Governor Barbour’s Comprehensive Plan for Gulf Coast Housing
To address the critical housing needs of the Mississippi Gulf Coast, the state of Mississippi is pursuing a comprehensive approach which:
- Compensates homeowners who relied to their detriment on those who said they did not need flood insurance;
- Assists uninsured and underinsured lower income homeowners affected by the storm surge;
- Lowers borrowing costs to encourage new homeownership;
- Restores lost public rental housing; rebuilds and constructs affordable rental units for lower income families;
- Mitigates the increasing cost of insurance for homeowners;
- Pursues innovative housing solutions such as modular housing;
- Helps local governments with the burden of inspecting and permitting housing construction; and
- Constructs new public water and sewer infrastructure to facilitate new housing developments.
With the programs outlined in the Governor’s plan, more than 30,000 households of both homeowners and renters will receive assistance.
• Using Federal Housing Funds to encourage home ownership
- Phase I of the Homeowners Assistance Grant Program is providing grants to approximately 13,500 homeowners who lived outside the federally delineated 100 year flood plain, had insurance, and suffered damage from the storm surge. As a part of this program, about 1,500 of the grantees will receive additional assistance to cover the costs of elevating their home out of potential danger areas. In exchange for this grant, the homeowner agrees to rebuild to the International Residential Building Code, the Advisory Base Flood Elevation maps and to maintain flood insurance on the property.
- Phase II of the Homeowners Assistance Grant Program will help 7,000-10,000 low to moderate income homeowners (less than 120% of the Area Median Income) whose homes were damaged by the storm surge. These homeowners are either uninsured or under-insured and can be either inside or outside the flood plain. These homeowners will receive a subsidy of up to $50,000 to fill the gap between the cost of rebuild/repair and the homeowner’s ability to pay. This subsidy also will be available to homeowners who choose to sell the damaged property and relocate somewhere else within the lower six counties in Mississippi. To be eligible for the subsidy, the homeowner must agree to stay in the home for at least five years, either on the pre-Katrina site or in the relocated home. An additional subsidy of up to $25,000 is available to homeowners with disabilities, special needs, etc. A significant component of this program will be financial counseling for the homeowners. This program will cost approximately $700 million.
- Governor Barbour has allocated $117 million in tax exempt private activity bond authority to the Mississippi Home Corporation to issue Mortgage Revenue Bonds. Through the sale of these bonds, the Mississippi Home Corporation is able to reduce home ownership costs by offering below-market rate interest rates and assistance with closing costs equal to 3% of the mortgage amount. With this authority, nearly 1000 families have received assistance since Katrina. Governor Barbour recently allocated an additional $40 million in bonding authority to assist nearly 350 additional families. These bonds are not general obligations of the state; rather they are repaid as homeowners pay their mortgages. Governor Barbour will continue to allocate additional tax exempt private activity bond authority to the Mortgage Revenue Bond program to help more families achieve their dream of homeownership.
- To assist former renters’ transition to homeownership, the Governor’s office is working with non-profit groups, the Mississippi Development Authority, and others to develop a financial assistance plan similar to the one designed for the Phase II applicants.
• Using Federal Housing Funds to increase the supply of rental housing
- Rebuilding Public Housing
More than 2,500 public housing units in South Mississippi were damaged or destroyed by Hurricane Katrina. The state has set aside $100 million to restore these public housing units on at least a “one-to-one basis.” Mississippi’s plan will distribute grants to each housing authority based on the proportionate damage done to their respective housing stock. The housing authorities receiving these grants may use the funding to leverage other available resources in developing affordable housing targeting low- and very low-income residents. The housing authorities may use the grants to rebuild and/or repair units that existed before the storm or to develop new multi-family properties that contain replacement units that target persons or families who earn 60 percent or less of the area’s median income.
- Repairing, Rebuilding, and Constructing Affordable Rental Properties
Hurricane Katrina destroyed a significant portion of the rental properties on the Gulf Coast. Many of these were single family units, duplexes, or other small rental properties. By offering $25,000 per unit in two annual installments to owners of 10 units or less in exchange for certain conditions on affordability, more than 5,000 rental units will become available to lower and workforce income families. The owner of the rental unit will repay 50% of this loan over a five year period to the state’s CDBG program beginning two years after the initial award. In exchange for this incentive, the owner must rent at least 80% of the units to tenants with incomes less than 120% of AMI, with 50% of the tenants at 80% or less of AMI. If the property owner does not maintain the rents at the level set by the program, the entire amount will be repaid plus interest. Any new construction, including rebuild, must be in accordance with the International Residential Building Code, and compliance with the ABFE. Repairs must have been in accordance with the code at the time of the repair. $125 million will be set aside for this program.
