False Start
Big production builders report few rebuilding successes.
Blowback: A tornado ripped the roof off of this house in Moore, Okla., in May 2003. Twisters are common in Oklahoma, but far less so in its cities.
Credit: Andrea Booher/FEMA
After fires burned 368,000 acres and 1,600 homes in Southern California in October 2007, Hallmark Communities—which hadn’t started a subdivision in two years—offered its expertise to homeowners looking to rebuild. The Solana Beach, Calif.–based builder contacted, through direct mail, most of the owners of homes that were burned, expecting to capture at least 200 rebuilding projects.
As of early September 2008, Hallmark was rebuilding only three homes. Its CEO, Mike Hall, has several explanations why: Insurance companies were taking longer to settle claims than they did after earlier fires. And the housing economy is so bad that builders from all over the state descended upon Southern California. “I know of a pool installer that’s building two homes, and a remodeler who’s building three,” says Hall. Hallmark lost jobs to contractors that were recommended to homeowners by friends, family, and, in one instance, a supermarket cashier. The fact that Hallmark told owners it would take 11 months to rebuild their houses put it at a competitive disadvantage against contractors who promised a quicker turnaround, even if they couldn’t realistically deliver it.
Stories such as Hallmark’s have kept production builders from getting into rebuilding after floods, storms, and fires. “I would be very surprised if you found a lot of builders that were tearing down [damaged] homes and putting up new ones as a business strategy,” says Donna Reichle, vice president of media and public relations for the NAHB.
“It’s just easier to build on a greenfield,” observes designer Marianne Cusato, “and those developments have formulas to them. When you’re dealing with owners with their own lots, it becomes more difficult.” That’s certainly what Brookfield Homes discovered after the 2003 fires in Southern California. Steve Doyle, president of Brookfield Homes’ San Diego division, notes, too, that local jurisdictions won’t “bend the rules” to make rebuilding more palatable to merchant builders. (“Ridiculous” is how he describes the number of roof planes some towns require.)
Oklahoma gets hit by 175 tornados, on average, every year. But they strike all over the state, and usually not in urbanized areas, says Vernon McKown, president of Norman, Okla.–based Ideal Homes. Even when tornados tore through Oklahoma City in 1999, damaging or destroying more than 3,000 homes, McKown says most production builders got involved in rebuilding only peripherally. Many owners simply took their insurance checks and bought homes outside of the tornados’ path. These owners sold their lots to builders such as Ideal, which picked up between 30 and 40 lots for about $30,000 each, McKown recalls. He also remembers how “nonprofessionals” and speculators swarmed into Oklahoma City and nearly doubled its inventory of houses, to a 10 months’ supply. “It took a year to get back to normal,” he says.
Even production builders that want to get into disaster rebuilding have encountered roadblocks. A deteriorating national housing market and the lack of available land undermined KB Home’s ambitious joint venture with The Shaw Group to build tens of thousands of homes in Louisiana’s Jefferson Parish. Last May, Melbourne, Fla.–based Holiday Builders pulled out of a development in Mississippi called Beaver Dam, where it planned to build nearly 400 homes, because the developers couldn’t get the lots ready to meet Holiday’s schedule. “We were supposed to start in late 2007,” says Ron Tuttle, president of Holiday’s Gulf division. “It’s disappointing, because we thought there would have been a pretty good market for the kinds of homes we were going to build.”
Toni Wendel was president of the HBA of Greater New Orleans when Katrina hit. She says her members that have wanted to do more rebuilding haven’t had much luck working with nonprofit groups that organize most of that work. (She’s hoping the HBA’s new emphasis on green building will make members more attractive as rebuilding partners.) Her own company, Olde World Builders and Remodelers, got into disaster rebuilding out of her interest in historic restoration. One of the seven post-Katrina rebuilding jobs it’s been working on is a 7,000-square-foot home in New Orleans’ Garden District that was badly damaged by flooding and had its roof parapet blown off. Originally, the owner hired Olde World before Katrina hit to remodel the kitchen. Wendel says that, excluding that remodeling, the total rebuild will run $1.5 million.
A day late: More than two years after FEMA allocated funding, a pilot program to build 500 affordable Katrina Cottages, like the one above, in New Orleans is finally getting off the ground. But its designer sees guidelines emerging for addressing future disasters.