Mack, 71, lost both houses to the floodwaters of Hurricane Katrina and, like thousands of her neighbors, has been struggling ever since. This great-grandmother, who has been married for 52 years to Johnny Mack, stayed in Atlanta until she found a place to rent near the two vacant lots where her houses used to stand.
Sadly, her mother died in March, and Mack is convinced her mother's death is related to the anxiety caused by uncertainty over where she would live.
Mack received $109,000 from the Road Home homeowner's program for the North Galvez Street home where she resided pre-K. A contractor has started building a new house on that site. Mack says the new house will cost $165,000, and she has no idea how she will make up the $56,000 difference.
As for the rental property, which Mack's family has owned for 50 years, she says she has little hope of rebuilding it. 'Now it's gone, and it was what we thought we were going to live on in our retirement years," Mack says. 'I don't know what I'm going to do."
Like many other small-time landlords, Mack initially had put her faith in the Louisiana Recovery Authority's Road Home 'Small Rental Property Program" (SRPP). The SRPP is a companion of sorts to the Road Home homeowners program, which has received tons of publicity. Both programs are administered by ICF International Inc.
Mack had hoped the $869 million rental property program would provide a loan to help her rebuild her rental property. She agreed with the program's stated objective of creating more affordable housing by making forgivable loans to landlords in exchange for lower monthly rents. With assistance from a neighborhood association, Mack filled out a program application. When she received a 'conditional award" letter from SRPP, she thought the process was nearing completion.
The conditional award was for less than the estimated costs of rebuilding, but Mack accepted the offer nevertheless. She returned her acceptance notice with a few additional required documents.
'I was waiting on them to call me and say "Lets get the money,'" Mack says. 'I did all the paperwork."
Unfortunately, Mack was wrong about how the program works. The Road Home's Small Rental Property Program isn't a traditional loan program at all; instead, it's an 'incentive" program. Worse yet, the rules apply in a Catch-22 fashion: Only after construction is completed " at the landlord's sole expense " and a rehabilitated property is thoroughly inspected (and a qualified low-income renter identified) can an applicant receive a forgivable loan. Until construction is finished and all paperwork and inspections are completed, landlord-applicants are on their own. Most difficult of all, they have to get their own financing to rebuild. While a forgivable SRPP loan sounds great, the banks that are financing reconstruction work expect timely repayment of every loan they make to SRPP applicants.
Somehow, that crucial bit of information didn't filter out to thousands of small-scale landlords like Mattie Mack.
SRPP administrators started accepting applications from small-scale landlords in January 2007. In a press release sent out by the Louisiana Recovery Authority (LRA), Walter Leger, chair of LRA's Housing Task Force, described the program as 'designed to help the mom and pop landlords preserve their investments and offer safe, comfortable and affordable homes to families trying to come home."
It's hard to imagine landlords more mom and pop than Mattie and Johnny Mack. Unfortunately, SRPP isn't helping them. In fact, since January, SRPP hasn't helped any landlords. As of last week, SRPP had not issued a single check for one of the forgivable loans, despite its $869 million budget and Louisiana's loss of 82,000 rental units as a result of Hurricanes Katrina and Rita.
The program's 'conditional award" notice sent to the Macks told them they were eligible to get up to a maximum of $138,000. The Macks have a written estimate that says it will cost a total of $228,000 to rebuild their rental house on North Miro Street. Now that the Macks are paying rent, they say there is no money left after they've paid their monthly bills.
They are stuck. And they are not alone.
Mattie Mack grows angry as she stands on the porch of her apartment and looks out at her Lower Ninth Ward neighborhood, where only a handful of homes are occupied more than two years after Katrina. She says she knows she won't be able to get a construction loan with her limited income, and she feels this disappointment doesn't only affect her.
'I was waiting on money to build my house," she says. 'I was figuring I could help someone because all my people are ready to come back."
