This report discusses the response of the Department of Housing and Urban Development (HUD) to Hurricane Katrina

Foote, Bruce E.

McCarty, Maggie

Perl, Libby

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1 See CRS Report RL33141, Hurricane Katrina: Social-Demographic Characteristics ofImpacted Areas, by Thomas Gabe, Gene Falk, Maggie McCarty, Virginia W. Mason.Congressional Research Service ˜ The Library of CongressCRS Report for CongressReceived through the CRS WebOrder Code RS22358January 5, 2006HUD’s Response to Hurricane KatrinaMaggie McCarty, Libby Perl, and Bruce E. FooteDomestic Social Policy DivisionSummaryHurricane Katrina resulted in the displacement of tens of thousands of familiesfrom their homes.  While the storm’s magnitude is unprecedented in the United States,the resulting need to shelter and house displaced families is not.  The Department ofHousing and Urban Development (HUD), the nation’s agency with a mission to providesafe and decent housing for all Americans, has played a role in meeting those needs inthe past and is playing a role in the wake of Katrina.  This report tracks the Department’sinitial actions as well as proposals to expand the Department’s role; it will be updated.The catastrophic devastation wrought by Hurricane Katrina in late August, and to alesser degree, Hurricane Rita in late September, has led to the displacement of hundredsof thousands of families.  CRS estimates that as many as 700,000 families lived in areasthat were acutely affected by the storm; these families may have been required toevacuate, at least temporarily.1  In the aftermath of the storm, the Federal EmergencyManagement Agency (FEMA) has taken the lead role in finding temporary shelter fordisplaced families, providing emergency shelters, cash grants, and trailers.  HUDprograms have been used as a conduit for funneling short-, interim-, and long-termfunding to disaster-stricken communities many times in the past, most recently inresponse to the four hurricanes that struck Florida in 2004 and after the September 11attacks.  This report tracks HUD’s actions in response to the storm and proposals inCongress to expand the Department’s role.Administrative Initiatives  Assisted Housing.  The Administration took a number of first steps to makeexisting housing programs and assistance available to victims of Katrina.  Immediatelyafter the storm, HUD established a toll-free number (1-888-297-8685) for HUD-assistedfamilies who had been displaced — such as public housing residents and Section 8 rentalhousing voucher holders — to call in order to reestablish their benefits.  In conjunctionCRS-22 A description of temporary waivers is available at [http://www.hud.gov/offices/pih/publications/katrinapihadminwaiv.pdf].3 “Jackson and Chertoff Announce Comprehensive Transitional Housing Assistance Program forKatrina Evacuees,” HUDNo. 05-130, available at [http://www.hud.gov/news/release.cfm?content=pr05-130.cfm].4 For an expanded discussion of the KDHAP program for formerly-assisted HUD renters, seeCRS Report RL33173, Hurricane Katrina: Questions Regarding the Section 8 Housing VoucherProgram, by Maggie McCarty.  For an expanded discussion about the specific treatment of thehomeless under KDHAP, see CRS Report RL30442, Homelessness: Recent Statistics, TargetedFederal Programs, and Recent Legislation, by Libby Perl (coordinator).with that number, the Department identified a number of vacant units across the countryin which to house displaced tenants, both formerly assisted and unassisted.  HUD issueda notice on September 27, 2005, summarizing waivers available to public housingauthorities.  Temporary waivers available included suspensions of reporting deadlines,loosening of quality standards and income determination rules, and increases in subsidylimits for public housing authorities affected by the storm.2  The Department is also tomake available emergency capital reserve funds to repair damaged public housing units.FEMA-HUD Joint Initiative.  On September 23, 2005, the Secretaries of HUD andthe Department of Homeland Security announced a joint transitional housing assistanceinitiative for Hurricane Katrina evacuees.3  The initiative provides two types of assistance,both funded by FEMA’s emergency supplemental funds.  The first is a type of individualand household grant administered by FEMA.  Displaced homeowners and renters (exceptfor HUD-assisted renters) are to receive from FEMA a cash grant of $2,358 to be used forhousing-related expenses.  The amount is meant to represent three months of housingcosts and is calculated using the national average fair-market rent (FMR) for a two-bedroom apartment.  