The Faces of Hurricane Katrina: A Portrait of Poverty Throughout America
Leadership Conference on Civil Rights Education Fund - August 22, 2006
Hurricane Katrina brought the attention of the media and the American public to the tragedy of extreme poverty in the United States. As we look back on the aftermath of the storm and the devastation it wrought, we still see a stark picture of the lack of economic opportunity, inadequate supply of affordable housing, and unequal access to quality heath care. These are three of the hallmarks of extreme and concentrated poverty, and while they were exposed by the hurricane, they are, in fact, endemic to people living in impoverished communities throughout the United States.
The effects of living in neighborhoods of concentrated poverty – including the inability to get home and business loans, bad schools, poor access to health care, homelessness and substandard housing – affect all residents of those neighborhoods, not just those living below the poverty line themselves. There are eight million Americans living in these neighborhoods, including six million in large cities.
In the wake of Hurricane Katrina, hundreds of thousands of jobs were lost, thousands of small businesses completely destroyed, and countless families who lost their homes were driven deeper into poverty. Major American cities are faced with the same extremes of high unemployment rates, dearth of business development, unavailability of commercial loans, and concentrations of families living below the poverty line.
Gulf Coast Economic Conditions after Katrina:
- More than 81,000 business were impacted by the storms, costing the region nearly 450,000 jobs.
- As of May 2006, the Small Business Administration had denied 11,500 small business loan applications from Louisiana, while approving 11,400, only 4,200 of which have received any money.
- Only 49 percent of the metropolitan area’s bus routes have reopened, with only 17 percent of the buses operational. Many of the poor in New Orleans do not own cars – which was a major factor in the government’s failure to evacuate residents before the storm – so they are dependent on public transportation in order to work.
- Ten months after the storm, child care facilities were still at only 21 percent of their pre-Katrina capacity. Without available day care services, many people cannot work, especially single mothers.
Persistent National Economic Conditions:
- The national poverty rate is 12.7 percent, or 37 million Americans, up 4 million from 2001.
- Over 3.5 million poor people live in neighborhoods of concentrated poverty (those with a 40 percent or higher poverty rate).
- Approximately 2.9 million people living below the poverty line are full-time workers.
- Payday loans, an abusive practice designed to take advantage of low-income workers who live paycheck-to-paycheck, can cost the borrower as much as $600 for a $225 loan. In California alone, there are more than 2,400 payday loan stores – primarily in poor and working class neighborhoods – costing Californians approximately $500 million per year in exorbitant lending fees.
- African Americans represent 12 percent of the population, yet receive over 20 percent of “subprime” home loans – which means loans with interest rates that are worse than prime market rate – and only 5.5 percent of prime market rate home loans.
- Homeowners in predominantly minority neighborhoods are approximately 2.4 times as likely to have subprime loans than homeowners in white neighborhoods.
- The Research Institute for Housing America, which is an offshoot of the Mortgage Bankers Association, confirms that minorities are more likely than whites to receive subprime loans, even when they controlled for the creditworthiness of the applicant.
- The equity loss suffered by a typical creditworthy family when they are forced to take a subprime loan can be more than $100,000 over the life of the loan.i That represents $100,000 that could have been spent on their children’s education, starting a business, or saving for retirement, but instead is transferred to lending institutions which provide absolutely no additional services or in return.
- With the high rate of subprime loans in minority neighborhoods, the amount of money that could have been used for economic development is staggering, potentially a $30 million loss in a typical minority Census track with 2,000 households.ii
Hurricane Katrina destroyed homes and apartment buildings of all sizes and uses, both public and private. The extreme drop in the availability of livable housing stock has caused prices in
New Orleans and throughout the Gulf Coast to skyrocket, pricing tens of thousands of low and moderate income citizens out of the market. Similar conditions are faced by poor people throughout the country as property values have risen sharply over the past decade.
Gulf Coast Housing after Katrina:
- Approximately 250,000 homes in the New Orleans metropolitan area were rendered uninhabitable.
- It has been estimated that 112,000 low-income homes were damaged.
- Ten months after Katrina, 60 percent of New Orleans homes still lacked electricity.
- More renters were displaced than homeowners, an indication of the disparate impact on poorer residents.
- The average rent in New Orleans Parish is up 39 percent from pre-Katrina prices.
- Prior to Katrina, there were 7,100 public housing units in New Orleans; 5,100 were occupied and 2,000 were slated for destruction.