Since SRPP began, it has announced more than $502 million in conditional awards, which was supposed to produce 11,507 apartment units " including 9,975 affordable units for low-income tenants " in a total of 5,939 properties. To date, not one landlord has received any of these dedicated funds.
By contrast, ICF International, the company that stands to make a total of $756 million for running this and other Road Home programs, so far has taken in $16.7 million from the SRPP.
The SRPP started out slowly, even more slowly than the moribund Road Home program for homeowners. The homeowners program began accepting applications in August 2006, nearly a year after Hurricane Katrina. The SRPP started taking landlord applications on Jan. 29, 2007.
Both programs are funded by the U.S. Department of Housing and Urban Development via Community Development Block Grants. The SRPP's $869 million budget, while seemingly large, pales in comparison to the homeowner program's budget of $7.5 billion. The rental property program, however, was never intended to bring back all of the 82,000 rental units that sustained major or severe damage from the 2005 storms. According to the SRPP handbook, the program's main objectives include:
To provide affordable rents for working families.
To encourage redevelopment in impacted communities.
With a budget that's less than 12 percent of the homeowner's program, the SRPP is designed to finance up to 18,000 affordable rental units. The $829 million allocation is spread over 13 parishes affected by Katrina and Rita, with $40 million reserved for pilot programs. Each affected parish has been accorded a percentage of the total budget based on its estimated damage. Orleans Parish, with nearly 70 percent of the statewide damage, is set to receive the lion's share " more than $577 million " of the forgivable loans. The state's Office of Community Development designed the program and supervises ICF International, the program administrator.
According to the New Orleans Index, a review of the New Orleans area's post-storm recovery, the average cost of a two-bedroom apartment has risen from $676 to $978 a month, a 45 percent increase. To satisfy the program's objective of providing affordable rents to lower-income tenants, landlords who get forgivable loans must agree to rent their units at below-market rates. Rents under the program are designed to be affordable to households that earn 80, 65 or 50 percent of the area's 'average median income" (AMI). The lower the rent that a landlord agrees to accept, the bigger the incentive (i.e., forgivable loan) that landlord qualifies to receive. For example, if a local landlord agreed to the 50 percent rental rate for a two-bedroom apartment, or $590 a month, that landlord could get a $47,000, no-interest, forgivable loan. The landlord would have to comply with the 50 percent rental tier for 10 years for the loan to be fully forgiven.
Because there were so many devastated rental units in New Orleans, participation in the local program has become competitive. For the first round of applications, only owners of one-to-four-unit rental properties were eligible, and applicants were ranked according to whether they provided energy-efficient utilities (washers, dryers, stoves, etc.), adhered to specific building codes, ensured each property was certified 'free of lead hazards," and whether the properties were located near amenities such as hospitals, schools and convenience stores. Other criteria required landlords to certify that 30 percent of their annual income was derived from rental revenue and that they had received three competitive bids from licensed contractors before repairing their properties.
The competition, which came in the form of a 'Priority Scoring Questions" section on each landlord's application, overwhelmed many of the elderly property owners applying for the SRPP. One source familiar with the program says that many people simply checked 'yes" for every question, thinking that the questions were more of a wish list that they wouldn't have to actually fulfill. Not so, says Calvin Parker, manager of the rental programs for state Office of Community Development (OCD). Parker says that if an applicant checked 'yes," that item must be satisfied. Otherwise, the incentive could be denied.
'There's always some [applicants] at the margins," Parker says. 'We have thousands of applications, so there's a mid-range of people that checked a lot of things."
ICF stopped taking applications for the first round of the program in mid-March. In April, Road Home administrators put out a press release that proclaimed, 'More than $202 million in federal funds will be awarded to help restore more than 5,200 rental units in 13 of the most damaged parishes in South Louisiana with 4,075 units (rented) at affordable rates for low-to-moderate income level working families." Seven months later, however, not one of those units has been rehabilitated and occupied by a low-income renter.
