Old Twist on Rebuilding New Orleans

NEW ORLEANS —  Officials and community advocates are quietly planting the seeds for an enterprising program that could give the government temporary control over thousands of privately owned homes damaged by Hurricane Katrina.

An increasing number of Louisiana housing authorities believe the proposal, based on an arcane legal concept called “usufruct,” could be a key to determining whether New Orleans will again be a seminal American city or whether it will stagnate with a population, like it has now, equal to that of Duluth, Minn., and Fort Smith, Ark.

Nearly two months after Katrina, the nation’s attention has shifted largely to the “old city” -- the French Quarter, the Garden District -- which was relatively unscathed and is showing considerable signs of life.

But New Orleans’ future will be decided elsewhere, in neighborhoods that, while they were rarely seen by tourists, were home to the bulk of the city’s residents. There, damaged homes sit empty for miles on end, with no power, no water and no hint of recovery.

“The entire redevelopment of New Orleans rests on this issue,” said Mtumishi St. Julien, a longtime community advocate, a housing advisor to Mayor C. Ray Nagin and the executive director of the Finance Authority, one of the primary local agencies that administers government housing programs. “We have a lot of people who, through no fault of their own, do not have the capability to come home and fix up their property. So our greatest challenge in redeveloping is acquiring the land to rebuild.”

The proposal would require deft legal maneuvering and could be controversial, largely because the Constitution severely restricts the government’s ability to control private property. But New Orleans is attempting to recover from a catastrophe, St. Julien said -- one that will require extraordinary steps.

St. Julien cautioned that the program would not be a “silver bullet,” but he said it could be a crucial tool, among a spectrum of public initiatives, to recover the housing stock in New Orleans, repopulate the city and find housing for civil servants who make the city work.

“You are not going to rebuild New Orleans unless you are able to get government access to private property,” he said Saturday. “If government does not solve that problem, everything else is just talk. It is foolish to believe otherwise.”

Usufruct is a centuries-old legal concept that gives a person the right to use and profit from property that belongs to someone else.

In Louisiana -- in a relic of the state’s unusual legal system, which is founded on Napoleonic code rather than English common law -- usufruct can apply to private property matters. It is sometimes used here to give a husband or wife control over property after his or her spouse dies. In lay terms, proponents of the housing program want to give that control to the government.

The proposal is in its infancy and would require an act of the Legislature and a significant financial contribution -- hundreds of millions of dollars, most likely -- by the federal government. But after originating with a handful of New Orleans lawyers, the idea has swept through the offices of housing authorities and other government officials in Louisiana and on Capitol Hill, and is gaining steam in many quarters.

The mechanics of the proposal remain uncertain but are beginning to come together. It would work like this:

Authorities would locate scattered homeowners to determine if they have the means or the inclination to rebuild. There are believed to be at least 100,000 homes in New Orleans that are damaged to the point that they are not habitable. If the owner is not planning to return anytime soon, local officials would strike a deal.

The owner would sign over controlling rights of the property -- but not the title -- to the government. In most cases, that would likely be the city of New Orleans, but the program would apply statewide and could involve numerous municipal or parish governments.

Through contracts targeting hundreds of properties at once, the government would then pay to make the home habitable again, while assuming, in most cases, mortgage payments for the owner.

The home would then be rented out, first to displaced “essential workers” such as teachers, police officers and firefighters and their families, then to the public. Rents would likely be subsidized, and checks would be written to the government agency that signed the deal or to a company hired to manage the money.

The owners would be allowed to return after an agreed-upon period of time -- perhaps three to five years -- provided they could repay the government for repairs made. If, at that point, the owner did not want to return or could not pay for the fixes, the government would have the right to sell it. If the house were sold, the government and the owner could share in profits and losses.

The proposal would achieve several objectives, advocates said.

Displaced civil servants living elsewhere or on cruise ships docked on the Mississippi River -- separated from their families in many instances -- could find reasonably priced housing. That could help, in particular, in rebuilding the New Orleans Police Department.

Because the government would not technically own the property, advocates believe the program would not represent a “taking” of homes and could sidestep constitutional questions. For the same reasons, the program would not require costly and lengthy court battles that typically ensue when the government tries to seize property through eminent domain.

Neighborhoods that would otherwise be left to rot, meanwhile, could start to come alive. The dire situation in pockets of New Orleans that were effectively destroyed has been compounded by a version of an old real estate adage: You never want to own the nicest house on the block. Even if an owner is able to rebuild, why proceed if no one else on the block is doing the same?

