IT TOOK ONLY A FEW HOURS ON AUG. 29, 2005, for Hurricane Katrina to scrub whole towns off the shores of Mississippi and Louisiana. Weeks were spent rescuing stranded citizens from the rooftops of New Orleans. As months go by, the worst-hit Louisiana parishes still look like abandoned war zones. And it's now clear that years will pass—many years—before the Gulf Coast recovers from the damage nature wrought during a few summer days in 2005.

One year after hurricanes Katrina and Rita, the Gulf Coast is a study in contrasts. On the one hand, there's an incipient construction boom fueled by insurance money and federal spending. Ninety miles from the coast, Baton Rouge's most obvious problems are traffic congestion and inflated rents. Already working flat-out, builders throughout the region report the troubles we usually associate with high times: expensive materials, scarce labor, and delays everywhere.

But in the hardest-hit areas, there is little sign of progress. As recently as June, a parent traveling with high school student volunteers described the group's shocked bus ride from the New Orleans airport to Habitat for Humanity's “Camp Hope” in Louisiana's St. Bernard Parish: “The bus was in a state of complete silence. I have never seen anything like it: Hundreds, thousands, of mangled cars piled under freeway ramps. Huge shopping malls desolate with roofs missing. Boats and discarded fridges scattered all over the place. House after house, block after block, empty, with spray-painted National Guard codes indicating whether dead bodies had been found inside. ... And everywhere we looked, mountains and mountains of debris.” Working to gut empty houses, the group saw young and inexperienced volunteers organizing most of the work: “Katrina was a massive natural disaster, and almost one year later we saw kids telling kids what to do about it.”

For Louisiana's local governments, burn-out and frustration are taking their toll. In July in St. Bernard Parish, Mike Hunnicutt, director of community development, became the fourth top administrator to resign since the storm; none have been replaced. Only 7,000 to 10,000 of the parish's pre-Katrina population of 68,000 are back. No one can say when, or if, the rest might return: Confusion at all levels—over codes, flood guidelines, temporary housing, recovery aid, and more—puts roadblocks in everyone's way.

And as Metairie, La., attorney Clayton Borne III remarks, “If you don't have the basic essentials—a place to live and a job—you're not gonna come back.” Former residents are leery of promises, says Borne: “No. 1 is the assurance that the levees are properly repaired. And people are not going to believe what somebody says—they are going to believe what happens. If we get another bad storm and the levees hold, I think you will see more migration back into these areas. But people just aren't doing it now. They just don't trust the situation.”

Documentation issues may slow the disbursement of billions in federal rebuilding aid. All the records in the St. Bernard Parish courthouse were destroyed by the flooding, says Borne. “If you go in there as an attorney, they ask you for copies of your records to put cases together. Obviously, if people don't have certified copies, you've got a problem.”

Even on the Mississippi coast, where levees are not an issue, rebuilding near the water has gained little steam. Builder Ricky Wilkerson of Gulfport says, “A lot of the people whose homes on the coast were destroyed are not building back. I'd say 70 percent of our people are not rebuilding down on the water—they're moving north.”

North of Gulfport, conditions for a builder are challenging but not discouraging, reports Wilkerson. “Put it this way: Labor is short, materials are short, and my temper is a little short. But, you know, things are moving.” Wilkerson does worry about pricing himself out of his market. “Labor has just gotten outrageous. I used to pay my bricklayer $350 a thousand for brick; now he gets $600 a thousand.” Because of rising costs, “houses that I was selling at $250,000 and $260,000 are now $320,000 and $330,000.” But Wilkerson expects insurance payouts and federal grant money to keep the market strong. “It's just taking a little bit of time, that's all. I think people will hold back to see what's going to happen next, like they always do—but I think we're OK. So we'll just keep rolling and keep doing it until we can't.”

Builder Mike Fearn and his partner Clinton Champagne took a direct hit from Katrina. Champagne's own home was destroyed, as were the homes of several employees and subcontractors. Four of Fearn's and Champagne's recently completed houses, and some partially built units, sustained major flood damage that insurance wouldn't cover. When this writer talked to Fearn in September 2005, he was standing in a Gulfport subdivision, gazing at a street full of flood-soaked drywall and insulation, and predicting, “We're going to go three or four months and not make a dime.”

But a year later, says Fearn, the company is back on its feet and going stronger than he had dared to hope: “It took about six months before we were back to flowing somewhat smoothly; eight months to get fully functional. We went through a tough time. But we cut back all of our expenses for a good portion of the time we were down; and based on our sales prior to the storm, plus what we closed right after the storm, we still made some money.”

Learn more about markets featured in this article: New Orleans, LA.