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Disaster Assistance for Rural America

In the past month, three major hurricanes have devastated coastal communities in Texas and Florida and virtually the entire island of Puerto Rico and the U.S. Virgin Islands (USVI). Damage assessments for Texas and Florida amount to over $270 billion and details are not yet known for Puerto Rico and the USVI. By contrast, total damage in the Gulf Opportunity Zone, or GoZone, established after Hurricanes Katrina, Rita, and Wilma in 2005, totaled around $200 billion.

Hurricane Harvey made landfall near Rockport, Texas on August 24 as a Category 4 storm. Although Harvey was downgraded to a tropical storm, it resulted in an unprecedented amount of rainfall along the Texas Gulf Coast. A State of Emergency was declared on August 25, with 39 counties qualifying for individual assistance from the Federal government (FEMA-4332-DR). Of those counties, 21 are nonmetropolitan counties. Over 835,000 Texans have registered for individual assistance, totaling over $783 million, of which $572 million is for housing assistance. Over 21,000 families checked into hotels for transitional sheltering, out of 338,000 eligible families. Total damage estimates for Texas exceed $200 billion.

Less than a week after Harvey, Hurricane Irma developed in the Atlantic and struck Florida as a Category 4 storm. In Florida, a state of disaster was declared on September 10 (FEMA-4337-DR), and 48 counties were identified for individual assistance, including 14 nonmetropolitan counties. Over 1.9 million people have registered for assistance in Florida, totaling more than $668 million, of which $438 million is for housing assistance. FEMA reports that nearly 8,000 Floridian households have checked into a hotel for transitional sheltering, but that nearly 640,000 are eligible to do so. Total damage estimates from Irma, which include Florida, Puerto Rico and the USVI, exceed $50 billion.

Puerto Rico, which was also struck by Hurricane Irma, suffered catastrophic damage from Hurricane Maria on September 20. A disaster declaration was made on September 20 (FEMA-4339-DR) for 54 municipalities in Puerto Rico, including six that are nonmetropolitan.[1] The extent of damage to housing has not yet been reported, but the situation on the island is reported to be dire. As September 30, only 45 percent of the population had access to drinking water, and of the 52 waste water treatment plants, just nine were operational.

One of the challenges of recovery assistance is getting to hard to reach places – like small rural communities – to ascertain the extent of the damage. The Rural Community Assistance Partnership has had teams in the field in Texas, South Carolina, and Florida, and have conducted assessments of 200 water systems, mostly in Texas. They are now starting their work in Puerto Rico. As these assessments turn into damage estimates, the size and scale of the cost of rebuilding will be clear.

The rapid succession of such powerful hurricanes brings to memory the hurricane season of 2005, when Katrina and Rita struck the Gulf States. The total damage following those storms was $197 billion. The damage from Harvey in Texas and Irma in Florida and the Caribbean will likely be over $270 billion. The final estimate for Maria in Puerto Rico is not yet available, but it seems likely the total damage from the three storms will close to $400 billion.

Comparing damage estimates[2] (2017 dollars, millions):

Disaster(s)Total Damage
Katrina $197,000
Harvey and Irma$272,400
Harvey$218,600
Irma$53,800

After the 2005 hurricane season, the U.S. Department of Agriculture (USDA) and its Rural Housing Service (RHS) played an important role in assisting the residents of rural communities in the devastated region. It is apparent that USDA and its rural development programs will play an important role in assisting the long term recovery of the communities hit by the storms.

Already, USDA Rural Development (RD) has issued a letter to USDA homeowners impacted by natural disasters (dated September 1, 2017) in response to Hurricane Harvey.[3] The letter instructs USDA borrowers to contact RD to obtain a claims package and brief instructions on available assistance, including loans for repairs for borrowers without flood insurance, payment assistance for borrowers whose income has been reduced for the foreseeable future because of the storm, and moratoriums on payment for borrowers with excessive, non-reimbursed storm-related repair expenses.

Katrina and Rita hit the Gulf Coast in late summer 2005, and Congress passed the GoZone Act in December. Homeownership loans, home repair grants, Rental Assistance and vouchers, and water-sewer financing, as well as a number of administrative measures were all put to use in the GoZone legislation. Congress is preparing a second disaster supplemental for Puerto Rico, which will provide disaster assistance for short term. However it may be a few weeks before the dust settles and detailed damage assessments are completed, meaning that comprehensive legislative action may take a while.

Rural Housing Service and Disaster Response After Katrina and Rita

Following Hurricanes Katrina and Rita, Congress made available $120 billion in directing spending and tax incentives to the GoZone. Under P.L. 109-234, total outlays for RHS programs for the 2005 hurricanes were $63 million. The Disaster Relief and Recovery Supplemental Appropriations Act of 2008 (P.L. 110-329) provided $38 million for activities for RHS for areas impacted by Hurricanes Katrina and Rita. USDA RHS provided housing relief to residents – both for families that were current borrowers and tenants of RHS properties and those that were not – in communities impacted by the storm in the form of payment moratoriums, moratorium on initiating foreclosures under the single family guaranteed homeownership loans, loan forgiveness, loan re-amortization, and refinancing. RHS also provided temporary Rental Assistance to displaced families.

