Audit outlines trouble with $75M hurricane program

The federally-funded, but state-run housing initiative had trouble finding occupants for some cottages and the housing ended up costing more than originally estimated by state officials, says the review by Legislative Auditor Daryl Purpera's office.

Some of the homes were so poorly constructed that families who had moved into them were forced to move out temporarily while repairs were done, the audit says.

Families living in 34 homes — about 7 percent of those built — had to leave while their homes were renovated to deal with water leakage in the walls and problems with insulation and subflooring.

The cottages ranged from 612 square feet to 1,112 square feet and cost an average of $145,216, according to Purpera's office. With infrastructure costs added, some homes cost as much as $195,452, by the auditor's estimates.

The Katrina cottages program, officially known as the Alternative Housing Pilot Program, was created by FEMA after hurricanes Katrina and Rita to build housing for displaced families while studying ideas for alternative housing in hurricane-prone areas.

Louisiana received $74.5 million from the $400 million program in December 2006.

Patrick Forbes, executive director of Louisiana's Disaster Recovery Unit for Gov. Bobby Jindal's administration, defended the state's performance and said a pilot program by its very nature is experimental.

He disagreed with comparisons about the housing cost and said the auditor's office didn't take into account the value of the lessons learned about alternative housing.

"Both the state and FEMA did gain a better understanding of how such an initiative could be implemented for intermediate and long-term housing after a disaster. The program also provided sustainable homeownership and rental opportunities for 461 storm-impacted families," Forbes wrote in a response to the audit.

Louisiana's Katrina cottages program was plagued with problems and became a poster child for a slow recovery riddled with federal and state bureaucracy. A federal inspector general's report said poor decisions made by FEMA created hurdles.

"Once construction began, each site encountered additional delays relating to correction of construction deficiencies, local partner funding issues ... and delays in delivery of power, sewer and water connections," the audit by Purpera's office says.

While Mississippi spent most of its $281 million grant within about two years, Louisiana's construction of the cottages went two-and-a-half years beyond the original grant deadline of September 2009. The program, which started under former Gov. Kathleen Blanco, was completed during Jindal's tenure.

In the end, 461 small homes were built at 12 sites in New Orleans, Baton Rouge and Lake Charles, according to the audit. More than two-thirds of the cottages were built in New Orleans.

The state partnered with local housing and community agencies to get land, find residents and sell the homes and worked with a developer, Cypress Realty Partners LLC, to build the cottages.

The homes cost between $121 and $176 per square foot — at least $53 per square foot more than housing of similar size built by other nonprofits and above the initial state estimates that they would cost from $108 to $128 per square foot, the audit says.

The review notes that the Katrina cottages were required to follow certain FEMA requirements, like steel framing and access for the disabled, that could have escalated costs.

Forbes disagreed with the methodology used by Purpera's office to compare housing costs. He said Katrina cottages were built by for-profit companies, so the cost per square foot includes a profit margin that wouldn't be included in housing constructed by nonprofits.

"In addition, many nonprofits received donated or discounted labor and materials when constructing housing and there is no indication if this was considered in the comparison of costs per square foot," Forbes wrote.