Louisiana to Drop Lawsuits Against Katrina Survivors Over Recovery Grants

Series: Disaster After Disaster

Growing Storms, Faltering Aid

The state of Louisiana is dropping thousands of lawsuits against homeowners who received grants to elevate their homes after hurricanes Katrina and Rita in 2005 but used the money to make repairs instead.

Many of those homeowners said they had been told by representatives of Road Home, the grant program, that they could use the money for repairs, according to an investigation by The Times-Picayune | The Advocate, WWL-TV and ProPublica.

“It’s about damn time,” said attorney Shermin Khan, who represented more than 50 of the 3,500 people who were sued over elevation grants.

Despite what homeowners were told, grant agreements said the money — federal grants that were managed by the state — had to be used to raise homes. Under pressure from the U.S. Department of Housing and Urban Development to recoup grants that hadn’t been spent properly, the state sued homeowners, seeking repayment of $103 million.

Many of those sued were older and poor. Several homeowners preemptively declared bankruptcy, according to their attorneys. Others failed to defend themselves in court, so the state placed liens on their properties.

Watch WWL-TV’s Report

Louisiana Gov. John Bel Edwards announced that the lawsuits would be dropped as he joined federal and New Orleans leaders Thursday morning at a community center in the Lower Ninth Ward to mark the official end of the Road Home program, 17 years after it launched. It was the largest housing recovery effort in U.S. history.

Edwards acknowledged that the $30,000 grants were “insufficient in size to actually elevate people’s homes.” At the time, it typically cost at least three times as much to lift a house and put it onto raised footings.

“It’s been a miserable thing for the state of Louisiana to pursue these individuals because we knew the vast majority of them were never going to pay,” Edwards said.

Edwards said about 5,000 people were sued or could have been for being out of compliance with grant rules. That includes grants for repairs as well as for elevation.

Homeowners sued by the state were living a “nightmare,” HUD Secretary Marcia Fudge said, worried they wouldn’t be able to pass their homes on to their children.

“I decided on my watch it was going to be over,” Fudge said. “The federal government is doing something that it has never done before for the people of Louisiana.”

U.S. Rep. Troy Carter, D-La., said in an interview that the news outlets’ reporting was instrumental as he tried to convince Fudge to find a way to stop the collection efforts.

“A program that was designed to pull people out of the storm should not put them back into the storm,” Carter said. “Unfortunately, Road Home did that to many.”

Dropping the lawsuits will allow people to go on with their lives, he said. “This gives us an opportunity to at least remedy as best we can the mistakes that were made.”

The state will halt collection efforts related to all Road Home grants and drop any liens placed on homes through the litigation. But people who made partial or full payments will not be reimbursed, officials said.

“There’s only so much we can do,” Carter said. “There won’t be an opportunity for a refund if you’ve already paid back.”

The state paused collection efforts in May after the news outlets found that a law firm it hired had accelerated the pace of legal filings. By then the state had collected about $5 million from 425 families.

Homeowners Offered Grants, but No One Double-Checked Eligibility

After an initial delay, the elevation grant program was launched in 2008, when the state sent letters to 40,000 homeowners telling them they could get $30,000 each to raise their houses to reduce flooding in the future. About 32,000 homeowners participated.

Once the state Office of Community Development received an application, it sent the money to homeowners, according to testimony in one of the lawsuits by Jeff Haley. He helped administer the elevation grant program as an official with ICF Emergency Management Services, the contractor Louisiana hired to run Road Home, from 2006 to 2009.

But no one double-checked before the money went out that homeowners were eligible or that their homes needed to be elevated, said Haley, who is now with the state Division of Administration. The state simply “didn’t have time,” he said. There was pressure to “get the funds out into the community as fast as possible.”

The state told the news organizations that it aimed the elevation grants at people whose homes were in flood-prone areas and who had already received another Road Home grant. It was up to homeowners to determine how much they needed to raise their homes, officials said; if they learned they were already at the correct height, they should have returned the money.

But when homeowners informed Road Home representatives, sometimes in writing, that they didn’t plan to elevate their houses, some were verbally told that they could use the money for repairs, according to eight families and eight attorneys representing more than 200 homeowners.

Wallace and Kristy Styron received a $30,000 elevation grant even though their home in southwestern Louisiana’s Cameron Parish was already above the required height. After the state sued them, Wallace Styron testified that he repeatedly told a Road Home representative that he didn’t need to raise his home and even said he had submitted paperwork to prove it. But the person insisted he accept the grant, he said, telling him he could use it for repairs.

A Road Home document outlining the benefits Styron initially qualified for, dated Dec. 2, 2006, said he was not eligible for an elevation grant. Forms for two other homeowners reviewed by the news organizations said the same. Another three homeowners indicated on forms that they didn’t want the elevation money. Yet all those homeowners received grants, and all were subsequently sued for repayment.

After HUD flagged many grants for being spent improperly, the state changed the rules twice between 2013 and 2015 to allow spending on repairs and other expenses. But by then, so much time had passed that many homeowners couldn’t prove how they had used the money.

HUD considered those to be overpayments and would not close out the Road Home program until Louisiana returned the money. Though state officials told the news organizations in 2022 they didn’t want to sue their fellow citizens, they had been paying attorneys to do just that for about five years.

Days after the news outlets published their investigation, local elected officials and housing advocates called on the state to drop the lawsuits. Two weeks later, Louisiana Commissioner of Administration Jay Dardenne announced he was ordering a pause to all collection efforts. He said the state had reached a settlement in a related lawsuit against ICF over how it managed Road Home, and that negotiations had begun with HUD to accept money from that settlement instead of homeowners.

ICF did not immediately respond to a request for comment, but spokesperson Lauren Dyke said in May the firm “worked within the policies put in place by the state.”

The state plans to use $12 million from the ICF settlement to pay off its debt to HUD, plus an anticipated $20.5 million appropriation by the state Legislature and $37 million in unused Road Home funds.

Cameron Parish attorney Jennifer Jones said the elevation lawsuits were a nightmare for her clients. She won four lawsuits in which homeowners testified that Road Home representatives told them they could use the grants to fix their homes, only to be sued later for doing so.

The majority of elevation grants were for properties in lower-income neighborhoods and communities of color, as were the lawsuits that followed, according to an analysis by the news outlets.

The $30,000 the state sought from her clients “might as well be $1 million,” Jones said. “They just don’t have it.”

Gentilly homeowner Donna Hilliard was ecstatic to hear the judgment the state filed against her for her $30,000 elevation grant would go no further and the lien against her house would be canceled. She said she was intimidated into making two monthly installment payments of $250 by attorneys working for the state, but she decided to stand her ground after sharing her story with the news organizations.

Pat Forbes, executive director of the Louisiana Office of Community Development, which oversaw the Road Home program, said in May he has “no reason to believe” the state’s attorneys threatened anyone or insinuated the state would take their home.

Celeste Matthews, 68, received $30,000 to raise her Gert Town home and was later sued when she failed to do so. The same day she was featured in the news story detailing the lawsuits, the law firm representing the state notified her that it would pursue a default judgment against her, which could result in a lien on her property. Matthews was facing financial ruin.

Upon hearing the news that the state was dropping the lawsuits, Matthews said: “Thank you, Jesus, thank you. I am elated. Now I can relax.”