Photo by Alan Ziebel, AFP-Getty
THURSDAY AFTERNOON UPDATE: While in New York, the President announced that Shaun Donovan, Secretary of the Department of Housing and Urban Development, will serve as the “federal government point-person for Washington’s involvement in New York’s Hurricane Sandy recovery.” I assume this means he will be the Federal Disaster Recovery Coordinator (FDRC), but that may be a silly supposition. Donovan’s appointment certainly confirms the key role that housing will play in the recovery. See more at Politico and The Daily News.
According to the Daily News, the White House release (don’t see it yet at the WH website, includes, “Secretary Donovan will be working closely with FEMA and other agencies working under the National Disaster Recovery Framework, a construct developed in the first term of the Obama Administration to improve long term recovery. FEMA continues to lead response and recovery efforts in the region.”
The power grid has been mostly — though not fully — restored across the region pummeled by Sandy. But thousands of flooded residences require safety inspections before they can be reconnected. On Monday in Brick Township, New Jersey 462 homes were inspected, out of which 105 were determined to be unsafe, requiring substantial electrical repairs.
On Wednesday morning FEMA estimated, 89,400 customers in New York and New Jersey are unable to receive power due to storm damage and/or damaged equipment.
The time needed to conduct inspections will be multiplied by the time needed to do repairs. Owners are trying to “camp out” to expedite inspections, repairs, and restoration. How long will the camping continue? Probably depends alot on weather.
It is the same story up and down the Jersey shore, Staten Island, Lower Manhattan, Long Island, and even on the Connecticut coast. Whatever the final number of homes needing electrical and other repairs, the regional housing market is in a sudden state of flux.
Late Wednesday afternoon Governor Cuomo announced,
FEMA will bring in contractors in order to perform basic repairs so that residents can return to their homes while more long term repairs are in progress. Only residents in the federally-declared counties are eligible to participate in this program… FEMA has developed a two-step approach to helping individuals make necessary repairs to their homes. They will use the newly developed Sheltering and Temporary Essential Power (STEP) program in conjunction with the existing Individuals and Households Program (IHP) in order to keep individuals in their homes, therefore avoiding the need to find long term sheltering or housing solutions. These programs can be accessed by individuals at the same time; participation in one does not preclude individuals from participating in the other.
Some insist current housing supply will be sufficient once electrical repairs are made. According to the Staten Island Advance, Borough President James Malinaro told DHS Secretary Napolitano,
“We don’t need, we don’t need mobile houses,” Molinaro told Ms. Napolitano. “We have it under control and we have a meeting tomorrow with the city. We have sufficient apartments for people that have to go in for temporary housing, for temporary housing. And most of the people that we’ve spoken to on the South Shore have said, ‘You get me back my energy, I don’t need to go any place, we’re staying here… My biggest concern right now, my biggest problem right now is returning electric to almost 10,000 homes. And we can’t do that until these homes are inspected, to make sure that they weren’t violated by salt water.”
Meanwhile, according to the New York Daily News:
Thousands of New Jersey residents displaced by Superstorm Sandy are frantically calling real estate offices, looking to rent a home or apartment while they figure out what to do about their storm-ravaged homes. Others are joining waiting lists at hotels filled with evacuees and out-of-state utility workers. Demand, real estate agents said, far outstripped supply. Much of the region’s copious summer rental stock is not listed this time of year, and properties on the beach may be damaged or inaccessible. The winter housing stock is much smaller, and months-long rentals of vacation homes are virtually unheard of. And the prices of rentals changes with each season. ”The number of people who need homes now is much greater than what all of the companies have combined is available,” said John Meechan, a broker with Diane Turton Realtors in Point Pleasant Beach, N.J. The company has 16 offices in Monmouth and Ocean counties.
The number of property owners having flood insurance is not yet known. According to the Consumer Federation of America:
Payments by private insurers for wind damage to homes and business properties from Hurricane Sandy will likely exceed $10 billion dollars. Flood claims paid by the National Flood Insurance Program (NFIP) will be at least $8 billion dollars and will likely exceed $10 billion, exhausting the NFIP’s existing $4 billion in payment authority.
In a front page story on Tuesday the New York Times outlined,
The federal government’s flood insurance program, which fell $18 billion into debt after Hurricane Katrina, is once again at risk of running out of money as the daunting reconstruction from Hurricane Sandy gets under way… the cost could reach $7 billion at a time when the program is allowed, by law, to add only an additional $3 billion to its onerous debt.
Some are pushing for government “insurance payments” even to flood victims not enrolled in the low-cost program. This was done after Katrina. But for both fiscal and policy reasons such a step may not be repeated this time. “We are now just throwing money to support something that is going to end up creating more victims and costing more money in the future,” Representative Earl Blumenauer, Democrat of Oregon, said.
What is being paid out is FEMA housing assistance. Residents in areas covered by a declared disaster have sixty days to register for FEMA housing assistance. Individuals can be awarded up to $31,900, depending on losses demonstrated. As of November 14, 403,798 residents of New Jersey, New York, and Connecticut have registered, 94,142 applicants have been approved to receive housing assistance, and $539,822,274 has been approved for dispersal, (though not necessarily dispersed). This housing assistance is often used for temporary shelter (e.g. hotels or rentals) and repairs. Much more will be spent.
How much will be spent rebuilding on vulnerable beach-front and other flood-prone property? In other words, how much will we invest in recreating our pre-existing vulnerabilities?
Tuesday New York City Council Speaker (and presumed Mayoral candidate) Chris Quinn told the Association of a Better New York:
“My grandfather came over on a boat from Ireland with a third grade education and worked his way up through the ranks of the Fire Department. Rockaway Beach offered him a chance to rent a bungalow in the summer, to afford a little place on the ocean just like the rich people he saw in the magazines. It was his own piece of the American Dream… Millions of New Yorkers have stories just like mine. We will make sure our children and our grandchildren have those stories too–not of a Rockaway destroyed, but of a Rockaway reborn.”
On November 8 economist Sam Chandon wrote,
From an analysis of historical behaviors, we can infer that investors believe the cost of flood protection will be borne across all property owners, or that government will offset the cost of serious events. Individual actors and investors are also myopic. When hyperbolic discounting of a presumably rare event leaves them underwater a second or third time, even detractors of big government will seek out disaster assistance. Premiums will not reflect risk-taking and the value of risky assets will be propped up by moral hazard.
I have no doubt Ms. Quinn’s rhetoric is more compelling that Mr. Chandon’s. Will that decide the issue?