La. Lawmaker Proposes Recovery Agency
STEVE INSKEEP, host:
Some of the devastated homes in New Orleans could be repaired, except that homeowners lack the money to do the job. Many also have mortgages they can't pay; many face the possibility of foreclosure and many property owners feel paralyzed by uncertainty over whether they will be protected from future hurricanes. One lawmaker thinks something called the Louisiana Recovery Corporation could be the solution and we have a report this morning from NPR's John Ydstie.
Representative RICHARD BAKER (Republican, Louisiana): ...is just an uphill battle. Oh, here's something you'd be interested in.
JOHN YDSTIE reporting:
Fifteen hundred miles from Louisiana in his Capitol Hill office, it's still all Katrina all the time, says Congressman Richard Baker. Right now the Republican from Baton Rouge is working hard to attach a bill creating a Louisiana Recovery Corporation to any spending legislation worth a shot at being approved in the next few days, before Congress shuts down for the holidays. He says strapped homeowners and banks need help.
Rep. BAKER: I'm very worried. I know that foreclosure notices by some institutions will start going out in January if they're not out already.
YDSTIE: Baker's Louisiana Recovery Corporation would relieve homeowners and banks of the burden of damaged property. Using federal funds, he says, it would pay homeowners who want to sell up to 80 percent of the equity they'd built up in their homes.
Rep. BAKER: The real benefit is we then step into your shoes with the mortgage company and we negotiate with the bank to give you release from your mortgage obligation. So now you're free to go, cash in your pocket and no mortgage obligation that ties up your credit.
YDSTIE: A bank might receive 40 percent of what it's owed, says Baker. And be happy to get that, he says, because bankers aren't interested in owning damaged properties in neighborhoods with uncertain futures.
Rep. BAKER: Unless there is a cohesive plan to restore these large tracks together for recovery, the bank has an asset that's worth nothing. In fact, it's a liability.
YDSTIE: The Louisiana Recovery Corporation would work with the locals to develop a plan for restoring the community. It would assemble large tracks of land to sell to developers who would do the rebuilding. For a small cost, former residents could reserve a right of first refusal to buy property in their restored neighborhoods.
Rep. BAKER: Some cases, I'm sure the contractor will come in and just sell vacant lots; let homeowners come in and build their own house. In other cases, I'm sure contractors will come in, reclaim it, redevelop it and start building structures. But this is an opportunity for the community to basically redesign what was once there.
YDSTIE: But for Stuart Butler of The Heritage Foundation, the Louisiana Recovery Corporation sounds like an echo of the misguided urban renewal projects of the 1960s.
Mr. STUART BUTLER (The Heritage Foundation): We have a plan that we have for this area. You're in the way, you homeowners here, and so either we're going to move you or essentially bribe you to join us because we have a better idea of the future. That's what leads, I believe, in the long run, to cities that don't revive.
YDSTIE: Butler favors enterprise zones, a concept he helped pioneer during the Reagan administration, where investors and companies receive tax breaks to encourage activity in designated areas. Such a plan was proposed by the Bush administration and is currently included in tax bills awaiting final congressional approval. In the short run, Butler says, devastated homeowners and businesses should receive aid from the federal government to help them hang on to their property. But John McIlwain of the Urban Land Institute, another Washington think tank, says Congressman Baker's Louisiana Recovery Corporation is needed.
Mr. JOHN McILWAIN (Urban Land Institute): Right now, properties are being sold into the market but at 10 cents on the dollar or less. Really the scalpers are down there trying to take advantage of people who need some money now and aren't able to wait.
YDSTIE: McIlwain has spent time in New Orleans working with the city to develop a rebuilding plan. He says given the massive devastation and the problems homeowners face, a well-financed entity that can make sure the rebuilding is coherent is critical.
Mr. McILWAIN: Left to the market, what you'll have is only a few houses in a neighborhood rebuilt and the others will be devastated and remain devastated. And without government action to acquire the other properties and rebuild them, the neighborhoods are simply going to decline and die out.
YDSTIE: The total cost of Congressman Baker's plan is likely to be in the tens of billions of dollars. The legislation, which is backed by the governor and the Louisiana congressional delegation, provides that any surpluses generated by the sale of properties to developers would be returned to the US Treasury.
John Ydstie, NPR News, Washington. Transcript provided by NPR, Copyright NPR.