October 13, 2005

By Barbara Sard and Douglas Rice

Executive Summary

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Housing Policy

Budget Priorities After Hurricane Katrina

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·     The amount of rental assistance provided to evacuees is insufficient for some families to secure housing.

·     For many families receiving rental assistance under FEMA's Individuals and Households Program, housing will remain unstable because the duration of assistance is uncertain.

·     Some families will need relocation and housing search assistance, as well as direct payments to owners through rental vouchers, to secure stable housing.

Hurricane Katrina displaced unprecedented numbers of people and caused physical and economic devastation of such a magnitude that it will be many months before the region can be rebuilt and many of the people who have been displaced can return home.  In the hardest-hit areas of southern Louisiana and Mississippi alone, hundreds of thousands of homes were damaged or destroyed, and up to 600,000 families will need transitional housing, according to FEMA estimates.[1]  As of October 6, about 60,000 people still were living in mass shelters, while about 435,000 people remained in hotels or motels.[2]  These figures do not include tens of thousands of families that are living doubled up with friends or relatives or in other accommodations that will not be adequate for the longer term.

A large percentage of Katrina evacuees have little or no income and few assets on which they can rely to pay for housing over the coming months.  Nearly one in five families fleeing the hurricane was already poor, and up to 400,000 residents have lost jobs as a direct result of the storm, according to an estimate by the Congressional Budget Office (CBO).[3]  While some who have lost jobs are covered by unemployment insurance, the benefit levels in the three states hit hardest by the hurricane are the lowest in the nation; the average unemployment benefit in Louisiana, Mississippi, and Alabama equals only about half of the income needed to raise a family of four to the poverty line.[4]  Due to the extent of poverty and job losses among families displaced by Katrina, many will be able to secure stable housing only with government assistance. 

The nation consequently faces a transitional housing challenge that far exceeds anything it has confronted in the past.  In the weeks immediately following the storm, FEMA’s housing plan focused primarily on the installation of temporary mobile homes, a strategy it had used in previous disasters.  However, after repeated criticism that this plan could not be implemented quickly enough on the scale that was needed — and that the creation of massive “trailer cities” would be “extraordinarily bad policy,” in Newt Gingrich’s words[5] — FEMA revamped its transitional housing strategy.

In accordance with the recommendations of housing policy experts from across the political spectrum, the Administration’s new strategy employs rental housing assistance as the primary means of helping displaced families to secure transitional housing.  Contrary to these recommendations, however, the Administration has declined to use the existing Section 8 housing voucher program to deliver this assistance, despite the program’s proven success and the fact that program rules could readily be streamlined to enable families to relocate quickly.  On September 14, the Senate approved an appropriation of $3.5 billion for 350,000 emergency Section 8 vouchers for 12 months for families that lost their homes due to Katrina, along with authorization for the HUD Secretary to waive some of the statutory provisions that could delay use of these vouchers.  The House of Representatives last week approved a similar set of waivers for displaced families that have existing Section 8 vouchers, endorsing the important role that housing vouchers can play “to get people into more permanent living arrangements.”[6]   The House bill does not include funding for additional Section 8 vouchers.

The Administration’s new plan has two parts.  First, displaced homeowners and renters are eligible to receive rental housing assistance through FEMA’s Individuals and Households Program (IHP) once FEMA has verified that their original dwelling is uninhabitable and other eligibility criteria have been met.  Families displaced from the eight coastal counties that were most severely damaged can receive an immediate cash payment of $2,358 to cover three months’ rent.  Two weeks after announcing the new plan, FEMA has approved expedited cash payments for more than 400,000 families.[7]

The second part of the plan addresses the housing needs of the relatively few households (about 50,000) that were living in HUD-subsidized housing or were homeless prior to the disaster.  These families are being offered rental housing vouchers under a temporary HUD program, the Katrina Disaster Housing Assistance Program (KDHAP).  The KDHAP component of the plan uses the same administrative structure and many of the same rules as the Section 8 voucher program but will provide lower monthly benefits for the lowest-income families than the benefits they would receive with Section 8 vouchers.  (A summary of the main features of these two programs is included in the Appendix.)

The Administration’s new transitional housing plan constitutes a welcome shift in strategy.  Both parts of the plan make use of the plentiful stock of existing private market rental housing, which will allow many families displaced by Katrina to secure housing more quickly and at a relatively low cost to the federal government.  Families also will be able to choose where they want to live, enabling them to move to towns and neighborhoods that are close to friends and family, job opportunities, and decent schools for their children.  In addition, KDHAP will be administered through the network of local public housing agencies that currently administer the Section 8 voucher program.  These agencies have a good understanding of local housing markets and can provide displaced families with relocation and housing search assistance, without which some families will have difficulty locating housing suitable for their needs.

