This second biggest hurricane in the entire history of America left 80 percent of New Orleans flooded, approximately 80 billion dollars of damage and more than 1800 killed civilians. Due to this disaster, New Orleans was almost completely destroyed including the residences of thousands of families. Not only were there economic enormous problems but also political questions rose by that time. The president by then, president Bush, came in discredit because of cutting in the federal funding which was protecting New Orleans. Since then a lot of things have actually changed but unfortunately, too late.
Complete neighborhoods were removed from the map, people became homeless and moved to different places. The effects on the housing market in New Orleans were immense. Because of the effect hurricane Katrina had on the housing market in New Orleans, the question which is arising is how the housing market in New Orleans has changed after hurricane Katrina? This paper will first examine the pre-Katrina situation in the housing market. Following on that, the post-Katrina situation. Lastly the current situation will be examined.
In the paragraphs the data given will be divided into two different parts of the housing market, the rented houses and actual bought houses. These topics will be supported by a number of graphs to clarify it even more. After these brief expositions there is going to be a conclusion in the end of the paper. Pre-Katrina situation Before directly heading to the main part of this paper we have to look back and see what the situation was before Katrina destroyed most of New Orleans. Prior to August 29th 2005 New Orleans was an incredibly diversified city with Hispanics, Asians and Latinos as big cultural subgroups.
Perhaps partly because of these diverse civilians New Orleans was not an attractive area fur business to invest their money in. The American business magazine Forbes (2013) has stated this very clearly in one of their reports were it is talking about the economic state of New Orleans before 2005: “Business executives were not even considering Louisiana as an acceptable state to do business, as it had a reputation for being one of the most corrupt states in the country”. New Orleans was in the pre-Katrina situation not even close of being one of the leading economic states of America.
However nobody is surprised if it is said that most of New Orleans economy was destroyed by Katrina, it has also turned out to be a new start. As you will see in the upcoming part of the paper New Orleans has undergone major changes since the disaster in 2005. What would happen if nothing had changed? None of us is 100% sure about this question; however the most reasonable reaction is probably that nothing would really change. After 2005 New Orleans made a remarkable comeback which never had been realized without Katrina.
To focus especially on the housing market in New Orleans we could say that it was similar to the general economic state. From 2000 to 2005 there has been a stable annual growth measured, nonetheless nothing to be really shocked about. As you can see in graph 1 after the 2005, when Katrina destroyed New Orleans, the housing market completely collapsed. Not really surprisingly however if you take into account that the estimated damage was over 80 billion. Graph 1 To continue and focus even more, we can divide the market into rental and owned houses.
From 1990 onwards there was a trend of more owned houses in New Orleans. While the amount of rental houses did not change, the amount of owned houses rose every single year. After Katrina the damage was big as well on the housing market. What stands out though, is that the renting part has been hit harder than the owner part of the housing market. On graph 2 it is visibly shown what the tendency was back then. Graph 2 After-Katrina situation Knowing something about the background of New Orleans and the economic situation back then, we can outline and evaluate the situation after Katrina came by.
More than 80 billion dollars of damage, over 1800 deaths and plenty of houses from top to bottom destroyed is making a tremendous impact on the economy of an area. Building up New Orleans has shown to be not easy at all. Civilians left the city, New Orleans went from 484,000 to 360,400 inhabitants after the hurricane. On top of that, the costs of rebuilding and time period for new construction went up dramatically. Although these aspects were not really encouraging to start rebuilding, America did try to nevertheless. Referring to the following stated by the U.
S. Department of housing and urban Development (2006): “The current construction period for a standard 1,200- to 1,500-square-foot single-family home is 8 to 9 months, compared with 4 to 5 months before the hurricanes. Construction costs have increased by an estimated 20 percent compared with prehurricane costs. As of September 1, 2006, an estimated 3,000 single-family homes are under construction. ” Although costs and construction time utterly increased people were still willing to buy new houses. As of November 2005 sales were back on their “normal” levels.
The only difference compared to the same period previous year is the price level. The average sales prices went up by a proportionate amount. At the highest level, July 2005, the average price level of buying a house was nearly 250,000 dollars, while in the same period previous year the price level was just a bit above 200,000. Graph number 3 will show the exact price levels from the period September 2004 – August 2006. Graph 3 Directly after the disaster the government decided to allocate over 7 billion dollar for the housing market. The money allocated is invested in both temporary and long-term housing.
Because of the enormous amount of people affected, nearly 3 billion dollar was necessary straight away to guarantee accommodation for the civilians. For long term housing the US government had at least three programs running to rebuild this market. Straight after Katrina The Brookings Institution wrote a review to the federal response to date. In this review the three main rebuild programs were outlined. The US government took three programs in place. These programs are being called the FEMA’s individual and household program (IHP), and are divided into three different programs.
