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September 16, 2005
Stuck in the Middle
Although much media attention has deservedly focused on New Orleans' poorest residents, the city's African-American middle class could take an even harder hit in Katrina's wake. Keith Butler, a financial advisor who lives part time in the Big Easy, notes that many members of the city's once-thriving black middle class lived in neighborhoods east of downtown that were severely flooded. Federal flood insurance tops out at $250,000 per home, but many properties were worth more than that. Such a housing hit would come at a time when many service jobs at schools, city government and hospitals are no longer needed, creating more problems for them financially. “Their contribution to the city's economy is significant," Butler notes. "If that suddenly changes, if New Orleans becomes the San Francisco of the south, expensive and much less diverse, these people will be double-whammied. They won't be able to afford to rebuild while their access to the upper reaches of government will be hampered by the population shift. They're not abjectly poor so it’s harder for them to find sympathy. The hit to their net worth as a group will be a larger percentage and hurt worse than any other.”
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Construction costs, excluding any disaster related premium, of $250k should allow rebuilding of about 2500 sqft of housing. I would be surprised if there were many homes larger than this. The land would have to be drained and/or cleared but would not have to be replaced.
Posted by: Lord at September 19, 2005 03:19 PM
According to the figures I've seen a huge number of residents in the city did not have flood insurance which seems quite shocking considering the terrain.
But what would be even more shocking is people whom you would assume are better educated to go along with their higher income would build and live in homes and not cover themselves with flood insurance considering the low lying terrain.
Absolutely shocking and just plain dumb and stupid if this report turns out to be true.
Plus why would any lender allow this to occur further why would any investor in mortgage banking back such a practice?
Posted by: Garth Gibson at September 22, 2005 10:49 AM