Order Code RS22358
January 5, 2006
CRS Report for Congress
Received through the CRS Web
HUD’s Response to Hurricane Katrina
Maggie McCarty, Libby Perl, and Bruce E. Foote
Domestic Social Policy Division
Summary
Hurricane Katrina resulted in the displacement of tens of thousands of families
from their homes. While the storm’s magnitude is unprecedented in the United States,
the resulting need to shelter and house displaced families is not. The Department of
Housing and Urban Development (HUD), the nation’s agency with a mission to provide
safe and decent housing for all Americans, has played a role in meeting those needs in
the past and is playing a role in the wake of Katrina. This report tracks the Department’s
initial actions as well as proposals to expand the Department’s role; it will be updated.
The catastrophic devastation wrought by Hurricane Katrina in late August, and to a
lesser degree, Hurricane Rita in late September, has led to the displacement of hundreds
of thousands of families. CRS estimates that as many as 700,000 families lived in areas
that were acutely affected by the storm; these families may have been required to
evacuate, at least temporarily.1 In the aftermath of the storm, the Federal Emergency
Management Agency (FEMA) has taken the lead role in finding temporary shelter for
displaced families, providing emergency shelters, cash grants, and trailers. HUD
programs have been used as a conduit for funneling short-, interim-, and long-term
funding to disaster-stricken communities many times in the past, most recently in
response to the four hurricanes that struck Florida in 2004 and after the September 11
attacks. This report tracks HUD’s actions in response to the storm and proposals in
Congress to expand the Department’s role.
Administrative Initiatives
Assisted Housing. The Administration took a number of first steps to make
existing housing programs and assistance available to victims of Katrina. Immediately
after the storm, HUD established a toll-free number (1-888-297-8685) for HUD-assisted
families who had been displaced — such as public housing residents and Section 8 rental
housing voucher holders — to call in order to reestablish their benefits. In conjunction
1 See CRS Report RL33141, Hurricane Katrina: Social-Demographic Characteristics of
Impacted Areas,
by Thomas Gabe, Gene Falk, Maggie McCarty, Virginia W. Mason.
Congressional Research Service ˜ The Library of Congress

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with that number, the Department identified a number of vacant units across the country
in which to house displaced tenants, both formerly assisted and unassisted. HUD issued
a notice on September 27, 2005, summarizing waivers available to public housing
authorities. Temporary waivers available included suspensions of reporting deadlines,
loosening of quality standards and income determination rules, and increases in subsidy
limits for public housing authorities affected by the storm.2 The Department is also to
make available emergency capital reserve funds to repair damaged public housing units.
FEMA-HUD Joint Initiative. On September 23, 2005, the Secretaries of HUD and
the Department of Homeland Security announced a joint transitional housing assistance
initiative for Hurricane Katrina evacuees.3 The initiative provides two types of assistance,
both funded by FEMA’s emergency supplemental funds. The first is a type of individual
and household grant administered by FEMA. Displaced homeowners and renters (except
for HUD-assisted renters) are to receive from FEMA a cash grant of $2,358 to be used for
housing-related expenses. The amount is meant to represent three months of housing
costs and is calculated using the national average fair-market rent (FMR) for a two-
bedroom apartment. The assistance may be extended for up to 18 months.
For families who were homeless or receiving HUD assistance before the storm,
FEMA initially provided funding to HUD, through a mission assignment, to administer
the HUD Katrina Disaster Housing Assistance Program (KDHAP).4 It provides ongoing
rental assistance, for up to 18 months, to displaced HUD-assisted renters (including
Section 8 voucher holders, families who had lived in public housing, and families who
had lived in other forms of HUD-assisted rental housing) and displaced homeless
families. The rental assistance is administered by local public housing authorities and is
calculated at 100% of the local area FMR. Families are required to pay any difference
between the rental assistance amount and the actual rent for the unit they have selected.
This program does not have any income eligibility or targeting requirements, and
families’ eligibility is determined after they register for FEMA assistance and contact the
KDHAP intake number (1-866-373-9509). Language included in the FY2006 Defense
Appropriations (P.L. 109-148) transferred $390 million in FEMA funds to HUD to
administer a modified Section 8 voucher program to the same population currently
eligible for KDHAP. It is unclear whether these new funds will be used to continue the
current KDHAP assistance or a modified version of it.
