Though federal officials are trying to expedite the process of rebuilding homes in New Orleans, the nation’s largest homebuilders are waiting on the sidelines, trying to assess how to take part in the reconstruction.

Bruce Karatz, chairman and chief executive of Los Angeles-based KB Home, plans to set up an office in New Orleans by the end of the year in order to identify parcels of land available for construction and cut through the red tape of the permitting process.

The question is how.

“I think there’s going to be a lot of opportunities for bigger companies to help rebuild these communities, but there are a lot of challenges that are beyond our control at this point,” he said.

Before Hurricane Katrina, no large homebuilders had operations in New Orleans. The market was considered too small, with no large tracts of land and only 5,000 to 6,000 new homes built every year not enough to attract the attention of the nation’s largest builders.

Karatz said KB Home would need at least 50 acres to build from 300 to 400 homes at one time. So far, officials in New Orleans estimate that the city needs to rebuild as many as 250,000 homes. With clean-up just getting started, construction is still months away. Securing large tracts could well become the crucial issue for larger homebuilders.

“The ability to control large parcels of land to build homes on is no small feat and we’ve been unable to identify any parcels of land of any size to build on,” Karatz said. “That is going to take months.”

Much of New Orleans and cities on the Gulf Coast are still waiting for electricity to be restored. Debris has to be removed and temporary housing constructed. Insurance companies have received thousands of claims, but it could take years for homeowners to get the cash to rebuild.

David Wilson, president of the National Association of Home Builders and a homebuilder himself, said there are many potential hurdles, including high costs of building materials.

“The recovery from four major hurricanes that struck the Gulf Coast in 2004 is still incomplete, hampered by shortages of roofing, concrete, plywood and other vital materials,” Wilson testified last month before a Congressional subcommittee examining how to rebuild New Orleans.

Another factor in the rebuilding effort is the difficulty of getting appraisals, since there are no comparable sales for the areas that are now underwater.

Rolling homes


The first beneficiaries of the post-Hurricane Katrina rebuilding effort have been makers of RVs and manufactured homes that already have picked up contracts from the Federal Emergency Management Agency.

Fleetwood Enterprises Inc., based in Riverside, received a $170 million contract for 7,500 travel trailers and 3,000 single-section mobile homes. Shares of Fleetwood, the largest maker of recreational vehicles, have surged more than $4 a share, or 30 percent, since late August to $12.31 a share.

“The homes that we’re making for FEMA are made to be short-term shelters for less than six months, and they want to put them on the properties of homeowners whose houses are being renovated,” said Kathy Munson, Fleetwood’s director of investor relations.

More than $62 billion in federal funding has been approved for the relief effort. But questions are being raised about contracts for cleanup projects that were awarded with little or no competition.

Karatz said most large homebuilders are not likely to bid on government contracts because of the bureaucratic red tape.

J.K. Huey, senior vice president at IndyMac Bank, said one of the most immediate needs is for mortgage companies to gain liquidity because they are extending grace periods on mortgage payments and late fees to borrowers.

Ginnie Mae, the Government National Mortgage Association, has already agreed to reduce its guarantee fees by as much as 50 percent, essentially lowering lenders’ expenses and providing an incentive for them to make more loans. As many as 360,000 mortgages were impacted by Hurricane Katrina.

*Staff reporter Kate Berry can be reached at (323) 549-5225, ext. 228, or at

[email protected]

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