Too hot to handle: Homeowner Jay Gray surveys the destruction to his Rancho Bernardo, Calif., home after fires swept through his neighborhood in October 2007. Few local production builders have had much success participating in the rebuilding efforts.

Photo Credit: Bob McMillan/FEMA News Photo

It’s Sept. 12, the day Hurricane Ike began wreaking havoc along the Gulf Coast, and Wes Wyman has evacuated his home in Plaquemines Parish, La. He is setting up a generator that will run his office in Belle Chasse in the event the storm knocks out the electricity.

Wyman, who owns Wyman Construction, has been down this road before—when Hurricane Katrina hurtled through the Gulf in August 2005, leaving in its wake 220,000 homes damaged or destroyed in greater New Orleans. Since then, Wyman’s company has rebuilt about 50 homes, ranging in price from $85,000 to $2 million, and could have built many more if he’d had a lot more manpower: An oil refiner approached him after Katrina about rebuilding homes for 150 of his employees. Even so, half of Wyman Construction’s current construction activity is rebuilding storm-damaged property. “There’s always going to be work,” he says.

But most builders here and in other markets clobbered by natural disasters say the process of rebuilding can be as slow as molasses. “It’s been like walking through quicksand,” says Marianne Cusato, a designer whose “Katrina Cottages” received considerable fanfare as viable emergency housing after Katrina hit but are only now coming to fruition in Louisiana.

All kinds of factors—government inertia, insurance payment snafus, and assorted other red tape—limit disaster-related reconstruction. Consequently, rebuilding after disasters isn’t the economic bonanza for builders that some might expect. “One of the biggest misconceptions is that everyone who comes to a storm becomes a millionaire,” says Anthony Johnson, owner of 1st Restoration Group in New Orleans, which has been doing insurance reconstruction for 13 years. “We have one job we did a year ago we’re still waiting to be paid for.”

Rising tide: Cedar Rapids, Iowa, was inundated by flooding in June, but since then rebuilding has been slow.

Photo Credit: Cedar Rapids Gazette

Michael Fearn, president of Champagne & Fearn, a builder in Biloxi, Miss., where very little post-storm reconstruction was happening this summer, adds that recent hurricanes have been followed by “a lot of hype,” with investors buying and flipping real estate but not much else. He points to a huge master planned community in Stone County, Miss., called Horizon, which broke ground on its 8,000-unit first phase in January 2007. As of mid-September, nothing had been built.

Almost entirely absent from these efforts are production builders; rebuilding on owners’ lots is contrary to their usual business model. Builders in California, Florida, Texas, Oklahoma, Louisiana, and Mississippi mostly have stayed on the sidelines when disasters strike, leaving repair and rebuilding work to local contractors and nonprofits. “It’s more of a custom environment,” observes Steve Doyle, president of the San Diego division of large production builder Brookfield Homes, which did not actively pursue rebuilding projects after wildfires swept through Southern California in October 2007 (see “False Start,” page 103).

But smaller builders can be just as ambivalent about diving deeply into the disaster rebuilding swamp. David Dale, whose construction company builds between 12 and 14 vacation homes annually in the Galveston market, remembers when Hurricane Alicia blew through Galveston 25 years ago and took out nearly 6,000 homes. His company had rebuilding work for more than six years after. But Dale told Builder a few days before Ike hit that he probably wouldn’t alter his immediate construction schedule regardless of how much residential wreckage that storm left behind.

Builders that have embarked on disaster rebuilding are profiles in perseverance. Their experiences are testaments to the haphazard and uncoordinated ways that government and the private sector respond to help people left suddenly homeless by storms, floods, and fires.

Midwest Miasma

To remediate severe mold problems, builders are stripping houses to their framing.

Photo Credit: Thomas Dostal Developers

On June 11, floods drenched Cedar Rapids, Iowa, causing severe damage to an estimated 1,000 to 3,000 homes. “We went from needing 140 to 200 affordable housing units to between 1,500 and 3,000,” says Randy Dostal, whose family owns Thomas Dostal Developers, a local builder that completes about 25 homes per year, ranging from the $200,000s to the $400,000s.

