Asymmetrical Information - Megan McArdle

11.19.12

How Will the Tri-State Area Rebuild After Sandy?

The area has to re-house tens of thousands of people. And that's where the problems start.

My father continues to send updates on New York City's attempts to recover from Sandy.  Here is his latest missive, on the problem of re-housing the displaced:  

Federal, state and local governments are going to face enormous challenges in trying to rehouse the estimated 50,000 or more that are without permanent housing in the New York, New Jersey, and Connecticut areas. President Obama came to the New York region on Thursday to announce his programs for reconstruction, the total cost of which may exceed $100 billions (I've extrapolated from Governor Cuomo’s search for $30 to 50 billions for New York State). But money is not the only issue.  It's not even necessarily the biggest issue.

The sheer number of people who need to be rehoused is itself an enormous issue. The second problem, for government officials, is that the program for rehousing will be under the scrutiny of the media every day and in every way.  It’s happening right under the noses of the media, and affects many of them directly, through their own stories and those of friends and family. Unlike Katrina’s rehousing needs, which to seemed to many after the first month to be happening in a galaxy far, far away, these needs will be happening right on the doorstep of the rich and the famous. And, in all three states, there has been a substantial destruction of critical waterfront economic centers from Coney Island to Jones Beach to the Jersey Shore. If these structures are not available for use next summer, what happens to both the entrepreneurs and the traditional users?

Three weeks after Sandy struck, we unfortunately still do not know how many housing units or commercial/retail structures will have to be rebuilt or substantially remodeled.  But it is fair to say that planners that think in terms of 50,000 units would not be far off. In this sort of case you would always rather overestimate than underestimate. And it is fair to say that the failure to get these new or rebuilt units in service in less than twelve months will create a political disaster for some elected officials.

But getting the units in place will require much more than taunting and/or screaming at the utility companies, as we have heard in the past two weeks. It will require swift and comprehensive decisions from elected officials in an area in which rapid decision-making is not the norm.  It will also require commitments of funding that will challenge all levels of government.

I want to run through some of the considerations that I think they will have to grapple with.

The first is the question of where the governments going to allow people to rebuild.  Elected officials will be under pressure from those displaced to allow everyone to rebuild. But that may not be good public policy.  There are certainly people ready and willing to make that case. Just to mention one of many, The Huffington Post put up a discussion on the question of excessive development contributing to the failures. The President of the New Jersey State Senate, Steve Sweeney, has also posed the question.

Sandy may have triggered new definitions for a flood plain, and put new areas in all three states into the flood plain designation. FEMA and the governments, state and local, are going to have to decide on a process for determining whether some areas, or some sites, are not going to support future development. When such decisions have been made in the past, the common practice has been for FEMA and the state/local entities to buy out the site and turn it into some form of public ownership (park, conservation area, etc). But what will happen here? Roughly 50,000 house and commercial lots are now in damaged condition, most in highly prized waterfront communities. How will they decide what to let go? What will be the appeal process? And where do those who are disappointed go and live?

Some of the no-go decisions will depend on a review of the existing storm water infrastructure and an assessment of what improvements can be made to that infrastructure or individual home sites. For the storm water professionals, the Sandy events will present both opportunities to get improvements funded, and opportunities to get public support for new approaches to storm water management.

When will these assessments get under way and how long will they take to make? If new or additional infrastructure will make a difference, who will pay for it and how long will it take to put it in place? Is home rebuilding allowed before the storm protections have been added?

Some of the assessments will circle around carefully the issue of pre-storm code compliance. In the Midland Beach area of Staten Island, an areal picture of which graced the A2 page of a recent edition of the Wall Street Journal, a number of houses are built below ‘legal grade’, with the house roofs being at the height of a street built to legal grade. What should be done to rebuild on those lots? Who should pay? And is it time to set a higher ‘legal grade’ for all of this rebuilding? In Breezy Point in Queens, originally a summer cottage colony, many of the houses that have been destroyed or damaged are on undersized lots by today’s zoning code. Does the City allow rebuilding or insist on lot consolidation to legal size, leaving only some winners and many losers? The same issue probably will affect the coastal communities in both New Jersey and Connecticut.

And even presuming all of these thorny issues can be resolved without contentious court cases, what new infrastructure will the public and private utilities want to install at this time?  We have not had a real inventory of how badly the public infrastructures have been damaged. It is very likely that the cleanup will reveal very badly damaged roads, sanitary sewers and storm sewers, along with unusable parks and schools. And what new infrastructure will the various levels of government want them to install? After the Blizzard of 1888, government commanded that utilities in Manhattan be put under ground. A 1989 hurricane led Bermuda to the same course of action for the entire island. Governor Cuomo has already stated his interest in creating a smart energy grid as part of the permanent recovery. Do we want the utilities to do this now in any locations? Who will pay for it? How long will it take to start this construction? And do we let invidual projects go forward before we develop a comprehensive plan?

Governments will have to address the same issues in the building codes for the replacement units. Is this the time to require solar panel installations on the roofs of every new unit or substantial remodeling?  How much extra insulation should be installed? How high off the ground will we want the housing built? What will be allowed on the lowest levels? Inquiring minds will want to know quickly.

Even if we can quickly hear the answers to these questions and avoid prolonged court cases--which is very unlikely given the passionate reaction against perceived overdevelopment along the shore--there are many questions remaining. Who will pay for the new housing? How will the rights of existing mortgage holders be reflected? What happens to mortgage holders in areas where rebuilding is not allowed? What will the governments try to do for those who did not purchase flood insurance? The Mayor of New York City has already put in place a plan to provide contractors to do immediate repairs. But how will they determine what is reparable and what must be destroyed? The City has already tagged over 200 houses for demolition. This may be just the tip of the iceberg.

Then we get to the actual building and occupancy. Will the states and the towns insist on architectural submissions by state-licensed architects? How much prefab/standard plans, etc will be allowed? Who will do the code compliance certifications? If a stock plan is certified in one jurisdiction, how much cross licensing will be allowed? How will inspections be handled? What materials approvals will be required? No one wants a repeat of the Chinese drywall fiasco.

The one thing that we know is that the post-Sandy rebuilding will precipitate the largest single family and two family homebuilding exercise for the New York region since the 50s--and that local towns, and even New York City, are not well staffed or equipped to manage the regulatory processes for so many units at one time. How do the towns and cities staff up for this bubble? Who will make sure that haste to satisfy the displaced does not lead to substandard building?

When the actual building is near, the question of who does the work and prevailing wage requirements will surely come up, especially if federal money is anywhere involved. Where do we find the labor pool that can build these new units? One of the little no-so-secrets about single-family/two-family housing construction before 2007 was that much of it was being done by either illegals or itinerant labor, with the construction trades having a very small presence in the market. What happens now? Can we give a local labor preference or must we open the pool up? Will there be project labor agreements that cover the entire area or at least the individual states?

In the ideal world the new units would be better housing, in more friendly neighborhoods, with better infrastructure. But to get there, the three states, their localities, and FEMA, will have to move much more quickly and more comprehensively than they have in recent years. If they fail, then the politicians involved will be paying at the polls for a long time. There is already great anger being expressed because it has taken so long to get power back on as the cold weather sets in. The announcement of new requirements before rebuilding, or a denial of rebuilding permits, or a delay in rebuilding, will add even louder voices. Doing each of these may be a very rational decision in light of what has happened, but the rationality will not lower the anger of those who have been displaced.