When Jefferson Parish finally allowed A. David Lynd to visit Laurel Gardens, his 60-unit property in Metairie, La., one week after Hurricane Katrina ravaged the Gulf Coast, he didn't know what to expect. He found rain-soaked units, debris on his grounds, sheetrock damage, and, perhaps most shocking, 39 of his residents still living in their units. "We tried to get them out," says Lynd, COO of The Lynd Co., an apartment manager and owner based in San Antonio, Texas. "There was no water and no electricity. There was nothing, and these people were still living there."
But just because his residents considered the units livable–or at least better than any of the other housing available in the New Orleans area at the time–doesn't mean HUD, which covered the rent at Laurel Gardens, did. "The government wouldn't pay on units that were uninhabitable or less than habitable [approximately 15 units]," says Lynd, who found insurance companies to be equally stubborn, but with a different point of view. "The insurance companies are telling me that I have a lease in place and a guy living there, so I should be able to get something."
The situation leaves Lynd with few options. "I have a big catch-22 where I can't get any money from HUD," Lynd says. "I can't get any money from the residents, because they can't pay. And I certainly can't throw them out, because the parish won't let me."
It's a complicated collection of issues facing Lynd, who finds himself the same difficult straits as many other apartment owners and managers with properties in New Orleans. Whether it's not being able to evict residents or their possessions, an inability to collect insurance money, the ongoing scarcity of labor, or challenges with HUD, landlords in the Crescent City are encountering countless obstacles to reopening their properties to meet the crushing housing demand from Katrina rebuilding contractors, FEMA workers, and returning residents, all of whom are converging on the area in search of places to live.
Who's Got Space?
Hang out in a hotel lobby in the New Orleans' central business district and you're bound to see them: the post-Katrina workforce. In one corner, you'll find FEMA workers wearing their government-issue navy blue windbreakers. Look in another direction and you'll notice the dusty guys. They're the construction workers and environmental remediation engineers and samplers. All of these people have descended on New Orleans to help clean up the city, and they all need a place to stay. "The labor coming in to rebuild will dominate the housing that's available," says Ric Campo, CEO of Camden Properties, an apartment REIT based in Houston.
But where is that available housing? While the New Orleans metropolitan population did plummet from 1.3 million people before the storm to an estimated 871,982 people (including contractors) in late February, the amount of housing did as well. Hurricane Katrina and the subsequent flooding destroyed 186,903 owned homes and 182,416 rental homes in the New Orleans metro area, according to GCR & Associates, a New Orleans-based planning and research firm. Not surprisingly, contractors and residents are clawing for any available space.
For the lucky ones, usually contractors, living in New Orleans these days means staying in the swanky Pere Marquette in the business district. But for others, it means far less hospitable accommodations. Some are stuffed on a boat docked on the Mississippi River. "I had an interior room for the first three weeks," said one worker living on a boat. "I thought I would go crazy."
Those who prefer land-based shelter can move into one of the tent cities that have sprung up between on the vacant land between a heavily looted Wal-Mart and the River Garden HOPE VI project in the New Orleans's St. Thomas District. But don't expect toilets or even running water. With options like these, it's little wonder that companies such as Domino Sugar, a subsidiary of American Sugar Refining, which is owned by Florida Crystals Corp. of West Palm Beach, Fla., have resuscitated their old company towns and are using them as housing for their employees, according to a story in The Washington Post.
Even small multifamily owners have followed this blueprint and decided to provide housing to contractors repairing their properties. A beat-up travel-trailer sits unhitched in the driveway of one of Spiro Latsis' Metairie rental properties. The setup certainly isn't posh, but it's better than a tent. "My contractors live in that trailer," says Latsis, co-founder and CEO of Spartan Properties, pointing at the small camper. "They take it from job to job."
Add the number of residents who are returning to New Orleans, and it's easy to see why the waiting lists are growing long at apartment properties. "We have a large number of existing residents who're eager to return and about 750 people on the waiting list," says Laird Sparks, investment manager for Greystar Real Estate Partners in Charleston, S.C. "But my sense is that many [people] are on many lists around town. We want to reoccupy [with] our existing tenants first. With Tulane and Loyola opening and the [central business district] and French Quarter up and running, people are coming back to the area."
Korey Francis, another Greystar employee and New Orleans native, sees the demand firsthand as director of resident relations at The Saulet, one of Greystar's New Orleans properties. "People call trying to get an idea of when they can lease one of these units," he says. "It's in high demand. One of our competitors is at 100 percent occupancy and eventually capped its waiting list at 3,000."
That demand has driven prices up to levels never seen before in the Crescent City. "If you look at apartment and single-family housing rents in the surrounding area, they've doubled because they're being rented to companies that are housing employees that are involved in rebuilding and clean-up work," Camden's Campo says. "It will be difficult for people to find reasonably affordable housing in the surrounding area."