A few days after the flooding, Dostal says his company devised a rebuilding strategy to present to its local HBA, which calls on the 200-plus builders in the area to cooperate and work in tandem. The damaged or destroyed homes average about 825 square feet and were valued at between $100,000 and $110,000. “I haven’t built a $100,000 home in 12 years,” says Dostal, who asked the city to give builders the lots for free so they can build affordably and still make money. The lots would be behind Cedar Rapids’ 500-year floodplain, and the land the homes sit on now would be converted for parks and recreation.

Photo Credit: Thomas Dostal Developers

There’s no question Iowa is suffering from last summer’s floods. The Rebuild Iowa Advisory Council, reporting to Gov. Chet Culver, estimates the cost to rebuild single-family dwellings alone at $856 million. But Dostal told Builder in mid-September that the local recovery effort was barely crawling, and that he was having trouble getting local officials’ attention. (On Sept. 24, HUD accepted an $85 million disaster-relief plan proposed by Iowa’s Department of Economic Development. The state intends to use the federal dollars to restore destroyed or damaged housing, stimulate small business recovery, and repair infrastructure.)

Dostal’s plan encountered several major roadblocks. Most owners with damaged houses didn’t have flood insurance. Many homes with the worst damage are in poorer communities, and FEMA has capped compensation aid to $28,800 per household (compared with $150,000 per home in New Orleans). Plus, the flooding created extreme mold problems, and Dostal says traces of 400 strains of E. Coli have been found in some basements.

With winter approaching, rebuilding probably won’t get started until next year, and Dostal wonders how many owners will eventually return. One family, though, won’t have to wait, as Dostal has been working with suppliers and subcontractors to rebuild for free a flood-damaged house owned by a Vietnam veteran raising five children, two of whom are handicapped.

Mississippi Modular

Off the map: Hurricane Ike wiped out entire neighborhoods on barrier islands near Galveston, Texas. One-third of that city’s residents lost their homes, according to its mayor. But it remains to be seen how involved local builders will be in the rebuilding effort.

Photo Credit: AP

Dr. Randy Nance is a physician who was practicing in Meridian, Miss., when Katrina hit. Within a week, he and 30 volunteers from his local church set up a medical clinic. “On the first day, we saw 200 people,” he recalls. But Nance wanted to do more to help Katrina’s victims.

So on Oct. 15, 2006, he launched New Gulf Homes, a modular-home builder that assembled its first house 10 months later. New Gulf opened a sales office in Gulfport, Miss., and enjoyed a banner year in 2007, when it sold 31 houses and was named builder of the year by its supplier, All-American Homes. The houses Nance builds range from 900 to 4,000 square feet and cost between $100 and $110 per square foot. “For a while, I was putting up a house a week,” he recalls. This year, though, has been a different story. “It’s been dead,” says Nance, who runs the company with his son, Ryan.

Tighter mortgage lending requirements haven’t helped matters in Mississippi. Nor has the prohibitive cost of flood and wind insurance, which could become worse, Nance thinks, if more insurers abandon the area after assessing the damage hurricanes Gustav and Ike have wrought. “There are a lot of people who don’t know what to do; their houses are destroyed, and they’re just standing there,” says Kevin Taylor, who owns Plum Homes, a high-end custom builder in Gulfport. Nance still believes there’s opportunity in disaster rebuilding, but for now his company is doing more commercial work and is looking to do more stick-built residential construction. When asked how many homes he’ll build this year, all he can say is, “It won’t be 31.”

Not so Big Easy

New Orleans’ recovery to something approximating its pre-Katrina past in the foreseeable future is in question. A report the Brookings Institution released in August finds that greater New Orleans may have recovered 72 percent of its pre-Katrina households, but nearly 72,000 of the city’s 213,700 addresses were still either vacant or unoccupied. Legal ownership of many houses remains in dispute because title records are nonexistent, dubious, lost, or vague.

Prefab solutions: In New Orleans, American Homestar displays two of its models in the parking lots of local Home Depots.

Photo Credit: American Homestar

Residential permits are up over 2007, but builders and local officials say there is a wide disparity between permits issued and what actually gets built. Johnson of 1st Restoration Group estimates that between 30 percent and 40 percent of his clients had been cheated previously by unscrupulous contractors.

