Only music and affordable housing can save New Orleans

PUBLISHED : Wednesday, 07 February, 2007, 12:00am
UPDATED : Wednesday, 07 February, 2007, 12:00am

After the devastation of Hurricane Katrina, thousands of people in the jazz capital of America are still homeless

When Hurricane Katrina hit New Orleans on August 29, 2005, Michael Harris was on tour in Brazil. The house of the black bass guitarist in the lower 9th Ward was shredded to pieces by the raging floods. About 80,000 houses were damaged or destroyed and 1,300 people died in the Big Easy that day during America's biggest natural disaster.

When Mr Harris returned two days later, even his music notes were gone. 'The destruction was complete, the silence was deafening: no cars, no music, no children playing,' he said.

One-and-a-half years later, Mr Harris is standing in front of his new home, a tiny 800 square feet wooden frame house with only one floor. The house will be part of the Musicians Village that Habitat for Humanity is building here for those musicians who cannot afford to buy new homes.

'If there is anything that's gonna save this city, it's the music,' Mr Harris said.

Not everybody in New Orleans is as lucky as Mr Harris. In this mecca of jazz that stands for legends like Louis Armstrong and Fats Domino, slightly less than half of the original population of almost 500,000 people remain. Half of the current population is displaced and lives in one of the 40,000 trailers that are spread all over town. To these people the biggest concern is not the crime spree that started the year with 12 homicides in 15 days, almost triggering a curfew.

'The biggest challenge now is clearly affordable housing,' said Mr Harris.

'We can't build housing fast enough, 50 per cent of our people have not returned and many can't because there is no housing,' said Cesar Burgos, a real-estate developer who sits on the Bring Back New Orleans Commission that was founded by mayor Ray Nagin after the catastrophe.

The lack of available housing capacity means rising rental prices. 'The rent for my two-bedroom apartment went up from US$450 to US$1,200 right after Katrina,' said Charles Ray, a security guard with the Marriott Hotel in Canal Street. Like Mr Harris he lost his house in the devastated 9th Ward.

Horrendous rental prices are not the only problem on New Orleans' real estate market. Dozens of proposals for affordable housing complexes are stalling because insurance and construction costs are so high.

'Even the housing tax credits issued through the Gulf Opportunity Zone Act aren't enough to make the projects feasible financially,' reports the local newspaper The Times-Picayune.

Local developers are reporting that insurance costs have risen threefold on apartment complexes since Katrina hit. Even the US$121.6 million tax credits by the Louisiana Housing Finance Agency are not enough to plug the gap.

'The insurance literally is going to kill deals,' said Tim Leonhard, a senior vice-president of loan originations and tax credit equity investment for CharterMac, a publicly traded real-estate company that finances affordable housing projects.

'In my opinion, insurance is the single largest impediment to the recovery of our area,' said Mark Madderra, chairman of the multifamily housing committee, which has pledged to help move the affordable housing projects forward.

While emptiness echoes in New Orleans' streets - tourism is down to less than half and retailers are struggling for survival with less than 40 per cent of pre-Katrina sales - recovery efforts are hampered in the Crescent City for other reasons.

Only 63 out of 120 public schools reopened, a third of the bus routes is operating, many churches cannot provide services, hospitals are only partially operating, and deserted shopping centres look like ghost towns.

The 'Road Home' programme stuffed with US$10 billion of federal money, is a 'Road to Nowhere', said Louisiana legislators, because by January 15, only 177 homeowners, out of 99,000 who had applied for financial assistance, had received funding. And there is trouble on the municipal level as well.

By mid-January the New Orleans Redevelopment Authority is still making hardly any progress. City Hall has still to deliver a list of nearly 4,000 properties that are up for sale to developers. 'Until we get that list, there's nothing we can do,' said Joe Williams, an investment banker who was hired as the agency's executive director.

'Home ownership is the most important factor in lifting a family out of poverty,' Mr Nagin said during a pre-Katrina prayer breakfast in 2004.

Now his administration was failing in this regard, said Bennett Davis, a broker associate with Corporate Realty, a leading property firm in town.

'There are no cranes downtown,' he said, referring to a glut of commercial properties, left over when prices came tumbling down after the oil boom in the 1990s. A good part of the oversupply, which was created when energy firms shut 1.2 million square feet of office space, was recently converted into residential properties. Rents even went slightly up, by 10 per cent after Katrina. But firms are still leaving.

According to Mr Davis, Chevron wants to build a new office tower outside of town. Murphy Oil wants to relocate to Houston. But Shell, the biggest corporate tenant in town, just renewed its leases for 10 more years.

'There is no market solution to New Orleans,' economics Nobel laureate Thomas Schelling said. 'There must be credible commitments.'

Exactly this seems to be happening now. On January 18, news broke that Brad Pitt and Angelina Jolie had bought a historic house in the French Quarter for US$3.5 million. 'This is exactly what we need, which is more focus on what needs to be done down here,' said Arthur Sterbcow, the president of Latter & Blum Realtors.

There is even more good news for the devastated city on the horizon. Donald Trump wants to go ahead with his plans for a mixed-use luxury tower in the financial district. Pinnacle Entertainment, a market leader in Louisiana's casino business, wants to expand its Riverboat complex for US$145 million. The Hyatt hotel, which has not yet reopened, plans a gigantic jazz park. The Louis Armstrong International Airport is proof that there are glimmers of hope on New Orleans' horizon.

Last year, air traffic returned to 69 per cent of what it was before Katrina hit. And there are finally good news from the insurance front. Last week, State Farm Fire & Casualty, which insures one out of five homes in the US, agreed to settle hundreds of lawsuits and reopen thousands of other disputed claims, a deal potentially worth hundreds of millions of dollars to homeowners devastated by Katrina.