- Constructing new rental housing for lower income families
The Gulf Opportunity Zone Act authorizes the Mississippi Home Corporation to allocate approximately $35 million in annually in Low Income Housing Tax Credits in 2006, 2007, 2008. The Mississippi Home Corporation awards these federal tax credits based on a competitive scoring process conducted according to the “Qualified Allocation Plan” approved by the Governor. In August 2006, Mississippi Home Corporation awarded over $10 million of housing tax credits which will facilitate the construction of 1,006 housing units in Hancock, Harrison, Jackson and Stone counties. These units are available only to families with incomes of less than 60% of the Average Median Income.
To ensure that more of the tax credits are directed to the areas which need them the most, the MS Home Corporation is restructuring the Qualified Allocation Plan at the Governor’s urging. Not only will the new plan ensure that more credits are used in the lower six counties, the revised plan encourages innovative mixed income developments which will provide new rental housing for families between 60% and 80% of the Average Median Income and new market rate rental units.
It is estimated these federal tax credits will spur the construction of more than 5,000 rental units in the lower six counties.
• Reducing the Cost of Insurance for Homeowners
Working with the Mississippi Department of Insurance, Governor Barbour set aside $50 million in Community Development Block Grants to offset the increased cost of reinsurance for the state-sponsored wind insurance program, making policies more affordable for Gulf Coast homeowners. This action made it possible for the Commissioner Dale to reduce the requested increase in wind insurance rates by more than 300%, saving a Gulf Coast homeowner more than $2000 a year on average.
The wind pool – officially known as the Mississippi Windstorm Underwriting Association – is an insurer of last resort for homes and businesses in Harrison, Hancock, Jackson, Stone, George and Pearl River counties. It is funded through customer premiums and assessments from every insurance company in Mississippi.
As a result of Hurricane Katrina, 16,000 policy holders in the wind pool, almost all of whom have already incurred devastating personal losses, faced the prospects of huge increases in their annual premiums for wind and hail insurance which would be economically debilitating. Many industry observers believe that absent another huge storm, reinsurance costs will substantially decrease for the 2007 hurricane season.
While the infusion of $50 million and the adoption of the International Residential Building Code and the Advisory Base Flood Elevations in the coastal communities helped mitigate the impact of rising insurance rates, the availability and affordability of insurance remains a problem throughout the country in areas at risk for hurricanes. Governor Barbour will continue to examine ways to reduce the cost of insurance for Mississippi homeowners.
• Promoting alternative housing solutions such as Modular Homes
Due to labor supply constraints, Gulf Coast homeowners are exploring new options to conventional, site-built, “stick-built” homes. One such alternative is modular housing.
“Modular homes” are often confused with “manufactured housing” (also referred to as mobile homes) since they are both “manufactured” in a plant. However, there are substantial differences between the two. Mobile homes are built to the HUD code, which is a national code governing the manufactured housing industry. Modular housing is typically built to comply with the local building codes governing conventional construction, e.g. the International Residential Code. Therefore, the construction of modular housing is virtually the same as a conventionally built home and qualifies for conventional mortgage financing.
Modular housing under Mississippi law is taxed at 7 percent while manufactured housing is taxed at 3 percent. Governor Barbour is asking the Legislature to reduce the tax on modular housing to the same level as manufactured housing in order to encourage more production of housing units to better serve the housing needs of residents affected by Katrina.
Other potential solutions for homeowners were demonstrated at the Governor’s Recovery Expo. Over 15,000 Mississippi residents attended the three-day event, which was designed as a one-stop shop for their recovery needs. The expo featured booths from over 140 vendors, 25 model house displays, and information and training sessions. Representatives from homebuilders, home product manufacturers, recovery organizations, financial institutions, non-profits, and state and federal agencies provided information on their products and services.
• Providing Resources to Local Governments for Inspecting and Permitting New Construction
In August 2006, the state provided more than $4 million in CDBG funds to cities and counties along the Mississippi Gulf Coast. These grants are used to expedite the rebuilding process by enabling cities to hire additional permitters, code enforcement officers and building inspectors to ensure that coastal structures are built in accordance with newly-adopted building codes.
• Construction of new water and sewer infrastructure
As a result of Hurricane Katrina, many Gulf Coast residents will move inland away from the risk of future storm surges and hurricane force winds. However, for housing to be built to accommodate any migration, water and sewer systems must be expanded to accommodate the growth in an environmentally responsible fashion. The Mississippi Department of Environmental Quality will soon release a master plan for water and wastewater improvements in the lower six counties. This plan will be implemented utilizing the new Gulf Coast Regional Wastewater Authority authorized by the 2006 Legislature. $500 million of CDBG funds are allocated for this program which will help create new housing opportunities while facilitating future economic development.