Texas will be forced to ration hurricane home repair grants

Texas should allocate the limited disaster funds so that they take care of the housing needs of Hurricane Ike/Dolly survivors as the State’s top priority and relegate funding for government programs to a lower priority. Families’ recovery should come first and government second.

If even after making housing the State’s top funding priority, not enough money is available to meet all of the housing needs, which we believe will prove to be the case, Texas should further prioritize funds to help those who have no other resources to get back into housing – in other words, the State should prioritize the poor who have no insurance and cannot obtain a loan to rebuild.

State officials must understand that the $1.3 billion in available CDBG funds will not be enough to fund the complete restoration of the hurricane damages.  In fact, we estimate that the funds will be insufficient to even fund the full restoration of the housing stock of low- and moderate income Texans.

Data is not available to produce completely accurate housing damage estimates. This requires access to FEMA data that it has thus far refused to release. Specifically, FEMA evaluations of individual damage claims by households at different income levels is required to quantify exactly how much of the housing damage is not covered by insurance. Short of the disclosure of this information for planning purposes there is no way for the State of Texas to accurately allocate funds for housing programs.

The lack of this data forces us to engage in a more difficult and imprecise method of estimating the funds needed for housing.

TDHCA obtained a report of applications for hurricane related housing damages for Galveston County as of November 5. Since applications for FEMA assistance are still being taken, the cut off date of November 5 clearly understates the number of claims and the amount of damages but this is the latest report we have access to.

That FEMA report indicates FEMA damage assessments put the number of destroyed owner-occupied houses in Galveston County at 1,153 with 879 being owned by households with incomes less than 80 percent of the area median family income (MFI). These families are those classified by HUD as having low to moderate incomes.

The report also indicates a total of 775 renter housing units were destroyed with 725 of those being occupied by households with incomes of less than 80% MFI.

The combined unmet housing repair needs in Galveston County according to the FEMA report total $421,104,822.

As we have noted elsewhere we believe FEMA actually underestimates actual housing repair needs for the following reasons:

  1. The FEMA report only covers claims through November 5;
  2. FEMA damage estimates do not reflect additional costs of housing repairs that must be incurred when using CDBG funds, including lead paint and asbestos abatement and the cost of bringing an older house to full code compliance and not simply repairing merely the hurricane related damages; and
  3. Costs of bringing rental housing back on line are not fully reflected in the FEMA estimates.

We know that the cost of rebuilding the typical owner occupied home with CDBG funds damaged by Hurricane Rita cost the State $75,000. While there is little experience with housing rehabilitation with homes damaged by Hurricane Rita, preliminary data indicates an average rehabilitation cost of $50,000 would likely be conservative.

Applying these average cost estimates to the number of housing units FEMA certified as destroyed and damaged as of November 5 we can arrive at the following conservative estimates of housing rebuilding needs for homes destroyed in Galveston County.

Owner-occupied homes destroyed = 1,153 x $75,000 (per house rebuild)  = $86,475,000
Renter-occupied housing destroyed = 775 x $75,000 (per house rebuild) = $58,125,000

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The combined cost of rebuilding destroyed owner and renter occupied housing in Galveston County is $144,600,000.

It is more difficult to estimate housing repair needs but a conservative estimate is that there are four housing units that will need to be repaired for each house that was destroyed. This is admittedly a guess as to the number of homes that need to be repaired. Based on this we estimate the housing repair needs in Galveston County to be as follows:

Owner occupied homes to repair = 4,612 x $50,000 (per house repair)        = $230,600,000
Renter occupied units to be repaired = 3,100 x $50,000 (per house rebuild) = $155,000,000

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The combined cost of repairing owner and renter occupied housing in Galveston County we estimate to be $385,600,000. The aggregate cost of rebuilding and repairing housing units in Galveston County is an estimated $530,200,000. Based on what we know from applications received from victims of Hurricane Rita we can assume that households with income below 80 percent of the area median family income had no insurance and thus will not be able to rebuild or repair without government assistance.  Of the owner occupants whose homes were destroyed, 83 percent have incomes below 80 percent of median according to the FEMA November 5 report. Therefore, assuming the state restricts benefits to households with income of 80 percent of the median or less, we need to discount the amount of money for rebuilding and repairs.

$144,600,000 owner occupied rebuilding + $230,600,000 owner occupied repairs = $375,200,000
$375,200,000 x .83 (percent < 80% of median) = $311,416,000 CDBG needed for owner occupied housing in Galveston County.

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Estimating the extent to which rental housing was insured and the extent to which rental housing owners will elect to rebuild is virtually impossible. All we know is that significant financial resources will be required to bring back the affordable rental housing stock. We determined that $213,125,000 was needed to restore the destroyed and damaged rental housing stock. To pick an arbitrary figure let’s assume that very conservatively half of these costs would need to be provided through CDBG funds to bring back the rental housing in Galveston County.  This would be $135,625,000.

Therefore, by our rough estimate, $447,041,000 of CDBG funds will be required for repair and rebuilding housing for households earning less than 80 percent of the median family income (MFI). If households above 80 percent of MFI are to be assisted additional funds would be required.

$447 million for housing in Galveston County for low- and moderate-income households is 55 percent of the $814 million ORCA is proposing to allocate to the Houston-Galveston Area COG to serve all the housing and non-housing disaster rebuilding in the COG’s 13 county area. This includes other hard hit counties like Harris, Chambers and Brazoria that are going to have huge additional low- and moderate-income housing needs.

It is likely that even if all of the CDBG funds are allocated for housing not all of the low- and moderate-income households could be assisted.