Grant Programs. As in past disasters, the Secretary of HUD issued a number of
waivers to permit local communities to redirect their existing HUD housing and
community development grant funds to meet their emergency needs. Waivers were issued
2 A description of temporary waivers is available at [http://www.hud.gov/offices/pih/
publications/katrinapihadminwaiv.pdf].
3 “Jackson and Chertoff Announce Comprehensive Transitional Housing Assistance Program for
Katrina Evacuees,” HUDNo. 05-130, available at [http://www.hud.gov/news/
release.cfm?content=pr05-130.cfm].
4 For an expanded discussion of the KDHAP program for formerly-assisted HUD renters, see
CRS Report RL33173, Hurricane Katrina: Questions Regarding the Section 8 Housing Voucher
Program
, by Maggie McCarty. For an expanded discussion about the specific treatment of the
homeless under KDHAP, see CRS Report RL30442, Homelessness: Recent Statistics, Targeted
Federal Programs, and Recent Legislation
, by Libby Perl (coordinator).

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for the Community Development Block Grant (CDBG) program5, the HOME Investments
Partnerships Program (HOME), the Emergency Shelter Grants Program (ESG), and the
Housing for Persons with AIDS Program (HOPWA). Some of the waivers were
automatically applied to affected communities; in other cases, communities were
instructed to apply for waivers. Table 1 summarizes the waivers issued.
Table 1. Grant Program Waivers Issued After 2005 Hurricanes
Provisions Altered
Program
Reduction of requirements regarding citizen participation in amending
HOME, ESG,
spending plans
HOPWA
Reduction of requirements and cost limits when using funds to provide rental
HOME, HOPWA
assistance
Reductions in the amount of documentation required to document families’
HOME, HOPWA
incomes for eligibility and benefit determination
Expanded ability to use funds for administrative costs
HOME
Reduction of matching contribution requirement
HOME
Increases in the maximum per-unit rental subsidy homeownership home value
HOME
Reductions in minimum property standards
HOME
Waiver of tenant selection plan requirements
HOME
Reduction in the mandatory set-aside for community housing development
HOME
organizations
Waiver of certain American Dream Downpayment Initiative (ADDI)
HOME
requirements
Waiver of optional relocation assistance, replacement housing assistance, and
HOME
one-for-one replacement requirements
Loosened standards for decent, safe, and sanitary conditions
HOME
Increase in the amount of funds that can be used for public services (15%)
CDBG
Broadened definition of emergency shelter
ESG
Extended deadlines for using grant amounts
ESG
Source: HUD’s website, [http://www.hud.gov/offices/cpd/library/katrina/].
Mortgage Insurance Programs. On August 31, 2005, HUD issued mortgage
letter 2005-33.6 It reminded HUD-approved lenders that when the President declares a
disaster, as in the case of Hurricane Katrina, the declaration automatically triggers certain
procedures with regard to FHA-insured mortgages in the affected areas. The following
5 For a discussion of the use of CDBG funds after a disaster, see CRS Report RS22303,
Community Development Block Grant Funds in Disaster Relief and Recovery, by Eugene Boyd.
6 Available at [http://www.hudclips.org/sub_nonhud/cgi/pdfforms/05-33ml.doc].

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procedures become effective for one year from the date of the declaration: (1) a
moratorium on foreclosures is in effect for 90 days from the date of declaration7; (2)
lenders are encouraged to offer special forbearance, mortgage modification, refinancing,
and waiver of late charges to affected borrowers; (3) families whose residences were
destroyed or severely damaged are eligible for 100% financing under Section 203(h) of
the National Housing Act for the cost of reconstruction or replacement of the residences;
(4) damaged properties become eligible for Section 203(k) financing under which the
costs to purchase and to rehabilitate the property are included in one loan, and HUD
waives the requirement that the property has been completed for more than one year prior
to application for a Section 203(k) mortgage; (5) the underwriting guidelines are relaxed
to permit disaster victims to qualify for loans even if their total monthly debt, including
the proposed mortgage, would equal 45% of gross income; and (6) lenders are directed
to ensure that hazard claims are expeditiously filed and settled, and lenders may not retain
hazard insurance proceeds to make up an existing arrearage without the written consent
of the borrower.