Single Family Housing

After Hurricanes Katrina and Rita, Congress provided emergency housing funding to several Federal agencies, including USDA RD, through the Emergency Supplemental Appropriations Act. By September 30, 2006, RD had obligated $179,742,190 in guaranteed homeownership loans; $80,627,941 in direct single family housing loans; $2,626,864 in home repair loans; and $15,127,127 in home repair grants.

As of October 2006, RD field offices in Mississippi and Louisiana received more than 13,000 loan and grant applications, which was significantly more than the typical demand. As an example, three offices in Mississippi typically processed just 25 applications each year, however by February 2006, they had received over 1,675 applications.

Administrative Action

USDA took several steps to assist those impacted by the hurricanes. On September 8, 2005, RHS authorized waivers for 60 days for individuals and families directly impacted by Hurricane Katrina. The waivers included:

  • Increasing the rural area designation to areas with populations for up to 50,000;
  • Relaxing the income and debt requirements for low-income applicants;
  • Allowing the use of in-file credit reports in lieu of residential credit reports;
  • Allowing field staff to disregard derogatory credit reports after the disaster, and the need to verify employment, wages, and bank deposits;
  • Authorizing loan approvals without appraisals;
  • Increasing the insurance claim check endorsement limit to $15,000, and the maximum number of days for completion of work to 180 days; and
  • Re-amortizing loans automatically after the moratorium period.

On September 14, 2005, RHS took further action in an unnumbered letter that increased the rural designation from 50,000 to 75,000 for impacted communities in Alabama, Louisiana, and Mississippi. RHS extended the designation for 3 years from date of disaster declaration. The designation was again extended to two more communities in Alabama on September 19, 2005.

On September 26, 2005, RHS granted all borrowers an automatic 6-month moratorium on loan payments. On November 8, 2005, RHS extended previously announced 60-day waivers to one year. On December 6, 2005, RD announced the continuation of a foreclosure moratorium on guaranteed loans in the areas impacted by the hurricanes. On February 27, 2006, the moratorium given to borrowers impacted by Hurricane Wilma was extended for another 120 days, subject to restrictions that had to be met by loan holders by March 31, 2006.

Rental Housing

RHS also adopted several policies to assist people impacted by the hurricanes though its rental housing programs. RHS identified vacant units in properties around the country financed through the multifamily housing programs and asked owners to place disaster victims into those units. RHS also allocated nearly $17 million from its appropriated Rental Assistance funding to pay for housing costs for up to six months for victims of the storms. Within a few weeks after the hurricanes, almost 8,000 people displaced by the storm had been placed into about 2,600 USDA multifamily housing units in 32 States. In total, RD placed nearly 11,000 victims into over 4,100 USDA rental units in 45 States and provided $2.6 million in emergency Rental Assistance.

Administrative Action

As with the single-family housing programs, RHS made several announcements and policy changes to assist impacted families in the weeks and months after the hurricane. On September 1, 2005, RHS authorized State directors to give temporary transfers of Rental Assistance from RHS properties made uninhabitable by the hurricanes to properties with habitable units. Displaced tenants from those properties received a Letter of Priority Entitlement, which allowed them first priority for vacant RHS units.

On September 12, 2005, RHS issued another letter that included specific guidance to State directors on the types of emergency Rental Assistance available to disaster victims, the procedures for requesting assistance, and the number of obligations available for each State, initially obligating funds for 3,000 units nationwide. RHS also asked State directors to identify available units for occupancy and report the number of disaster victims that had been placed in their states.

On September 20, 2005, RHS officials informed the State directors that additional Rental Assistance had been obligated for 7,000 units and authorized the use of multifamily property funds to cover the cost of transporting hurricane victims from shelters to RHS multifamily properties.

RHS issued another letter on January 3, 2006, informing State directors that as of January 8, 2006, the agency would no longer accept hurricane victims into RHS multifamily units on an emergency basis, and that there would be no extension to the 6-month term of emergency Rental Assistance, except in cases of hardship where a 2-month extension could be requested. RHS encouraged hurricane victims to register with FEMA or HUD for additional assistance. As of May 31, 2006, USDA provided Rental Assistance to 3,124 displaced disaster victims.

USDA extended the lease of USDA multifamily housing units to all hurricane evacuees – regardless of whether they were living in USDA-financed properties (single or multifamily) prior to the hurricane, as long as they paid rent for the unit. As of May 31, 2006, USDA leased 3,848 units to victims of Hurricanes Katrina and Rita.

Also notable, after the Hurricanes, USDA halted its practice of offering for sale to the general public its foreclosed homes, and established a new initiative of making the foreclosed homes available for lease to displaced residents of the disaster areas. According to USDA, 153 homes were offered for lease under this initiative, and 25 were eventually leased. Hurricane victims without income were eligible to receive up to 3 months of free rent, and those with income were required to pay 30 percent of their adjusted income as rent. Finally, the hurricane victims who rented USDA homes were offered the first option to purchase the homes at any time during the lease period.

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[1] Municipalities are the equivalent entity to counties in Puerto Rico.

[2] Source for Katrina and Harvey: Damage estimates by Dr. Mark Burton and Dr. Michael Hicks, whose widely cited research model was developed by the Army Corp of Engineers. Source for Irma damage: Preliminary estimates by analysis firm, CoreLogic.

[3] USDA Letter to Homeowners, dated September 1, 2017. Available at: https://www.rd.usda.gov/files/USDARDHARVEYLetter09-01-2017.pdf.