[StBernard] Point of View

[Westley Annis]

Why can't our Road Home be as simple as Mississippi's?


Thursday, August 17, 2006 
 
 
John Lovett
After almost a year, the Louisiana Road Home program is finally ready to
open its first homeowners assistance centers. Meanwhile in Mississippi,
owners of ruined homes are busy cashing their state checks and getting on
with their lives. A comparison of how the neighboring states handled their
compensation plans is revealing -- not just about how Louisiana and
Mississippi's leaders are different, but about how our futures may be
different, too. 
 
Mississippi Gov. Haley Barbour's plan just takes the insured value of an
eligible home (a number that is easy to find and cannot be disputed),
multiplies this figure by the percentage of damage the home suffered,
subtracts the homeowner's insurance and FEMA payments, and sends out a check
for the difference, up to a maximum of $150,000. 
 
Once an eligible Mississippi homeowner receives a check, he can use the
money for anything he wants (like paying for a kid's college education,
starting a new business, or taking a cruise around the world). As long as
the homeowner settles up any outstanding balance on his mortgage, the money
is his -- no questions asked. 
 
Louisiana Gov. Kathleen Blanco and the LRA decided this past spring that
this kind of simple, trust-the-homeowner kind of plan would not work for
Louisiana. Instead, they decided, the state needed a more paternalistic plan
that would encourage owners of damaged homes to remain in Louisiana and
ensure that the Community Development Block Grant money would be spent on
housing. 
 
The result is the plan we have now, which has two overarching features.
First, it supposedly provides financial incentives in the form of larger
grants to homeowners who choose to rebuild their homes on site or buy new
ones in Louisiana, rather than sell out and move away. Many homeowners
regard these "incentives" as financial penalties for moving away. 
 
Second, rather than issue checks to homeowners and trust them to spend the
money wisely, the LRA's plan will establish escrow or disbursement accounts
for those who choose the more generous options, monitored by mortgage
lenders and closing agents who will make sure that the grant money is spent
on approved rebuilding costs or on a new Louisiana home. 
 
These two features make our plan considerably more complex and costly to
administer than Mississippi's plan. Is it worth it? 
I have grave doubts that it is. 
 
The LRA's persistent response is first to say that homeowners who don't like
the move-away penalty can always sell their homes on the private market and
assign their Road Home rights to the purchasers. Well, that sounds fine,
until you contemplate how few buyers might be willing to purchase a flooded
home in an empty neighborhood and pay a substantial mark-up for murky Road
Home rights. 
 
Their second response is simply to repeat the mantra about encouraging
people to stay and rebuild. Yet the LRA's own data indicated in March (when
the key decisions were being made) that 75 percent of those who had
registered for the Road Home on-line intended to stay and rebuild anyway.
Thus the LRA's incentives might really affect just a quarter of the eligible
homeowners, many of whom will ultimately make decisions based not on the
amount of money they get from the state but on their sense of what the
quality of life will be like here in the future. 
 
I suspect that if the LRA had poured more of its Community Development Block
Grant funds immediately into infrastructure and affordable housing, it might
have swayed more people sitting on the fence to stay here in Louisiana than
it will ever influence with its purported incentives. 
 
At this point, we will never know what would have happened if we had adopted
a fast, simple plan like Mississippi's and used what we would have saved on
direct investment in community infrastructure. 
 
Instead, we will have to muddle through with what we've got -- complexity,
consultants and many long appointments at the local housing assistance
center. 
. . . . . . . 
 
John A. Lovett is an associate professor at Loyola University New Orleans
School of Law. He can be reached at jlovett at loyno.edu. 
 
 

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