FEMA’s “Road Home” grant program has issued awards to nearly three-quarters of the 330,000 eligible owners whose homes suffered minor to complete damage. But it took two years after Katrina for the first dollars to be distributed, and its funds might not be fully disbursed until October 2009. The New York Times reported in August that another federally financed program run through the New Orleans Affordable Homeownership Corp., which had spent nearly $2 million ostensibly to gut and repair storm-damaged homes for the poor and elderly, was a sham.

In such an environment, it’s surprising anything gets rebuilt. Yet some here see the city moving in the right direction. “It’s been three years, and a lot of progress has been made,” insists M. von Nkosi, a housing program executive working with the Mayor’s Office of Recovery and Redevelopment Administration. A memo he wrote in May projected that from 2006 through 2008, nonprofits will have rehabbed or reconstructed 5,300 housing units without any city financial support.

A day late: More than two years after FEMA allocated funding, a pilot program to build 500 affordable Katrina Cottages, like the one above, in New Orleans is finally getting off the ground. But its designer sees guidelines emerging for addressing future disasters.

Photo Credit: Lowes

So far, the home building industry has played a minor role in New Orleans’ rebuilding drama, although some builders have found their niche. Johnson’s company has rehabbed about 60 homes since Katrina hit, and his jobs average $60,000. Several of those projects have been nearly complete reconstructions, as he explains that when homeowners leave a portion of the house, like a porch, standing and tear down the rest to be rebuilt, they pay the same taxes as before, whereas a complete teardown is assessed at its current value, which Johnson says often translates into three times the property taxes.

Builders and officials here agree that the decision to disburse grant money to homeowners, instead of through a government agency that would pay contractors when work is completed, was a mistake; a lot of that money never went toward repair or rebuilding. But Johnson remains hopeful because “people who would never have hired a contractor hired them after the flooding. I’ve seen new roofs on homes that wouldn’t have been replaced for another 30 years without the storm.”

Jayar Daily also sees “remarkable progress” in New Orleans’ recovery, even though “the market seems to be slowing at present.” Daily is vice president of Houston-based American Homestar, a modular-home supplier and builder that, through August, had sold and assembled nearly 60 homes in New Orleans. Since March 2007, his company has marketed its homes, which average 1,500 square feet and sell from $160,000 to $180,000, through The Home Depot and has furnished models in the parking lots of two of that dealer’s stores.

What Daily is still waiting for, however, is to see how government plans to expand New Orleans’ neighborhoods incrementally. “That will require schools, roads, and shopping,” he says.

New Codes Emerge

Prefab solutions: Modular home builders have seen demand for their products and services expand in the rebuilding of Gulfport, Miss., where New Gulf Homes has been active.

Photo Credit: New Gulf Homes

American Homestar’s houses in New Orleans comply with the higher flood elevations mandated by statewide building codes Louisiana passed after Katrina. And even home builders that aren’t involved in disaster rebuilding must adjust to code changes that are the by-product of these climatic catastrophes.

Texas builder Dale says Hurricane Alicia ushered in the use of ½-inch sheathing around a house and the appearance of field inspectors at jobsites for the first time. When Hurricane Andrew exposed abysmal construction practices, Florida required all builders to be licensed by the state and imposed stricter building standards. Mississippi doesn’t have statewide licensing or codes yet, but that hasn’t kept builders and owners from going beyond what’s required locally. Taylor, for one, is replacing one client’s destroyed beach house with a $3 million, 7,000-square-foot home fortified by concrete walls and columns, and 6-inch steel beams supporting the porch.

Doyle of Brookfield Homes says that post-fire building codes in his markets have been upgraded to include enclosed eaves and vents that prevent embers from entering the house. He also notes that builders have won some concessions aimed at fire prevention, such as being able to clear brush up to 150 feet, versus only 30 feet previously. “We’re not removing habitat; we’re thinning it,” so that it’s less combustible, Doyle explains.

Building codes, though, are rarely ever set in stone. Johnson of 1st Restoration recently spent $4,500 to make the entrances of a house wheelchair accessible, only to be told later that FEMA no longer requires this. In New Orleans, at least, “the rules keep changing,” he says.

False Start

Big production builders report few rebuilding successes.