The FEMA’s program needed lots of investments. Approximately 3. 1 billion dollars was invested in the FEMA’s program. The three subprograms are the standard rental assistance, the transitional rental assistance and the other needs assistance program. In these programs stated, the civilians are getting federal assistance, which do not exceed 26,200 dollar, to make home repairs. The money given by the government can only be used to repair your house; this is controlled via a proof of payment. These programs have showed to be very effective.
As the Brooking Institution (2005) stated in their report “In total, the most recent numbers indicate that 878,267 households have been approved for IHP assistance. Of that total, 652,057 are in Louisiana, 192,010 are in Mississippi, and 34,200 are in Alabama. ” Current situation New Orleans Today it is approximately 8 years since Katrina has hit New Orleans. Since then lots of things have changed in that area. New Orleans was due to the hurricane mandatory to start right from the very bottom. However to start completely from the beginning will shape new opportunities and could create nother, perhaps better, image of the city. In New Orleans has actually changed a lot of things since 2005. Another part of the population is living in New Orleans, the entire population is bigger as before, new major businesses has decided to settle in that area and the image of New Orleans as a city has become more positive as it was before. These are just some examples of what has been changed since 2005. Since the population of New Orleans decreased dramatically in 2005, the entire economy in that area dropped in the US rankings.
Not only over 1800 people passed away those days, but moreover half a million people decided to leave the area and settle somewhere else. The New Orleans market went from the 35th place in US market straight away to the 49th market. At the moment the market is getting back to a higher place in the rankings and hits the 45th place. This recovery process is established for the most important part due to the governmental support. Which great impact helped New Orleans getting back is partly the change in population. Younger, stable and wealthier civilians came to New Orleans which changed the housing market.
The former civilians were mostly renters of houses which changed into owners. As Allison Plyer of the Greater New Orleans Community Data Center (2010) stated: “Those in poverty tended to be renters, and there was little assistance for rebuilding rental properties. ” The new neighborhoods were modern areas with younger and wealthier residents compared to the former residents. Those more upscale civilians made it more attractive for new businesses to invest and settle in New Orleans. This change has been extremely important for New Orleans to get back to their former economic situation and even go above that level.
To underline the improvement New Orleans has made in the last 8 years, they hit the number one ranking in overall economic recovery according to Brooking Institution. To be even more specific, out of 100 areas they were ranked number 26 in housing prices. Conclusion After doing extensive research from different and independent sources, the ability of answering the purpose statement made in the beginning of the paper is there. The question which arises was how the housing market in New Orleans has changed after hurricane Katrina? In first place the paper examined the situation of New Orleans before hurricane Katrina destroyed the city.
We could see that the housing market had an annual growth before 2005, however New Orleans had to deal with their image and their civilians of lower classes. The hurricane made the housing market drop dramatically. Secondly in the paper the after-Katrina effects were outlined. After Katrina the US government did major attempts to rebuild the economy in the areas hit. Immense project were set up to help the civilians and get the housing market back on track. The best example is the three sub-projects called FEMA’s project. Lastly the recent situation of New Orleans was examined in this paper.
Changes in population, type of civilians and new businesses willing to settle in New Orleans were important aspects stated in the third paragraph. The question whether the housing market in New Orleans has changed after hurricane Katrina is ready to be answered. We could say referring to the paper and the sources used that there has been some big changes in New Orleans since 2005. In the beginning New Orleans and their housing market was hit hard, however at the moment New Orleans is getting back. Referring to Forbes (2013) “They say that the view from the bottom is often the reason – the inspiration – for getting back up. This paper showed that this citation could be used to refer to New Orleans and the housing market in that particular area. References W. Victor Crain. (2006). U. S. department of housing and Urban Development. Retrieved 2013, from http://www. huduser. org/portal/publications/PDF/CMAR_NewOrleansLA_07. pdf A. Lopez. (2013). Forbes. Retrieved 2013, from http://www. forbes. com/sites/adrianalopez/2013/01/03/americas-new-frontier-for-business-opportunity/ M. Scott. (2010). DailyFinance. Retrieved 2013, from http://www. dailyfinance. com/2010/08/28/post-katrina-demographic-shifts-could-boost-rebuilding-efforts-i/ A. Plyer. 2013). Greater New Orleans Community Data Center. Retrieved 2013, from http://www. gnocdc. org/Factsforfeatures/HurricaneKatrinaRecovery/ E. Fussell. (2011). Sociology Department Washington State University. Retrieved 2013, from http://paa2011. princeton. edu/papers/112008 R. Ross. (2008). Schalkenbach. Retrieved 2013, from http://schalkenbach. org/scholars-forum/An%20Analysis%20of%20New%20Orleans’Housing%20Market%20Before%20and%20After%20K. pdf B. Katz. (2005). The Brookings Institution. Retrieved 2013, from http://www. brookings. edu/~/media/research/files/reports/2005/11/metropolitanpolicy%20katz/20051114_costofhousing