In the same April press release, the Road Home stated that there were 6,734 applications in the first round " and that an estimated 2,693 small rental property owners 'will receive awards," which means 4,041 didn't get a conditional award. Of those who were denied, 2,960 (more than 73 percent) were from Orleans Parish. Another 182 were from Jefferson Parish, and 899 were from all other parishes.
Statewide, as of late October, Parker reports that only 932 of the 2,693 who were supposed to get awards are still considered 'live" applications " that is, still working through the process " and that 850 of them were transferred to 'round two."
In Orleans Parish, 1,836 landlords initially received 'conditional award" letters last April. The letters told applicants how much they were eligible to receive, although none has received anything yet. Parker says that 625 of these New Orleans applicants, about a third of the original number, are still considered 'live."
Many landlords who received the 'conditional award" letters must have believed the Road Home hype. Mattie Mack, who was notified of her award in round two, certainly thought a check was on its way. Although the $138,000 promised in her conditional award letter reflected the maximum she could get " and even though it was $90,000 less than a contractor said it would take to complete construction " Mack thought she could at least get started. She realizes now that the letter marked only the beginning of the process and that she will need to secure her own financing to continue.
And therein lies the problem for Mack and many others.
'I can't afford to get a loan," Mack says, 'and I can't even rebuild with the little money they are giving me."
Mack's reaction is typical among poor and elderly landlords in the Lower Ninth Ward, says Soleil Rodrigue, former legal advocacy coordinator for Common Ground Relief, a volunteer organization that provides free legal assistance and other services in hurricane-damaged areas. 'Once they found out that they would have to secure their own financing, that disappointed them," Rodrigue says. 'Many of them declined to go forward with the process."
'Disappointed" is putting it mildly.
Elderly landlords like Mack couldn't explore other options; they were forced to give up, says Patricia Jones, founder and executive director of the Lower Ninth Ward Neighborhood Empowerment Network Association (NENA). Jones and her staff helped many elderly landlords, including Mack, fill out applications for the SRPP program, which Jones describes as an 'over-promised and under-delivered program." Jones says the program doesn't fully compensate for a landlord's loss because the destruction stemmed from the failure of both the federal and state governments.
'If these funds come from the feds, then we should have more than $47,000 on the table to help people rebuild," Jones contends, referring to the maximum amount a landlord could receive for a two-bedroom rental. 'How did they calculate that? Secondly, when you're dealing with someone who is elderly and wholly dependent on rental property for their sustainability and you require them to first finance the work and then have them possibly be reimbursed up to $47,000, you're already setting them up for a failure."
Parker defends SRPP's funding process and says that what people misunderstand is that it is a 'rehabilitation" program that is designed to put damaged properties back into use. By contrast, the homeowner's program compensates people for their losses and isn't particularly concerned with how applicants spend their compensation. SRPP is required by federal regulations to demonstrate that more rental units are available to low-income renters. That can't happen, says Parker, 'until we actually get that person in the unit."
In light of the program's requirement that landlords first finance their own repairs, Parker isn't surprised that a number of applicants have given up.
'Folks who get those conditional awards have to perform, and they have to actually end up with the finished project, and they have to demonstrate that they can document all the things that got them the funding in the first place," Parker explains. 'So naturally, some of these folks were going to fall out."
That too, is a understatement.
Almost two-thirds of the Orleans Parish landlords who received conditional award letters are no longer part of round one. Parker says some of them are now in round two, but he doesn't know how many. He says program officials did everything they could to make it open and easy for applicants.
According to the SRPP application handbook for round two, here's what happens once a landlord gets a conditional award:
The letter explains that the fund reservation is the amount of incentive the property owner is eligible to receive but does not indicate an actual award or entitlement. The letter also lists additional steps required by the property owner, including any documentation still needed, as well as steps to be taken by the Road Home.