Blowback: A tornado ripped the roof off of this house in Moore, Okla., in May 2003. Twisters are common in Oklahoma, but far less so in its cities.

Photo Credit: Andrea Booher/FEMA

After fires burned 368,000 acres and 1,600 homes in Southern California in October 2007, Hallmark Communities—which hadn’t started a subdivision in two years—offered its expertise to homeowners looking to rebuild. The Solana Beach, Calif.–based builder contacted, through direct mail, most of the owners of homes that were burned, expecting to capture at least 200 rebuilding projects.

As of early September 2008, Hallmark was rebuilding only three homes. Its CEO, Mike Hall, has several explanations why: Insurance companies were taking longer to settle claims than they did after earlier fires. And the housing economy is so bad that builders from all over the state descended upon Southern California. “I know of a pool installer that’s building two homes, and a remodeler who’s building three,” says Hall. Hallmark lost jobs to contractors that were recommended to homeowners by friends, family, and, in one instance, a supermarket cashier. The fact that Hallmark told owners it would take 11 months to rebuild their houses put it at a competitive disadvantage against contractors who promised a quicker turnaround, even if they couldn’t realistically deliver it.

Stories such as Hallmark’s have kept production builders from getting into rebuilding after floods, storms, and fires. “I would be very surprised if you found a lot of builders that were tearing down [damaged] homes and putting up new ones as a business strategy,” says Donna Reichle, vice president of media and public relations for the NAHB.

“It’s just easier to build on a greenfield,” observes designer Marianne Cusato, “and those developments have formulas to them. When you’re dealing with owners with their own lots, it becomes more difficult.” That’s certainly what Brookfield Homes discovered after the 2003 fires in Southern California. Steve Doyle, president of Brookfield Homes’ San Diego division, notes, too, that local jurisdictions won’t “bend the rules” to make rebuilding more palatable to merchant builders. (“Ridiculous” is how he describes the number of roof planes some towns require.)

Oklahoma gets hit by 175 tornados, on average, every year. But they strike all over the state, and usually not in urbanized areas, says Vernon McKown, president of Norman, Okla.–based Ideal Homes. Even when tornados tore through Oklahoma City in 1999, damaging or destroying more than 3,000 homes, McKown says most production builders got involved in rebuilding only peripherally. Many owners simply took their insurance checks and bought homes outside of the tornados’ path. These owners sold their lots to builders such as Ideal, which picked up between 30 and 40 lots for about $30,000 each, McKown recalls. He also remembers how “nonprofessionals” and speculators swarmed into Oklahoma City and nearly doubled its inventory of houses, to a 10 months’ supply. “It took a year to get back to normal,” he says.

Even production builders that want to get into disaster rebuilding have encountered roadblocks. A deteriorating national housing market and the lack of available land undermined KB Home’s ambitious joint venture with The Shaw Group to build tens of thousands of homes in Louisiana’s Jefferson Parish. Last May, Melbourne, Fla.–based Holiday Builders pulled out of a development in Mississippi called Beaver Dam, where it planned to build nearly 400 homes, because the developers couldn’t get the lots ready to meet Holiday’s schedule. “We were supposed to start in late 2007,” says Ron Tuttle, president of Holiday’s Gulf division. “It’s disappointing, because we thought there would have been a pretty good market for the kinds of homes we were going to build.”

Toni Wendel was president of the HBA of Greater New Orleans when Katrina hit. She says her members that have wanted to do more rebuilding haven’t had much luck working with nonprofit groups that organize most of that work. (She’s hoping the HBA’s new emphasis on green building will make members more attractive as rebuilding partners.) Her own company, Olde World Builders and Remodelers, got into disaster rebuilding out of her interest in historic restoration. One of the seven post-Katrina rebuilding jobs it’s been working on is a 7,000-square-foot home in New Orleans’ Garden District that was badly damaged by flooding and had its roof parapet blown off. Originally, the owner hired Olde World before Katrina hit to remodel the kitchen. Wendel says that, excluding that remodeling, the total rebuild will run $1.5 million.

A day late: More than two years after FEMA allocated funding, a pilot program to build 500 affordable Katrina Cottages, like the one above, in New Orleans is finally getting off the ground. But its designer sees guidelines emerging for addressing future disasters.