President's 'Homesteading Act' Proposal Is a Start, But More Help Is Needed, Some Say By JACKIE CALMES Staff Reporter of THE WALL STREET JOURNAL September 19, 2005; Page A4
WASHINGTON -- On behalf of the hundreds of thousands of families left homeless after Hurricane Katrina, President Bush has proposed a response in keeping with his "ownership society" agenda: the Urban Homesteading Act.
With the name, the president conjured up images of the famed Homestead Act of 1862, which settled the West through government giveaways of land. Under the 21st-century version, the government would identify property it owns in the affected region and run a lottery to award sites to low-income "homesteaders" who would pledge to build there.
It's a concept along the lines of Mr. Bush's broader agenda to expand asset ownership -- not just housing, but shares of stock, and savings accounts -- to lower-income families. But it's a modest step for meeting needs in Louisiana and Mississippi, according to housing experts across the political spectrum, who say tax incentives and many additional rental vouchers also will be needed to get developers and nonprofit groups to do the rest.
"It's a very small effort," says Ronald Utt, a housing scholar at the Heritage Foundation, which works closely with Republicans. But, he adds, "We're all flying blind here. We don't have any examples in modern history of a million people being displaced in America."
The president's domestic-policy chief, Claude Allen, says the homesteading initiative "is only a piece of the housing needs that are being addressed." Mr. Allen adds that "the real solution" is to provide aid for renting housing to those who choose to go to other states, though it's unclear if the administration will ask for new money beyond existing programs.
In the New Orleans area alone, Katrina left a quarter-million families homeless, Mr. Bush told the nation last week. The White House doesn't know how many federal properties might be available through foreclosures and vacancies for the homesteading lottery, although the main landlord, the Department of Housing and Urban Development, has identified about 4,000 in the region, including about a thousand in the New Orleans area. Other agencies are combing their inventories of vacant lots and buildings. The administration envisions public-private partnerships, working with charitable groups such as Habitat for Humanity, to help the needy get mortgages or donations to build on the sites.
Robert Greenstein, executive director of the liberal Center on Budget Policies and Priorities, said the initiative's reach will be limited not only by the available federal land, but also by the poverty of many prospective claimants, who wouldn't be able to afford a mortgage on their homes, even if they won the land. "This is probably not something that would help the poorest of the poor," he says. Policy analyst Ray Boshara at the nonpartisan New America Foundation notes that Mississippi families overall have the lowest net worth in the nation, while Louisiana and Alabama are 49th and 44th, respectively -- facts that could crimp Mr. Bush's goal of spurring ownership.
Beyond the homesteading initiative, the Federal Emergency Management Agency is buying several hundred thousand trailers and mobile homes for temporary and long-term housing. Liberals and conservatives alike say the administration should rely more on increasing federal rental vouchers, instead of letting FEMA follow what Republican Newt Gingrich, the former House speaker, calls "this crazy notion of thousands of mobile homes" for evacuees that will "isolate them from the rest of society" -- much as some victims of last year's Florida hurricanes still remain in crime-ridden trailer camps.
Mr. Gingrich sees the Katrina recovery effort as a chance to "get rid of public housing." Especially in New Orleans, where segregation of impoverished households was among the worst in the nation, he sees "a one-time opportunity to move everyone forward to live in decent housing."
That takes new construction, which Mr. Bush's proposals go only so far to address. Besides the homesteading initiative, he outlined two proposals to spur business investment and jobs. One would create "Worker Recovery Accounts," up to $5,000 for evacuees to spend on job training and education to find new work, and for child-care expenses as they search. The other would designate Louisiana, Mississippi and Alabama as a Gulf Opportunity Zone, with the government providing about $2 billion in tax incentives, loans and loan guarantees for small businesses.
However, New Orleans and the Mississippi Delta region were among the first tax-favored "enterprise zones" a decade ago, and the record shows little impact, says Leslie Papke, an economics professor at Michigan State University. "If there's an effect, it will be small," she predicts. "I think businesses will wait to see what infrastructure is in place" as the federal, state and local governments rebuild roads, bridges and levees.
Nicolas Retsinas, director of Harvard University's Joint Center for Housing Studies, says restoring the Gulf Coast's housing stock "is clearly going to be a venture that's going to involve more than government." Mr. Retsinas is vice chairman of the board of Habitat for Humanity, to which Mr. Bush is looking for help. He says the organization is weighing how to expand its activities, though the first priority for 25 affiliates in the region is to rebuild 800 Habitat homes that were lost. This week it will announce a "Home-in-a-box" program to be tested in Jackson, Miss.; modular house parts will be built, and then trucked to permanent sites as those become available to new owners.
As for the private sector, Pres Kabacoff, chief executive of HRI Properties, a leading New Orleans developer, says the main thing for government to do is rebuild the infrastructure so that the lenders and insurance companies that builders depend on will have the confidence to reinvest. The government also could expand a tax break for developers, which now applies to projects that include housing for lower-income renters, to apply also to projects for lower-income owners -- as the administration has proposed in the past but not pursued. Mr. Kabacoff also would like the government to raise the income limits for such mixed-income rental units from the current ceiling of about $40,000 in New Orleans to as high as $80,000 for a family of four, to make more people eligible and to encourage construction.
"We know how to build high-volume, mixed-income communities for homeownership and rental housing," says Bruce Katz, a senior fellow at the Brookings Institution think tank and a former Clinton administration housing official, citing experiences with local tax incentives. But the president must go further, he adds, including by promoting his own proposal for tax incentives for mixed-income homeowner developments: "Why not put the private sector to work here?"