- In July 2006, only 880 of the public housing units were occupied with 5,000 slated for destruction, including many that were not damaged.
- Almost 100 percent of public housing families in New Orleans are African-American.
Persistent National Housing Conditions:
- Despite significant overall increases in home ownership, ownership among the bottom quartile of income earners declined by approximately 1 percent between 1970 and 2003.
- On average for the nation, a worker must earn $15.37 an hour to afford a two-bedroom apartmentiii, but the national average for hourly wages is about $14, and more than 25 percent of workers earn less than $10 an hour. (2004 data)
- There are only four counties – none of them in metropolitan areas – in the U.S. where a person working full-time at minimum wage can afford the average rent on a one-bedroom apartment.
- Only four states have mean housing values low enough that two full-time minimum wage workers can afford the market rate for a two-bedroom rental. In 10 states and the District of Columbia, three full-time minimum wage jobs aren’t enough to afford a two-bedroom apartment.
- In 2005, the monthly federal Supplemental Security Income (SSI) payment to eligible elderly, disabled, or blind recipients was $579. Nowhere in the country is the fair market rent for even an efficiency or studio apartment low enough to afford for people dependent on the SSI benefit.
- Across income levels, African Americans are approximately twice as likely to live in “severely inadequate housing” (defined by the Census Bureau to be housing without hot water, heat, electricity, or having significant upkeep problems).
Access to Quality Health Care
While causing an extensive increase in the need for both physical and mental health care, Hurricane Katrina devastated the delivery of health care throughout the Gulf. Hospitals and clinics were destroyed and most are still closed or operating at a fraction of their original capacity. Thousands of health care workers at all levels have not come back to the region. The increased need for both trauma and chronic care coupled with the decreased capacity to provide the care are extreme examples of the types of conditions faced by Americans living in poverty in both cities and rural areas throughout the country.
Gulf Coast Health Conditions after Katrina:
- Only 55 percent of the region’s hospitals have reopened.
- Charity Hospital and University Hospital, which provided most of the medical care to poor and uninsured residents of New Orleans, are still closed. A makeshift facility in what used to be a department store has 39 beds including only nine for Intensive Care. Before the storm, the hospitals provided over 300 in-patient beds.
- Charity Hospital was the Level I trauma center for the region before it closed. The closest Level I center is now more than 150 miles from New Orleans.
- Charity was also the city’s primary mental health care provider. Neither its psychiatric crisis center nor in-patient unit has been replaced. According to the coroner, the city’s suicide rate has tripled since before the storm.
- The Louisiana Department of Health and Hospitals has estimated that New Orleans has lost half of its physicians and suffers from a shortage of 1,000 nurses.
- There has been an increase in both acute and chronic physical and mental health problems since the storms.
- Many Louisianans are receiving little or no treatment, with the loss of health care providers complicated by an extensive loss of medical records and health insurance – 44 percent of adult caregivers are without any health insurance.
- According to a Columbia University report, 34 percent of children in FEMA-subsidized communities have at least one chronic health condition that requires treatment, but half of the affected children no longer have a medical provider.
Persistent National Health Conditions:
- Adults living below the poverty line are more than 62 percent more likely to have no source of consistent health care.
- Children living in poverty are more than three times as likely to be without a consistent source of health care as those not living in poverty.
- Racial disparities compound the problem, with poor Latino children twice as unlikely to be without consistent health care as poor white children; African-American children fall in the middle.
- Approximately 39 percent of poor children are uninsured, twice the rate of non-poor children.
- Along with worse access to insurance and health care, poor Americans suffer from higher rates and greater severity of illnesses across the board, ranging from diabetes to vision and hearing loss.
- The rate of serious vision problems is nearly twice as high, at 13.7 percent for the poor and 7.3 percent for the non-poor; severe hearing loss is almost 50 percent higher among the poor.
- Crucial diagnostic and preventative medicine is also routinely out of reach for people living in poverty. Women over 40 who are not living in poverty are 50 percent more likely to have had a mammogram than poor women.
i Figure based on a $140,000 30-year mortgage with a prime rate of 6.25 percent versus a subprime rate of 9.25 percent; total difference in payments over the life of the loans would be $104,310. Calculation done with Bankrate.com’s mortgage calculator with typical March 2006 interest rates.
ii Calculation based on 15 percent rate of creditworthy households getting subprime loans with a $100,000 equity loss per household.
iii Calculation based on the Department of Housing and Urban Development’s federal affordability standard of spending no more than 30 percent of income on housing costs.