Wednesday, December 12, 2007

LRA accepts home buyout plan

BATON ROUGE -- The Louisiana Recovery Authority on Tuesday approved Orleans and Jefferson parishes' plans to deal with thousands of storm-damaged properties being sold to the state through the Road Home program.

So far, 2,000 homeowners have sold their properties to the state -- rather than renovate or rebuild -- but officials expect about 15,000 will take the buyout option by the time the homeowner grant program is done.

Ultimately, those properties will be transferred to local governments which will decide what to do with them, such as renovate or redevelop, or convert them into parks or green space. The LRA must approve each parish's plan for the buyout properties it receives.

Of the two plans approved, the largest came from New Orleans, which expects its New Orleans Redevelopment Authority to receive 7,000 Road Home properties in the next year. The city's plan calls for the properties to be sold to developers or cleared for parks and community gardens in the next 10 years.

A goal of the city plan is to avoid putting too many of the properties on the market too quickly, out of concern that supply will outpace demand and lead to blight in some neighborhoods, NORA Executive Director Joe Williams said.

Williams said that even before any Road Home properties are passed on to NORA, a process that will start next year, there already are about 2,400 properties on the market in New Orleans, a year's worth of housing supply. Ommeed Sathe, a land policy expert for NORA, said healthy real estate markets should have six to nine months of inventory.

NORA also is concerned about how it will cover costs to keep the properties maintained and secure, a bill that could reach $12.5 million a year. LRA Housing Chairman Walter Leger said the board would look at ways to help the parishes pay such costs, and Sathe said it would be important to hold the LRA to that.

Jefferson Parish's plan, which is slated for approval by the Jefferson Parish Council today, is far smaller and doesn't have such complicated strategic issues. It is based on fewer than 200 properties and seeks to sell all of them at auction within a year.

St. Bernard Parish, which expects to get nearly as many buyout properties as Orleans, was the first parish to offer a redevelopment plan, but the LRA said it must be reworked to adhere to federal requirements before it can be approved.

Each parish plan also must set aside 25 percent of the properties for low- to moderate-income housing. In its plan, Jefferson Parish said it might not be able to adhere to that requirement because of the high cost of development.

A faith-based organization, the Jeremiah Group, may have found a way to make that requirement easier. It asked the LRA to dedicate $75 million in the affected parishes to so-called "soft-second mortgages," subsidized no-interest second mortgages that are typically forgiven if the buyer stays in the house for 10 years.

The LRA voted Tuesday to redirect $35 million to the subsidies. The LRA previously had put that into a tax-credit program for large rental property developers, but the Jeremiah Group, which had long fought to protect the rental money, said Monday it would support stripping the money because it would help many renters become homeowners.

Leger said his LRA housing task force would meet in a week to try to come up with another $40 million, possibly from the LRA's $869 million Road Home small rental program.

Donald Vallee, head of the New Orleans Landlords Association, said drawing down from the small rental program would be a mistake. He said that program needs more money, not less.

"Many housing loan programs are available in the industry that provide this service to homeowners," Vallee said of soft-second mortgages. "None, if any, are available to restore or build rental housing for our work force and displaced residents."

All told, it was a good day at the LRA for the hurricane-affected parishes, with the biggest news being the board's preliminary approval of $500 million to help 23 parishes with their long-term recovery efforts.

Sathe said the infrastructure financing, the redevelopment strategy and the extra help for homebuyers will work together to drive an efficient redevelopment effort.

"It's three legs of a stool, and all will help revitalize our city's neighborhoods," Sathe said.