New Orleans Homeowners File Lawsuit

Notice the house markings

New Orleans homeowners filed a lawsuit against the Louisiana Recovery Authority, alleging that it discriminates against black homeowners whose houses were damaged by Hurricanes Rita and Katrina. The Road Home Program, administered by the Authority, bases grants on the pre-storm value of the house or the rebuilding cost, whichever is less.

When I read the newspaper’s account of this lawsuit, it reminded me of some news I had heard on the occasion of my last visit to New Orleans: I was told that plaintiff’s attorneys were seeking to bring suit against federal disaster relief agencies on the grounds that the post-disaster aid to small businesses in the Gulf Coast was significantly less than that that awarded to Lower Manhattan small businesses in the aftermath of 9-11. If true, this rests on a serious misunderstanding of what aid was actually made available to Lower Manhattan small businesses.

But the more troubling aspect of this approach, for the small business community if not for homeowners, is how it delays the recovery process. A study of small businesses in the immediate vicinity of the World Trade Center at the time of the 1993 bombing found that of those small businesses that could not get back online within five business days, 90% were out of business one year later. Cash flow is critical to a small business, which is why you either recover quickly or you don’t recover at all. Perhaps this explains why homeowners are more likely than small business owners to litigate claims following a disaster.