NEW ORLEANS — New Orleans Area Habitat for Humanity is on a quest to find emergency relief funds to help about 140 of its homebuyers stay in their homes. The rising cost of insurance, coupled with expensive hurricane repairs and pandemic-related income losses, has stretched the budgets of some of the affordable housing nonprofit’s low-income buyers past the breaking point.
Since its formation in 1983, Habitat has partnered with local families to build and finance about 750 new homes. It serves people who are unable to qualify for traditional home loans but have stable income and are willing to contribute “sweat equity” by helping with construction.
Habitat offers zero interest loans to keep monthly payments low. Its roughly $7 million annual budget pays for these homebuilding programs along with other services and its ReStore retail operation.
“The majority of our buyers were making 50% or below of the area median income when they purchased,” Habitat for Humanity Executive Director Marguerite Oestreicher said. “No other entity, nonprofit or commercial lender, has a similar portfolio. Habitat loaned to these families when no one else would, and, until insurance increased so much, our model worked.”
To date, the 72-unit Musicians’ Village in the Upper 9th Ward is Habitat’s highest-profile project. An even more ambitious plan for a 150-home affordable housing community is in the early stages of development on a 44-acre site in Terrytown. Unfortunately, though, some of Habitat’s legacy work is being threatened by the spike in homeowners’ insurance costs in the wake of hurricanes Laura, Delta, Zeta, and Ida in 2020 and 2021.
Each Habitat homeowner in crisis has figure out a way forward.
“For some people, the best thing will be to sell the house, for others a reverse mortgage could make sense,” Oestreicher said. “Others may simply give their homes back. Some may be able to secure alternative or additional employment but many are now older and unable to work due to health issues.”
After those 2020 and 2021 hurricanes, which led to billions of dollars in claims, about a dozen insurance companies stopped writing policies in the state, and an equal number closed up shop altogether. As a result, many property owners were pushed to Louisiana Citizens Property Insurance Company, the state-run insurance company of last resort that is required, by law, to charge more than the market rate.
At the end of 2021, there were 41,000 Citizens policies statewide. The number more than tripled to 133,000 by the end of 2022.
Citizens rates have jumped by thousands of dollars per year. In July, the insurer’s data showed that its nearly 27,000 customers in New Orleans now are paying an average of $5,445 a year.
For Habitat homeowners, like others with low income, the impact can be devastating. Before the storms, many buyers were paying about $650 per month, but they are seeing increases between $500 and $1800 per month. As a result, they are falling behind on payments. Of the 140 families with loans from NOAHH who are late on their payments, the average amount they are behind is about $4,500.
The nonprofit has allowed some homeowners to make late payments on the principal balance of their loans, and has helped them find ways to reduce or delay costs, but it can’t afford to pay their insurance bills.
Oestreicher said Habitat delayed foreclosure proceedings as long as possible, but it is beginning the process for about two dozen homebuyers this week. Two other homeowners have simply turned in their keys and walked away from their houses.
To prevent an additional flood of foreclosures, Oestreicher is looking for financial help. She’s been making the rounds, requesting emergency funding from foundations and private donors as well as the City of New Orleans.
Last month, she asked the New Orleans City Council for $2 million from the city’s stash of unused American Rescue Plan Act funds to provide direct relief and to pay for counseling.
Some council members expressed a desire to help but also a concern for fairness, considering the number of other low-income homeowners in the city experiencing financial distress.
“It’s fair to say that everyone is hurting,” Oestreicher said. “But the impact of high insurance rates is not felt equally. Habitat loaned money to families that traditional lenders would not have loaned to. Up until the insurance crisis, our portfolio had lower foreclosure rates than traditional lenders. In short, the model worked. These families — many of whom work in hospitality, janitorial, retail, health care and transportation — are the backbone of our economy and our culture.”
One promising solution, although it may not help people currently in crisis, is to put new “Fortified” roofs on Habitat houses. The more expensive roofs, endorsed by insurance companies, hold up better to extreme weather and can reduce premiums.
Affordable housing advocate Andreanecia Morris, of the nonprofit organization Housing NOLA, said the city needs to invest more in its pilot program to fund Fortified roofs for low-income homeowners. In May, the city announced a plan to use $500,000 in federal funds to pay for 35 of the better-built roofs.
The program, Morris said, is a smart long-term strategy even as the city considers stop-gap measures to help homeowners in crisis.
Oestreicher is equally enthusiastic about the roof program but wants to find funds now to make sure Habitat homebuyers are still in their homes and able to take advantage of it.
“We’d like to keep people housed to give them time to make plans without them becoming homeless and also destroying their credit,” she said. “The $2 million would stabilize everyone who is now foreclosure eligible, provide a bit of a bumper for those who are not quite there but on the brink and would fund case management to help people figure out the best next steps.”