The property owner may accept the Notice of Conditional Award by returning a signed conditional award summary within 30 days of receiving the notice.
After all required documents are returned, the Road Home issues a commitment letter obligating the amount of funds to be disbursed to the property owner. However, all construction of the qualifying rental units must be completed and up to code before any award funds can be disbursed. Commitment letters are supposed to help property owners secure private bank financing to pay for repairs up front, but things don't necessarily work out that way.
It's easy to see how 71-year-old Mack mistakenly concluded that her conditional award letter was a commitment. The second sentence in her letter states: 'The maximum award you are eligible to receive for providing affordable rental housing on this property is: $138,000." Not until the fourth paragraph does the Road Home explain that the notice 'is not a final commitment letter and does not constitute a firm commitment of Federal assistance or site approval."
OCD manager Parker maintains that commitment letters are 'ironclad" for lenders and should satisfy any concerns that a lender might have. In addition, the SRPP handbook identifies a number of 'participating lenders" for applicants to use.
'There's no requirement for you (a lender) to look at someone's credit as to whether they're going to pay off something," Parker says, 'because they don't need to pay anything off unless what they're borrowing was more money than we're backing up."
Try telling a bank not to look at someone's credit.
Metairie Bank and Trust Company is one of the 'participating lenders" cited in SRPP literature. Bank Vice President Scott Schellhaas says he has been trying to work with the program, but to date his bank hasn't financed a single construction loan for SRPP. He says that although the bank looks at the commitment letter as a source of repayment, the applicants still have to meet normal loan requirements.
'They're coming to us just like anyone else applying for a loan," Schellhaas says. 'They are subject to the same underwriting " credit history, income, debt serviceability " qualifications."
Schellhaas says he's encountered people in Mack's situation " low monthly income and no rental income " on numerous occasions. He sympathizes, but says there's little the bank can do.
'Many of these people (like Mack) have gone broke because of the loss of rental income," Schellhaas says.
Plus, in Mack's case, she'll need an additional $90,000 construction loan to make up for the difference between what the Road Home has conditionally offered her and what her contractor estimates it will cost to build the house.
Asked about commitment letters, Parker last week told Gambit Weekly that his office had issued a total of 14 commitment letters statewide " a small fraction of the 5,593 awards that OCD claimed as of late September. Of the 14 commitment letters issued statewide, six went to New Orleans landlords and four to Jefferson Parish landlords.
Mattie Mack doesn't sleep well these days. Like her mother, Mack says she worries about where she and Johnny will live. Their combined monthly income is $1,200, which doesn't go far " definitely not far enough for a banker who wants substantial proof of income. Before the storm, Mack says she never had to take any medications, but now she takes blood pressure medicine and a daily dose of the antidepressant Lexapro, which she says 'helps me sleep, and, I guess, it's for my depression."
When asked what she'll do now that she knows the conditional award letter isn't a loan announcement, Mack shakes her head and replies softly, 'I just don't know."
NENA's Jones isn't nearly as equivocal when she sizes up the Road Home's Small Rental Property Program. She says the program was never designed to help poor and elderly property owners; she adds that she would have run it much differently.
'I would have handed the people the money," Jones says. 'Even if you were going to give them $47,000; even if it's that little of an amount. Just cut the people the goddamn check. Think about it. They're 70-80 years old. What are they going to do? Where are they going to run? This is their primary source of income. You mandate that they do the work; you come and check it. Done. Folks are home. I'll bet they can get more done with $47,000 now than if they have to go through getting a financed product. You're just killing people; you're killing them."
Parker still contends that, even though there hasn't been one SRPP closing, 'most of the owners are going through the process and are getting where they need to go." He is also quick to point out that people need to realize there's never been a program like this, one that focuses on the mom-and-pop landlord. He admits the process has been 'challenging."
For Mack, the program itself has become her main challenge. As long as she lacks the resources to replace her rental property on her own, she has little hope of getting any real help from the small rental program.