“There is going to be a drag on the energy level of folks wanting to exert their energy to restore and rebuild if their neighbors’ homes -- or their former neighbors’ homes -- continue to deteriorate,” said Wayne Neveu, a New Orleans bond attorney who was an originator of the proposal and frequently represents local government agencies.

“It is a tremendous challenge to help those who return to feel comfortable and confident that the government is supporting their efforts to return and is going to exert energy to ensure that units don’t remain vacant and abandoned in a way that creates a disincentive to invest. This is a tool to do that.”

The proposal has met with a welcome reception even among some politicians and officials who consider themselves advocates of private property rights.

“I would not want the city taking any liberties that did not involve the respect of private property rights,” said City Councilwoman Jacquelyn Brechtel Clarkson, a veteran realtor and a strong proponent of those rights. “But if it’s a good plan, then it’s wonderful.”

Kim Hunter Reed, director of policy and planning for Gov. Kathleen Babineaux Blanco, also welcomed the proposal and said it could prove invaluable in addressing the historic shortage of affordable housing in New Orleans -- a dilemma that was compounded exponentially by Katrina.

Clarkson, however, said she would draw the line at voluntary arrangements. If the proposal called for the government to force owners into contracts giving up control over their homes, she said she would fight it.

On that point, even the most ardent proponents of the proposal have not agreed.

St. Julien said the program would likely be restricted to voluntary agreements, partly because he fears that involuntary agreements could be construed as a governmental taking, making it more likely that homeowners could demand compensation before signing over their rights to use their property.

But Neveu made no such promises, and said that if an abandoned home deteriorated to the point that it represented a “threat to health and safety” -- a threshold already reached by thousands of homes -- the government could force owners to sign the deal.

“In some cases, if owners are uncooperative ... then perhaps a more forceful implementation of receivership or usufruct can be established,” he said. “This tool can be used for voluntary agreements with owners or for involuntary control by the city.”

Alternatively, government agencies could resort to more customary efforts to seize blighted property through condemnation. Either way, efforts to seize private property without the consent of the owner could anger property rights advocates.

Chip Mellor, president of the Institute for Justice, a libertarian public-interest law firm that challenges what it calls the abuse of governmental eminent domain efforts, said the proposal had merit, provided the government could show that contracts with homeowners were “truly voluntary.”

“Conceptually, if it is a voluntary transaction, then there may be a role for the government to play in rehabilitating these neighborhoods,” he said. “But the minute you give the government the chance to condemn property, you are opening the door for widespread abuse.”

While that contentious issue looms, other questions remain: How would the program factor in insurance payments or government assistance already received by a homeowner? Also, if the government is required to compensate homeowners in some cases, how much is a home worth if its neighborhood is effectively uninhabitable? What if the bank or financial firm that holds the mortgage doesn’t want to go along?

“The devil is in the details,” St. Julien said. But he said something must be done -- and quickly.

He and his wife of 31 years, Shawishi, live in an eastern pocket of New Orleans that isn’t even on the maps given to tourists at the airport.

It was there that the couple built their first home, raised three children and filled an empty nest with toys for the grandkids. Their home was a congenial slice of suburbia, with an imported palm in the circular driveway, a display case in the foyer full of diplomas and the kids’ sports trophies.

Katrina sent chest-high water crashing through the living room. Today, black mold is creeping toward the ceiling. Outside, the air conditioning unit was uprooted and tossed on its side. The kitchen counter was bowed and contorted like a massive bowl.

“Look at what it did to the piano,” St. Julien said, his shoes squishing an inch deep in the soggy carpet. “It just picked it up and flipped it over.”

St. Julien is, for now, homeless and working out of an office in Baton Rouge. He could likely fix up his home -- unlike tens of thousands of others who are impoverished and did not have insurance. But even with the means, he said, he is paralyzed by uncertainty.

Will the protective levee system around New Orleans be rebuilt so that it can withstand another Katrina? If not, why rebuild? What happens if he sinks money into his home, only to find that the government changes the flood maps, eliminating his ability to get insurance or requiring that his home be hoisted onto stilts?

“There are so many variables. Do we roll the dice?” he asked. “I don’t know if we’re renovating or demolishing. I don’t know what to do, and it’s the same with every owner in every area affected by the water. I’m lost. We’re all lost.”