The Administration’s plan is likely to be sufficient to tide many families over until they are able to return to their homes or earn sufficient incomes to afford new housing.  But in spite of its positive features, the plan is unlikely to succeed in helping a substantial number of displaced families (especially those with low incomes and few assets) to secure transitional housing unless the plan is modified.

The Administration should modify its transitional housing plan to address these shortcomings.  It can do so without action by Congress.  The Stafford Act authorizes FEMA to provide IHP rental assistance to disaster victims for up to 18 months.  FEMA should issue guidelines making clear that families that cannot afford transitional housing on their own will receive timely, ongoing rental assistance for up to 18 months.  Similarly, the FEMA and HUD policies against covering utility costs are not required by the Stafford Act.  Without increasing the maximum benefits under the Act, these policies can be modified to allow families to use the assistance to pay utility bills.

Still, even if these important improvements to IHP and KDHAP are implemented, legitimate questions will remain about whether FEMA has the capacity and expertise to deliver the high volume of housing assistance that will be needed over the next year and a half.  In testimony before Congress, Acting Director David Paulison noted that FEMA has never housed more than 20,000 families after a disaster, which is only a small fraction of the hundreds of thousands of families that will need transitional housing assistance as a result of the hurricanes.  In contrast with prior disasters, moreover, FEMA will have to rely primarily on rental assistance to help families displaced by Katrina and to provide this assistance for longer periods of time.  It remains to be seen whether FEMA can create de novo an administrative structure that will deliver this assistance efficiently and reliably – or whether it even ought to do so, in light of the short-term focus of FEMA’s primary mission.

Accordingly, the Administration and Congress should consider another option for extending assistance to Katrina evacuees who are eligible for IHP rental assistance – rental housing vouchers.  Specifically, once FEMA has determined that a family is likely to need transitional housing assistance for more than a few months, it could transfer responsibility for providing that assistance to HUD, which could provide displaced families with KDHAP housing vouchers good for the balance of the 18 months for which they are eligible for assistance.  (Families that wish to remain under the FEMA cash payment system could be permitted to do so.)  Similarly, families that are unable to obtain housing within several weeks of receiving their initial IHP rental assistance from FEMA should be given the option of receiving relocation and housing voucher assistance through the KDHAP program, which as noted, is being administered by HUD and local public housing agencies.  FEMA and HUD could agree to make these changes without Congressional action.  

Issuing KDHAP housing vouchers to displaced families would provide them with the housing stability they need to pursue job opportunities and to maintain regular school attendance for their children.  In addition, for families that had not yet obtained stable housing, a KDHAP voucher would connect them with a network of experienced local public housing agencies that could provide them with relocation and housing search assistance, as well as secure leasing arrangements with local landlords.

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End Notes:

[1] Testimony of Robert David Paulison, Acting Director, FEMA, before the Senate Committee on Homeland Security and Governmental Affairs, October 6, 2005

[2] Id.

[3] A CBPP analysis of data from the 2000 Census shows that nearly 19 percent of households in the hardest-hit areas had incomes below the poverty line.  See Arloc Sherman and Isaac Shapiro, “Essential Facts about the Victims of Hurricane Katrina,” September 19, 2005, available at https://www.cbpp.org/9-19-05pov.htm.  The Congressional Budget Office (CBO) estimates that between 280,000 and 400,000 workers have lost jobs as a direct result of hurricanes Katrina and Rita.  See Letter from CBO Director Douglas Holtz-Eakin to Congressman Jim Nussle, September 29, 2005, available at http://www.cbo.gov.

[4] Isaac Shapiro, “Benefit Levels for Unemployed Hurricane Victims Are Too Low,” Center on Budget and Policy Priorities, September 27, 2005, available at https://www.cbpp.org/9-27-05ui.htm.

[5] Quoted in Peter G. Gosselin and Ricardo Alonso-Zaldivar, “Limiting Government's Role: Bush favors one-time fixes over boosting existing programs to help Katrina victims,” Los Angeles Times, September 23, 2005.

[6] Remarks of Rep. Rodney Alexander (R-LA), Congressional Record, p. H8666, October 6, 2005.  The House bill is H.R. 3894.  The Senate action added an amendment proposed by Sen. Paul Sarbanes (D-MD) to the Commerce, State, Justice appropriations bill, H.R. 2862, which the Senate passed the next day.

[7] FEMA, “Governmental Gulf Coast Response to Hurricanes Katrina and Rita,” October 11, 2005, available at http://www.fema.gov/news/newsrelease.fema?id=19580.