The Section 203(h) program is available for borrowers who already own homes in
the affected area. The loans are limited to the FHA loan limit for the area, subject to the
provision that the loan may not exceed 100% of the appraised value of the property. In
some cases it may not be possible to obtain 100% financing. It may often be the case that
the cost to repair or replace the property exceeds the appraised value of the property. This
is the reason that most lenders require borrowers to obtain hazard insurance that covers
the replacement cost of the property instead of its appraised value. The Section 203(k)
program permits borrowers who do not already own homes to purchase and rehabilitate
properties in the area that are either abandoned by owners, or are being sold by owners
who do not want to repair them and remain in the area. The current FHA underwriting
guidelines provide that a prospective borrower’s total debt, including the proposed
mortgage payment, may not exceed 41% of the borrower’s gross monthly income. In
recognition of the fact that borrowers in these programs [Section 203 (h) and (k)] may
have to incur debt to replace personal property, the underwriting guidelines are relaxed
to permit loans to borrowers whose total debt is up to 45% of gross monthly income. The
limit may even be exceeded if justified by compensating factors.
On December 5, 2005, HUD announced the Mortgage Assistance Initiative (MAI),
under which HUD will make mortgage payments for up to 12 months on behalf of
borrowers who have FHA-insured mortgages on their homes and who have been
displaced or are unemployed because of the recent disasters.8 Eligible borrowers must
meet the following requirements: (1) have homes that are repairable and are located
within parts of Alabama, Florida, Louisiana, Mississippi, or Texas declared eligible for
individual assistance as a result of Hurricanes Katrina, Rita, or Wilma; (2) have missed
between four and 12 payments on an FHA-insured home loan; (3) be temporarily unable
to make mortgage payments but have the expectation to resume full mortgage payments;
and (4) the homes must be the primary residences of the borrowers and the borrowers
7 HUD Mortgagee letter 2005-45, issued November 22, 2005, extended this deadline for many
areas affected by Katrina through the end of February 2006.
8 “HUD Announces Mortgage Assistance for Disaster Victims: $200 Million Initiative Designed
to Rebuild Lives and Communities,” HUD No. 05-164, available at [http://www.hud.gov/
news/release.cfm?content=pr05-164.cfm].

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must be committed to continued occupancy of the properties as primary residences. No
interest is charged on the MAI loans, and repayment is not required until the original
FHA-insured loans are repaid. The program expires in 18 months. It is expected to assist
about 20,000 families.9 FHA notes that more than 52,000 FHA-insured loans are
delinquent due to the storms.10
In April 2005, HUD augmented its existing 203(k) program by announcing the
“Streamline(k) Limited Repair Program” to facilitate the purchase of properties needing
minor rehabilitation.11 Eligible properties were those needing repairs costing at least
$5,000 but not more than $15,000. The program was amended in December to, among
other changes, eliminate the minimum repair cost, increase the maximum repair cost to
$35,000, and make lead-based paint stabilization an eligible work item.12 The Streamline
(k) program is not directed specifically at properties damaged by Hurricane Katrina, but
the program will facilitate the purchase and repair of such properties that meet the
program requirements.
Congressional Action
Supplemental Appropriations. In response to Hurricane Katrina, Congress
initially enacted two emergency supplemental appropriations bills totaling more than $60
billion, primarily for FEMA.13 HUD did not receive direct funding in either bill. On
October 28, 2005, President Bush submitted to Congress a rescission and reallocation
package to help fund reconstruction in the Gulf Coast after the recent hurricanes. The
proposal would have rescinded $140 million from HUD programs and reallocated $2.2
billion in FEMA emergency disaster relief funds to HUD programs to aid in disaster
recovery. On December 30, the President signed the FY2006 Defense appropriations bill
(P.L. 109-148) that included a Katrina supplemental funding bill similar to the
Administration’s October proposal. It provided $11.89 billion to HUD for Katrina
disaster assistance. Of that amount, $11.5 billion was provided to CDBG to be distributed
to states and areas most acutely affected by Katrina, and $390 million was provided to
Section 8 for serving the same families currently assisted under KDHAP. These increases
in funding were offset by rescissions from FEMA’s disaster relief fund, as well as specific
rescissions from selected other programs across the government (none from HUD), and
an across-the-board rescission of 1% (which will affect HUD programs). The bill also
includes administrative provisions permitting housing authorities to combine their public
housing and Section 8 voucher funds, and directing the Secretary, to the extent feasible,
to preserve all assisted housing damaged by the storm.
