For generations in the U.S., political and private sector leaders have preached the nobility of the “American dream.” Home ownership is a goal for which all individuals should strive and which government should encourage – or so the traditional thinking goes. But recent trends in New Orleans have run counter to the dream and some say that in the current environment this contra-movement could pick up steam.

For decades, concentrations of federally subsidized rental housing have been far heavier in New Orleans than in surrounding parishes. This both stems from and supports the existence of the city’s disproportionate share of low-income and impoverished households relative to the larger metropolitan area.

In some ways, subsidized housing has been a boon to the local economy, providing affordable housing for the legions of service workers who support the city’s tourism industry. But the sheer mass of local rental units allocated for low-income individuals also has deterred growth in the ranks of middle- and upper-income households and that doesn’t bode well for the future.

Recently, the local Bureau for Governmental Research (BGR) released a report that raised red flags about the impact of post-Katrina rebuilding incentives. In their report, BGR analysts noted that New Orleans’ large supply of subsidized housing – totaling more than 19,000 units in 2005 – has fueled a disturbing demographic imbalance: Poverty is concentrated in the city while good jobs and many middle- and upper-income residents flock to the suburbs. The dynamic robs the city of the tax base that pays for core services and limits opportunities for economic advancement among the poor, thereby lowering the quality of life for all.

BGR says federal, state and local policies aimed at assisting low-income people have played a big role in this imbalance. Large public housing complexes, in particular, have concentrated subsidized rental housing in the inner city and suburban communities have used zoning laws to exclude such housing within their boundaries. According to BGR, while New Orleans had almost 6,000 public housing units prior to Hurricane Katrina, neighboring Jefferson Parish had fewer than 600 such units and St. Tammany and St. Bernard parishes had almost none.

RUNNING UP THE COST

“Federal policy has myopically focused on the city’s core,” says BGR Executive Director Janet Howard. “This not only affects the tax base relative to other parishes, it also tends to run up the cost of government, making services more expensive. What happens is the cost burden for low-income housing for the whole region is placed on a very small part of that community.”

Howard says BGR’s latest concern is that the regional imbalance of subsidized housing will grow still worse thanks to incentives offered to developers and property owners following Katrina. Housing tax breaks available within the Gulf Opportunity Zone, for instance, largely target the development or renovation of low-income housing rather than “market rate” rentals or single-family homes. Policy decisions have sought to restore pre-Katrina levels of low-income housing within the city even though the city’s current population is smaller.While the emphasis on housing for low- and moderate-income residents is clear, local real estate expert Wade Ragas believes fears of a demographic imbalance may be overstated.Ragas, president of Real Property Associates and former head of the Real Estate Market Data Center at the University of New Orleans, agrees that development incentives favor low-income units over market-priced homes. However, he says developers are unlikely to create as much low-income rental housing as is currently authorized. “It doesn’t appear at this time that even half of those proposed will succeed in going forward – a lot of it is not going to get built,” he says.

He also notes that some geographic shifting of affordable housing is occurring under the incentives. “There’s more going into the downtown and Mid-City areas than we’ve ever seen before,” he says.

Still, Ragas says it’s inevitable that restoration of moderate-income rental property will occur primarily in the areas that held it before. “The sites that were available were mostly in [eastern New Orleans]. Developers had to go in where it was already zoned, where sewer and water lines and other infrastructure already were. They couldn’t wait around for zoning debates [over new sites],” he says.

RELIEF IN SIGHT?

Complicating the debate over placement of low-income housing is concern about the pace of economic recovery. Tax base issues aside, the metropolitan area needs an ample supply of reasonably priced housing to accommodate the hospitality industry. Because Katrina put many rentals out of commission and the Housing Authority of New Orleans has been reluctant to reopen many public housing units, a labor shortage has plagued the tourism industry and sectors such as shipbuilding and construction for the past two years. A rise in rents on the units that were available after Katrina aggravated the labor shortage but Ragas says some relief may be in sight.“

Right after the storm, the shortage caused rents to spike as much as 25 percent, so public housing vouchers had to be adjusted upward in order to enable people to get housing,” he explains. “But just as they were adjusted up, they will get adjusted down again as it becomes clear that market rents are starting to decline, which they are in some parts of Orleans Parish right now.”As developers continue to evaluate the rental property market, BGR’s Howard says her agency will continue to push the state’s housing finance authority for policies to help rebalance, geographically, the local supply of affordable housing. “It has to be driven at the state level because it involves interparish planning and zoning,” she says.

“We’re facing the risk of concentrated poverty and our population base is not big enough to deal with all the problems that brings.”

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