Homeland Security Watch

News and analysis of critical issues in homeland security

November 15, 2012

Response-to-recovery: The housing crisis

Filed under: Catastrophes,Preparedness and Response — by Philip J. Palin on November 15, 2012

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.”

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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?

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5 Comments »

Comment by William R. Cumming

November 15, 2012 @ 1:54 am

Interesting post! Housing in American life is as proved often the last best hope of some kind of investment that will outrun the slicky boys of Wall Street. Used to be like stuffing money under the mattress with assurance unless stolen will be there. Well the financial crisis since 2008 has proved that money invested in housing may or may not be there when needed. But whether a good investment or not we all need a roof over our heads. HUD of course has a basic charter to do that since its formation in 1966 and startup under Secretary Weaver. But of course the USA does NOT provide decent, safe, sanitary housing for all. Why?

Even before Mother Nature sometimes intervenes, a great deal of subsidy to waste is represented by the unlimited mortgage deduction that favors the wealthy. And then of course you have to “own” property to have an insurable interest in the property. And much of
STATE and LOCAL taxes including the provision of education is based on the property tax.

And then there is the second or third home that some own for not just investment but occupancy. The Internal Revenue Code requires that these non-principal residences be occupied by the owners just two weeks a year to allow the tax benefits of rental housing to be achieved.

Comment by William R. Cumming

November 15, 2012 @ 9:10 am

Perhaps some discussion of the NFIP would be appropriate. The basic principle of that program is that existing occupancy of the flood plain prior to FEMA mapping that flood plain would receive a permanent subsidy in the form of lower premiums for flood insurance in return for STATES and their Local Governments controlling floodplain development, in particular for single family and 1-4 family housing, in the face of that known risk.
The FEMA maps are the enforcement arm of the program but they are gamed in many ways.
Now that program should be reformed by returning to the original statutory scheme and flood insurance should only be provided in mapped areas of the 1% annual occurrence [exceedence] flood ofter erroneously referred to as the 100-year flood.
Congress conducted partial reform this last July when it mandated that full acturial rates should be paid post-loss and this mandate will heavily impact the required flood insurance on the Jersey and NY shores.

In NOLA because of a decision early on in the NFIP to not show as flood prone properties behind levees and flood walls and below dams, the people occupying those areas of NOLA knew of the malfeasance, misfeasance, and non-feasance of local flood plain management and bought federal flood insurance at extremely cheap rates since they were technically in non-flood prone areas. Thus the almost $20B outlays of the NFIP post-Katrina.

In a Boston Globe opinion piece today the author opined on some of these issues.

Comment by William R. Cumming

November 15, 2012 @ 10:21 am

Hoping my comments present and past make all understand that neither FEMA nor HUD as currently organized are fully competent to handle disaster housing issues at the level of Katrina and Sandy!

Again, while laughed at, during my time in
FEMA I argued for specific plans in several areas of the USA as a baseline to house up to 5M without housing.

Comment by William R. Cumming

November 15, 2012 @ 10:22 am

And did I mention that under Congressional mandate there is in fact a published final National Disaster Housing Strategy!
Its current relevance and usage unknown to me!

Comment by William R. Cumming

November 16, 2012 @ 10:24 am

Well more evidence of cluelessness at the WH on domestic crisis management. Maybe Brennan trained by the CIA should take on Housing and Recovery.

Evidence–the National Disaster Recovery Strategy was referred to in the Thursday afternoon update. Not the National Disaster Housing Strategy. And the recovery strategy produced and released IMO before the housing strategy. Clearly someone thought this distinction was unimportant or ignorant of the two separate uncoordinated strategies. I would have mentioned both or the housing strategy unless as I suspect FEMA, having lost the earthquake hazards reduction program lead in 2002, its national security emergency preparedness lead in 2003, numerous other programs, functions, activities departure since 2003, and what I think is probably a permanent departure of the LTR [long-term recovery] lead it is obvious whatever FEMA’s Hurricane Sandy performance it is a step child that no responsible entity wants to go beyond being a channel for funding and information in disasters. So death by a 1000 cuts seems FEMA’s future. No real advocates left for its all-hazards mission and goals.

Too bad since I believe this slow bleeding to death of FEMA by last three administrations a huge mistake and almost ensuring a larger future DoD role in civil domestic crisis management.

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