, namely FEMA, is dragging its feet to the detriment of the citizens and itself.

FEMA rules allow the appeal process, and in many cases, the inspection process -- which was conducted mainly by private contractors working for the city -- has been flawed. That said, some former FEMA managers, as well as members of the LRA, have been sharply critical of the city's willingness to haggle.

Critics of the city say that it creates several problems: One, it may encourage the rebuilding of homes that are below the recommended elevation and may be prone to future flooding. And two, it jeopardizes the city's participation in the National Flood Insurance Program, and establishes a bad precedent for FEMA nationwide.

"It destroys the integrity of the program," said Bob Hunter, former administrator of the program and now director of insurance for the Consumer Federation of America. "When the next flood happens in Minnesota, how do you tell people there that they can't rebuild where they are? They ought to err on the side of safety, especially with all the questions raised about the levees."

George Bernstein, the original administrator of the flood program, notes that flood insurance is highly subsidized, with the understanding that homes susceptible to flooding will be taken out of harm's way once a certain threshold of claims has been reached.

"It's not really an insurance program; it's a tradeoff for subsidized rates," Bernstein said. "If you get the benefits, you have to pay a price. If they start playing games with the 50 percent rule, they're ensuring that future construction will never catch up with the subsidized side of the program."

Sean Reilly of the LRA echoed some of those concerns, warning that people should think long and hard about what's truly in their own interest. With future new homes all built higher off the ground, older repaired slab homes still at street level are unlikely to be hot commodities.

"What we hope is that people choose safety over expediency," Reilly said. "At the end of the day, that may be a penny-wise and pound-foolish decision. We don't want you to do something that may cause your home to lose sale value, something that makes it difficult to insure, difficult to mortgage, difficult to sell.

"Gaming the damage estimates to get a permit should be avoided by everybody. We're trusting people to exercise good judgment on the less-than-50-percent damage. People need to keep in mind the long-term value of their homes could be damaged to a greater degree by doing the unsafe thing."

OK, that's the FEMA side of the story. When you throw the homeowner into the mix, things get more complicated.

Drew Sachs of James Lee Witt and Associates, the firm founded by the former FEMA director that was hired by the LRA, said officials have been considering ways to try to discourage rebuilding homes that may not be safe or wise to rebuild.

One possibility, Sachs said, would be to deny renovation grants to owners of homes that were worth less -- based on pre-Katrina values -- than the repairs are slated to cost.

For instance, if a home was worth $70,000 before the storm, and it will cost $90,000 to fix, then the LRA would not approve a renovation grant. Instead, the owner could have his home demolished by the Army Corps of Engineers, and then use up to $150,000 in grant money to construct a new house at an elevation that complies with the new maps.

No such provision now exists in the state's plan. And in the end, Kopplin said it's unlikely that the agency will impose new and tougher rules. While higher elevations may be the best long-term solution, he said, there are other factors at play, including the limited pot of money the state has at its disposal and the need to get people in homes quickly.

As an example, Kopplin cited relatively inexpensive slab homes in Kenner that he saw on a recent visit. Renovating the homes might cost, say, $35,000 apiece, he said, compared with $100,000 or more for building new houses. Even if the houses are below flood elevations, renovation might be the most sensible option, he said, given the limited pool of cash available to the state.

So what we have here is conflicting interests between the parties involved.

  • The federal government, FEMA, wants homes built below BFE to be raised if the amount of the damage is above 50% of the estimated pre-Katrina value and is willing to grant up to $30,000 toward raising the home.
  • The city is interested in rebuilding the damaged neighborhoods as quickly as possible so that taxes can be paid and re-establish the labor market but has to be wary of FEMA looking over their shoulder so that the permit process is not abused, circumventing FEMA's 50% rule.
  • The state's rebuilding committee wants New Orleans rebuilt also to re-establish the tax base but is limited in what it can do due to a finite pot of cash to do it with.
  • Banks are desparate to settle the mortagages so that mortagage holders will not be forclosing on concrete slabs but can't wait forever for settlements.
  • The average homeowner, as usual, is caught in the middle of a Catch-22.

    "You take a house that's badly damaged, but still probably salvageable, with a roof, foundation and framing," he said. "If you do the math, and it's 52 percent damaged, that means there's 48 percent left. If it's a $100,000 house, if you require bulldozing, that person has lost $48,000 of structure. Why take this guy and deprive him of that?"

    Miller further argues that encouraging or allowing renovation provides the best hope for neighborhoods to recover.

    "If the house is demolished, the owner has no particular incentive to rebuild at that site," he said. "He may very well take any insurance proceeds or other funds he has and rebuild elsewhere. This leaves the stores, churches, schools and universities without their usual customers and can lead neighbors not to return, knowing their own neighbors will not be returning. The social compact in which I rebuild . . . is destroyed."

The real dilema for the homeowner is that the raised house typically cost much more to build than the slab-on-grade as I noted above. Although many people have been interested in the raised-cottage, rising construction costs may again put the needed house type out of reach for the average Joe and he may be forced back into the cheap "ranch house". And as usual, the federal goverment is playing the part of the roadside faith healer.

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