Saturday, February 03, 2007

Road Home Math - Calculating the Grant

From the Road Home Web Site FAQ;
"Road Home compensation benefits are determined by calculating the lesser of the uncompensated damage cost or the uncompensated loss of value up to $150,000."
The Road Home Grant calculation can be expressed in a fairly simple formula;
  • Where
    • G = The Road Home Grant.
    • V = The Pre Storm Value.
    • R = The Cost of the Repair.
    • C = The total received from Property, Flood Insurance and Other Compensation.

  • If (V<R) then (G=V-C) else (G=R-C)

The two most important and subjective inputs for the Road Home Formula are the Pre-Storm Value and the Cost of Repair. I've been collecting information from Road Home Option Letters and although I don't have a large enough number of examples to reach a statistically valid conclusion. I do have a couple of observations.

The Cost of Repair is remarkably constant at $110-$130 per square foot. Most of the houses I have information on were merely flooded and had little wind damage. The cost of repair varies very little, there are a couple of exceptions with values in the $60-$70 per square foot range. These houses might be two story houses which didn't flood above the first floor. If that is the case the figures are even more constant. This is also consistent with press reports and public statements by LRA officials.

The Pre-Storm Value varies significantly more. The thing is, it seems fairly consistent within a neighborhood. I find that where there are clusters or even a couple of houses in a neighborhood the square foot value is consistent and generally below what I thought the market was. I really don't have enough information to generalize beyond that.
  • I have constructed a Google Spreadsheet where you can play with your numbers. (You need a free Google Account to access it.)

  • Road Home publishes up to date statistics here.
As always when I write about Road Home, I ask you please send me your particular information and I will incorporate it into my analysis, and of course I have no inside information. I gather my information from people willing to share and from public sources.


Anonymous said...

Mominem is in the Road Home process which we have been in for two months so far and are at the inspection stage. Sort of stage two (after application) I would be interested in hearing how many are in process and how long???

mominem said...

Road Home publishes up to date statistics here.

Unfortunately they don't say when the applications were filed.

bayoustjohndavid said...

You're using cost of repair, which seems reasonable. One thing I haven't understood, is the number of people saying things like, "The pre-Katrina value was$250K, we received $70K in insurance money, let the grant's $50K. Not the difference or the $150K max." Or, "Houses in our neighborhood sold for around $200 sq. ft, Road hHome is offering half that." I have no idea what the actual numbers I've heard in examples of the second case were, but I've even somebody from CHAT who seems very knowledgeable say something similar about her case. That'st's made me hesitant to say anything, because I figured I must be missing something, but wouldn't the pre-storm value be the value of the house plus the property? In most cases, the value of the property wouldn't come close to making up the difference, but people seem to leave it of the equation altogether. It's not relevant in calculations of grants based on cost of repair, of course.

BTW, I know that I seem like a Blanco defender, but it's just that the Road homes is bad enough that I don't see the need for the distortions and exaggerations. I think reasonable person would agree that it's borderline dishonest to make the Mississippi comparisons without mentioning the six month difference, yet the Picayune constantly does that. However, it does feel like I've been saying for six months. In general, I can't understand the advocacy journalism where Blanco is concerned, the on again/off again advocacy journalism where the federal government is concerned, and its near-absence where Nagin is concerned.

mominem said...

From the Road Home Web Site FAQ;

"Road Home compensation benefits are determined by calculating the lesser of the uncompensated damage cost or the uncompensated loss of value up to $150,000."

Damage Cost = Cost of Repair.

The information I have suggests that Road Home s using a a formula which results in the Cost of Repair (Damage Cost) coming out close to $120 per square foot.

The Pre-Storm Value is the one thing which seems consistently low.

As I understand it The Pre-Storm Value is the actual value of the house on August 28, 2005, including the value of the land. The methods used to determine Pre-Storm Value are consistent with that interpretation, as are public statements of LRA officials.

ICF has recently revised their methods and I don't have any recent information to know if this has been corrected.I know of at least one case where ICF didn't follow their own published methodology for determining the Pre-Storm Value.

I've asked CHAT for access to their numbers but have not gotten any response.

There is one other factor which I didn't go into, because its a little complicated and not much information is available. There is a 30% reduction applied to uninsured losses. The most common situation would be a house in a flood plain which doesn't have flood insurance. This could account for some of the discrepancies

I assume that the "discount" is applied to the total amount of the Grant not to the inputs, but aren't too sure about that. My Google Spreadsheet assumes that and calculates an alternate Grant for uninsured loss.

That calculation could get messy if ICF is separating flood damage and wind damage and applying the reduction to them individually. It should be higher in that case. I am hoping people would use the spreadsheet report their results to me.

In any event if your house flooded, it was in a flood plain and didn't have flood insurance the maximum grant possible for simple flood damage is $105,000 ($150,000*70%).

As I understand the Mississippi program people in a flood plain without flood insurance don't get anything, at least until some later "phase".

CoachingByPeter said...

It is also important to know information about your location's flood risk to have an idea on how much water might get into your place. Info can be avail in floodplain management office or building department. Anyone can be a victim of financial difficulties because of the damages that brought about by flooding.

mominem said...

Please see my other posts on Base Flood Elevations. There are problems there as well. Often the BFE is below the Katrina Water Level and my differ substantially on different sides of the same street, especially if that street is a boundary between an AE and AO zone.