The assistance may be extended for up to 18 months. For families who were homeless or receiving HUD assistance before the storm,FEMA initially provided funding to HUD, through a mission assignment, to administerthe HUD Katrina Disaster Housing Assistance Program (KDHAP).4  It provides ongoingrental assistance, for up to 18 months, to displaced HUD-assisted renters (includingSection 8 voucher holders, families who had lived in public housing, and families whohad lived in other forms of HUD-assisted rental housing) and displaced homelessfamilies.  The rental assistance is administered by local public housing authorities and iscalculated at 100% of the local area FMR.  Families are required to pay any differencebetween the rental assistance amount and the actual rent for the unit they have selected.This program does not have any income eligibility or targeting requirements, andfamilies’ eligibility is determined  after they register for FEMA assistance and contact theKDHAP intake number (1-866-373-9509).  Language included in the FY2006 DefenseAppropriations (P.L. 109-148) transferred $390 million in FEMA funds to HUD toadminister a modified Section 8 voucher program to the same population currentlyeligible for KDHAP.  It is unclear whether these new funds will be used to continue thecurrent KDHAP assistance or a modified version of it.Grant Programs.  As in past disasters, the Secretary of HUD issued a number ofwaivers to permit local communities to redirect their existing HUD housing andcommunity development grant funds to meet their emergency needs.  Waivers were issuedCRS-35 For a discussion of the use of CDBG funds after a disaster, see CRS Report RS22303,Community Development Block Grant Funds in Disaster Relief and Recovery, by Eugene Boyd.6 Available at [http://www.hudclips.org/sub_nonhud/cgi/pdfforms/05-33ml.doc].for the Community Development Block Grant (CDBG) program5, the HOME InvestmentsPartnerships Program (HOME), the Emergency Shelter Grants Program (ESG), and theHousing for Persons with AIDS Program (HOPWA).  Some of the waivers wereautomatically applied to affected communities; in other cases, communities wereinstructed to apply for waivers.  Table 1 summarizes the waivers issued.Table 1.  Grant Program Waivers Issued After 2005 HurricanesProvisions Altered ProgramReduction of requirements regarding citizen participation in amendingspending plansHOME, ESG,HOPWA Reduction of requirements and cost limits when using funds to provide rentalassistanceHOME, HOPWAReductions in the amount of documentation required to document families’incomes for eligibility and benefit determinationHOME, HOPWAExpanded ability to use funds for administrative costs HOMEReduction of matching contribution requirement HOMEIncreases in the maximum per-unit rental subsidy homeownership home value HOMEReductions in minimum property standards HOMEWaiver of tenant selection plan requirements HOMEReduction in the mandatory set-aside for community housing developmentorganizationsHOMEWaiver of certain American Dream Downpayment Initiative (ADDI)requirementsHOMEWaiver of optional relocation assistance, replacement housing assistance, andone-for-one replacement requirementsHOMELoosened standards for decent, safe, and sanitary conditions HOMEIncrease in the amount of funds that can be used for public services (15%) CDBGBroadened definition of emergency shelter ESGExtended deadlines for using grant amounts ESGSource:  HUD’s website, [http://www.hud.gov/offices/cpd/library/katrina/]. Mortgage Insurance Programs.  On August 31, 2005, HUD issued  mortgageletter 2005-33.6  It reminded HUD-approved lenders that when the President declares adisaster, as in the case of Hurricane Katrina, the declaration automatically triggers certainprocedures with regard to FHA-insured mortgages in the affected areas.  The followingCRS-47 HUD Mortgagee letter 2005-45, issued November 22, 2005, extended this deadline for manyareas affected by Katrina through the end of February 2006.8 “HUD Announces Mortgage Assistance for Disaster Victims:  $200 Million Initiative Designedto Rebuild Lives and Communities,” HUD No. 05-164, available at [http://www.hud.gov/news/release.cfm?content=pr05-164.cfm].  