This is the third in a series of blog posts related to our work around housing and opportunity. To learn more about this project, check out the first blog post, the second blog post, the full report, the Executive Summary, or our interactive StoryMaps. The views and opinions expressed in the report and this blog post are those of the Center for Community Capital and do not necessarily reflect the views and opinions of JPMorgan Chase & Co. or its affiliates.
The severity and devastation of hurricanes striking the U.S. is predicted to increase over time. Local, state, and national policymakers would do well to prepare for the effects of these changes on housing markets, and especially to ready themselves to assist the low- and moderate-income homeowners and renters with the least ability to weather the storm.
The 2017 hurricane season is estimated to have been the most expensive in U.S. history: between hurricanes Harvey, Maria, and Irma, as well as the fourteen other storms that struck during the season, U.S. losses tally to more than $385 billion.
At the most personal level, hurricanes can result in tremendous loss to individuals and families as their homes and belongings are damaged or destroyed. At a broader level, regional level, hurricanes disrupt economies and also affect housing markets, reducing the supply of available housing and driving up home prices and rents on the units that survive intact. These increased costs might be manageable for those with higher incomes, but for lower-income homeowners and renters – whose homes are more likely to be damaged in major storms and who are therefore more likely to need shelter in a storm’s aftermath – the search for affordable housing can be a near-impossible task.
While we might expect the supply of post-hurricane housing to increase over time and for initially high home prices and rents to fall, recent research that CCC undertook in New Orleans as part of a project funded by JPMorgan Chase & Company revealed that housing affordability is still a pressing issue in New Orleans more than a decade after Hurricane Katrina devastated the city.
Affordability is still a pressing issue in New Orleans more than a decade after Hurricane Katrina devastated the city.
CCC’s research in New Orleans focused on the St. Bernard Area – the neighborhood that includes Columbia Parc, the redeveloped St. Bernard Public Housing Development. Our analysis of changes to housing prices in this neighborhood reveals that affordability is a pressing concern for residents. In 2000, the median home value in the St. Bernard Area was $65,295. By 2010 – five years after Katrina – this had almost doubled, to $118,800 (U.S. Census). Housing values have continued to rise since then: the neighborhood’s median home value in 2015 was $167,600 (2011-15 American Community Survey).
Meanwhile, the St. Bernard Area’s 2015 median income was $20,149, meaning that half the neighborhood’s residents made less than this annually. Assuming a traditional 20% downpayment on the median-value home, an outstanding mortgage of $134,080, a 30-year mortgage at a fixed rate of 4%, $2,400 in annual property taxes, and $1,000 annual homeowner’s insurance costs, purchasers would have to put down $33,520. For the majority of St. Bernard Area residents, saving this amount would be nearly impossible, not to mention meeting the monthly mortgage payment of $923.
Residents and stakeholders interviewed as part of CCC’s research in the St. Bernard Area listed housing affordability as one of their chief concerns. From the people we spoke with, we heard about the ongoing effect of Hurricane Katrina on housing access in New Orleans.
Interviewees discussed the irrationality of New Orleans’s housing market post-Katrina. As one person explained, “We have a significant double-digit vacancy rate when you count in apartments and homes that are sitting unoccupied because they are too expensive for the market, when you factor in properties that are sitting vacant and unoccupiable because of blight and dereliction, and when you also consider vacant land.” Other factors that were cited as exacerbating New Orleans’s affordable housing crisis include the demand for housing by new (post-Katrina) arrivals to the city, the failure of the city to replace unit-for-unit the affordable housing available before the storm, and the influx of federal funding into the city following the storm, which some say led to the city’s not developing an effective affordable housing policy.
“We have a significant double-digit vacancy rate when you count in apartments and homes that are sitting unoccupied because they are too expensive for the market, when you factor in properties that are sitting vacant and unoccupiable because of blight and dereliction, and when you also consider vacant land.”
Increased housing costs in New Orleans affect lower-income people in a number of ways.
- High housing prices and rents force lower-income people to live far from their jobs in the city center, increasing commute times and travel expenses.
- Those who want to remain close to jobs are forced into substandard housing in less-safe neighborhoods.
- Increased housing values make it difficult for lower-income owners to remain in their current homes: as one interviewee explained, “When you begin to build quarter of a million, three hundred thousand dollar homes in what was once a sixty-five, seventy thousand dollar area, you increase the assessments on those properties, which increases the taxes on those folks, which increase their insurance on their houses…. They aren’t trying to sell, [and] now they’ve got to figure out how they’re going to make ends meet just to pay for the excessive things that they normally wouldn’t have to reach that high to pay for.”
The severity and devastation of hurricanes striking the U.S. is predicted to increase over time. Local, state, and national policymakers would do well to prepare for the effects of these changes on housing markets, and especially to ready themselves to assist the low- and moderate-income homeowners and renters with the least ability to weather the storm.
Topics(s): Affordable Homeownership