Tag Archives: Daniel Rothschild

The Road Home?

Our own Daniel Rothschild testified last week before the House Judiciary Subcommittee on the Constitution, Civil Rights, and Civil Liberties, about the role of state and federal governments in obstructing home building in devastated New Orleans neighborhoods. From Louisiana’s Daily World:

Daniel Rothschild, director of the Gulf Coast Recovery Project at George Mason University, said the problem isn’t necessarily that government officials are discriminating, but that they’re becoming overly involved in recovery efforts.

“Federal and state policies designed to rebuild homes sowed confusion and uncertainty, making it difficult for people to make informed choices about how, when and where to rebuild,” Rothschild said.

He said the government should set clear, simple rules, then get out of the way to allow rebuilding to take place from the ground up.

“Community leaders, clergy, social entrepreneurs have leveraged social capital and local knowledge to spur rebuilding, and over 1 million Americans have volunteered their time, some for weeks and some for years,” he said. “They got it fixed and built houses one at a time.”

For more Mercatus work on the problems created by post-disaster government uncertainty, and how we could encourage rebuilding efforts, see some of our extensive publications on the subject.

Haiti’s Road Home: Rebuilding Lessons from the Gulf Coast

The Louisiana Road Home program was established to provide up to $150,000 for homeowners rebuilding in the wake of Hurricane Katrina. Almost 5 years after the hurricane devastated the Gulf Coast, the Louisiana Recovery Authority estimates that one third of grant recipients have yet to rebuild and return home. Why? Garett Jones and Neighborhood Effects blogger Daniel Rothschild offered a few reasons last year in Forbes:

While initially designed to rapidly provide rebuilding assistance to residents, [the Road Home program] was loaded down with caveats and clauses meant to engineer a particular rebuilding plan, rather than allow the rebuilding to emerge spontaneously. Government rules became government direction, and private decision making was shoved into the back corner….

The biggest problem with Road Home was that it caused people to wait for promised federal help, and indeed, some people are still waiting. The initial promise of quick and easy government assistance combined with inept program administration and a 57-step application process mean that even [nearly five] years after Katrina, thousands of homeowners are still waiting for their checks…. So government action delayed private action and government plans crowded out local solutions.

Haiti — and the international commission that will direct its reconstruction — should heed lessons from the Gulf Coast recovery.

Yet development economist Jeffrey Sachs, like many other experts, advocates a centralized reconstruction strategy for the country. “There should be one overarching framework. There should be one major multi-donor bank account to finance the heavy outlays required for Haiti’s recovery. There should be a highly professional executive team co-ordinating the international support efforts.”

The Interim Haiti Recovery Commission grants Sach’s wish. It will determine which reconstruction projects deserve funding and then disperse the $9.9 billion pledged by donors. But it must beware entangling Haitians in obstacles that plagued Gulf Coast rebuilders — crowding out of local solutions, creating bureaucratic red tape that delays recovery, and unintentionally encouraging inaction as citizens wait for government or international panaceas.

Evidence from the Road Home program suggests that the federal government’s Katrina recovery strategy encouraged residents to battle for grants rather than innovate creative solutions to overcome their challenges. The international community’s reconstruction strategy in Haiti must avoid doing the same.

Convertable housing vouchers

Robert Lerman, a fellow at the Urban Institute in Washington, has an interesting proposal in the February 27 issue of the Washington Times.

Lerman notes that around 2 million low-income households are now receiving more than $20 billion per year in total rental subsidies from the federal government.  For example, a household might rent an apartment for $800 per month, and pay only $300 out of its own pocket, while the federal government picks up the remaining $500.

Lerman’s suggestion is simple.  Partly because of the depressed housing prices today, if the federal government kept up the same level of payments, it would be financially workable for these households to purchase a home with the same amount of money – or often less – that is now going to rents.  In Detroit, for example, a typical house in a lower to moderate income neighborhood now sells for around $70,000.   At current rates, paying off a 30-year mortgage would cost about $400 a month, leaving up to the remaining $400 (from the $800 now being spent on rent) to cover taxes, maintenance, and other home costs.

With much of the mortgage payment in effect guaranteed by the federal government, a small down payment might be possible.  Under this idea, many new households might be able to join the ranks of homeowners without any additional costs to the government.  And if large numbers of households pursued this course, it might also help to stabilize currently stressed housing markets and prices in many cities across the United States.

Errata: This post originally showed Daniel Rothschild as the author. It is Bob Nelson.