procedures become effective for one year from the date of the declaration: (1) amoratorium on foreclosures is in effect for 90 days from the date of declaration7; (2)lenders are encouraged to offer special forbearance, mortgage modification, refinancing,and waiver of late charges to affected borrowers; (3) families whose residences weredestroyed or severely damaged are eligible for 100% financing under Section 203(h) ofthe National Housing Act for the cost of reconstruction or replacement of the residences;(4) damaged properties become eligible for Section 203(k) financing under which thecosts to purchase and to rehabilitate the property are included in one loan, and HUDwaives the requirement that the property has been completed for more than one year priorto application for a Section 203(k) mortgage; (5) the underwriting guidelines are relaxedto permit disaster victims to qualify for loans even if their total monthly debt, includingthe proposed mortgage, would equal 45% of gross income; and (6) lenders are directedto ensure that hazard claims are expeditiously filed and settled, and lenders may not retainhazard insurance proceeds to make up an existing arrearage without the written consentof the borrower.The Section 203(h) program is available for borrowers who already own homes inthe affected area.  The loans are limited to the FHA loan limit for the area, subject to theprovision that the loan may not exceed 100% of the appraised value of the property.  Insome cases it may not be possible to obtain 100% financing.  It may often be the case thatthe cost to repair or replace the property exceeds the appraised value of the property.  Thisis the reason that most lenders require borrowers to obtain hazard insurance that coversthe 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 rehabilitateproperties in the area that are either abandoned by owners, or are being sold by ownerswho do not want to repair them and remain in the area.  The current FHA underwritingguidelines provide that a prospective borrower’s total debt, including the proposedmortgage payment, may not exceed 41% of the borrower’s gross monthly income.  Inrecognition of the fact that borrowers in these programs [Section 203 (h) and (k)] mayhave to incur debt to replace personal property, the underwriting guidelines are relaxedto permit loans to borrowers whose total debt is up to 45% of gross monthly income.  Thelimit 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 ofborrowers who have FHA-insured mortgages on their homes and who have beendisplaced or are unemployed because of the recent disasters.8  Eligible borrowers mustmeet the following requirements:  (1) have homes that are repairable and are locatedwithin parts of Alabama, Florida, Louisiana, Mississippi, or Texas declared eligible forindividual assistance as a result of Hurricanes Katrina, Rita, or Wilma; (2) have missedbetween four and 12 payments on an FHA-insured home loan; (3) be temporarily unableto 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 borrowersCRS-59 Ibid.10 Leslie Eaton, “Mortgage Aid Set for 20,000 Storm-Hit Homes,” New York Times, Dec. 6, 2005.11 HUD Mortgagee Letter 2005-19, “Streamline(k)” Limited Repair Program, Apr. 29, 2005.12 HUD Mortgagee Letter 2005-50, Enhancements to “Streamline(k)” Limited Repair Program,Dec. 29, 2005.13 For more information, see CRS Report RS22239, Emergency Supplemental Appropriations forHurricane Katrina Relief, by Jennifer E. Lake and Ralph M. Chite.must be committed to continued occupancy of the properties as primary residences.  Nointerest is charged on the MAI loans, and repayment is not required until the originalFHA-insured loans are repaid.  The program expires in 18 months.  It is expected to assistabout 20,000 families.9  FHA notes that more than 52,000 FHA-insured loans aredelinquent due to the storms.10In April 2005, HUD augmented its existing 203(k) program by announcing the“Streamline(k) Limited Repair Program” to facilitate the  purchase of properties needingminor rehabilitation.11  Eligible properties were those needing repairs costing at least$5,000 but not more than $15,000.  The program was amended in December to, amongother changes, eliminate the minimum repair cost,  increase the maximum repair cost to$35,000, and make lead-based paint stabilization an eligible work item.12  The Streamline(k) program is not directed specifically at properties damaged by Hurricane Katrina, butthe program will facilitate the purchase and repair of such properties that meet theprogram requirements.Congressional ActionSupplemental Appropriations.  In response to Hurricane Katrina, Congressinitially enacted two emergency supplemental appropriations bills totaling more than $60billion, primarily for FEMA.13  HUD did not receive direct funding in either bill.  OnOctober 28, 2005, President Bush submitted to Congress a rescission and reallocationpackage to help fund reconstruction in the Gulf Coast after the recent hurricanes.  Theproposal would have rescinded $140 million from HUD programs and reallocated $2.2billion in FEMA emergency disaster relief funds to HUD programs to aid in disasterrecovery.  