9 Ibid.
10 Leslie Eaton, “Mortgage Aid Set for 20,000 Storm-Hit Homes,” New York Times, Dec. 6, 2005.
11 HUD Mortgagee Letter 2005-19, “Streamline(k)” Limited Repair Program, Apr. 29, 2005.
12 HUD Mortgagee Letter 2005-50, Enhancements to “Streamline(k)” Limited Repair Program,
Dec. 29, 2005.
13 For more information, see CRS Report RS22239, Emergency Supplemental Appropriations for
Hurricane Katrina Relief
, by Jennifer E. Lake and Ralph M. Chite.

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Legislation Introduced. On September 8, 2005, Senator Reid introduced the
Katrina Emergency Relief Act of 2005 (S. 1637). Title III includes the “Helping to House
Victims of Hurricane Katrina Act of 2005.” The bill would provide $3.5 billion in
emergency supplemental appropriations to HUD to fund temporary vouchers for families
displaced by Hurricane Katrina. The vouchers would not be subject to many of the
Section 8 rules regarding eligibility and tenant payments. In addition, the upper limit on
the amount of assistance that can be provided would be increased. Also on September 8,
Senator Sarbanes offered the same “Helping to House Victims of Hurricane Katrina Act
of 2005” as a floor amendment to the Commerce-Justice-Science FY2006 appropriations
bill (H.R. 2862). The amendment was adopted, but dropped in conference.
On September 22, 2005, the Senators from Louisiana each introduced identical bi-
partisan relief and recovery bills. The Hurricane Katrina Disaster Relief and Economic
Recovery Act (S. 1765 and S. 1766) calls for new programs and additional funding in
areas ranging from defense, to energy, to health care, to the environment. The housing
section would provide $3.5 billion for emergency Section 8 vouchers; $50 billion for
CDBG, up to $5 billion of which could be transferred to the HOME program and $5
billion to the HOPE VI program; and $3 billion for mortgage relief. The bills were
referred to the Senate Finance Committee.
On September 26, 2005, the members of the Louisiana House delegation introduced
the Hurricane Katrina Emergency Housing Act of 2005 (H.R. 3894). The bill would
waive a number of the rules in the Section 8 voucher and project-based programs,
including those regarding eligibility and subsidy determination, for families displaced by
Hurricane Katrina. On the same date, all but one member of the same delegation
introduced two additional housing bills: the Hurricane Katrina Emergency Relief CDBG
Flexibility Act of 2005 (H.R. 3896) and the Rural Housing Hurricane Relief Act of 2005
(H.R. 3895). The CDBG bill would waive the cap on the amount of CDBG funds that can
be used for community services and would waive the public hearing requirements for
communities impacted by Hurricane Katrina. The rural housing bill would allow the
reprogramming of certain rural housing funds and expand the uses of certain loans. All
three bills were passed by the full House and are pending in the Senate.
On October 17, Representative Danny Davis introduced the Hurricane Katrina
Victims Emergency Shelter Act of 2005 (H.R. 3794). It would direct the Secretary of
HUD to make foreclosed FHA-insured properties available to families displaced by
Katrina. On November 18, 2005, Representative Wicker introduced H.R. 4431 to provide
additional CDBG funding to communities affected by the storm. On November 22, 2005,
Representative Watt introduced H.R. 4197, the Hurricane Katrina Recovery, Reclamation,
Restoration, Reconstruction and Reunion Act of 2005, a broad-ranging bill that would
authorize expansions in funding for a number of HUD programs and include a temporary
voucher program similar to that proposed by Senators Reid and Sarbanes. On December
13, Representative Jindall and Senator Allard introduced identical bills (H.R. 4514/S.
2088) to authorize an urban homesteading program proposed by the President. All five
of these bills have been referred to committee.