Fund is launched to support post-disaster rental rebuilds
13th December 2021 · 0 Comments
By Ryan Whirty
Contributing Writer
After Louisiana has endured powerful, destructive hurricanes and floods practically on a yearly basis, rental-property owners in the storm-ravaged Pelican State will now be eligible for up to $3 million through a new pilot program launched by the nonprofit Enterprise Community Partners and investment firm Morgan Stanley.
Enterprise and Morgan Stanley announced late last month the creation of their $25-million Disaster Recovery Accelerator Fund, which will provide loans to owners of multi-family rental properties in three disaster-plagued states – Louisiana, Oregon and Iowa – to help the rental owners rebuild their properties after natural disasters.
The first-of-its-kind program aims to fill in the gap caused by long delays rental owners experience in receiving financial assistance from the federal Department of Housing and Urban Development. While HUD allows homeowners to swiftly begin repairing and protecting their homes and then receive cost reimbursement from the government, no such system exists for rental-property owners, who must wait for HUD assistance to arrive first before the owners can begin work on their disaster-ravaged property.
According to Enterprise officials, the waiting time faced by rental owners in receiving funding can take up to two years, leaving the property owners without crucial rental income, and forcing renters – often families – to essentially face housing insecurity at best and homelessness at worst for months on end while the government funding trickles down.
Enterprise’s vice president and Gulf Coast market leader Michelle Whetten said that hopefully, the pilot program will help some of Louisiana’s most vulnerable populations.
“Lower-income communities, people of color and people living in affordable housing are often the hardest hit by climate disasters, and they also face the highest barriers to recovery,” Whetten said. “It can take up to two years for federal disaster relief to reach communities so they can rebuild, and those delays have real consequences for people’s health and livelihoods. Louisianans and New Orleanians are all too familiar with the devastating impacts of climate events and the very long road to recovery.”
The precise source of the federal funding delays facing rental developers is the bureaucracy of HUD’s Community Development Block Grant Disaster Recovery (CDBG-DR) housing programs that don’t provide multi-family rental-property owners – many of whom are also hindered in their attempts to obtain private capital for disaster repairs – with relief funds up front. The Disaster Recovery Accelerator Fund provides those property owners with bridge capital for rebuilding while they wait for HUD assistance. Whetten said that under the new program, developers can access financial help for repairs as soon as Congress approves emergency CDBG-DR funding, “getting people safely back on their feet as soon as possible.”
Under the Disaster Recovery Accelerator Fund, multi-family rental-property owners can apply for interest-only loans of up to $3 million with a three-year term.
In a press release announcing the launch of the Disaster Recovery Accelerator Fund, Morgan Stanley Managing Director for Community Development Finance Joan Tally said the banking firm is looking forward to joining Enterprise in the pilot program, which was created with a grant from MacKenzie Scott, the former wife of Amazon founder Jeff Bezos.
“Morgan Stanley is excited to partner with Enterprise on this pilot program to accelerate the flow of capital for affordable rental housing in communities impacted by natural disasters,” Tally said. “Enterprise’s deep understanding of community recovery will help states across the U.S. have the needed time to complete their planning process while facilitating efficient distribution of funds.”
Follow-up inquiries to Morgan Stanley media relations by The Louisiana Weekly weren’t answered by press time.
According to research by the Urban Institute, a Washington, D.C.-based economic- and social-policy think tank, rental-property developers following disasters wait an average of 20 months to receive CDBG-DR funds to help them rebuild.
Daniel Teles, a senior research associate with the Urban Institute’s Metropolitan Housing and Communities Policy Center, said that delay in financial assistance from the CDBG-DR program occurs because of a multi-step, multi-level bureaucratic process.
He said that CDBG-DR funding is not permanently authorized, meaning that HUD can’t establish the rules that grant applicants must follow in each round of funding until Congress acts on the disaster-relief effort. Following that, states and local governments must then wait for those HUD rules before they can draw up their own plans and application process – guidelines that then must be approved by HUD before state and local governments can begin dispersing financial assistance to rental owners.
Teles added that “since every plan and every disaster leads to their own unique recovery programs, state and local governments can take years to process applications and distribute funds.”
Teles said that while homeowners can more quickly take advantage of a wider variety of insurance and loan programs, “there are fewer resources for renters who might be faced with moving costs, fewer housing options and spiking rents.
“Ideally,” he added, “this new [Enterprise] program will help get rental units rehabbed and back on the market faster.”
Greater New Orleans Housing Alliance president Andreanecia Morris said the Enterprise program is just the kind of forward-thinking, compassionate effort landlords and renters in Louisiana need.
“The needs of renters are often overlooked and this pilot can shorten the rebuilding period for hundreds of units that have been offline since Hurricane Delta and Laura devastated the Lake Charles area,” she said. These funds should also be a catalyst for the effective and quick allocation of public funds. All public agencies responsible for housing in Louisiana must undergo a critical evaluation that assesses whether they deliver housing in an effective and timely manner and what must be done to guarantee that they meet their mission.”
Morris added that climate change poses serious, life-altering threats to Louisiana renters, just like natural disasters affect all residents and rental owners in the state.
“Rebuilding must also look forward to ensure that renters have safe, decent, sustainable homes that they can afford,” Morris said. “Climate change increases the frequency and intensity of storm events, and the increasing rate of coastal land loss in Louisiana poses significant danger. In order to create more resilient communities, sustainable infrastructure and design principles will continue to play a role in mitigating risk, decreasing environmental impact, and reducing energy costs for residents. These funds should be deployed in a way that allows for necessary and needed upgrades that will lower costs and improve the quality of life for their renters.”
Whetten said Louisiana is an ideal target for the pilot program because of the continual challenges that climate-related natural disasters present to state officials and residents, a history that has made Louisianans familiar with using disaster funding to rebuild their communities, including the most recent round of CDBG-DR appropriations from Congress.
“Louisiana checks all these boxes, and was a great partner to Enterprise as we developed this fund,” Whetten said. “We look forward to working with property developers across the state to provide initial bridge loans to aid in housing recovery.”
Whetten added that the new pilot program is also about fairness, opportunity and accessibility, especially for those in Louisiana already challenged by dire socioeconomic situations.
“Disaster recovery is an equity issue,” she said. “Lower-income communities, people of color and people living in affordable housing often bear the brunt of climate disasters, while simultaneously facing the biggest barriers to recovery. It shouldn’t be possible for a single storm to completely derail a person’s life, but that is a reality for too many Louisiana families without safety nets or financial supports. Thanks to this unique partnership with Morgan Stanley and our partnerships with HUD and the state of Louisiana, the Disaster Recovery Accelerator Fund will get recovery dollars to affordable housing developments faster than ever before.”
This article originally published in the December 13, 2021 print edition of The Louisiana Weekly newspaper.
