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As Federal Disaster Relief Revitalizes, Private Lenders


WASHINGTON — Private lenders will play a larger role in disaster recovery funding under a program announced Tuesday to fill the void left by slow federal aid programs that have taken years to provide money for victims of floods, wildfires and other disasters.

Funded in part by financial giant Morgan Stanley, the program will pay apartment owners to rebuild faster so they don’t have to wait for federal funds. These loans will be repaid by taxpayers, including interest paid to Morgan Stanley, which concerns some climate and disaster experts.

“Discovering new ways to speed up relief timelines is absolutely important,” said Miyuki Hino, a professor focused on managing the effects of climate change at the University of North Carolina at Chapel Hill. “But this arrangement poses some new challenges.”

The program reflects the government’s struggle to keep up with the frequency and intensity of disasters as climate change worsens. Victims often wait years for help to get home because money for repairs moves so slowly. Those who wait the longest are tenants who, unlike landlords, are more likely to be of color or low income.

“Disaster recovery is not fair in this country,” said Priscilla Almodovar, president and CEO of Enterprise Community Partners, a Washington-based nonprofit housing company. “Tenants are the hardest hit.”

To shorten that wait, Enterprise and Morgan Stanley said they will begin lending money to owners of multi-family rentals to repair damage to these complexes, which will speed up tenants’ return home.

The loans will be repaid with interest using disaster money from the U.S. Department of Housing and Urban Development. The department provides most of the federal disaster recovery money through the Community Development Block Grant Disaster Recovery program.

Morgan Stanley declined an interview request. Joan Tally, general manager of community development finance at Morgan Stanley, said in a statement that the program will “accelerate capital flows for affordable rental housing in communities affected by natural disasters.”

On average, it takes 20 months for HUD’s housing assistance programs to start distributing money after a disaster. Research by the Urban Institute. And these programs were often still handing out money two years from now.

The delay in distributing the money reflects the temporary nature of HUD’s disaster recovery spending. Congress has never given the ministry permission to create a permanent program for disasters. Instead, lawmakers must decide whether to give HUD money to help victims after each disaster.

As a result, the delay between a disaster and Congress funding recovery through the HUD can be months or years. The agency must then spend months creating a program to distribute the money to the states, which in turn must decide how to distribute it to local governments.

The last round of disaster money approved by Congress illustrates this delay. The law that President Biden signed on Sept. 30 provides funds to help people in 10 states Surviving hurricanes and other disasters in 2020, most of which occurred more than a year ago.

HUD officials declined to discuss the matter on tape. The agency made available a senior official who spoke on condition of anonymity. He said that if Congress made the disaster recovery program permanent, the HUD could cut the time needed to deliver disaster money by up to 90 percent.

deputies introduced invoices would make these changes. But these bills have not passed yet. Enterprise’s chairman, Ms. Almodovar, said her group also pushed Congress to make this change.

Enterprise declined to say how much interest it will charge on its loans, saying it will only be in the “mid-single digits”. Almodovar said rates should reflect the fact that loans are not backed by collateral.

He said private market financing of disaster loans provides access to a deep source of money and makes it possible to expand the program that began in Louisiana, Oregon and Iowa.

In the absence of adjustments in the disaster recovery program, climate experts Enterprise and Morgan Stanley said the new loan arrangement was beneficial. Liz Koslov, a professor in the city planning department at the University of California, Los Angeles, said the program “mets a real need.” But he said it’s still problematic, part of a broader trend of private companies profiting from disasters.

Carlos Martín, a fellow at the Brookings Institution who studies the impact of federal disaster programs, said that tenant mistreatment worries him more than the companies that make money from these events. He said the new program will help tenants get home faster.

Dr. “We neglect rental communities,” Martín said. “Our federal disaster relief response focuses on property, not people.”



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