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People in New Orleans Are Being Pushed Out of Their Homes--And Now, They're Pushing Back

Public housing demolitions and disastrous redevelopment policies have turned New Orleans' housing crisis into a human rights emergency.

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The plan does little for poor New Orleanians—and the reality is likely to be worse. In one of the little-known intricacies of affordable-housing finance, the track record shows that development deals like these eventually phase out the deeply affordable rentals. Typically after 10 to 15 years, developers are allowed to convert low-income properties into market-rate units.

So, in the end, the developers get their cake and eat it, too. At least that was business as usual before 2008, when the U.S. financial system was shaken to its core.

A Financial Storm Hits

By the beginning of 2008, bulldozers had razed three of the four New Orleans complexes, and with great fanfare, groundbreaking for new housing began at the C.J. Peete, B.W. Cooper and St. Bernard sites. Then construction stalled, as the credit markets collapsed and the recession began in earnest. Tax credits, which investors had deemed worth up to 92 cents on the dollar, dropped to 65 cents. Investors, who normally provide capital for development projects by buying tax credits to offset their tax liabilities, had no profits to offset.

By the end of July 2009, about 10,000 new affordable housing units in Louisiana—5,000 of them planned for New Orleans—were at risk of losing their financing. The Big Four developers raced against a 2010 deadline to find investors, secure funds and start construction.

Eventually, with the help of last-minute maneuverings and public money from other federal pots, the developers were reported to have found financing. The C.J. Peete and St. Bernard projects got backing from Goldman Sachs, one of the few big financial institutions in need of a tax shelter. FEMA contributed $17.5 million for demolition on the premise that the buildings were a public safety hazard and HANO shifted funds from stalled projects.

“Obviously, it’s politically untenable for the redevelopments not to move forward,” Morgan Williams, a lawyer for the Greater New Orleans Action Center, said at the time.

The B.W. Cooper development, once touted as one of the largest tax-credit deals in U.S. history, has since fallen short of a needed $22 million in equity, according to its Ohio-based developer, KBK. In 2009, the firm’s CEO, Keith B. Keys, became the subject of an attorney general’s investigation in his home state. (Keys was allegedly involved in a deal to provide prison monitoring devices at exorbitant rates to the corrections department, whose deputy director was a college fraternity brother.) Meanwhile, the Lafitte developers told Congresswoman Waters they would need until 2012 to finish construction.

Stiff Competition for Housing

The longer the delays, of course, the less likely it is that former residents will be able to return, even to the few affordable units available to them. Not only will it be harder to locate people, it’s also more likely that former residents will be priced out of New Orleans housing. Apartments in the city now cost twice as much to rent as they did before Katrina.

And each development is setting its own criteria for returning residents, who must apply for admission. Developers prefer applicants who have jobs; in fact, Columbia Residential is making employment a requirement for adult residents, although that is prohibited under federal housing law. Another problem for locals is the criminal background checks the developers require. Laura Tuggle, a housing attorney with Southeast Louisiana Legal Services, notes: “It’s kind of challenging in this city for a young African American male to have no arrest record.”   

Along with employment and credit checks, the developers have rules governing outdoor gatherings, visitors, holiday decorations, even the flowers planted in the yard. This is the developers’ way of ensuring order in their mixed-income neighborhoods, claimed Noel Khalil, Columbia Residential’s president, in the March 2007 issue of the magazine Affordable Housing Finance. “We’ve learned we need to have very clear guidelines about who can come back to the community…You can have different people living with different incomes, but we must make sure people share the same values and hold them accountable.”