On December 30, the President signed the FY2006 Defense appropriations bill(P.L. 109-148) that included a Katrina supplemental funding bill similar to theAdministration’s October proposal.  It provided $11.89 billion to HUD for Katrinadisaster assistance.  Of that amount, $11.5 billion was provided to CDBG to be distributedto states and areas most acutely affected by Katrina, and $390 million was provided toSection 8 for serving the same families currently assisted under KDHAP.  These increasesin funding were offset by rescissions from FEMA’s disaster relief fund, as well as specificrescissions from selected other programs across the government (none from HUD), andan across-the-board rescission of 1% (which will affect HUD programs).  The bill alsoincludes administrative provisions permitting housing authorities to combine their publichousing and Section 8 voucher funds, and directing the Secretary, to the extent feasible,to preserve all assisted housing damaged by the storm.CRS-6Legislation Introduced.  On September 8, 2005, Senator Reid introduced theKatrina Emergency Relief Act of 2005 (S. 1637).  Title III includes the “Helping to HouseVictims of Hurricane Katrina Act of 2005.”  The bill would provide $3.5 billion inemergency supplemental appropriations to HUD to fund temporary vouchers for familiesdisplaced by Hurricane Katrina.  The vouchers would not be subject to many of theSection 8 rules regarding eligibility and tenant payments.  In addition, the upper limit onthe amount of assistance that can be provided would be increased.  Also on September 8,Senator Sarbanes offered the same “Helping to House Victims of Hurricane Katrina Actof 2005” as a floor amendment to the Commerce-Justice-Science FY2006 appropriationsbill (H.R. 2862).  The amendment was adopted, but dropped in conference.On September 22, 2005, the Senators from Louisiana each introduced identical bi-partisan relief and recovery bills.  The Hurricane Katrina Disaster Relief and EconomicRecovery Act (S. 1765 and S. 1766) calls for new programs and additional funding inareas ranging from defense, to energy, to health care, to the environment.  The housingsection would provide $3.5 billion for emergency Section 8 vouchers; $50 billion forCDBG, up to $5 billion of which could be transferred to the HOME program and $5billion to the HOPE VI program; and $3 billion for mortgage relief.  The bills werereferred to the Senate Finance Committee.On September 26, 2005, the members of the Louisiana House delegation introducedthe Hurricane Katrina Emergency Housing Act of 2005 (H.R. 3894).  The bill wouldwaive a number of the rules in the Section 8 voucher and project-based programs,including those regarding eligibility and subsidy determination, for families displaced byHurricane Katrina.  On the same date, all but one member of the same delegationintroduced two additional housing bills:  the Hurricane Katrina Emergency Relief CDBGFlexibility Act of 2005 (H.R. 3896) and  the Rural Housing Hurricane Relief Act of 2005(H.R. 3895).  The CDBG bill would waive the cap on the amount of CDBG funds that canbe used for community services and would waive the public hearing requirements forcommunities impacted by Hurricane Katrina.  The rural housing bill would allow thereprogramming of certain rural housing funds and expand the uses of certain loans.  Allthree bills were passed by the full House and are pending in the Senate.On October 17, Representative Danny Davis introduced the Hurricane KatrinaVictims Emergency Shelter Act of 2005 (H.R. 3794).  It would direct the Secretary ofHUD to make foreclosed FHA-insured properties available to families displaced byKatrina.  On November 18, 2005, Representative Wicker introduced H.R. 4431 to provideadditional CDBG funding to communities affected by the storm.  On November 22, 2005,Representative Watt introduced H.R. 4197, the Hurricane Katrina Recovery, Reclamation,Restoration, Reconstruction and Reunion Act of 2005, a broad-ranging bill that wouldauthorize expansions in funding for a number of HUD programs and include a temporaryvoucher program similar to that proposed by Senators Reid and Sarbanes.  On December13, Representative Jindall and Senator Allard introduced identical bills (H.R. 4514/S.2088) to authorize an urban homesteading program proposed by the President.  All fiveof these bills have been referred to committee.

HUD's Response to Hurricane Katrina

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HUD's Response to Hurricane Katrina

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