Housing deficiencies may restrain economic growth in the hurricane-ravaged New Orleans metropolitan area, and it will take about 50,000 housing renovations per year over the next three years to counter the projected shortage, according to a study prepared by an economics professor at Louisiana State University.
The study, supported by a research fund of the Financial Services Roundtable, reports that 71 percent of the damaged housing stock in the area must be renovated over the next three years to accommodate projected job growth, in addition to the construction of an estimated 13,500 new homes each year. The financial services roundtable is a forum for U.S. financial services companies, and its members include major mortgage, banking and insurance companies.
Katrina killed about 1,000 people and was the costliest hurricane in U.S. history. The Insurance Information Institute estimated in October 2005 that insured losses associated with Katrina totaled about $40 billion. The institute, along with the National Association of Home Builders and American Red Cross, estimated that Katrina destroyed 275,000 homes.
“Housing becomes a binding constraint on the ability of New Orleans to recover unless New Orleans homes are quickly renovated, temporary units are made available, or homes in other nearby parishes are available,” according to “What’s Needed for Post-Katrina Recovery,” a report released this month by economics professor James A. Richardson.
“Private decisions will ultimately determine the speed and sustainability of the recovery of the New Orleans economy with housing being one of these major decisions.”
The New Orleans metro area lost about 190,000 jobs – or 25 percent of all jobs, in the aftermath of Hurricane Katrina, which devastated the region in August.
“To accommodate the return of these employees, appropriate housing must be available,” the report states. “The final piece of the puzzle is to rebuild permanent housing in the New Orleans Metropolitan area.”
An estimated 150,000 renovated housing units will be needed over the next three years if job growth replaces in the New Orleans metro area replaces 65 percent of the jobs lost in Katrina’s aftermath, according to the report. If temporary housing becomes more widespread or commuting from other areas becomes more common, the demand for new housing and renovated housing could be diminished.
Residents in the New Orleans metro area occupied 31,157 temporary trailers as of February 2006 and requested a total of about 70,000 trailers, the report states.
The report stated that the population in the New Orleans metro area shrank from 1.3 million in July 2005 to between 848,237 and 1 million in January 2006 – a loss of 24 percent to 36 percent of the pre-Katrina population in the area. “Significant damage to over 100,000 rental units forced over 250,000 persons to scatter across the country. The Brookings Institute, a public policy group, reported in February that about 750,000 households in the Gulf region were still displaced by Hurricane Katrina.
About 210,000 homes and rental units – about 11 percent of the housing stock in the New Orleans metro area – was “destroyed and made uninhabitable” by Katrina, according to the “What’s Needed for Post-Katrina Recovery” report. Also, about 18 percent of all businesses in the state were destroyed or damaged by Katrina, and about 45 percent of hospitals in the area and 42 percent of public schools remained closed six months after the disaster.
“Conventions and tourists must return rapidly to New Orleans. Alternative housing must be made available for government employees, relief workers, local workers, students and other persons currently using hotels. New Orleans needs tourists to survive and tourists need hotel rooms,” the report also states.
Housing for workers in the leisure and hospitality industries is in high demand, and there is a particular need for “a large number of moderately priced houses and apartments,” the report concludes.
In Mississippi, Katrina demolished or badly damaged 11 percent of the state’s housing stock, making 68,700 homes uninhabitable and inflicting major damage to another 65,000 homes. Employment in the Biloxi-Gulfport metro area fell about 23.4 percent from August 2005 to December 2005, which represents a loss of about 26,900 jobs. Population relocation appears to have been largely temporary in Mississippi, the report states. Mississippi Power reported that it served 195,700 customers prior to Hurricane Katrina, and it is now serving about 175,500 customers.
“Temporary housing will be required for a number of years” in Mississippi, the report also states.
Construction activity will provide a temporary boost to the region hit by Katrina, according to the report. “Construction activity will be a leading economic force for a number of years because of the destruction in the area. In the short-term … this construction activity will provide jobs for residents and jobs for persons from other states, major projects for construction companies … and tax receipts for state and local governments.”
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