The house Katrina built

This is from my column BreakingViews

Hurricane Katrina: The justly-maligned US government's Federal
Emergency Management Agency (Fema) has just contracted with
five major corporations supposedly to speed emergency housing
relief to Gulf Coast families displaced by Hurricane Katrina.
The oddity is that there is already an abundance of unoccupied
housing in the US, not least in the areas affected by Katrina.


What's the explanation? Well, at one level, one might just
shrug one's shoulders. Perhaps it should come as no surprise
that the hapless Fema, now a unit of the vast bureaucracy that
has become the Department of Homeland Security, seems unaware
of the situation on the ground. At another level, one could
view this as another example of excessive government largesse
in the face of disaster - perhaps to quell disastrous
criticism of its initial poor response.

But it is also worth questioning Fema's motives for doling out
lucractive contracts. After all, the five contractors -
Bechtel, Fluor, Shaw Group, CH2M Hill and Dewberry
Technologies - may all be expert in massive engineering
projects. But none is known as a housebuilder. Curious minds
will also note that Bechtel and Fluor happen to be actively
engaged in Iraq.

Luckily for the US, there is no shortage of home builders.
Indeed, new home building has been proceeding at a torrid rate
for the past five years. And most of the building has been in
the south and west, in areas where Katrina's victims lived and
have now dispersed.

One consequence of all that construction, and of low mortgage
rates, is that the vacancy rate for rental housing is at or
near record levels. The rate for the US as a whole is just
under 10%, according to the Census Bureau. But it's higher -
at 12% - in the south. While Louisiana's rental vacancy rate
is on the lower side for the region, nearby Alabama, Texas and
Georgia are all among the highest nationally. Vacancy rates
for lower-priced houses are even higher than for more
expensive homes.

As there are 34m rental units in the US, that means that more
than 3m are empty. With thousands of refugees now housed in
sports stadiums and convention halls, it would seem there is
little time to await the construction of even temporary
housing. If the federal government could provide just a little
grease in terms of help relocating and some rental subsidies,
the problem of housing Katrina's refugees seems quite
solvable. Bechtel's expensive help is not required.

See also: Fresh Pricks in the Housing Bubble