Hammering out new housingMississippi apartment owners confront labor shortages, rising wages, slow insurance payments in push to get damaged units livable again

Nine months after losing most of her furniture and clothes when Hurricane Katrina lashed the Mississippi Gulf Coast with 30-foot storm surges and 125-mile-an-hour winds that smashed a tree into her apartment roof, Coral Edelen is working at a new job that gives her a key role in rebuilding the state’s housing stock.

As executive director of the Mississippi Multifamily Council, a division of the Home Builders’ Association of Mississippi, Edelen helps provide education, training, lobbying, and other services for apartment owners, developers, property managers, and other industry professionals in the Magnolia State – including participants in the affordable housing industry.

“The rest of my family, their houses were completely underwater,” said Edelen, who grew up on the Gulf Coast. Only one of her extended family members had a house that was still livable after the hurricane, and about half a dozen relatives moved in there, said Edelen.

Affordable housing is critical to the economic revitalization of the storm-struck areas. Thousands of apartments were damaged or demolished by the hurricane, shrinking the coast’s housing supply so much that rents have soared by 25% or more in many areas. And that’s when residents can find permanent housing. As many as 10,000 people on the Gulf Coast were still living in Federal Emergency Management Agency (FEMA) trailers as of March, officials have said.

“Our biggest challenge right now is affordable housing, and there is a severe shortage of that – as there is of housing in general,” said Marcia Crawford, an information specialist at the Harrison County Development Commission. Harrison County, the most populous of Mississippi’s three coastal counties, lost several thousand apartments in the storm.

Thousands of apartments destroyed

“We’ve never seen this kind of devastation before,” said Tish Williams, executive director of the Hancock County, Miss., Chamber of Commerce. Hancock County is home to Bay St. Louis and Waveland, the worst-hit cities, where entire neighborhoods were demolished.

Of more than 42,000 rental units in Mississippi’s three Gulf Coast counties, about 14,000 were completely destroyed, said Dianne Bolen, executive director of the Mississippi Home Corp. (MHC), the state’s housing finance agency, in testimony before the U.S. Senate in October 2005.

FEMA estimates that nearly 21,500 of the apartment units on the coast suffered at least minor damage.

“Some of them are still tied up in insurance, some are probably negotiating to sell, and some are negotiating to convert to condos if they can,” said Mike Rowell, publisher of the Apartment and Condominium Directory, an advertising circular for the Mississippi Gulf Coast. “I’m seeing stuff happening, but it’s very slow.”

Off the top of his head, Rowell rattled off a list of a dozen apartment complexes consisting of more than 1,600 units that were destroyed by the storm, most of which he predicted would not be rebuilt.

Hopeful signs

Still, some property owners have already completed repairs, and others are rushing to start new projects.

At Brookstone Park, a 96-unit affordable housing development in Gulfport that opened for business just a month before the storm hit, repairs to wind-damaged buildings were completed within a few months, and by this spring, the property was fully leased.

One afternoon in early April, two elementary-school-aged girls sat in leather chairs watching television in the immaculate clubhouse, just a hop, skip, and a jump away from a clear blue outdoor pool. The only sign the storm had torn through the development was the bedraggled state of a thin stand of oak trees the developers had originally envisioned as part of a small tree preserve attached to the property.

About 40 miles away in Bay St. Louis, two dozen construction workers earning double what used to be average wages were hard at work bleaching and drying the studs in empty two-bedroom units, hammering sheetrock, painting walls, and installing new refrigerators, stoves, and tubs in a 128-unit garden apartment complex that will serve low- and moderate-income residents when it reopens in a few months.

Both properties are owned by The Park Cos., which, through its development arm, is Mississippi’s largest multifamily housing developer. Officials at the company’s management arm, recently acquired by Ambling Management Co., had a jump on other property owners on the coast by having their insurance claims prepared even before the storm hit.

“We had the adjusters lined up and ready to go,” said Debbie Groves Caldwell, Ambling’s regional property manager for the Gulf Coast.

Long list of challenges

For apartment owners and managers on the coast, the biggest challenges these days are dealing with insurance companies or otherwise finding money to rebuild, eradicating mold, finding housing for their employees, and coping with shortages that have pushed up the costs of both labor and materials.

Even though local officials are operating out of trailers in the hardest-hit parts of the coast, “Cities have issued [rebuilding] permits very quickly,” said Cliff Bates, director of acquisitions at Park’s development arm.

Plus, proposals to rezone areas for affordable housing developments, which he called a “tough proposition” before Katrina hit the coast, now meet little opposition, he said.

The Park Cos., claimed about $9 million in insurance losses on its Bay St. Louis development, which flooded with about 10 feet of water in addition to suffering smashed roofs and windows that opened up second-story units to rainwater damage.

At an average reconstruction cost of more than $70,000 per unit, the insurance settlement – which is being paid out as each phase of renovation is completed – will barely cover repairs. Renovation is costing as much as or more than new construction would cost, said Don Reed, a senior vice president with Ambling Management.

Fighting with insurers

But unlike Park, many property owners on the coast didn’t have flood insurance, and most are still fighting to get insurers to pay their claims. In Pascagoula, one apartment owner has rented out her top-floor units but kept the bottom-floor apartments empty because she does not have the money to rebuild, said Ambling’s Caldwell.

Even though housing for construction workers doing renovations is scarce, apartment owners with units in livable condition are in a prime position to capitalize on the imbalance between supply and demand.

Park, like most apartment owners on the coast, is raising rents by about $100 per unit at its market-rate developments and to the maximum allowed at its projects funded with low-income housing tax credits. At Ashton Park, the company’s affordable-housing complex in Gulfport, that will mean rents of $510 and $585 for two- and three-bedroom units, respectively.

At the company’s Westwick Apartments in Biloxi, work is almost finished on the 54 units damaged by hurricane winds and rains, and 40 of those are already pre-leased, said manager Nita Groce. Housing demand is so high that she and other managers say they’ve had people come to them begging to rent even wind- and rain-damaged units – anything to get a roof over their heads.

Still, even with contractors and other employers bidding up wages in the scramble to find workers, the Gulfport-Biloxi metro area had the highest unemployment rate in the nation in February, at 15.6%. And some are estimating that it could be a decade before the Gulf Coast is completely rebuilt.

“It’s going to be a long process,” said Bill Webb, the Gulf Coast regional manager with the Mississippi Development Authority.